Promotion of improved productivity

Higherproductivity

Continuous improvement of business operations
As part of its business innovation for productivity and quality improvement, Tokyo Electron (TEL) is tackling system anddata integration across the entire TEL group value chain, such as development and manufacturing divisions, as well as
sales and administration divisions. The primary objective of our project to introduce a new ERP1 system is to integrateeach of our division’s previously discrete business systems, and to aggregate previously disaggregated internal data,
enabling more centralized management. By freely utilizing the aggregated data in each business operation, we can quickly
collect data needed for business decisions, make production schedules more reasonable and more efficient, visualizedelivery dates for parts, and achieve stronger coordination between sales planning and production/procurement/
inventory planning. To make the system fully operational in fiscal year 2024, we are proceeding with introducing thesystem in a way that does not disrupt existing production lines. Given that the system involves business operations
performed by a range of employees, as we seek to bring the system to fruition, we are building an internal framework
for cooperation, sharing the merits of migrating to the new system and updates on progress in a timely manner with all
employees, including the project members.
Overview of ERP system
Sales CRM
(Opportunities and Forecast)Medium-term goals

New system

Customerinvestments

Constantly pursue higher management efficiency

that integrates the corebusiness operationsof an enterprise,such as accounting,personnel, production,

Warranty
ERP1(Sales, Inventory, Accounting,
Production Management)

Forecast

logistics, and sales, forbetter efficiency andcentralized information

Sales

Production
planning

Technical
acceptance2

Production
preparation

Start-up

PLM (product lifecycle
management): The

Deliverytechnique of keeping
track of a single productin a centralized manner,

DesignBooking

Procurement Manufacturing

managing the stages

PLM2 (Product Lifecycle Management)

and processes in an
integrated, crossdivisional mannerwith an aim of overall
optimization

Software development initiatives
Main activities

SDGs initiatives■ Promote productivity, continuously increase management
efficiency, contribute to the development of the industry andsociety, and contribute to sustainable economic growth

Promotionof improved
productivity

Softwaredevelopment
initiatives

Quality
management

Improvement ofquality in thevalue chain■ Promote streamlined business operations and quality
management throughout the value chain, ensuring sustainable
forms of production and consumption■Promotion of improved productivity
Continuous improvement of business operations■Software development initiatives
Streamlining product development, expanding global activities,
Developing smart equipment■Quality management
Quality policy, Management system■Improvement of quality in the value chain
Improvement of quality in the value chain, Raising awareness andskills, Initiatives at the development and design stages, Response
to quality problems, Response to safety laws and regulations,
Initiatives with suppliers

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TOKYO ELECTRON SUSTAINABILITY REPORT 2020

1
ERP (enterprise resource
planning): A system

Maintenanceand service

Opportunities

Tokyo Electron is striving to improve productivity along the entire value chain, promoting greater standardization, efficiency,
and automation of operations throughout the group, such as by integrating business systems in each division and unifying
databases. Recognizing the importance of quality management, we are enhancing the awareness and capabilities of each
employee regarding productivity by rolling out various educational programs. In addition, we are implementing continuous
quality improvement activities throughout the supply chain in collaboration with suppliers. We will strive to enhance corporate
value, constantly pursuing higher management efficiency by implementing more streamlined business operations and qualityfocus operations.

Key processes

Service (Field-Support)

Streamlining product development, expanding global activities
Since 1995, Tokyo Electron (TEL) has incorporated platform software developed in-house in its semiconductor production
equipment, and has worked on streamlining operations and improving product quality. By standardizing platform
software, we have been able to reduce the hours spent on developing duplicate functions for each type of equipment,
leading to guaranteed real-time3 control and enhancement of our response to new demands and technologies. Having
adopted such concepts as object-oriented4, we are also working on more efficient development of new platform
software for the development of next generation equipment.
In addition, we are engaged in global activities to promote digital transformation (DX) development. As well as sharing
information and various tools among responsible personnel in Japan and overseas, we are expanding a range of training
programs, such as drawing up a data analysis skills map designed to improve DX skills throughout the TEL group.

3
Real-time: The propertyof time limitation until
the completion of work
4
Object-oriented: A
software engineering
theoryDeveloping smart equipment
Decent work andeconomic growth

Responsible
consumption andproduction

Partnerships for thegoals

Amid advances in manufacturing that make the most of innovative technologies
such as IoT and AI, our customers are forging ahead in improving productivity
by taking advantage of visual representations of data, and building smart fabs5
to improve consistency in quality. In this context, we are developing necessary
software and systems for sites producing equipment, such as automation, for
reducing work time. Our specialized development and manufacturing divisions,and business units work in cooperation to develop various functions for smart
equipment, such as simple operation, presentation of the causes and resolutions oftroubles, and autonomous operation through prediction of results.

Steps in realizing smart equipment

Visualization
Digitization
Collection andconnection ofdata

Controlmeasures
Autonomy

5
Smart fab: A fab thatutilizes digital data
to realize continual,progressive reforms ofoperational processes
and improvements inquality and productivity

Data analysis
Analysis/forecasting

TOKYO ELECTRON SUSTAINABILITY REPORT 202028

Higher productivity■Example initiative
The Software Engineering Department at Tokyo Electron Kyushu is involved in designing, developing, and the testing andpost-release maintenance of control software for coater/developer tailored to customer requests. In addition, it works todevelop competitive software by constantly improving the development process and environment and nurturing humanresources.
The department reviewed and redesigned the configuration and structure of software, mindful of any risk of bugs
that might corrupt a program when making a design change due to the problem of the complexity in upgrading themas a result of years of software revisions. This eliminated complexity and improved maintainability, enabling the team to
respond rapidly to customer needs.
Furthermore, over the years, the department has engaged in PDCA activities to improve the development process.
After identifying that work quality had declined due to past operational practices and preconceptions, and that there
had been a deficiency in sharing information on improvement measures, it renewed its appreciation of the importanceof doing the simple things well. It consequently worked on re-learning the definitions, procedures, and measures ineach step of the development process. It succeeded in reducing the amount of work spent on following up on nonconformance.
In the past, setting the hundreds of thousands of parameters necessary for control software to work in mass
production design relied on veteran engineers' experience. In order to improve this individualized work and to generate
accurate parameters more swiftly, the department developed “HCube”—an auto-generation tool. HCube was put
into action in April 2019, and since then, the department has seen about a 50% reduction in time spent designing new
equipment and upgrading shipped equipment. Other outcomes include a decrease in non-conformance attributable tohuman error. This achievement was also praised in a third-party audit as an endeavor worthy of note.

Average

300

Equipment shipped

Return for modification after shipment
20% reduction

250

To provide consistent, high-quality products, TEL is building quality assurance systems under the leadership of theRepresentative Director and President. We have been promoting ISO 9001 quality management system certification, andall of our manufacturing companies have completed transition to ISO 9001: 2015.
ISO 9001 certified factories and offices
Company nameFactory/Office name

September 1994

Fujii Office/Hosaka Office

Tokyo Electron Technology Solutions
Tokyo Electron Kyushu

Certification dateTohoku Office

December 1994

Koshi Office

March 1997

TEL Magnetic Solutions—

November 2009

Tokyo Electron Korea

Balan Factory

September 2011

Tokyo Electron Miyagi
TEL Manufacturing and Engineering of America
Tokyo Electron (Kunshan)

Taiwa Office

September 2012

Chaska Office

March 2013

Billerica Office1

May 2014—

May 2018

1
The Billerica Office was
relocated in May 2020.

Improvement of quality in the value chain
Improvement of quality in the value chain

Progress: Design staff-hours (per unit as of November 2019)(h)Management system(target 50%)

Tokyo Electron (TEL) believes that making ongoing improvements in all work processes contributes to improved quality
and productivity of products and services. We will continue working hard to promote quality management throughout
the value chain while keeping track of customer needs and strengthening internal and external collaboration.

200
150

50% reduction(target 45%)

100
50% reduction

50
0Improved quality and productivity

No change(target 40%)

(target 75%)
New design

New design(automatic)

Large-scale Large-scale modification
modification(automatic)

Medium-scale
Medium-scale
modification modification (automatic)

Small-scale
modification

Small-scale modification(automatic)

Marketingand sales

Development

DesignProcurement

Manufacturing

Sales

Installation

Maintenanceand service

Value chain

Quality management
Quality policy
Tokyo Electron (TEL) has a quality policy shared by all group companies which it has developed and is rolling out.
1. Quality Focus
Focusing on quality to satisfy customers, meet production schedules, and reduce required maintenance even with temporary cost increases.
2. Quality Design and Assurance
Building quality into products, assure 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 analysis and resolve problems as quickly as
possible.
4. Continual Improvement
Ensuring customer satisfaction and trust by establishing quality 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.

29

TOKYO ELECTRON SUSTAINABILITY REPORT 2020

Raising awareness and skills
TEL is striving to enhance the awareness of every employee toward quality
QC certification holders
by conducting various education programs. In addition to the basic education
on quality that new employees receive, we have also globally rolled out PDCA
Education and other programs that target all TEL group employees. In PDCA
Education, employees learn about the need for continuous improvement(as of FY2020)
through the four processes of plan, do, check, and act. As of FY2020, 84% of
employees had completed this program.
We also implement our own education program, called TEL 6-Step, for employees closely involved in quality control,
such as developers, designers, quality managers, and service personnel, through which they acquire a problem-solving
model to handle important issues. The program is a modified version of the eight discipline (8D) problem-solving
method2, widely used in quality control, customized to replace our problem-solving process. The program cultivatesthe ability to resolve problems quickly and to take measures preventing recurrence, by thoroughly investigating
the true nature of problems, and determining the technical factors and root causes. As of FY2020, approximately
5,800 employees had attended this program. We also conduct group training targeted at quality control leaders toprovide them exercise-based learning opportunities for resolving quality-related issues to further enhance their work
improvement skills at production and development sites.
Moreover, so that employees can tackle quality improvement autonomously, we advocate QC certification3 andencourage them to acquire fundamental skills. Since fiscal year 2012, the number of QC certified employees has increased
yearly to approximately 2,400 as of FY2020.

2,400

2
8D problem-solving
method: A method forsolving problems inquality improvement
through eight disciplines
or processes
3
QC certification:
Quality management
certification operated
by the JapaneseStandards Associationand the Union ofJapanese Scientists andEngineers. The total
number of certified
people nationwide
exceeds 580,000 (as of
September 2019)TOKYO ELECTRON SUSTAINABILITY REPORT 202030

Higher productivity

Initiatives with suppliers

Initiatives at the development and design stages

1
FMEA (failure modeand effects analysis):
Method to identify,
prevent, and mitigate
risks in advance

Cost

ProfitPromotion of Shift Left (front-loading) and self-process assurance systems
In order to improve the quality of products, it is important to prevent non-conformance from occurring in upstream
processes, and to ensure thorough quality control in each process so that non-conforming products are not allowed
to flow into later processes. From this perspective, TEL promotes “Shift Left” and self-process assurance systems. With
Shift Left, in order to raise the degree of product quality at an early stage, we implement thorough risk detection andmitigation measures (FMEA1) from the initial stages of product design in an effort to suppress the occurrence or outflow
of non-conformance. As for self-process assuranceMarket research/planning
Development/design
Production/sales
Service/maintenancesystems, we carry out thorough inspections in eachprocess and conduct verifications using simulation. In
Improve profit
conjunction with these promotion activities, we are
marginalso focusing on the deployment of Product Lifecycle
Accelerate time-toExtend lifetime
market for products
value of productsManagement (PLM). By deploying and promoting PLM,
we comprehensively manage and analyze all processes
Timefrom product planning, development, design, andproduction through to service, in an effort to facilitate
Reduce development
costs
the earlier release of products, enhance work efficiency,
improve quality, and reduce costs.

Response to quality problems
利益

To comply with ISO and EN2 safety standards and to achieve higher levelsof safety,開発・設計
TEL has established
its ownサービス・保守
design
市場調査・企画
生産・販売
rules for each of its products. As an equipment manufacturer, we have developed systems for manufacturing products,
which include safety considerations. We have other systems in place for responding to equipment design and production
non-conformance and any occupational accidents.
In the event of an accident, we use our TIRS3 accident reporting system to distribute information to safety and quality
personnel in each division, officers, and management, including senior management. An accident investigation is also
conducted immediately to identify the cause and plan preventive measures.
We also use a proprietary system called QA-BOX4 to share information on equipment quality and any major nonconformance across all quality departments within the TEL group. Measures obtained from the results of an accident
investigation are promptly applied, not only to the problem equipment, but also to relevant equipment operated byother customers, and revisions are made to current design standards. In the case of an accident caused by the wrong
cable being connected, for instance, in addition to verifying the position and shape of the slot for inserting the cable andanalyzing the factors that led to the human error, we are working to prevent a recurrence of the accident, such as by
preparing procedures that are easier to understand.
Through QA-BOX, as well as getting relevant
TEL Group
departments collaborating to share data on
Management
issues, remedies, and other accident-related
Seriousinformation, we also assign the right personnel
accident
Fire
Accident
department
reporting
Policeand work hard to prevent accidents fromsystemdepartment
Relevant divisions(TIRS)
Investigation of causes and development ofrecurring.
recurrence prevention measures
Defective
quality reporting
system
Accident-related data accumulated in QA(Q-VICS)
Customer
contact
Customerpoint
BOX is utilized for the cumulative analysis ofOperations
divisions
Safety division
trends to visualize the types and frequency of
Qualityassurance
division
problems for individual equipment, whereby
we implement countermeasures that have
Servicedivision
an immediate impact. As we strive to prevent
problems from recurring and their associatedripple effects, this is leading to a reduction in thenumber of accidents attributable to equipment.
Investigate andidentify causes

Issue FCN5

Report and workplace recovery

Confirm spread

Share with Group(QA-BOX)
Reflect in design
standards

Determine measures

Revise standards
Notify revision

Establish
implementation plan

Permanent measures

Accident information:

Information sharing:Operations and information flow:

Response to safety laws and regulations

2
EN (European Norm):
Uniform standard for
the European Union
complimenting partsof technical standards
not stated in European
Commission directives(“New Approach”
directives)
3
TIRS: TEL Incident
Report System
4
QA-BOX: Tool for the
sharing and horizontal
expansion of importantquality-related
information within the
TEL group
5
FCN (Field Change
Notice): Refers togeneral recall notice

Continuously improving quality based on strong partnerships with suppliers is essential for providing high-quality
products quickly to the market. Since fiscal year 2001, TEL has conducted its unique Supplier Total Quality Assessments(STQA) in an effort to ensure its suppliers properly understand the level of quality it expects from them. Before starting
business with new suppliers, an STQA is conducted via self-assessment to evaluate their product quality, costs, andinformation security. The assessment also includes their CSR initiatives, including human rights, ethics, safety, and theenvironment. If a risk is identified, we visit the supplier and confirm the area of non-conformance on site. Once ourapproach to quality has been confirmed, we request that they plan and implement improvement measures, and we
provide continuous support until all of them have been completed. In addition, we also conduct on-site audits once
every three years for suppliers who handle important components and for suppliers where quality issues have beenfound. Since STQA is a system shared by our whole group, STQA-L meetings are held regularly, gathering together leaders
selected from among manufacturing companies to share supplier information and to resolve any issues.
We are also focused on process improvement activities using SPC1. Invariably, our customers’ production sites require
limited variations in quality between equipment, accurate process repeatability, and high productivity. To meet theserequirements, we get our suppliers who handle specific important parts to understand the importance of SPC, and wework on implementing SPC together with our suppliers to reduce variations in the quality of parts and to maintain andimprove processes manufacturing good-quality products.
■Example initiative
Number of non-conforming parts (full year)
In the event a flaw, defect, or other non-conformance is foundin a delivered part, time and money is spent in the production
565
600
process, working to replace the part, investigate the cause, change
47 1
500
425
production schedules due to process delays, and to implement other400
changes as needed.
300
The Quality Assurance Division at Tokyo Electron Miyagi had
200
previously limited its quality improvement activities to those
100
suppliers with a large number of non-conforming parts. During the0
FY2020FY2018FY2019process of confirming the overall percentage of non-conformanceand the associated causes, it came to the realization that these
activities needed to be conducted for all suppliers. For this reason,
since fiscal year 2019, it has issued its own Quality Report to all suppliers from which parts were found to be nonconforming, and by including statements on the supplier’s level of quality and the monthly number of non-conforming
parts, it has worked to reduce non-conforming parts and foster awareness for quality.
In fiscal year 2020, the division issued reports to 108 suppliers, and as a result, non-conforming parts decreased by
17%2. One supplier acknowledged, “Using the Quality Report as a guideline to clarify issues related to quality helped us
strengthen our overall capacity to supply parts.” In addition to achieving a concrete outcome, that is, a decrease in thenumber of non-conforming parts, by sharing quality improvement activities based on qualitative data with suppliers, weare also working to raise our level of active communication.
Going forward, we will enrich the content of the reports by incorporating the feedback of suppliers and we will further
accelerate our efforts to improve the quality of parts.

1
SPC (statistical processcontrol): Refers
to monitoring forabnormal values for themean of a characteristic
subject to control, andimplementing process
improvements

2This figure is the actual
result for FY2020
compared to FY2018

6
SEMI S2: Refer to Note 3
on p. 25.

Quality Reports
7
EMC Directive: Refer toNote 5 on p. 25.

Provision of
better-quality products

PDCA at TEL

PDCA at suppliers

High-quality parts

TEL has systems in place to check and comply with the latest trends in laws, regulations, and guidelines for equipment
safety. Equipment is checked by a third-party inspection organization before shipment, to ensure that it complies withsafety requirements, such as international safety standards and SEMI S26. Also, in response to the Machinery Directiveand EMC Directive7, we obtain certificates of conformity from the Notified Bodies in Europe.

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TOKYO ELECTRON SUSTAINABILITY REPORT 202032