Tokyo Electron  Annual Report 2011

Review of Operations

Semiconductor Production Equipment
Semiconductor Production
Equipment Sales(Billions of Yen)

511.3

726.4

600642.6

800200262.4

325.4

4000070809

1011

Overview of FY2011
In the fiscal year ended March 31, 2011, the global economy as a whole attained a trend of mild
recovery, supported by government stimulus measures in various countries. The semiconductor
market expanded rapidly as a result of robust demand for smartphones, tablets, and other mobileelectronics. Responding to this increased demand, semiconductor manufacturers made aggressive
capital investments, particularly in wafer fab equipment.
Net sales in the segment soared 94.9% year on year to ¥511.3 billion, driven upwards by semiconductor manufacturers’ robust investments in scaling, or miniaturization, and capacity expansion.
By region, sales rose sharply in all geographic markets, mainly bolstered by investments by NAND
flash memory and logic semiconductor manufacturers.
By product, sales of all product groups increased sharply as a result of the proactive promotionof new models of such products as the coater/developer CLEAN TRACK™ LITHIUS Pro™ V, plasmaetch system Tactras™ Vigus™, and the thermal processing system TELINDY PLUS™. New products,
such as the plasma etch system Tactras™ RLSA™ Etch, also contributed to the increased sales.

FPD/PV Production Equipment
Overview of FY2011

FPD/PV Production
Equipment Sales(Billions of Yen)

66.7

71.4

68.0

60

88.1

90

100.8

120

30

007

08

09

1011

While the market for large liquid crystal display (LCD) panels used in flat-screen TVs entered aninventory adjustment phase, demand for small- and medium-sized panels was robust due tostrong demand for smartphones and tablets. In line with the growth in the mobile electronics
market, capital investments by LCD panel manufacturers were firm, especially in China and SouthKorea. In the photovoltaic cell (PV) production equipment business, the single-crystal silicon cellmarket is expanding, but the thin-film silicon PV market that Tokyo Electron has entered has yet todemonstrate strong growth.
Net sales in the segment declined 6.5% year-on-year to ¥66.7 billion. FPD production equipment
sales were roughly on par with the previous year, supported by steady demand for sixth-generation
and above models, while sales of PV production equipment declined.
By region, sales in China surged by 171%, as the country continues to become the center oflarge LCD panel production. South Korea sales jumped 124% and Taiwan sales increased 29%.
Sales in Japan, however, fell 66% below the previous year to ¥14.6 billion.

Electronic Components and Computer Networks*
Electronic Components andComputer Networks Sales(Billions of Yen)

60

90.2

84.5

94.2

111.2

90

107.5

120

30

007

1408091011

Overview of FY2011About 90% of the sales in this segment are from Japan. In the domestic electronics market,
though demand was brisk in the first half of the fiscal year, sales stalled in the second half as somegovernment stimulus measures came to an end and consumers lost their appetite for personal
electronics upgrades.
Net sales in the segment rose 6.8% to ¥90.2 billion. Sales of semiconductor products used inconsumer electronics such as flat-screen TVs and digital household electronics entered a slump fromthe beginning of the year, but semiconductor products used in industrial equipment such as medical equipment, semiconductor production equipment, and factory automation (FA) equipment werebrisk. Sales of high added-value analog integrated circuits (IC) and custom ICs also increased. Dueto the slowness of the recovery in corporate IT investment, sales of computer network-related
products declined, though software and maintenance services posted sales growth.
* Tokyo Electron Device Limited operates this business.

Annual Report 2011

Business Outlook
The semiconductor market continues to expand, driven by brisk worldwide demand for smartphones, tablets and other mobile electronics that can now function as a result of the diffusion ofwireless broadband and mobile applications. The semiconductor production equipment market,
which is underpinning this expansion in semiconductors, is also expected to continue its highgrowth, despite periodic fluctuations in demand.
Tokyo Electron is taking advantage of this market environment to further expand its business.
Two management priorities are the comprehensive strengthening of existing product groups andthe establishment of new businesses. In existing product groups, Tokyo Electron will strive toenhance its position in etch systems and cleaning systems, two markets which are both large andalso have strong growth potential, by means of timely launching new products based on customerneeds. In the establishment of new businesses, the Company will expand products for manufacturing new 3D chip stacks for high-density semiconductors, expand the applications of a new plasma
source using radial-line slot antenna, and accelerate the development of systems to meet the customer need of reducing test costs.
Furthermore, Tokyo Electron is bolstering its field solutions business through the proactive promotion of used equipment business, equipment refurbishment and service contracts, aiming toestablish a stable earnings stream from the business.

Sales by Region
China &Others

11%

Japan

17%

29%
20%
17%

TaiwanKorea

Business Outlook
The applications for displays are expanding. In addition to large LCD panels used in televisions,demand for small- and medium-sized touch-panels used in smartphones and tablets is surging.
Moreover, digital signage, electronic paper, and other applications using flat panels are expected tobecome popular in the near future. Going forward, China is expected to be the center of growinginvestment in large LCD panel manufacturing, while new rounds of investment in small- andmedium-sized panel manufacturing are also forecast.
Tokyo Electron will focus on launching differentiated products that address high-speed andhigh-definition technologies. As competition intensifies, the Company will also strive to further
reduce costs. In addition, Tokyo Electron will accelerate development of production equipment for
OLED displays, considered to be the next-generation display in the post-LCD era, in preparation formarket entry in the near future.
The thin-film silicon PV business Tokyo Electron is currently entering is still in its infancy. Thebusiness potential over the medium- to long-term, however, is significant as the technology willevolve in tandem with the global shift to renewable energy. Tokyo Electron has business allianceswith Sharp Corporation of Japan and the Swiss company Oerlikon Solar Ltd., while also developing
its own proprietary technologies. The Company plans on opening a new R&D center in Tsukuba,
Ibaraki Prefecture, Japan in spring 2012, where it will research technologies for efficiency improvements and aim for the early establishment of the thin-film silicon PV business.

Tokyo Electron

6%NorthAmericaEurope

Sales by Region
China &Others

Business Outlook
Though the Great East Japan Earthquake has introduced some opaque elements into the semiOverseas
conductor market in the first half of 2011, overall the market is expected to remain on a steady
growth track. In addition, though IT investment has been tepid, a recovery is still expected in thesecond half of the year. Amid this business environment, Tokyo Electron will reinforce both its
sales structure and support services as a semiconductor trading company, promote its businessoutside Japan, and invest more in proprietary technology development to expand sales of its own
brand “inreviumTM” across Asia. Through these measures, the Company aims to increase revenueand profits.

Japan

22%

22%

28%

28%

Taiwan

Korea

Sales by Region
12%

Japan

88%

15