Tokyo Electron: long-term performance & turning pointsSales (revenue) and profit-margin ratio
Sales (¥ bn)Net margin (%)
1963The instigator of Japan's IC industry: from trading house to manufacturer
Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
FY1970 · unconsolidated
Revenue$34M
Net income$358K
Net margin1.1%
→
FY1993 · consolidated
Revenue$1.4B
Net income$15M
Net margin1.1%
1963Tokyo Electron Laboratories founded in Tokyo with ¥5m capital from Tokyo Broadcasting
1964Agency agreement with Thermco; imports of diffusion furnaces begin
1964Sole agency for Fairchild won; first IC tester delivered to Nippon Electric
1968Tel-Thermco established in Yokohama; Osaka branch opened
1972Tokyo Electron America, Inc. established
1974Kubo Tokuo becomes president; withdrawal from consumer-goods exports decided
1978Export business fully wound up; renamed Tokyo Electron Limited
1980Listed on the second section of the Tokyo Stock Exchange
1981Yamanashi works opened
1983First wholly owned factory built in Kumamoto
1984Telmec absorbed; moved up to the first section of the TSE
1986First operating loss since founding; Kotaka Toshio returns as president
1988All shares of Tel-Thermco acquired
1993Tokyo Electron Sagami and Tokyo Electron Tohoku merged
Everything that Tokyo Electron later became was set in these thirty years, when a firm founded to import and export electronics decided what it would not do. It gave up the export business that earned most of its revenue, wrote down seven conditions for what it would sell instead, and moved — through joint ventures, its own factories and a string of absorptions — from selling other people's machines to building its own.
Five million yen from Tokyo Broadcasting, and the agency rights for IC equipment
In November 1963 Kubo Tokuo (久保徳雄), then an employee of the trading house Nissho (today Nissho Iwai), left the firm and set up Tokyo Electron Laboratories in Minato-ku, Tokyo, with an investment of $13,889 (¥5m) from Tokyo Broadcasting System. Kubo said in later years that he had struck out on his own carrying the dream of building an ideal company, and admitted that behind it lay the experience of not being trusted from above inside a general trading house, which had drained his motivation. He put the word Laboratories into the name because he believed that what would be needed was not a plain trading house but technical service that stood close to manufacturing. The initial business was exporting VTRs and car radios and importing electronic equipment, with a staff of only a few people. In May of the following year, 1964, Kotaka Toshio (小高敏夫), who had handled the import and sale of semiconductor production equipment at Nissho, joined him. Kotaka had come to feel keenly that this was a business unsuited to the constitution of a general trading house, and he meant to try his own idea of the right way to do it at the new company.
A week after joining, Kotaka flew to the United States, and at the end of May 1964 began importing and selling Thermco diffusion furnaces. In its first year the company rented no more than about thirty square metres of office space inside the Tokyo Broadcasting headquarters building, yet in October of that year it beat the general trading houses in open competition to become the sole agent for Fairchild. The first IC tester was paid for with $111,111 (¥40m) raised as a bank loan guaranteed by Tokyo Broadcasting, and delivered to Nippon Electric. In Japan of 1963 and 1964, opinion was overwhelmingly sceptical about putting ICs to practical use. Kotaka went round Nippon Electric, Hitachi, Toshiba and Fujitsu preaching the future of the IC, and personally escorted each firm's head of development to Fairchild's IC plant. In the company newsletter of September 1974, Kotaka reported that about 180 large testers had been delivered in Japan and that the company held the number-one share of the Japanese market.
Full withdrawal from consumer-goods exports, and seven conditions for choosing what to sell
The Nixon shock of August 1971 and the move to floating exchange rates that followed halved the company's profits. The oil shock of 1973 compounded it, and in the year to September 1974 the export division — which accounted for six-tenths of sales — lost about $1M (¥300m). In the newsletter of December that year Kotaka reported internally that recurring profit had fallen from $1.2M (¥330m) in the previous period to $682,594 (¥200m), and that the cause lay in the export division's losses. On the profit side the import division was earning about $1.7M (¥500m). Kotaka looked back on how, in car stereos, Matsushita Communication Industrial and other large makers had entered one after another and put production onto a full-scale footing; there was almost no gap in technology or product, and a small or mid-sized firm could not compete. Every export product was sold OEM under the brand of a European or American company, so the movements of the end consumer could not be read, and when orders from the United States were suddenly cut off, mountains of inventory piled up. After the one managing director who had opposed complete withdrawal most fiercely resigned, and two others left for separate reasons such as starting out on their own, the Kubo-as-president, Kotaka-as-executive-vice-president line-up took office in November 1974.
In the newsletter of December 1974 Kotaka set out a bold contraction and abolition of unprofitable divisions, and listed seven conditions for choosing what the company would handle: that the market be growing from here; that rivals be few and the product not the mainstay of a large maker; that others not be able to enter easily; that the customers be first-class companies so that collection of payment gave no worry; that handling it not require large amounts of capital; that it not fall in price while held in stock; and that added value and margins be high. Exports of car radios, car stereos and calculators plainly failed those seven conditions. The withdrawal proceeded in stages: export sales of calculators were stopped in September 1976, and of car stereos and transceivers in September 1978. Exports fell from $35M (¥9bn) in the year to September 1977 to $13.9M (¥3bn) the following period, and reached zero in the year to September 1979. Kubo said the company had pulled out because it had learned that, in markets expanding that fast, it could not win without a large sales network and large capital.
From a hybrid trader-manufacturer to a manufacturer
In the year to September 1979, imported goods made up about 75 per cent of the products handled; the probers of the subsidiary Telmec and the diffusion furnaces of Tel-Thermco, the joint venture with Thermco, accounted for a little over 20 per cent of the whole. Since Tel-Thermco had been established in Yokohama in 1968, the diffusion furnaces had been made in Japan. Products manufactured in-house by affiliates accounted for 25 per cent of sales, and even on imported systems the company took on work that belonged to the manufacturer's domain — modifications to suit customer requirements and software development. Kubo explained that these products demanded a high level of technical skill in after-sales service and heavy investment in developing that capability, so that the recurring margin came out closer to a manufacturer's than a trader's. In October 1978 the company changed its name to Tokyo Electron Limited, and in June 1980 it listed on the second section of the Tokyo Stock Exchange. Of a Japanese market for semiconductor production equipment worth about $441.1M (¥100bn) in fiscal 1980, the company held roughly 25 per cent — first place — and in three product lines, diffusion furnaces, high-pressure oxidation furnaces and low-pressure CVD furnaces, its domestic share reached 70 per cent each.
In 1983 it built its first wholly owned factory, in Kumamoto; in February 1984 it absorbed the IC-equipment maker Telmec; and in March of the same year it moved up to the first section of the Tokyo Stock Exchange. On promotion to the first section, president Kotaka asked that the company's industry classification be changed from trading to electrical machinery, and was refused; he said that the in-house factory, the absorption and the first-section listing were all actions taken because he did not want to be called a trading house, and were meant to attract engineers. Sales, which had grown to $629.3M (¥150bn) in the year to September 1985, fell to $500.2M (¥84bn) in the year to September 1986 in the semiconductor slump, and operating profit turned to the first loss since the founding. In October 1986 president Yoshida Minoru (吉田稔) resigned, and Kotaka, who had stepped up to chairman two years earlier, returned as president. Kotaka said Yoshida had offered his resignation to take responsibility for the deteriorating results, though testimony also circulated that a motion to remove him had been tabled. The move in-house continued afterwards: in February 1988 the company acquired all the shares of Tel-Thermco, and in April 1993 it merged Tokyo Electron Sagami and Tokyo Electron Tohoku.
1994Globalisation, its light and its shadow, up to the Applied Materials plan
Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
FY1994 · consolidated
Revenue$1.9B
Net income$50M
Net margin2.7%
→
FY2015 · consolidated
Revenue$5.1B
Net income$593M
Net margin11.7%
1994Tokyo Electron Europe Ltd. established in Britain
1994Overseas sales switched wholly from distributors to direct sales
1997Barry Mayson becomes president of the American subsidiary
1998Tokyo Electron Arizona, LLC established
2000All shares of Supercritical Systems, Inc. acquired
2001All shares of Timbre Technologies, Inc. acquired
2002First consolidated net loss, ¥19.9bn, ends the run of profits
2003Sato Kiyoshi named president on the nomination committee’s recommendation
2003Tokyo Electron Device listed; Shanghai and TEL Technology Center America set up
2010Operating loss ¥2.2bn and net loss ¥9.0bn after the Lehman shock
2012Entry into solar-panel production equipment via the Oerlikon Solar acquisition
2013Merger of equals agreed with Applied Materials, Inc.
2014Exit from the solar business; extraordinary loss of ¥47.7bn
2015Merger agreement with Applied Materials dissolved
As the leading chipmakers moved out of Japan, Tokyo Electron rebuilt the way it reached them, cutting out the distributors and selling directly through wholly owned subsidiaries — and its own products went from just over half of sales to almost all of them. The same two decades brought the first losses in its history, a governance rebuild that followed them, a failed venture outside semiconductors, and finally an attempt to solve the cost of development by merging with the world's largest equipment maker.
Customers move out of Japan, and the distributors are cut for direct sales
Until the early 1990s Japanese firms — NEC, Toshiba, Hitachi — led the world in DRAM technology, but by the middle of the decade Samsung Electronics and Hyundai Electronics Industries of South Korea had risen. In the United States there was Intel, holding some seventy per cent of the world CPU share, along with Motorola and Texas Instruments and the other giants of the MPU business. The most advanced customers had moved outside Japan, and the route by which customer requirements were fed back into the products had to be rebuilt. In October 1994 the company switched sales of semiconductor production equipment in Europe and the Americas entirely from distributors to direct sales through wholly owned subsidiaries. In the United States it moved the headquarters of Tokyo Electron America to Austin, Texas, securing a site of 200,000 square metres, on the scale of a factory plot. At Austin it built the first clean room outside Japan to reproduce the environment of a semiconductor fab. In Europe it established Tokyo Electron Europe Ltd. in Britain in April 1994 as the regional holding company for the continent.
The switch to direct sales showed up first in the American figures: the company's share of the United States equipment market, 8 per cent at the end of 1995, had risen to 34 per cent by the end of 1999. After Onozato Mitsuru (小野里充), who had led the launch, collapsed with a heart attack in the winter of 1996 and returned to Japan, the man who became president of the American arm in April 1997 was Barry Mayson (バリー・ラポーゾ), who had once been stationed in Japan as an executive of a joint-venture partner. He greatly increased the number of American salespeople and engineers, expanding the American subsidiary from 300 staff at his appointment to 1,200. The share of sales accounted for by the company's own products rose from 55.8 per cent in the year to March 1994 to 94.9 per cent in the year to March 2000, and the shift from trading house to equipment maker advanced. In the year to March 1999 the semiconductor slump cut consolidated sales to $2.8B (¥314bn), two-thirds of the previous period, and consolidated operating profit to $56.2M (¥6bn), a fifth. Even so, by the year to March 2001 it had recovered to sales of $6.0B (¥724bn) and net profit of $510.2M (¥62bn).
A first net loss reshapes governance, and the exit from solar
The collapse of the IT bubble produced a consolidated net loss of $158.8M (¥20bn) in the year to March 2002, breaking a run of profitable results that had lasted from the founding to the year to March 2001. The year to March 2003 brought a recurring loss of $1.7M (¥200m) and a net loss of $358M (¥42bn), two loss-making years in succession. The company had an unwritten rule: one loss was a danger signal, two in a row and the management changed. Higashi Tetsuro (東哲郎), who had become president in 1996 at the age of 46, separated directors from executive officers in 1998, and in 1999 set up a remuneration committee and disclosed the pay of the four representative directors individually. In November 2000 he created a nomination committee of three directors. On 10 March 2003 the board, acting on the nomination committee's recommendation, chose Sato Kiyoshi (佐藤潔), 46 years old and with no experience as an officer, as the next president; in June, Higashi moved up to chairman. To lower the break-even point Sato cut about 1,000 people, a tenth of the workforce, consolidated factories, and — to answer demand from digital consumer electronics with their short product lives — instructed that the five-to-six-month manufacturing cycle be halved.
By the year to March 2008 sales had grown to $8.8B (¥906bn) and operating profit to $1.6B (¥169bn), but the Lehman shock brought the year to March 2010 down to an operating loss of $25.1M (¥2bn) and a net loss of $102.5M (¥9bn). In July 2009 president Takenaka Hiroshi (竹中博司) said that while fixed costs would be cut by close to $911.5M (¥80bn) across the previous and current years, research and development spending — the lifeline of the company's technology — would be held at its existing level. Looking for a source of earnings outside semiconductors, in 2009 the company signed a distribution agreement with Oerlikon Solar of Switzerland and began selling production lines for thin-film silicon solar panels. It bought the business in 2012, but panel production equipment remained in chronic oversupply, and even as conversion efficiency improved and costs came down the investment could not be recovered. At the end of March 2014 the company withdrew from manufacturing, development and sales, keeping only the maintenance of equipment already delivered. Goodwill impairment arising from the solar business and from a revision of the plan for TEL NEXX brought an extraordinary loss of $450.7M (¥48bn). The year to March 2014 ended with operating profit of $304.2M (¥32bn) but a net loss of $183.3M (¥19bn).
The merger plan with Applied Materials, and its collapse
On 24 September 2013 Tokyo Electron announced a merger with Applied Materials of the United States, the world's largest maker of semiconductor production equipment. Chairman and president Higashi told the press conference that the aim was to become a genuinely international company. Simply added together, the two companies' sales came to $13.3B (¥1.3tn) and their market share reached 25 per cent. The plan was to establish a holding company in the Netherlands with both operating companies beneath it, structured so that Applied Materials' shareholders would hold 68 per cent of the holding company's shares. Higashi, however, was to be chairman of the board and Gary Dickerson chief executive of the new company, with the remaining directors drawn five from each side. In July 2014 the name of the new company, Eteris, was announced. One aim of the merger was to contain research and development costs: as the industry moved to next-generation semiconductors — 3D memory, finer logic geometries — development costs for equipment kept rising, and standardising parts and facilities was expected to yield about 500 million dollars of savings in the three years after the merger.
The two companies filed for antitrust review in eight countries, and clearance came in Singapore and Germany. The review proved difficult, however, and completion of the merger, originally set for September 2014, was postponed three times. The combination would have held about thirty per cent of the world share in front-end process equipment, and the review extended to some forty product markets. On 27 April 2015 the two companies announced that the merger agreement had been dissolved, and Higashi explained that they had been unable to reconcile themselves to the United States Justice Department's view that even products still under development and not yet on the market fell within the scope of the review. On the same day Tokyo Electron announced an increased dividend and a share buyback of up to $991.6M (¥120bn), but the share price fell 14 per cent the following day, the 28th. Higashi said there had been things gained in the course of the merger negotiations, and switched to growing alone. He said development spending, $684.5M (¥75bn) in the year to March 2016, would be raised to the $735M (¥80bn) and then $826.9M (¥90bn) level, and that acquisitions aimed at obtaining the technology needed for three-dimensional structures remained possible in future.
2016Going it alone, and the profit surge of the generative-AI era
Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
FY2016 · consolidated
Revenue$6.1B
Net income$715M
Net margin11.7%
→
FY2026 · consolidated
Revenue$15.4B
Net income$3.6B
Net margin23.5%
2016Kawai Toshiki becomes president; development unified across equipment lines
2018Sales pass ¥1 trillion for the first time, at ¥1,130.7bn
2019Medium-term plan targets ¥2 trillion sales and a 30% operating margin
2022Sales reach ¥2,003.8bn, two years ahead of the plan
2022New medium-term plan to March 2027: ¥3 trillion sales, 35% operating margin
2022New development building approved at Tokyo Electron Kyushu, Koshi
2023Each ordinary share split into three
2024Sales to China reach ¥813.3bn, 44 per cent of the total
2025Generative-AI demand lifts sales to ¥2,431.5bn
2025New production building announced at Tokyo Electron Miyagi, about ¥104bn
2025Process development building at Koshi completed, about ¥47bn
2026Sales ¥2,443.5bn and operating profit ¥624.9bn
Denied the scale it had tried to buy, Tokyo Electron spent the following decade proving it could compound alone — sales rose from $6.1B (¥664bn) in the year to March 2016 to $15.4B (¥2.44tn) in the year to March 2026, with operating margins near thirty per cent. The company chose margin over volume, kept spending on development through every downturn, and found the demand of the generative-AI era waiting at the other end.
Going it alone, and growth past the trillion-yen mark
When Kawai Toshiki (河合利樹) became president in January 2016, the previous year's merger with Applied Materials of the United States had foundered on antitrust grounds, and the route of absorbing soaring development costs through a merger was closed. Kawai chose to grow alone and unified the development organisation, which had been divided by equipment type. The reason was that at the leading edge the coordination between tools matters more than the performance of any single tool, and Kawai said there were only three equipment makers in the world with a product line-up as broad as his own. Around the same time Samsung Electronics of South Korea was ahead in 3D NAND flash for SSDs, and Toshiba decided to put $7.9B (¥860bn) into next-generation semiconductors over the three years from fiscal 2016. The semiconductor equipment industry entered a boom described as the first bubble in ten years: sales in the year to March 2017 were $7.1B (¥800bn), and in the year to March 2018 $10.2B (¥1.13tn). Over the same two years the operating margin rose from 19.5 per cent to 24.9 per cent.
In May 2019 Tokyo Electron announced a medium-term management plan targeting sales of $18.3B (¥2tn) and an operating margin above 30 per cent within five years. The memory market then entered a correction, compounded by the trade friction between the United States and China, and sales in the year to March 2020 fell to $10.6B (¥1.13tn) with operating profit of $2.2B (¥237bn). Even so Kawai shared multi-generation technology roadmaps with customers and set out a plan to spend $3.7B (¥400bn) on development over the three years from that period. In the autumn of 2020 he described a sense of crisis shared across Japan's equipment and materials firms: technology advances so fast that stopping development even for a year is fatal. Coater/developers, which handle the application and development of circuit patterns, held ninety per cent of the world share and 100 per cent for EUV lithography, and Kawai said there was no leading-edge semiconductor that did not pass through one of his machines. Sales were $12.7B (¥1.4tn) in the year to March 2021 and $15.3B (¥2tn) in the year to March 2022, and the financial model of the medium-term plan was achieved two years early.
Managing for margin, and reaching two trillion yen
In the year to March 2022 sales were $15.3B (¥2tn), operating profit $4.6B (¥599bn) and the operating margin 29.9 per cent. The gross margin was 45.5 per cent, five points above the 40.2 per cent of the year to March 2016. Against a world semiconductor equipment market that expanded about 40 per cent in the preceding year, 2021, Tokyo Electron's equipment division grew sales about 60 per cent, and its world ranking among equipment makers rose to third. Kawai attributed growing faster than the market to not chasing short-sighted profit protection, and to having increased research and development spending year on year even in periods when the market turned to negative growth. The year to March 2023 also held sales of $15.7B (¥2.21tn) and an operating margin of 28.0 per cent. The shareholder-return policy — a consolidated payout ratio of 50 per cent combined with a floor on the annual dividend — was maintained, share buybacks were layered on opportunistically, and in April 2023 each ordinary share was split into three.
In June 2022 Tokyo Electron set out a new medium-term management plan with the year to March 2027 as its final year. It called for sales above $22.8B (¥3tn), an operating margin above 35 per cent and an ROE above 30 per cent, with more than $7.6B (¥1tn) for research and development and $3.0B (¥400bn) for capital investment over five years. Research and development in the preceding five years had come to about $4.6B (¥600bn), so this was an increase of nearly seventy per cent. Kawai said that almost no company satisfies sales of three trillion yen and a 35 per cent operating margin at the same time, and that the company would hold to margin by shipping equipment that raises its customers' productivity. Preparing for a forecast that the semiconductor market would double to one trillion dollars by 2030, in 2023 he also set out a plan to add 10,000 people over five years to a workforce of about 17,000, roughly 2,000 of them new domestic graduates. At the end of the year to March 2025 the workforce stood at 19,573.
Generative-AI demand and the recovery to 2.4 trillion yen
In the year to March 2024 sales fell 17 per cent year on year to $12.1B (¥1.83tn) and operating profit 26 per cent to $3.0B (¥456bn). Emerging Chinese semiconductor makers piled on investment for mature generations, and sales to China came to $5.4B (¥813bn), 44 per cent of the total. In the following year to March 2025 generative AI changed the composition of demand, and enquiries rose for leading-edge logic for AI servers, DRAM for HBM applications and advanced packaging. Kawai said the share of sales from equipment for AI semiconductors would rise from 15 to 30 per cent in a single year. Sales recovered to $16.2B (¥2.43tn) and operating profit to $4.7B (¥697bn), with an operating margin of 28.7 per cent and a gross margin of 47.1 per cent. The China share of sales fell from the high forties in the first half of that period to the high thirties in the second half, but leading-edge products carry high added value and the effect on margins was said to be small. The impact of the additional United States restrictions on China that took effect in December 2024 was seen as limited, while the company did not expect the restrictions to be relaxed.
In etching the company holds a strong position in DRAM capacitor processing, and its world share in dielectric films reached 60 per cent in calendar 2024. Cryogenic etching equipment will begin contributing to sales from calendar 2026, when full volume production of 400-layer-class 3D NAND begins. In back-end processes too, sales of temporary bonders and debonders for HBM reached $200.5M (¥30bn) in the year to March 2025, about three times the level of the year to March 2023. On the other hand etching equipment, which accounts for more than thirty per cent of new equipment sales, remains second in the world, and semiconductor industry consultants have pointed out that the gap in technical capability against Lam Research of the United States has become a management issue. In August 2025 a former employee was prosecuted by the Taiwanese authorities for illegally obtaining trade secrets relating to TSMC's 2-nanometre technology, and Tokyo Electron dismissed him for disciplinary reasons. In the year to March 2026 sales were $15.4B (¥2.44tn) and operating profit $4.0B (¥625bn), short of the medium-term plan's targets of three trillion yen in sales, a 35 per cent operating margin and a 30 per cent ROE.
The turning points, read in full: what was at stake, what was chosen and what the revenue did around it. The Japanese edition is the edition of record and carries the sourced dossier behind each decision — background, options weighed, outcome — linked under every decision.
Key decision · 1963
Founded on an investment from Tokyo Broadcasting (1963)
The shape of the company was set by whom it partnered with
The core of this founding decision is that two men short of money traced their personal connections and landed a powerful backer, one of the heavyweights of the business establishment. What mattered was less the five million yen itself than the credit conferred by having Tokyo Broadcasting standing behind them. That a company of six employees could take the gamble the following year of buying a forty-million-yen IC tester was possible for no other reason than the debt guarantee from Tokyo Broadcasting. The fact that an unknown young man could draw an investment out of a figure called the monster of the business world rested on ties formed while posted abroad, and it shows that the frame of this company was set not only by what it would sell but by whom it would partner with.
The choice of business domain deserves equal attention. Stepping deliberately into ICs, of which most were sceptical, and choosing a path of raising quality through technical service rather than a commission business, anticipated at the moment of founding the pattern of niche concentration and high added value that would run through the company ever after. The postscript that five million yen produced close to seven billion in profit eighteen years later says that this first choice was not mere luck. Whom to have at your back, and on what ground to fight — the character of Tokyo Electron was already inscribed in this founding decision.
Full withdrawal from consumer-goods exports (1974)
The weight of choosing to throw away the breadwinner
The core of this management decision lies not in the defensive tidying-up of a loss-making business, but in letting go, ahead of time, of a business that still earned six-tenths of sales, because its structural decline could be foreseen. Had the company sought to protect near-term revenue, there was a road of propping up exports and working the profitability back into shape. Kubo and Kotaka did not take it because they judged that consumer-goods exports did not suit their own constitution, and that there was no escape from a war of attrition with the large makers. The pain of throwing away the breadwinner extended as far as a change in the management line-up — the resignation of the managing director who had opposed it most fiercely — and it was by no means a smooth decision.
That the resources freed by the withdrawal were directed into IC production equipment by an explicit yardstick, the seven selection criteria, became the blueprint for the high-margin constitution of later years. The pattern of taking a large share of a narrow market and raising added value through technical service was put into words at the moment of this decision. Rather than chasing the scale of revenue, how to concentrate resources on the business where one's own strengths tell — Tokyo Electron's first step in shedding the skin of a trading house to become a manufacturer can be seen in this decision to let the breadwinner go.
The full switch of overseas sales to direct selling (1994)
Transplanting the pattern that won at home to the world
The essence of this decision is not simply expansion abroad but the transplanting, unchanged, of the winning pattern built at home. Station engineers beside the most advanced fabs, read the next requirement out of maintenance work and feed it back into the equipment — this circuit, which had underpinned the company's advantage in Japan, could not be reproduced overseas with a distributor in the middle. To reproduce it worldwide, the selling apparatus itself had to be rebuilt as direct sales, connecting straight to the user. The clean room in Austin and the appointment of a local national at the top both follow the same single logic: pick up the customer's own voice by the shortest route.
The timing of the decision deserves equal attention. The period around 1994, when the company committed to direct sales, was one of falling revenue and profit in a semiconductor slump. Rebuilding an overseas sales network from scratch while results were painful must have been a considerable burden, but that advance investment coincided with the changing of the guard in the semiconductor industry, and led within six years to a structural shift out of dependence on the home market. Change the machinery at the bottom of the cycle and harvest when the next wave comes — the foundation on which Tokyo Electron climbed to become a global company can be seen in this change to its sales structure.
The merger with Applied Materials: agreed 2013, abandoned 2015
Why the world’s first and third agreed a merger of equals, then lost it to the antitrust review
On 24 September 2013 Tokyo Electron announced a merger with Applied Materials of the United States, the world's largest maker of semiconductor production equipment. Chairman and president Higashi told the press conference that the aim was to become a genuinely international company. Simply added together, the two companies' sales came to 1.3 trillion yen and their market share reached 25 per cent. The plan was to establish a holding company in the Netherlands with both operating companies beneath it, structured so that Applied Materials' shareholders would hold 68 per cent of the holding company's shares. Higashi, however, was to be chairman of the board and Gary Dickerson chief executive of the new company, with the remaining directors drawn five from each side. In July 2014 the name of the new company, Eteris, was announced. One aim of the merger was to contain research and development costs: as the industry moved to next-generation semiconductors — 3D memory, finer logic geometries — development costs for equipment kept rising, and standardising parts and facilities was expected to yield about 500 million dollars of savings in the three years after the merger.
The two companies filed for antitrust review in eight countries, and clearance came in Singapore and Germany. The review proved difficult, however, and completion of the merger, originally set for September 2014, was postponed three times. The combination would have held about thirty per cent of the world share in front-end process equipment, and the review extended to some forty product markets. On 27 April 2015 the two companies announced that the merger agreement had been dissolved, and Higashi explained that they had been unable to reconcile themselves to the United States Justice Department's view that even products still under development and not yet on the market fell within the scope of the review. On the same day Tokyo Electron announced an increased dividend and a share buyback of up to 120 billion yen, but the share price fell 14 per cent the following day. Higashi said there had been things gained in the course of the negotiations, and switched to growing alone.
This English edition follows the Japanese one chapter by chapter. The Japanese edition remains the edition of record: it carries the source-by-source citations, the financial tables and the shareholder and executive records. 日本語版（詳細）— Tokyo Electron full history in Japanese →
Tokyo Electron Limited — 有価証券報告書 (annual securities reports), including the 沿革 corporate-history section, and the company's IR materials: press releases, results briefings and the medium-term management plan briefing of 8 June 2022.
異端の男とその一族 : 火の玉集団・東京エレクトロンの奇跡 (The Maverick and His Clan: The Miracle of the Fireball Squad, Tokyo Electron), April 1982 — the source for the founding, the Fairchild agency and the withdrawal from exports.
Nikkei Business — 日経ビジネス: 31 May 1982 and 26 April 1984, both carrying remarks by president Kotaka Toshio, the latter under the title 超商社、超メーカー大いなる野望; 2 January 1995; 9 October 2000.
証券 (Securities), vol.32 no.6 (375), June 1980, published by the Tokyo Stock Exchange — NDL Digital Collections.