New Medium-Term Management Plan

May 31, 2017

Tokyo Electron ("TEL") pursues a global standard level of profitability and aims for sustained growth in corporate value. Compared to the business environment envisioned when TEL determined the Medium-Term Management Plan in July 2015, the business environment that surrounds TEL has dramatically shifted, including the further expansion of the market size for Semiconductor Production Equipment. In light of these circumstances, TEL has reviewed the previous medium-term management plan to determine a new medium-term management plan for the period up to the fiscal year ending March, 2020.
To achieve the new financial model for the fiscal year ending March, 2020, TEL aims to strengthen product competitiveness to achieve sales growth that surpasses the growth of the market and raise development efficiency and business productivity to further improve profitability.

1. Semiconductor Production Equipment Market Size Projected in the Financial Model
・  In our financial model announced in July 2015, TEL presented a range according to economic conditions.
  (Wafer Fab Equipment market size $30 to $37 billion, and equipment for wafer-level packaging is not included.)
・  Our new financial model anticipates the Wafer Fab Equipment market size to reach a size of $42 to $45 billion by the fiscal year ending March, 2020.
  (Equipment for wafer-level packaging is included.)


2. Financial Model (toward FY2020)
(Billion Yen)
 

FY2017
(Actual)

FY2018
(Estimate)

FY2020
(Medium-term plan)

WFE* Market size

WFE $37B

WFE $40B

WFE $42B

WFE $45B

Net sales

799.7

980.0

1,050.0

1,200.0

        SPE

749.8

910.0

970.0

1,120.0

        FPD

49.3

70.0

80.0

80.0

Gross profit
    Gross profit margin

322.2
 40.3%

412.0
 42.0%

452.0
 43.0%

522.0
 43.5%

SG&A expenses
    SG&A expense ratio

166.5
 20.8%

196.0
 20.0%

200.0
 19.0%

210.0
 17.5%

Operating income
    Operating margin

155.6
 19.5%

216.0
 22.0%

252.0
 24.0%

312.0
 26.0%

Net income attributable to
owners of parent

115.2

163.0

180.0

220.0


3. Approach to Financial Model
・  Pursue technological differentiation
・  Cost reductions through integration of development units
      -Establishment of Tokyo Electron Technology Solutions Ltd.
・  Meet expanding demand for field solutions
・  Raise business productivity, control fixed costs
      -Improve business efficiency of service divisions
      -Control development expenses at level appropriate to balance with current profitability

4. Targeted Management Indicator (toward FY2020)
While maintaining a global standard level of profitability, TEL will continue with development of the next generation of products to aim for sustained growth in corporate value.

WFE* Market size

WFE $42B

WFE $45B

Net sales

¥1,050 Billion

¥1,200 Billion

Operating margin

24%

26%

ROE (Return on Equity)

20% - 25%


5. Capital policy and Shareholder Return Policy
Approach to capital policy
While securing and generating resources necessary for growth investment, TEL will make positive efforts to provide returns to shareholders and keep appropriate balance sheet management with a view of medium- to long-term growth. Specifically, TEL will endeavor to improve return on equity (ROE) by improving operating income to sales and total asset turnover and continuing to make efforts to generate cash flow.

Approach to shareholder policy
Our dividend policy is to link dividend payments to business performance on an ongoing basis and a payout ratio is around 50% based on consolidated net income attributable to owners of parent. However, the amount of annual dividend per share shall not be less than 150 yen. TEL will review our dividend policy if TEL does not generate net income for two consecutive fiscal years.
TEL will flexibly consider share buybacks.

*The semiconductor production process can be divided into two sequential sub-processes: front-end (wafer fabrication) and back-end (assembly and test) production.
  WFE (Wafer Fab Equipment) is used in the front-end production process. Front-end production equipment includes equipment for wafer-level packaging.


The company’s presentation materials will be available at http://www.tel.com/ir/policy/mplan/index.htm.

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