CVD System ALD System
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Tokyo Electron Corporate Update May 11, 2018 CORP IR / 2018.05.11 1 Contents 1. TEL Overview 3 2. Medium-term Management Plan TEL Initiatives and Progress 9 3. FY2019 Business Environment and Financial Estimates 16 Appendix 1: Etching System 25 Appendix 2: Effects of EUV Lithography Adoption 30 Appendix 3: FPD Production Equipment 35 Appendix 4: Financial Data 42 CORP IR / 2018.05.11 2 TEL Overview CORP IR / 2018.05.11 3 TEL is Innovative and Flexible to Market Change Established development/ Striving for Distributor of other suppliers’ products Globalization Production reform (Billion Yen) manufacturing functions new growth 1,500 TEL consolidated net sales 1,200 900 600 300 0 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 (FY) (E) Established first Listed on TSE #2 in1980 and #1 in 1984 Strengthened corporate governance manufacturing JV (TEL-Thermco) Discontinued export business of Began overseas direct operations consumer products Consumer Semiconductor Mainframe Mobile electronics, applications computer PC phone etc. CORP IR / 2018.05.11 4 Financial Performance: Sales and Operating Margin (Billion Yen) 1,500 1,400.0 50% TEL Net sales Operating income 1,200 1,130.7 40% Operating margin 906.0 900 26.1% 30% 799.724.9% 723.8 668.7 663.9 18.6% 19.5% 16.7% 612.1613.1 600 14.6% 497.2 20% 14.4% 17.6% 300 5.3% 10% 2.5% 0 0% -0.5% -4.4% -300 -10% 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 (FY) (E) 4M DRAM oversupply • Financial crisis in Asia • IT bubble crash • World financial crisis • Effects of European debt crisis, • 64M DRAM oversupply • Excessive logic foundry investment • Memory oversupply slowdown in emerging markets • Weak demand for PC, mobile CORP IR / 2018.05.11 5 The Market TEL Participates in CY2016 World Market FY2018 TEL Sales (April 2017-March 2018) Others FPD Production ¥0.4B, Equipment ¥75.0B, 0% Electronic System US$ 1,742B (FPD) 7% Semiconductor US$ 343B ¥1,130.7B ¥1,055.2B, 93% Semiconductor WFE* CAPEX US$ 37B Production Equipment (SPE) *The semiconductor production process can be divided into two sequential sub- processes: front-end (wafer fabrication) and back-end (assembly and test) production. WFE is used in the front-end production process. Front-end production equipment includes equipment for wafer level packaging. Source: Gartner, “Forecast: Semiconductor Wafer Fab Manufacturing Equipment, Worldwide, 1Q17 Update” 13 April 2017 Charts/graphics created by Tokyo Electron based on Gartner research. CORP IR / 2018.05.11 6 TEL Main Products World Market Share (CY2017) Semiconductor Production Equipment 26% 25% 36% 87% Coater/Developer Dry Etch System Deposition System Cleaning System FPD Production Equipment (FY2018) 42% 31% 38% 19% 71% ALD CVD Oxidation/Diffusion FPD Coater/Developer FPD Etcher/Asher Source (SPE): Gartner, “Market Share: Semiconductor Wafer Fab Equipment, Worldwide, 2017”, 18 April 2018, Charts/graphics created by Tokyo Electron based on Gartner research. Source (FPD): TEL survey Coater/Developer: Photoresist processing (Track), Dry Etch System: Dry etch, Deposition System: Tube CVD + Atomic layer deposition tools + Oxidation/diffusion furnaces + Nontube LPCVD, ALD: Atomic layer deposition tools, CVD: Tube CVD + Nontube LPCVD, Oxidation/Diffusion: Oxidation/diffusion, Cleaning System: Wet stations + Spray processors + Other clean process CORP IR / 2018.05.11 7 World Top 10 SPE Makers CY2016 Revenue Ranking (Billions of US$) Applied Materials 9.87 ASML 7.33 Lam Research 6.37 Tokyo Electron 6.06 KLA-Tencor 3.19 SCREEN 1.78 Advantest 1.41 Teradyne 1.36 Hitachi 1.12 High-Technologies ASM Pacific Technology 0.93 Source; The Chip Insider Equipment & Emerging Markets (VLSI Research, May 2017) Exchange Rates: 1US$=¥108.80 CORP IR / 2018.05.11 8 Medium-term Management Plan TEL Initiatives and Progress CORP IR / 2018.05.11 9 Wafer Fab Equipment (WFE) Market Outlook Future growth drivers PC, internet, mobile WFE market growth accelerating. + Investment expanding to VR/AR/MR*, IoT, AI, RPA**, machine learning, big data, $50B+ autonomous driving, blockchain * VR/AR/MR: Virtual reality/Augmented reality/Mixed reality ** RPA: Robotic process automation ($ Billion) 60 50 40 30 20 10 0 CY'13 CY'14 CY'15 CY'16 CY'17 CY'18 Equipment market is moving to the next phase amid expanding applications for semiconductors CORP IR / 2018.05.11 Source: VLSI “Wafer Fab Equipment (WFE) Market History and Forecast” April 2018. Graph created by TEL using above data Equipment for wafer-level packaging is not included in the market size here. 10 SPE Business Strategy: Etching System Achieving success in DRAM as planned. Continue to Focus on 3D NAND and Logic DRAM 3D NAND HARC* processes Logic . Capacitor processes (HARC) . Improve our position in 9X/12X through . Maintain high interconnecting our clear lead in productivity and etch dielectric process market share . Interconnects Interconnects profile . Enhance our position in 7nm and finer CY’17 CY’18 CY’19 advanced patterning Capacitor 6X 6X/9X 9X Interconnects Multi-level . Lower customer patterning costs through contact combining multiple steps into one FinFET Word line Channel Simplify processes isolation (Slit) (Memory hole) Market share CY’15 (Actual) CY’16 (Actual) CY’17 (Actual) ・・・ CY’19 (Target) Etching System 21% 23% 26% >30% * HARC (High aspect ratio contact) process: a process for forming holes that requires advanced processing technology CORP IR / 2018.05.11 11 SPE Business Strategy: Deposition System Aim to expand earnings based on new technologies for further miniaturization and next-generation semiconductors ALD system CVD system . Achieve both high quality film formation and high . Differentiate in memory through our clear lead in productivity needed for miniaturization and for 3D batch system productivity structure with semi-batch system . Achieve high quality metallization to enable further ALD system market ¥150.0B miniaturization CAGR >10% ¥90.0B Semi-batch ALD system 2014 2015 2016 2017 2018 2019 Batch system Metallization system ™ ™ ™ NT333 Source: TEL estimate TELINDY PLUS Triase+ Market share CY’15 (Actual) CY’16 (Actual) CY’17 (Actual) ・・・ CY’19 (Target) Deposition system 38% 37% 36% >47% Source: Gartner, “Market Share: Semiconductor Wafer Fab Equipment, Worldwide, 2016”, 30 March 2017, Charts/graphics created by Tokyo Electron based on Gartner research. Deposition System: Tube CVD + Atomic layer deposition tools + Oxidation/diffusion furnaces + Nontube LPCVD CORP IR / 2018.05.11 12 SPE Business Strategy: Cleaning Systems . Expand sales of CELLESTA™ single wafer cleaning system – Expand applications based on backside and bevel cleaning* and drying technology that prevents pattern collapse during the post-etch cleaning processes Single wafer cleaning system . Secure key 3D NAND processes through batch cleaning CELLESTA™ – Provide high quality and productivity in the metal etching, polysilicon etching, and nitride film removal processes required for precise controllability . Apply best known coater/developers methods to cleaning system business – Share leading-edge technology and expertise by unifying R&D Batch cleaning system EXPEDIUSTM Market share CY’15 (Actual) CY’16 (Actual) CY’17 (Actual) ・・・ CY’19 (Target) Cleaning system 18% 20% 25% >24% * Bevel cleaning: process for removing film from the outer part of the wafer CORP IR / 2018.05.11 13 Field Solutions (FS) Business: Medium-term Plan Field Solutions sales FS business strategy 400 WFE$45B . Respond to new customer needs ¥320.0B 350 driven by IoT 300 140.0 – Provide upgrades and 251.0 Used equipment remanufactured equipment that 250 and modification 208.0 101.0 handle new applications 200 185.0 170.0 93.0 80.0 150 77.0 180.0 . Contribute to improving customer 150.0 productivity 100 Parts and services 105.0 115.0 93.0 – Provide added-value services using 50 remote connections 0 FY'15 FY'16 FY'17 FY'18 FY’20 (Installed base of 62,000 units) (Medium-term plan) Increase earnings in both the used equipment/modification and parts/service segments through a business model that utilizes makers’ strengths CORP IR / 2018.05.11 14 Financial Model (toward FY2020) (Billion Yen) FY2018 FY2019 FY2020 (Actual) (Estimate) (Medium-term plan) WFE $51B WFE $58B WFE $42B WFE $45B Net sales 1,130.7 1,400.0 1,050.0 1,200.0 SPE 1,055.2 1,288.0 970.0 1,120.0 FPD 75.0 112.0 80.0 80.0 Gross profit 475.0 598.0 452.0 522.0 Gross profit margin 42.0% 42.7% 43.0% 43.5% SG&A expenses 193.8 232.0 200.0 210.0 SG&A expense ratio 17.1% 16.6% 19.0% 17.5% Operating income 281.1 366.0 252.0 312.0 Operating margin 24.9% 26.1% 24.0% 26.0% Net income attributable 204.3 270.0 180.0 220.0 to owners of parent CORP IR / 2018.05.11 15 FY2019 Business Environment and Financial Estimates (FY2019: April 1, 2018-March 31, 2019) CORP IR / 2018.05.11 16 Business Environment (Outlook as of April 2018) ► WFE* capex CY2018 investment driven by buoyant demand for memory, expect YoY growth of approx. 15% ►FPD production equipment capex for TFT array process** We expect CY2018 investment in production equipment to increase approx. 10% YoY despite adjustments to investment in small/medium panels for mobile devices, with demand driven by significantly expanded investment in G10.5 on demand for large panels Accelerating growth in the equipment market on active investment in IoT and next generation technologies * 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 and inspected again.