Identifying Material Issues

Tokyo Electron (TEL) uses the following process to identify important and priority material issues (key issues) to be addressed for the medium- to long-term enhancement of corporate value.

Issues Awareness

Social Environment

While steady growth is forecast for the global economy, humans are also faced with various social issues, including abnormal climate conditions and natural disasters, conflicts between states and cyber-terrorism, water and food crises. TEL is deepening its awareness of social environments that may affect the value chain as a whole, and social issues with a high degree of relevance to the business, giving consideration to SDGs, the United Nations Global Compact, RBA*, and recommendations from third-party organizations.

* RBA: The RBA, formerly known as the Electronic Industry Citizenship Coalition (EICC®), was rebranded to the current name in October 2017.



Business Environment

With the spread of big data*1 and AI*2, the dawn of IoT*3, and the introduction of the 5G*4 next-generation communication standard, applications are expanding for semiconductors and flat panel displays (FPDs) that support social infrastructure and demand for technological innovation is also growing. In these circumstances, TEL, whose core business is semiconductor and FPD production equipment, must accurately grasp social trends and customer needs, and consider them from the early stages of development, in order to provide products for the market in a timely manner. Furthermore, it is important to provide high-value-added maintenance services for improving the productivity of delivered equipment, extending service life, and so on.

*1 big date: To record, store, and immediately analyze massive data groups that are difficult to record, store, and analyze with conventional database management systems or similar
*2 AI: Artificial Intelligence
*3 IoT: Internet of Things
*4 5G: Fifth-generation mobile communication system. It is the next-generation wireless communication system that is currently becoming standardized

Risks and Opportunities

Given the social and business environment in which TEL finds itself, we examined the risks and opportunities closely related to sustainable business development.

Social trends

Risks for TEL

Opportunities

Dealing with environmental issues

● Failure to comply with laws and

 regulations or industry codes of

 conduct

● Increases in business

 costs

● Promotion of environmental management

● Improvement of product environmental

 performance and creation of business

 opportunities

Evolution of technology

● Reduction in customer

 satisfaction

● Lost business opportunities

● Generating of innovative products and

 services

● Maintaining competitive advantage

Increased reliance on cyber

● Loss of core information

● Stoppage of business

 operation

● Generating of innovative products and

 services

● Maintaining competitive advantage

Governance and compliance

● Ethics and compliance

 violations

● Loss of society’s trust

● Development of highly effective

 governance

● Sustainable corporate management

Supply chain management

● Weakening of supply system

● Loss of business continuity

● Creation of new value through collaboration

● Ongoing collaboration by building

 relationships of trust

Stakeholder Engagement

TEL considers the importance of the issues it faces based upon opinions and expectations gained through communication with its stakeholders.

Stakeholders

Communication opportunities

Key opinions and requests

Shareholders/ investors

● Earnings announcement

● ESG surveys

● Interviews

● Medium- and long-term growth scenario and associated

 measures

● Further initiatives for corporate governance

● Sharing of market perspectives and improved accuracy of

 business forecasts

Customers

● Technology conference

● Customer Satisfaction Survey

● Individual technology

 collaboration

● Understanding of diverse application needs

● Proposal of high-value-added solutions

● Comprehensive and optimal solutions

Suppliers

● Production update briefing

● Partners day

● STQA<sup>*</sup> audit

● Sharing of higher-quality, timely information

● Improvement of own processes through compliance with

 quality standards

Employees

● Employee meetings

● Global engagement survey

● Career interest survey (Japan)

● Sharing of management messages, direct dialogue

● Support for medium- to long-term career development for

 employees

● Creation of opportunities for promoting and recognizing

 productivity in the working environment and a the spirit of

 challenge among diverse employees

Local communities

● Community contribution

 activities

● Tours of factories and offices

● Coexistence of company with communities

● Creation of employment

● Revitalization of local economies, such as through purchasing

 and logistics


* STQA: Supplier Total Quality Assessment

Analysis and Selection

TEL has ascertained the social and business environment, has considered the risks and opportunities, and made arrangements according to the wishes of all stakeholders. The company has deliberated material issues from the perspectives of their importance to both the building of a sustainable society and importance to the business so as to lead to increasing TEL’s corporate value.

As a result, the company has defined its material issues as product competitiveness, responsiveness to customers, and higher productivity, which are items identified for enhancement in the medium-term management plan, in addition to people and workplaces, which are important as a resource for creating value, and management foundation, which concerns corporate governance, the environment, human rights, and other issues.

Verification of Validity

Validity of the defined material issues was verified by the Review Council, which included external experts.

Material Issues

Material issuesMedium-term goalPriority themes
Product CompetitivenessCreate strong next-generation products Challenge to technological innovation
● Environmental contribution of products 
Responsiveness to CustomersBecome the best and sole strategic partner● Solutions that create value for
 customers
● Improvement of customer satisfaction
Higher ProductivityConstantly pursue higher management efficiency● Quality management
● Improvement of quality in the value
 chain
People and WorkplacesMaximize dreams and drive● Diversity
● Career development
● Work-life balance
● Health and safety
Management FoundationBuild a management foundation for increasing value● Governance and compliance
● Human rights
● Environmental management
● Supply chain management

CSR Goals and Results

TEL establishes annual goals and medium-term goals, based on material issues and their priority themes. Initiatives aimed at the achievement of goals are promoted throughout TEL, and the results are linked to evaluation and improvement with the aim of increasing corporate value further.

Fiscal Year 2019

Material issuesPriority themesAnnual goalsResults

product competitiveness

Tackling technological innovation

・Ensure that 20% or more (three-year
 moving average) of all equipment
 models are new products for next-
 generation technologies

・Achieved 20% or more

・Maintain the previous year’s global
 patent application rate

・Achieved 81.2%
 higher than
 the level of the previous
 fiscal year
Environmental contribution of products

・Reduce per-wafer consumption of
 energy and pure water by 10% by
 fiscal year 2019
 (as compared with fiscal year 2014)

・Achieved for 8 out of 9
 relevant models

responsiveness to customers

Solutions that create value for customers

・Increase TEL’s value to customers

・Achieved sales growth
 for major customers
 on the back of
 vigorous demand
 for memory

・Increase field solutions business sales
 from the fiscal year 2018 level
・Increase of 25% from
 the fiscal year 2018 level

Improvement of customer satisfaction

・Get 3 points (“Satisfied”) or
 more on 100%
 of customer satisfaction
 survey items

・Achieved 84.4%

Higher productivityQuality management・Reduce quality improvement costs
 from the fiscal year 2018 level
・Implemented medium- to
 long-term improvement
 plan that
 incorporates quality
 improvement costs

Improvement of quality in the value chain

・Revise business processes to reduce
 man-hours used for sales operations
 from the fiscal year 2018 level

・Developed systems
 that support
 sales operations

people and workplaces

Diversity

・Double percentage of female
 managers by fiscal year 2021
 (as compared with fiscal year 2018)

・Increased from 1.8%
 in fiscal year 2018
 to 2.0%
 in fiscal year 2019

Career development

・Increase number of training sessions
 attended per person by 10% from
 the fiscal year 2018 level

・Number of
 training sessions
 attended per person: 11.6

Work-life balance

・Reach 70% of take-up rate
 of annual paid leave

・Increased from 64.3%
 in fiscal year 2018
 to 67.9%
 in fiscal year 2019

Health and safety

・Reduce gap between health age*1
 and actual age by 1.5 points
 by fiscal year 2021
 (as compared with fiscal year 2018)
・Ensure that the number of
 workplace injuries
 per 200,000 work hours
 (the total case incident rate)
 is less than 0.5

・Decrease of 0.02 points
・Achieved 0.20

management foundation

Governance

・Improve on issues identified in
 evaluations of the effectiveness
 of the Board of Directors

・Held discussions at offsite
 meetings and during
 exchanges of opinion
 with outside directors,
 in order to
 enhance consideration of
 medium- to long-term
 issues,
 such as growth strategies
・Continued to examine the
 ratio of outside
 directors on
 the Board of Directors,
 as well as its diversity,
 such as gender and
 international mindedness

Compliance

・Establish external hotline and
 reorganize internal hotline
 at group companies overseas

・Conducted selection of
 outside agencies at which
 to establish external
 hotlines
・Reviewed structure
 of internal hotlines
Human rights

・100% participation
 in human rights training

・Achieved 100%

Environmental management

・Reduce energy consumption by 1%
 from the fiscal year 2018 level
 (per-unit basis*2)
 at each plant or office

・Achieved at 5 out of 11
 factories or offices

・Maintain water consumption
 at the fiscal year 2012 level
 according to per-unit basis*3set
 at each plant or office

・Achieved 12 out of 14
 goals

Supply chain management

・Implement supply chain CSR
 assessments for 80% or more of
 suppliers (procurement volume basis)

・Assessed key suppliers
 accounting for more than
 80% of our procurement
 spend

*1 An indication of the risk of lifestyle diseases in years, based on the results of health checkups
*2 Per-unit basis: Calculated using complex weighting of the number of developed evaluation machines, units produced, floor area, and labor-hours for each district
*3 Per-unit basis: Calculated based on floor area and labor-hours, etc. for each district

Fiscal Year 2020

Material issuesPriority themesAnnual goalsMedium-term goalRelevant SDGs 
Product competitivenessTackling technological innovation

・Ensure that 20% or more
 (three-year moving average)
 of all equipment
 models are new products for next
 -generation technologies

Create strong next-generation products

17.jpg

・Maintain the previous year’s global
 patent application rate

Environmental contribution of products

・Reduce per-wafer consumption of
 energy and pure water by 20% by
 fiscal year 2025
 (as compared with fiscal year 2014)

Responsiveness to customersSolutions that create value for customers・Increase TEL’s value to customersBecome the best and sole strategic partner

・Increase sales in field solutions
 business from the fiscal year
 2019 level
Improvement of customer satisfaction

・Get 3 points (“Satisfied”) or more on
 100% of customer satisfaction
 survey items

Higher productivityImprovement of quality・Utilize knowledge and strengths
 within the group
Constantly pursue higher management efficiency

Improvement of customer productivity/yield

・Promote and implement front
 loading and traceability

People and workplacesDiversity・Double percentage of female
 managers by fiscal year 2021
 from 1.8% in fiscal year 2018
Maximize dreams and drive

Career development

・Increase number of training
 sessions attended per person
 by 10% from the fiscal year
 2019 level

Work-life balance・ Reach at least 70% take-up rate of
 annual paid leave
Health and safety

・Reduce gap between health age*1
 and actual age by 1.5 points by
 fiscal year 2021 (as compared with
 fiscal year 2018)

・Ensure that the number of
 workplace injuries per 200,000
 work hours (the total case incident
 rate) is less than 0.5

Management foundation

Governance

・Improve on issues identified in
 evaluations of the effectiveness
  of the Board of Directors

Build a management foundation for increasing value



Compliance・Reorganize internal hotline and
 establish hotline for suppliers,
 etc. at group companies
 overseas (ongoing)
・Achieve at least 90% recognition
 among employees concerning
 internal hotline
・Revise Code of Ethics,
 conduct basic annual training,
 and achieve pledge rate of at least
 90%
Environmental management

・Reduce energy consumption by 1%
 from the fiscal year 2019 level (per-
 unit basis*2) at each factory or office

Maintain water consumption at the
 fiscal year 2012 level according to
 per-unit basis*3 set at each
 factory or office

Supply chain management

Implement supply chain CSR
 assessments for 80% or more of
 suppliers (procurement volume
 basis)

*1 health age: An indication of the risk of lifestyle diseases by age based on the results of health checkups
*2 Per-unit basis: Calculated using complex weighting of the number of developed evaluation machines, units produced, floor area, and labor-hours for each district
*3 Per-unit basis: Calculated based on floor area and labor-hours, etc. for each district