Chapter 2

Value Creation Story

Characteristics of Semiconductor Production
Equipment Business

R&D from a medium- tolong-term perspective andsolid management andfinancial foundations to
support it

carry out R&D at a global level. A solid management and financial
foundation is essential to perform these activities consistently andeffectively.
Furthermore, in recent years, there has been a proactive pushtoward digital transformation (DX), such as the use of AI, to offer
high-value-added technical services that support the stable
operation of equipment.
In addition to these aspects, in our business activities, it is
crucial to build a sustainable supply chain based on partnerships
with various suppliers involved in parts and materials supply,
equipment assembly and adjustment, customs clearance, logistics
and the like.
Moreover, semiconductor production equipment
manufacturers are required to contribute to the development ofsemiconductors with high performance and lower power
consumption, improve manufacturing equipment productivity andstreamline operations in plants and offices, as part of their
response to reducing environmental impact.

Development ofequipment with highest
performance that realizes
technological innovations

Driving
Force

1

2

 edication to improving customer satisfaction level and building of relationship of mutual trust with the aim to be the sole strategic partner for customers
DTimely provision of high-value-added technical services based on a long track record in response to the increasingly advanced and diverse
technological needs of customers● Provision of highly efficient and high-quality services such as remote maintenance services using AI and digital technologies, and predictive
maintenance using operational data of equipment●●3

 ased on the idea that “our corporate growth is enabled by people, and our employees both create and fulfill company values,” we promoteBmanagement that emphasizes employee motivation● Implementation of “TEL Values,” which summarize the company culture that we have treasured since our founding, values and codes of conduct
for all employees● Understanding issues and implementation of measures based on employee engagement surveys●

Only oneSpecialized expertise in avariety of fields, including
electronics, mechanics,
process and software

The world’s only manufacturer with products
for the four sequential key processes
necessary for semiconductor scaling:deposition, coater/developer, etch andcleaning

Deposition

Requirements of semiconductor production
equipment manufacturers
Strengths

Provision ofhigh-value-added
technical services

No. 1/No. 2

Building of sustainablesupply chains

Measures to reduce
environmental impact

Etch

Our product lines are strongly
positioned in their respective
segments, all of which having
achieved first or second place inmarket share2

N0.

1

Coater/Developer
N0.

Cleaning

1

N0.

2

N0.

1

N0.

EUV lithography

2

N0.

1

N0.

2

N0.

2

Diffusion
Batch
Metal
Coater/Plasma Gas chemical Cleaning3
Wafer
Furnace3 deposition3 deposition3 Developer
etch
etch
prober2	Our estimate (2022)3	Our product lines in respective segments: Diffusion furnace includes thermal processing, batch deposition includes ALD (Atomic Layer Deposition) and CVD (Chemical Vapor
Deposition), metal deposition includes single wafer deposition, and cleaning includes single wafer cleaning and batch cleaning.

Technical service and marketing developed
based on relationships of absolute trust withcustomers, built through the highest numberof installations in the world
4 As of March 31, 2023

No. 1

Coater/Developer

100% share in EUV1 lithography coater/developer, which are necessary forsemiconductor evolution
1 EUV: Extreme Ultraviolet. A semiconductor industry term for an
exposure technology that uses a specific wavelength of 13.5 nm.

Solid relationship ofmutual trustwith customers

TOKYO ELECTRON Integrated Report 2023

We generate innovative and diverse technologies through joint development with our customers and collaboration with world-leading
consortiums, and promptly bring high value-added next-generation products to market
● Proactive
R&D investment aimed at creating leading-edge technologies based on solid management and financial foundations
● Optimizationand improved efficiency of product development through the promotion of DX●

Challenging spirit of our employees, who are capable of flexibly and rapidly adapting to changes in the environment
Driving
Force

No. 1

11

Abundant technological capabilities cultivated as an industry leader

Absolute trust from customers based on our reliable technical services
Driving
Force

100%
Technological innovations insemiconductors driving the
growth of the production
equipment market

who are capable of flexibly and rapidly adapting to changes in theenvironment.” By maximizing the strengths created by thesedriving forces in our business activities, we aim for further growthand strive for medium- to long-term profit expansion andcontinuous corporate value enhancement.

From its founding, we have treasured the trust and reliability of our
stakeholders, which serves as the foundation for our uniquebusiness model. We have also developed three key driving forces ofgrowth: “abundant technological capabilities cultivated as anindustry leader,” “absolute trust from customers based on our
reliable technical services,” and “challenging spirit of our employees,

The Driving Forces of Growthbehind Our Company

The role of semiconductors is becoming increasingly important as
the spread of AI and IoT accelerates the transition to a data-driven
society. Digital technology usage continues to expand, driving thedemand for large volume and diverse semiconductors while also
demanding higher performance. Advances in semiconductor
technological innovation, in addition to larger capacity, higher
speed, improved reliability and lower power consumption, areanticipated to progress further. This increases the importance ofsemiconductor production equipment.
In an environment where semiconductor technologicalinnovation drives the growth of the production equipment market,
in this way, it is vital for semiconductor production equipment
manufacturers to utilize specialized expertise in a variety of fields
and develop equipment with highest performance to continuously
expand business. This requires comprehending the needs ofcustomers early on based on a solid relationship of mutual trust,and conducting R&D across multiple generations with a futureoriented perspective. In addition, we must collaborate withconsortiums engaged in creating leading-edge technologies and

The Driving Forces of Growth and Strengths
behind Our Company

Industry-leading installed base (cumulative)
approximately 88,000 units4
Increase of approximately 6,000 units each annually

Globally No. 1 patents owned in thesemiconductor production equipment industry

Company A

5 As of March 31, 2023.
The figure is based on LexisNexis®PatentSight® database.

Company C

21,645 patents

5Company B
Company D

TOKYO ELECTRON Integrated Report 2023

12

Chapter 2
Value Creation Story

Material Issues
Identified Material Issues

Identifying Material Issues
Every year, we look at social issues and business environments,
consider risks and opportunities, and examine the opinions andrequests of all stakeholders to identify our material issues following
discussions and approval at the Corporate Officers Meeting,participated in by the CEO, and a report to the Board of Directors.
We strengthen our “Product Competitiveness” that continuously
creates next-generation products with high added value for the
future by drawing on our specialization, and our “Customer
Responsiveness” as their sole strategic partner based on the strong
trust of our customers, and through pursuing innovativetechnologies, and along with engaging in “Higher Productivity” that
continuously pursues operational efficiency through operations thatprioritize the improvement of business operations and quality bydrawing on our digital technology, we shall work to enhance our“Management Foundation” including governance, compliance, risk
management and human capital in order to support these from astrong financial foundation based on profits.

Material
IssuesAwareness as Material Issues●

Continuously create high value-added
next-generation products
Product
Competitiveness

Strong relationship based on trust
Sole strategic partner

Product
Competitiveness

Customer
Responsiveness●Pursuit ofoperational efficiency●

Management Foundation

Customer
ResponsivenessStakeholder EngagementS olid management and financial
foundations are required to continue todevelop next-generation products withleading-edge technology

HigherProductivity●

Material Issues Identification Process

Issues Awareness ontinually creating and providing highCvalue-added next-generation products toachieve technological innovation insemiconductors is vital for our medium- tolong-term growth

Identifying Material Issues

Building strong relationships based on trustwith our customers and pursuing
technological innovation in semiconductors
with our customers as their sole strategic
partner are vital for our growthIt is important to work to further improvecustomer satisfaction, one of ourManagement Policies, through proposing
optimal solutions that contribute tocustomer value creation, and providing theBest Technical Service with high added
value in a prompt and appropriate manner

Main Initiatives (page in this report)

Initiatives to the SDGs

P. 29 S trengthening Research andDevelopment Capabilities

P. 29 Shift Left
P. 29 Collaboration with Consortiums andAcademia

P. 29 Product Marketing●●

P. 30 New Product/Function Development
P. 30 Intellectual Property Management●

Climate change, human rights issues,geopolitical confrontation, supply chain
management, cybersecurity, price rises, etc.

Shareholders/Investors●

 eturn of profit generated from businessR
activities● ealization of medium- to long-term growthRand enhancement in corporate value

Business Environment
●

●

●
●

Further expansion of semiconductors andsemiconductor production equipment market
as we move rapidly to a data-driven society

Customers●

Initiatives for the preservation of the global
environment

 ropose optimal solutions that contribute toPvalue creation for customers●

Human rights initiatives
Further strengthening of corporate governanceS pread environmentally friendly products andservices with focus on safety and quality

Suppliers●

Risks for Our Company and Main Initiatives●

The main risk management initiatives havebeen reviewed and deployed1Identify material issues based on theirimportance to society and their importance tobusiness●

 etermine annual goals for each material issueDand clarify SDGs to address2●

 rganize material issues related to the value
O
chain

●

 iscussion and approval at the Corporate
D
Officers Meeting and report to the Board of
Directors

Employees●

Creating a workplace environment replete withdreams and vitality that enables a diverse
range of people to realize their full potential,
based on mutual trust between theorganization and the individuals

Local Communities●

 romotion of regional revitalization andPenvironmental preservation●

F inancial contributions through tax payments
and investments

Governments/Associations●●●

HigherProductivity●

Further improving added value of products andservices through collaboration with us, andconstructing a sustainable supply chain

 roviding solutions that help the industry andPsociety solve issues and develop
 arrying out business activities that complyCwith laws and regulations, industry codes ofconduct, etc.

1 Refer to Risk Management on p. 69
2 Refer to the “Sustainability goals and results” on our website for details: www.tel.com/sustainability/goals-and-results/index.html

Importance to society●

Identify the following cross-division andcomprehensive key risks across the entire
Group to build a solid financial foundation
based on the Medium-term Management Plan
Market fluctuations, research anddevelopment, geopolitics, procurement,
production and supply, safety, quality,
environmental issues, laws and regulations,
intellectual property rights, information
security, human resources, etc.

●

Identified
Material Issues

It is important to work to enhance
corporate value, expand profits in themedium- to long-term, and pursue
operational efficiency by practicing
operation that prioritizes quality andmaking work more efficient across all
business activities
It is vital to establish a competitive edge
through prompt and appropriate
management decisions as well as to engage
in improving productivity in all aspects, fromthe product planning and development
stages to maintenance, by promoting Shift
Left and drawing on our digital technologies

Leveraging a Wide Range of ProductLineupP. 37 E xpansion into the Diversified

Semiconductor Market●

P. 38 Initiatives for Improvement of

Customer Satisfaction
P. 41 Globalize Field Engineers andStrengthen Customer Responsiveness●P. 41 P
 romotion of High-value-added

Services

P. 42 Initiatives for Continuous Equipment

TOKYO ELECTRON Integrated Report 2023

 ontribute to customer innovationCand value creation through theproposal of optimal solutions and theprovision of high-value-added
servicesEnsure sustainable forms of
production and consumption
throughout product life cycles byconsidering safety and theenvironment

P. 30 New Product/Function Development
P. 30 The Use of Materials Informatics
P. 33 World-class Manufacturing Operations●

P. 41 P
 romotion of High-value-added

Services

P. 57 Quality●

P. 58 Continuous Improvement of Business

Operations and Creation of New
ValuesPursue productivity, continuously
increase management efficiency, andcontribute to sustainable economic
growth romote streamlined businessP
operations and quality management
throughout the value chain, ensuring
sustainable forms of production andconsumption

P. 44 Human Resources
P. 47 Human Rights●

Importance to business
Management
Foundation●

It is vital to work to enhance a strong
management foundation that underpins
our business activities, focused around thethree material issues aboveIt is important to promote initiatives suchas corporate governance and risk
management, safety and quality,
compliance, human rights, and humancapital, and to expand sustainable
operation

P. 48 C ompliance
P. 50 Supply Chain Management
P. 51 Environment
P. 56 Safety
P. 57 Quality
P. 58 Continuous Improvement of Business●

Operations and Creation of New
Values

P. 59 C orporate GovernanceP. 69 Risk Management
P. 71 Information Security

13

 elp develop a sustainable society by
H
providing environmentally friendly
products and services

P. 37 Proposing Customer Solutions

SupportSocial Issues

 reate innovative technologies byCpromoting innovation●

Build a solid management foundationthat achieves sustainable growth
based around highly effective
corporate governancePromote value creation in the supply
chain, including ourselves, throughrespect for human rights andenvironmental awarenessTOKYO ELECTRON Integrated Report 2023

14

Chapter 2
Value Creation Story

Medium-term Management Plan
Main Initiatives in the Medium-term Management Plan
Amid the rapid technological innovation of the electronics industry,
Tokyo Electron, as the leading company in semiconductor
production equipment, is actively expanding its business based on
our Corporate Philosophy: “We strive to contribute to thedevelopment of a dream-inspiring society through our leading-edge
technologies and reliable service and support.” With our 60th

Message from the GM, Finance Unit

anniversary approaching, in fiscal 2023, we formulated a new Vision
aimed at further growth to become “A company filled with dreams
and vitality that contributes to technological innovation insemiconductors,” announced our Medium-term Management Planand launched various initiatives towards its achievement.

3. Capital Policy

Financial Targets●

This Medium-term Management Plan sets financial targets, aimed
at future growth, of further improvements to our world-classoperating margin and ROE in fiscal 2027. Amid the expectation ofincreasing demand for semiconductors and significant future
growth in the semiconductor production equipment market, we willcontinue to strive to enhance product competitiveness andcustomer responsiveness, as well as improve productivity based ona solid management foundation we set of high profitability, in linewith the material issue, strive for the Best Products, Best Technical
Service, and to achieve medium- to long-term profit expansion andcontinuous corporate value enhancement.

●

●

●

Expand our business in the fields of our expertise, using ouraccumulated technology, in areas where we can leverage ourmanagement know-how
Introduce next-generation products with high added value
required in the future by our customers into the market as early as
possible and provide superior technological services
Conduct proactive R&D investment worth more than 1 trillion yen
in the five years from fiscal 2023
We will endeavor to sell parts and offer upgrades andmodifications for the industry-leading approximately 88,000 units
we have installed to date, and to resolve issues such as improved
utilization rate and yield enhancement for the devices that ourcustomers produce, while also aiming to expand revenue in theafter-market by providing such advanced field solutions. In

Net Sales

15

TOKYO ELECTRON Integrated Report 2023

Senior Vice President
GM, Finance Unit

3 trillion yen or more●●

Operating Margin

35% or more

ROE

30% or more

As we aim to expand medium- to long-term profit andcontinuously enhance corporate value, we will
implement the following growth strategy, financial
strategy, capital policy and shareholder return policy.
1. Growth Strategy●

addition, in preparation to support future cumulative installed
equipment of over 100,000 units, we will also focus on developing
highly efficient high added-value service through such means asremote maintenance service and predictive maintenance utilizing
device operating data and AI
We will expand E-COMPASS, aimed at preservation of the global
environment through the entire supply chain. We have formulateda roadmap and are conducting various activities aimed atachieving our medium-term environmental goals up to fiscal 2031
in order to strengthen environmental initiatives in our products,
plants and offices. Also, we are driving initiatives to achieve ourlong-term environmental goal of reducing greenhouse gas
emissions to net zero by 2050

As high growth is expected in the semiconductor market, we willcontinue to make aggressive R&D investments more than 1
trillion yen to maintain and improve our world-leading
technological innovation during our Medium-term Management
Plan period, which spans five years from fiscal 2023. At the sametime, we plan to invest over 400 billion yen over five years tostrengthen R&D, expand production capacity and improve
productivity through capital investments.
In the Medium-term Management Plan, we have set
financial targets for net sales of 3 trillion yen or more, anoperating margin of 35% or more, and ROE of 30% or more by
fiscal 2027. We aim for sustainable growth and pursue highcapital efficiency, including improving ROE, by further enhancing
the operating margin and asset efficiency, which were achievedin the previous Medium-term Management Plan, and striving to
expand cash flow. We will maintain a solid financial position
while aiming for world-class profit generation.

2. Financial Strategy

Corporate Governance
The semiconductor production equipment market is expected tosee significant growth also in the future, and we anticipate
increasing our business sites, which currently number 83, in 18
countries and regions, to over 100 in the near future. In thesecircumstances, we consider it is important to work on enhanced
corporate governance, in order to achieve sustainable growth. Whileaiming for a Board of Directors that is certain to always achieve an
optimally effective supervisory function, we are also establishing astrong execution system and ensuring expansion of an operating
rhythm that supports business execution in order to further
facilitate growth-oriented management at our global bases.

Hiroshi Kawamoto

Financial Targets (Target Year: Fiscal 2027)

Main Initiatives●

Through our engagement with capital markets, we continuously
work to improve corporate value and capital efficiency.
Additionally, we will enhance our returns to shareholders
through the expansion of profits and cash flow. The specificmeasures are as follows.
Accurately understanding our own corporate value andevaluating stock prices and market capitalization
Achieving an optimal capital structure with awareness ofcapital cost and capital profitability
Executing continuous and aggressive returns to shareholders
based on the expansion of cash flow
Backed by our recent strong profit growth and expectations
for further growth in the future, our market capitalization has
shown strong growth, with PBR (Price Book-value Ratio) of 4.7
as of the end of March 2023. As a result of the capital market’s
evaluation of our corporate value, stemming from ouraggressive shareholder return policy, high-level growthinvestments, recruitment and fostering of excellent humanresources based on our management strategy andcollaborations with customers and suppliers and their results,
our market capitalization has increased significantly comparedto net assets. Furthermore, we executed a 3-for-1 stock split ofcommon stocks effective April 1, 2023. By conducting this stock
split, we established an environment that is easier for investingby reducing the amount per investment unit.

From June 2022, we introduced a Corporate Officer system
aimed at further strengthening governance, speedier decision
making and agile business execution. The corporate officers are
responsible for overall Group management and business execution
as the highest rank on the executive side. They attend Board of
Directors meetings where they explain their business execution,
facilitating appropriate supervision of the executive side by the
Board of Directors and enabling the officers to leveragedeliberations appropriately and speedily at the Board of Directors inbusiness execution.

As a frontrunner in the semiconductor production equipment
industry with high growth potential, we have achieved significant
growth. We will continue to effectively utilize the cash we haveacquired thus far for our next growth investments and pursue
further business expansion in areas where growth is expected toenhance our medium- to long-term corporate value. To realize
our medium-term financial targets, we will implement thefollowing financial strategies to support the targets:Stabilize management by securing working capital for
anticipated business expansion
Maintain a solid financial position
Pursue appropriate cash allocation and balance sheet
management●●●

4. Shareholder Return Policy
Our basic stance is to enhance shareholder value by returning toshareholders, made possible by achieving world-class mediumterm management targets and through a high level of dividends
coupled with flexible repurchases of treasury stocks. Regarding
dividends for shareholders, we mainly adopt a performancelinked model, aiming for a payout ratio of 50% of the net
income attributable to owners of parent. (However, the amountof annual dividend per share shall not be less than 50 yen, andwe will review our dividend policy if we do not generate net
income for two consecutive fiscal years.) For repurchases oftreasury stocks, we will execute it flexibly, taking into accountthe current cash position, funds for medium- to long-term
growth investments, stock price levels and total returnconditions. Note that we have resolved and commenced therepurchase of treasury stocks on May 11, 2023, with a limit of 10
million shares and a purchase amount limit of 120 billion yen.
We will continue to execute this financial strategy to realize
our Vision and achieve our financial targets, while also
contributing to the enhancement of corporate and shareholder
value through engagement with capital markets.

TOKYO ELECTRON Integrated Report 2023

16

Chapter 2
Value Creation Story

Key Indicators for Continuous Corporate Value Enhancement
The Medium-term Management Plan clearly defines financial and sustainability metrics as “key indicators for continuous corporate valueenhancement.” At quarterly review meetings, we regularly check the progress and action plans, and various activities are carried out under
the responsible persons for each indicator.
Target Area
FinanceResearch andDevelopment

Environment

Plants and Offices

Objective

Fiscal 2027●

2,209.0 billion yen●

Operating Margin: 35% or more

Fiscal 2027●

28.0%●

ROE: 30% or more

Fiscal 2027●

32.3%●

 ontinuously create high value-added next-generation products by implementing R&D expense of more than 1 trillion yen over 5
C
years

Fiscal 2027

●

●

●

Refer to Main Initiatives in the Medium-term Management Plan on p. 15-16

R&D investment 191.1 billion yen●

Further deliberate on and implement R&D strategies in the Medium-term Management Plan

76% reduction●

Consider reestablishing objectives for further reductions●

 romote visualization of energy usage and energy efficiency in business activities
PEncourage the purchase of non-fossil certificates and secure a continuous supply of renewable energyReduce total CO2 emissions by 70% (compared to fiscal 2019)

Fiscal 2031●

A rate of 100% renewable energy usage

Fiscal 2031

●

91%

●

Reduce energy consumption (per-unit basis) by 1% from the previous fiscal year at each plant and officeEvery fiscal year●

Achieved goal at 6 of 11 plants or offices●

Promote visualization of energy usage and energy efficiency in business activities●

Maintain water consumption (per-unit basis) at each plant and office at individual base year levels

Every fiscal year●

Achieved 9 out of 13 goals●

Plan and implement actions related to water consumption reduction●

Reduce CO2 emissions of total logistics (own delivery) by 30%* by further promoting modal shift and joint delivery

Fiscal 2027●

11.4% reduction●

Expand modal shift and joint delivery, and introduce electric vehicles* Reestablish due to goal achieved●

Reduce the usage ratio of wood packaging for products to 50% or less (packaging of semiconductor production equipment)

Fiscal 2024●

79.7%●

Promote evaluations and explain and deploy to targeted customers●

Reduce per-wafer emissions of CO2 by 30% (compared to fiscal 2019)

Fiscal 2031●

20.8% reduction●

Implement ahead of schedule the plan to reduce emissions from targeted equipment●

 ngagement survey score: Continuously improve (increase score compared to the previous survey) or achieve a score higher thanE
the average of other companies in each region●F rom fiscal 2016 to fiscal 2023, the overall score increased by 18 points(6 points higher than the previous survey)●Identify current issues through survey result analysis
Plan and execute actions needed to improve employee engagement awarenessJapan: 99%
Overseas: Higher than the industry average (96%)●

Engagement●

Employee retention rates* Japan: 99%, Overseas: Higher than the industry average* Excluding retirement at the mandatory retirement age and so on
Employees

Work-life Balance

Future Initiatives●●

Careers

Fiscal 2023 Performance

Net Sales: 3 trillion yen or more

Logistics
Products

Target Year●

Every survey
Every fiscal year e have created an environment where every employee can create value for the Company’s growth and for society with theWsupport of supervisors and others by challenging themselves to do what they want while imagining their own futures (career
paths) and growing.

Fiscal 2027

 nnual paid leave utilization rate
A
Japan: (1) 80%/(2) 90%
Overseas: Equal to or better than the previous fiscal year’s result

Japan: ( 1) Fiscal 2027/(2) Fiscal 2031
Overseas:
Every fiscal year● atio of female managers
R
Japan: 5%; Global: 8%

Fiscal 2027●

S upply chain sustainability assessment implementation rate
Material suppliers: Covering at least 85% of our procurement spend
Logistics suppliers: 100% of customs-related operators
Staffing suppliers: 100% of employment agencies and contracting companies (internal contractors)

Every fiscal year

S upply chain BCP assessment implementation rate
Material suppliers: Covering at least 85% of our procurement spend

Every fiscal year

●

●

●
●

●

●
●

 nhanced career education for employees from new hires to those inE
their third year of employment
Japan: 70.0%
Overseas: 65.6% (previous fiscal year’s result: 73.1%)

●

●
●
●

Introduce a retirement reason analysis process as a company-wide measure
In companies with high turnover risk, promote individual analysis and initiatives targeting identified groups onduct a reality check on career self-reliance* by generation and job type and consider effective measuresCImplement measures to improve understanding of career self-reliance* among managerial class* Career self-reliance: Refers to the individuals thinking about their own careers and actively managing their career development●●Implement announcements to promote acquisition across all companies
Consider and implement acquisition promotion plans at each company

Improve motivation through mentoring for candidates
Conduct executive roundtables at each company to deepen understanding of DE&I and gain support from management● Maintain and expand the talent pipeline (human resource development plan) through career discussions andcareer seminars (Japan)●

Diversity, Equity &Inclusion (DE&I)

Supply Chain
Management●

Japan: 2.7%
● Global: 5.7%
●

●
●
●

●

●

 aterial suppliers: Achieved 85% or more of our procurement spend
MLogistics suppliers: Achieved 100% of customs-related businesses
Staffing suppliers: Achieved 100% of employment agencies andcontracting companies (internal contractors)●

Assured implementation of actions for understanding issues and remediation based on assessment

Material suppliers: Achieved 85% or more of our procurement spend●

Assured implementation of actions for understanding issues and remediation based on assessment

Fiscal 2027

TCIR 0.33
Special measures activity in accordance with the declaration of safety
emergency● Thorough investigation into the causes of personal accidents that aremanagement priorities● Special safety audits (understanding actual on-site work)

Every fiscal year

1. Seeking a Board of Directors with high effectiveness● As a company with an Audit & Supervisory Board, we improved theratio of outside directors from the conventional one-third (4 out of12) to one-half (3 out of 6)● Off-site meetings: 2 times● At every Board of Directors meeting, in principle, the CEO explains
important matters concerning business execution● CEO mission: Shared with members of the Board of Directors● Closed session on evaluation of representative directors: 2 times
2. Operating rhythm supporting the execution of business● Corporate Officers Meeting: 14 times● CSS meeting: 4 times● Quarterly review meeting: 4 times●●

Safety●TCIR* No more than 0.10 (Globally No. 1 in the industry)* TCIR: Total Case Incident Rate. The number of workplace incidents per 200,000 work hours.
●

Corporate Governance are working at all times to establish an optimal and highly effective Board of Directors and an aggressive managementWe
execution system, and by continuously addressing issues based on evaluations of the effectiveness of the Board of Directors andinput from institutional investors and other stakeholders, we will achieve solid corporate governance for enhancing corporate value
over the medium to long term and sustainable growth.
1. Seeking a Board of Directors with high effectiveness● Audit & Supervisory Board System:
Ratio of outside directors: One-third (including two females), Free and open discussions including corporate auditors● Off-site meetings: For discussions on medium- to long-term strategies, issues, etc. (twice annually)● CEO reports: Reports to the Board of Directors on the status of execution of key duties by the CEO (every Board of Directors meeting)● CEO mission: Information is shared concerning the CEO’s mission for achieving the Medium-term Management Plan
● Representative director assessment closed sessions: Sessions including directors and Audit & Supervisory Board members but
excluding the representative director (once annually)
2. Operating rhythm supporting the execution of business● Corporate Officers Meeting: The highest decision-making body on the executive side (once monthly)● CSS (Corporate Senior Staff) meeting: Global, across-the-board coordination of company-wide business execution (four times
annually)● Quarterly review meeting: Monitoring the progress of the Medium-term Management Plan (four times annually) romoted DX of risk management activities
PStrengthened risk management PDCA and the efficiency of risk
identification and evaluation at the Group level● Positioned the Risk Management Committee as a standingorganization to promote the PDCA of company-wide risk management
activities, and conducted biannual monitoring for risks assumed in
conducting business● Developed and implemented activity plans for relevant risks such as
production risks and corporate risks at Group companies. Also,
strengthened communication between the head office and Group
companies for system enhancement● Implemented compliance risk assessment through an externalorganization, and then improved and executed the compliance program● Continued to conduct ethics, compliance, and risk management training

 ontinue efforts from the previous fiscal year
C
Disseminate safety regulations● Strengthen appropriate safety training depending on the nature of the work
● Ensure feedback of equipment safety design information to the technical department●●●

 iming to become the top company globally in the medium to long term we will continue to work on each ofA
the following matters to further strengthen the supervisory function of the Board of Directors and the
management and execution functions of the executive side and will further enhance its effectiveness byregularly reviewing its progress.
● The company will systematically set agendas in line with medium to long term strategies and issues for
growth, and will enhance discussions from a long term perspective● The company will enhance the effectiveness of the Corporate Officers Meeting, the highest decision making
authority on the executive side● The company will conduct an analysis of the decision making of the Board of Directors, clarify the points ofdeliberation, and enhance opportunities for sharing information with outside directors and outside Audit &Supervisory Board members on occasions other than board meetings and off-site meetings●●

Risk Management

17

We are building and further improving a highly effective risk management system that supports a strong management foundation.
● We are enhancing risk management and compliance based on the slogan “Safety, Quality and Compliance. Our top priority. It’s
our pride.”
Together with establishing a dedicated Compliance Department at our headquarters and appointing a Chief Compliance Officer
and Regional Compliance Head, we are also conducting assessments by external agencies and undertaking education.
● We are conducting supervision and monitoring through reports to the Corporate Officers Meeting—the highest decision-making
body on the executive side—and the Board of Directors (twice annually).
● To conduct appropriate measures with certainty across the entire Group, we are identifying risks (12 risks in fiscal 2024) expectedin the execution of business centered on the Risk Management Committee and deploying them in the activities of each company.
● We are continuously conducting activities to foster awareness about safety, compliance and risk management, and reflecting theawareness of all executives and employees as well as their autonomous and specific initiatives in our human resource evaluation.

TOKYO ELECTRON Integrated Report 2023●

Every fiscal year stablishing a highly effective risk management PDCA posture across all Group companies, early detection ofEsignificant risks assumed in business execution, and assured implementation of measures
Continually foster a corporate ethical culture to prevent serious incidents, and establish a compliance posture● Plan and further improve education and training● Emphasize and deploy training targeting managers●●

TOKYO ELECTRON Integrated Report 2023

18

Chapter 2
Value Creation Story

Outlook of Semiconductor Production Equipment BusinessWith the acceleration of society’s digital shift, vigorous
investment took place in various fields including logic andfoundry for leading-edge semiconductors along withsemiconductors for vehicles and industry. The semiconductor
market was worth in the range of US$574.0 billion in 2022, andconsequently, the wafer fab equipment market was worth
approximately US$100 billion. In the future, the importance ofsemiconductor technological innovation for the shift towards adata-driven society and decarbonization is expected to lead tosignificantly greater expansion of the semiconductor market,
which is forecast to be worth over US$1 trillion by 2030—growththat will more than double the current market.

Semiconductor Market(US$ trillion)

Over US$

1 .0

0.8

1 trillion (2030)

US$ 574.0 billion (2022)

0.6
0.4
0.2
0.0

1990

DRAM
In DRAM, we believe that requirements will also grow not only fortechnology to further advance 2D scaling, but also for technology
for high aspect ratio capacitor and contact formation. While manyof our deposition, etch and cleaning systems are used for thistechnology, we will continue to provide new products andsolutions to achieve even higher density. In the future, along withadvancement in 2D scaling, a shift to 3D DRAM, that adopts 3D
structures, is also expected. In 3D DRAM, as with the shift from 2D
to 3D NAND, vertical multi-layering will drive scaling in place of 2D
lithographic scaling. This is particularly expected to increase theimportance of the deposition and etch processes.

■

2000

2010

2020

2030 (CY)

Source: WSTS (1990-2022) / IBS, June 2023 (2023-2030)

Semiconductor Device Technology Evolution and Business Opportunities
Further growth in the semiconductor and semiconductor
production equipment markets will be supported by technologicalinnovation in semiconductor devices. In logic/foundry, NAND and
DRAM applications, increased demand for further scaling, lower

manufacturing costs per transistor or bit through higher multilayering, lower power consumption and higher speeds is expected.
We will utilize our broad product lineup to contribute to the
manufacturing of devices with a highly competitive advantage.

Semiconductor Devices and Our Product Lineup
Logic

DRAM

NAND

3D System
Integration

Wafer Bonder/
DebonderThermal processing

Wafer prober

ALD** Atomic Layer Deposition

Single wafer
deposition

Coater/Developer

Plasmaetch

Logic/Foundry
Increasing patterning complexity requires co-optimization between
unit processes. It is expected that high-NA EUV1 lithography
technology will be applied to mass production to achieve further
scaling going forward. In addition to scaling through high-NA EUV,
various new technologies and structures will be introduced.
Transistor structures are expected to shift from FinFET2 3D models
to new structures (GAA NS3 and CFET4). In wiring technology,
progress is being made in development of backside wiring to
reduce power supply wiring resistance, while also effectively using
new materials instead of Cu, and available space. Our front-end
process equipment and wafer bonding equipment will contributeto the realization of this kind of technological innovation.
■

1	High-NA EUV: Refers to next-generation EUV, an exposure technology that shortens the resolvableline width by increasing the numerical aperture (NA)2	FinFET: Fin Field Effect Transistor, a process technology with a three-dimensional structure in the
shape of a fin
3	GAA NS: Gate All Around Nanosheet, a next-generation technology for FinFET
4	CFET: Complementary Field Effect Transistor, transistor with a new structure

19

TOKYO ELECTRON Integrated Report 2023

Gas chemical
etchSingle wafer
cleaning

NAND
3D NAND multi-layering is progressing even further, and layercounts will increase to 300 and 500 in the future. Accordingly, thiswill require etch that enables processing of deep holes andtrenches with a high aspect ratio5, high productivity sacrificial film
removal and atomic level deposition on 3D structure. Also, there isdemand for greater capacity and increased data transfer speed,which requires enhanced performance of peripheral circuits toachieve, however there remain issues due to limitations on
performance and scaling arising from the thermal processing used
when molding memory cells. To resolve this, development isunderway aimed at mass production of 3D integration technology
to manufacture and bond memory cells and peripheral circuit inseparate wafers. We are striving to further improve theperformance of our etch, ALD and wafer bonding equipment tomeet these technological requirements.

■

5	Aspect ratio: Depth to width ratio of the pattern formed on the wafer

3D System Integration
In 3D integration using wafer bonding technology, in addition to
NAND, progress is also being made in aspects such as theapplication of mass production of stacked CMOS image sensors forthe production and bonding of separate wafers for pixel and signal
processing circuits. Also, development is underway of 3D system
integration for 3D packaging of high-capacity memory, etc. to logic
circuits to realize higher speeds, lower power consumption andincreased functionality of devices. These are used for bonding
wafers together and for bonding operation-tested KGD6. We
contribute to evolve the leading-edge device and the system level
performance by providing wafer bonding and laser edge trimming
systems based on the technology and experience we havecultivated in front-end processes.

■

6	KGD: Known Good Die. Semiconductor chips that are quality assured, including for reliability

Development for Several Generations through Collaboration with Customers
With the increasing technical difficulty of scaling, in addition to theevaluation of the Nth mass production generation, developmentfrom N+1 to N+4 is also progressing simultaneously for leadingedge memory, logic and foundry. As a semiconductor production
equipment manufacturer, high technology development
capabilities, resources in engineering and a strong financial
foundation are required in order to continue this kind ofdevelopment and evaluation with semiconductor manufacturers.
We work with semiconductor manufacturers, who are ourcustomers, in our respective roles to co-create long-term
technology roadmaps and develop and evaluate technologies up to
four generations ahead. We are able to quickly demonstrate both
equipment and process performance by conducting evaluations
using wafers that are actually used in the manufacturing processesof our customers. Through initiatives like this, we steadily createhigh-value-added products and strive to capture new business
opportunities.
Development and Evaluation up to Four Generations Ahead

N+1
N+2

Demo Evaluation(TEL)
Demo Evaluation(Customer)
Mass Production

N+3
N+4

Further Strengthening of Development Structure
In order to advance the simultaneous development and evaluationof leading-edge technology up to four generations ahead, we will
endeavor to further strengthen our development structure.
In 2023, we completed a new development building at theTokyo Electron Technology Solutions Hosaka Of fice for thedevelopment of film deposition and gas chemical etch as well as
corporate development, and in 2025, we are also planning toTokyo Electron Technology Solutions
Hosaka Office New Development Building(Completed in July 2023)

Tokyo Electron Miyagi
New Development Building(Completion scheduled for spring 2025)

operate a new development building at Tokyo Electron Miyagi for
etch system development, and another at Tokyo Electron Kyushu
for coater/developer and cleaning system development.
In the future, we will continue proactive R&D and capital
investment to ensure the realization of sustainable growth.

Tokyo Electron Kyushu
New Development Building(Completion scheduled for summer 2025)

TOKYO ELECTRON Integrated Report 2023

20

Chapter 2
Value Creation Story

Value Creation Model
We will make the most of the capital we own and continue to provide new value that contributes to the resolution of issues anddevelopment of industry and society through the development of a value chain in our business activities in research anddevelopment, procurement and manufacturing, sales and installation and maintenance services.

INPUT (investment capital) Fiscal 2023

OUTCOME (created value) Fiscal 2023

Financial capital
Net assets
Equity ratio
Total assets

Financial capital

1,599.5 billion yen
68.7%

The Driving Forces of Growth Behind Our Company

2,311.5 billion yen

Abundant technological capabilities cultivated as an industry leader

Manufactured capital

Challenging spirit of our employees, who are capable of flexibly and rapidly
adapting to changes in the environment

Manufacturing sites 9 total(6 in Japan and 3 overseas)

Many years of know-how and provenperformance in manufacturing operations

Research andDevelopment

Installation and
Maintenance Services

R&D investment
191.1 billion yen
A high level of expertise in numerous areas,
and the ability to fuse this knowledge
together to create new products

Provide prompt and accurate
high-value-added service
supporting the stable operationof equipment

Product
CompetitivenessBroad-ranging knowledge andtechnological capabilities in semiconductor
manufacturing processes

Sales

Human capital

Propose optimal solutions
as the sole strategic partner

17,20467.6%

1,495,000

TOKYO ELECTRON Integrated Report 2023

Solutions for key processes in semiconductor scaling
Number of patents owned 21,645

Suppliers

Human capital
Retention rate*● Creating a workplace

Employees* Include individual contributors in the number of managers

environment repletewith dreams and vitalitythat enables employees
to realize their fullpotential based on
mutual trust between
the organization andindividuals

Social and relationship capital● The revitalization of andPercentage of respondents who selected “Very Satisfied”
100%
or “Satisfied” in the Customer Satisfaction Survey** For each question, average score is calculated for all customers who responded

30.5%(compared to fiscal 2022)

Local
Communities

Creating employment opportunities in and paying taxes to local
municipalities and nations where we carry out business activities

OUTPUT

operations across oursustainable and highly
competitive supply chain● Improving added valueof products and services
handled, throughcollaboration with us

96.2% (Global)

Ratio of female managers* 5.7% (Global)

Semiconductor Production Equipment
Field Solutions
m3● Deployment of business

Product lineup with No. 1 or No. 2 market share

Number of TEL FOR GOOD* programs

194* TEL FOR GOOD: The brand name for Tokyo Electron’s social contribution activities
Natural capital

Energy consumption 106,637kL

21

Innovative, high-value-added unique technologies

Efficiently manufacturinghigh-quality products
backed by a sustainablesupply chain

Foundation for business activities inlocal communities
Natural capital

Customers

continuous growth forcustomers● Improving productivity(utilization rate andyield) and reduced
environmental impact
in semiconductor
manufacturingIntellectual capital

Rate of improvement after supply chain
sustainability assessment

Solid partnerships with our suppliers● Value creation and

Observing equipment delivery and installation schedules

Building of relationships of trust with stakeholders by employeeswith a high level of engagement

Social and relationship capital

Water consumption

Safety-first operation: TCIR 0.33

Procurement andManufacturing

Human resource development throughTEL UNIVERSITY

generated from businessactivities● Realization of mediumto long-term growthand enhancement incorporate value

Manufactured capital

Improvement in desire for growth and demonstration of the challenge
spirit in employees, who both create and fulfill company values

Personnel able to perform globally

Relationship of mutual trust withcustomers built through many years of
performance records

Shareholders/
Investors

Highly efficient and high-quality service

Management Foundation

Impact● Return of profit* Calculated using data on turnover rate

Equipment-related data accumulated
through AI and knowledge management

Proportion of engineers

Continuously
strengthening researchand development to create
innovative and unique
technologies in a timely
mannerCustomer
HigherResponsiveness Productivity

Customer requests and technology trends

Number of employees

Total annual dividend

High-quality and high-reliability products incorporating leading-edge
technologies

Increasing of production capacity and leveling

14 totalR&D sites(7 in Japan and 7 overseas)

ROE

2,209.0 billion yen
28.0%
471.5 billion yen
32.3%
267.9 billion yen (payout ratio: 56.6%)

Cumulative number of equipment installations: Approximately 88,000 units(annual shipment volume of approximately 6,000 units)

Manufacturing-related capital investment,such as new plant buildings andmanufacturing equipment

Intellectual capital

Net income

Stakeholders

Own CO2 emissions

76% reduction

CO2 emissions not from our Group (per wafer)

20.8% reduction

Waste material recycling rate

98.5%

(compared to fiscal 2019, reduction of 132 kilotons due to renewable energy usage)(compared to fiscal 2019)sustainable development
in local communities
through humanresource development,
employment
opportunities, initiatives
to preserve the local
environment andpaying taxes to local
municipalities

Realization of Vision and Practice of Corporate Philosophy

Absolute trust from customers based on our reliable technical services

Net Sales
Operating margin

IMPACT● Carrying out businessGovernments/
Associations

activities that comply
with laws andregulations, industry
codes of conduct andother rules● Initiatives that help theindustry and society
solve issues and develop
through collaboration
with usTOKYO ELECTRON Integrated Report 2023

22

Chapter 2
Value Creation Story

Stakeholder Engagement
Actively providing opportunities for engagement with our stakeholders and promoting mutual communication
allows us to accurately comprehend their demands and expectations as we deploy our business activities.
We strive to build a solid relationship of mutual trust with all the stakeholders surrounding our company byworking steadily to fulfill our roles and responsibilities in society.

Relationship with Stakeholders
 hareholders and investors provide our company’s capital,
S
while expressing their opinions, demands and expectationsof our company from the shareholder/investor perspective
through constructive dialogue and through exercising theirvoting rights at the Shareholders’ Meeting● We share our management vision and growth scenario withshareholders and investors, and incorporate the opinions
and demands we hear from them into our management inan effort to enhance our corporate value●aSh

Value Provided to Stakeholders●●

Return of profit generated from business activities ustomers purchase the semiconductor production equipment weCprovide and also utilize services necessary for maintaining that
equipment● We not only provide products, services and solutions but also createtechnology roadmaps spanning multiple generations and carry out
joint technology development with customers
●

to m

er s

●

Value Provided to Stakeholders
 echnology conferenceTJoint development● Customer Satisfaction Survey●●L ocal communities are striving to offer more value by working
to foster local industry and educate human resources● We contribute to the development of the local communities
where we operate through employment opportunities,
initiatives to preserve the local environment and paying taxes
to local municipalities

Value Provided to Stakeholders
Humanresources development and employment
opportunities● Promotion of environmental preservation in communities●●

Financial contributions through tax payments

23 TOKYO ELECTRON Integrated Report 2023

High-value-added Best Technical Service

 nvironmentally friendly products and services with a focus onEsafety and quality● Solutions that satisfy a variety of application needs uppliers supply the materials and human resources necessary forS
our company’s business administration, and also perform customs
clearance, logistics operations and other operational services● In addition to purchasing these materials and operational services,
we cooperate with our suppliers on the further development andimprovement of these aspects and enhancement of their quality.
We build a sustainable supply chain that takes into account labor,
the environment, health and safety, ethics and the like●

 ooperation withC
government andadministrative agencies● Collaboration with
global initiatives andNGOs etc.
● Industry group
activities

 roduction updateP
briefing● TEL Partners’ Day/TEL E-COMPASS Day● Sustainability
assessment● STQA* audit●●*	STQA: Supplier Total Quality
Assessment

 olutions that help the industry and society solve
S
issues and develop● Business activities that comply with laws andregulations, industry codes of conduct and other rules●

Best Products incorporating leading-edge technologies●

Relationship with Stakeholders●

Relationship with Stakeholders●●

T EL FOR GOOD
(Social contribution activities)● T ours of plants and offices● E nvironmental debriefing
●

Lo
ca
lC
om
mu
nit
ies

Employee meetingGlobal engagement survey● Training and workshops

Suppliers

Value Provided to Stakeholders

 arnings release conference,E
Medium-term Management Plan
briefing, IR Day● IR conference, IR road show*,
individual IR interview● Shareholders’ Meeting

C us

shareholders and investorss
Governments/Association

 overnments and associations not only requireG
companies to comply with laws, regulations, industry
codes of conduct and other rules, but also aim to work in
partnership with companies to bring about development
at the industrywide, national and community level● While carrying out our business activities incompliance with such laws, regulations, industry
codes of conduct and the like in the countries andcommunities where we operate, we contribute tosocial development and the resolution of societal
issues by accurately grasping social needs
●

e

ves

*	IR road show: IR activities presented directly to ealization of medium- to long-term growth andRenhancement in corporate value

Relationship with Stakeholders

re

ld
ho

In
rs /

Relationship with Stakeholders

to r sValue Provided to Stakeholders
 urther improving added value of products and services throughF
collaboration with our company● Business opportunities in the semiconductor production equipment
markets● Maintaining soundness and strengthening competitivenessthroughout the entire supply chain●●

Relationship with Stakeholders

●

s
ee
y
o
pl
Em

 ur employees contribute to enhancing our corporate value byOdemonstrating their individual capabilities and pursuing personal
growth through making use of opportunities for education● We promote the improvement of employee engagement undermanagement that emphasizes employee motivation●

Value Provided to Stakeholders
 workplace environment replete with dreams and vitality thatA
enables employees to realize their full potential based on mutual
trust between the organization and individuals● Opportunities for career development and skill improvement●●

Fair performance review and remuneration commensurate with results

TOKYO ELECTRON Integrated Report 2023

24