TOKYO ELECTRONINTEGRATEDREPORT 2021

Cover Image“Digital × Green”

Akasaka Biz Tower, 3-1 Akasaka 5-chome
Minato-ku, Tokyo 107-6325, Japan
Tel: +81-3-5561-7000
www.tel.com

TEL is a registered trademark or a trademark of Tokyo Electron Limited in Japan and/or other countries.

PR59-313

Editorial Policy
Contents
Issuance of an Integrated Report

Tokyo Electron has issued an integrated report from this year for the purpose ofreporting our medium- to long-term profit expansion and continuous corporate valueenhancement to our stakeholders. This report contains a message from the CEO, alongwith information such as material issues and value creation model. The continuous
creation of value in the value chain of our business activities is also explained alongwith our sustainability initiatives.
We remain committed to accurately comprehending all of our stakeholders’demands and disclosing information timely and transparently.

Chapter1

About Tokyo Electron

Continuous Improvement of
Business Operations

42

3

CEO’s Message

5

TEL Values

12

Corporate Governance

43

Scope

Company Overview

13

Message from the Chairman of the Board

47

This report and related data cover the entire Tokyo Electron Group (28 consolidated
companies, including the Group companies), with the exception of some domestic(Japan-exclusive) content.

Financial and Non-financial Highlights

15

Compliance48

Risk Management

49

Information Security

51

Engagement with Capital Markets

52

Evaluation from Third-party Institutions

52• International Integrated Reporting Council (IIRC): International <IR> Framework• Ministry of Economy, Trade and Industry: Guidance for Integrated Corporate
Disclosure and Company-Investor Dialogues for Collaborative Value Creation• Global Reporting Initiative (GRI): Sustainability Reporting Standards• Environmental Reporting Guideline 2018, Ministry of the Environment,
Government of Japan• Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)

Characteristics ofProduction Equipment Business

Chapter2

Issued Date
August 2021

16

Material Issues andValues Provided
Material Issues

17

Medium-term Management Plan

18

Value Creation Model

21

Stakeholder Engagement

23

The Driving Forces behind Our Company

24

Fiscal 2021 (April 1, 2020, to March 31, 2021), some content also covers fiscal 2022
ChapterContact
Tokyo Electron Limited
Akasaka Biz Tower 3-1 Akasaka 5-chome, Minato-ku, Tokyo 107-6325, Japan
www.tel.com/contactus/

3

Value Creation by theValue Chain

Tokyo Electron’s logo was created as a symbol for our next stage of growth, based on
our Corporate Philosophy and vision. This simple design represents our reliability andthe engaging presence we bring to a competitive industry. The green square at thecenter of the logo signifies the core of innovation supporting development in theindustry; the translucent blue expresses our leading-edge advanced technology. We
strive to contribute to the development of a dream-inspiring society through ourleading-edge technologies and reliable service and support.

4

Achieving Greater Growth
Aiming to Be a Truly Excellent
Global Company

53

Financial Review

55

Consolidated Eleven-Year Summary

59

Sustainability Data

61

Initiatives in the Value Chain

25

Consolidated Subsidiaries

67

Research and Development

27

Stock Information

68

Procurement and Manufacturing

29

Sales

31

Installation and Maintenance Services

33

Sustainability Initiatives in the Value Chain

Tokyo Electron’s Logo

Chapter

Data Section

Period Covered

TOKYO ELECTRON Integrated Report 2021

41

Corporate Philosophy/Management Policies

Reference Guidelines

1

Quality

Financial Section
Consolidated Financial Statements

69

Environment

35

Notes to Consolidated Financial Statements

75

Safety37

Business-Related and Other Risks

89

Human Rights

37

Independent Auditor's Report93

Supply Chain Management

39

Human Resources

40

TOKYO ELECTRON Integrated Report 2021

2

Chapter 1

About Tokyo Electron

Corporate Philosophy

Management Policies

The Corporate Philosophy defines the purpose of

The Management Policies highlight the management values thatTokyo Electron’s existence and its mission in society.

Tokyo Electron regards as essential to achieving the objectives defined in

It represents TEL‘s basic way of thinking that forms the foundation for

its Corporate Philosophy. They express the logic that underscores

its corporate activities.

our eight general rules of management.

 Profit is Essential

We strive to contribute to the developmentof a dream-inspiring society throughour leading-edge technologies and reliable
service and support.

The TEL Group aims to contribute to thedevelopment of society and industry and to
the enhancement of corporate value while
continually pursuing profit.

 Growth Philosophy
We will tirelessly take on the challenges oftechnological innovation to achieve
continuous growth through businessexpansion and market creation.

 Employees
The TEL Group’s employees both create andfulfill company values, performing their workwith creativity, a sense of responsibility, and acommitment to teamwork.

 Safety, Health, and the Environment
The TEL Group gives the highest consideration
to the safety and health of every person
connected with our business activities as wellas to the global environment.

3

TOKYO ELECTRON Integrated Report 2021

 Scope of Business
The TEL Group leads markets by providing
high-quality products in leading-edge
technology fields with a focus on electronics.

 Quality and Service
The TEL Group strives to understand the trueneeds to achieve customer satisfaction andsecure customer trust while continuously
improving quality and service.

 Organizations
The TEL Group builds optimal organizations
that maximize corporate value in which all
employees can realize their full potential.

 Social Responsibility
Feeling a strong sense of corporate social
responsibility, we strive to gain the esteem ofsociety and to be a company where our
employees are proud to work.

TOKYO ELECTRON Integrated Report 2021

4

Chapter 1

About Tokyo Electron

CEO’s Message
Practice of the Corporate Philosophy:
Semiconductors and Displays
in a “Digital × Green” Society

Toshiki Kawai
Representative Director,
President & CEO

Toward Expansion ofMedium- to Long-term Profit andContinuous Corporate Value Enhancement
I would like to express my sincere gratitude to all
stakeholders for your continued support and patronage.
Tokyo Electron was established in 1963 by a few
young people full of venture spirit. That spirit has been
passed down through the years, making it possible for us
to launch innovative equipment for semiconductor and
LCD panel manufacturing, areas characterized by rapid
technological change.
With the spread of IoT, AI and 5G today, the shift
toward a data-driven society is accelerating, and we

5TOKYO ELECTRON Integrated Report 2021

expect to see further expansion in business
opportunities against a backdrop that demands
unending technological innovation.
Amid such circumstances, we constantly remainaware of the “Purpose” of our existence in society, as
represented by our Corporate Philosophy: “We strive tocontribute to the development of a dream-inspiring
society through our leading-edge technologies andreliable service and support”. By leading the world in thecreation of high-value-added technologies, we strive toexpand profits in the medium to long term, andcontinuously enhance our corporate value.

The previous year 2020 saw the global spread of
COVID-19 and frequent natural disasters arising fromclimate change, including torrential rains in Japan andhurricanes and cold spells in North America. In addition,
there were geopolitical issues such as trade friction as
well as various human rights issues that occurredworldwide. It became a year carved in history as one that
had a major impact on society and the lives of people.
On the other hand, it was also a year when digitaltransformation (DX) made progress in our daily lives andall kinds of industries, and the importance ofsemiconductors, which are essential for information andcommunication technologies (ICT), became prominent.
As the shift toward a data-driven society accelerates
and efforts to solve global environmental problems
progress, “Digital × Green” has become a major trend
worldwide. Green refers to carbon neutrality, the goal of
decarbonization by suppressing CO2 emissions. (Fig. A)

Fig. A: Trend toward the Future

Therefore, the world is currently pushing firmly ahead
with implementing ICT and DX as well as taking action torealize a carbon-free society in order to build a strong
and resilient society in which economic activities do notstop under any circumstances.
Going forward, the digitalization of all kinds ofindustries will penetrate widely through society,including the evolution of new technologies such as
autonomous driving and smart fabs, smart agriculture,
smart medical care, and smart cities. Standing at theircore and supporting them are semiconductors.
Semiconductors were first used in computers andtelevision sets and then spread to mobile phones. They
are now no longer simply chips that power things but
have instead become an infrastructure for the whole ofsociety. It is only with semiconductors that thedigitalization of society becomes possible. The
technological demands on semiconductors, such aslarger capacity, higher speed, higher reliability, and lower
power consumption, are limitless.
Alongside the evolution of semiconductors are displaysthat form the interface between people and data.
Technological innovation continues to center on organic
light-emitting diodes (OLEDs), and application is expanding
beyond the concept of just being monitors. Technologicalinnovation will continue as long as efforts to makedisplays more beautiful and easier to use continue. (Fig. B)

Fig. B: Technological Demands on Semiconductors and Displays

Digital (ICT/DX) × Green (decarbonization)
Largercapacity

Higherdefinition
Thinner

Higherspeed

Semiconductors

Displays
Lighter

Higherreliability
Foldable
Lower
power
consumption

Lower
power
consumption

TOKYO ELECTRON Integrated Report 2021

6

Chapter 1

About Tokyo Electron

Reflecting on the past, the 1990s were called
computer-centric, with personal computers driving thesemiconductor market. We then entered themobile-centric 2000s, when smartphones drove themarket. Going forward, we will enter the age of DX,
where billions of “things” will be connected to theinternet and the big data generated by these things will
drive society. Global data traffic is expected to increase at
a compounded annual growth rate of 26%1.
The semiconductor market will expand greatly tosupport the explosive increase in data traffic. In thenearly 70 years since the invention of the transistor in
1947, the size of the global semiconductor market
reached approximately US$440 billion in 2020. It is
expected to reach US$1 trillion in 2030, more than twice
the size of the current market which has grown over the
past 70 years. In other words, it means a market that is
the same size or greater than the current one willdevelop in the next 10 years. (Fig. C)
The wafer fab equipment (WFE2) market that we are apart of is expected to have a market size of over US$90
billion in 20213. Looking toward the future, further growthis expected with the trends toward ICT, DX,decarbonization, electric vehicles, autonomous driving
and post-5G communication, and just as thesemiconductor market is expected to reach US$1 trillion,
the WFE market will also enter what we refer to as a new“Big Years” growth phase. (Fig. D)
To achieve further growth, we will ride the wave ofsuch technological innovation and create high-addedvalue technologies that the world has never seen andonly we can accomplish. Applying our expertise as an
equipment manufacturer developed through being an
industry leader and using all management resources,
including our employees who both create and fulfill
company values, we will contribute toward achieving thesocietal shared value of balancing “Digital × Green”. We
will strive to practice our Corporate Philosophy andachieve sustainable growth through these efforts andmeet the expectations of all stakeholders.
1 A compounded annual growth rate of 26%: Omdia’s projection for 2020-2030
2 WFE: Wafer Fab Equipment. The semiconductor production process is divided
into front-end production, in which circuits are formed on wafers and inspected,
and back-end production, in which wafers are cut into chips, assembled andinspected again. Wafer fab equipment refers to the production equipment usedin front-end production. Refer to Semiconductor Manufacturing Process andOur Main Products on p. 14.
3 Market size for 2021 is our estimate as of August 16, 2021.

Medium-term Management Plan

Our Material Issues

In May 2019, we revised our Medium-term Management
Plan upward. We developed a financial model that shows
the relationship between operating margin and return on
equity (ROE) that we should seek to achieve for eachanticipated sales scope. The model’s core targets are toachieve net sales of 2 trillion yen, an operating margin of
30% or more and an ROE of 30% or more by fiscal 2024.
It was designed to capture as much growth potential as
possible while steadily reinforcing our financial strengthand seeking to achieve world-class profits and ROE.
(Fig. E)
Through these profits, we will achieve shareholder
satisfaction and stable and enriching lives for our
employees in all business situations. We will also strive toinvest in technology development and secure
outstanding human resources for continuous growth. In
addition, we will seek financing when necessary underfavorable conditions by building a solid financial
foundation based on profits and fulfill our corporate
responsibility by paying proper taxes.
For fiscal 2022, we forecast net sales to be 1,850 billion
yen with a 27.5% operating margin*. We assess that weare making smooth progress toward our targets and willcontinue to work as one to achieve this financial model.

We define our material issues as we strive for medium- tolong-term profit expansion and continuous enhancementof corporate value. In addition to “Management
Foundation”, with areas such as safety, quality,
compliance, governance and risk management that
support our business activities at the foundational level,
our material issues consist of “Product Competitiveness”,“Customer Responsiveness” and “Higher Productivity”. As
a manufacturer, we always keep in mind the pursuit ofbecoming “Only One, Number One” through sales andsupport of equipment with world-leading performancethat fulfills extreme technological needs; that is to say,we offer the Best Products and Best Technical Service. We
will quickly grasp the changes in the trends of and needs
for leading-edge technologies to create next-generation
products with overwhelming added value andperformance required by customers in the future; be thesole strategic partner using our customer responsiveness;and further strengthen our earning power using higher
productivity based on continually improving operational
efficiency. (Fig. F)* Net sales and operating margin for fiscal 2022 are estimates as of August 16, 2021.

Fig. C: Outlook for the Semiconductor Market

Fig. D: WFE Market Trends

Fig. E: Financial Model of Medium-term Management Plan

The semiconductor market will grow to more than
twice its current size in the next 10 years
US$1 trillion(US$ trillion)

Ride the wave of technological innovation
toward a new growth phase

Aiming for world-class profits and ROE(US$ billion)

Fig. F: Our Material Issues

Create strong
next-generation products
Financial Model of Medium-term Management Plan (by Fiscal 2024)

100
1.0
80

0.8

60

0.6

US$440.4 billion

0.4

ICT, DX,
decarbonization,
electric vehicles,
autonomous
driving, post-5G

40

0.2

20

0.0

0

Net Sales¥

1.5 trillion¥

1.7 trillion¥

OperatingMargin26.5 %

28.0 %>30.0 %

ROE
2000

2010

2020

Source: 2000‒2020 (WSTS), 2021‒2030 (IBS, April 2021）

7

TOKYO ELECTRON Integrated Report 2021

2030

1990

2000

2010

2020

2030

2.0 trillion

Product
CompetitivenessBe the sole
strategic partner

Continually improve
operational efficiency

Customer
Responsiveness>30.0 %

HigherProductivity

Management
Foundation

Source: VLSI Research (1990‒2020)

TOKYO ELECTRON Integrated Report 2021

8

Chapter 1

About Tokyo Electron

Leveraging Expertise and Strengths

Sustainability Initiatives

Based on these aforementioned ideas, we will adopt
strategies that maximize the application of our expertise andstrengths, which are as follows: (1) being the only
manufacturer in the world with the series of four key processsystems required for semiconductor scaling; (2) having thenumber one or two product share for these systems; (3)specifically, our 100% share of coater/developers for EUV
lithography, which is essential for leading-edge scaling; and(4) delivering approximately 4,000 units annually and having
a cumulative number of equipment installations ofapproximately 76,000 units, the largest number in theindustry, through which sold equipment become new
business opportunities and build a business model for field
solutions that generate value. (Fig. G)
Under such circumstances, we plan to invest 165
billion yen for research and development in fiscal 2022,
the highest amount ever. When we revised theaforementioned Medium-term Management Plan, we
announced a research and development investment planof approximately 400 billion yen in the three years
starting from fiscal 2020. We are executing investments
according to this plan. Going forward, we will continue toproactively invest in growth using our solid financial
foundation based on profits.
Virtually every semiconductor or display in the world
passes through our systems. We will further grow ourstrengths and bring in growth opportunities to thefurthest extent possible.

Our sustainability initiatives are the practice of our
Corporate Philosophy itself. We will achieve sustainablegrowth and the enhancement of corporate value by
using our unique expertise as an equipment
manufacturer and contributing to the development ofindustry and society.
The Environment
Based on this approach, we are undertaking the buildingof a carbon-free society from three perspectives.
First, we will contribute toward higher performanceand lower power consumption for semiconductor
devices being used around the world. We will create thesocietal shared value of balancing “Digital × Green” bypromoting technological innovation together with ourcustomers.
Next is saving energy during the operation ofequipment. In December of last year, we revised our
Medium-term Environmental Goals for 2030,
announcing our goal of reducing per-wafer CO2
emissions by 30% compared to 2018.
The third perspective is the activities at our plants andoffices. We have set our goals to achieve a rate of 100%
renewable energy usage and a 70% reduction in total CO2
emissions compared to 2018 by 2030. (Fig. H)
We will fulfill our mission and responsibility towardachieving decarbonization based on industry-leading,
top-class goals.

We established E-COMPASS (Environmental
Co-Creation by Material, Process and Subcomponent
Solutions) in June of this year as a new supply chain
sustainability initiative. We will actively endeavor topreserve the global environment throughout the
supply chain. (Fig. I)
Human Resources
We believe corporate growth is about people, andemployees both create and fulfill company values. Basedon this approach, we place importance on the following
three perspectives.
The first perspective is from the corporate culture andcodes of conduct that we have cherished since ourfounding, and we summarized them as TEL Values1. We
always keep in mind the TEL Values as we strive to create
a company replete with dreams and vitality.
The second perspective is from management thatemphasizes motivation. “Employee capabilities andmotivation” is essential for the Company’s growth, andwe focus on improving employee motivation together
with the strengthening of human resource development
such as through TEL UNIVERSITY2. We see the main
components of employee motivation as (1) dreams andexpectations of the Company’s future; (2) opportunities
to take on challenges; (3) fair evaluations that recognize
employee effort; and (4) an open workplace. Based onthese components, we introduced a new humanresources system in July of 2017 to promote theimprovement of communication between managers and1 Refer to TEL Values on p. 12
2 TEL UNIVERSITY: An in-house educational establishment, helping employees toindependently build their careers and realize their personal goals

Fig. G: Systems for Series of Four Key Processes

Fig. H: Medium-term Environmental Goals

Fig. I: E-COMPASS

Leading-edge systems supporting technological innovation

CO2 emission reduction goals (2030)

Pursue “Digital × Green” change throughout
the supply chain

Products

Deposition

Coater/Developer

Etch

Cleaning

30% reduction

Per wafer (compared to 2018)

Plants and offices

70

Environmental Co-Creation by Material,
Process and Subcomponent Solutions% reduction

TOKYO ELECTRON Integrated Report 2021

Best Products・Best Technical Service

Total emissions (compared to 2018)100

A rate of%renewable energy usage

9

their subordinates. In addition, the Corporate Senior Staff(CSS), consisting of our executive officers andmanagement executives of overseas subsidiaries, reviews
the progress of the entire Group’s overall growth strategy
and additional measures every quarter to improve
openness and mobility within our organization. I also
personally communicate the Company’s direction at
employee meetings being held at each location and listen
to on-site opinions and proposals from employees
directly in an effort to make prompt and accurate
management decisions.
The third perspective is from human resource
diversity. With 76 locations in 18 countries and regions
around the world, 42% of our employees are foreign
nationals. We actively implement initiatives for global
diversity, including appointing the presidents andmanagement executives of overseas subsidiaries mainly
from locally recruited employees. In addition, we are also
undertaking further gender-related initiatives to promote
diversity and inclusion to bring about further growth.

Environmental
PerformanceTOKYO ELECTRON Integrated Report 2021

10

Chapter 1

About Tokyo Electron

Corporate GovernanceAs for corporate governance, we seek to build a highly
effective framework that achieves sustainable growth
while taking into consideration our corporate culture andbusiness characteristics for the proper functioning ofmanagement’s decision-making and supervisory role. We
have introduced a skills matrix in this fiscal year and willencourage diversity in the members of our Board of
Directors and promote further improvement todeliberations. In addition, to further strengthen
compliance and risk management, we have defined 13
business-related and other risks across our value chain
and are working to strengthen our framework to becapable of always going through the PDCA* cycle.
We will build governance that is both proactive andprudent to incorporate our growth potential to the
maximum extent.

TEL Values

To Be a Company that Is Loved andTrusted by All Stakeholders
A rich future that will be realized by semiconductors, andsemiconductors which continue to evolve; the market for
production equipment which support these has entereda further growth phase.
Corporate growth is about people, and employees
both create and fulfill company values. Utilizing our
expertise as an equipment manufacturer and diverse
management resources, we will provide society withhigh-value-added technologies that the world has neverseen and only we can accomplish.
Going forward, we will continue to take on challenges
and evolve to be a truly excellent global company that is
loved and highly trusted by all stakeholders.
We look forward to your continued support and patronage.

* PDCA: The continuous implementation of the Plan, Do, Check, Act cycle toimprove operations

Toshiki Kawai
Representative Director,
President & CEO

Semiconductors= Future

Creating technologies Continuing to takethat the world
on challenges
has never seen
and evolve

Based on the thinking that corporate growth is about people and that employees both create and fulfill company
values, we looked back at the values accumulated since our founding and what it means to be our company andsummarized the codes of conduct that we hope to honor in the future as the TEL Values.
We will start our 60th fiscal year in April of next year. To further grow and keep being a company replete withdreams and vitality in the future, we will open up a new era together with the TEL Values as our foundation.

We have established the TEL Values, and we willcontinue to develop them accordingly in the future.

Pride

Challenge

We take pride in providing high-value
products and services.

We accept the challenge of going beyond what
others are doing in pursuing our goal of becoming
number one globally.

We offer our customers cutting-edge technological products,
along with the highest level of quality and technical service,in the pursuit of total customer satisfaction.
We consider profit to be an important measure of value inour products and services.

We view changes as opportunities and respond to themflexibly and positively.
We are tolerant of failure and consider it important tolearn from the process and results.

Ownership

Teamwork

We will keep ownership in mind as we think things
through, and engage in thorough implementationin order to achieve our goals.

We respect each other’s individuality andwe place a high priority on teamwork.

We always have an awareness of problems and tackle
challenges with enthusiasm and a sense of responsibility.
We make decisions quickly and do what we consider to be
the best course of action.

We create a workplace with an open atmosphere andpositive communication.
We establish relationships of trust with our business
partners in order to facilitate mutual growth.

Awareness
We must have awareness and accept responsibility
for our behavior as respectful members of society.
We strictly comply with laws and regulations and the rulesof society.
We give top priority to safety, health and the global
environment.
We strive to become a company that local communities
hold in high esteem.

P. 53

11

TOKYO ELECTRON Integrated Report 2021

Please also refer to Chapter4 “Achieving Greater Growth”
TOKYO ELECTRON Integrated Report 2021

12

Chapter 1

About Tokyo Electron

Company Overview
Tokyo Electron operates worldwide as a leading company in semiconductor and flat panel display (FPD) production equipment.
By providing the Best Products and Best Technical Service, we are aiming for medium- to long-term profit expansion andcontinuous corporate value enhancement. We are also practicing our Corporate Philosophy by contributing to developing asustainable society through our business.

TEL Solar Services

52.4 (3.7%)

Tokyo Electron (Shanghai)Tokyo Electron (Shanghai) Logistic CenterTokyo Electron (Kunshan)

Tokyo Electron Taiwan(fiscal year ended
March 31, 2021)

Tokyo Electron
Technology Solutions

7 companies at 26 sites
Overseas: 21 companies at 50 sites in 17 countries and regions

Japan:

28 companies at 76 sites in 18 countries and regions (consolidated)

285.2

1970s

1980s

1990s

Mainframe
ComputerSingle Chip
Microprocessor

Personal
Computer

Shifting to a fullscale manufacturer

Listed on the Second
Section of the Tokyo
Stock ExchangeTokyo Electron
KyushuThermal Processing
SystemTokyo Electron FE
Tokyo Electron BP
Tokyo Electron Agency

13

TOKYO ELECTRON Integrated Report 2021

Listed on the First
Section of the Tokyo
Stock Exchange

Accelerating
globalization

1990s

Enhanced the groupstructure in Japan by, forexample, establishing
service andmanufacturing
companies, and set up
overseas subsidiaries
throughout the world

TEL marks a major moveinto development andmarketing of FPD
production equipment

1994

Started direct sales andsupport systems
overseas

Export ofsemiconductor
production equipment
begins

2000s

2010s
DigitalConsumerElectronics

Mobile Phone

1990
1984

■Wafer Process (Front-end)

Lithography(Photoresist coating, Development)■Assembly and Test Process (Back-end)

Etching

Cleaning

Coater/Developer

Plasma Etch System Plasma Etch System

CLEAN TRACKTM LITHIUS ProTM Z

TactrasTM

Single Wafer
Cleaning System

Tokyo Electron Miyagi

TELINDY PLUS TM

Single Wafer
Deposition System

Aspiration toward innovationand new growth

2006“TEL Values” formulated
as code of conduct

2007

Established “TELUNIVERSITY” tostrengthen humanresource development

2015

Establishment of Tokyo
Electron Corporate
Governance Guidelines

Atomic Layer
Deposition System

Trias +TM

NT333 TM
Silicon nitride film

EpisodeTM ULCELLESTATM-

Completed
Transistor Before
Wiring

Photoresist

Wafer

Oxide/Nitride film deposition

History1986(26.6%)* Fractions smaller than 100 million yen are truncated.

Repetition

TEL-Thermco
Engineering Co., Ltd.
began domestic
production of diffusion
furnaces

3,846(20.4%)

Silicon dioxide film

1968

(fiscal year ended
March 31, 2021)

Asia

Tokyo Electron (World Headquarters)

Worldwide total:

TEL acquires importingand selling rights for
diffusion furnace
manufactured by
Thermco Products Corp.
(U.S.) and begins sales

South Korea

249.7 (17.9%)

Deposition

1964

peopleSemiconductor Manufacturing Process and Our Main Products

1980

14,479billion yen

Tokyo Electron Singapore

Tokyo Electron
Laboratories, Inc.
renamed Tokyo
Electron Ltd.

(57.3%)

Tokyo Electron U.S. Holdings
Tokyo Electron America

Tokyo Electron (Malaysia)

Founded as technical specialized
trading company

8,296(12.4%)

TaiwanTEL Venture Capital

1978(3.7%)

1,399.1

TEL Manufacturing and Engineering of America

Tokyo Electron India

Tokyo Electron
Laboratories, Inc. isestablished with capitalfrom Tokyo Broadcasting
System, Inc.

(28.5%)

Japan

541

1,796

197.5 (14.1%)

Tokyo Electron Israel

1963

Europe(Unit: People)

North America

Japan

TEL Technology Center, America

1960s

China

398.4

Europe152.0 (10.9%)

Tokyo Electron Korea

Tokyo Electron Europe

Southeast Asia, and Others

North America■Branch, Office (including Field Service), Sales Office

TEL Magnetic Solutions

Number of Employees by Region (Consolidated)(Unit: Billions of yen)

63.5 (4.5%)

Number of Sites (As of March 31, 2021)■Head office

Sales by Region (Consolidated)

Photoresist coating

Exposure

Development

Etching

Ashing/Cleaning

Isolation Formation/Gate Formation

2020s~

Interconnect formation

Gate ElectrodeTesting

Packaging/Inspection

Big Data

Single Wafer Deposition
SystemTrias

TM

Intermetal dielectric film
Metal film

Plasma Etch System

Wafer Prober

Wafer Bonder/Debonder

TactrasTM / EpisodeTM UL

PrecioTM XL

Synapse TM V/
Synapse TM Z Plus

Wafer /Dicing Frame
Prober

WDF TM 12DP+

Completed
Semiconductor
Packaging

Metal film

2015

Re-emergence as the
New TEL (Vision,
Medium-termManagement Plan
formulated and new
Corporate Logo created)

2019

Revision of theMedium-termManagement Plan tofurther enhance
corporate value

Contact Formation

Interconnect
Formation

Wafer Probe Testing

Completed Integrated Circuit

Wafer Bonding/
DebondingInspection

Packaging/Assembly

FPD Production Equipment

1999

Category of industry on
the Tokyo Stock
Exchange First Sectionchanged from
“Wholesale Trade” to“Electric Appliances”

FPD Coater/Developer
ExcelinerTM

FPD Plasma Etch/Ash System
ImpressioTM

FPD Plasma Etch/Ash System
BetelexTM

Inkjet Printing System for
manufacturing OLED display
EliusTMTOKYO ELECTRON Integrated Report 2021

14

Chapter 1

About Tokyo Electron

Financial and Non-financial Highlights

業界についてFinancial

As technological innovations drive the growth of the production equipment market,
高まる技術革新への要求に対応するため、
it is essential to provide leading-edge technologies and services.
高度な技術力、整備された体制、強固な財務基盤がますます重要に

Net Sales and Gross Profit Margin
Net sales (Billions of yen)

40.3

Operating Income and Operating Margin

Gross profit margin (%)

42.0

41.2

Characteristics of Production Equipment Business

Operating income (Billions of yen)

40.1

40.4
24.9

1,399.1
1,278.2

799.7

310.5

281.1

19.5

1,127.2

1,130.7

Operating margin (%)

320.6

24.3

22.9

21.0
237.2

155.6

2017.32018.32019.32020.32021.32017.3Net Income Attributable to Owners of Parent and ROE
Net income attributable to owners of parent (Billions of yen)

2018.3

(Yen)

781

758
624

製造装置メーカーの役割
Requirements of Production Equipment Manufacturers
半導体およびFPDの進化に伴い、新しい材料や、
Alongwith evolutions in semiconductors
and FPDs, newより複雑

588

21.8

19.1

2021.3

Cash Dividends per Share

242.9
26.5

248.2
204.3

2020.3

ROE (%)

30.1

29.0

2019.3materials and more complex
structures are being adopted,
な構造が採用され、その製造の技術的難易度が高まっていま
resulting in an increasing degree of technical challenges in their
す。半導体チップには数百億ものトランジスタが集積されてproduction. As many as dozens of billions of transistors are
おり、
ナノメートルレベルの微細加工技術を駆使し、1,000を
integrated
into leading-edge semiconductor chips, whichareproducedthrough
more
than
1,000
processing
steps
fully
超える工程を経て製造されます。このような中、半導体および
utilizing nanofabrication technologies. Consequently, the
FPD製造装置への技術要求は、より一層高度化しています。
市場規模と価値創造
technical requirements for semiconductor and FPD production
製造装置メーカーにとっては、
equipment
are becoming more andエレクトロニクスやメカニク
more advanced.
For production equipment manufacturers, it is extremely

185.2
352

115.2

2017.32018.32019.32020.32021.32017.32018.32019.3Pursuitof Technological Innovations
技術革新の追求
AsIoT、
the spreadofの普及により、
IoT, AI and 5G accelerates
the transition to a
AI、5G
データ社会への移行が加速す
data-driven society, the role played by semiconductors is
る中、半導体が担う役割はますます重要になっています。
becoming
ever more important. The big data era will require ビッlarge quantities of diverse
semiconductors as well as even higher
グデータ時代には、大量かつ多様な半導体が必要になると同
performance. There is no stopping technological innovation in
時に、さらなる高性能化も求められます。大容量化、高速化、
semiconductors, including larger capacity, higher speed,
低消費電力の実現、信頼性の向上など半導体の技術革新は
improved reliability andlower power consumption. Meanwhile,theapplication
scope
for
displays, which form the interface
止まりません。そして、人とICTをつなぐインターフェイスであbetween people and data, is expected to expand thanks toるフラットパネルディスプレイ
（FPD）についても、高精細・低higher resolution, lower power consumption, larger size and
消費電力・大型化やフレキシブルな形状を生かしたデザイン
improved design freedom from taking advantage of flexible
shapes. As long as technological innovations continue,
the
性の向上により用途の拡大が期待されます。
技術革新が継続
semiconductor and flat panel display (FPD) markets will keep
する限り、半導体、FPD市場は成長します。そして、それを支
growing. At the same time, the market for production
える製造装置市場もさらなる成長が見込まれます。
equipment, which supports these devices, can also be expected
to grow further.

2020.3

importantto develop
highest-performance equipment thatス、
プロセス、
ソフトウェアなどさまざまな領域における専門
helps
realize
semiconductor
and FPD technological innovations
性を駆使し、半導体およびFPDの技術革新を実現する最高のby fully utilizing specialized expertise in a variety of fields,
性能の装置を開発することが極めて重要となります。
including electronics, mechanics, process and software. そのた
Therefore,
it is crucial that manufacturers comprehend
customer
め、
顧客との確固たる信頼関係に基づき、ニーズを早期に把needs early, based on a solid relationship of mutual trust with
握するとともに、自社内に留まらず顧客やコンソーシアムと協
customers, and carry out research and development
働し、継続的に研究開発をおこなうことが必要です。
continuously
not only in-house but also with customers また、and 将
consortiums. In
addition, to carry out research and development
来を見据え、
複数世代にわたる研究開発を実施するためにthat span multiple generations with an eye toward the future,は、強固な経営・財務基盤も不可欠です。さらに、装置の安定
solid management and financial foundations are also essential.
稼動を支える技術サービスの重要性もさらに高まっており、
Furthermore, the importance of technical services that supportよstable equipment operation is continuing to increase,and the
り付加価値の高いサービスの提供に向けて、AIなどの活用も
utilization of AI and other technologies is actively being
積極的に進められています。
promoted toward providing higher-value-added services.
また事業活動においては、In our business activities, it is部品・材料の供給、
also crucial to build装置の組み
asustainablesupply
chain
based
on
partnerships
witha variety of
立てや調整、通関・物流など、さまざまなサプライヤーとのsuppliers, including those who supply parts and materials,
パートナーシップに基づくサステナブルなサプライチェーンのassemble and adjust equipment, and perform customs
構築も欠かせません。
clearanceand logistics operations.
Moreover,as a “Digital× Green” society is being
promoted, theこれらに加えて、「デジタル×グリーン」
社会が推進される
demand for reducing environmental impact is also heightening.
中、環境負荷低減の要請も高まっています。製造装置メーカー
Toward the realization of a sustainable society, productionには、
持続可能な社会の実現に向けて、
低消費電力の半導体
equipment
manufacturers are required to contributeto thepreservationoftheglobalenvironment
throughvarioussteps,
およびFPDの開発への貢献や、製造装置の生産性向上、事業
such as contributing to the development of low-power所におけるオペレーションの効率化などを通して、地球環境
consumption semiconductors and FPDs, increasing theの保全に貢献していくことが求められています。
productivity of their production equipment and improving theoperational efficiency of their plants and offices.

2021.3* For amounts shown in billions of yen, fractions smaller than 100 million yen are truncated. Percentages are calculated using the actual non-truncated values and rounded off.

Non-financial Fiscal 2021
R&D initiatives
R&D expense

136.6

billion yen

Number of patents owned

Semiconductor production
equipment

18,69296.7
1 2
この図だけ使ってください→No.
ormarket share1

ISO 90012/140013 certification
key manufacturing sites in Japan

Waste material recycling rate

Turnover rate4

100

98.8

2.5

％

Percentage of respondents who selected“Very Satisfied” or “Satisfied”
in the customer satisfaction survey

％

％

％

Number of
TEL FOR GOOD5 programs

136

1 Our estimate. Equipment included:
Coater/Developer (No. 1), Cleaning (No. 2), Plasma etch (No. 2), Gas chemical etch (No. 1), Diffusion furnace (No. 1), Batch deposition (No. 1), Metal deposition (No. 2) and Wafer prober (No. 1)
2 ISO 9001: An international standard for promoting continuous maintenance and improvement of quality management systems to provide better products and services to customers
3 ISO 14001: An international standard for environmental management systems established to mitigate the direct and indirect impact that an organization’s activities, products and services haveon the environment
4 Turnover due to personal circumstances
5 TEL FOR GOOD: A brand name that represents our social contribution activities

15

TOKYO ELECTRON Integrated Report 2021

Technological innovations driving the growth of the production equipment market

Requirements of production equipment manufacturers
R&D from a medium- tolong-term perspective andsolid management andfinancial foundations to
support it

Development ofhighest-performanceequipment that realizes
technological innovations

Solid relationship ofmutual trust withcustomers

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

Building of sustainablesupply chains

Provision ofhigh-value-added
technical services

Initiatives to reduce
environmental impact

TOKYO ELECTRON Integrated Report 2021

16

Chapter 2Material Issues and Values Provided

Material Issues

Medium-term Management Plan

Material Issues Crucial to Tokyo Electron’s Sustainable Growth

Overview and State of Progress of the Financial Model

As a manufacturer of semiconductor and flat panel display
production equipment, we have identified “ProductCompetitiveness”, “Customer Responsiveness” and “Higher
Productivity” as three items to be enhanced in the Medium-termManagement Plan. We have defined these three items, as well as“Management Foundation” that supports all our businessactivities, as high-priority material issues we must tackle in order
to both expand our medium- to long-term profit and continueenhancing corporate value.
To appropriately respond to changes in the businessenvironment surrounding our company, our management team,including our CEO, identifies material issues and reviews them ona regular basis by evaluating
Productrisks and opportunities as well as
Competitivenessengaging with our stakeholders.
Additionally, continuing our
support of the Sustainable
Customer
HigherDevelopment Goals (SDGs),
ResponsivenessProductivity
which are globally shared goals
Management
to be achieved by 2030, weFoundation
have identified appropriate
SDGs initiatives through ourbusiness for each material issue and are conducting these
initiatives throughout the entire Group.

SDGs Initiatives

Product
Competitiveness

Customer
Responsiveness

HigherProductivity

Management
Foundation

By jointly creating technology roadmaps spanning multiple generations to respond to therequirements of technological innovation, we are promoting leading-edge research anddevelopment on a global level. It is important for us to utilize our expertise as an equipment
manufacturer and all of our management resources to continuously create high-value-added,
next-generation products based on innovative technology on a timely basis.
We are strengthening our ability to make technical suggestions by integrating thedevelopment departments with the production departments. We are also providing
equipment suitable to various applications by improving the performance of individual
products and merging the wide variety of technologies we possess.
We are striving to further enhance customer satisfaction, which is a key management
theme we have tackled since our founding, aiming to be the sole strategic partner forcustomers. We help customers manufacture leading-edge semiconductor devices anddisplays by maintaining an accurate and prompt grasp of customer needs and providing
innovative technologies for future generations.
As an equipment manufacturer with a diverse product lineup, we propose optimal
solutions contributing to value creation for customers. Making full use of leading-edge AI,
digital technologies, and knowledge management tools, we help customers stably
operate various generations of equipment by providing high-value-added services.
To enhance corporate value, it is important for us to improve our business operations,
implement quality-first management and improve operational efficiency continually.
Through taking steps such as integrating business systems in each division and unifying
databases, we are striving to standardize and improve business operations throughout
the entire Group, promote automation and improve productivity along the entire value
chain. At the same time, we are utilizing AI and promoting digital transformation.
Additionally, we are also working to optimize our production operations by formulating
detailed production plans, procuring parts and materials, and leveling production andinstallation based on assessment and analysis of technological and market trends.
To ensure continued growth in business activities, building a strong and soundmanagement foundation that supports them is vital. To ensure that operational
decision-making and supervisory functions are exercised sufficiently, we are striving tobuild a highly effective corporate governance system, and further strengthen complianceand risk management.
Through our business, we are also working to preserve the global environment, ensure
respect for human rights and build a sustainable supply chain. Furthermore, based on abelief that employees both create and fulfill company values, we are striving to further
improve employee engagement by respecting diversity and building a workplaceenvironment replete with dreams and vitality that enables employees to realize theirfull potential.

• Create innovativetechnologies by promoting
innovation and providing
environment-friendly
products and services to help
develop a sustainable society

We are aiming for sustained growth in corporate value through amanagement base with global-standard strength. As thesemiconductor production equipment industry enters a newstage in its development, our business activities in focus areas
are progressing smoothly, with our sales far outpacing themarket as one example of our progress.
It is in this environment that we have set our sights onachieving our financial model as the goal of the Medium-termManagement Plan toward our further growth.
In the Medium-term Management Plan that was revised in
May 2019, we added a model that aims to achieve net sales of 2
trillion yen and an operating margin of 30% or more. At the sametime, the model—which we target to achieve by fiscal 2024—
aims to achieve a return on equity (ROE) of 30% or more. Ourfinancial model seeks not to anticipate the scope of our future
sales but to optimize the business management that we shouldseek to achieve for each kind of sales scope anticipated. By•Pursue productivity
improvement, continually
improve operational efficiency
and promote sustainableproduction-consumption mode,
to contribute to thedevelopment of the industry andsociety and to economic growthFiscal 2021 (Actual)

Fiscal 2022 (Estimates)¥1,399.1 billion¥1,850.0 billion¥1,500.0 billion¥1,700.0 billion¥2,000.0 billion

Operating Margin

22.9%

27.5%

26.5%

28.0%

>30.0%

ROE

26.5%

—

Financial Model (by Fiscal 2024)>30.0%

Principal Initiatives to Achieve the Financial Model• To create the Best Products, operate business in the fields ofsemiconductor and flat panel display (FPD) production
equipment where we have strength and can leverage ouraccumulated technologies and management know-how• Introduce state-of-the-art technological products with highadded value required by customers into the market ahead ofothers and provide the Best Technical Service• Continue to make proactive research and development
investments using our solid financial foundation to maintain andenhance our world-leading technological innovation capabilities• Expand revenues in the after-sale market through theprovision of sophisticated field solutions based on ourworld-leading installed base
• Provide highly efficient, high-value-added services throughthe use of equipment data and AI

Trends in R&D Expenses and Capital Investment(Billions of yen)

165.0

R&D expenses

200• Build a solid managementfoundation that achieves
sustainable growth, respecthuman rights, takeenvironment-conscious
actions and promote value
creation in the supply chain* Net sales and operating margin for fiscal 2022 are estimates as of August 16, 2021.

Actual Performance in Fiscal 2021, Estimates for Fiscal 2022* and Financial Model of the Medium-term Management Plan

Net Sales•Contribute to customer
innovation generation andvalue creation by proposing
optimal solutions, providing
high-value-added services,
ensuring equipment safety, andtaking environment-conscious
actions

realizing this financial model, we intend to improve operational
efficiency and profitability as well as secure resilience to market
fluctuations.
In addition, through continuous efforts such as securing andgenerating resources necessary for growth investment andproactive returns to shareholders, we are working to improve
capital efficiency by implementing appropriate balance sheet
management with a view of medium- to long-term growth.
In fiscal 2021, Tokyo Electron’s net sales reached 1,399.1 billion yen
with an operating margin of 22.9% and ROE of 26.5%. We achieved
net sales of over 1 trillion yen, an operating margin of over 20% and
ROE of over 20% for the fourth consecutive year. For fiscal 2022, weare planning for net sales of 1,850 billion yen with a 27.5% operating
margin*, and we are making smooth progress toward the financial
model of our Medium-term Management Plan. We will continue toaim for world-class operating margins and ROE.

billion yen(Billions of yen)

150

75

100

50

50

25

0

2017.32018.32019.32020.32021.32022.3(estimates)

Capital investment

100

0

64.0

billion yen

2017.32018.32019.32020.32021.32022.3(estimates)

For information about the material issues’ identification process and the annual goals, please refer to the Tokyo Electron Sustainability Report 2021. www.tel.com/csr/report

17

TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

18

Chapter 2Material Issues and Values Provided

Various External Collaboration toward Achieving Technological Innovations
Through collaboration with various external organizations,
In addition to the development of leading-edge technologies at
we strive to establish our unique, innovative technologies andlocations in Japan and overseas, such as in the United States,
continue to create leading-edge semiconductor and FPD
South Korea and Taiwan, we cooperate with customers in andproduction equipment.
outside Japan as well as international research institutions topursue research for next-generation semiconductor
manufacturing technologies in order to further strengthen our
product competitiveness. Furthermore, we undertake
collaboration with academia in a wide range of fields within ourbusiness areas—including a joint research bidding system with
Academia
Outside(universities,
Consortiums
universities and research institutions in Japan—to discoverresearch institutions,companies
etc.)
advanced fundamental technologies. We also make investments
in outside companies through TEL Venture Capital toward
development of new technologies necessary for further
business growth and application of our advanced technologies
in other industries.

Technological Capabilities
Our Approach to Increasingly Advanced Manufacturing Technologies
More complex structures and new materials are being adopted towith plasma modules that are excellent in processing uniformity
achieve evolution of semiconductors and displays that support theand energy efficiency, development and evaluation of inkjet
development of information and communication technologies
printing systems, which have strong advantages in handling(ICT). Production equipment manufacturers are required to havelarger sizes and material efficiency, are also accelerating toward
comprehensive capabilities that respond to all kinds of technologies.
adoption for mass production.
We have a rich product lineup that includes equipment
We are also actively working to improve unit area
capable of the series of four key processes—deposition, coater/
productivity and energy consumption of our equipment.
developer, etch and cleaning—required to achieve higher
Positioning environmental performance as part of ourperformance and lower power consumption of leading-edge
equipment’s basic specification, we reflect it in our productsemiconductor devices. We are undertaking the development ofroadmaps of major models. We are promoting the reduction ofequipment with innovative and extreme processing
CO2 emissions that include reducing the usage of energy, water,
performance, centered on (1) deposition systems that can handle
process gases and chemical substances, reducing productnew materials and structure while utilizing batch, semi-batch
footprint, volume and weight, reducing frequency of partsand single-wafer characteristics and allow optimal film thickness
maintenance and increasing lifespan, and even shortening theand film quality control; (2) coater/developers for leading-edgetime for equipment installation.
EUV lithography; (3) etch systems that achieve precision
In addition, for the equipment we have shipped, which
processing of fine structure and processing of deep holes andamounts to a cumulative total of 76,000 units, we will carry out
trenches with high selectivity; and (4) cleaning systems thatmaintenance, inspection and continuous improvement towardremove particles and residues—which are causes of lower
stable operation. At the same time, through our field solutions
yields—without causing the collapse of fine patterns. We also
business, we will strive to reflect customer requirements in thehave a range of other equipment, such as wafer probers used indevelopment of next-generation technologies. We are
the wafer testing process and wafer bonders/debonders used forcontributing to our customers’ manufacturing of semiconductor
3D integration of semiconductor devices.
devices and displays by conducting high-value-added upgrades
The wide range of our product coverage allows us to propose
and providing re-engineered equipment*, including thesolutions for issues faced by customers from a variety ofstrengthening of services such as through promoting digital
approaches, including process integration based on antransformation (DX).
understanding of upstream and downstream processes. SpecificIn the development and production of semiconductor andexamples include proposals for processing methods in the
FPD production equipment, it is important to fuse technologies
deposition and etch of hard masks necessary for the processing ofby specialists in various fields—process, hardware, software,
ultra-fine patterns as well as proposals for cleaning methods
quality management, manufacturing and field engineering. Our
according to the residues generated after deep-hole etching andemployees’ creativity, sense of responsibility and strong
deposition methods—including preprocessing—according to theteamwork that achieve this fusion form the core of oursurface state after cleaning. We strive to accurately understandtechnological capabilities. Using our rich technologicalthe characteristics of our customers’ devices and peripheral steps
capabilities developed over many years, we will continue toof processing and provide optimal solutions.
pursue the Best Products and Best Technical Service together
In the field of flat panel displays (FPDs), the patterningwith our employees who both create and fulfill company values.
precision is becoming more advanced and progress is being* Re-engineered equipment: Equipment that replaces old units and parts with new ones
while maintaining compatibility with existing processes to offer performance at themade in technologies related to OLEDs. Under such conditions, insame level as the latest equipment
addition to the increasing deployment of PICPTM etch systems
Logic
3D NAND

CMOS image sensor

Maximization of Equipment Performance through the Promotion of DX
based on using AI to analyze data on the states of operation and
To meet the diverse technological needs of customers, we areprocesses monitored through multiple sensors installed insidestrengthening DX toward early realization of aspects such as theequipment—and TELeMetricsTM, a remote maintenance service
establishment of performance and productivity improvementof our equipment and co-optimization of several process steps
for equipment that has been installed at customers’ fabs.
of manufacturing.
Through these initiatives, we will provide functions and services
We are promoting the realization of smart equipment—
meeting the needs of customers, such as improvement of
which helps improve performance by controlling equipment
equipment uptime, improvement of productivity and upgrades.

Monitoring

Data analysis

OurEngineers
engineers
TEL

Control
Products
Our
products

Development of Technological Development Strategy with a View of the Future
Together with the appearance of new technologies and services
and people’s values, we are constantly holding discussions onamid progress in building a “Digital × Green” society, lifestyles andtechnological development strategies toward our sustainablebusiness models are changing significantly. Manufacturing
growth. We share our medium- to long-term vision across thetechnologies for semiconductors and displays, which support
entire Group so that every employee can quickly grasp thesuch movements, are also becoming more advanced and diverse.
changes of the times and respond flexibly and appropriately.
Based on insights regarding changes in future social structure–2020

Bonder/DebonderTM

Customers
Customers

DRAM

FurnaceTELeMetrics
TELeMetricsTM Remote
Maintenance Service

Realization of Smart Equipment

Diversification

202X– Expansion of IoT technologies

Cloud server

2030 To the world where people and societies are linked all together

Smart Manufacturing
Smart Transport
Diversification

Integration
Smart Health Care

ALD
CVD**

Coater/Developer

Plasma etch

Gas chemical
etchSingle wafer
cleaning

Batchcleaning

Wafer
proberSmart phone

PC

Smart Energy* CVD: Chemical Vapor Deposition

19

TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

20

Chapter 2Material Issues and Values Provided

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

INPUT (investment capital) Fiscal 2021

OUTPUT (value created through business activities) Fiscal 2021

Financial capital

Net sales

Net assets
Equity ratio

1,024.5 billion yen
71.1 %

Corporate Philosophy

1,399.1 billion yen
22.9 %
242.9 billion yen
26.5 %
121.9 billion yen (payout ratio: 50%)

Operating margin
Net income
ROE
Total annual dividend

Manufactured capitalManagement Policies

9

Manufacturing sites total(6 in Japan and 3 overseas)

Cumulative number of equipment installations Approximately(annual shipment volume of approximately 4,000 units)

Manufacturing-related capital investment, such as
new plant buildings and manufacturing equipment
Many years of know-how and proven performance inmanufacturing operations

TEL Values

12 total (6 in Japan and 6 overseas)
R&D investment 136.6 billion yen
R&D sites

Broad-ranging knowledge and technologicalcapabilities in semiconductor and flat panel display(FPD) manufacturing processes

Installation and
Maintenance Services
Support the stable
operation of equipment
and provide prompt andaccurate high-valueadded service

Number of employees
Proportion of engineers

14,47966.9 %

0.27• Contributing to customers' fab utilization rate andResearch andDevelopment
Continuously strengthening
research and development tocreate innovative and unique
technologies in a timely
manner• Providing leading-edge technologies to contributeto technological innovation and manufacturing insemiconductors and FPDs

Building a product portfolio with technical superiority
Number of patents owned

18,692• Operating fair and sound business that respects

intellectual property rights

Semiconductor production equipment
Product lineup with No. or market share

1 2

Procurement andManufacturing

Sales

Efficiently manufacturinghigh-quality products
backed by a sustainablesupply chain

Employee skill upgrade programs andhuman resource development

Foundation for business activities in local
communities
Relationship of mutual trust with customers built
through many years of performance records
Solid cooperative working relationships with
suppliers• Providing new value to industry and society

through technological innovation

2.5 %Average service years 17 years and 4 months (Japan)
Improvement in engagement score 12 points (compared to fiscal 2016)
Turnover rate

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

Percentage of respondents who selected “Very Satisfied” or“Satisfied” in the customer satisfaction survey

The driving forces behind our company

Abundant technological capabilities
cultivated as an industry leader

Trust from customers
based on our reliable technical services

94,640 kL
Water consumption 1,397 km
3

21TOKYO ELECTRON Integrated Report 2021

Rate of improvement after supply chain CSR assessment
Number of TEL FOR GOOD programs

Natural capital
Energy consumption

yield improvement through the Best Technical Service

Intellectual capital

Innovative and unique technologies

Personnel able to perform globally

Social and relationship capital

Manufactured capital

Value Chain

Propose optimal
solutions as the sole
strategic partner

Human capital• Continuing proactive investment for growth

Observing equipment delivery and installation schedules

Customer needs and equipment-related dataobtained from installed equipment base
Infrastructure for promoting digital transformation(enterprise system/database/talents and skills)• Building a solid financial foundationand the growth of semiconductor and FPD markets
through the Best Products* TCIR: Total Case Incident Rate. The number of workplace incidents per 200,000 work hours.

Production capacity and capabilities that can respondto increases in demand• Returning generated profit to stakeholders• Contributing to customers' product manufacturing

Contributing to customers‘ productivity enhancement
Safety-first operation (TCIR*)

Financial capital

76,000 units

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

Vertical transfer system, from development to mass
production

Intellectual capital

OUTCOME (value provided to industry and society)96.7 %
23.1 %
136

Human capital• Creating fulfilling workplace environments that

motivate employees• Improving value provided to stakeholders bycultivating employees with a high level ofengagement• Building a sustainable operation

Social and relationship capital• Maintaining soundness and strengthening

competitiveness throughout the entire supply chain• Contributing to customer value creation by

providing the Best Products and Best Technical
ServiceCreating employment opportunities in and paying taxes to local
municipalities and nations where we carry out business activities• Contributing to the revitalization of and

16 % reduction (compared to fiscal 2014)
Renewable energy consumption 7,763 MWh

Natural capital

Per-wafer CO2 emissions

Challenging spirit of our employees,

Energy consumption at plants
and offices per net sales

who are capable of flexibly and rapidly adapting to changes in the environment

Waste material recycling rate

10 % reduction (compared to fiscal 2020)
98.8 %

sustainable development in local communities• Implementing products and business activities thathave a low environmental impact and help topreserve the global environment• Providing technologies that help customers

manufacture semiconductors and FPDs that havea low environmental impact

TOKYO ELECTRON Integrated Report 2021

22

Chapter 2Material Issues and Values Provided

Stakeholder Engagement

The Driving Forces behind Our Company

Actively providing opportunities for engagement with our stakeholders and promoting mutual communication
allows us to accurately comprehend their requirements and reflect them in our business activities. We strive to build
a solid relationship of mutual trust with all the stakeholders surrounding our company and respond to each of their
expectations, so that we can fulfill our roles and responsibilities in society.

We are striving to enhance our medium- to long-term corporate value. As the driving forces behind further growth,
we are utilizing our abundant technological capabilities cultivated over many years and the customer trust gained
based on reliable technical services and relying on our employees and their spirit of challenge.

Main Engagement
Opportunities

Stakeholders

Relationship with Stakeholders

Value Provided to Stakeholders

Shareholders/
Investors• Shareholders and investors support ourcompany’s business expansion from a financial
aspect and participate in company managementby exercising their voting rights, etc.
• We share our management vision and growthscenario with shareholders and investors, andincorporate the feedback received from themthrough constructive dialogue into
management decision-making in an effort toenhance our corporate value• Return of profit generated from businessactivities• Realization of medium- to long-term
growth and enhancement in corporate
value• Customers purchase the semiconductor andflat panel display (FPD) production equipment
our company provides and also utilize services
necessary for maintaining that equipment• We not only provide products and services but
also create technology roadmaps spanning
multiple generations and carry out joint
technology development with customers
toward developing next-generation devices
and processes• Best Products with world-leading
performance that incorporate
leading-edge technologies• High-value-added Best Technical Service• Environment-friendly products andservices with a focus on safety andquality• Solutions that satisfy a variety of
application needs• Suppliers supply the parts, materials andhuman resources necessary for our company’sequipment manufacturing, and also perform
customs clearance and logistics operations• We improve and enhance the quality of our
products and services collaboratively with our
suppliers, audit their business environments asneeded, and promote improvement activities.
In this way, we build a sustainable supply
chain that takes into account labor, theenvironment, health and safety and ethics• Maintaining soundness andstrengthening competitivenessthroughout the entire supply chain• Further improving added value of
products and services throughcollaboration with our company• Providing business opportunities in thesemiconductor and FPD production
equipment market• Production update briefing• TEL Partners Day• STQA* audit• Employees help enhance corporate value by
utilizing their individual abilities andknow-how, and by improving their skills
through training• We strive to improve employee engagement
so our employees can realize their fullpotential• A workplace environment replete withdreams and vitality that enables employees
to demonstrate a challenge spirit• Opportunities for career development
and skill improvement• Fair performance review and remunerationcommensurate with results• Employee meeting• Global engagement survey• Career interest survey(Japan)• We strive to advance together with the local
communities where we carry out businessactivities. We create employment
opportunities, develop local industries andadvance environmental preservation
initiatives as well as pay taxes in line with theprofit generated by our business activities• Provision of employment opportunities• Promotion of environmental preservationin communities• Financial contributions, such as tax
payments• Community contribution
activities• Tours of plants and offices• Environmental debriefing• In the markets where we carry out ourbusiness activities, we work to accurately
comprehend societal needs by collaboratingwith highly relevant internationalorganizations, industry associations, initiatives
and NGOs, contributing to the resolution ofissues faced by the industry and society, as
well as to further development• Solutions that help solve industrial andsocietal issues• Equipment technology that increases
environmental performance as well as
CO₂ emission reduction in our products,
plants and offices• Business development based on respectfor human rights

Customers

Suppliers

Employees

Local
Communities

Governments/
Associations

23 TOKYO ELECTRON Integrated Report 2021

• Earnings release conference,
Medium-term Management
Plan briefing, non-financial
briefing (IR Day)
• IR conference, IR roadshow*, individual IR
interview• Shareholders’ Meeting* IR road show: IR activities presented
directly to shareholders and investors• Technology conference• Customer satisfaction
survey• Joint development* Refer to Initiatives with Suppliers on
p. 30

Driving Force1

Abundant technologicalcapabilities cultivated as anindustry leader

Driving Force

2

Trust from customers
based on our reliable
technical services• Industry group activities• Collaboration with global
initiatives

Major Initiatives

Related Data

• Creating innovative and varied technologies throughjoint development with customers who are leadingin the semiconductor and flat panel display (FPD)
market and collaboration with world-leading
consortiums• Accurately comprehending customer needs toachieve early market introduction of next-generation
products possessing overwhelmingly high added
value and the level of performance that will be
required in the future• Executing proactive R&D investment aimed atcreating leading-edge technologies• Strengthening development capabilities and productcompetitiveness by promoting digitaltransformation, which utilizes data and AI• Proposing optimal processes that take advantage ofa wide variety of product lineup• Semiconductor production equipment
Product lineup with No. 1 or 2 market
share(Example: 100% share in EUV-compatible
coater/developers)• R&D investment: More than 400 billion
yen over three years from fiscal 2020
• Number of patents owned: 18,692• Carrying out activities to improve the customer
satisfaction level and build a relationship of mutual
trust with the aim to be the sole strategic partner
for customers• Contributing to customers’ manufacturing ofsemiconductors and displays by providing advanced
field solutions that achieve steady operation ofvarious generations of equipment and productivity
improvement• Providing high-efficiency, high-value-added
services, such as remote maintenance services thatutilize AI and digital technology, and predictive
maintenance that utilizes equipment operation data
• Building a global service structure that responds tocustomer needs in a timely manner andstrengthening the skills of front-line engineers* whowork directly with customers• Business expansion: 76 sites located in
18 countries and regions of the world• Number of field engineers:
Approximately 4,000• Percentage of respondents who
selected “Very Satisfied” or “Satisfied” inthe customer satisfaction survey: 96.7%* Refer to Enhancing Front-line Engineers on p. 34

Driving Force

3

Challenging spirit of ouremployees, who are capable offlexibly and rapidly adapting
to changes in the environment• Sharing with our employees the “TEL Values”, whichsummarize the corporate culture cherished since
our company’s founding and the codes of conduct
for all employees• Focusing on strengthening human resource
development and enhancing employee motivation
to maximize “Employee capabilities and motivation”• Setting management goals that increase thepromise of our company’s future, providing
opportunities for taking on challenges without fearof failing, providing a system for fair performance
reviews commensurate with results, and creating aworkplace environment conducive to teamwork
and open communication• Enhancing productivity throughout the entire value
chain and building a relationship of mutual trustwith stakeholders by addressing issues andimplementing policies based on a regular employee
global engagement survey• Improvement in the engagementscore: 12 points (compared to fiscal 2016)• High employee retention rate*:
94.1% (Japan)* Retention after three years of joining the Company,
average over the past five years• Low turnover rate: 2.5%

TOKYO ELECTRON Integrated Report 2021

24

Chapter 3

Value Creation by the Value Chain
Procurement
ResearchandandDevelopment Manufacturing

Initiatives in the Value Chain

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Tokyo Electron is building a superior business model that takes advantage of our company’s characteristics, and is continuing
to create value through sustainability initiatives and a series of business activities.

Research andDevelopment

Procurement andManufacturing

P. 27

Installation and
Maintenance Services

Sales
P. 31

P. 29

P. 33

Overview

Overview

Overview

Overview

 Development of innovative and unique Establishment of stable production capabilities

 Be the sole strategic partner for customers by Deploying the Best Technical Service with high

 Proposals on optimal solutions that contribute Strengthening of our global support structuretechnologies for creating high-value-added,
next-generation products that will be neededby customers in the future

by building a sustainable supply chain Efficient manufacturing of high-quality,

high-reliability, safe and environmentfriendly products

 Continuous development that looks into the

future based on the prompt comprehension ofmarket and technological trends, as well as
customer needs

providing the Best Products and BestTechnical Service

added value in a prompt and appropriatemannerto the creation of value for our customers

to provide advanced field solutions that solve
customers’ issues

 Creation of value through partnerships

with suppliers

Differentiation Points

Differentiation Points

Differentiation Points

Differentiation Points

 Optimization of R&D by maintaining close Business expansion based on relationships of Early comprehension of the needs of Field engineers who are highly specialized andcollaboration between the Corporate
Innovation Division and the development
divisions at individual sites

mutual trust with suppliers who possess highquality and technological capabilities World-class manufacturing operations

through the use of our manufacturingknow-how, knowledge and the equipment
data we have accumulated over many years

 Development of leading-edge technologies

through various types of collaboration withconsortiums and academia in Japan and overseas Pursuit of development efficiency and new

possess broad knowledge

 Providing highly efficient and high-quality

services by a remote maintenance service, etc.

 Ability to suggest solutions by taking advantage

 Enhancing productivity by promotingof a wide range of product lineup and to satisfy
a broader range of customer needs with usedequipment and re-engineered equipment

 Aiming for productivity and efficiency byvalue creation by promoting digitaltransformation (DX)customers based on a solid relationship ofmutual trust and incorporating those needs
into product development

creating production systems that respondswiftly to market fluctuations

knowledge management and utilizing AI,
digital technology, etc.

 Continuous initiatives to improve thecustomer satisfaction level

Value Created

Value Created

Value Created

Value Created High-value-added, innovative, and unique High-quality and high-reliability products

 High-value-added products incorporating Comprehensive services that include

 Improvement in equipment productivity, such Shortening of production lead times by

 Products that address a variety of applications, Contribution toward the long-term steady Customer responsiveness based on the High-quality technical services that contributetechnologies

innovative technologies by simultaneous
parallel evaluation of four technology nodes

incorporating leading-edge technologies

as higher throughput*, a higher utilization rateand smaller space requirements

further improving the accuracy of the
production plan and increasing the efficiencyof manufacturing operations

 Equipment technology that increases

environmental performance Safety-first operation

everything from equipment delivery to
post-sale maintenanceas well as used equipment and re-engineered
equipment

operation of equipment across many
generations

deployment of global operations* Throughput: Ability to process wafers over a unit of time

to improving customers’ productivity

Sustainability Initiatives in the Value Chain
� Environment� SafetyP. 35

� Continuous Improvement of Business Operations
� Information Security

25 TOKYO ELECTRON Integrated Report 2021

P. 51

� Human Rights

P. 37
P. 42

� Corporate Governance� Engagement with Capital Markets

P. 52

� Supply Chain Management

P. 37
P. 43

� Compliance

P. 39

P. 48

� Evaluation from Third-party Institutions

� Human Resources

P. 40

� Risk Management

P. 49

� Quality

P. 41

P. 52

TOKYO ELECTRON Integrated Report 2021

26

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Value Chain Initiatives

We are taking on the challenge of developing our own unique technologies through basic and applied
R&D as well as through utilizing in-house and outside knowledge, while always remaining conscious of
the most current customer needs.
to long-term development strategies and progressing various
types of basic and elemental R&D toward the next growth phase.
Additionally, we are continuing to develop technologies that will
help customers create value through worldwide collaboration
with domestic development bases as the core as well as throughstrengthening our R&D capabilities through alliances with outside
consortiums, research institutes and academia.

Key Themes for Medium- to Long-term Value Creation
 Timely development of high-value-added technologies and products through promotion of Shift Left*
 Creating innovative and unique technologies for manufacturing leading-edge semiconductors and FPDs
 Increasing investment in human resources and development* Shift Left: A method that tests performance and quality from an early stage of the development life cycle to reduce reworking in the latter stages

Management Resources to Be Invested
R&D investment
over three years, beginningin fiscal 2020
More than400

billion yen

Human resources possessing
knowledge in a variety of
specialized fields related to

R&D sites

12

semiconductor and FPD
production equipment(6 in Japan and 6 overseas)

Primary Management Indicators
Cost of development andreturn (ROI)

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Research and Development
研究開発

We are creating innovative and unique technologies for
manufacturing leading-edge semiconductors and flat panel
displays (FPDs) by ascertaining technological and market trends aswell as customer needs early on by leveraging global marketing
activity networks and sharing that information throughout all
relevant departments. Through development portfolio
management, we are formulating short-term as well as medium-Sales

New products fornext-generation technologies
as a percentage of all
equipment models

Reduction in CO₂emissions from products

Main Research and Development Initiatives
Strengthening Research and Development Capabilities
One of the important themes that we uphold is continuous
creation of high-value-added, next-generation products thatwill be needed by customers in the future. To make this happen,
we have a duplex structure for development. The development
divisions at individual sites and the Corporate Innovation
Division jointly promote both the progress and improvement oftechnology in both the areas they manage and newer areas,collaborating where necessary while maintaining theirrespective individuality.
The development divisions at individual sites are focusing on
improving functions in the product areas they manage as well as inperipheral areas, and also developing technologies and systems to
be installed in products intended for use in manufacturing vastly
evolved future-generation semiconductors and FPDs.
The Corporate Innovation Division works closely with thedevelopment divisions at individual sites to maintain consistency
in each product area and focuses on further high-value addition by
optimizing research and development while maintaining a bird’seye view of the entire development structure. At the same time,the division is also engaged in a search for potential growth areas,
as well as in research and development of fundamental
technologies toward creating new value in the future.

Global Alliance
To promptly comprehend leading-edge technological trends andlink them to stronger R&D capability and productization, we areadvancing various types of collaboration with consortiums andacademia in Japan and overseas.
With research institutes and universities in Japan, we are
primarily developing basic and fundamental technologies. In
Europe, we are conducting joint research at leading-edge
research facilities at some of the world’s largest international
institutes, in an effort to develop leading-edge processes,
including next-generation patterning technologies. In the UnitedStates, we are participating in a consortium specializing in
nanotechnology and are conducting joint research on newgeneration AI chips, neuromorphic devices modeled after humanneural circuits, and three-dimensional stacking technology,
which is attracting attention as a new integration technology.

We are actively deploying the leading-edge technologies
established through these activities to our company’s R&D,
helping our customers bring to fruition the cutting-edge devices
they are working on.
(As of March 31, 2021)
Tokyo Electron Development Sites
Consortiums

Tokyo Electron
Technology Solutions1
Tokyo Electron Kyushu2
Tokyo Electron Miyagi

TEL Magnetic
Solutions TEL
Technology
imecCenter Korea
CEA-Leti

TEL Manufacturing andEngineering of America3

TEL Technology
Center, America
CNSE
BRIDG

National Institute of Advanced
Industrial Science and Technology

IME
1 Tohoku Office, Hosaka Office, Fujii Office
2 Koshi Office, Ozu Office
3 Chaska Office, Chelmsford Office

TEL Technology
Center, Taiwan

Promotion of Digital Transformation (DX)
Sustainability Initiatives
� Initiatives related to product environment  P. 35

Medium- and Long-term Environmental Goals

� Future-oriented development of environmental technologies
P. 36

Initiatives Related to Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)

� Structure to promote innovative development that takes advantage of global diversity
� Development efficiency improvement through the promotion of DX

P. 42

P. 40

Diversity and Inclusion

Continuous Improvement of Business Operations

Risk Management Initiatives
Main Risks

27

Research andDevelopment

Declining productcompetitivenessIntellectual
Property Rights

Declining productcompetitivenessOccurrence of liability
for damage

Human
Resources

Diminished product development
capability or
customer support quality

TOKYO ELECTRON Integrated Report 2021

Initiatives
� Established the Corporate Innovation Division, and built a Group-wide development framework that integrates

innovative technological development with the technologies of each development division� Provide highly competitive next-generation products ahead of competitors through collaborating with research

institutions and sharing a technology roadmap spanning multiple generations with leading-edge customers� Advance the R&D strategy, business strategy and intellectual property strategy in an integrated manner to build

an appropriate intellectual property portfolio

Prioritizing DX as an important means for continuing to provide
new value to customers, we are promoting it company-wide.
Tangible results are definitely showing up in research anddevelopment, including the realization of remote support using
AR technology. We are also advancing initiatives targeted atproviding new value to customers, such as the search for new
materials and achievement of process optimization at
overwhelming speeds by utilizing materials informatics.
In 2020, we opened TEL Digital Design Square, a DX-focusedsite, in Sapporo, Japan. We are establishing an environment inwhich data scientists can thrive, and are also providing educationand training on DX knowledge and methods to support engineers
in the individual divisions in creating innovation in their work.
We plan to continue promoting DX and the utilization of things
such as AI in solving a variety of issues and developing functions, andto advance the development and provision of products, such as
production equipment that analyzes its own operating conditions
and makes functional enhancements and operating efficiency
improvements, that are equipped with innovative functions.
Development Activities
Equipment
software

DigitaltransformationAI
applications

� Make ongoing improvements to work environments and promote health and productivity management, including

having top management share direction through regular employee meetings, establishing training plans for the
next generation of human resources, visualizing career paths for employees and offering attractive remuneration
and benefits

TOKYO ELECTRON Integrated Report 2021

28

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Value Chain Initiatives

Main Procurement and Manufacturing Initiatives

Along with striving to build a sustainable supply chain, we have establisheda system for manufacturing high-quality products more efficiently.

Initiatives with Suppliers

To ensure stable and sustainable procurement, we carry out
CSR and BCP assessments throughout the supply chain based on
industry codes of conduct, as well as share knowledge* with our
suppliers regarding safety, quality, the environment andcompliance. We value fair and transparent relationships with our
suppliers and aim to grow alongside them and contribute tosociety on a global level through firm relationships based on trust.
* Knowledge: Value-added information such as experience and know-how that isbeneficial to a company

Key Themes for Medium- to Long-term Value Creation
 Creating production systems and capabilities appropriate for the market size
 Optimizing management resource allocation to truncate the transition period from product development to mass production
 Streamlining manufacturing operations with consideration toward the operating margin and ROEManagement Resources to Be Invested
Many years of know-how(people and products)

Firm trust-based
relationship

Product Lifecycle Management System*
based on the latest
digital technology

in semiconductor/FPD
manufacturingwith our suppliers*A system for improving operational
efficiency and profitability acrossthe entire product life cycle

Primary Management Indicators
Direct and indirect
manufacturing costs

Procurement
stockout rate

Production lead times

Sustainability Initiatives
� Quality control in manufacturing  P. 41

Quality� Promoting sound supply chain management based on industry codes of conduct

P. 39

Supply Chain Management

� Initiatives for reducing CO2 emissions and using renewable energy at plants and offices
P. 35

Medium- and Long-term Environmental Goals

� Shortening of production lead times and levelingP. 42

Continuous Improvement of Business Operations

Risk Management Initiatives
Main Risks
Delays in the supply of products

SafetyOccurrence of safety-related problems
and liability for damages, and a decline incredibility

Quality

Occurrence of costs for countermeasuresof a product defect and a decline incredibility

Environmental
Issues

Initiatives
� Formulate BCPs, establish alternate production capabilities, develop multiple sources of important parts,

Procurement,
Production and
Supplyseismically reinforce plants, etc.

� Build a system for the stable supply of products by sharing forecasts based on demand projections with

suppliers to ensure the early procurement of parts and production leveling

Costs such as for developing new products
or changing specifications, and declining
product competitiveness and diminishedpublic confidence in the Company

29 TOKYO ELECTRON Integrated Report 2021

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Procurement and Manufacturing

We are aiming for constant innovation in production based on
the themes of safety, high quality and high reliability, and are
putting together manufacturing operations that are ecofriendly. Besides working toward a vertical transfer from productdevelopment to mass production via further improvements toefficiency, we are also promoting the creation of production
systems that can respond swiftly to market fluctuations, as well
as strengthening and leveling of production capacity.

Sales� Based on the “Safety First” approach, thoroughly implement safety design at the product development

stage, promote safety training and establish a reporting system in the event of an accident� Establish a quality assurance system and a world-class service system� Resolve technical issues from the product development and design stage� Investigate the cause of any defects and implement measures to prevent the same or similar defects

from occurring� Monitor the quality status of suppliers, conduct audits and provide support for improvement� Set industry-leading medium- to long-term environmental goals� Reduce greenhouse gas emissions from product use. Reduce overall energy consumption and increase

the ratio of renewable energy used at plants and offices� Provide technologies that help reduce the power consumption of semiconductors

In addition to conducting STQA* when beginning transactions
with new suppliers, we conduct annual surveys with regard to
CSR, BCP, conflict minerals and environmental laws andregulations, and we work with our suppliers to promote
improvement activities based on the survey results. We also holdproduction update briefings and TEL Partners Day on a regularbasis to create opportunities to share market trends, ourmanagement policy and business policies, and CSR initiatives
with our suppliers.
Procurement policies based on each country’s laws andregulations, social norms and industry codes of conduct are
disseminated internally and externally to relevant parties, andcompliance is encouraged. In addition, as a BCP measure, we havecreated a database of manufacturing sites for procured items andhave established a system that enables us to quickly confirm thedamage sustained in the event of a disaster and promptly begin
restoration activities. We are also striving to improve the quality ofprocured items by clarifying the required specifications foressential parts and units, identifying and improving parts with highnon-conformance rates and auditing suppliers’ quality systems.
STQA Activity Model
Unit
A

Supplier
selection

Improvement
report review

Creating
improvement
plan

Selfassessment

On-siteaudit

Social responsibility(CSR/RBA/Environment/Safety)

Unit
B

Improvements (cost reduction)

Unit
C

General quality

Unit
D

Individual process management* STQA: Supplier Total Quality Assessment. An assessment that focuses on industry
codes of conduct, cost reduction/higher productivity and quality.

Manufacturing Operations
We have key manufacturing sites in Japan. We are constantly
striving to innovate in production and further improve
profitability while engaging in the strategic development ofworld-class manufacturing operations through the use of ourmanufacturing know-how, knowledge and the equipment data
we have accumulated over many years.
In assembly, adjustment, inspections and other processes, wehave implemented in-process quality control consisting of
thorough screening, simulation verification and so on to prevent
non-conforming products from making it through to subsequent
processes. In the manufacturing process, which consists of a
combination of procurement from suppliers and our own
operations, we meticulously control the quality of procured
products and are working to build a resilient supply chain that canguarantee stable procurement. Moreover, each manufacturing site
is working to shorten the transition period from productdevelopment to mass production and improve product quality bystrengthening production capacities, optimizing inventory andreducing management resources involved in mass production andreallocating them to product development.

Tokyo Electron Technology Solutions
New Production Buildings (Left: Tohoku Plant Right: Fujii Plant)

Aiming for Productivity and Efficiency
We are creating a production system that centralizes all
production-related information and can respond swiftly tomarket fluctuations. In addition, we have implemented a coresystem and a manufacturing execution system (MES1) thatutilize the latest digital technology to strengthen our IT
infrastructure and computerize field data. By utilizing theaggregated data in each business operation, we can quickly
collect data needed for business decisions, make production
schedules more reasonable and more efficient, visualize delivery
dates for parts and achieve stronger coordination between sales
planning and production/procurement/inventory planning.
In addition, based on BOM2 information, we have establishedproduction capabilities (flow lines) for performing work in an
accurate and efficient manner according to the schedule
expected by the customer, all while ensuring appropriate
availability of materials and staff. Also, given the nature of ourbusiness, which involves a wide range of parts, we haveintroduced automated warehouses and a warehousing andshipping navigation system, as well as automated inspections tosave on human labor and increase efficiency.
1 MES: Manufacturing Execution System. A system that monitors and controls the work offactory machines and workers by linking them to the parts of the factory production line.
2 BOM: Bill Of Materials. A list of the parts that control a product, showing the hierarchicalstructure as well as including basic information on each part, such as from which parts
the product is assembled.

Tokyo Electron Miyagi JIT Supply Center (Automated Warehouse)

TOKYO ELECTRON Integrated Report 2021

30

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Value Chain Initiatives

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Sales
We propose optimal solutions that contribute to the creation of value forour customers in order to be the sole strategic partner.
technologies for future generations.
In addition, by leveraging our strengths as a device manufacturer
with a diverse product lineup and the experience and high level ofquality we have cultivated over many years, we propose optimal
solutions that contribute to the creation of value for our customers.
Moreover, by focusing on sales of used equipment andre-engineered equipment, we can meet a wider range of customer
needs and help maximize their return on investment.

Since our company’s inception, improvement of customer
satisfaction has been a significant management theme. We willbuild strong, trust-based relationships with our customers byproviding the Best Products and Best Technical Service in order
to be their sole strategic partner.
We help customers manufacture leading-edge devices bygrasping the latest technological trends and customer needs inan accurate and timely manner, as well as developing innovative

Key Themes for Medium- to Long-term Value Creation
Improving our responsiveness to customers and customer satisfaction
Increasing mutual profits by providing the Best Products and Best Technical Service
Improving our position among our major customers

Management Resources to Be Invested
A global sales and service system

Joint development evaluationequipment

in which business units, the Account Sales
Division, the Global Sales
Division and overseas
subsidiaries coordinate
with one anotherfor promoting
on-site collaboration
with customers

Broad-ranging knowledge andcomprehensive technologicalcapabilities
born fromour diverse
product lineup

Primary Management Indicators
Customersatisfaction

Market share ofmajor customers

OperatingmarginMain Sales Initiatives
Product Feedback that Reflects Accurate Understanding of Customer Needs
optimize products and shorten the time from technology
By collaborating with customers to create technology roadmaps
development to mass production.
spanning multiple generations, we can identify customer needs
To carry out these activities efficiently, global operations
early on and reflect them in R&D for the next generation and(=One-TEL) are being rolled out by an organic organization
beyond. This allows us to offer highly competitive products thatconsisting of business units, the Account Sales Division, thehelp improve the yield rate of devices and maximize equipment
Global Sales Division, development and manufacturing divisions,
utilization rate. We are also strongly promoting on-site
service divisions, overseas subsidiaries and other entities.
collaboration to deliver value-added machines to customers’
fabs and laboratories at an early stage, and are working to

Proposing Customer Solutions Leveraging a Wide Range of Product Lineup
To solve customers’ issues and contribute to the manufacture ofhighly competitive devices, we offer proposals that leverage ourwide range of product lineup, including equipment for key
Cleaning
processes such as deposition, coater/developer, etch andcleaning. We simultaneously strive to help optimize
manufacturing processes and enhance the productivity andquality of development and manufacturing processes by
providing optimal solutions that include remote support systems
and software for maximizing equipment utilization rate.
Furthermore, through continuous improvements toperformance of our mass production equipment, we areproactively responding to customer demands for the productionof multiple generations of products.
We are also working to satisfy the market’s diversifying needs
Etchby providing products for the IoT market, which include powerdevices, image sensors and communication devices, as well as
used equipment and re-engineered equipment.

Deposition

Coater/Developer

Improvement of Customer Satisfaction
Sustainability Initiatives
� Initiatives for improvement of customer satisfaction  P. 32
� Ongoing efforts to ensure customer safety  P. 37

Improvement of Customer Satisfaction

Safety� Reducing CO2 emissions from product usage by addressing Medium-term Environmental Goals
P. 35

Medium- and Long-term Environmental Goals

� Improvement of operational efficiency in sales activities

P. 42

Continuous Improvement of Business Operations

Risk Management Initiatives
MarketFluctuations

Main Risks

Initiatives

Opportunity losses due toinability to supply customers
with products in a timely
manner� Periodically review market conditions and orders received at Board of Directors and other important meetings,

Geopolitics

Restrictions on businessactivities

Information
Security

Diminished public confidence
in the Company or liability fordamages

and appropriately adjust capital investments, personnel/inventory planning and other aspects of business� Account Sales Division and Global Sales Division to strengthen the sales framework and customer base by

grasping investment trends of customers and responding to a wide range of customer needs� Carefully watch policy and diplomatic trends to understand moves to introduce regulations

� Communicate opinions to policy-making authorities such as through public comment, and anticipate the impact

of different countries introducing polices and regulations, and consider countermeasures� Establish an information security system that conforms to global standards by launching a dedicated security

organization and having security assessments conducted by external experts

� Establish globally standardized rules and regulations for information management

We are working to build a solid relationship of mutual trust withcustomers by further enhancing customer satisfaction, which wehave valued highly since our founding. As an indicator for thiseffort, for many years we have been conducting a uniquecompany-wide customer satisfaction survey (TEL CS Survey) at
the same time every year to promote ongoing improvements toour business practices.
In the customer satisfaction survey for fiscal 2021, responses
were received from approximately 1,400 individual customers(70.2% of all customers), and 96.7% of all survey items received ascore of three points or higher (Very Satisfied or Satisfied)*. This
marked an improvement of 3.4 percentage points from fiscal
2020. Information obtained from the survey is analyzed bybusiness unit (product), account (customer) and function(software, development, etc.), and the results of this are sharedwith relevant divisions, such as sales, plants, service and overseas
subsidiaries to implement actions for improvement.

CS Survey activity
preparation

Conduct survey ofcustomers

Feedback to customers
Implement improvement
activities in each division
Confirm progress ofimprovement activities

Analyze and reportsurvey results
Investigate
improvement plan

* On a four-point scale, three points or higher represents “Very Satisfied” or “Satisfied”.

31

TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

32

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Value Chain Initiatives

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Installation and Maintenance Services
We have established a global support system to provide the Best Technical Service with high added
value in a prompt and appropriate manner.
provide timely feedback to our development and manufacturing
operations. In addition, we are making efforts to further improve
the quality of our services through the provision of advanced
field solutions, such as by constructing a global support system
via our Total Support Center (TSC) and enhancing remotesupport through our remote maintenance service.

For installation and equipment maintenance, we take advantage of acumulative number of equipment installations of approximately
76,000 units to offer the Best Technical Service with high added value.
We make full use of leading-edge AI, digital technology andknowledge management* tools, and promote enhanced efficiency
for our services to support the stable operation of various
generations of equipment for a wide variety of applications.
By refining the skills of the front-line engineers who interact withcustomers, we work hard to accurately identify customer needs andSales* Knowledge management: Management approach to promote internal company
sharing of tacit knowledge held by individuals, in order to encourage innovationand to improve overall productivity

Key Themes for Medium- to Long-term Value Creation
 Improvement of customer satisfaction through the provision of high-value-added services
 Maximizing service revenues through expanded sales of comprehensive contract-based services* Addressing new customer needs with equipment for power devices, re-engineered equipment and other measures

Main Installation and Maintenance Service Initiatives
Enhancing Front-line Engineers
We believe it is essential to accurately ascertain valuable
information, including customer needs and equipment operation
status, in markets where we deliver equipment, as well as toprovide timely feedback with regard to related operations to assist
in equipment development and improvements to functionality.
To efficiently conduct these activities, we are working to
improve the skills of each and every engineer involved in on-siteequipment installation and maintenance. We also strive topromote seamless communication between our development
and manufacturing departments and both the engineers at ouroverseas subsidiaries and our own engineers assigned overseas
who serve as our on-site contacts with customers.
Moreover, we are making efforts to establish a management
system for operations in each country and region so that we canrespond in a flexible and rapid manner to changes in the businessenvironment and promote efficient operations.

Customers
Providing the Best Products & Best Technical Service

Overseas subsidiaries
Engineers atoverseassubsidiaries

Customerfeedback

Development andmanufacturing
divisions

Engineers
assignedoverseas

Seamlesscollaboration

Professional
technical support

Business Unit
Product development inline with customer needs* Comprehensive services primarily for post-warranty maintenance (maintenance work, performance maintenance, provision of spare parts etc.)

Management Resources to Be Invested

Promotion of High-value-added Services

Service database andremote support system

Service support infrastructure at

76 sites in
18 countries and regions

Approximately

4,000 field engineersthat utilizes AI, knowledge
management etc.

with highly specialized
and broad knowledge

Primary Management Indicators
Net sales for field
solutions business

Man-hours for
installation andmaintenance services
at overseas subsidiaries

Profitability of field
solutions business

Sustainability Initiatives
� Improving the efficiency of start-up operations and maintenance services  P. 42
� Safety initiatives for installation and maintenance services
� Provision of high-quality services

P. 41

� Effective utilization of diverse talent

P. 37

Continuous Improvement of Business Operations

SafetyQuality

P. 40

Quality

Occurrence of costs forcountermeasures for a
product defect and a decline incredibility

Human
Resources

Diminished productdevelopment capability or
customer support quality

The Novel
Coronavirus(COVID-19)

Slows the Company’s businessactivities or the deteriorationof global economic conditions

33 TOKYO ELECTRON Integrated Report 2021

Promoting these initiatives in smooth collaboration with fieldengineers and manufacturing sites allows us to provide highvalue-added services.
* Smart glasses: Glasses-style wearable devices that can display images and digital
information

CustomerField engineer dispatched

Total Support Center

Dispatch

TELeMetricsTM

Technical support
engineers
Equipment records
Service
database

Response

Technical advice

Diversity and Inclusion

Improving Service Productivity

Risk Management Initiatives
Main Risks

We have built a global support system, establishing Total
Support Centers (TSCs) in Japan, the United States, China andEurope. At each TSC, dedicated representatives maintain andutilize a database of information about customers’ equipment
and examples of similar incidents. Further, through our
TELeMetrics™ remote maintenance service, TSCs use theirknowledge and tools to propose solutions to the various issues
customers face.
And to expand remote support for field engineers, we areengaged in developing a remote support system that can sharevideo and audio from customers’ fabs in real time, as well as
further enhance the confidentiality of information. Throughsuch efforts, we are promoting remote support that helps toensure stable equipment operation. Starting in fiscal 2021, we
will add unique functions such as information protection,
restricted video transmission, and call translation to ourexisting smart glasses* system to make remote support moreconvenient and further improve support quality.

Initiatives
� Establish a quality assurance system and a world-class service system� Resolve technical issues from the product development and design stage� Investigate the cause of any defects and implement measures to prevent the same or similar defects from occurring� Monitor the quality status of suppliers, conduct audits and provide support for improvement

� Make ongoing improvements to work environments and promote health and productivity management, including

having top management share direction through regular employee meetings, establishing training plans for the
next generation of human resources, visualizing career paths for employees and offering attractive remuneration
and benefits

To further improve service productivity, we are implementing
initiatives in conjunction with Group-wide business innovation
projects. To promote knowledge management, we are deploying
Service CRM* on a global scale to centrally manage customers’
equipment records (support/trouble history) as a database, as
well as to ascertain each field engineer’s actual work statusthrough work orders.

In addition, we are placing more emphasis than ever ondeveloping advanced equipment diagnostic capabilities thatutilize equipment output data. Going forward, we plan to utilize
these functions to support comprehensive contract-based
services, particularly those with billing based on performance(Pay for Performance contracts).
* Service CRM: Service Customer Relationship Management� Established an Emergency Task Force headed by the CEO� Restrict travel to high infection-risk countries and regions, maintain supply chains and thoroughly implement

infection prevention measures at plants and offices

TOKYO ELECTRON Integrated Report 2021

34

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sustainability Initiatives in the Value Chain

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Tokyo Electron is merging business activities with a variety of sustainability initiatives, focusing on the environment, society
and governance to help create new value.

Environment
Environmental Management
Environmental issues such as climate change are growing evermore crucial. To promote activities in the medium to long termthat meet the environmental/social/governance needs of its
customers and other stakeholders, the Manufacturing Company
Presidents’ Council, which includes the corporate director in
charge of environment, health and safety (EHS), monitors andsupervises progress related to environmental issues. A
headquarters has been established, headed by the corporate
director in charge of EHS, and promotes environmental activities
across the entire Group. The Environment Council, made up of
members appointed by the executives of the Group companies,
sets targets related to environmental issues, monitors progress
and also works to achieve its goals. Furthermore, to continuously

promote our environmental activities, we have operated anenvironmental management system based on ISO 14001 since
fiscal 1998, primarily at our manufacturing subsidiaries. The
progress of our activities and legal compliance status arechecked through internal audits and third-party audits. Any
issues identified through these activities are reviewed by theEnvironment Council, reported to the Manufacturing Company
Presidents’ Council and used for promoting environmental
activities across the entire Group. Under such an environment
management system, fiscal 2021 was again free fromenvironmental incidents, accidents, violations and associatedlegal proceedings.

Medium- and Long-term Environmental Goals
In order to further strengthen our initiatives toward theenvironment in our products, plants and offices, the contents ofthe medium-term environmental goals for fiscal 2031 wererevised in December 2020. In the goals for products, the reference
year for per-wafer CO₂ emissions was changed from fiscal 2014 to
fiscal 2019. In addition, in the goals for plants and offices, the total
CO₂ emissions reduction goal was changed from 20% reduction to
70% reduction, while reaching a rate of 100% renewable energy
usage. At present, we are working on new initiatives towardachieving these revised goals. Specifically, we are planning to
introduce renewable energy at our plants and offices in Japan, theUnited States and China starting from fiscal 2022. This will bringour use of renewable energy company-wide to over 50%, while

dropping our CO₂ emissions by 40%. In terms of products, we aremoving ahead with understanding the amount of CO₂ emissions
during use of standard equipment and creating a roadmap. We arerolling out activities toward achieving our goals based on this.
We have set the following as a long-term goal to achieve by
2050: “As a leading company in environmental management, we
strive to contribute to the development of a dream-inspiring
society by proactively promoting the reduction of environmental
burden of both our products, plants and offices, and at the sametime, providing evolutionary manufacturing technologies that
effectively reduce the power consumption of electronic products”.
We are working on initiatives for this at a company-wide level.

E-COMPASS
We established E-COMPASS (Environmental Co-Creation by
Material, Process and Subcomponent Solutions) as a new supply
chain sustainability initiative. E-COMPASS aims to align our
products and the entire operations more closely with ourenvironmental mandates, strengthen our ties with business

partners, solidify our industry leadership, and pave the way for asustainable future. We will utilize every management resource atour disposal to drive the major trends of digitalization andgreening of society and actively endeavor to preserve the global
environment throughout the supply chain.

Initiatives Related to Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)
divisions of the Group companies.
We are pursuing ongoing disclosures and initiatives based on the
For Scope 1 and 2 CO2 emissions, we are adopting renewable
TCFD framework and relating to risks and opportunities thatclimate change presents to our business.
energy from a global perspective, including the implementationof measures at our key manufacturing sites in Japan with highStatus of Initiatives Related to Recommendations of the TCFD
emissions.
• Governance
For Scope 3 emissions, we recognize the importance ofEach of our corporate directors for EHS and CSR is working underproviding products that generate fewer CO2 emissions because
the supervision of the CEO to monitor progress of goals related
about 88% of the emissions in our entire value chain are
to our response to climate change. With the establishment of thegenerated during use of products after sale, so we are focusing
EHS Promotion Department and CSR Operations Department at
on development of a range of environmental technologies.
headquarters, these activities are being driven by the entire
We also formulate business continuity plans in anticipation ofGroup. At the Environmental Council , comprised of members
natural disasters caused by abnormal weather and other factors,
appointed by executives of the Group companies, companyand take measures with our suppliers to ensure that businesswide goals are set, progress is monitored and the achievement ofoperations can be maintained.
• Metrics and Targets
these goals is promoted.
• Strategy
To further reinforce our initiatives toward improving
Utilizing the framework of the TCFD recommendations, we
environmental performance of products and conserving theidentified the risks and opportunities of climate change that will
environment at our plants and offices, we revised our mediumimpact business over the medium to long term. We haveterm environmental goals in December 2020*. While supporting
evaluated the quantitative impact on business from some of
the advancement of information and communications
those risks and opportunities, and we aim to continue
technology through the provision of our semiconductor and FPD
quantifying others going forward as we investigate relevant
production equipment, we are also committed to achieving newmeasures.
environmental goals in keeping with our Corporate Philosophy:• Risk Management"We strive to contribute to the development of a dreamThrough the Manufacturing Company Presidents’ Council, we
inspiring society through our leading-edge technologies andapprove company-wide risk management initiatives, from shortreliable service and support.”
term to long term, that related divisions and councils* Refer to Medium- and Long-term Environmental Goals on p. 35
recommend, and then apply those initiatives to the facilities andExamples of Climate Change (Risks and Opportunities) Impacting Business over the Medium to Long term
ScenarioType

Details

2°C
Temperature
Increase

Transition
risks• Increased energy costs in line with taxes on fuel and energy. Assuming our greenhouse gas (GHG) emissions and useof renewable energy remain at fiscal 2021 levels, if a carbon tax were applied, we estimate our costs would increaseby 1.1 billion yen/year by fiscal 2026 (assuming a tax of 6,000 yen per ton CO2) and 2.6 billion yen/year by fiscal 2041
(14,000 yen per ton CO2)
• Decreased net sales if we are unable to meet customers’ requirements and demands for environmental initiatives• Reduced reputation among investors, NGOs and local communities if a response to climate change and otherenvironmental issues is delayed

4°C
Temperature
Increase

Physical risks• Impacts on us, our suppliers and customers from abnormal weather (net sales decrease as a result of supply chain
disruptions, operation stoppages, production/shipping delays and other factors)

CO2 Emissions across the Value Chain
Our Scope 3 CO₂ emissions account for approximately 97% of total emissions, and approximately 88% (5,668 kilotons) of that comesfrom the use of products, so we believe that product development with low CO₂ emissions during operation is critical.

409

kilotons
Scope 3 upstream Not from our Group
Fuel- andenergy-related
activities

14 kilotons

Employee commuting

11 kilotons

Business travel

Capital goods

162 kilotons

Purchased goods
and services

211 kilotons

186

kilotons
Scope1, 2 Own emissions

1 kiloton

Waste generated inoperations

1 kiloton

Upstream transportationand distribution

9 kilotons
Upstream

35 TOKYO ELECTRON Integrated Report 2021

5,813 kilotons

Scope 3 Not from our Groupdownstream

End-of-life treatmentof sold products

Direct emissions
from fuel and gas use
Scope 1

29 kilotons

Indirect emissions fromelectricity use andheat purchase
Scope 2157 kilotons

2 kilotons

Use of sold products

5,668 kilotons

Downstream
transportation anddistribution

143 kilotons
Downstream

Scope 1: Direct greenhouse gas (GHG)
emissions from use of fuel and gas we
owned or controlled
Scope 2: Indirect GHG emissions fromuse of electricity, steam and heat wepurchased
Scope 3: Emissions from corporate
value chains (excluding scope 1 and 2
emissions), such as producttransportation, employee businesstravel and major outsourced
production processes* Scope 3 is divided into upstream
activities, which include emissions
associated with purchased or
procured products and services, anddownstream activities, which include
emissions associated with soldproducts and services

Common• Accelerated efforts to create new value, including innovation toward development of low-GHG products and services,and equipment and technologies that contribute toward the manufacture of low-power consumption devices• Gaining superiority and business opportunities through proactive initiatives for climate change and adding value toOpportunities the market• Higher productivity by streamlining operations and reducing related environmental impacts• Securing a competitive advantage by building resilience (responsiveness to climate change) into global operations,
including working to adopt renewable energy, and improving corporate value through these initiatives

TOKYO ELECTRON Integrated Report 2021

36

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

SafetyApproach to Safety
Under the “Safety First” slogan, everyone at Tokyo Electron, fromtop management to on-site personnel, is actively andcontinuously improving safety and promoting health, giving
safety and health the highest priority when carrying out various
types of operations such as development, manufacturing,transportation, installation and maintenance.

Handling of Accidents
We analyze the causes of all accidents and implement corrective
measures. We strive to prevent accident recurrence by not only
identifying the main cause, but also carrying out multi-faceted
cause analysis, targeting the operator who was involved, the facility,
the environment, the involved coworkers and the management
aspect, and sharing the results with all Group companies.

Safe Design of Equipment
Taking the entire product life cycle into consideration, we carryout product risk assessments as early as possible in thedevelopment phase. Based on the assessment results, we
implement safe equipment design1 to reduce the risks posed tohumans. We also examine and ensure compliance withincreasingly strict laws and regulations around the globe, andhave a system in place for all safety regulations of the regions
where our equipment is delivered. Equipment we ship is checked
to ensure that it complies with international safety standards such
as SEMI S22 and CE marking3 as well as the safety laws andregulations of each country and region.

Safety Education
We are implementing two education programs globally for theestablishment of safe work environments. The first is a programon basic safety targeting all employees and the second is a
program on advanced safety targeting employees working on
manufacturing lines and cleanrooms. To eliminate incidents, we
also provide online training and risk assessment training for
employees in Japan and overseas. Also, to expand the concept ofsafe equipment design to our design, manufacture and service
operations, we hold a semiannual safe equipment design
seminar at our manufacturing sites in Japan, inviting an external
guest to speak. Finally, we also promote our initiatives to prevent
accidents, such as providing our suppliers and customers withsafety information as circumstances demand. As a result of
having maintained a high priority on creating safe work
environments, TCIR has been maintained at less than the
Company’s target of 0.5, with 0.27 in fiscal 2021.

1 Safe equipment design: A design concept that eliminates the cause of the machine’s
harm to humans through the safety design of the machine
2 SEMI S2: This is a set of environmental, health and safety guidelines forsemiconductor production equipment. It is used mainly by the leading manufacturersof semiconductor equipment in the United States and Europe, not only forsemiconductors but also as safe procurement guidelines for electric and electronic
device manufacturing equipment around the world.
3 CE marking: When exporting into the European Union, CE marking defines rules fordisplaying a CE mark as proof that the equipment is safe and complies with EU-definedrules (directives)

0.27

TOKYO ELECTRON Integrated Report 2021

3 Refer to Supply Chain Management on p. 39

Commitment

Assessment

Remediation

ReportCommitment to respecting
human rights• Human Rights Policy publication• Awareness and implementation• Education

Assessment of human rights risks
in business and supply chains• CSR assessment• Human rights risk assessment• Human rights impact assessment

Actions to reduce risks based on
assessment results• Feedback sheet publication
 rogram development and•Preview according to issues

Regular disclosure of information• Sustainability Report publication• Disclosures on the website

We recognize the importance of having highly effective
grievance mechanisms related to human rights and are working
to establish and operate those mechanisms. In fiscal 2021, we
further strengthened our internal and external reporting systems
in Japan and overseas for employees and suppliers. By continuing

to conduct human rights due diligence going forward, we willassess and correct any human rights issues we identify in ourbusiness activities, and further improve the grievancemechanisms we provide.

Supplier Human Rights Risk Survey Results
Percentage of companies
considered to have low
risks

65%

Human Rights Initiatives
In fiscal 2018, we formulated our Human Rights Policy1,
summarizing our approach to human rights. We have specified thehuman rights we believe are particularly important in businessactivities as Freedom, Equality & Non-Discrimination; Freely
Chosen Employment; Product Safety & Workplace Health and
Safety; Freedom of Association; and Appropriate Working Hours &Breaks/Holidays/Vacations. In preparing the Human Rights Policy,
we referred to the United Nations’ Guiding Principles on Businessand Human Rights and the International Bill of Human Rights andthe ILO Declaration on Fundamental Principles and Rights at Work
referred to therein, the Ten Principles of the United Nations Global
Compact, and the RBA Code of Conduct2.
1 Human Rights Policy: www.tel.com/csr/employee/diversity/
2 RBA Code of Conduct: A global initiative with a focus on the electronics industry, theResponsible Business Alliance (RBA) establishes a set of standards for supply chains in
the electronics industry for a safe labor environment, to ensure that workers are treatedwith respect and dignity, and that companies take responsibility for environmental
impact in the manufacturing process.

37

utilized a self-assessment questionnaire (SAQ) for internal use,
based on the RBA Code of Conduct, and also reviewed the resultsof a CSR assessment3 for suppliers of materials, staffing andlogistics to assess the current situation throughout the value
chain. We are using the results of these surveys to consider
corrective actions and reduce human rights risks.

TCIR

Human Rights
Approach to Human Rights
Conscious of our corporate social responsibility, we recognizethat it is important to conduct ourselves with a strong sense of
integrity. Based on this recognition, we have firmly upheld
human rights since our founding, as reflected in the spirit of our
Corporate Philosophy and Management Policies. For us,
respecting human rights means a significant undertaking, notonly to fulfill our responsibility for eliminating adverse impacts
on people caused through business activities, but also to respect
those people who support our business activities, and contributeto the realization of a sustainable, dream-inspiring society. We
incorporate the concept of respect into every aspect of ourbusiness activities, and strive to nurture a dynamic corporate
culture where each person can realize his or her full potential.

We ensure that our executives and employees, as well as
suppliers, are fully aware of this content. Specifically, we publish
the Human Rights Policy on our website to make it available toeveryone inside and outside the Company, and also implement
online human rights training targeting all of our executives andemployees. In fiscal 2021, as in the previous fiscal year, we
conducted human rights due diligence, as well as risk surveys,
and identified and assessed impacts. As part of the surveys, we

Percentage of companies
considered to havepotential/actual risks

35%

Environment

Management Systems• Appropriate use of water and waste
water management to prevent
pollution• Reporting system

Labor

Health and Safety• Working hours• Burden of
employment-related
fees• Deployment of trained emergency
response personnel• Designation of emergency response
teams, and provision of personal
protection equipment and training• Establishment of risk assessment
procedures and programs, assuming
emergency situations• Implementation of evacuation drills
for all workers, assuming fires andother emergencies

The results of human rights risk surveys conducted at
suppliers showed that 35% of those with 500 or more
employees had potential/actual risks. Among these risks, themajor risks are health and safety issues related to humanrights, followed by labor issues. Based on these results, we
continued to request those suppliers to comply withdomestic laws and regulations and social norms related tohealth and safety. We will work to reduce human rights risks
by promoting corrective actions together with our suppliers.
Meanwhile, inside our company, we identified potential
human rights risks in the areas of labor, and health and safety.
To mitigate these risks, we are renewing our efforts to fully
manage working hours and also taking steps to improve
operational efficiency further.

TOKYO ELECTRON Integrated Report 2021

38

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Supply Chain Management

Human Resources

Principles and System of Supply Chain Management
The building and maintenance of a supply chain, which responds
flexibly to the demands and risks of a diverse society andcontributes to the creation of new value, is crucial for theenhancement of our medium- and long-term corporate value.
To make our entire supply chain sound and sustainable, we haveformulated a procurement policy based on the laws, regulations
and social norms of each country, as well as the RBA Code of
Conduct, and are promoting activities based on this policy bydisseminating it throughout the Company and our suppliers. We
also promote improvement activities from various perspectives
while valuing continuous communication with diverse suppliers,
including materials suppliers that handle parts and raw materials,
staffing suppliers that provide services and logistics suppliers
that handle physical distribution operations.
We strive to create value in the supply chain by working tobuild relationships of trust with our suppliers, who support ourbusiness as partners, and by working together to conduct
operations in compliance with global standards. Under theleadership of the Representative Director, President & CEO,issues identified during various activities are shared with relevant
divisions for consideration and action on specific improvements.
Initiatives in the Supply Chain
CSR Operations
To keep track of our suppliers’ engagement in CSR activities,
we have conducted a CSR assessment in the areas such aslabor, health and safety, the environment and ethics since
fiscal 2014. We analyze the results of the assessments, provide
feedback and work together with our suppliers to remediate
any issues. In fiscal 2019, we completely revised the content of
the survey based on audit standards stipulated by the RBA,
and have since conducted surveys on materials1, staffing2 andlogistics3 suppliers.
In fiscal 2021, with the help and understanding of our
suppliers, steps were taken to repay workers with respect tocases of an employment-related expense burden for forcedlabor and bonded labor, which had been identified in theprevious fiscal year and which have been given particularemphasis in the RBA Code of Conduct. In addition, with respect
to cases of false reporting, changes were made in businessprocesses and audits were introduced.
Regarding the human rights issue of “freely chosen
employment”, we have expressly stipulated our zero tolerance
policy for forced labor and bonded labor, and by communicating
this to our major suppliers, we are promoting initiatives to ensurethat all people in our supply chain can work of their own free will.
1 Material suppliers: Surveys have been conducted since fiscal 2014 for suppliers
accounting for more than 80% of our procurement spend.
2 Staffing suppliers: Surveys have been conducted since fiscal 2019 on 100% of
employment agencies and contracting companies (internal contractors).
3 Logistics suppliers: Surveys have been conducted since fiscal 2019 on 100% of
customs-related operators.

Responsible Procurement of Minerals (Conflict Minerals)
We regard taking action against conflict minerals (3TG4) obtained
through illegal exploitation, including sources with human rights
violations or poor working conditions, as an important part ofcorporate social responsibility. Our resolute goal is to eliminate theuse of raw materials made from these conflict minerals, as well as
any parts or components containing them. We conduct surveys on
conflict materials using the CMRT5 and referring to the OECD6 Due
Diligence Guidance for Responsible Supply Chains of Minerals from
Conflict-Affected and High-Risk Areas.

Formulation of
supply chain policies

39 TOKYO ELECTRON Integrated Report 2021

practice by our employees all over the world.
We have established TEL UNIVERSITY as an in-house
educational establishment, helping employees to independently
build their careers and realize their personal goals for their
growth and development. Our aim is to stand shoulder toshoulder with each employee, supporting their self-growth andfruitful career development throughout their working life, andcreate a foundation that enables the organization and individuals
to trust each other and grow. We are focusing on employee
growth that leads to corporate growth through the following
four initiatives: Provision of Personalized Learning Opportunities,
Support for Career Development, Leader Programs, andProvision of Global Learning Opportunities.

Corporate Education System (TEL UNIVERSITY)
Management

Executives

Leaders

Junior Employees/
New Employees

Mid-level Employees

Introductory programs (new graduates, mid-career recruits)
Level-based
Programs

OJT* programs (new graduates, mid-career recruits)
Manager programs

Mid-level employee programs

Junior employee programs

Leader programs
Compulsory web-based training

4 3TG: Tantalum, tin, tungsten and gold

Business skills

5C
 MRT: Conflict Minerals Reporting Template. Survey format for reporting conflictmaterials, provided by the Responsible Minerals Initiative (RMI), which has establishedinternational guidelines on conflict minerals.

Goal-based
Programs

Procurement BCP
As part of our business continuity plans (BCPs), we collaborate
with suppliers for disaster preparation.
We maintain a database of suppliers’ production sites so that
if a crisis arises, we can promptly identify impacted suppliers andquickly collaborate in recovery efforts. In addition, we conduct
BCP assessments on our suppliers, analyze their responses andprovide them with feedback to promote further improvement.

Do

Check

Act

Notification of requests toour suppliers and appeal
for CSR activities

Implementation of
supply chain CSR assessment
and analysis of response

Provision of feedback based on
the results and requests for
improvements to suppliers

Global communication
Employee life support
Technical programs (seminars, workshops)

6O
 ECD: Organisation for Economic Co-operation and Development

Supply Chain CSR Process

Plan

Employees Both Create and Fulfill Company Values
A total of 14,479 employees are working at the 76 Tokyo Electronsites located in 18 countries and regions of the world, and webelieve that each of them maintaining a high level ofengagement and demonstrating their full potential will leaddirectly to our company’s growth. By sharing with our employees
the direction toward which management is aiming and providing
platforms for direct dialogue through the employee meetingsand discussions held every year at each site, we are striving tobuild mutual trust between the organization and individuals.
Furthermore, to realize our Corporate Philosophy, we establishedTEL Values, which delineate Tokyo Electron’s values, the mindset
that each employee must possess and the codes of conduct tobe passed on to the future. The TEL Values—pride, challenge,
ownership, teamwork and awareness—are being put into

* OJT: On the Job Training

Diversity and Inclusion
At Tokyo Electron, diversity and inclusion are management pillars
that lead to the continuous generation of innovation andincreased corporate value. We are actively pursuing them withthe strong commitment of our management.

Although the areas of emphasis for diversity and inclusion
vary by country, we have taken on gender and nationality as
major themes and put the following goals and initiatives in place
based on the characteristics of each region.

• In terms of succession planning, we conduct a diversityconscious talent pipeline (plan for developing humanresources) and strive to increase the ratio of women in
management positions• We create an organizational structure where even thosefrom outside of Japan can take on corporate roles
through the use of technology and shared global humanresources systems• Taking into consideration that many of our employees
are engineers, we actively invest in the use of recruiters
and branding to hire women at a level that is equal to or
greater than the ratio of women in each region (or theratio of women majoring in science and engineering in
the case of engineers)• We organize events such as talks on diversity andinclusion from internal and external experts and leaders,
generate networking opportunities for employees withsimilar characteristics and experience, and hold roundtable discussions regarding careers before and after
taking maternity/paternity leave and childcare leave

TOKYO ELECTRON Integrated Report 2021

40

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Employee Engagement
Improving employee engagement is essential to maximize
corporate performance and achieve sustainable growth.
Recognizing that employees both create and fulfill company
values for us, we have been regularly conducting engagement
surveys since fiscal 2016 to assess the current state of employee
engagement and identify issues. Based on the results of thesurveys, our management takes the lead in making
improvements to foster a better workplace environment andculture. These initiatives resulted in an increase in the employee
engagement score of 12 points from fiscal 2016 to fiscal 2021 anda turnover rate of 2.5%.
We plan to continue these initiatives since we believe that
improving employee engagement leads to providing increased
value to our stakeholders.

Continued Implementation of Engagement Surveys（ポイント）

40
Reviewingof circumstances

Improvementof measures

30

Planning formeasures20

10

Confirmationof effects

Score

Implementationof measures

Up 12 points

0

We strive to implement own-process assurance systems bycarrying out strict risk management and development/design
inspections beginning at the development stage, and also by
ensuring verification of customers’ operations using simulations.
スコア
We have also built an important component traceability systemポイント
as part of our effort to strengthen our information environment.
By making it possible to use the One Platform1 to view suchinformation as past problems and adjustment values used during
manufacturing and assembly, as well as important component
inspection information from suppliers, we have successfully
strengthened our risk management (FMEA2) to prevent various
types of non-conformance.
We believe that thorough implementation of these own（年）
2016
2021
process
assurancesystems and prevention
makes it possible for
employees to focus on high-value-added business operations
and promote initiatives that lead to Shift Left (front-loading). We
will continue to strive to provide high-quality and high-valueadded products and services to our customers.

Shift Left (Front-loading) Initiatives
Man-hours

Front-loading
development style

12
UP

Accelerated issue
identification
Creation ofvalue-added
operations bysolving issues atthe early stage ofdevelopment

Detailed
designConceptual
designPrototypeevaluation

Development
quality

1 One Platform: A platform that makes it possible to easily view multiple different
systems as seamless information sources, in order to effectively and efficiently achieve
traceability

Full-scale
production

Supplier
qualityTime

Operation
streamlining

2 FMEA: Failure mode and effects analysis. Method to identify, prevent and mitigate risks
in advance.

Quality
Initiatives for Quality Improvement
In order to help each of our employees correctly understandand implement quality assurance activities, we realize theimportance of correctly defining the ideal form of quality
assurance (goals), along with creating an environment andculture for widely disseminating it. From the ideal form, weestablished “Our Approach to Quality” and “Quality Policy” andcommunicate the importance of quality to our employees atvarious opportunities to increase their quality awareness. To
carry out correct quality assurance activities, it is important toestablish clear rules for what has to be done and correctly
implement those rules. To ensure that our employees are always
aware of their roles and purposes and correctly perform theirwork, we are striving to make the rules comprehensive, reassessand deploy our quality education from time to time andvisualize appropriate quality information. Based on thesefoundations, we help our employees mutually enhanceawareness about quality in a variety of situations so that theirefforts lead to the improvement and growth of our businessprocesses, enabling us to provide product quality and services
that surpass customer expectations.
Approach to Quality
We have defined our approach to quality as follows:“The Tokyo Electron Group seeks to provide the highestquality products and services. This pursuit of quality begins at
development and continues through all manufacturing,
installation, maintenance, sales and support processes. Our

employees must work to deliver quality products, quality
services and innovative solutions that enable customer success”.

Quality Policy
1. Quality Focus
Focusing on quality to satisfy customers, meet production
schedules and reduce required maintenance even withtemporary cost increases.
2. Quality Design and Assurance
Building quality into products and assuring in-process quality
control, from the design and development phase throughout
every process.
3. Quality and Trust
When a quality-related problem occurs, working as a team to
perform thorough root cause analyses and resolve problems
as quickly as possible.
4. Continual Improvement
Ensuring customer satisfaction and trust by establishingquality goals and performance indicators and by implementing
continual improvement using the PDCA cycle.
5. Stakeholder Communication
Listening to stakeholder expectations, providing timely
product quality information and making adjustments
as needed.

Continuous Improvement of Business Operations
We are currently introducing a new enterprise system (ERP*) to
improve productivity and quality further. The new ERPs, being
integrated across operational and national boundaries, are aimed
at creating the following five benefits: (1) compliance with the
new revenue recognition standards in Japan; (2) business andmanagement decision making with quick response to change;(3) large improvements in business operation efficiency;(4) utilization of globally integrated information with an eye
toward overall digital transformation; and (5) realization ofultimate work style reform. Beginning with business operational
improvement, we are contributing to the resolution of issues
from COVID-19 with global progress in the expansion of
telecommuting, the shift to online approval operations, andoverall digitalization.

In fiscal 2021, we made progress in communication andconsensus-building that included our headquarters,
manufacturing sites in Japan, and overseas subsidiaries, as well as
partner companies, to form a globally unified team towardbusiness innovation. In May 2021, the new ERPs began operation,
primarily at our headquarters. While making the most of theknowledge gained from this process and the results, we plan torealize a true globally integrated system, with project members
and all our employees working as one.
* ERP: Enterprise resource planning. A system that integrates the core business
operations of an enterprise, such as accounting, personnel, production, logistics andsales, for better efficiency and centralized information.

Overview of the New Enterprise System
Sales
CRM

Scheduler(Plan)(Opportunities
and Forecast)

Customer
Investments

Opportunities

Product
Lifecycle
Management

IT System

Supply Chain
Management(Procurement)(Design)

Forecast

Production
Planning

Production
Preparation

Manufacturing
Execution
SystemWarehouse
Management
System(Manufacturing)

DesignBooking

Procurement

Manufacturing

Global Trade
Management

Key Processes

Service CRM(Field-Support)(Export)(Warehouse)

DeliveryStart-up

Technical
Acceptance

Sales

Warranty

Post-sale

ERP (Sales, Inventory, Accounting)

41

TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

42

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Corporate GovernanceCorporate Governance Framework
With over 80% of our sales coming from overseas, we regard
building governance structure as essential in order to achieve
success in global competition and sustainable growth. To that
end, we have built a framework to maximize use of worldwide
resources, and have worked to incorporate a wide range of
opinions to strengthen our management foundation andtechnology base, establishing a governance structure capable of
ensuring that we attain global-level earnings power. We havealso established the Corporate Governance Guidelines* which
outline this governance structure.
We use the Audit & Supervisory Board System, which consistsof a Board of Directors and an Audit & Supervisory Board, andhas achieved effective governance based on the supervision ofmanagement by the Audit & Supervisory Board. Furthermore, in
addition to the Board of Directors, whose role is to make major
operational decisions and play a supervisory role in the executive
management’s execution, and support appropriate risk-taking
by them, we have established systems that facilitate growthoriented governance directed at sustainable growth, including
the following: (1) the Nomination Committee and Compensation
Committee to ensure fair, effective, and transparent
management; (2) the Corporate Senior Staff (CSS) to formulate
and advance company strategy; and (3) the Business Execution
Meeting, to play a role in deliberations of the executive
management.
* Corporate Governance Guidelines: www.tel.com/about/cg/

Diagram of the Corporate Governance Framework, Internal Control System and Risk Management System
Shareholders’ Meeting
Appointment or Dismissal of Corporate Directors

Management& Supervision

Nomination
Committee
Compensation
Committee

Appointment or Dismissal of Audit & Supervisory Board Members

Audit

ReportAudit

Board of Directors

Audit &
Supervisory Board

ReportCooperate

Independent Auditors

Audit

Proposal & Report

Business execution

Appointment or Dismissal

Supervision/
Appointment or
Dismissal

Cooperate

Cooperate

ReportRepresentative Director,
President & CEO

Global Audit Center

Audit

Business Execution
Meeting
Internal Control Executive Officer

Corporate Senior Staff(CSS)

Risk Management Executive Officer

Ethics Committee

Compliance Executive Officer

Risk Management Committee

Audit

Information Security Committee
Export Trade Control Committee

Business Execution Organization (All Division/All TEL Group companies)

Composition and Results of the Board of Directors, Nomination and Compensation Committees (In fiscal 2021)

Policies for Allocation of Earnings
Our basic stance is for the appropriate allocation of company
earnings to all stakeholders.
Our dividend policy to shareholders is to link dividend
payments to business performance on an ongoing basis andmaintain a payout ratio of around 50% based on net income
attributable to owners of the parent company. Furthermore, we
also set the minimum annual dividend at 150 yen per share inlight of the stable distribution of dividends.
We effectively use internal capital reserves to raise corporate
value through earnings growth by concentrating investment inhigh-growth areas and provide returns directly to shareholders
by linking dividend payments to business performance.
Furthermore, we flexibly consider implementing repurchases oftreasury stocks as part of returning earnings to shareholders.
Establishment of the Director Compensation System
As our basic policies on executive compensation, we emphasize(1) levels and plans for compensation to secure highly competentmanagement personnel with global competitiveness; (2) highlinkage with business performance in the short term andmedium- and long-term increase of corporate value aimed atsustainable growth; and (3) securement of transparency andfairness in the decision process of compensation andappropriateness of compensation.
Compensation for inside directors consists of fixed basic
compensation, annual performance-linked compensationand medium-term performance-linked compensation.
Compensation for outside directors consists of fixed basic
compensation and non-performance-linked (stock-based)compensation. Compensation for Audit & Supervisory Board
members consists solely of fixed basic compensation inconsideration of their role being primarily the audit andsupervision of management.
In order to secure transparency and fairness in management
and appropriateness of compensation, the Compensation
Committee, which an independent outside director chairs,
utilizes advice from an external expert, compares compensationlevels with those of industry peers in Japan and overseas, andanalyzes the latest trends and best practices in Japan andoverseas (such as reflecting ESG in compensation). The
committee then proposes to the Board of Directors acompensation policy for corporate directors, a compensation
system that is globally competitive and the most appropriate
for us, and individual compensation amounts for the
representative directors.

Composition
Fixed Basic
Compensation

Number of Times Held

Corporate Directors

Independent
OutsideDirectors

Speaker/Chairperson

Board of Directors

83

Corporate Director(Non-Executive Director)

12

Corporate Directors

Nomination Committee

31

Corporate Director

10Compensation Committee

22

Independent Outside Director

743 TOKYO ELECTRON Integrated Report 2021

Fixed Basic Compensation
Fixed basic compensation is determined in reference to thecompensation standards of industry peers in Japan and overseas.
For inside directors, it also depends on the scale of their
responsibilities based on the job grade framework provided by
the external specialist organization.
Annual Performance-linked Compensation
Annual performance-linked compensation consists of cash
bonuses and stock compensation-based stock options at a ratioof approximately 1:1. The specific amounts paid and the numbersof stock options granted are determined based on the results ofcorporate business performance and individual performance
evaluations for the relevant fiscal year. Net income attributableto owners of parent and consolidated ROE are adopted as
evaluation indicators for corporate business performance.
Evaluation items for individual performance include the degreeof contribution to short-term and medium-term management
strategy targets (including ESG).
Medium-term Performance-linked Compensation
Medium-term performance-linked compensation is a
performance share (stock-based) compensation to motivate
recipients to contribute to improving medium-term businessperformance and raise awareness for enhancing corporate valueby sharing the perspective of shareholders through the holdingof shares. The number of shares issued to each corporate
director varies according to the payout rate based on theirrespective responsibilities and level of performance goal
achievement over the relevant three-year period. Consolidated
operating margin and consolidated ROE have been adopted as
the indicators for measuring the levels of performance goal
achievement which are linked to the Medium-termManagement Plan.
Non-performance-linked (Stock-based) Compensation
Non-performance-linked stock-based compensation has been
introduced for the purpose of making the compensation systemfor outside directors more consistent with their expected role of,in addition to supervising management, giving advice tomanagement from the perspective of increasing corporate value
over the medium to long term. Under this stock-based
compensation system, shares are granted after the expiration of
the applicable period (three fiscal years) which is set each year.

Annual Performance-linked Compensation

Medium-term
Performance-linked
Compensation

Non-performancelinked Compensation

Cash Bonuses

Stock Compensationbased Stock Options

Performance Share
(Stock-based)

Restricted Stock Units(Stock-based)

●

●

●

●

－

Outside Directors

●

－

－

－

●

Audit & Supervisory Board
Members

●

－

－

－

－

TOKYO ELECTRON Integrated Report 2021

44

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Process for Evaluating the Effectiveness of the Board of Directors and Management Issues
conduct, aggregate and analyze the interviews in an effort toTo evaluate the effectiveness of the Board of Directors, including
increase objectivity.
the Nomination Committee and Compensation Committee, we
In terms of the evaluation results in fiscal 2021, open andconduct questionnaire surveys of all corporate directors anddynamic discussions were held at Board of Directors meetings
Audit & Supervisory Board members, as well as individualand off-site meetings. We recognize that the Board of Directors,
interviews with some corporate directors and Audit &including the Nomination Committee and Compensation
Supervisory Board members. We also conduct opinion
Committee, is functioning in an effective manner.
exchanges and deliberations with a group comprised mostly of
In light of the results of this evaluation, we will continue ouroutside directors and Audit & Supervisory Board members. The
efforts to have fuller discussions regarding medium- to longresults of this questionnaire, summaries of interviews and theterm management strategies, promote diversity, strengthen
content of deliberations are then shared with the entire Board ofgroup governance at a global level and share appropriate
Directors before deliberating and comprehensively evaluating
information with the Nomination Committee, Compensation
the effectiveness of the Board of Directors. We appoint a third
Committee and Board of Directors.
party to provide advice on setting assessment items and to

Skills Matrix
In view of our Corporate Philosophy that “We strive to contributeto the development of a dream-inspiring society through ourleading-edge technologies and reliable service and support”, weare engaged in enhancing our governance structure and insustainability-focused management in order to respond tochanges in the global environment, achieve success in global
competition, and realize sustainable growth and increased
corporate value over the medium to long term to respond to the

mandate from our stakeholders. We believe that our corporate
directors and Audit & Supervisory Board members have thenecessary qualifications to realize these initiatives.
Described in detail below, all of them have knowledge ofglobal business, governance, sustainability and so on. In
addition to this matrix of individual skills, we also disclose theoverall diversity of our Board of Directors in an easy-tounderstand format.

Diversity of Board Members
Expertise and experience of Corporate Directors and Audit &Supervisory Board Members

Independence and diversity of Corporate Directors(Unit: persons)(Unit: persons)

Independent Outside Directors

8

Corporate Management

4/12
3/12

12

Semiconductor/FPD

8

Manufacturing/Development
Sales/Marketing
Finance, Accounting/Engagement with Capital Markets
Legal Affairs/Risk Management10

Foreign national/female Corporate Directors

8
6Foreign national Corporate Director

Female Corporate Director

Directors and Audit & Supervisory Board Members (As of July 1, 2021)
Directors

Tetsuo Tsuneishi

Toshiki Kawai

Sadao Sasaki

Yoshikazu Nunokawa

Tatsuya Nagakubo

Corporate Director
Chairman of the Board

Representative Director
President & CEO

Representative Director

Corporate Director

Corporate Director

Kiyoshi Sunohara

Seisu Ikeda

Yoshinobu Mitano

Charles Ditmars Lake II

Michio Sasaki

Corporate Director

Corporate Director

Corporate Director

Outside Director

Outside Director

Chairman and Representative
Director, Aflac Life Insurance
Japan Ltd.
President, Aflac International
Incorporated
Outside Director, Japan Post Holdings
Co., Ltd.

Director and Vice President,
SHIFT Inc.
Outside Director,
ZUIKO CORPORATION

Corporate Director,
Tokyo Electron Device Ltd.

President & Representative
Director, Tokyo Electron
Technology Solutions Ltd.

Expertise and Experience*
Name

Corporate
Management●

Tetsuo Tsuneishi

Corporate
Directors●

Sales/
Marketing

Finance,
Accounting/Engagementwith CapitalMarkets●●

Toshiki Kawai

●

●

●

●

Sadao Sasaki

●

●

●

●

Yoshikazu Nunokawa

●

●

●

Tatsuya Nagakubo●

Kiyoshi Sunohara

●

●

●

Seisu Ikeda

●

●

●

●

●

●

Yoshinobu Mitano
Charles Ditmars Lake Ⅱ

Outside●Michio Sasaki

Outside●Makiko Eda

Outside●Sachiko Ichikawa

Outside●●●●Kazushi Tahara
Kyosuke Wagai

OutsideMasataka Hama

OutsideRyota Miura

Outside●●Legal Affairs/
RiskManagement

●
●

●

●

●

●

●

●

●

●

●

●
●

●

Yoshiteru Harada
Audit &
Supervisory
Board
Members

Semiconductor/ Manufacturing/
FPD
Development●

Sachiko Ichikawa

Outside Director

Outside Director

Chief Representative Officer,
World Economic Forum Japan
Outside Director,
FUJIFILM Holdings Corporation

Partner, Tanabe & Partners
Outside Corporate Auditor, Ryohin Keikaku Co., Ltd.
Statutory Auditor, The Board Director Training
Institute of Japan
Outside Director, OLYMPUS CORPORATION

Audit & Supervisory Board Members●●●* The six categories of “expertise and experience” are defined as follows:� Corporate management: Having experience in managing an enterprise (experience serving as a representative director or chairperson/president)
� Semiconductor/FPD: Having knowledge of semiconductor/FPD-related industries
� Manufacturing/development: Having knowledge/experience in manufacturing and development at Tokyo Electron and other manufacturers
� Sales/marketing: Having knowledge/experience in sales and marketing at Tokyo Electron and other manufacturers
� Finance, accounting/engagement with capital markets: Having knowledge in financial accounting and M&A, or knowledge/experience in engagement with capital markets
� Legal affairs/risk management: Having knowledge in legal affairs, compliance and risk management

45 TOKYO ELECTRON Integrated Report 2021

Makiko Eda

Yoshiteru Harada

Kazushi Tahara

Kyosuke Wagai

Masataka Hama

Ryota Miura

Audit & Supervisory Board
MemberAudit & Supervisory Board
MemberOutside Audit & Supervisory
Board Member

Outside Audit & Supervisory
Board Member

Outside Audit & Supervisory
Board Member

Representative, Wagai CPA OfficeOutside Audit & Supervisory Board
Member, Mochida PharmaceuticalCo., Ltd.

Outside Director, Nissay AssetManagement Corporation

Partner, Miura & Partners Legal
Profession Corporation
Corporate Auditor, TECHMATRIXCORPORATION
Outside Director, Eisai Co., Ltd.

TOKYO ELECTRON Integrated Report 2021

46

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

ComplianceApproach to Compliance
To practice Tokyo Electron’s Corporate Philosophy, it is vital thateach employee performs their daily duties with strong interest in
and a deep understanding of compliance. We established “Tokyo
Electron’s Code of Ethics” as a code of conduct to ensure that ouremployees are aware of the risks around them and conduct
themselves appropriately. We have built a global system that candirectly raise questions and concerns about compliance andbusiness ethics to quickly address potential problems.

Message from the Chairman of the Board

Further Pursuit of Board
Effectiveness and Strengthening ofGovernance Structure Are theFoundation for Enhancement ofCorporate Value

Compliance System
In order to effectively promote a global compliance program, we
have appointed a Chief Compliance Officer (CCO) andestablished a dedicated Compliance Department at ourheadquarters. Additionally, people responsible for compliance(Regional Compliance Controllers) have been appointed at key
overseas sites, creating a system for direct reporting to the Chief
Compliance Officer and Compliance Department.

Tetsuo Tsuneishi
Corporate Director
Chairman of the Board

The most important duty of Tokyo Electron’s Board of
Directors is making decisions on important matters towardenhancing short-, medium- and long-term shareholder value.
In fiscal 2021, we achieved the highest net sales and operating
income in our corporate history. This was due in large part tothe tremendous effort of our executive management andemployees. At the same time, I also recognize that the Boardof Directors maintained a high level of effectiveness andmade decisions on important directions and strategies afterwide-ranging discussions, all of which also contributed to ourgood performance.
Priority issues for further growth, medium- to long-term
management strategies and initiatives regarding
sustainability were also discussed and deliberated in depth. All
corporate directors and Audit & Supervisory Board members
engaged in discussions based on their diverse insights andexperience with a global perspective and strong awareness ofTokyo Electron’s corporate culture to arrive at our directions
for growth and many important resolutions.
Through our discussions about short-, medium- and longterm value creation, we made the decision to issue theIntegrated Report starting from this year in addition to ourannual Sustainability Report to allow us to accurately
communicate these initiatives to our stakeholders.

Japan’s Corporate Governance Code was revised in June 2021,
and the Tokyo Stock Exchange will also be carrying out atransition to new market segments (Prime, Standard and
Growth) in April 2022. To further improve the effectivenessof the Board of Directors, we are also working on initiatives
for the new recommended items in the revised Corporate
Governance Code. Together with the introduction of a skills
matrix for corporate directors, we are also overseeing
successor training plans as appropriate. In addition, we seek
to strengthen diversity by positioning the development andappointment of global human resources and the promotionof gender diversity as key issues that must be addressed. As
for the important matter of risk management, we will
broadly identify risks on a company-wide basis, including
overseas sites, and respond to them appropriately. At thesame time, we will evolve and further strengthen ourGroup’s governance.
To correctly grasp the trends of the rapidly growing global ICT
industry, meet the expectations of the capital market, achievesustainable growth and improve our medium- to long-term
corporate value, our Board of Directors will undertake
management with world-class effectiveness so as to always
make the best decisions at the right time regarding importantmanagement issues.

Compliance Initiatives
Business Ethics
In addition to establishing the Code of Ethics as standards ofconduct by which executives and employees should abide anddistributing it in the form of booklets, we also strive forunderstanding and awareness by regularly obtaining
confirmation of compliance from all executives and employees.
In fiscal 2021, we made a full-fledged revision on the content towhat is required as a global company and changed the booklet
design to make it easier to understand.

Initiatives for Anti-Bribery and Corruption and forCompetition Laws
We have established the “Global Anti-Bribery and Corruption
Policy” as well as the “Gifts and Entertainment Guidelines”, andthe “Global Competition Law Policy” and the “Guidelines”. In
addition, we also regularly conduct training to promote
understanding and awareness.
Internal Reporting System
Preventing problems from occurring and resolving them before
they become significant requires a system that allows employees
to raise questions and concerns about business ethics andcompliance without reservation or hesitation and to discussthem fully. For this reason, we have established an internalreporting system that ensures complete confidentiality,
anonymity and the prohibition of retribution, so that employees
can safely and reassuringly provide information and seek redress
outside the chain of command about behavior that is, or may be,in violation of laws, regulations or business ethics.
Specifically, we have established and are operating the Tokyo
Electron Group Ethics & Compliance Hotline—a global common
internal point of contact that uses a third-party system that is
also accessible to our suppliers—as well as an external point ofcontact that allows direct consultation with an outside law firm.
Reports and consultations received via these points ofcontact are handled with sincerity and investigations areundertaken in accordance with internal regulations. If acompliance violation is found, disciplinary action is taken inaccordance with the Rules of Employment, and preventive
measures and corrective measures, such as improvements to theworkplace environment, are implemented as necessary.

Response to Internal Reports
Board of Directors
Audit & Supervisory Board Member

Third-party System
Report/Consult
Progress/Results Report

Information
ProvidersInternal Pointof Contact

NoticeProgress/Results Report

Follow-up
Redress
Report/Consult
Progress/Results Report
Follow-up

External Pointof Contact(Outside Law Firm)

ReportCompliance
ReportDepartment/
Legal, Compliance
Division of each
Overseas
Subsidiary

Representative Director, President & CEO
GM of Legal, Compliance Unit
Chief Compliance Officer

Report/Consult

Request for Investigation/
Corrective and Preventative Action

Report/Consult

Progress/Results Report

Relevant Divisions, etc.

Corporate Director
Chairman of the Board

47 TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

48

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Risk Management

Item

Approach to Risk Management
Reflecting changes in society and the business environment, therisks facing businesses are growing increasingly complex anddiverse. Tokyo Electron considers understanding andappropriately addressing the risks that it may face in its
businesses, as well as their impacts, to be essential to its
sustainable growth.

management activities throughout our Group, we will implement
risk management that is more effective than ever before.
1 Enterprise risk management: Group-wide systems and processes related to risk
management activities

4. Procurement,
Production and Supply

2 CSA: Control Self-Assessment. Internal risks and controls are evaluated and monitoredby those who are actually performing the duties with the goal of building andmaintaining an autonomous risk management system.

5. Safety

Risk Management System and Initiatives
In order to promote more effective risk management, we carryout enterprise risk management1 through a body establishedwithin the General Affairs Department at our headquarters. Thisbody works with the respective departments responsible foreach operation to identify a wide range of risks arising in businessactivities, such as compliance risk, human resource and labor risk,
and business continuity risk. It then classifies risks with highimpact and probability as our key risks.
The body also formulates and executes measures to minimize
these key risks, monitors the effect of said measures, as well asworks to understand the status of risk control, and implements
the PDCA cycle for risk management.
In fiscal 2021 we introduced CSA2 and started a risk
management committee. We will continue these activities going
forward. By continuing to strengthen and progress risk

Item

1. Market Fluctuations

2. Geopolitics

3. Research and Development

Auditing by the Internal Audit Department
The Global Audit Center serves as the internal audit department
for the entire Group and implements audits based on the audit
plan. Based on the results of these audits, it provides instructions
for making improvements as needed, confirms the progress ofthese improvements, and provides any necessary support. The
Group’s internal control over financial reporting in fiscal 2021 wasalso evaluated as effective by the independent auditors.
Risk Management Initiatives
We conduct Group-wide reviews to identify the current status ofrisk management as well as any potential and actual risks
surrounding the Company in the future. Based on the results of
the reviews, we have identified the following 13 risks as having
potential to cause significant issues to our financial condition,
operating results and cash flows, and are working to address them.

Main Potential Risks

Main Risk Management Initiatives

Rapid contraction of the semiconductor market
could lead to overproduction or an increase in deadinventory. In addition, a rapid increase in demand
could lead to an inability to supply customers
with products in a timely manner resulting in lost
opportunities• Periodically review market conditions and orders received
at Board of Directors and other important meetings,
and appropriately adjust capital investments, personnel/
inventory planning and other aspects of businessInitiatives made by an individual country or region
from such perspectives as industrial policy, national
security or environmental policy in shifting todomestic production of semiconductor-related
businesses, strengthening policies prioritizing
domestically manufactured products or tighteningof export controls and environmental laws andregulations could lead to restrictions on businessactivities• Carefully watch policy and diplomatic trends tounderstand moves to introduce regulations

Delays in the launch of new products or the mismatchof such products with customer needs could lead to a
decline in the competitiveness of products• Establish the Corporate Innovation Division, and build
a Group-wide development framework that integrates
innovative technological development with thetechnologies of each development division• Account Sales Division and Global Sales Division tostrengthen the sales framework and customer base by
grasping investment trends of customers and responding
to a wide range of customer needs• Communicate opinions to policy-making authorities suchas through public comment, and anticipate the impact ofdifferent countries introducing polices and regulations,and consider countermeasures• Provide highly competitive next-generation productsahead of competitors through collaborating with research
institutions and sharing a technology roadmap spanning
multiple generations with leading-edge customers

Main Potential Risks

Main Risk Management Initiatives

Interruptions in production due to a natural disasteror delays in component procurement due todeterioration in the business conditions of a supplieror an increase in demand that exceeds the supplier’s
supply capacity could lead to delays in the supply of
products to customers• Formulate BCPs, establish alternate production
capabilities, develop multiple sources of important parts,
seismically reinforce plants, etc.

Safety-related problems with the Company’s
products could lead to damages suffered bycustomers, liability for damages and a decline incredibility•B ased on the “Safety First”3 approach, thoroughly
implement safety design at the product development
stage, promote safety training and establish a reporting
system in the event of an accident

The occurrence of a product defect could lead toliability for damages, costs for countermeasures anda decline in credibility•E stablish a quality assurance system and a world-classservice system

6. Quality• Build a system for the stable supply of products by
sharing forecasts based on demand projections with
suppliers to ensure the early procurement of parts andproduction leveling•R esolve technical issues from the product development
and design stage• Investigate the cause of any defects and implement
measures to prevent the same or similar defects fromoccurring•M onitor the quality status of suppliers, conduct audits
and provide support for improvement• Monitor compliance activities at key sites in and outside
Japan under the direction of the Chief Compliance Officer

7. Laws and Regulations

Violations of the laws and regulations of the countries
and regions where the Company does business could
lead to diminished public confidence in the Company,
fines, liability for damages or restrictions on businessactivities

8. Intellectual Property Rights

The inability to obtain exclusive rights to proprietary
technologies could lead to reduced productcompetitiveness. Furthermore, infringement of theintellectual property rights of third parties could leadto liability for damages• Advance the R&D strategy, business strategy andintellectual property strategy in an integrated manner tobuild an appropriate intellectual property portfolio

Breaches of information or the suspension of services
due to unauthorized access by cyberattack, natural
disasters or other factors could lead to diminishedpublic confidence in the Company or liability fordamages• Establish an information security system that conforms
to global standards by launching a dedicated security
organization and having security assessments conductedby external experts

The inability to recruit and retain necessary humanresources on an ongoing basis or the inability tocreate an environment where people with diverse
values and expertise can play an active role could
lead to diminished product development capability or
customer support quality•M ake ongoing improvements to work environments andpromote health and productivity management, including
having top management share direction through regular
employee meetings, establishing training plans for the
next generation of human resources, visualizing career
paths for employees and offering attractive remuneration
and benefits

The inability to respond appropriately to eachcountry’s climate change policies, environmental
laws and regulations, and customer needs could leadto additional related costs such as for developing
new products or changing specifications, as well as
to reduced product competitiveness and diminishedpublic confidence in the Company• S et industry-leading medium- to long-term
environmental goals4

The spread of COVID-19 could slow the Company’sbusiness activities or lead to the deterioration of
global economic conditions• Establish an Emergency Task Force headed by the CEO

Business could be influenced by global and regional
political conditions, economic conditions, financial
and stock markets, foreign exchange fluctuations andother factors• Take necessary measures to counter such risks

9. Information Security

10. Human Resources

11. Environmental Issues

12. T he Novel Coronavirus(COVID-19)

13. Other Risks• Have assessments conducted by external experts andreport identified issues to the CEO, Board of Directors andAudit & Supervisory Board for swift and effective action• Establish globally standardized rules and regulations for
information management• Reduce greenhouse gas emissions from product use.
Reduce overall energy consumption and increase theratio of renewable energy used at plants and offices• Provide technologies that help reduce the power
consumption of semiconductors• Restrict travel to high infection-risk countries and regions,maintain supply chains and thoroughly implement
infection prevention measures at plants and offices

3 Safety First: Company slogan that prioritizes the safety of every person connected with our business activities
4 Refer to Medium- and Long-term Environmental Goals on p. 35

49 TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

50

Chapter 3

Value Creation by the Value Chain
Research
Procurement
andandDevelopment Manufacturing

Sales

Installation and
Maintenance
Services

Sustainability Initiatives in the Value Chain

Information Security

Engagement with Capital Markets

As the data society develops and the importance of information security increases, we take active measures to use data including digitaltransformation and achieve information security effectively.

Our management actively engages in Investor Relations (IR) and
Shareholder Relations (SR) activities to contribute to oursustainable growth and increase corporate value over the
medium to long term. The Chairman of the Board, CEO andcorporate director in charge of finance serve as spokespersons as
required at IR conferences in and outside Japan and strive toengage directly with investors. In addition to holding quarterly
earnings release conferences, we actively share our businessstrategies and growth story at the Medium-term Management
Plan briefings and on IR day.
The IR Department, which was established under the directcontrol of the CEO, also appropriately supplements the
explanation through individual interviews and regularly reports
opinions from investors to management so that feedback can beof use in management.

Main activities

Creating information security systems

Establishment of global rules

We established a system centered around theVice President and General Manager,
Information Security, and are implementing
integrated security measures on a global scale.

We established global standardized
information security rules and regularly
conduct checks on compliance status andprovide education for all relevant parties.

Supply chain security

Information security management
We identify risks by conducting periodic risk
assessments and internal audits and implement
technological, human, organizational andphysical security measures.

We respond to customer requests and monitor
the status of security at suppliers so that we
can securely use confidential information andcustomer information in our business activities
without compromising utility.

Responses to security threats

Increasing resilience

To respond to cyberattacks and information
leaks, which are major security threats in modern
society, we actively introduce advanced
technologies and have specialized organizations
create systems to establish mechanisms forreliable monitoring.

To prepare for the occurrence of security
incidents, we established a specialized incident
response organization and have establishedsystems so that we can share incident
information at an early stage and promptly
respond and recover.

24

Overview of Information Security
Mechanisms that support
information security activities
Vice President andGeneral Manager,
Information Security

Information Security
Committee

Day-to-day activities implemented globally

Systems established in preparation for
emergencies

Tokyo Electron

Security Monitoring Organization

Information Security Management
Responses to security threats

Early detection ofsigns of potential
attacks

Human/Organizations

Technology

PhysicalMinimization ofdamage when an
incident occurs

Do

Act

Check

24

3 MSCI World ESG Leaders Indexes: Companies that have high ESG performance are selected from the MSCI Global Sustainability Index, an ESG investment index developed by Morgan
Stanley Capital International (MSCI). Please check the link for the logo's disclaimer. www.tel.com/csr/review/
4 Euronext Vigeo World 120 Index: An index selected by NYSE Euronext and Vigeo Eiris composed of 120 companies that excel from an ESG perspective.
5 STOXX Global ESG Leaders indices: STOXX, a subsidiary of Deutsche Börse, selects companies that meet its evaluation standards based on the results of research from the ESG researchcompany Sustainalytics.

Supply Chain
Security
Customers

Our sustainability initiatives have received high appraisal from
evaluation organizations around the world. We have continued
to be selected as a constituent stock under leading global ESG
investment indices, including the DJSI1 Asia Pacific Index,
FTSE4Good Index2 and MSCI World ESG Leaders Indexes3,
Euronext Vigeo World 120 Index4 and STOXX Global ESG Leaders
indices5, and in 2021, we were also rated as a low-risk company in
Sustainalytics’ ESG Risk Ratings6.
We also ranked number 1 among Japanese companies in thesecond ROESG Rankings7 (2020 edition) implemented by Nikkei
Inc. and QUICK Corp. ESG Research Center, with our superior
capital efficiency and dedication to ESG engagement earning asignificantly high score.
Additionally, all Group companies operating in Japan once
again received recognition as top 500 companies under the 2021
Certified Health & Productivity Management Outstanding
Organizations Recognition Program8.

2 FTSE4Good Index: An index related to environmental performance and corporate social responsibility developed by FTSE Russell.

Strengthen/Improve

Plan

Evaluation from Third-party Institutions

1 DJSI: Dow Jones Sustainability Indices. An ESG (environmental, social and governance) investment index of S&P Dow Jones Indices LLC. The DJSI Asia Pacific covers companies in that region.

Incident Response Organization
Information Security
Committees at eachcompany

As a part of our shareholder relations activities, company
executives play a central role in active and constructive
dialogue with our major institutional investors and proxyadvisory firms. In addition to explaining the Shareholders’Meeting agenda, we continuously engage in dialogue on a wide
range of topics including the business environment, ESG andsustainability initiatives, and respond to business risks andopportunities including social and environmental issues in orderto deepen mutual understanding. To encourage active
discussion and facilitate smooth and efficient voting at
Shareholders’ Meetings, we send convocation notices at an
early stage and also post the notice in both Japanese andEnglish on our website to provide information to shareholders
in a timely manner. In addition, we analyze the results of theexercise of voting rights and report to the Board of Directors tofurther enhance engagement with investors.

Suppliers

6 Sustainalytics’ ESG Risk Ratings: An ESG risk measured for institutional investors by Sustainalytics in the Netherlands. The rating is based on a company’s exposure to industry-specificmaterial ESG risks and how well a company is managing those risks.
Copyright ©2021 Sustainalytics. All rights reserved. This article contains information developed by Sustainalytics (www.sustainalytics.com). Such information and data are proprietaryof Sustainalytics and/or its third party suppliers (Third Party Data) and are provided for informational purposes only. They do not constitute an endorsement of any product or project,
nor an investment advice and are not warranted to be complete, timely, accurate or suitable for a particular purpose. Their use is subject to conditions available at https://www.
sustainalytics.com/legal-disclaimers.
7 Nihon Keizai Shimbun, March 29, 2021. ROESG: An integrated index of management sustainability that integrates ROE, which is an indicator of capital efficiency, and ESG, a non-financial
index of sustainability.
8 Certified Health & Productivity Management Outstanding Organizations Recognition Program: The program publicly recognizes particularly outstanding organizations that arepracticing health-oriented business management, based on initiatives attuned to local health-related challenges and on health-promotion initiatives led by the Nippon Kenko Kaigi

51

TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

52

Chapter 4

Achieving Greater Growth

Aiming to Be a Truly Excellent Global Company

The world is currently pushing firmly ahead with implementing information and communication technologies (ICT) anddigital transformation (DX) as well as taking action to realize a carbon-free society in order to build a strong andresilient society in which economic activities do not stop under any circumstances.

Toward building a strong and resilient society in which
economic activities do not stop under any circumstances

Semiconductors are growing even more important as social infrastructure with increasing technological demands suchas larger capacity, higher speed, higher reliability and lower power consumption. The applications of displays, which
form the interface between people and data, are also expanding.
Tokyo Electron will strive toward medium- to long-term profit expansion and continuous corporate value enhancement
by promoting technological innovation to apply its expertise as a manufacturer of semiconductor and flat panel display(FPD) production equipment and using all management resources, including its employees who create and fulfill

Digital × Green
ICT/DX

Decarbonization

Increasing importance ofsemiconductors associal infrastructure

Led bytechnological innovation ofsemiconductors
Larger capacity, higher
speed, higher reliability andlower power consumption
FPDs evolving at
the same timecompany values.
Based on these activities, we will practice our Corporate Philosophy—which specifies our mission in society and the
purpose of our existence—and meet the expectations of all of our stakeholders.
We will start our 60th fiscal year in April of next year. Going forward, we will continue to take on challenges and evolve
to be a truly excellent global company that is loved and highly trusted by all stakeholders.

Corporate Philosophy

We strive to contribute to the developmentof a dream-inspiring society throughour leading-edge technologies and reliable
service and support.

53 TOKYO ELECTRON Integrated Report 2021

Create social value and economic value by promoting
technological innovation to utilize expertise as asemiconductor and FPD production equipment manufacturer
and all management resources

Medium- to long-term profit expansion andcontinuous corporate value enhancement

Practice our Corporate Philosophy to meet the expectations of
all stakeholders surrounding the Company

TOKYO ELECTRON Integrated Report 2021

54

Data Section

Financial Section

Financial Review
85.9% of net sales.
Cost of sales increased 23.5% to 834.1 billion yen and grossprofit increased 25.0% to 564.9 billion yen. As a result, the grossprofit margin expanded by 0.3 points to 40.4%. Selling, generaland administrative (SG&A) expenses increased 13.8% to 244.2
billion yen, while the ratio to consolidated net sales declined by
1.6 points to 17.5%.
As a result, operating income increased 35.1% to 320.6 billion
yen and operating margin increased 1.9 points to 22.9%. After
netting of non-operating income of 5.4 billion yen and nonoperating expenses of 4.0 billion yen, ordinary income increased
31.5% to 322.1 billion yen. Income before income taxes was 317.0
billion yen (year-on-year growth of 29.6%) and net income
attributable to owners of parent was 242.9 billion yen (year-onyear growth of 31.2%).
As a result, net income per share was 1,562.20 yen comparedto net income per share of 1,170.57 yen in the previous fiscal year.

Operating Results
During fiscal 2021, although the global economy was affected by
the novel coronavirus (COVID-19) pandemic, there are signs of a
return to positive economic growth, driven by the implementationof economic stimulus policies by national governments.
In the electronics industry, where Tokyo Electron operates, themarket for semiconductor production equipment is expanding
as demand for semiconductors increases, driven by the transition
to a data-driven society due to the expansion of the use of
information and communication technologies (ICT) such as IoT, AI
and 5G. Although it will be necessary to continue to monitor the
impact of COVID-19, the market for semiconductor production
equipment is expected to grow further.
In this environment, the consolidated operating results forfiscal 2021 were as follows.
Net sales for the fiscal year increased 24.1% from the previous
fiscal year to 1,399.1 billion yen. Domestic net sales increased
22.1% from the previous year to 197.5 billion yen, while overseas
net sales increased 24.5% to 1,201.5 billion yen to account for

Sales and Income

Millions of yen

2017.32018.32019.32020.32021.3

Net sales¥799,719¥1,130,728¥1,278,240¥1,127,286¥1,399,102

Gross profit

322,291

475,032

526,183

451,941

564,945

40.3%

42.0%

41.2%

40.1%

40.4%

Selling, general and administrative expenses

166,594

193,860

215,612214,649244,259

Operating income

155,697

281,172

310,571

237,292

320,685

Operating margin

19.5%

24.9%

24.3%

21.0%

22.9%

Income before income taxes

149,116

275,242

321,508

244,626

317,038

Net income attributable to owners of parent

115,208

204,371248,228

185,206

242,941

Gross profit margin

Net Sales and Gross Profit Margin
Net Sales (Billions of yen)

40.3

42.0

41.2

Operating Income and Operating Margin

Gross Profit Margin (%)

40.1

40.4

24.9

24.3

1,399.1

281.1

310.5

1,278.2
1,130.7

Operating Income (Billions of yen)

19.5

Operating Margin (%)

320.6

Net Income Attributable to Owners of
Parent and ROE
Net Income Attributable to Owners of Parent (Billions of yen)
ROE
（％）

29.0

22.9

21.0

204.3

237.2

1,127.2

30.1

248.2

26.5
21.8

19.1
799.7

242.9

185.2

Financial Conditions

Cash Flows

Total current assets at the end of fiscal 2021 were 1,015.6 billion yen,
an increase of 53.2 billion yen compared to the end of the previous
fiscal year. This was mainly due to an increase of 41.5 billion yen in
trade notes and accounts receivable, an increase of 36.6 billion yen
in cash and deposits, an increase of 23.2 billion yen in inventories,
and a decrease of 44.8 billion yen in short-term investments.
Net property, plant and equipment increased by 21.3 billion
yen from the end of the previous fiscal year, to 196.9 billion yen.
Investments and other assets increased by 72.2 billion yen fromthe end of the previous fiscal year, to 212.6 billion yen.
As a result, total assets increased by 146.8 billion yen from theend of the previous fiscal year, to 1,425.3 billion yen.
Total current liabilities decreased by 54.9 billion yen from theend of the previous fiscal year, to 327.6 billion yen. This was largely
due to a decrease in customer advances of 53.6 billion yen.
Total non-current liabilities increased by 6.9 billion yen fromthe end of the previous fiscal year, to 73.1 billion yen.
Total net assets increased by 194.8 billion yen from the endof previous fiscal year, to 1,024.5 billion yen. This was largely due
to an increase of 242.9 billion yen in net income attributableto owners of parent, a decrease resulting from the payment of
109.5 billion yen in year-end dividends for the previous fiscal year
and an interim dividend for fiscal 2021, and an increase of 45.9
billion yen in net unrealized gains on investment securities. As aresult, the equity ratio was 71.1%.

Cash and cash equivalents at the end of fiscal 2021 increased by
18.0 billion yen compared to the end of the previous fiscal year,
to 265.9 billion yen. The combined balance including 45.5 billion
yen in time deposits and short-term investments with maturities
of more than three months that are not included in cash andcash equivalents was 311.5 billion yen, a decrease of 26.8 billion
yen from the end of the previous fiscal year. The overall situation
regarding cash flows for the fiscal year was as described below.
Cash flows from operating activities were positive 145.8
billion yen, a decrease of 107.2 billion yen compared to the same
period of the previous fiscal year. The major positive factors were317.0 billion yen in income before income taxes, 33.8 billion yen
in depreciation and amortization. The major negative factors
were 87.7 billion yen in payment of income taxes, a decrease incustomer advances of 54.8 billion yen, an increase in trade notes
and accounts receivable of 37.7 billion yen, and an increase ininventories of 17.2 billion yen.
Cash flows from investing activities were negative 18.2 billion
yen compared to positive 15.9 billion yen in the same period of
the previous fiscal year. This was largely due to the paymentof 53.8 billion yen for the purchase of property, plant andequipment, and an inflow of 44.9 billion yen from a decrease in
short-term investments.
Cash flows from financing activities were negative 114.5 billion
yen compared to negative 250.3 billion yen in the same period of
the previous fiscal year. This was largely due to the payment of
109.5 billion yen in dividends.

Financial Conditions
2018.32019.32020.32021.3

Total current assets¥775,938¥946,597¥982,897¥962,484¥1,015,696

Net property, plant and equipment

100,441

125,952

150,069

175,580

196,967

Total investments and other assets

81,067130,246

124,661

140,431

212,699

Total assets

957,447

1,202,796

1,257,627

1,278,495

1,425,364

Total current liabilities

247,770

368,452

304,882

382,578

327,661

Total liabilities

311,447

431,287

369,510448,802400,801

Total net assets

645,999

771,509888,117829,692

1,024,562

Note: From fiscal 2019, the Company applied the Accounting Standards Board of Japan’s “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28,
revised on February 16, 2018). Total current assets, total investments and other assets, total assets and total liabilities for fiscal 2018 have been restated in accordance with therevised accounting standard

Cash Flows

155.6
115.2

2017.32018.32019.32020.355 TOKYO ELECTRON Integrated Report 2021

2021.32017.32018.32019.32020.32021.32017.32018.32019.32020.3

Millions of yen

2017.32021.3

Millions of yen

2017.32018.32019.32020.32021.3

Cash flows from operating activities¥136,948¥186,582¥189,572¥253,117¥145,888

Cash flows from investing activities(28,893)(11,833)(84,033)

15,951(18,274)

Cash flows from financing activities(39,380)(82,549)(129,761)(250,374)(114,525)

Cash and cash equivalents at end of year

164,366

257,877

232,634

247,959

265,993

TOKYO ELECTRON Integrated Report 2021

56

Financial
Section
Data
Section•Semiconductor Production Equipment
Due to the expanded use of ICT mentioned above, capital
expenditure in semiconductors for logic/foundry has been
robust in a wide range of areas, from the leading-edge to mature
generations of semiconductors. In addition, capital expenditurein NAND increased significantly during fiscal 2021, reflecting
the transition to a data-driven society. Furthermore, capital
expenditure in DRAM that had been adjusted also started torecover due to an improvement in the supply and demandbalance toward the second half of fiscal 2021. Consequently,
net sales in this segment during the fiscal 2021 were 1,315.2
billion yen (year-on-year growth of 24.0%). Segment profit was
362.5 billion yen, an increase of 34.0% from the previous fiscal
year. Amid active capital expenditure by customers on new
equipment, as a result of smooth progress in sales strategies
within key fields, net sales in fiscal 2021 increased significantly,
especially in sales for logic/foundry and NAND. In addition, net
sales for used equipment and modifications as well as parts andservices also grew steadily due to the increase in cumulative
number of equipment installed and high equipment utilization
by customers.
Segment profit margin was 27.6% in fiscal 2021, an increase of
2.1 points from 25.5% in the previous fiscal year. This was mainly
due to the decrease in the ratio of fixed costs arising from thesignificant increase in net sales.

Management Discussion and Analysis of State ofOperating Results
Our operating results for fiscal 2021 were a record-high
1,399.1 billion yen, an increase of 24.1% from the previous fiscal
year, due to active capital expenditure by customers in boththe semiconductor and flat panel display (FPD) production
equipment markets.
Together with the significant increase in net sales, operating
income also reached 320.6 billion yen, an increase of 35.1% fromthe previous fiscal year, and the operating margin was 22.9%,
an increase of 1.9 points from the previous fiscal year. This was
mainly due to the increase in gross profit margin from theincrease in net sales of key fields, and the decrease in the ratioof selling, general and administrative expenses arising from theincrease in net sales. Total R&D expenses increased by 16.3 billion
yen (13.6%) from the previous fiscal year to a record-high of 136.6
billion yen in order to achieve the financial model of the Mediumterm Management Plan as well as to achieve further growth in
the future.
Net income attributable to owners of parent—which
is operating income with non-operating profit and loss
and unusual or infrequent profit and loss reflected less tax
expenses—was 242.9 billion yen, and its ratio against net sales
was 17.4%, an increase of 1.0 points from the previous fiscal year.
Net income per share was 1,562.20 yen due to the increase inprofits as well as the impact of the purchase of treasury stock
conducted in the previous fiscal year.
The following is our understanding, analysis and consideration
about the state of operating results for each segment. Please notethat segment profit corresponds to income before income taxes on
the consolidated statements of income.

Selling, General and Administrative Expenses
and Ratio to Net Sales
Selling, General and Administrative Expenses (Billions of yen)
Ratio to Net Sales (%)•FPD Production Equipment
The FPD production equipment market underwent positive
growth year-on-year, with an increase in capital expenditurein small- to medium-sized OLED panels for mobile devices
in addition to robust capital expenditure in large-sized LCD
panels for televisions. Consequently, net sales in this segment
during the fiscal 2021 were 83.7 billion yen (year-on-year
growth of 26.8%). Segment profit was 8.8 billion yen, a

R&D Expenses (Billions of yen)

Ratio to Net Sales (%)

244.2

215.6

Capital Expenditures and Depreciation
and Amortization

R&D Expenses and Ratio to Net Sales

113.9

193.8

Regarding our financial conditions, total assets stood at 1,425.3
billion yen at the end of fiscal 2021, an increase of 146.8 billion
yen from the end of the previous fiscal year. This was mainly
due to the increase in trade notes and accounts receivable,
inventories, property, plant and equipment, and investment
securities included in investments and other assets. Trade notes
and accounts receivable reached 191.7 billion yen, an increase of
41.5 billion yen from the end of the previous fiscal year, due to thesignificant increase in net sales during the fourth quarter against
the backdrop of rapid growth in the market for semiconductor
production equipment. Inventories reached 415.3 billion yen, an
increase of 23.2 billion yen from the end of the previous fiscal year,
in reflection of the robust demand for equipment and parts—
which will continue into the following fiscal year—as well as aresult of incorporating measures such as leveling of production.
Net property, plant and equipment increased 21.3 billion yen
year-on-year to 196.9 billion yen, in reflection of the completionof new buildings at our Yamanashi and Tohoku plants aimed

Net Income per Share

54.6

53.8

17.1

2018.316.9

45.6

1,245.48

2019.317.5

2020.32021.32017.32018.3

8.9

2019.39.8

2020.32021.3

20.6

17.8

2017.320.6

24.3

Segment Profit Margin (%)

Segment Sales (Billions of yen)Segment Profit Margin (%)

111.2
27.6

1,166.7

83.7

1,060.9

75.0

749.8
49.3

702.26

21.8

17.7

66.0
16.0

9.4

2018.32019.32020.32021.32017.32018.32019.32020.32021.32017.32018.32019.32020.32021.3

Note: Segment profit corresponds to income before
income taxes on the consolidated statements ofincome.

57 TOKYO ELECTRON Integrated Report 2021

FPD Segment Sales and Profit Margin

1,315.2

28.0
25.5

1,055.2

1,170.57

29.1

10.7
8.6

29.8
24.4

33.8

10.5

19.1

Segment Sales (Billions of yen)

1,562.20

1,513.58

49.7

120.2

83.8
20.8

Semiconductor Segment Sales and Profit Margin
(Yen)

97.1

166.5

2017.3

Management Discussion and Analysis of State of
Financial Conditions and Cash Flows, and Information
Related to Sources of Capital and Fluidity of Funds

Capital Expenditures (Billions of yen)
Depreciation and Amortization (Billions of yen)

136.6

214.6

at enhancing our production capacities, as well as other works
such as the ongoing construction of the Technology Innovation
Center at our Miyagi plant.
Investment securities increased 66.6 billion yen year-onyear to 105.0 billion yen due to the higher market prices ofstrategically-held listed shares. Due to these factors, total assets
increased since the end of the previous fiscal year, but as theincrease in net sales was greater, the turnover period for total
assets decreased from 414 days in the previous fiscal year to 372
days, improving asset efficiency.
Regarding cash flows, the balance of cash and cash
equivalents including deposits and short-term investments withoriginal maturities of more than three months decreased 26.8
billion yen year-on-year to 311.5 billion yen. This was mainly due
to a concentration of equipment shipments in the fourth quarterof the previous fiscal year and a portion of payments from
customers for sales in fiscal 2021 being recognized as customer
advances in the previous fiscal year.
Given that the required working capital is increasing, such as
an increasing level of inventories due to business expansion, we
continued to invest in growth, including the enhancement of our
production capabilities in preparation for higher demand andresearch and development. At the same time, we returned 109.5
billion yen to our shareholders based on our shareholder return
policy of a 50% dividend payout ratio. These were all covered
using cash on hand obtained through business operations.
We will continue to undertake investments for future growth
and aggressive shareholder return while maintaining our solid
financial foundation built through high profit margins.
Return on equity (ROE), one of our management indicators,
increased from 21.8% in the previous fiscal year to 26.5%,
improving capital efficiency. This was due to the increase in theratio of net income attributable to owners of parent against net
sales as well as the decrease in the turnover period for total assets.

decrease of 16.7% from the previous fiscal year. The significant
growth in this segment’s net sales was due to the increase incapital expenditure on small- to medium-sized OLED panels
for mobile devices as well as robust capital expenditure onlarge-sized LCD panels for televisions.
Segment profit margin was 10.5% in fiscal 2021, a decrease of
5.5 points from 16.0% in the previous fiscal year. This was mainly
due to inventories—manufactured during the previous fiscal
year when our plant utilization rate was temporary low—being
realized as cost of sales in fiscal 2021.

2017.3

10.5

2018.32019.32020.32021.3

Note: Segment profit corresponds to income before
income taxes on the consolidated statements ofincome.
TOKYO ELECTRON Integrated Report 2021

58

Financial
Section
Data
SectionConsolidated Eleven-Year SummaryTokyo Electron Limited and Subsidiaries
As of and for the years ended March 31

Thousands of
U.S. dollars

Millions of yen

2021
2021
$ 12,637,546 ¥ 1,399,102

1

Net sales2020¥ 1,127,286

2019¥ 1,278,240

2018¥ 1,130,728

2017¥ 799,719

2016¥ 663,949

2015¥ 613,125

2014¥ 612,170

2013¥ 497,300

2012¥ 633,091

2011¥ 668,722

11,879,691

1,315,200

1,060,997

1,166,781

1,055,234

749,893

613,033

576,242

478,842

392,027

477,873

511,332

FPD production equipment

756,682

83,772

66,092111,261

75,06849,38744,68732,71028,317

20,07769,88966,721

PV production equipment

-

-

-

-

-

-

-

3,618

3,806

83

-

-

Semiconductor production equipment

Electronic components and computer networks

-

-

-

-

-

-

-

-

100,726

84,66584,86890,216

1,172

129

197

197

425

438

6,229

555

479

448

461

453

Operating income

2,896,628

320,685

237,292

310,571

281,172

155,697

116,789

88,11332,205

12,54960,443

97,870

Income (loss) before income taxes

2,863,679

317,038

244,626

321,508275,242

149,116

106,467

86,828(11,756)

17,76760,602

99,579Net income (loss) attributable to owners of parent

2,194,393

242,941

185,206

248,228

204,371

115,208

77,892

71,888(19,409)

6,076

36,72671,924Comprehensive income (loss)

2,762,183

305,801

187,084

242,696

206,152

119,998

60,98480,295(10,889)

15,82636,95469,598Domestic sales

1,784,543

197,566

161,812208,796

148,760

101,122

121,808

95,046

161,631

118,504

171,364

182,165

Overseas sales

10,853,002

1,201,535

965,474

1,069,443

981,967

698,597542,141

518,079

450,539

378,796

461,727

486,557

305,696

33,843

29,107

24,323

20,61917,872

19,257

20,87824,88826,631

24,19817,707

486,576

53,86854,66649,75445,603

20,697

13,341

13,184

12,79921,77439,541

39,140R&D expenses

1,234,295

136,648

120,268

113,980

97,10383,80076,28771,35078,66473,24981,50670,568

Total assets6

12,874,753

1,425,364

1,278,495

1,257,627

1,202,796

957,447

793,368

876,154828,592

775,528

783,611809,205

Total net assets

9,254,475

1,024,562

829,692

888,117771,509645,999564,239641,163590,614605,127

598,603584,802

14,47913,837

12,742

11,946

11,241

10,62910,844

12,304

12,201

10,684

10,343

Other

Depreciation and amortization2
3

Capital expenditures

Number of employees
U.S. dollars

Yen

Net income (loss) per share of common stock:$ 14.11¥ 1,562.20¥ 1,170.57¥ 1,513.58¥ 1,245.48¥ 702.26¥ 461.10¥ 401.08¥( 108.31)¥ 33.91¥ 205.04¥ 401.73

14.03

1,553.29

1,164.02

1,507.22

1,241.22

700.35460.00400.15-33.85

204.72401.10Net assets per share of common stock

58.82

6,512.18

5,267.96

5,371.78

4,674.49

3,919.50

3,428.37

3,567.23

3,225.92

3,309.58

3,275.14

3,198.66

Cash dividends per share of common stock

7.05

Basic
4

Diluted

781.00588.00758.00624.00352.00237.00143.00

50.00

51.00

80.00

114.00

Number of shares outstanding (thousands)

157,210

157,210

165,210

165,210

165,210

165,211

180,611

180,611

180,611

180,611

180,611

Number of shareholders

29,54730,34850,84335,186

21,937

24,664

20,82930,56341,28742,41444,896

%

ROE

26.5

21.8

30.1

29.0

19.1

13.0

11.8

(3.3)

1.0

6.3

13.3

Operating margin

22.9

21.0

24.3

24.9

19.5

17.6

14.4

5.3

2.5

9.5

14.6

71.1

64.1

70.0

63.8

67.2

70.9

73.0

69.8

76.5

74.9

70.8

1.03

0.89

1.04

1.05

0.91

0.80

0.72

0.76

0.64

0.79

0.89

¥ 62,466¥ 56,540¥ 49,754¥ 40,759¥ 59,256¥ 64,655

6Equity ratio

6

Total asset turnover (times)

U.S. dollars

Net sales per employee$ 872,818

Thousands of yen¥ 96,629¥ 81,468¥ 100,317

1 From fiscal 2015, Electronic components and computer networks were excluded because Tokyo Electron Device Limited, a former consolidated subsidiary, became an equity method
affiliate. Photovoltaic panel (PV) production equipment was included in FPD production equipment until fiscal 2012 but from fiscal 2016, it has been included in Other.
2 Depreciation and amortization does not include amortization and loss on impairment of goodwill.
3 Capital expenditures only represent the gross increase in property, plant and equipment.
4 Dilution is not assumed for the year ended March 31, 2014.

59 TOKYO ELECTRON Integrated Report 2021

¥ 94,653¥ 71,143

5 The amounts in this summary in millions and thousands of yen; thousands of U.S. dollars; and thousands of shares as of and for the years ended March 31, 2016 and prior are rounded
to the nearest unit. Such amounts as of and for the years ended March 31, 2017 and onward are truncated at the nearest unit. Accordingly, totals for the years ended March 31, 2017 andonward do not necessarily agree with the sum of the corresponding individual amounts.
6 From fiscal 2019, the Company applied “Partial Amendments to Accounting Standard for Tax Effect Accounting” (Statement No. 28, revised on February 16, 2018) released by the ASBJ.
Accordingly, total assets, equity ratio and total asset turnover for fiscal 2018 have been restated.

TOKYO ELECTRON Integrated Report 2021

60

Data Section

Sustainability Data
Social2017
Number of users

Tokyo Electron Limited and Subsidiaries
As of and for the years ended March 31* � denotes data in the “Tokyo Electron Sustainability Report 2021” with third-party assurance. www.tel.com/csr/report/

Second career
support system

Men

Women
Percentage of regular employees who received regularperformance and career evaluations

2018

2019

2020

2021

34

31

30

23

23

30

30

28

18

20

4

1

2

5

3

100.0

100.0

100.0

100.0

100.0

Employee Retention (Japan)
Composition of Employees

2017
2017

Regular employees(Region/Group)

2018

2019

2020

Retention after three years of joining TEL1

2021

Number of regular employees

10,92011,696

12,46913,542

14,022

Men

Japan

6,967

7,268

7,526

7,806

7,921

Women

Rest of Asia

1,850

2,218

2,832

3,494

3,796

448

492

513

528

509

Europe and Middle East
North America

1,655

1,718

1,598

1,714

Employee retention

1,796

Average service years

Employees(Employment type/Japan)

2018

2019

2020

Number of employees

7,288

7,516

7,797

8,100

8,296

Regular employees

6,967

7,268

7,526

7,806

7,921

6,079

6,292

6,479

6,681

6,722

888

976

1,047

1,125

1,199

321

248

271

294

375

Men

209

181

220

263

348

Women

112

67

51

31

27

Men
Women
Non-regular employees

94.1

94.1

94.3

93.5

94.6

94.8

85.2

87.1

88.0

88.6

89.3

17 yrs. 1 mo.

17 yrs. 1 mo.

17 yrs. 2 mos.

17 yrs. 2 mos.

17 yrs. 4 mos.

Men

17 yrs. 4 mos.

17 yrs. 4 mos.

17 yrs. 5 mos.

17 yrs. 5 mos.

17 yrs. 7 mos.

Women

15 yrs. 5 mos.

15 yrs. 7 mos.

15 yrs. 8 mos.

15 yrs. 11 mos.

15 yrs. 10 mos.

102

103

108

82

87

82

82

88

54

75

Women

2017
Annual paid leave

2020

2021

64.3

67.2

72.6

62.5

Number of those who took leave

586

639

605

901

688

Men

499

556

507

773

610

Women

87

83

98

128

78

Number of those who took leave

179

180

155

184

148

Number of those who took leave

44

41

56

46

41

2

4

8

12

16

42 (95.5)

37 (92.5)

48 (100.0)

34 (97.1)

25 (92.6)

44

44

43

48

54

2

6

6

8

15

42

38

37

40

39

Percentage reinstated

93.6

93.6

93.5

94.1

96.4

72

163

198

280

252

Men

70

131

166

233

207

Women

2

32

32

47

45

30–49 yrs old

0

4

1

1

1

Men

0

4

1

1

1

Women

0

0

0

0

0

Retention rate

0

0

0

0

0

95.7

90.0

88.9

93.3

95.0

Number of those who used

Men

0

0

0

0

0

170

176

153

149

132

Men

0

0

0

0

24

8

11

9

Women

0

23

Women

Percentage of women

2.8

19.2

16.1

16.7

17.8

147

152

145

138

123

Number hired

279

262

239

150

191

102

102

85

42

56

Men

85

85

67

35

49

Women

17

17

18

7

7

30–49 yrs old

170

156

145

96

123

Men

155

135

119

82

92

Women

15

21

26

14

31

7

4

9

12

12

6

3

5

10

11

1

1

4

2

1

Percentage of women

11.8

14.9

20.1

15.3

20.4

Percentage hired (TEL)

2.13

2.22

2.18

2.06

2.43

Percentage hired (Group)

1.98

1.91

2.04

2.01

2.3

Number of people

42

20

22

23

26

Percentage

1.6

1.8

2.0

2.0

2.2

Number of users

125

156

201

242

313

123

155

196

235

305

2

1

5

7

8

Women

Men
Women

1 Percentage of female managers Calculation method: Number of female managers/Number of managers × 100
2 Grade resetting through global human resources system since FY2018 3 As of March 31

61

2019

64.1

253

Men

Reemployment system

2021

2018

Take-up rate3281

50 and over yrs old

Female managers (Group)1, 2, 3

12
1.0

199

Under 30 yrs old

Employees with disabilities

28
1.0

167

50 and over yrs old

Career-track recruits

2020

20
1.4

72

Under 30 yrs old

New graduates hired

2019

21
1.4

Work-life Balance (Japan)

Paternity leave

2018

20
1.4

1 Average in recent five years 2 Turnover due to personal circumstances

Recruitment/Employment (Japan)
2017

2021
93.8

Turnover percentage

Refreshment leave

Number hired

2020
93.0

Men

Turnover 2

2021

2019
93.4

Employee turnover

2017

2018
92.9

TOKYO ELECTRON Integrated Report 2021

Men
Women (percentage who took leave)
Number of those who returned
to work after leave
Men

Childcare leave

Women

Shorter working hour system

Number of those who took leave
Leave to care fora sick/injured child

464

455

517

625

510

Men

263

281

334

428

353

Women

201

174

183

197

157

106

120

129

125

86

Men

16

19

26

26

29

Women

90

101

103

99

57

2

3

5

2

2

Men

1

2

2

2

0

Women

1

1

3

0

2

50

47

63

95

110

Men

31

25

38

56

69

Women

19

22

25

39

41

0

0

2

2

0

Men

0

0

0

1

0

Women

0

0

2

1

0

Number of those who took leave
Childcare support leave

Number of those who took leave
Extended nursing care leave

Number of those who took leave
Short nursing care leave

Number of those who used
Shorter working hour system
for nursing care��

3 Take-up rate of annual paid leave Calculation method: (Days of paid leave taken by employees*)/(Days of paid leave provided to employees*) × 100 * Incl. non-regular employees

Customers
2017
Percentage of respondents who selected “Very Satisfied” or“Satisfied” in the customer satisfaction survey

2018
67.6

2019
59.4

2020
84.4

2021
93.3

96.7

TOKYO ELECTRON Integrated Report 2021

62

Data Section

Environment

Products/Innovation
2017

2018

2019

2020

2021

Total number of incidents of non-compliance with regulations and voluntary codes
concerning the health and safety impacts of products and services

0

0

0

0

0

Number of active issued patents

Active issued patents (Region/Country)

16,023

16,767

17,473

18,137

18,692

Japan

4,984

5,091

5,304

5,348

5,484

North America

4,224

4,321

4,415

4,606

4,822

Europe

199

185

179

191

206

Korea

2,672

2,864

3,076

3,223

3,363

Scope

2,925

Emissions metric (sales) (t-CO2/billion yen)

1.77

1.34

1.24

1.38

1,892

Emissions (kt-CO2)

141

152

159

155

169

Japan

110

119

127

127

138

Overseas

31

33

32

28

31

2,387

Taiwan

2,675

1,557

China

Global patent application rate
Japan

1,682

20161

20171

2,948
1,821
20181

Greenhouse Gas Consumption/Emissions

CO2 from energy consumption

20191

2017

2018

2019

2020

2021
1.21

70.0

76.1

81.2

79.8

74.3

Scope 11 emissions (kt-CO2)

8

9

9

11

12

66.5

71.5

82.9

83.1

84.9

Japan, energy-derived

6

7

7

10

10

87.3

Overseas, energy-derived

2

2

2

2

2

72.3

North America

2,817

1,631

20151

Patent application success rate

Tokyo Electron Limited and Subsidiaries
As of and for the years ended March 31* � denotes data in the “Tokyo Electron Sustainability Report 2021” with third-party assurance. www.tel.com/csr/report/

78.0

85.1

85.5

1 Calendar year when patents were filed/granted

CO2 by scope

2017

2018

2019

2020

133

143

150

144

157

Japan

104

112

120

118

128

Overseas

29

31

30

26

29

Scope 22 emissions (kt-CO2)

Safety2021

Percentage of employees who received training on basic safety

100

100

100

100

100

Scope 33 emissions (kt-CO2)

4,028

5,855

6,467

5,874

6,222

Percentage of employees who received training on advanced safety

100

100

100

100

100

Emissions (kt-CO2e) (Japan)

28

26

47

59

70

0.63

HFCs

3

3

3

6

5

0.27

PFCs

8

11

18

24

30

SF6

9

4

11

11

7

Other

8

8

15

18

28

9

8

15

16

17

0.46

Lost time incident rate (LTIR)

0.77

0.28

Number of workplace injuries per 200,000 work hours (TCIR)

0.40

0.38

0.20

0.51
0.23

Non-energy-derived greenhouse gas

Procurement
2017

2018

2019

2020

Scope 14 emissions (kt-CO2e)2021

Percentage of new important suppliers screened using social criteria

100

100

100

100

100

Rate of improvement after supply chain CSR assessment (including green procurement survey)

16.9

20.7

—2

35.8

23.1

32.3

21.2

19.4

16.0

20.3

237 (100)

249 (100)

253 (100)

261 (100)

236 (100)Rate of improvement after supply chain BCP assessment
Number of identified RMAP conformant smelters (rate of identification)

2 Unable to compare with previous fiscal year due to comprehensive revisions, including the survey

Governance
2017

2018

2019

2020

2021

Total number of critical incidents notified to Board of Directors

1

0

0

0

0

Total number of incidents subject to legal action on the basis of anti-competitive conduct, antitrust
activity, or monopolistic practices where the governance body’s involvement was revealed

0

0

0

0

0

Number of executive officers who received training on anti-corruption3

12

13

0

0

15

Total number (percentage) of directors who provided instructions on the body’s policies andprocedures in relation to anti-corruption3

11 (100)

12 (100)

12 (100)

11 (100)

11 (100)

Total number (percentage) of directors who received training on anti-corruption

9 (81.8)

9 (75.0)0 (0)11 (100)

0 (0)Payment to industry groups, etc. (thousand yen)4

19,676

20,54321,09329,92732,036

Payment to politically affiliated organizations (yen)

—

0

0

0

0

Average tenure of directors

—

8.04

7.36

4.84

6.09

Average rate of attendance for board meetings

—

99.46

98.24

99.39

98.96

3

Resource Consumption
Scope
Consumption (thousand m3)
Japan
Groundwater

Water

Percentage of employees who have consented to the information security agreement

2018

2019

2020

Copier paper

2021

—

—

—

—

98.8

99.9

99.9

100.0

100.0

99.4

0

0

0

0

0

Significant fines and non-monetary sanctions for non-compliance with laws and regulations inthe social and economic area

5 Scope: Global

Social Contribution

Cashdonationsbreakdown

2018

2019

2020

242

238

281

127

Charity donations (providing donations/relief supplies to charity organizations)

17

13

11

4

13

43

49

55

68

62

Commercial initiatives (charitable expenses with anticipated effects on business growth)

40

38

34

28

25

6 Spending on social contribution activities excluding disaster relief contributions

33

1,397

861

966

1,054

1,098

1,183

251

359

363

390

430

385

387

422

411

450

225

220

269

297

303

Overseas

194

177

186

207

214

Use (t) (Japan)

157

194

165

132

38

(Unit: kt-CO2)

Water Consumption
Industrial water (Japan)
Overseas

138

127

32

28

31

194

2018.32019.32020.32021.3220

2017.32018.3

450

411

422

177

186
269

2019.3

1,183
430

390

363

387

Groundwater (Japan)

1,098

1,054

359

385

�

(Unit: thousand m3)

Tap water (Japan)

966

225

2017.3

2021

1,305

251

31

2020

1,240

861

244

2019

1,143

Tap water

Overseas

119

2018

1,055

2021

250

Community investment (charitable expenses for long-term cause for community)

63 TOKYO ELECTRON Integrated Report 2021

Japan

2017

Industrial water

CO2 Emissions from Energy Consumption

110
2017

Spending on social contribution (million yen)6�

Direct GHG emissions from use of fuel and gas owned or controlled by TEL
Calculation method: Emissions = Σ (fuel consumed × CO2 emission factor)
Emission factor based on Japan’s Act on Promotion of Global Warming Countermeasures
2 Scope 2: Indirect GHG emissions from use of electricity purchased by TEL
Calculation method: Emissions = Σ (purchased electricity × CO2 emission factor)
Adjusted emission factors for the electrical power providers concerned based on Japan’s Act on Promotion of Global Warming Countermeasures were used as the emission factor for Japan
Emission factors based on values from the Emissions Factors 2019 edition published by the International Energy Agency (IEA) were used as the emission factor for overseas
electricity consumption
3 Scope 3: Emissions from corporate value chains (excluding scope 1 and 2 emissions), such as product transportation, employee business travel, and major outsourced production processes
The entire scope is divided into 15 categories, of which calculations were made for categories 1, 2, 3, 4, 5, 6, 7, 9, 11, and 12. Calculations for categories 8, 10, 13, 14, and 15 were not made as
they are either not included in TEL’s activities, or have already been included in other categories.
4 Scope 1: Non-energy-derived CO2 and greenhouse gases other than CO2
Calculation method: Emissions = Σ (consumption × emission per unit consumption – amount recovered and properly treated) × global warming factor
Global warming factor is based on Japan’s Act on Promotion of Global Warming Countermeasures

Compliance2017

�

1 Scope 1:

3 Scope: Japan 4 Industry groups were reviewed from FY2017

Education on TEL’s Code of Ethics/pledge rate5

�

207
297

2020.3214303

2021.3

TOKYO ELECTRON Integrated Report 2021

64

Data Section

Energy Consumption/Generation

Amount of Waste Generated
Scope

Energy

2017

2018

2019

2020

2021

Scope

Emissions metric (sales) (kL/billion yen)

0.84

0.66

0.63

0.75

0.68

Consumption (crude oil equivalent) (kL)67,45775,03380,91884,931

94,64052,676

59,61365,75770,52078,035

Japan

14,781

Overseas
Consumption (MWh)Electricity

Japan

282,274

305,795

317,614354,961

226,747

250,911265,293294,652

54,88452,321
3,565

3,820

Japan

1,666

1,947

1,948

2,611

2,728

Overseas

1,211

1,136

1,043

954

1,092

797

875

915

1,482

1,560

796

874

915

1,481

1,560

1

1

0

1

0

3,334

3,458

3,834

3,334

4,980

0

0

0

0

0

3,334

3,458

3,834

3,334

4,980

4,436

4,414

4,392

3,804

4,068

4,436

4,414

4,392

3,804

4,068

0

0

0

0

0

1,346

1,386

1,382

1,225

1,285

1,346

1,386

1,382

1,225

1,285

0

0

0

0

0

Purchase (MWh)Japan
Overseas
Power generation (MWh)Japan
Overseas
Power sales (MWh)*Japan
Overseas

Recycling

Scope

2017

2019

2020

122

146

186

152

Japan

7

12

9

9

9

Overseas

90

110

137

177

143

31.9

36.4

35.9

31.9

34.3

Proportion of marine transportation(international)

Japan(Unit: Million kWh)

Overseas

CO2 Emissions from Logistics and the Proportion ofMarine Transportation

PRTR Class I designatedchemical substances

200.5

226.7

250.9

265.3

294.7

146
122
97

52.8

55.5

54.9

52.3

2017.32018.32019.32020.39060.32021.31102018.3

3,683

4,904

6,619

5,911

6,718

Recycled amount (t)12,128

14,211

14,77013,74814,814

11,281

13,561

14,092

12,831

13,587

847

650

678

917

1,227

190

224

190

241

183

Japan

112

133

116

142

118

Overseas

78

91

74

99

65

874

905

1,006

1,078

1,195

Japan

709

759

850

900

1,006

Overseas

165

146

156

178

189

2017

2018

2019

2020

64

100

101

121

144

Ferric chloride

33

82

84

98

106

Hydrogen fluoride and its water-soluble salts

25

12

11

12

24

Methylnaphthalene

5

5

5

10

13

VOCs1

0.0

0.0

0.0

0.1

0.1

Other

1

1

1

1

1

59

95

96

111

131

5

5

5

10

13

Emissions (t)

7.9

11.5

9.6

11.9

13.0

SOx

Emissions (t)

2.5

2.7

2.8

4.0

4.9

1 VOCs: Volatile Organic Compounds

Other
Scope

2018

2019

2020

2021

8

9

9

9

11

Japan

5

5

5

5

5

Overseas

3

4

4

4

6

Number of ecosystem tours2

18

22

17

18

18

Number of ecosystem tour participants2

396

718

595

368

52

Number of breaches of environmental
laws and regulations

0

0

0

0

0

Amount of fines for breaches of laws
and regulations

0

0

0

0

0

20,445

34,11032,71531,184

28,862
2 Scope: Japan

Incinerated and landfill waste (t)1432020.32017

Number of certified offices

Recycling Rate/Generation of Incinerated and Landfill Waste in Japan

137

2021

Volume handled (t)91772019.3

1,292

Emissions (t) (Japan)

Consumption (t)Recycling rate (%): (Recycled amount/Amount of waste generated) × 100

99.0
2017.3

1,016

Total product shipment (t)2

9

12

752

NOx

Environmental laws and regulations

9
152

7

741

Amount transported (waste amount) (t)

35.9
186

13,705925

Scope

Biodiversity

34.3

31.9
36.4

12,973Chemical Substances Consumption/Emissions (Japan)

Logistics in Japan (kt-CO2)
Overseas logistics (kt-CO2)
Proportion of marine transportation in international logistics (%)

31.9

14,208Water discharge volume (thousand m3)

ISO 14001

Electricity Consumption

13,6942021

97

Emissions (kt-CO2)
CO2

2018

14,997

11,393

Amount of waste (t)* Heating, cooling and steam not soldEnvironmental Impact of Logistics

2021

13,989Overseas

Water discharges

2020

14,960Japan

Incinerated and landfill waste

201914,435

Overseas
Specially controlled industrial waste

201812,318

Japan

Waste

60,3092,991

Overseas

Power sales

55,527
3,083

Japan

PV power generation system

16,605200,547

Consumption (crude oil equivalent) (kL)Green power

14,411

2,877

Consumption (crude oil equivalent) (kL)Fuel15,161

253,300
52,753

Overseas

Gas

15,4202017

Amount generated (t)99.0

2021.399.2

98.9

Volume of PRTR Class I Designated Chemical Substances
Handled in Japan
Ferric chloride
Methylnaphthalene

99.1

Target: Maintain recycling rate of 97% or more(t)

Hydrogen fluoride and its water-soluble salts
144 1
Other
13
121 1
24
10
101 1
100 1
12
5
5
11
12

64 1
112

133

116

142

118

5
25

82

84

98

106

33

2017.365 TOKYO ELECTRON Integrated Report 2021

2018.32019.32020.32021.32017.32018.32019.32020.32021.3

TOKYO ELECTRON Integrated Report 2021

66

Data Section

Consolidated Subsidiaries (As of March 31, 2021)
Japan• Tokyo Electron Technology Solutions Ltd.
• Tokyo Electron Kyushu Ltd.

Stock Information (As of March 31, 2021)
Corporate Name and Head Office

Common Stock Listed on

WebsiteTokyo Electron Limited
Akasaka Biz Tower
3-1 Akasaka 5-chome, Minato-ku,
Tokyo 107-6325, JapanTokyo Stock Exchange 1st Section(Stock code: 8035)

www.tel.com

Independent Auditor
KPMG AZSA LLC

Established

Administrator of Shareholders’ Register• Tokyo Electron Miyagi Ltd.

November 11, 1963

• Tokyo Electron FE Ltd.

Annual General Meeting of Shareholders• Tokyo Electron BP Ltd.
• Tokyo Electron Agency Ltd.

Sumitomo Mitsui Trust Bank, Limited
4-1 Marunouchi 1-chome, Chiyoda-ku,
Tokyo, Japan

June

Direct mail and inquiries to:
Sumitomo Mitsui Trust Bank, Limited
8-4 Izumi 2-chome, Suginami-ku,
Tokyo, 168-0063, Japan
Tel (toll free): 0120-782-031 (available onlyin Japan)Common Stock
Stock trading unit
Authorized
IssuedNumber of shareholders

100 shares
300,000,000 shares
157,210,911 shares
29,547U.S.
Major Shareholders

Number ofshares held
(thousands)

Votingshare ratio(%)

The Master Trust Bank of Japan Limited (trust account)

31,205

19.98

Treasury stock

Custody Bank of Japan, Ltd. (trust account)

13,232

8.47

0.67%

JP Morgan Chase Bank 385632

8,301

5.31

TBS HOLDINGS, INC.

5,991

3.83

Other Japanese
corporations

Custody Bank of Japan, Ltd. (trust account 7)

3,852

2.46

Custody Bank of Japan, Ltd.
(securities investment trust account)

2,903

1.85

STATE STREET BANK WEST CLIENT - TREATY 505234

2,416

1.54

EuropeCustody Bank of Japan, Ltd. (trust account 4)

2,325

1.48

SSBTC CLIENT OMNIBUS ACCOUNT

2,233

1.43

• Tokyo Electron Europe Ltd.

JP Morgan Chase Bank 385781

1,837

1.17

• Tokyo Electron U.S. Holdings, Inc.
• Tokyo Electron America, Inc.
• TEL Technology Center, America, LLC• TEL Venture Capital, Inc.
• TEL Manufacturing and Engineering of America, Inc.

• Tokyo Electron Israel Ltd.
• TEL Magnetic Solutions Ltd.

Distribution of Ownership among Shareholders
Japanese financial institutions
and securities companies

46.90%

4.73%
Japanese
individuals
and others

5.31%
Foreign institutions
and others

Notes: 1. Shares of less than one thousand have been rounded down in the “Number of shares held.”
2. Voting share ratios are calculated excluding treasury stock (1,044,374 shares). Figures aretruncated after the second decimal place. Treasury stock excludes the 615,237 Company
shares owned by the executive compensation Board Incentive Plan (BIP) trust account andthe share-delivering Employee Stock Ownership Plan (ESOP).

42.39%

Stock Price and Trading Volume

Asia• Tokyo Electron Korea Ltd.
• Tokyo Electron Taiwan Ltd.
• Tokyo Electron (Shanghai) Ltd.
• Tokyo Electron (Kunshan) Ltd.
• Tokyo Electron Singapore Pte. Ltd.

(Yen)
(Thousands of shares)

50,00045,00040,00035,00030,00025,00020,00015,00010,0005,000

75,000Stock price50,000027 consolidated subsidiaries in total, including the above 19 companies

25,000
Trading volume

CY2017

CY2018CY2019CY2020CY20212017.32018.32019.32020.32021.3High (yen)12,28523,87521,93525,87547,320Low (yen)

6,603

11,455

11,595

13,76018,925

Total shareholder return (%)

170.5

286.1

241.7

309.1

(TOPIX, dividends reinvested)

67 TOKYO ELECTRON Integrated Report 2021

0

CY2016（114.7）（132.9）（126.2）（114.2）680.1（162.3）

TOKYO ELECTRON Integrated Report 2021

68

Financial Section

Consolidated Balance Sheets
Tokyo Electron Limited and Subsidiaries As of March 31, 2021 and 2020

Thousands of
U.S. dollars

Millions of yen

ASSETS

2021

2020

2021

Current assets:

Thousands of
U.S. dollars

Millions of yen

LIABILITIES AND NET ASSETS

2021

2020

2021

¥ 90,606¥ 95,938$ 818,413

Current liabilities:¥ 265,993¥ 247,959$ 2,402,611

Short-term investments

45,55990,447

411,524

Income taxes payable

49,27252,654445,058

Trade notes and accounts receivable

191,700

150,134

1,731,556

Customer advances

81,722

135,326

738,169

(99)

(105)

(896)

Accrued employees’ bonuses

34,254

29,139309,410Inventories

415,344

392,064

3,751,640

Accrued warranty expenses

14,415

14,534130,209

Prepaid consumption tax

82,704

69,034747,033

Other current liabilities

57,38954,986518,372

Other current assets

14,493

12,949130,915

327,661

382,578

2,959,633

Total current assets

1,015,696

962,484

9,174,386

Net defined benefit liabilities

62,24860,745562,262

Other liabilities

10,891

5,478

98,382

73,14066,224

660,644

400,801

448,8023,620,278

Common stock
Authorized: 300,000,000 shares
Issued: 157,210,911 and 157,210,911 shares
as of March 31, 2021 and 2020, respectively

54,961

54,961

496,442

Capital surplus

78,01178,011

704,642

Retained earnings

835,240

702,9907,544,401

Treasury stock, at cost
1,659,611 and 1,685,556 shares
as of March 31, 2021 and 2020, respectively(30,744)(29,310)(277,701)

66,124

20,126597,281

(79)

(52)

(714)

10,441(4,111)

94,310(978)(3,313)(8,836)

11,585

10,391

104,648

1,024,562

829,692

9,254,475

Cash and cash equivalents

Allowance for doubtful accounts

Trade notes and accounts payable

Total current liabilities
Non-current liabilities:

Property, plant and equipment:Land

26,92926,298243,245

Buildings

208,475

179,379

1,883,073

Machinery and equipment

197,982

173,505

1,788,295

Construction in progress

22,391

29,413202,253

Other property, plant and equipment

6,002

4,139

54,218

Total property, plant and equipment

461,780

412,736

4,171,084

264,812

237,156

2,391,951

196,967

175,580

1,779,133

Less: Accumulated depreciation
Net property, plant and equipment

Investments and other assets:

Total non-current liabilities
Total liabilities

Net assets:
Shareholders’ equity

Investment securities

105,065

38,374

949,011

Deferred tax assets

53,12864,729479,892

Net unrealized gains on investment securities

Net defined benefit assets

12,021

5,837

108,581

Net deferred losses on hedging instruments

Intangible assets

17,163

10,921

155,033

Foreign currency translation adjustments

Other assets

26,72821,980241,431

Accumulated remeasurements of defined benefit plans

Allowance for doubtful accounts(1,407)(1,413)(12,716)

212,699

140,431

1,921,233¥1,425,364¥1,278,495$12,874,753

Total investments and other assets
Total assets
See accompanying Notes to Consolidated Financial Statements.

69 TOKYO ELECTRON Integrated Report 2021

Accumulated other comprehensive income

Share subscription rights
Total net assets
Total liabilities and net assets¥ 1,425,364¥ 1,278,495 $ 12,874,753

See accompanying Notes to Consolidated Financial Statements.
TOKYO ELECTRON Integrated Report 2021

70

Financial Section

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Tokyo Electron Limited and Subsidiaries Years ended March 31, 2021 and 2020

Tokyo Electron Limited and Subsidiaries Years ended March 31, 2021 and 2020

Thousands of
U.S. dollars

Millions of yen

2021
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income

2021

2020

¥ 1,399,102

2021¥ 1,127,286 $ 12,637,546

834,157

675,3447,534,615

564,945451,941

5,102,930

244,259

214,649

2,206,302

320,685

237,292

2,896,628

Other income (expenses):

Net income¥ 185,206 $ 2,194,393

7,099

415,345

Net deferred gains on hedging instruments

32

6

294

Foreign currency translation adjustments

14,536(8,461)

131,299

Remeasurements of defined benefit plans

2,266

3,278

20,474

41

(45)

375

62,8601,878

567,789

305,801

187,084

2,762,183

305,801

187,084

2,762,183

Share of other comprehensive income of associates accounted for using
the equity method

1,920

11,742

Share of profit of associates accounted for using the equity method

1,110

794

10,027

Revenue from grants

1,130

1,330

10,214Gain on sales of property, plant and equipment

24

34

221

Comprehensive income

Gain (loss) on change in equity

(7)

136

(63)

Total comprehensive income attributable to:(3,147)

2,539(28,428)

Commission for purchases of treasury stock

-

(174)

-

Additional payment of customs duty

-

(173)

-

Loss on sales and disposal of property, plant and equipment(1,354)(483)(12,234)

Provision for loss on liquidation of subsidiaries and associates(3,327)-(30,053)

622

1,408

5,624

317,038

244,626

2,863,679

Current

82,56865,177

745,806

Deferred(8,471)(5,757)(76,520)

Net income

242,941

185,206

2,194,393¥ 242,941¥ 185,206$ 2,194,393

Income before income taxes¥ 242,941

45,982Net unrealized gains on investment securities

1,300

Other, net

2021

2020

Other comprehensive income (loss):

Interest and dividend income

Foreign exchange gain (loss), net

Thousands of
U.S. dollars

Millions of yen

Total other comprehensive income (loss)

Owners of parent
See accompanying Notes to Consolidated Financial Statements.

Income taxes:

Net income attributable to owners of parent

Yen

U.S. dollars

Per share of common stock:
Net income — basic¥ 1,562.20¥ 1,170.57$ 14.11Net income — diluted

1,553.29

1,164.02

14.03

Net assets

6,512.18

5,267.96

58.82

781.00588.00

7.05

Cash dividends
See accompanying Notes to Consolidated Financial Statements.

71

TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

72

Financial Section

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Cash Flows

Tokyo Electron Limited and Subsidiaries Years ended March 31, 2021 and 2020

Tokyo Electron Limited and Subsidiaries Years ended March 31, 2021 and 2020

Millions of yen
Shareholders’ equity

Thousands of
U.S. dollars

Millions of yen

Accumulated other comprehensive income
Net unrealized Net deferredgains onlosses on
investment
hedgingsecurities
instruments

Foreign
AccumulatedSharecurrency
remeasurements
subscription
translationof definedrightsadjustments
benefit plans

2021

2020

2021

Income before income taxes¥ 317,038¥ 244,626$ 2,863,679

Depreciation and amortization

33,843

29,107

305,696

199

196

1,802

Increase (decrease) in accrued employees’ bonuses

4,612(3,802)

41,659Cash flows from operating activities:

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

Balance as ofMarch 31, 2019

¥ 54,961¥ 78,011¥ 748,827¥( 11,821)¥ 13,024¥( 34)¥ 4,366¥( 6,585)¥ 7,368¥ 888,117

Cash dividends--(95,513)

-

-

-

-

-

-

(95,513)

Net income attributable toowners of parent--

185,206

-

-

-

-

-

-

185,206

Provision for loss on liquidation of subsidiaries and associates

3,327

-

30,053Purchase of treasury stock

-

-

-

(154,096)

-

-

-

-

-

(154,096)

Interest and dividend income(1,300)(1,920)(11,742)

Disposal of treasury stock--(1,616)

2,684

-

-

-

-

-

1,067

Increase in trade notes and accounts receivable(37,736)(5,370)(340,856)

Cancellation of treasury
stock

-

-

(133,922)

133,922

-

-

-

-

-

-

Increase in inventories(17,226)(44,065)(155,597)

Others

-

-

10

-

-

-

-

-

-

10

Increase (decrease) in trade notes and accounts payable(8,255)22,337(74,571)

Net changes except forshareholders’ equity

Increase in prepaid consumption tax(13,549)(19,508)(122,390)

-

-

-

-

7,102

(17)

(8,478)

3,271

3,022

4,900

Increase (decrease) in accrued consumption tax(5,699)6,140(51,484)¥ 54,961¥ 78,011¥ 702,990¥( 29,310)¥ 20,126¥( 52)¥( 4,111)¥( 3,313)¥ 10,391¥ 829,692

Increase (decrease) in customer advances(54,851)

58,630(495,455)

Cash dividends--(109,542)

-

-

-

-

-

-

(109,542)

Other, net

11,5906,308

104,688

Net income attributable toowners of parent--

242,941

-

-

-

-

-

-

242,941

Subtotal

231,990292,679

2,095,481

Purchase of treasury stock

-

-

-

(4,339)

-

-

-

-

-

(4,339)

1,669

2,326

15,083

Disposal of treasury stock--(1,149)

2,906

-

-

-

-

-

1,757

Income taxes paid

(87,772)(41,888)(792,814)

Net cash provided by operating activities

145,888

253,117

1,317,749

-

-

-

-

45,998(26)

14,553

2,335

1,194

64,054¥ 54,961¥ 78,011¥ 835,240¥( 30,744)¥ 66,124¥( 79)¥ 10,441¥( 978)¥ 11,585¥ 1,024,562

Payment for purchases of short-term investments(45,568)(100,449)(411,602)

Proceeds from maturities of short-term investments

90,506

170,000

817,507

Payment for purchases of property, plant and equipment(53,806)(49,369)(486,012)

Payment for acquisition of intangible assets(7,124)(3,383)(64,353)

Other, net(2,281)(845)(20,609)

Net cash provided by (used in) investing activities(18,274)

15,951(165,070)(4,339)(154,096)(39,201)(109,542)(95,513)(989,453)

(643)

(764)

(5,809)(114,525)(250,374)(1,034,464)

Balance as ofMarch 31, 2020

Net changes except forshareholders’ equity
Balance as ofMarch 31, 2021

Total
net assets

Thousands of U.S. dollars
Shareholders’ equity

Accumulated other comprehensive income
Net unrealized Net deferredgains onlosses on
investment
hedgingsecurities
instruments

Foreign
AccumulatedSharecurrency
remeasurements
subscription
translationof definedrightsadjustments
benefit plans

Amortization of goodwill

Receipts from interest and dividends

Cash flows from investing activities:

Commonstock

CapitalsurplusRetainedearnings

Treasurystock$ 496,442$ 704,642$ 6,349,840$( 264,753)$ 181,798$( 477)$( 37,141)$( 29,927)$ 93,860$ 7,494,285

Cash dividends--(989,453)

-

-

-

-

-

-

(989,453)

Net income attributable toowners of parent--

2,194,393

-

-

-

-

-

-

2,194,393

Purchase of treasury stock

-

-

-

(39,201)

-

-

-

-

-

(39,201)

Effect of exchange rate changes on cash and cash equivalents

4,946(3,369)44,679

Disposal of treasury stock--(10,379)

26,252

-

-

-

-

-

15,873

Net increase in cash and cash equivalents

18,033

15,324

162,893

Net changes except forshareholders’ equity

-

-

-

-

415,482(236)

131,452

21,091

10,787

578,577

Cash and cash equivalents at beginning of year

247,959

232,634

2,239,717¥ 265,993¥ 247,959$ 2,402,611$ 496,442$ 704,642$ 7,544,401$( 277,701)$ 597,281$( 714)$ 94,310$( 8,836)$ 104,648$ 9,254,475

Balance as ofMarch 31, 2020

Balance as ofMarch 31, 2021

Total
net assets

Cash flows from financing activities:
Payment for purchases of treasury stock
Dividends paid
Other, net
Net cash used in financing activities

Cash and cash equivalents at end of year
See accompanying Notes to Consolidated Financial Statements.

See accompanying Notes to Consolidated Financial Statements.

73 TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

74

Financial Section

Notes to Consolidated Financial Statements
Tokyo Electron Limited and Subsidiaries
Years ended March 31, 2021 and 2020

1. Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated financial statements ofTokyo Electron Limited (hereinafter “the Company”) and its
subsidiaries (hereinafter collectively referred to as “Tokyo
Electron”) have been prepared in accordance with theprovisions set forth in the Financial Instruments and Exchange
Act of Japan and its related accounting regulations, and in
conformity with accounting principles generally accepted inJapan, which are different in certain respects as to applicationand disclosure requirements of International Financial
Reporting Standards.
The Company uses financial statements prepared by foreignsubsidiaries in accordance with International Financial ReportingStandards or U.S. generally accepted accounting principles
for the preparation of the consolidated financial statements,
together with adjustment for certain items which are required tobe adjusted in the consolidation process.
The accompanying consolidated financial statements
have been restructured and translated into English from thestatutory Japanese language consolidated financial statements.
Some supplementary information included in the statutory
Japanese language consolidated financial statements is
not presented in the accompanying consolidated financial
statements.
The amounts in the consolidated financial statements andassociated notes shown in millions and thousands of yen;
thousands of U.S. dollars; and thousands of shares as of and forthe years ended March 31, 2021 and 2020 are truncated at thenearest unit. Accordingly, totals do not necessarily agree with thesum of the corresponding individual amounts.
U.S. dollar amounts included herein are solely for theconvenience of readers and are presented at the rate of¥110.71 to $1.00, the approximate rate as of March 31, 2021. The
translation should not be construed as a representation that
the Japanese yen amounts shown could be converted into U.S.
dollars at that or any other rate.
2. Summary of Significant Accounting Policies(a) Principles of consolidation
The consolidated financial statements include the accountsof the Company and its 27 and 29 subsidiaries as of March 31,
2021 and 2020, respectively. All significant inter-company
transactions and account balances have been eliminatedthrough consolidation procedures.
There are 9 affiliates accounted for using the equity method
as of March 31, 2021 and 2020.
The fiscal year-end of all entities is March 31, except for
3 consolidated foreign subsidiaries. Financial statements
provisionally closed for the period ending March 31 are used for
those subsidiaries.
(b) Foreign currency translation
All assets and liabilities denominated in foreign currencies
are translated into Japanese yen at the year-end rates, except
for those hedged by forward exchange contracts, which aretranslated at the contracted rates. Resulting exchange gains and
75 TOKYO ELECTRON Integrated Report 2021

losses are included in earnings for the year.
Revenue and expense items are translated at the rates thatapproximate those prevailing at the time of the transactions.
The balance sheet accounts of foreign subsidiaries aretranslated into Japanese yen at the rates of exchange in effect atthe balance sheet date, except for shareholders’ equity accounts,
which are translated at the historical rates. Revenue and expense
accounts of foreign subsidiaries are translated at average rates
of exchange in effect during the year. Resulting translation
adjustments are presented in net assets as a componentof accumulated other comprehensive income (loss) in the
consolidated balance sheets.

Estimated useful lives of property, plant and equipment are
as follows:
Buildings
2 to 60 years
Machinery and equipment
2 to 20 years(c) Cash and cash equivalents
Cash and cash equivalents consist of cash, short term
deposits and low-risk financial instruments with original
maturities of three months or less.

(j) Impairment of fixed assets
Tokyo Electron evaluates the carrying value of fixed assets
held for use in the business and idle assets.
If the carrying value of a fixed asset is impaired, a loss isrecognized based on the amount by which the carrying value
exceeds its recoverable amount, being the higher of the net
selling price or the value in use of the assets. Net selling priceis determined using the fair value less disposal costs and value
in use is based on the total amount of discounted cash flows
estimated to be generated from the continuing use of theindividual assets or the asset group and the disposal of theassets.

(d) Short-term investments
Short-term investments consist of short term deposits andlow-risk financial instruments with original maturities of morethan three months.
(e) Investment securities
Tokyo Electron examines the intent of holding each security
and classifies those securities as trading securities, held-to
maturity debt securities or other securities. Tokyo Electron has
no trading securities as of March 31, 2021 and 2020. Held-tomaturity debt securities are stated mainly at amortized cost.
Other securities with market prices are valued at fair value at thebalance sheet date. The differences between the book value andfair value of other securities, net of applicable income taxes, arepresented in net assets as a component of accumulated othercomprehensive income (loss) in the consolidated balance sheets.
Other securities without market prices are valued at cost using
the weighted-average method.
The cost of sold securities is calculated using the weighted
average method.
(f) Inventories
Inventories are stated at the lower of cost, determined byprincipally the specific identification method, or net selling
price, which is defined as selling price less estimated additional
manufacturing costs and estimated direct selling expenses.
(g) Property, plant and equipment
Property, plant and equipment are stated at cost.
Depreciation of buildings, machinery and equipment of theCompany and its domestic subsidiaries is computed using
the declining-balance method, except for buildings acquiredsince April 1, 1998 and facilities attached to buildings andstructures acquired since April 1, 2016 which are depreciatedusing the straight-line method, based on the estimateduseful lives of assets. Foreign subsidiaries mainly apply thestraight-line method over the estimated useful lives ofassets.

(h) Intangible assets (excluding goodwill)
Intangible assets are amortized by the straight-line method
over their estimated useful lives.
(i) Goodwill
Goodwill is evaluated on an individual basis and amortized by
the straight-line method over a period not exceeding 20 years.

(k) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an
amount determined based on the historical experience of bad
debts with respect to ordinary receivables, and an estimateof uncollectible amounts determined by reference to specificdoubtful receivables from customers which are experiencing
financial difficulties.
(l) Accrued employees’ bonuses
The provision for accrued employees’ bonuses is provided
based on the estimated payments to be made in respect of the
fiscal year.
(m) Employee benefits
The Company and its domestic subsidiaries provide defined
benefit plans for their employees. Expected benefits are
attributed to accounting periods by the benefit formula basis.
Prior service costs are charged to earnings on a straight-line
basis, beginning from the fiscal year in which they are incurred,over a fixed number of years (4 years) within the averageremaining years of service of employees when the changes
occur. Actuarial differences are charged to earnings on astraight-line basis, beginning from the following fiscal year after
they are incurred, over a fixed number of years (4 years) within
the average remaining years of service of employees when the
differences occur.
The provision for accrued pension and severance costs
for directors and audit & supervisory board members of
the Company and its domestic subsidiaries is calculated inaccordance with internal regulations.

The Company and certain domestic subsidiaries decided to
discontinue the payment of severance pay for directors andaudit & supervisory board members after April 1, 2005, and at thegeneral shareholders’ meeting in June 2005, it was resolved thatthe severance pay for directors and audit & supervisory board
members until March 31, 2005 would be paid at the terminationof their service and the decision regarding the payment amountfor each director and audit & supervisory board member was
delegated to the board of directors and audit & supervisoryboard members. The accruals for severance costs for directors
and audit & supervisory board members are included in Net
defined benefit liabilities in the consolidated balance sheets.
(n) Accrued warranty expenses
Tokyo Electron’s products are generally subject to warranty,
and Tokyo Electron accrues estimated warranty costs when
product revenue is recognized. Estimated after-sale repair
expenses over warranty periods are accrued based on thehistorical ratio of actual repair expenses to corresponding sales.
(o) Derivatives and hedge accounting
The Company and certain subsidiaries (hereinafter “theGroup”) make use of derivatives in order to manage certain risks
arising from adverse fluctuations in foreign currency exchange
rates. The amount of derivatives is limited to the extent offoreign currency assets, liabilities and actual orders or forecasted
transactions, and the Group does not trade in derivatives for
speculative purposes.
Derivatives are carried at fair value in the consolidatedbalance sheets with changes in unrealized gain or loss charged
or credited to earnings, except for those which meet the criteria
for hedge accounting. Unrealized gains or losses on hedging
instruments, net of taxes, are reported in net assets as acomponent of accumulated other comprehensive income (loss)
in the consolidated balance sheets. Receivables and payables
hedged by qualified forward foreign exchange contracts aretranslated at the corresponding foreign exchange contract rates.
(p) Income taxes
Tokyo Electron records deferred tax assets and liabilities
on temporary differences between the carrying amounts ofassets and liabilities for financial reporting purposes and theamounts used for income tax purposes and net operating loss
carryforwards. Deferred tax assets and liabilities are measured
using the enacted tax rates and laws which are expected to bein effect when net operating loss carryforwards and temporary
differences are expected to be realized.
(q) Revenue recognition
Revenue from Semiconductor and FPD (Flat Panel Display)production equipment is principally recognized at the time of
the customer confirmation of set-up and testing of products.
Revenue from equipment not requiring substantial installationis recognized at the time of shipment. Service revenue formaintenance is recognized ratably over the term of themaintenance contract.

TOKYO ELECTRON Integrated Report 2021

76

Financial Section(r) Research and development expenses
Research and development expenses are charged to earnings
as incurred and amounted to ¥136,648 million ($1,234,295
thousand) and ¥120,268 million for the years ended March 31,
2021 and 2020, respectively.
(s) Reclassifications
Certain reclassifications have been made to the prioryear’s consolidated financial statements to conform with thepresentation used for the year ended March 31, 2021.
Tokyo Electron adopted “Accounting Standard for Disclosureof Accounting Estimates” (ASBJ Statement No. 31, March 31,2020) for the consolidated financial statements for the fiscal
year ended March 31, 2021 and, therefore, Significant Accounting
Estimates is presented as note 3. below. The note does notinclude information for the prior consolidated fiscal year inaccordance with the transitional provision set out in paragraph 11of the Accounting Standard.
3. Significant Accounting Estimates
1. Valuation of inventories(1) Carrying amounts in the consolidated financial statements asof March 31, 2021
¥415,344 million ($3,751,640 thousand)(2) Information on the nature of significant accounting estimatesfor identified items
Inventories are principally stated at cost on the consolidatedbalance sheet. When the net selling price for inventory decreases
below its cost at the end of the fiscal year, the Company writes
down inventories in an amount equal to the difference between
the cost of the inventory and the net selling price.
Inventories aged over a certain holding period are classified
based on the use and salability and are then systematically
written down according to their classification.
The carrying amount of inventories to be disposed of iswritten down to the estimated disposal value.
The valuation of inventories is based on forecasts offuture demand and prospects of market environment. The
semiconductor industry, where Tokyo Electron operates, isinfluenced by the short-term unbalance between supply anddemand, and the market could undergo significant fluctuations.
Unforeseen rapid contraction of the semiconductor market
could lead to additional write downs of inventories in the
consolidated financial statements for the next fiscal year.
2. Accrued warranty expenses(1) Carrying amounts in the consolidated financial statements asof March 31, 2021
¥14,415 million ($130,209 thousand)(2) Information on the nature of significant accounting estimatesfor identified items
The Company accrues estimated warranty costs. Estimatedafter-sale repair expenses over warranty periods are accrued
based on the historical ratio of actual repair expenses to
77 TOKYO ELECTRON Integrated Report 2021

corresponding sales.
Tokyo Electron’s products are based on the integrationof numerous leading-edge technologies. The occurrence of
unforeseen defects could lead to additional after-sale repair
expenses in the consolidated financial statements for the next
fiscal year.
4. C hange in Accounting Policies and Adoption of New
Accounting Standards
Year ended March 31, 2020
Certain consolidated overseas subsidiaries adopted IFRS 16“Leases” from the beginning of the fiscal year ended March 31,
2020, and recognize all leases as a lessee in principle as assets
and liabilities on the balance sheets.
Tokyo Electron elected to use the transitional approach torecognize the cumulative effect of initially applying this standard
at the date of initial application. Right-of-use assets wererecognized at the same value as lease liabilities and, therefore,
there was no impact on retained earnings at the beginning of the
fiscal year ended March 31, 2020.
The effect of this change on the consolidated financial
statements is immaterial.
5. Additional Information
Transactions of Delivering the Company’s Own Stock to
Employees, etc. through Trusts
Tokyo Electron introduced stock delivering schemes(hereinafter “the Schemes”) from the fiscal year ended March
31, 2019 as a common global incentive plan. The purpose of the
Schemes is to encourage the directors of the Company and its
subsidiaries (excluding outside directors), executive officers
and senior and mid-level employees to contribute to improving
medium-term business performance, as well as to share ashareholder perspective by holding Company shares and raisingawareness towards enhancing corporate value.
For the Company’s outside directors, the Company has
introduced non-performance-linked stock-based compensationfrom the fiscal year ended March 31, 2021 as a system thatis more consistent with their expected role of advising
management from the perspective of increasing corporate value
over the medium- to long-term, in addition to management
supervision. In accordance with that objective, the Company
partially modified the Schemes and the Company’s outside
directors are now within the scope.
Tokyo Electron adopted the “Practical Solution on
Transactions of Delivering the Company’s Own Stock to
Employees, etc. through Trusts” (PITF No. 30, March 26, 2015) for
the accounting treatment of the Schemes.
1. E
 xecutive compensation BIP (Board Incentive Plan) Trust(1) Overview of the transactions
The Executive compensation BIP Trust which the Company
established acquires the Company’s shares, and delivers andprovides shares of the Company and monetary compensation
corresponding to the cash conversion value of the Company’s
shares to the directors of the Company and its subsidiaries inaccordance with the share delivery rules.
(2) The Company’s shares held by the trust
Tokyo Electron recorded the Company’s shares held by thetrust in “Treasury stock, at cost” under “Net assets” at the bookvalue in the trust (excluding ancillary expenses). The book value
and the number of such treasury shares were ¥1,744 million($15,757 thousand) and 80,538 shares, respectively, as of March
31, 2021, and were ¥1,154 million and 60,538 shares, respectively,
as of March 31, 2020.
2. Share-delivering ESOP (Employee Stock Ownership Plan) Trust(1) Overview of the transactions
The Share-delivering ESOP Trust which the Company
established acquires the Company’s shares, and delivers andprovides shares of the Company and monetary compensation
corresponding to the cash conversion value of the Company’s
shares to the general managers, senior employees and mid-classemployees of the Company and its subsidiaries based on theirposition and attainment of performance targets in accordancewith the share delivery rules.
(2) The Company’s shares held by the trust
Tokyo Electron recorded the Company’s shares held by thetrust in “Treasury stock, at cost” under “Net assets” at the bookvalue in the trust (excluding ancillary expenses). The book value
and the number of such treasury shares were ¥11,507 million($103,944 thousand) and 534,699 shares, respectively, as ofMarch 31, 2021, and were ¥7,840 million and 411,492 shares,
respectively, as of March 31, 2020.
6. Accounting Standards Issued but Not yet Adopted“Accounting Standard for Revenue Recognition” (ASBJ
Statement No. 29, March 31, 2020 (hereinafter, “Statement
No.29”))“Implementation Guidance on Accounting Standard for
Revenue Recognition” (ASBJ Guidance No. 30, March 26, 2021
(hereinafter, “Guidance No.30”))“Implementation Guidance on Disclosures about Fair Value of
Financial Instruments” (ASBJ Guidance No. 19, March 31, 2020)(1) Overview
The International Accounting Standards Board (IASB) and the
U.S. Financial Accounting Standards Board (FASB) collaborated
on a project to develop a single, comprehensive revenue
recognition model and jointly issued new revenue recognition
standards “Revenue from Contracts with Customers” (IFRS 15
published by IASB, ASC Topic 606 published by FASB) in May
2014. IFRS 15 is effective for annual reporting periods beginningon or after January 1, 2018 and Topic 606 is effective for annual
reporting periods beginning after December 15, 2017.
Considering the above circumstances, the AccountingStandard Board of Japan (ASBJ) also developed a new revenue
recognition standard and issued Statement No.29 together with
Guidance No.30.
ASBJ’s basic policy in developing the new revenue recognition

standards is to first incorporate the core principle of IFRS 15 in
the light of improving the international comparability of financial
statements and then add additional alternative treatments
to the extent that international comparability would not be
impaired where any business practices operated in Japan need tobe considered.
(2) Effective date
Effective from the beginning of the fiscal year ending March
31, 2022.
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries are
currently in the process of determining the effects of these newstandards on the consolidated financial statements.
“Accounting Standard for Fair Value Measurement” (ASBJ
Statement No. 30, July 4, 2019 (hereinafter, “Statement No.30”))“Accounting Standard for Measurement of Inventories” (ASBJ
Statement No. 9, July 4, 2019)“Accounting Standard for Financial Instruments” (ASBJ
Statement No. 10, July 4, 2019)“Implementation Guidance on Accounting Standard for Fair
Value Measurement” (ASBJ Guidance No. 31, July 4, 2019)“Implementation Guidance on Disclosures about Fair Value of
Financial Instruments” (ASBJ Guidance No. 19, March 31, 2020)(1) Overview
The International Accounting Standards Board (IASB) and the
U.S. Financial Accounting Standards Board (FASB) have provided
similar detailed guidance for fair value measurement (IFRS 13“Fair Value Measurement” published by IASB, ASC Topic 820 “Fair
Value Measurement” published by FASB).
Considering the above circumstances, the AccountingStandard Board of Japan (ASBJ) issued Statement No.30 andthe other standards above to enhance consistency between
Japanese accounting standards and international accounting
standards regarding guidance for fair value of financial
instruments and required disclosures.
ASBJ’s basic policy in developing the new fair value
measurement standards is to basically incorporate all principles
of IFRS 13 in light of improving the international comparability offinancial statements by using a unified measuring method, andthen provide other treatments for individual items to the extent
that international comparability would not be significantly
impaired where any business practices operated in Japan need tobe considered.
(2) Effective date
Effective from the beginning of the fiscal year ending March
31, 2022.
(3) Effects of the application of the standards
The Company and its consolidated domestic subsidiaries
have not determined the effects of these new standards on the
consolidated financial statements yet.

TOKYO ELECTRON Integrated Report 2021

78

Financial Section

7. Securities
Other securities as of March 31, 2021 and 2020 are as follows:

8. Inventories
Inventories as of March 31, 2021 and 2020 are as follows:

Millions of yen

2021:

Cost

Non-current
Securities with carrying value exceedingacquisition cost
¥8,123Equity securities¥103,607

Securities with carrying value not exceedingacquisition cost
Equity securities

1,051

1,037

274

274

¥9,449¥104,920

Other
Total

Millions of yen

2020:

Cost

Carrying value

Non-current
Securities with carrying value exceedingacquisition cost
Equity securities¥7,991¥37,013

Securities with carrying value not exceedingacquisition cost
Equity securities

1,053

Other
Total

1,031

330

330

¥9,375¥38,374

Thousands of U.S. dollars

2021:

Cost

Carrying value

Non-current
Securities with carrying value exceedingacquisition cost
$73,372

Equity securities$935,845Securities with carrying value not exceedingacquisition cost
Equity securities

9,494

9,375

Other

2,483

2,483

$85,350$947,704

Total

Held-to-maturity securities classified as current assets are¥125,014 million ($1,129,207 thousand) and ¥188,500 million as ofMarch 31, 2021 and 2020, respectively.
Reconciliation of held-to-maturity securities as of March 31,
2021 and 2020 to the amounts of short-term investments in the
consolidated balance sheets are as follows:
Millions of yen

2021
Held-to-maturity (current)Deposits and low-risk financial
instruments with original
maturities of three months or lessDeposits with original maturities ofmore than three months
Short-term investments¥125,014(80,000)

2020

Thousands of
U.S. dollars

2021¥188,500 $1,129,207(108,500)(722,608)

545

10,447

4,925¥45,559¥90,447$411,524

For the years ended March 31, 2021 and 2020, there was no
Net loss on devaluation of investment securities.
For the year ended March 31, 2021 and 2020, the Company
sold available-for-sale securities and the amounts wereimmaterial.

79 TOKYO ELECTRON Integrated Report 2021

2021

2020

2021

(6) Accumulated remeasurements of defined benefit plans
Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Millions of yen

Carrying value(2) Movement of plan assets
2021
Balance at April 1, 2020
and 2019

2020

2021

2021
Prior service cost that is yet to berecognized (before tax)

¥63,931¥60,925$577,467

Expected return on plan assets

1,335

1,266

12,0581,314,891

Actuarial gain (loss)

4,404(1,551)39,787Net actuarial loss that is yet to berecognized (before tax)

$3,751,640

Employer contributions

5,042

5,046

45,546

Total

Benefits paid

(1,434)(1,130)(12,957)Foreign currency exchange
rate changes

844

(608)

7,624

Other

(28)

(16)

(252)

¥74,095¥63,931$669,275

Finished products¥269,772¥267,625$2,436,749

Work in process, raw materials
and supplies

145,571

124,439

Total¥415,344¥392,064

The amounts of change in inventory provision included incost of sales in the consolidated statements of income for theyears ended March 31, 2021 and 2020 were an increase of ¥3,223
million ($29,112 thousand) and an increase of ¥2,290 million,
respectively.
9. Pledged Assets
Tokyo Electron did not hold any assets pledged as collateral
as of March 31, 2021 and 2020.
10. Short-term Borrowings
There are no short-term borrowings classified as current
liabilities as of March 31, 2021 and 2020.
As of March 31, 2021 and 2020, Tokyo Electron had unusedlines of credit amounting to ¥276,952 million ($2,501,604
thousand) and ¥126,929 million, respectively.
11. Employee Benefits
The Company and its domestic subsidiaries provide a cash
balance plan and a non-contributory retirement and severance
benefit plan as defined benefit plans, and provide a defined
contribution plan as defined contribution plans for theiremployees. Further, certain consolidated overseas subsidiaries
provide defined benefit plans and defined contribution plans fortheir employees.

Balance at March 31, 2021
and 2020(3) Reconciliation from defined benefit obligations and plan
assets to net defined benefit liabilities (assets)
Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

Funded defined benefit
obligations¥63,053¥58,536$569,536

Plan assets(74,095)(63,931)(669,275)

Funded status(11,042)(5,395)(99,738)Unfunded defined benefit
obligations

61,15860,193

552,424Net defined benefit liabilities at
March 31, 2021 and 2020

¥50,116¥54,797$452,685

Net defined benefit liabilities

62,13760,635561,266

Net defined benefit assets(12,021)(5,837)(108,581)

Net defined benefit liabilities at
March 31, 2021 and 2020

¥50,116¥54,797$452,685

Note: The provision for accrued pension and severance costs for directors and audit &supervisory board members of ¥110 million ($995 thousand) and ¥110 million as ofMarch 31, 2021 and 2020 is not included.

Thousands of
U.S. dollars

Millions of yen¥(338)

2021

2020¥(677)$(3,058)(885)(3,882)(7,994)¥(1,223)¥(4,559)$(11,052)

2021

2020

(7) Plan assets
1. Plan assets comprise:
Bonds

30%

31%

Life insurance company general account29

29

Equity securities

14

12

Alternative investments (Note)

13

15

Cash and cash equivalents

1

1

Other

13

12

Total

100%

100%

Note: Alternative investments mainly consist of hedge funds, real estate, insurancelinked securities and infrastructure.

2. Long-term expected rate of return
Current and target asset allocations, and historical andexpected returns on the various categories of plan assets havebeen considered in determining the long-term expected rate of
return.
(8) Actuarial assumptions
The principal actuarial assumptions as of and for the years
ended March 31, 2021 and 2020 are as follows:
2021

2020

Discount rate

0.50%

0.55%

Long-term expected rate of return

2.00%

2.00%

(4) Defined benefit costs
Defined benefit plans(1) Movement of defined benefit obligations
Millions of yen

2021
Balance at April 1, 2020
and 2019

Thousands of
U.S. dollars

Millions of yen

2020

Thousands of
U.S. dollars

Service cost

2021

Interest cost

2021

2020

2021

¥6,179¥6,160$55,813

814

596

7,355

Expected return on plan assets(1,335)(1,266)(12,058)¥118,729¥118,461$1,072,434

Net actuarial gain amortization

676

3,104

6,106

Service cost

6,179

6,160

55,813

Prior service cost amortization

338

338

3,058

Interest cost

814

596

7,355

Other

522

410

4,721

Actuarial gain (loss)

1,834(2,528)

16,574

Benefits paidTotal defined benefit costs forthe years ended March 31, 2021
and 2020¥7,195¥9,344$64,995(4,498)(3,531)(40,632)Foreign currency exchange
rate changes

830

(618)

7,503

Other

322

189

2,911

¥124,212¥118,729$1,121,960

Balance at March 31, 2021
and 2020

The expected rates of salary increase for the years ended
March 31, 2021 and 2020 are also considered as one of theactuarial assumptions, and are set based on the salary increaseindex by age group as of January 1, 2019.
Defined contribution plans
The contributions of the Company and its subsidiaries to thedefined contribution plans are ¥2,873 million ($25,954 thousand)and ¥2,570 million for the years ended March 31, 2021 and 2020,
respectively.

(5) Remeasurements of defined benefit plans
Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

Prior service cost

¥338

¥338

$3,058Actuarial gain

2,997

4,322

27,073Total¥3,335¥4,660$30,131

TOKYO ELECTRON Integrated Report 2021

80

Financial Section

12. Income Taxes
Significant components of the deferred tax assets andliabilities as of March 31, 2021 and 2020 are as follows:
Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

Deferred tax assets
Elimination of unrealized profit ininventories¥32,723¥30,607$295,574

Net defined benefit liabilities

19,305

18,843

174,381

Devaluation of inventories

8,792

7,543

79,419Software

7,522

3,732

67,945

Accrued employees’ bonuses

7,480

6,616

67,566

Net operating loss carryforwards

5,260

9,168

47,513

Accrued warranty expenses

4,023

4,069

36,343Other

19,091

14,641

172,444

Total gross deferred tax assets

104,199

95,221

941,189

Less valuation allowance(4,762)(8,392)(43,017)

Total deferred tax assets

99,43686,828898,171

Deferred tax liabilities
Net unrealized gains on
investment securities(29,164)

Undistributed earnings ofsubsidiaries(10,570)(8,165)(95,483)

Other(6,590)(5,081)(59,527)(8,886)(263,433)

Total deferred tax liabilities(46,326)(22,134)(418,445)

Net deferred tax assets¥53,110¥64,694$479,726

The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income during theperiod in which temporary differences become deductible andnet operating loss carryforwards are available to be utilized.
For assessment of the realizability of deferred tax assets,management considers the scheduled reversal of deferred
tax liabilities, future estimated taxable income, tax planning
strategies and level of net operating loss carryforwards, if any,in accordance with accounting principles generally accepted inJapan.
Based on the level of historical taxable income and future
estimated taxable income over the periods which the temporary
differences are deductible and net operating loss carryforwards
are available to be utilized, management believes Tokyo Electron
will realize the benefits of deferred tax assets, net of valuation
allowance, as of March 31, 2021 and 2020.
The Company and its wholly-owned domestic subsidiaries
apply a consolidated tax filing system for corporate tax purposes.
The Company and its domestic subsidiaries calculated theamounts of deferred tax assets and deferred tax liabilities
based on the Income Tax Act prior to amendment regarding
the transition to group tax sharing system established in “Actfor Partial Amendment of the Income Tax Act, etc. ” (Act No.8
of 2020) and the items for which the single tax payment
system was amended in line with the transition to group tax
sharing system, in accordance with the treatment specified
by paragraph 3 of “Practical Solution on the Treatment of Tax
Effect Accounting for the Transition from the Consolidated
Taxation System to the Group Tax Sharing System” (PITF No.39,
81

TOKYO ELECTRON Integrated Report 2021

March 31, 2020) instead of the provision of paragraph 44 of”Implementation Guidance on Tax Effect Accounting” (ASBJ
Guidance No. 28, February 16, 2018).
Significant components of the difference between thestatutory and effective tax rates for the years ended March 31,
2021 and 2020 are as follows:

14. Other Comprehensive Income
Other comprehensive income for the years ended March 31, 2021 and 2020 is as follows:
Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

¥66,262¥10,339$598,521

0

(102)

0

Net unrealized gains on investment securities
Net unrealized gains arising during the year

2021

2020

Reclassification adjustments

30.62%

30.62%

Sub-total, before tax

66,262

10,236

598,521Tax expense(20,279)(3,136)(183,176)

Tax credits(7.52)(5.96)

Sub-total, net of tax

45,982

7,099

415,345

Difference in statutory tax rates of subsidiaries(1.14)(1.52)

Undistributed earnings of subsidiaries

0.74

0.25

Others, net

0.67

0.90

Net deferred gains arising during the year

47

9

425

24.29%

Reclassification adjustments

—

—

—

Sub-total, before tax

47

9

425

Tax expense

(14)

(3)

(130)

Sub-total, net of tax

32

6

294

Adjustments during the year

13,448(8,495)

121,473

Reclassification adjustments

69

33

623

13,517(8,461)122,097

Statutory tax rate in Japan
Adjustments:

Effective tax rate

23.37%

13. Net Assets
Net assets comprises four subsections, which areshareholders’ equity, accumulated other comprehensive income,share subscription rights and non-controlling interests.
Under Japanese laws and regulations, the entire amount
paid for new shares is required to be designated as common
stock. However, a company may, by a resolution of the board of
directors, designate an amount not exceeding one half of theprice of the new shares as additional paid-in capital which isincluded in capital surplus.
In cases where dividend distribution of surplus is made, thelesser of an amount equal to 10% of the dividend or the excess, ifany, of 25% of common stock over the total of additional paid-in
capital and legal reserve must be set aside as additional paidin capital or legal reserve. Legal reserve is included in retained
earnings in the accompanying consolidated balance sheets.
Both appropriations of legal reserve and additional paid-in
capital used to eliminate or reduce a deficit generally require aresolution of the shareholders’ meeting.
Additional paid-in capital and legal reserve may not be
distributed as dividends. All additional paid-in capital and legal
reserve may be transferred to other capital surplus and retained
earnings, respectively, which are potentially available fordividends.
The Company is subject to restriction of dividends basedon the Japanese Corporate Act, which restricts the amount ofdividends to retained earnings on a consolidated basis.
The Company’s articles allow for the distribution of earnings
to shareholders on dates other than the mid-term and yearend, by a resolution of the board of directors in accordance withJapanese laws and regulations.
At the board of directors’ meeting held on May 13, 2021, thedistribution of cash dividends amounting to ¥65,746 million($593,858 thousand) was resolved. Such appropriations havenot been accrued in the consolidated financial statements
as of March 31, 2021 since they are recognized in the period
in which they are resolved at the board of directors’ meeting.
The dividends of ¥65,746 million include ¥259 million ($2,339
thousand) related to treasury stock held by the BIP/ESOP Trusts.

Net deferred gains on hedging instruments

Foreign currency translation adjustments

Sub-total, before tax
Tax expense

1,018

—

9,202

Sub-total, net of tax

14,536(8,461)

131,299

20,967

Remeasurements of defined benefit plans
Adjustments during the year

2,321

1,217

Reclassification adjustments

1,014

3,443

9,164

Sub-total, before tax

3,335

4,660

30,131

Tax expense(1,069)(1,382)(9,657)

Sub-total, net of tax

2,266

3,278

20,474

Share of other comprehensive income of associates accounted for using the equity method
Adjustments during the year
Total other comprehensive income

15. Share Subscription Rights
Stock option plan
The Company’s shareholders have approved annual stock
option plans for directors and selected employees since theyear ended March 31, 1999. The options under the plans vest
immediately or over three-year period with restriction on
exercise up to three years after the date of grant, and have an
exercise period of seventeen years from the date on which the

41

(45)

375

¥62,860¥1,878$567,789

options become exercisable.
Options to purchase 130,800 shares and 360,400 shares of
the Company were authorized and granted at exercise prices of¥1 ($0.01) and ¥1 for the years ended March 31, 2021 and 2020,
respectively.
A summary of stock options outstanding and exercisable asof March 31, 2021 and 2020 is as follows:

2021
Number ofshares2020

Weightedaverage exercise priceYen

U.S. dollars

Number ofshares

Weightedaverage exercise price
Yen

Outstanding at the beginning of year

866,900¥1$0.01

688,700

Granted130,800

1

0.01

360,400

1

Exercised

169,600

1

0.01

182,200

1
—

¥1

—

—

—

—

Outstanding at the end of year

828,100

1

0.01

866,900

1

Exercisable at the end of year

117,000

1

0.01

141,900

1

Expired (forfeited)TOKYO ELECTRON Integrated Report 2021

82

Financial Section

Amounts expensed related to stock options
The amounts expensed related to stock options for the years
ended March 31, 2021 and 2020, are as follows:
Thousands of
U.S. dollars

Millions of yen

2021
Selling, general andadministrative expenses

2021

2020

¥2,884$26,056¥4,059Valuation method of fair value per unit of stock options
Fair value as of the grant date for stock options granted forthe year ended March 31, 2021 was ¥22,054 ($199.21) per unit,
which was evaluated as follows:(1) Valuation method used: Black-Scholes model(2) Major underlying assumptions and estimates:
16th Stock Acquisition Rights
Volatility (Note 1)

36.18%

Expected residual period (Note 2)

5.49 years

Expected dividends (Note 3)¥ 673 ($6.08) per share

Risk-free interest rate (Note 4)(0.12)%

Short-term investments consist of short term deposits andlow-risk financial instruments and Tokyo Electron trade withhighly-rated financial institutions to mitigate credit risks.
Investment securities consist of mainly equity interests inlisted companies exposed to equity market risks. Conditions,
including market prices, for these investment securities aremonitored on a regular basis.
Trade payables, which consist of notes and accounts payable,
mainly mature within one year. Trade payables are exposed toliquidity risks which are managed through activities such as
implementing cash management plans.
See note 18 for detailed discussion on derivative financial
instruments.
Fair value of financial instruments
Carrying amount and estimated fair value of financial
instruments as of March 31, 2021 and 2020 are set out below.
Fair value of financial instruments which is practically difficult toestimate are excluded.
Millions of yen

2021:

Notes: 1. Calculated based on the stock price performance for the period corresponding
to the expected residual period (from December 2014 to June 2020).
2. Calculated based on past actual results and forecast of the exercise of stock
options.
3. Based on the dividends paid for the years ended March 31, 2020
and 2019.
4. Based on Japanese government bond yield corresponding to the
expected residual period.

Carrying
amountEstimated
fair value1

AssetsCash and cash equivalents¥265,993¥265,993

Short-term investments

45,55945,562

Trade notes and accounts
receivable, net of allowance for doubtful
accounts (¥99 million)

191,601

191,601

Investment securities

103,781

103,781

Hedge accounting not applied

600

600

Hedge accounting applied——

Derivatives (see note 18)

2020:

Thousands of
U.S. dollars

2020

2021

Due within one year

¥4,601¥3,915$41,563

Due over one year

10,051

7,608

90,792

Total¥14,653¥11,523$132,356

Note: Certain consolidated overseas subsidiaries adopt IFRS 16 “Leases” . Accordingly,
leases as a lessee are not included in the amounts above, since they are now
recorded on the balance sheets in principle.

Carrying
amountEstimated
fair value1

17. F
 air Value of Financial Instruments
Policy for financial instruments
Tokyo Electron limits its fund management to short-termbank deposits and low-risk financial instruments.
Trade receivables, which consist of notes and accounts
receivable, are exposed to credit risk in the event of nonperformance by the counterparties. Execution and managementof credit risk, maturity and receivable balance are conductedpursuant to the internal management rules for credit control.
Credit risk of major customers is assessed on a regular basis.

Cash and cash equivalents¥247,959¥247,959

Short-term investments

90,447

90,162

Trade notes and accounts
receivable, net of allowance for doubtful
accounts (¥105 million)

150,029

150,029

Investment securities

37,03037,03095,93895,938

Liabilities
Trade notes and accounts payable

Estimated
fair value1

Cash and cash equivalents$2,402,611$2,402,611

Short-term investments

411,524

411,544

1,730,659

1,730,659

937,417

937,413

818,413

818,413

5,424

5,424

—

—

AssetsTrade notes and accounts
receivable, net of allowance for doubtful
accounts ($896 thousand)
Investment securities
Liabilities
Trade notes and accounts payable
Derivatives (see note 18)
Hedge accounting not applied
Hedge accounting applied

Notes: 1. Fair value calculation of financial instruments
Cash and cash equivalents, short-term investments, trade notes and accounts
receivable and trade notes and accounts payable.
The carrying amounts approximate fair value because of the short maturity ofthese instruments.
Investment securities
The fair values of marketable securities are based on quoted market prices.
See note 7 for further information by classification of investment securities.
Derivatives
See note 18 for detailed discussion on derivative financial instruments.
2. The following financial instruments are not included in the above as they do nothave quoted market prices and therefore it is considered extremely difficult tomeasure their fair value.

2021

Thousands of
U.S. dollars

2021

2020

forward foreign exchange contracts in order to hedge such risks,
but do not enter into such transactions for speculative purposes.
The Group implements a ratio analysis of the total cumulative
cash flow fluctuations to assess effectiveness of hedging for all
derivative transactions, except for transactions where the criticalterms of the hedging instrument and hedged item match andthe Group could conclude that changes in fair value or cash flows
are expected to completely offset. Execution and managementof all derivative transactions are conducted pursuant to theinternal management rule.
The estimated fair values of the derivative financial
instruments as of March 31, 2021 and 2020 are as follows:
1. D erivative financial instruments not designated as hedging
instruments
Millions of yen

2021:

Contract
amountFair value

Gains(losses)

Buy U.S. dollars¥12,449

¥551

¥551

Buy Chinese yuan

2,931

48

48

Buy Singapore dollars

328

0

0

Buy EURO

77

0

0

Total

¥15,786

¥600

¥600

2020:

Contract
amountFair value

Millions of yen

Gains(losses)

Sell U.S. dollars

¥668

¥(8)

¥(8)

¥1,008¥1,014$9,110

Sell EURO

525

(0)

(0)

Other

274

330

2,483

Sell Swiss francs

61

0

0

Total

¥1,283¥1,344$11,594

Buy U.S. dollars

21,973

162

162

Buy Chinese yuan

Reported amount in balance sheet

Unlisted stocks

3. Maturities of financial assets and securities are as follows:
Millions of yen

Within 1 year

After 1 through5 years¥265,993¥—

Short-term investments

45,559—Trade notes and accounts receivable

191,700

—

—

144

2021:

Assets2021

83 TOKYO ELECTRON Integrated Report 2021

90,606

Millions of yen

16. Leases
Future minimum lease payments on non-cancelable
operating leases are as follows:
Millions of yen

90,606

Trade notes and accounts payable

Carrying
amount2021:

Millions of yen

Liabilities(3) Method of estimating the number of vested stock options
It is not necessary to estimate the number of vested stock
options as the rights to exercise stock options are vested
immediately when granted.

Thousands of U.S. dollars

Cash and cash equivalents

Investment securities

Millions of yen

2,105

(28)

(28)

Buy GBP

334

(1)

(1)

Buy Singapore dollars

303

0

0

Buy Taiwan dollars

45

1

1

Total

¥26,018

¥125

¥125

2021:

Contract
amountFair value

Gains(losses)

Buy U.S. dollars$112,449$4,978$4,978

Buy Chinese yuan

26,478438

438

Buy Singapore dollars

2,966

5

5

702

0

0

$142,596$5,424$5,424

Thousands of U.S. dollars

Within 1 year

After 1 through5 years

Cash and cash equivalents¥247,959¥—

Buy EURO

Short-term investments

90,447—

Total

Trade notes and accounts receivable

150,134—2020:

Derivatives (see note 18)

Note: The fair values are based on the quoted forward foreign exchange rates.

Thousands of U.S. dollars

Hedge accounting not applied

125

125

Hedge accounting applied

(47)

(47)

2021:

Within 1 year

After 1 through5 years

Cash and cash equivalents$2,402,611$—

Short-term investments

411,524—

Trade notes and accounts receivable
Investment securities

1,731,556

—

—

1,307

18. Derivative Financial Instruments
Tokyo Electron and certain subsidiaries are subject to risk
from adverse fluctuations in foreign currency exchange rates
in its operating and financing activities. The Group enters into

TOKYO ELECTRON Integrated Report 2021

84

Financial Section

Information about reportable segment net sales, segment profit (loss), segment assets and other items
Reportable segment information as of and for the years ended March 31, 2021 and 2020 is as follows:

2. Derivative financial instruments designated as hedging instruments
The contract amounts of forward foreign exchange contracts, entered into to hedge future transactions and receivables andpayables denominated in foreign currencies that have been translated by the corresponding contracted rates, are as follows:

Millions of yen

Reportable Segment

2021:

Contract
amountMillions of yen

Thousands of U.S. dollars

Contract
amount due
after 1 year

Contract
amount due
after 1 year

Fair value

Contract
amount2021:
Fair value

Monetary assets and liabilities in foreign currency (Note)

Sales to external customers
1,804

—

—

16,299——Intersegment sales or transfers

Total¥1,804¥—¥—$16,299

$—

$—

Total

2020:

Contract
amountContract
amount due
after 1 year

Fair value

Future transactions denominated in a foreign currency¥4,281¥—¥(47)

Sell U.S. dollars

1,818

—

—

Total

¥6,100¥—¥(47)

Sell U.S. dollars

Total

Adjustments

Consolidated¥1,399,102¥1,315,200¥83,772¥129¥1,399,102

¥—

—

—

21,952

21,952(21,952)—

1,315,200

83,77222,082

1,421,055(21,952)

1,399,102

Segment profit

362,526

8,823

534

371,884(54,846)

317,038

Segment assets

626,957

29,405

3,276

659,638

765,725

1,425,364

Depreciation and amortization

17,9191,492

199

19,611

14,231

33,843

199

—

—

199

—

199

23,485

1,256

107

24,84939,91364,762Adjustments

Consolidated¥1,127,286

Amortization of goodwill
Capital expenditures, including intangible assets

Monetary assets and liabilities in foreign currency (Note)

Note: The fair value of these derivative financial instruments, which is based on the quoted foreign exchange rates, is included in the carrying value of hedged assets and liabilities.

Other

Net sales

Sell U.S. dollars

Millions of yen

Semiconductor
FPD
production
production
equipment
equipment

Millions of yen

Reportable Segment

2020:

Semiconductor
FPD
production
production
equipment
equipment

Other

Total

Net sales

19. Segment Information
General information about reportable segments
A reportable segment is a component or an aggregated component of Tokyo Electron. For each of the components, discrete
financial information is available and the operating result is regularly reviewed by management to make decisions about resources to beallocated to the segment and assess its performance.
The operation of Tokyo Electron consists of segments by products and services based on business units (BUs), and Tokyo Electron
identifies as a reportable segment, “semiconductor production equipment (SPE)” and “flat panel display (FPD) production equipment”.
Products of the SPE segment consist of coater/developers, etch systems, deposition systems, cleaning systems used in wafer
processing, wafer probers used in the wafer testing process and other semiconductor production equipment, such as wafer bonders/debonders. The SPE segment principally develops, manufactures, and sells such products, and provides services on them.
Products of the FPD production equipment segment consist of coater/developers, etch/ash systems used in the manufacture offlat panel displays and inkjet printing systems used in the manufacture of OLED displays. The FPD production equipment segmentprincipally develops, manufactures, and sells such products, and provides services on them.
Basis of measurement of reportable segment net sales, segment profit (loss), segment assets and other items
The accounting policies applied in each reportable segment are generally consistent with those applied for the preparation of theconsolidated financial statements. Intersegment sales or transfers are determined by negotiation between the Tokyo Electron groupcompanies considering current market prices. Assets in common use have not been allocated to each reportable segment, while costs
associated with those assets have been allocated to reportable segments on a systematic basis.

Sales to external customers¥1,060,997¥66,092¥197¥1,127,286

¥—

—

—

19,292

19,292(19,292)—

1,060,997

66,092

19,4891,146,578(19,292)

1,127,286

Segment profit

270,496

10,589852

281,937(37,310)244,626

Segment assets

538,532

42,215

2,864

583,612694,882

1,278,495

Depreciation and amortization

16,072

1,242

194

17,50911,598

29,107

196

—

—

196

—

196

21,082

4,035

284

25,40333,31258,715Adjustments

Consolidated

Intersegment sales or transfers
Total

Amortization of goodwill
Capital expenditures, including intangible assets

Thousands of U.S. dollars

Reportable Segment

2021:

Semiconductor
FPD
production
production
equipment
equipment

Other

Total

Net sales
Sales to external customers
Intersegment sales or transfers
Total$11,879,691$756,682——

198,292$1,172 $12,637,546
198,292

11,879,691

756,682

199,464

12,835,838$ — $12,637,546(198,292)—(198,292) 12,637,546

Segment profit

3,274,560

79,696

4,831

3,359,088(495,408)

2,863,679

Segment assets

5,663,057

265,604

29,594

5,958,256

6,916,497

12,874,753

161,864

13,481

1,800

177,145

128,550

305,696

1,802

—

—

1,802

—

1,802

212,132

11,351

971

224,455

360,521584,977

Depreciation and amortization
Amortization of goodwill
Capital expenditures, including intangible assets

Notes: 1. “Other” includes all other operating segments which are not included in the reportable segments, including group-wide logistic services, facility maintenance and insurance.
2. (1) “Adjustments“ for segment profit totaling ¥(54,846) million ($(495,408) thousand) and ¥(37,310) million for the years ended March 31, 2021 and 2020, respectively, mainly
consists of research and development costs of ¥(21,669) million ($(195,732) thousand) and ¥(19,796) million for the years ended March 31, 2021 and 2020, respectively,
pertaining to the Company’s fundamental research and element research, provision for loss on liquidation of subsidiaries and associates of ¥(3,327) million ($(30,053)
thousand) for the year ended March 31, 2021 and other general and administrative costs that do not belong to the reportable segments.
(2) “Adjustments” for segment assets totaling ¥ 765,725 million ($ 6,916,497 thousand) and ¥694,882 million as of March 31, 2021 and 2020, respectively, mainly consist of cash
and cash equivalents, short-term investments and buildings not allocated to any of the reportable segments.
(3) “Adjustments” for capital expenditures totaling ¥ 39,913 million ($ 360,521 thousand) and ¥33,312 million for the years ended March 31, 2021 and 2020, respectively, mainly
consist of capital expenditures for buildings not allocated to any of the reportable segments.

85 TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

86

Financial Section

Other information(1) Domestic and overseas net sales by destination for the years ended March 31, 2021 and 2020 are as follows:

Information about reportable segment goodwill
Reportable segment information about amortization of goodwill for the years ended March 31, 2021 and 2020, and unamortizedbalances as of March 31, 2021 and 2020 are as follows:

Millions of yen

2021:

Japan

North America

Net sales¥197,566¥152,073

Europe¥63,502

Millions of yen

South Korea

Taiwan

China

Other

¥285,261¥249,766¥398,491¥52,439

Total¥1,399,102

Notes: 1. Sales are classified in countries or regions based on location of customers.
2. Net sales of North America include sales in the U.S.A. of ¥151,659 million.

2021:

Semiconductor
production
equipment

FPD
production
equipment

Total

Amortization of goodwill

¥199

¥—

¥199

Goodwill

733

—

733

Millions of yen

2020:

Japan

North America

Net sales¥161,812¥205,804

Europe¥58,899

South Korea

Taiwan

China

Other

¥154,801¥261,116¥249,234¥35,6172020:

Notes: 1. Sales are classified in countries or regions based on location of customers.
2. Net sales of North America include sales in the U.S.A. of ¥205,783 million.
Thousands of U.S. dollars

2021:
Net sales

Japan

North America$1,784,543$1,373,624

EuropeSouth Korea

TaiwanChina$573,593$2,576,656$2,256,042$3,599,415

Other

Japan

Other

Total

¥155,637¥41,330¥196,967

Property, plant and equipment

Japan

Other

Total

¥139,098¥36,481¥175,580

Thousands of U.S. dollars

2021:
Property, plant and equipment

Japan

Other

Total

$1,405,813$373,319$1,779,133¥196

Goodwill

910

—

910

Thousands of U.S. dollars

Related reportable segment

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD production equipment

FPD
production
equipment

Total

Amortization of goodwill$1,802$—$1,802

Goodwill

6,621

—

6,621

The basis for the calculation of net income per share for the fiscal years ended March 31, 2021 and 2020 is as follows:(3) Major customer information
Net sales to external customers that represent 10 percent or more of net sales are as follows:
Name of customer

Semiconductor
production
equipment

20. Per-Share Information
Net income per share and net assets per share are computed based on the weighted-average number of shares of common stock
outstanding during each year. Net income-diluted per share is computed based on the weighted-average number of shares of common
stock outstanding during each year after incorporating the dilutive potential effect of shares of common stock to be issued upon theexercise of stock options.
Dividends per share has been presented on an accruals basis and include, in each fiscal year ended March 31, dividends approved or
to be approved after March 31 but applicable to the year then ended.

Millions of yen

2020:

Total

¥—

2021:

Millions of yen

FPDproduction
equipment

¥196

Total

(2) Net property, plant and equipment by location as of March 31, 2021 and 2020 are as follows:

Property, plant and equipment

Semiconductor
production
equipment

Amortization of goodwill$473,669 $12,637,546

Note: Net sales of North America include sales in the U.S.A. of $1,369,877 thousand.

2021:

Millions of yen

Total¥1,127,286

Thousands of U.S.
dollars

Millions of yen

2021
Millions ofyen

Thousands of
U.S. dollars

2021

2021

¥256,656$2,318,276

Intel Corporation

Semiconductor production equipment

193,706

1,749,671

Taiwan Semiconductor Manufacturing Company Ltd.

Semiconductor production equipment

164,340

1,484,426

Note: The amounts include sales to the customer and its subsidiaries.
Millions ofyen

Name of customer

Related reportable segment

2020

Intel Corporation

Semiconductor production equipment¥230,340

Taiwan Semiconductor Manufacturing Company Ltd.

Semiconductor production equipment

187,890

Samsung Electronics Co., Ltd.

Semiconductor production equipment and FPD production equipment

120,127

2021

2020

Net income per share of common stock - Basic¥242,941¥185,206———

Net income pertaining to holders of common stock¥242,941¥185,206$2,194,393

Weighted-average number of shares of common stock outstanding (thousands)

155,511

158,219

Net income attributable to owners of parent
Less components not pertaining to holders of common stock$2,194,393

Net income per share of common stock - Diluted
Adjustment of net income attributable to owners of parent——

Increase in number of common stock (Thousands of share)

892

889

892

889

Increase in number of share subscription rights (Thousands of share)—

Note: The shares of the Company held by "Executive compensation BIP Trust" and "Share-delivering ESOP Trust", which are recorded in “Treasury stock, at cost” under shareholders’equity, are included in the treasury stock which is deducted in calculating the per-share information.
The number of treasury shares deducted in the calculation of net assets per share was 615 thousand shares and 472 thousand shares as of March 31, 2021 and 2020, respectively,
and the average number of treasury shares deducted in the calculation of net income per share and fully diluted net income per share was 568 thousand shares and 398 thousand
shares for the fiscal years ended March 31, 2021 and 2020, respectively.

Note: The amounts include sales to the customer and its subsidiaries.

87 TOKYO ELECTRON Integrated Report 2021

TOKYO ELECTRON Integrated Report 2021

88

Financial Section

Business-Related and Other Risks
The following are recognized as the main risks that may have a
critical impact on Tokyo Electron’s financial condition, operating
results or cash flow. This is not a comprehensive list of all risks
pertaining to us and there are also risks which are not listed.
(1) Market changes
The semiconductor market is expected to further grow inthe medium to long term due to continuing technologicalinnovation amid an accelerating transition to a data-driven
society backed by the spread of information and communication
technology applications such as IoT, AI and 5G; progress indigital transformation (DX); and response to sustainability
transformation (SX). However, a wide range of factors—
including the global economy, demand for end products, trade
and tariff policies, and geopolitical factors—can cause shortterm supply and demand to become unbalanced and generatesignificant fluctuations in market size. Rapid contractionof the semiconductor market could lead to results such as
overproduction, increases in dead inventory or losses from bad
debts resulting from the worsening of a customer’s financial
position. On the other hand, a rapid increase in demand that wecannot respond to could lead to situations such as an inability
to provide products to customers in a timely manner resulting
in lost opportunities. Both of these circumstances can adversely
affect our business performance.
To respond to such market fluctuations, we constantly
work to appropriately adjust our capital investment, personnel,
inventory plans and other aspects of our businesses basedon understanding of the latest market conditions throughperiodically reviewing the market environment and orders
received at Board of Directors and other important meetings.
In addition, a large portion of our sales are to major, leadingedge semiconductor manufacturers. As such, our performancetends to be impacted by changes in capital investment by thesemajor customers.
We have established an Account Sales Division, which works
in close coordination with major customers and quickly grasps
trends in their capital investment outlook, as well as a Global
Sales Division, which responds to a wide range of customer
needs from around the world and cultivates new customers
emerging in step with growth in semiconductor demand.
Through such efforts, we strive to strengthen and expand oursales framework and customer base.)(2) Geopolitics
We undertake businesses in various countries and regions, anda high proportion of sales comes from overseas. Amid growinginternational attention on semiconductors, countries andregions are seen to be embarking on measures—including
the domestication of semiconductor-related businesses,
prioritization of domestically manufactured products,
tightening of export controls and strengthened environmental
regulations—from perspectives such as industrial policy,
national security and environmental policy. Our businessperformance may therefore be affected if our business activities
are restricted as a result of those measures.
89 TOKYO ELECTRON Integrated Report 2021

We grasp the implementation moves of regulations regarding
import and export of products and technological development
by carefully watching policy and diplomatic trends of countries,
anticipating the impacts when policies and regulations are
introduced and considering countermeasures. At the same time,in addition to the early identification of risks, we also strive totake fast and appropriate response when risks occur, including
communicating our opinions to the policy-making authorities
through means such as public comments for the healthy
development of the semiconductor industry.
(3) Research and Development
Through ongoing R&D investment in leading-edge technologies,
we quickly bring to market new products incorporating suchtechnologies, succeeding in capturing high market share in eachproduct category and achieving a high profit margin. However,delays in the launch of new products that meet customers’
technological needs, the mismatch of newly developed productswith such needs, or the launch of new technologies or products
by competitors before our launches could negatively affect thecompetitiveness of our products, impede the recovery of R&D
costs or otherwise affect our business performance.
We have established a Corporate Innovation Division, whichdevelops innovative technology and makes groundbreaking
technology proposals that integrate the products andtechnologies of each development division as part of a Groupwide development framework. In addition, we have in placea system that constantly provides highly competitive Nextgeneration products that meet future needs ahead of ourcompetitors through initiatives such as conducting joint researchwith global research institutions and sharing technology
roadmaps spanning multiple technology generations withleading-edge customers.
(4) Procurement, Production and Supply
Our key production sites are located in Japan, and we
supply products to customers in and outside Japan. As such,
earthquakes, floods or other natural disasters, acts of terrorism,
unavoidable events like infectious disease outbreaks or othersuch accidents occurring in Japan could cause interruptions in
production that, if not promptly resolved, could delay the supplyof products to customers. Furthermore, the stable supply ofcomponents and such provided by suppliers is indispensable
to stable production. Therefore, in addition to the risk ofdisasters, accidents or other similar events, delays in component
procurement due to the worsening of a supplier’s businessconditions, demand that exceeds supply capabilities arising fromthe expansion of the semiconductor market or similar factors
could result in delays in the supply of products to customers andaffect our business performance.
We formulate and periodically review business continuity
plans (BCPs) and undertakes measures such as establishingalternate production capabilities, developing multiple sourcesof important parts, seismically reinforcing its plants, andmaintaining backups of information systems. In addition, we
also seek to procure components early and level production

by sharing forecasts with suppliers that consider ourcustomers’ investment plans as well as semiconductor demand
projections. Through these and other measures, we strive tomaintain stable product supply.
(5) Safety
Our business performance may be affected if problems related
to the safety of our products occur, including damage tocustomers, order cancellations, liability for damages or decline in
our credibility.
Our “Safety First” approach entails the constant considerationof safety and health in the execution of business activities,
including development, manufacturing, sales, services andmanagement. In accordance with this approach, we work
continuously to improve the safety of our products. Measures
to this end include thoroughgoing safety design at the
product development phase, promotion of safety training andmaintaining an accident reporting system.
(6) Quality
Our products are based on the integration of numerous
leading-edge technologies. The occurrence of defects
could lead to recalls, liability for damages based on quality
responsibility, additional costs related to implementing defectcountermeasures, decline in our credibility, or otherwise affectour business performance.
Based on a uniform Group-wide quality control policy,
we provide quality training for our employees and suppliers
and strive to constantly maintain a quality assurance system,
including ISO 9001 certification, as well as a world-classservice system. In development, we introduce collaboration
with sales and service departments from the initial stagesof product development and design to solve technologicalissues. Furthermore, we mitigate and address risks such as byusing simulation technology for thorough validation. Whendefects occur, we investigate the root of the problem andtake thoroughgoing measures to prevent recurrences andthe occurrence of similar defects. Similarly, in managing thequality of procured components, we constantly monitor thestate of supplier quality and conduct audits, improvement
support and other measures.
(7) Laws and Regulations
We operate globally and are therefore subject to the various
laws and regulations of the countries and regions where we dobusiness, including those regarding imports and exports, theenvironment, competition, labor, corruption, bribery and transfer
pricing taxation. We strive to ensure compliance with such laws
and regulations. However, violations of such laws or regulations
could result in consequences such as diminished public confidence
in us, fines, liability for damages or restrictions on businessactivities. Furthermore, national security policies of countries
and unanticipated future legal amendments or tightening of
regulations could, if not appropriately responded to, result in
liability for costs related to such response or restrictions on
business activities, or otherwise affect our business performance.

We have built a system for monitoring compliance activities
at each of the key sites in and outside Japan under the directionof a Chief Compliance Officer. We conduct complianceassessments by external experts, report the identified issues
to the CEO, Board of Directors and Audit & Supervisory Board,and carry out swift and effective measures as well as further
enhancement of systems.
(8) Intellectual Property Rights
Our products are based on the integration of numerous
leading-edge technologies. Obtaining and legally protecting ourintellectual property rights and preventing infringements of suchrights by third parties are crucial to differentiating and reinforcing
the competitiveness of our products. Infringements by us of
the intellectual property rights of third parties could lead torestrictions on the production and sale of our products or liability
for damages, or otherwise affect our business performance.
By advancing R&D strategy, business strategy and intellectual
property strategy in an integrated manner, we strive to build an
appropriate intellectual property portfolio and obtain exclusive
rights to numerous proprietary technologies to capture high market
share and achieve high profit margins in each of our product fields.
(9) Information Security
In the course of its business activities, we may obtain, hold andutilize confidential information, customer information and personal
information. Incidents—such as the breach of information andservice disruption—caused by unauthorized access or operation
due to cyberattacks and other causes, human errors, natural
disasters or other reasons could result in diminished publicconfidence in us, liability for damages or other consequences which
may otherwise affect our business performance.
Together with seeking organizational reinforcement
such as by creating a dedicated department centered on the
Information Security Committee, we are building an information
security system based on global standards, by conducting
security assessments by external experts. In addition, besidetechnological aspects such as the introduction of an anomaly
detection system in preparation for the occurrence of incidents,
we are also taking measures from operational aspects, suchas establishing globally standardized rules and regulations for
information management and guidelines for response during theoccurrence of incidents.
(10) Human Resources
Securing and developing diverse human resources in andoutside Japan and the practice of diversity and inclusion are
crucial to the continued innovation and growth of our global
businesses. The inability to recruit and retain the necessary
human resources on an ongoing basis or the inability to create
an environment where human resources with diverse values andexpertise can apply their individualities can lead to diminishedproduct development capability or customer support quality.
This may result in not being able to realize an organization withcompetitive advantage or other such consequences that may
affect our business performance.

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Financial Section

Business-Related and Other Risks
We believe that our employees are the source of ongoingvalue creation and that increasing employee engagement is
one of the most important factors in increasing corporate
value. Specifically, we undertake measures such as the sharingof direction by top management through regular employee
meetings, the building of plans to continuously develop nextgeneration human resources, the visualization of employee
career paths, and the provision of attractive remuneration
and benefits. We are also advancing ongoing measures toimprove work environments as well as health and productivity
management, including steps to prevent excessively long work
hours and workplace harassment.

(13) Other Risks
Our businesses are influenced by many factors, including the
global and regional political conditions, economic conditions,financial and stock markets, commodity and real estatemarkets, foreign exchange rates, the success or failure ofcorporate acquisitions, major lawsuits, and competition overstandardization. We expect that such factors will sometimes
affect our business performance and take the necessary
measures to counter such risks.

(11) Environmental Issues
Globally, there are growing requests from society, including
our stakeholders, related to sustainability. Given this,difficulties in adequately responding to requirements
accompanying the transition to a carbon-free society—including the climate change policies and environmental laws
and regulations of countries, industry standards of conduct,
technological innovation and customer needs—could
result in costs for additional responses such as new productdevelopment, specification change and modifications,
reduced product competitiveness, diminished publicconfidence in us or other consequences that may otherwise
affect our business performance.
Together with striving to comply with environmental laws
and regulations and industry standards of conduct, we set ourown industry-leading medium- to long-term environmental
goals and work to reduce greenhouse gas emissions fromthe use of our products. We also seek to increase the ratio ofrenewable energy usage and reduce energy consumption at ourplants and offices. In addition, we work to protect the global
environment through our business activities by such means
as providing technologies to reduce semiconductor power
consumption, promoting used equipment and parts businesses,
reducing equipment size, increasing productivity by improving
throughput, reviewing packaging and promoting modal shifts.
(12) The Novel Coronavirus (COVID-19)
The spread of COVID-19 could affect our business continuity,
including our manufacturing and sales activities. In addition,
restrictions on the worldwide movement of people and things,
the deterioration of global economic conditions, and othersuch impacts from the spread of COVID-19 could affect ourbusiness performance.
Centered on the Emergency Task Force headed by the CEO,
we are implementing related countermeasures, including
restricting travel to high infection-risk countries and regions,taking steps to maintain supply chains, and thorough infection
prevention measures at our plants and offices.

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Financial Section

Independent Auditor’s Report
Reasonableness of the valuation of inventories in the semiconductor production equipment business
The key audit matter

How the matter was addressed in our audit

To the Board of Directors of Tokyo Electron Limited:

OpinionWe have audited the accompanying consolidated financial statements of Tokyo Electron Limited (“the Company”) and its
consolidated subsidiaries (collectively referred to as “the Group”), which comprise the consolidated balance sheets as at March
31, 2021 and 2020, the consolidated statements of income, comprehensive income, changes in net assets and cash flows for theyears then ended, and the related notes to the consolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Group as at March 31, 2021 and 2020, and its consolidated financial performance and its consolidated
cash flows for the years then ended in accordance with accounting principles generally accepted in Japan.

Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordancewith these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.

Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of theconsolidated financial statements of the current period. These matters were addressed in the context of our audit of theconsolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.

In the consolidated balance sheet for the current fiscal year,
the Company recognized Inventories of ¥415,344 million, which
represented approximately 29% of total assets in the consolidated
financial statements. Most of the inventories belonged to thesemiconductor production equipment business.
As described in Note 3 “Significant Accounting Estimates, 1.
Valuation of inventories” to the consolidated financial statements,
inventories are measured in principle at the lower of either theacquisition cost or the net selling price at the end of the fiscal
year. However, inventories aged over a certain holding period
are classified based on the use and salability and are thensystematically written down according to their classification. In
addition, the carrying amount of inventories to be disposed of iswritten down to the estimated disposal value.
The valuation of inventories aged over a certain holding period
and the identification of finished goods and work in process
inventories to be disposed of are based on management’s
forecasts of future demand and prospects of market environment.
Among the markets in which the Group participate, thesemiconductor market is susceptible to significant fluctuations
due to a short-term imbalance between supply and demand,
which could result in an unforeseen rapid market contraction.
Therefore, the forecasts of future demand and prospects ofmarket environment involve uncertainty and management’s
judgment thereon may have a significant effect on thevaluation of inventories.
We, therefore, determined that our assessment of thereasonableness of the Company’s valuation of inventories inthe semiconductor production equipment business was one of
the most significant in our audit of the consolidated financial
statements for the current fiscal year, and accordingly,
a key audit matter.

The primary procedures we performed to assess whether
the Company’s valuation of inventories in the semiconductor
production equipment business was reasonable included
the following:(1) Internal control testing
We tested the design and operating effectiveness of certainof the Company’s internal controls relevant to the valuationof inventories.
In this assessment, we focused our testing on controls designed todetermine the rates of write-down for each holding period on the
carrying amount of inventories aged over a certain holding period
and to identify finished goods and work in process inventories tobe disposed of in a comprehensive manner.
(2) Assessment of whether the valuation of inventories aged
over a certain holding period was reasonable
The rates of write-down by holding period adopted bymanagement in applying the method that writes down the
carrying amount of inventories on a systematic basis according totheir holding periods were determined based on management’s
forecasts of future demand and prospects of market environment.
In order to assess the reasonableness of assumptions underlying
the rates of write-down determined by management, we:• evaluated the rates of write-down by holding period determinedby management by referencing published demand forecasts forsemiconductor production equipment and the customers’ capital
investment plans; and• compared the amount of the write-down of inventories aged
over a certain holding period, calculated using the rates of writedown by holding period determined by management, with ourown estimate of the write-down of those inventories.
(3) A ssessment of whether finished goods and work inprocess inventories to be disposed of were identified in acomprehensive mannerAmong finished goods and work in process inventories aged over acertain holding period, we assessed the accuracy of management’s
sales forecasts by comparing the past forecast for a selection offinished goods and work in process inventories held for a long
period with actual sales results and examining the causes ofvariances between the two. In order to assess the reasonablenessof assumptions related to sales forecasts adopted by management
in identifying finished goods and work in process inventories to bedisposed of, we primarily:• evaluated the basis for management judgment on its sales
forecasts for finished goods and work in process inventories held
for a long period by inquiring of management and inspecting
relevant documents.

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Financial Section

Responsibilities of Management and Corporate Auditors and the Board of Corporate Auditors for theConsolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance withaccounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue asa going concern, disclosing, as applicable, matters related to going concern in accordance with accounting principles generally
accepted in Japan.

We communicate with corporate auditors and the board of corporate auditors regarding, among other matters, the planned
scope and timing of the audit, significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide corporate auditors and the board of corporate auditors with a statement that we have complied with relevant
ethical requirements regarding independence, and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.

Corporate auditors and the board of corporate auditors are responsible for overseeing the directors’ performance of their duties
with regard to the design, implementation and maintenance of the Group’s financial reporting process.

From the matters communicated with corporate auditors and the board of corporate auditors, we determine those matters thatwere of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matteror when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because theadverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Convenience Translation

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free frommaterial misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonableassurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards
generally accepted in Japan will always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these consolidated financial statements.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2021
are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our
opinion, such translation has been made on the basis described in Note 1 to the consolidated financial statements.

As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public
Accountants Act of Japan.

• I dentify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in thecircumstances, while the objective of the audit is not to express an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’sreport. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate whether the presentation and disclosures in the consolidated financial statements are in accordance with accounting
standards generally accepted in Japan, the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying transactions and eventsin a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within theGroup to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision andperformance of the group audit. We remain solely responsible for our audit opinion.

/S/ 宍戸 通孝 (SEAL)
Michitaka Shishido
Designated Engagement Partner
Certified Public Accountant

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Interest required to be disclosed by the Certified Public Accountants Act of Japan/S/ 西野 聡人 (SEAL)
Akira Nishino
Designated Engagement Partner
Certified Public Accountant/S/ 鈴木 紳 (SEAL)
Shin Suzuki
Designated Engagement Partner
Certified Public Accountant
KPMG AZSA LLC
Tokyo Office, Japan
June 17, 2021

Notes to the Reader of Independent Auditor’s Report:
This is a copy of the Independent Auditor’s Report and the original copies are kept separately by the Company and KPMG AZSA LLC.

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