The 52nd Annual General Meeting of Shareholders
Tokyo Electron Limited June 19, 2015
The 52nd Annual General Meeting of Shareholders 1 FY2015 Financial Report (FY2015: April 1, 2014 – March 31, 2015)
The 52nd Annual General Meeting of Shareholders Consolidated Statement of Income
(Billion Yen)
FY2014 （％） FY2015 第52期 （％） （％） Variance
Net sales 612.1 100.0 6,131613.1 100.0 +0.9
Sales by division by Sales SPE 478.8 78.2 5,762576.2 94.0 +97.4 FPD 28.3 4.6 32732.7 5.3 +4.3 PVE 3.8 0.6 363.6 0.6 ▲0.1
EC/CN 16.5 100.7 SPE: Semiconductor Production Equipment FPD: Flat Panel Display Production Equipment PVE: Photovoltaic Panel Production Equipment EC/CN: Electric Components & Computer Networks The 52nd Annual General Meeting of Shareholders 3 Consolidated Statement of Income （Billion Yen） FY2014 （％） FY2015第52期 （％）（％） Variance
Net sales 612.1 100.0 6,131613.1 100.0100.0 +0.9
Gross profit 201.8 33.0 2,427242.7 39.639.6 +40.8
Operating income 32.2 5.3 88.1881 14.414.4 +55.9 Ordinary 5.8 15.215.2 income 35.4 92.9929 +57.4 Unusual or infrequent profit 0.5 1.818 +1.3 Unusual or infrequent loss 47.7 8.080 ▲39.7 Income before ▲1.9 14.214.2 income tax ▲11.7 86.8868 +98.5 Net income ▲19.4 ▲3.2 71.8718 11.711.7 +91.2
The 52nd Annual General Meeting of Shareholders 4 Consolidated Balance Sheet
Assets Liabilities & Net Assets (Billion Yen) (Billion Yen)
876.1 876.1 828.5 828.5
234.9 Liabilities 268.1 317.6 Cash & cash equivalents* 237.9
Trade notes, accounts 129.0 110.8 receivables Net assets 168.2 175.5 Inventories 590.6 641.1 56.0 66.7 Other current assets 112.3 106.8 Tangible assets 29.5 27.5 Intangible assets 65.1 70.8 Investment & other assets 2014/3/31 2015/3/31 2014/3/31 2015/3/31
*Cash and cash equivalents: Cash and deposits + Short-term investments, etc. (Securities in B/S).
The 52nd Annual General Meeting of Shareholders 5 Consolidated Statements of Changes in Net Assets
(Billion Yen) 700
Net Income Cash Dividends Disposal of treasury stock Other 0.1 changes 650 △17.9 Net Assets 71.8 △3.6 641.1 600 Net Assets
590.6
550
0 Balance Balance at end of FY2014 at end of FY2015
The 52nd Annual General Meeting of Shareholders 6 Non-consolidated Financial Statement （Billion Yen） Statement of FY2014 （％） FY2015 第52 期（％） （％） Variance Income Net sales 462.2 100.0 5,550555.0 100.0100.0 +92.8 Operating income 16.2 3.5 47.0470 8.58.5 +30.8 Ordinary income 27.8 6.0 86.5865 15.615.6 +58.6 Income before income taxes ▲26.0 ▲5.6 61.9619 11.211.2 +87.9 Net income ▲26.4 ▲5.7 63.2632 11.411.4 ＋89.6
Balance Sheet FY2014 （％） FY2015 （％） Variance Total assets 608.2 100.0 6,717671.7 100.0100.0 +63.5 Total liabilities 251.5 41.4 2,662266.2 39.639.6 +14.7 Total net assets 356.7 58.6 4,054405.4 60.460.4 ＋48.7 Total liabilities & net 100.0 100.0100.0 +63.5 assets 608.2 6,717671.7
The 52nd Annual General Meeting of Shareholders 7 FY2015 Dividends
► Annual dividend per share
（Yen） 143 150 114
100 80 51 50 50
0 FY2011 FY2012 FY2013 FY2014 FY2015
Annual Total 1Q 2Q 3Q Year-end Payout ratio dividends dividends
FY2015 10yen 30yen 35yen 68yen 143yen 25.6 35.7% Billion yen
The 52nd Annual General Meeting of Shareholders 8 FY 2016 Financial Estimates (FY2016: April 1, 2015 – March 31, 2016)
The 52nd Annual General Meeting of Shareholders Business Environment
▶ SPE Capex CY2015 WFE capex is expected to rise around 5% YoY. Especially, the growth of capex for memory is anticipated.
▶ FPD Capex CY2015 demand for LCD panel manufacturing equipment forecast to increase 20% YoY due to increase in capex for large panels and the start of investment in small/medium panels for mobile devices.
The 52nd Annual General Meeting of Shareholders 10 FY2016 Consolidated Financial Estimates
（Billion Yen） 1st Half 2nd Half Full通期 year YoY changes
Net Sales 320.0 355.0 675.0750 +10.1% Sales Sales by division SPE 300.0 325.0 625.06,250 +8.5%
FPD 17.5 29.5 47.0470 +43.7%
PVE 2.5 0.5 3.030 ▲17.1％ Operating 47.0 65.0 1,120112.0 +27.1% Income 14.7% 18.3% 16.6% +2.2pts Ordinary Income 47.0 65.0 1,120112.0 ＋20.5％ Income before income taxes 46.0 65.0 1,110111.0 +27.8% Net income 33.0 46.0 79.0790 +9.9%
SPE: Semiconductor Production Equipment FPD: Flat Panel Display Production Equipment PVE: Photovoltaic Panel Production Equipment The 52nd Annual General Meeting of Shareholders 11 FY2016 Dividend Forecast
► Annual dividend per share (forecast) Interim Year-end Annual total 65yen 90yen 155yen
（Yen） 143 155 150
100 90
50 65 0 FY2015 FY2016 (forecast)
The 52nd Annual General Meeting of Shareholders 12 The 52nd Annual General Meeting of Shareholders 13 Pursuing Global Excellence
The 52nd Annual General Meeting of Shareholders Regarding the business combination plans with Applied Materials
The 52nd Annual General Meeting of Shareholders 15 Context: Sep. 24, 2013 Merger plans announced Jun. 20, 2014 Approval obtained at the Tokyo Electron Annual Shareholders Meeting Jun. 23, 2014 Approval obtained at the Applied Materials Extraordinary Shareholders Meeting Apr. 27, 2015 Termination of the business combination agreement at the Board of Directors by the two companies
The 52nd Annual General Meeting of Shareholders 16 Our planned business combination terminated due to the gap unfilled between the view of the U.S. Department of Justice and our view
The 52nd Annual General Meeting of Shareholders 17 Although our business integration didn’t come into reality…
The 52nd Annual General Meeting of Shareholders 18 Even during the preparation phase for the merger:
Management structure improved and Profit margin increased
The 52nd Annual General Meeting of Shareholders 19 Through the efforts towards the merger:
The strengths of Tokyo Electron reaffirmed • Enormous trust from customers • Products and technological competitiveness • Excellent teamwork
The 52nd Annual General Meeting of Shareholders 20 Through the efforts towards the merger:
Inspiring findings earned on ”What makes a true global company” and ”Drastic approach to profits”
The 52nd Annual General Meeting of Shareholders 21 A fresh start as the new Tokyo Electron
The 52nd Annual General Meeting of Shareholders 22 Contents:
1. Vision 2. Business growth 3. Increasing profitability 4. Shareholder return
The 52nd Annual General Meeting of Shareholders 23 1. Vision
The 52nd Annual General Meeting of Shareholders 24 Vision
A true global company generating high added- value and profits through innovative technology and groundbreaking ideas with diverse integrated technologies
The 52nd Annual General Meeting of Shareholders 25 Major efforts
• Drastic differentiation of the key business • Shifting to anticipating customer needs • Securing a footing for growth and technological innovations • Ensuring operation efficiency • Global talent optimization
The 52nd Annual General Meeting of Shareholders 26 New organization
Key features of our organization reform:
• New COO appointed • Capable talent newly assigned • Strengthening local responsiveness to customers
Shifting to a business that “identifies latent customer needs’’ delivering more than expected
The 52nd Annual General Meeting of Shareholders 27 2. Business growth
The 52nd Annual General Meeting of Shareholders 28 Business circumstances
2014 2020 World population 7.2 billion 7.7 billion Number of connected things 14.5 billion 50 billion Things connected PCs, Wearables, to the internet smartphones, PAN/BAN, automobiles, tablets transportation systems, industrial machinery, etc.
Forecast by CISCO Anything will be connected to internet in the near-future of IoT
The 52nd Annual General Meeting of Shareholders 29 Business circumstances
World IP traffic Zetta byte/year 2 CAGR 21% (2013-18) 1.5 1.6 1
0.5 0.6 0 2013 2014 2015 2016 2017 2018 Cisco Visual Networking Index（VNI）2013 ~2018
Data on the internet will continue to increase explosively
Zettabyte: Unit indicating the magnitude of computer storage devices and digital data. 10^21 bytes
The 52nd Annual General Meeting of Shareholders 30 Business circumstances World Semiconductor Market B$ 500 400 340B$ Industrial 300 Smart- Health- phones care 200 Auto- PCs motive Servers Environ- 100 Homes mental
0 1985 1990 1995 2000 2005 2010 2014 Increased application by paradigm shift to IoT will expand semiconductor market Source: Gartner “Forecast :Semiconductor Manufacturing Equipment, Worldwide, 1Q15 Update April 2015
The 52nd Annual General Meeting of Shareholders 31 Business circumstances
CY2014 World Electronics-related industry
Electronic System s m ar tp h o n US$ 1,778B e Semiconductor US$ 340B Wafer Fab Equipment US$ 32B
SPE market assuming a critical role in the value chain Source：Gartner “Forecast :Semiconductor Manufacturing Equipment, Worldwide, 1Q15 Update April 2015
The 52nd Annual General Meeting of Shareholders 32 Our SPE competitiveness
WFE market share:
CY2013 CY2014
10.4% 13.6% Source: Gartner
Significant turnaround in market share in CY2014
The 52nd Annual General Meeting of Shareholders 33 Our SPE competitiveness
TEL Product market share (CY2014) Overwhelming competitiveness
TEL
Coater/ Etch Thermal Single wafer Cleaning Prober developer processing deposition
Source: Gartner Year-on-year growth overall, particularly with rapid share expansion of the cleaning system
The 52nd Annual General Meeting of Shareholders 34
Semiconductor industry at an inflection point
Semiconductor technology today is facing the most critical inflection ever
The 52nd Annual General Meeting of Shareholders 35 Semiconductor industry at an inflection point Blood Cell Size range of 10-3 m = 1mm LSI manufacturing ＜10μm ～ 1nm＞ 10-4 1970 10-5 1990 10-6 m = 1µm 10-7 2010 10-8 10-9 m = <10nm DNA Inflection Point 10-10 Interatomic 10-11 CMOS Scaling distance of Si 10-12 m = 1pm ≒0.3nm Functional Diversification Atom
The 52nd Annual General Meeting of Shareholders 36 Direction of technological innovations
Functional Diversification
TSV/WLP Advanced Packaging High-k Si photonics metal gate MRAM ReRAM Multiple FinFET New Memory patterning SiGe/Ⅲ-Ⅴ DSA/EUV Carbon/CNT
CMOS Scaling CMOS New Structure/New Materials
Electron Beam Lithography Advanced Patterning
Evolution of semiconductors involves new, extensive technologies The 52nd Annual General Meeting of Shareholders 37 SPE strategic products Compatible with the advanced patterning, new structure (2D to 3D) and new materials
Dry cleaning ALD system Plasma etch NT333™ system system Certas LEAGA™ Tactras™ RLSA™ Etch
Coater/developer CLEAN TRACK™ Thermal Metallization LITHIUS Pro™ Z processing system system Triase+™EX-II™ TiN TELINDY PLUS™
The 52nd Annual General Meeting of Shareholders 38
SPE strategic products
Product line-up for STT-MRAM
GCIB system Cleaning system Etching/CVD Magnetic annealing MTJ Stack Film system system Deposition system
Ready for mass production of the new memory
STT-MRAM: Spin Transfer Torque-Magnetoresistive Random Access Memory
The 52nd Annual General Meeting of Shareholders 39 FPD new generation technology New display requires: ▶ Ultra-high resolution ▶ Ultra-low power consumption ▶ Flexibility (curved, foldable, rollable)
4K Curved OLED
LGD Panel @IFA2014
Next-generation OLED displays in the spotlight
The 52nd Annual General Meeting of Shareholders 40 FPD strategic products
head
Elius™2500 Inkjet Printing System for OLED panel manufacturing
Developed in collaboration with Seiko Epson
Launched new equipment for manufacturing large OLED displays
The 52nd Annual General Meeting of Shareholders 41 Growth in two large markets
New systems Post-sales featuring innovative solutions Service contracts, parts sales, relocation, modifications, performance improvement, used equipment
New system market and post-sales market
The 52nd Annual General Meeting of Shareholders 42 Post-sales
(Billion yen) 200.0 • Huge business opportunities 170.0 with 54,000 tools shipped from TEL (world’s number one ) 106 • JPY170 bil. achieved inFY2015, ahead of time • Future target of JPY200 bil.
2012 2013 2014 2015 201X Estimate
Sales from post-sales activities included in the sales of SPE and FPD.
The 52nd Annual General Meeting of Shareholders 43 3. Increasing profitability
The 52nd Annual General Meeting of Shareholders 44 Factors for the increased margin
• Consolidation of the domestic business locations • Withdrawal from the unprofitable PVE business • Deconsolidation of Tokyo Electron Device Ltd.
⇒ Management structure improved
The 52nd Annual General Meeting of Shareholders 45 Recent gross margin
Trend過去１０年間の推移 over the past 10 years 50% 39.6% 40% • Record-high gross margin in FY2015 30%
20% 28.2% • Reaching/ exceeding 40% soon 10%
0% 2006 2010 2015
The 52nd Annual General Meeting of Shareholders 46 Recent operating income & operating margin
16.6% (Billion yen) 14.4%
• Significant operating margin 112.0 improvement 88.1 • FY2016 operating income expected to be over JPY110 bil.
2012 2013 2014 2015 2016 Estimate
The 52nd Annual General Meeting of Shareholders 47
Profit margin benchmarking (most recent FY)
Gross margin Operating margin
JP competitors avg. 31% JP competitors avg. 4% TEL 39.6% TEL 14.4% U.S. competitor A 42% U.S. competitor A 17% U.S. competitor B 44% U.S. competitor B 15% U.S. competitor C 58% U.S. competitor C 26%
Aiming to achieve global-level results
The 52nd Annual General Meeting of Shareholders 48
Recent ROE
20%
11.8%
10% 6.3% • Sharp recovery in ROE • Further improvement expected 1.0% 0% in FY2016
-3.3%
-10% 2012 2013 2014 2015 2016 Estimate
The 52nd Annual General Meeting of Shareholders 49 Financial model
Aiming at global-level results
WFE market size: US$30B US$37B
Operating margin: 20% ~ 25% ROE: 15% ~ 20%
Details to be confirmed in the process of mid-term management plan preparation, followed by necessary disclosure
The 52nd Annual General Meeting of Shareholders 50
For further increased profitability
Development/design Create value Marketing Feature value and quality that customers demand in the Identify latent development/design phase customer needs Proactively identify and provide Manufacturing ideas that exceed customer expectations Maximize value Achieve value with optimized cost/efficiency
The 52nd Annual General Meeting of Shareholders 51 R&D expenses / Capital expenditures
R&D Expenses Capital Expenditures (Billion yen) (Billion yen) 100 100 74.5 75 75
50 50
25 25 12.0
0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Estimate Estimate High-level R&D investment maintained
The 52nd Annual General Meeting of Shareholders 52 4. Shareholder return
The 52nd Annual General Meeting of Shareholders 53 Operating cash flow
(Billion yen) >100.0
71.8 • Cash-generating capability remarkably improved • FY2016 operating cash flow expected to exceed JPY100 bil.
2012 2013 2014 2015 2016 Estimate
The 52nd Annual General Meeting of Shareholders 54 Basic policy on use of cash
Growth ＋ Shareholder investment return
Development of innovative Dividends ＆ share buybacks solutions
For continuous growth investment and further enhanced shareholder return
The 52nd Annual General Meeting of Shareholders 55 Shareholder return
Dividend per share
(Yen) 155 143 • Record-high achieved in FY2015; Further increase expected in FY2016 • Target dividend payout ratio of 35%
2012 2013 2014 2015 2016 Estimate
The 52nd Annual General Meeting of Shareholders 56 Shareholder return
Share buybacks worth up to JPY120 bil. planned
• Period: May 14, 2015 – May 13, 2016 • Total shares to acquire: Not exceeding 15.4 mil. shares
The 52nd Annual General Meeting of Shareholders 57 The 52nd Annual General Meeting of Shareholders 58 Proposals to be resolved
1. Partial Amendments to the Articles of Incorporation concerning the liability-limiting contracts 2. Election of Thirteen Corporate Directors 3. Election of One Audit & Supervisory Board Member 4. Payment of Bonuses to Corporate Directors for the 52nd Fiscal Year 5. Issuance of Share Subscription Rights as Stock-Based Compensation to Corporate Directors 6. Issuance of Share Subscription Rights as Stock-Based Compensation to Executives of the Company and its Subsidiaries
The 52nd Annual General Meeting of Shareholders 59 Proposal 1 Partial Amendments to the Articles of Incorporation concerning the liability-limiting contracts
The 52nd Annual General Meeting of Shareholders 60 1. Partial Amendments to the Articles of Incorporation concerning the liability-limiting contracts (Proposed amendments are underlined.) Current Articles of Incorporation Proposed Amendments CHAPTER IV DIRECTORS AND BOARD OF DIRECTORS CHAPTER IV DIRECTORS AND BOARD OF DIRECTORS
Article 24 Liability-Limiting Contracts with Outside Article 24 Liability-Limiting Contracts with Directors Directors In accordance with the provisions of Article 427, Paragraph 1, In accordance with the provisions of Article 427, Paragraph 1, of the Companies Act, the Company may, within the limits of the Companies Act, the Company may, within the limits stipulated by laws and regulations, conclude contracts with stipulated by laws and regulations, conclude contracts with directors (excluding Executive Directors, etc.) exempting outside directors exempting those outside directors, in the those directors, in the absence of intentional conduct or absence of intentional conduct or gross negligence, from the gross negligence, from the liability provided for in Article 423, liability provided for in Article 423, Paragraph 1, of the Paragraph 1, of the Companies Act. Companies Act.
CHAPTER V AUDIT & SUPERVISORY BOARD MEMBERS CHAPTER V AUDIT & SUPERVISORY BOARD MEMBERS AND AUDIT & SUPERVISORY BOARD AND AUDIT & SUPERVISORY BOARD
Article 32 Liability-Limiting Contracts with Outside Audit & Article 32 Liability-Limiting Contracts with Audit & Supervisory Board Members Supervisory Board Members In accordance with the provisions of Article 427, Paragraph 1, In accordance with the provisions of Article 427, Paragraph 1, of the Companies Act, the Company may, within the limits of the Companies Act, the Company may, within the limits stipulated by laws and regulations, conclude contracts with stipulated by laws and regulations, conclude contracts with outside Audit & Supervisory Board Members exempting Audit & Supervisory Board Members exempting those Audit those outside Audit & Supervisory Board Members, in the & Supervisory Board Members, in the absence of intentional absence of intentional conduct or gross negligence, from the conduct or gross negligence, from the liability provided for in liability provided for in Article 423, Paragraph 1, of the Article 423, Paragraph 1, of the Companies Act. Companies Act.
The 52nd Annual General Meeting of Shareholders 61 Proposal 2 Election of Thirteen Corporate Directors
The 52nd Annual General Meeting of Shareholders 62 2. Election of Thirteen Corporate Directors
Note: Hiroshi Inoue and Masahiro Sakane are the candidates for outside director in accordance with Article 2 item (15) of the Companies Act of Japan.
The 52nd Annual General Meeting of Shareholders 63 Proposal 3 Election of One Audit & Supervisory Board Member
The 52nd Annual General Meeting of Shareholders 64 3. Election of One Audit & Supervisory Board Member
Yoshiteru Harada
The 52nd Annual General Meeting of Shareholders 65 Proposal 4 Payment of Bonuses to Corporate Directors for the 52nd Fiscal Year
(The 52nd Fiscal Year: April 1, 2014 – March 31, 2015)
The 52nd Annual General Meeting of Shareholders 66 4. Payment of Bonuses to Corporate Directors for the 52nd Fiscal Year
Payment of Bonuses to Corporate Directors for the 52nd Fiscal Year Corporate Directors of Tokyo Electron Limited at the end of the 52nd Fiscal year Eligible persons Note: 9 persons (including 2 outside directors)
394.5 million yen Aggregate amount (including 14 million yen for outside directors)
The 52nd Annual General Meeting of Shareholders 67 Proposal 5 Issuance of Share Subscription Rights as Stock-Based Compensation to Corporate Directors
The 52nd Annual General Meeting of Shareholders 68 5. Issuance of Share Subscription Rights as Stock-Based Compensation to Corporate Directors
Stock-Based Compensation to Corporate Directors (Share Subscription Rights) Corporate Directors of Tokyo Electron Limited Eligible persons to be elected at this shareholders meeting Note: 11 persons (excluding outside directors)
Aggregate amount Up to 420.8 million yen
The 52nd Annual General Meeting of Shareholders 69 5. Issuance of Share Subscription Rights as Stock-Based Compensation to Corporate Directors Description of Share Subscription Rights
Up to 754 rights Aggregate number (Up to 75,400 shares of the common stock)
Issuance price Gratis Paid-in amount 1 yen per share for exercise To be resolved at the Board of Directors meeting from the date Exercise period three years after the allotment date until the date 20 years after the allotment date 1. The minimum number of subscription rights exercisable shall be one. 2. Other conditions pertaining to the exercise of subscription Conditions for exercise rights include matters regarding advertising subscription rights based on a resolution of a meeting of the Board of Directors, and the agreement for granting share subscription rights concluded thereof.
The 52nd Annual General Meeting of Shareholders 70 Proposal 6 Issuance of Share Subscription Rights as Stock-Based Compensation to Executives of the Company and its Subsidiaries
The 52nd Annual General Meeting of Shareholders 71 6. Issuance of Share Subscription Rights as Stock-Based Compensation to Executives of the Company and its Subsidiaries
Description of Share Subscription Rights Executive officers of Tokyo Electron Limited and corporate directors and Eligible persons executive officers, etc. of TEL subsidiaries Aggregate Up to 935 rights number (Up to 93,500 shares of the common stock) Issuance price Gratis Paid-in amount 1 yen per share for exercise To be resolved at the Board of Directors meeting from the date three years after Exercise period the allotment date until the date 20 years after the allotment date 1. The minimum number of subscription rights exercisable shall be one. 2. Other conditions pertaining to the exercise of subscription rights include Conditions for matters regarding advertising subscription rights based on a resolution of exercise a meeting of the Board of Directors, and the agreement for granting share subscription rights concluded thereof.
The 52nd Annual General Meeting of Shareholders 72 The 52nd Annual General Meeting of Shareholders 73