Section on the Applied Materials & Tokyo Electron merger from our report on Japan's electronics sector

1. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
JAPAN’S ELECTRONICS MANUFACTURERS
“MONO ZUKURI”
23nd Edition, September 26, 2013
by Gerhard Fasol, PhD, Eurotechnology Japan KK
http://www.eurotechnology.com/
fasol@eurotechnology.com
Section summarizing the Applied Materials + Tokyo Electron merger. Download full report here:
Latest revision: http://www.eurotechnology.com/store/j_electrical/
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2. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
AGENDA - LIST OF CONTENTS
7
•Executive summary
•“mono zukuri” (= making things) as a philosophy and business model
•Branding
•“Galapagos effect”, Japan-Focus vs. globalization, and business model issues
•Keiretsu industrial family bonds
•Japan’s 8 major consumer electronics manufacturers
•Industry sector overview, financial analysis and trends
•Company overview and analysis
•Hitachi
•Panasonic
•SONY
•Mitsubishi Electric
•Sharp
•Toshiba
•Fujitsu
•NEC
•Japan’s 7 major electronic component makers
•Industry sector overview, financial analysis and trends
•Company overviews and analysis
•Murata
•Kyocera
•TDK
•Alps Electronics
•Nidec
•Nitto Denko
•Rohm
•Other companies covered in this report
•Nintendo
•Canon, RICOH
•Oki
•Citizen
•Summary

3. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
TOKYO ELECTRON ANDTHE MERGER WITH
APPLIED MATERIALS
200

4. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
TOKYO ELECTRON
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5. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013202
Tokyo Electron Limited
TEL
founded as “Tokyo Electron Laboratories” (TEL)
Founded
Founder
Headquarters
Stock Exchange
Consolidated sales
Number of employees
Major share holders
Major business areas
April 6, 1951 as 桜洋行株式会社 (Sakura yoko ?)
Nov 11, 1963,Tokyo Broadcasting Systems (TBS) invests
Tokyo
TokyoTSE 8035 (Tokyo Electron DeviceTSE 2760)
YEN 497 Billion (US$ 5.0 Billion) (March 31, 2013)
10,068 consolidated (March 31, 2010)
TBS Holdings (4.83%), Chase Manhattan Bank (2.76%), JP Morgan
(1.82%)
semiconductor production equipment, electronic components

6. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
TOKYO ELECTRON: REVENUES AND INCOME
203
•BothTokyo Electron’s annual revenues and annual income show strong year-on-year fluctuations due
to the cyclic nature of the semiconductor industry
•Clearly visible is the very strong drop in revenues in 2008 due to the Lehman crisis
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
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annualrevenueYENBillion
US$ 1 Bill.
US$ 2 Bill.
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US$ 8 Bill.
Annual revenues of TokyoElectron
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annualoperatingandnetincomeYENBillion
US$ 0.5 Bill.
0
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TokyoElectron
mean operating income
mean net income
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7. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
TOKYO ELECTRON: MARGINS
204
•Tokyo Electron shows mean annual operating margins of 7.8% and mean net margins of 4.0%
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
30
20
10
0
10
20
30
annualoperatingmargin
TokyoElectron
mean operating margin 7.8
mean net margin 4.0
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8. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
APPLIED MATERIALS
205

9. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
APPLIED MATERIALS:
REVENUES AND INCOME
206
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
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annualrevenueUS$Billion
Annual revenues of AMAT
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AMAT
mean operating income
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10. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
APPLIED MATERIALS: MARGINS
207
•Tokyo Electron shows mean annual operating margins of 10.2% and mean net margins of 7.0%
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
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0
10
20
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annualoperatingmargin
AMAT
mean operating margin 10.2
mean net margin 7.0
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11. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
ACQUISITION OFTOKYO
ELECTRON BY APPLIED
MATERIALS
208

12. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
MAJOR FACTS FORTHE MERGER:
TOKYO ELECTRON - APPLIED MATERIALS
209
•new merged company will be created with new name:
•with combined market capitalization of US$ 31 billion
•dual headquarters inTokyo and Santa Clara
•incorporated inThe Netherlands
•Chairman =Tetsuro Higashi (Tokyo Electron)
•CEO = Gary Dickerson (Applied Materials)
•CFO = Bob Halliday (Applied Materials)
•ownership:
•68% Applied Materials shareholders
•32%Tokyo Electron shareholders

13. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
COMPARING APPLIED MATERIALS AND
TOKYO ELECTRON
210
Applied Materials Tokyo Electron
Revenues (sales)
R&D spending
Employees
Patents
Market capitalization
ratio of combined market
capitalization (=US$ 31.5 billion)
Ownership of merged company
US$ 7.2 billion US$ 5.4 billion
US$ 1.3 billion (18% of sales) US$ 0.8 billion (14.8% of sales)
15,000 10,068
10,500 16,000
US$ 21.46 billion
YEN 991.554 billion
(US$ 10.07 billion)
68.06% 31.93%
68% 32%

14. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
REVENUES
211
•Applied Materials revenues are on the order of 20% higher than revenues ofTokyo Electron
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
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annualrevenueYENBillion
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Annual revenues of TokyoElectron
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annualrevenueUS$Billion
Annual revenues of AMAT
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15. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
INCOME
212
•Mean operating and net income of Applied Materials are approximately twice as high as ofTokyo
Electron
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
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annualoperatingandnetincomeYENBillion
US$ 0.5 Bill.
0
US$ 0.5 Bill.
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TokyoElectron
mean operating income
mean net income
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annualoperatingandnetincomeUS$Billion
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mean operating income
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16. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
MARGINS
213
•Applied Materials margins are substantially higher thanTokyo Electron Margins
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
30
20
10
0
10
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30
annualoperatingmargin
TokyoElectron
mean operating margin 7.8
mean net margin 4.0
c2013EurotechnologyJapanKK
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1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
30
20
10
0
10
20
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annualoperatingmargin
AMAT
mean operating margin 10.2
mean net margin 7.0
c2013EurotechnologyJapanKK
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17. (c) 2013 Eurotechnology Japan KK www.eurotechnology.com Japan’s electronics manufacturers (23rd edition) September 26, 2013
CONTACT AND MORE INFORMATION
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Contact
•Gerhard Fasol PhD
•Eurotechnology Japan KK,Tokyo, Japan
•http://www.eurotechnology.com/
•Mobile +81-90-8594-6291
•fasol@eurotechnology.com
•gfasol@gmail.com
More information:
•reports:http://www.eurotechnology.com/store/
•twitter: http://twitter.com/gfasol/
•website: http://www.eurotechnology.com/
•personal site: http://fasol.com