Supply Chain Management

Approach to Supply Chain Management

To make its entire supply chain sound and sustainable, Tokyo Electron has formulated a procurement policy based on the laws, regulations and social norms of each country, as well as the RBA Code of Conduct, and is promoting activities based on this policy by disseminating it throughout the company and its suppliers. We also promote improvement activities from various perspectives while valuing continuous communication with diverse suppliers, including materials suppliers that handle parts and raw materials, staffing suppliers that provide services and logistics suppliers that handle physical distribution operations.

We strive to create value in the supply chain by working to build relationships of trust with our suppliers, who support our business as partners, and by working together to conduct operations in compliance with global standards. Under the leadership of the Representative Director, President & CEO, issues identified during various activities are shared with relevant divisions for consideration and action on specific improvements.

  1. Compliance with Applicable Laws, Social Norms, and the RBA Code of Conduct

    We engage in procurement activities based on business ethics and with integrity, in compliance with the laws, regulations, and social norms of each country as well as the RBA Code of Conduct.*

    *The RBA Code of Conduct: Responsible Business Alliance Code of Conduct
    https://www.responsiblebusiness.org/code-of-conduct/
    A code of conduct drawn up by the RBA. The RBA Code of Conduct establishes standards to ensure that working conditions are safe, that workers are treated with respect and dignity, and that business operations are environmentally responsible and conducted ethically.

  2. Priority on the Environment

    We conduct procurement with full consideration for reduction of environmental impact and protection of the global environment.

  3. Fair Business Practices

    We continuously seek high-value technologies and create broad opportunities for their business transactions based on the precondition of open competition.

  4. Partnership

    We prioritize relationships of trust based on mutual understanding with suppliers and conduct activities in the pursuit of mutual continuous growth.

  5. Information Management

    We properly manage the confidential information of suppliers that we obtain in the course of business

The Tokyo Electron Group aims for sound and sustainable growth together with suppliers to contribute to the development of society. We will strive to achieve this, with the cooperation of our suppliers. We therefore request your active efforts in the following matters.

  1. Compliance with Applicable Laws, Social Norms, and the RBA Code of Conduct

    In addition to complying with the following matters, we ask our suppliers to observe the applicable laws and social norms in the countries and regions where they engage in business, as well as the RBA Code of Conduct.

    • Compliance with prohibition of child labor, and forced labor, and with other labor-related laws and regulations
    • Respect for fundamental human rights, beginning with the prohibition of discrimination
    • Protection of intellectual property rights
    • Compliance with export/import-related laws and regulations
    • Prohibition of involvement with antisocial forces

    [Conflict minerals] We see our efforts with regard to conflict minerals as part of our corporate social responsibility, and promote all efforts to eliminate any use of raw materials that utilize conflict minerals which have been mined or extracted with illicit funds or by illegal methods, as well as components or parts that contain such conflict minerals. To this end, we are conducting due diligence surveys of our supply chain, using the Conflict Minerals Reporting Template (CMRT) and referring to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. We request that all suppliers work with us in dealing with conflict minerals.

  2. Working Conditions

    We request that suppliers respect fundamental human rights, also prepare independent standards, and provide safe and healthy work environments.

  3. Environmental Activities

    In accordance with "Tokyo Electron Green Procurement Guidelines", we request that, together with the acquisition of ISO 14001 and the development of a structure for environmental conservation, suppliers also actively engage in environmental conservation activities and strive to use parts and materials, and methods of production, that have a reduced environmental impact and that consider resources conservation.

  4. Management System

    We request that management systems are developed and continuously improved, including systems related to safety, health, the environment, product quality and labor, in accordance with the corporate procurement agreement or any specific agreements or arrangements with the Tokyo Electron Group.

  5. Technical Skills

    We request that, in order to provide products and services that conform to customers' needs, suppliers always strive for improved technical skills and technological innovations.

  6. Quality

    We request that suppliers provide high-quality products and services which meet the specifications required by the Tokyo Electron Group, by means of building quality during the design phase, and strengthening change control.

  7. Supply, and Provide Systems

    We request that suppliers provide a stable and flexible supply of products and services to deal with huge volatility in demand. Also, we request that suppliers prepare precautionary steps and continuity plans to reduce risks in the event of unforeseen situation such as disaster.

  8. Price

    We request that products and services are offered at competitive prices, and that continuous effort is made to reduce costs.

  9. Business Management

    For the continuation of our business transactions, we ask that sound and stable business management be implemented. We also request that the financial and company information needed to confirm those matters is disclosed.

  10. Information Security

    We request that a system be provided which prevents the leaking of confidential information and that any information acquired in dealings with the Tokyo Electron Group is strictly controlled.

To maintain a robust supply chain capable of supporting streamlined product manufacturing, TEL has instituted a procurement policy and established a system for administering fair procurement practices based on mutual trust with suppliers. Under the TEL Representative Director and President as the top of the procurement system, the manufacturing companies presidents’ council and the purchasing department manager council are convened to share information on various procurement issues. The council also serves as a venue to address current problems and discuss approaches to improve partnership with suppliers.

Representative Director,President&CEO Development&Production Group Manufacturing Companies President's council Purchasing department manager council

Initiatives in the Supply Chain

CSR Operations

To keep track of our suppliers’ engagement in CSR activities, we have conducted a CSR assessment in areas such as labor, health and safety, the environment and ethics since fiscal year 2014.We analyze the results of the assessments, provide feedback and work together with our suppliers to remediate any issues. In fiscal year 2019, we completely revised the content of the survey based on audit standards stipulated by the RBA and have since conducted surveys on materials*¹, staffing*² and logistics*³ suppliers.

In fiscal year 2021, with the help and understanding of our suppliers, steps were taken to repay workers with respect to cases of employment-related expense burden for forced labor and bonded labor, which had been identified in the previous fiscal year and which have been given particular emphasis in the RBA Code of Conduct. In addition, with respect to cases of false reporting, changes were made in business processes and audits were introduced.

Regarding the human rights issue of “freely chosen employment,” we have expressly stipulated our zero-tolerance policy for forced labor and bonded labor, and by communicating this to our major suppliers, we are promoting initiatives to ensure that all people in our supply chain can work of their own free will.

Supply chain CSR process

*1 Material suppliers: Surveys have been conducted since fiscal year 2014 for suppliers accounting for more than 80% of our procurement spend.
*2 Staffing suppliers: Surveys have been conducted since fiscal year 2019 on 100% of employment agencies and contracting companies (internal contractors).
*3 Logistics suppliers: Surveys have been conducted since fiscal year 2019 on 100% of customs-related operators.

Responsible Procurement of Minerals (Conflict Minerals)

We regard taking action against conflict minerals (3TG*¹) obtained through illegal exploitation, including sources with human rights violations or poor working conditions, an important part of corporate social responsibility. Our resolute goal is to eliminate the use of raw materials made from these conflict minerals, as well as any parts or components containing them. We conduct surveys on conflict materials using the CMRT*² and referring to the OECD*³ Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. In fiscal year 2021, we conducted our seventh annual survey on potential conflict minerals, and as a result, we were able to identify 236 RMAP*⁴ conformant smelters, providing us confidence that 3TG sourced from these smelters were conflict-free. In addition, none of the materials we procured were found to contain 3TG involved in conflict.

*1 3TG: Tantalum, tin, tungsten and gold
*2 CMRT: Conflict Minerals Reporting Template.Survey format for reporting conflict materials, provided by the Responsible Minerals Initiative (RMI), which has established international guidelines on conflict minerals.
*3 OECD: Organization for Economic Co-operation and Development
*4 RMAP: Responsible Minerals Assurance Process. A program promoted and led by the RMI for auditing smelters/refiners that do not use conflict minerals.

Procurement BCP

Percentage of supplier sites by country(FY2021)

As part of our business continuity plans (BCP), we collaborate with the suppliers for disaster preparation. We maintain a database of suppliers’ production sites so that if a crisis arises, we can promptly identify impacted suppliers and quickly collaborate in recovery efforts. During fiscal year 2021, about 22,000 supplier sites were registered, and post-disaster impact surveys were conducted five times.

In addition, we conduct BCP assessments* on our suppliers, analyze their responses and provide them feedback to promote further improvement. In the fiscal year 2021 assessment, improvements in the overall rating level were observed at 20% of suppliers, and improvements in the overall raw score were seen at 43%.

*BCP assessment: A survey that has continuously been conducted to key suppliers accounting for more than 80% of our procurement spend since FY2013

Supply Chain Communication

Cooperation with Suppliers

In addition to daily communications, Tokyo Electron(TEL) holds Production Update Briefings and a TEL Partners Day to enhance relationships with suppliers. At these events, we present and exchange information on the management plans, market trends, business policies, and CSR initiatives. We also ask for continued cooperation in strengthening our supply chain, and honor outstanding suppliers to express our appreciation for their constant support.

Developing strong partnerships with suppliers is essential to improve product quality. Since 2000, TEL has regularly conducted Supplier Total Quality Assessments (STQA) to clarify what is expected of suppliers in terms of maintaining and improving quality.

Before starting business with new suppliers, an STQA is conducted via self-assessment to evaluate their product quality, costs, and information security. The assessment also includes CSR issues, including human rights, ethics, safety, and the environment. If any risks to quality are found, we visit the supplier on-site to explain the problems, our expectations for improvement, and the level of quality we require. After the supplier understands the issues, we ask that they plan and implement improvement measures. We also offer continual support to suppliers until all necessary improvements have been made. We conduct on-site audits once every three years at suppliers who manufacture important components and at suppliers where quality issues have been found.

We focus on the change control education with our suppliers. We aim to reduce the number of quality issues that occur as a result of changes to the design or manufacturing of equipment components and modules. We also aim to reduce the cost of quality improvements. We conduct briefings for suppliers to explain matters such as the importance of change control, and have conducted online training since fiscal 2016.

Supplier Case Studies

Aside from the assessment program described above, Tokyo Electron Kyushu cooperates with suppliers to implement initiatives to reduce the occurrence of defective goods. We visit the production sites of suppliers to learn about their production environment whereby they are able to provide effective improvement proposals. We conduct process analysis together with suppliers to build better processes whereby we promote steady reduction of defects, creating win-win relationships for improved productivity.

Cooperation with industry organizations

In June 2015, TEL joined the RBA*. RBA participation includes adopting the RBA Code of Conduct, a set of standards to improve labor practices, health and safety, environmental impact, and ethics in supply chain. TEL adheres to the RBA Code of Conduct to maintain and strengthen its supply chain, in cooperation with other RBA member companies.

*RBA: Responsible Business Alliance

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