Quality

Knowing our customers’ real needs enables us
to attain world-leading product quality.
Winning the trust and satisfaction of our customers requires precise understanding of their criticalneeds. TEL attentively listens to customers and uses this feedback to continually improve all aspectsof operations, resulting in even higher quality products and services.
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TOKYO ELECTRON Sustainability Report 2016

Highlights
Customer satisfaction
surveyPercentage of wafers with no-defect after
introduction of TELeMetricsTM

62

Up 2.3％

Receive 3.0 or more points (VerySatisfied or Satisfied) on a 4.0 scale for
62% of questions.

percentage points

Goals and results for fiscal year 2016
Theme
Quality
improvement

Improvingcustomer
satisfaction

Compliance

Goals
Reduce accidents that resultin property damage.

Improve quality of equipmenttraining.

Improve customer satisfaction.

Compliance●

Results

Reduce product-related accidents resulting in property damage by 20%
year-over-year across the organization.

●

●
●

●

●

Score an average of 4.0 points or more on a 5.0 scale in trainee feedback.

Receive 3.0 points or more on a 4.0 scale for all questions in the customer
satisfaction survey.
Implement the PDCA continual improvement cycle to check compliancewith regulations and processes in TEL .

●●Reduced these accidents by
14.5% year-over-year.
Scored an average of 4.6 points,
receiving 4.0 points or more forall questions.
Received 3.0 points or morefor 62% of questions.
Implemented compliancechecks at 8 key sites.

Framework
TEL has a quality assurance framework headed by the Representative Director and President and supported by the Senior Executive
Vice President in charge of Development and Production. Quality improvement, as well as other important quality issues and othershared concerns, are addressed through collaboration amongst TEL presidents and the Quality General Managers (GMs). To ensure
efficient and stable quality control, TEL has five working groups in place, including the Quality council, Engineering council, Productioncouncil, Purchasing council, and EHS council. These working groups collaborate to pursue organization-wide quality assurance
activities across all divisions.
To constantly maintain high quality standards, TEL has also been working since 1997 to acquire ISO 9001 quality management
system certification at various sites. Ten sites (primarily manufacturing operations) have achieved this certification to date.
Thanks in part to our efforts under this framework, there were no legal or regulatory violations of TEL’s products and services infiscal year 2016.

Representative Director, President & CEO

Senior Executive Vice President, General Manager,
Development & Production Division
Presidents of Group companies
Heads of Council

Quality Promotion Dept.

TEL Quality Committee

Quality council

Engineering council

Production council

Purchasing council*

EHS council* Official name: Purchasing department manager council

TOKYO ELECTRON Sustainability Report 201619Quality
Product quality
Initiatives for improving quality
TEL is continually improving the quality of its products to win customer satisfaction and trust. An important statement from the quality policy is that “We build quality into every TEL product during the designphase by focusing on leading-edge technology. By bringing quality into our processes early and focusing
on quality throughout all processes, we succeed in providing high quality products and services.” This is thefoundation of our quality assurance activities.
Specifically, we have adopted the front-loading approach. This involves identifying and solving problems
early in the product development and design processes to enhance design quality. In addition, we have
expanded our training programs and established a system to verify skill levels in order to improve individual
skills and design quality, ultimately ensuring proper identification of problems and appropriate analysis.
In addition, we implement in-process quality control1 during each process̶from development and design to shipment. Semiconductor production equipment consists of various components and modules,
and assembly involves multiple processes. Making each of the manufacturing processes responsible forcomponent quality is very effective, significantly reducing production costs and defects. Each of our process
teams constantly seeks improvement, helping to produce superior products by taking ownership of quality
assurance within a given process.
Because the quality of each component can affect the overall quality of the end product, we also focus on
the quality of components early in the design phase. TEL’s development and quality assurance divisions exchange information among themselves and with suppliers in order to improve the quality of drawings andpurchase specifications. This also enables early sharing of component information. As a result, the quality ofcomponents has improved, leading to fewer component defects.

Education
To promote high-quality manufacturing in alignment with customer needs, TEL continually carries out
cross-functional quality improvement activities with involvement of not only its development and design
departments but also other departments such as planning, sales, administration and field service. As part ofthese efforts, we encourage TEL employees to obtain external quality certification. Administered by the Japanese Standards Association and the Union of Japanese Scientists and Engineers, the QM/QC Exam (QualityManagement and Quality Control Examination) is a major quality certification, with more than 363,000
certification holders in Japan as of September 2015. The certification enables employees to improve theirknowledge and skills in the area of quality control, improve the quality of their work, and provide customers
with high-quality products. Starting in fiscal year 2012, this initiative has increased the number of certified
employees each year to a total of 1,273 as of March 2016.
In addition, we are also educating our employees in the Plan, Do, Check, Act (PDCA) cycle. Although PDCA
is most frequently used to improve management of production and quality, we have chosen to employ thismethod in every aspect of our business, not just in production activities. PDCA is already being used in many
areas, driving process efficiency and greater value for our customers.

Response to quality problems
Despite our efforts to produce high-quality products with the front-loading approach, in-process quality
control, and employee education, unforeseen quality problems occur from time to time. When any suchproblem is reported by customers, the information is fed into our proprietary Q-VICS knowledge management system. This information is distributed to the departments concerned, enabling information sharing
and quick problem resolution. If disclosure of defect information is deemed necessary based on our internal
criteria, we issue necessary technical documents and inform our customers.

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1 in-process quality control: The
idea that, at each process, employees take responsibility toensure product quality with nodefects

For particularly serious problems, we employ the TEL 6-Step problem-solving model, a customized version of the eight discipline (8D) problem solving method1 widely used in quality management. The TEL
6-step model enables systematic and highly reliable analysis of a problem to determine the root cause,
leading to quick implementation of countermeasures and preventing recurrence of similar problems. We
are currently training our personnel to actively use this method.
When a quality issue occurring in one business unit has the potential to affect other business units, weuse a proprietary system called QABOX to prevent the problem from spreading. The system allows relevant information to be centrally managed on our secure network. The information is shared with quality
assurance managers at TEL manufacturing companies and with the corporate quality division to discussappropriate resolution. Following the discussion, critical information is reported to the corporate executive
officer in charge of quality to quickly determine the future actions on the issue.

1 8D problem solving method:
A quality improvement method
for solving problems througheight disciplines or processes

Streamlining operations
Quality and productivity improvement through TPM
TEL has been implementing TPM2 for over ten years. The purpose of TPM is to eliminate inefficiencies,waste, and loss, and thereby improve productivity. The TPM approach is playing a role in employee education and skill development and has been successfully integrated into our production lines. TPM activities
that have produced outstanding results are shared with the rest of TEL at the annual TPM presentation. In
fiscal year 2016, the participants included not only teams from Japanese manufacturing sites but also thefirst overseas presenters from Tokyo Electron (Kunshan) Limited (established in 2012).

2 TPM: Total Productive Maintenance or Total Productive Management

Production division initiatives
At Tokyo Electron Miyagi Limited, the standard practice was to hold shipment of the equipment until all component modules were available. Because of this, many of the finished modules had to be kept in the clean
room for an extended period, taking up precious production space. Accordingly, the team in Miyagi revised
the process management practices during the production planning phase. They adopted a module-based
rather than product-based logistics approach, ensuring no deterioration in the quality level. The change
allowed the modules to be packaged and shipped as they were finished. At the same time, improvements
were made in the loading area layout as well as in shipping list preparation and cargo packaging. This freed
up even more production space and improved productivity while reducing lead time. Additionally, the new
approaches have made it easier to respond to any changes in specifications that customers might require.
Administrative division initiatives
TEL is pursuing TPM not only at its production sites but also in its factory administration and sales departments. As a manufacturer of production equipment, we need to communicate our customers’ technologicalneeds for improving productivity (including system modifications and enhancements) to the Development &Production Division as quickly as possible. This allows us to share the information and respond with actual products. Accordingly, we have established a system capable of processing customer requests within 24 hours ofreceipt. We have also standardized the system modification formats and request forms in an effort to remove
ambiguity in the requests. This has enabled the departments concerned to share highly specific information
and respond more quickly to customer requests. To better manage requests for substantial modifications
to our equipment, we have also improved the ordering system for products with long lead times to achieve
faster delivery.

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Quality
Consideration for customers
Customer satisfaction
Improving customer satisfaction
Accurately assessing customer needs is critical to providing quick, innovative solutions. TEL’s policy on quality and service states, “TEL strives to understand the true needs of our customers to achieve customer
satisfaction and secure customer trust while continuously improving quality and service.” Under this policy,
TEL has a customer satisfaction system headed by the President. This enables TEL to engage in various activities to offer high value-added products and services to meet customer needs now and in the foreseeable
future.
Customer satisfaction survey
TEL conducts a customer satisfaction survey every year, with the goal of making continual improvements
based on customer feedback.
The survey started in 2003 with a limited number of sales departments. Since then, TEL has made numerous improvements in the questionnaire, survey method and analysis, feedback to customers about
targeted improvements, and overall management of the program. The survey grew to include all semiconductor production equipment departments in 2014. The FPD production equipment division and overseas
subsidiaries were added in 2016 to make the survey a key organization-wide initiative. The questions aredesigned to allow multi-faceted analyses of customer opinions, so the feedback can directly lead to practical improvements in the sales, development and production, and service divisions.
In the survey for fiscal year 2016, over 1,000 individual customers responded, and the results were satisfactory. On a 4-point scale (from 0 to 4), TEL received an average of 3 points or higher (Very Satisfied orSatisfied) on 62% of the questions. For questions that were rated below 3.0, we have analyzed the results
to further improve the quality of our products and services.
Responding to customers’ suggestions for improvement
Each year, we receive many important suggestions from our customers through this survey. The results
are shared in a timely manner, not only by the management team but also by the sales, development andproduction, and service departments. When improvements are identified from the customer responses, weassign a responsible department for each area and implement corrective actions. In this manner, we makefull use of the responses to the survey̶both positive and negative̶to improve our services and productdevelopment. We also regularly communicate the results of the survey and our plans for improvement toour customers.
By engaging in organization-wide PDCA activities on an ongoing basis, TEL provides comprehensive andinnovative solutions to its customers.
Conceptual image of understanding customer needs

Planning and sales

Customer needs
Requests

Development and design

Expectations

Compile and analyze

Grasp customer needs
Procurement and manufacturing
Services
Enhance quality through continual improvement

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TOKYO ELECTRON Sustainability Report 2016

Improving customer productivity
In addition to providing high quality products to customers, TEL also recommends ways to operate theequipment most efficiently at customer fabs and offers optimization services.
TEL has introduced TELeMetrics, a service that connects the equipment installed at customer sites withTEL via a communications network, enabling TEL to monitor and analyze data to improve equipment performance. Specifically, the service takes advantage of TEL’s unique technological insights and specialized
analytic tools to multilaterally analyze data such as equipment functionality, component degradation overtime, and product variability. This allows TEL to identify problems in real time and offer appropriate solutions. This service can significantly reduce the costs for installation, operation, and management of facilities
and equipment. TELeMetrics also has a proven record of improving the overall efficiency of facilities atcustomer fabs.
For example, one customer reported that TELeMetrics successfully reduced the percentage of nonuniform wafers from 2.8% to 0.5%. As the yield improved, the customer could also reduce the impact on
the environment and reduce costs.

Effects of TELeMetrics on the rate of wafer non-uniformity (%)*

2.80.5Before

After* In low-pressure chemical vapor deposition (LP-CVD) processesTEL receives Intel’ s prestigious SCQI award
TEL received Intel Corporation’s prestigious Supplier Continuous Quality Improvement (SCQI) award in March 2016.
The SCQI award is part of Intel’s Supplier Continuous Quality Improvement program to encourage Intel’s key suppliers to strive for excellence andcontinual improvement. Only the highest performing suppliers receive this honor. TEL provides coater/developers, dry etch systems, wet etch systems, thermal processing systems, deposition systems, and test systems, all essential to Intel’s success. TEL was selected as one of eight companies
to receive this honor. The award illustrates TEL’s exceptional performance in attaining Intel’s goals in 2015 and demonstration of industry-leading
commitment across all critical focus areas measured: quality, cost, availability, technology, customer service, labor and ethics systems, and environmental sustainability. This was the 16th consecutive time that TEL received this quality award, and we intend to keep demonstrating stellar performance on cost competitiveness, leading-edge technology, quality programs, and outstanding customer service.

Intel and the Intel logo are trademarks or registeredtrademarks of Intel Corporation or its subsidiaries in
the United States and other countries.
* Other names and brands may be claimed as theproperty of others.

Photo: Chip Holley Productions

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