Accelerating the creation of a major virtuous cycle to enhance corporate value

Established the Human Capital Division based on top management’s strong commitment

In the fiscal year ended December 2024, the final year of the previous tok Medium-Term Plan 2024, we established the Human Capital Division to clearly embed President Taneichi’s philosophy that “truly caring for people is our company’s starting point” throughout the organization and to deploy more effective measures. Simultaneously, we formulated four human capital strategies under the Policy on Utilizing Human Capital: Form a diverse talent pool, Human capital development, Promote DE&I, and Improve employee engagement. Through this, we believe we have successfully demonstrated our commitment to valuing people through our actions and clearly communicated to employees our sincere intention to value people and draw out their potential. In addition, we have systematized all human capital initiatives under these four strategies and restructured them into a consistent framework with clear purposes and goals, and we are proud of this significant progress.

Discussions related to the material issue of the pursuit of happiness by human capital

In the deliberation process for formulating new material issues starting in 2025, human capital emerged as the most critical keyword in all discussions regarding other material issues: “Contributions to society through innovation and corporate value enhancement,” “Evolution of Sustainability Governance,” “Global environmental conservation considering future generations,” and “Development of the semiconductor ecosystem.” Therefore, we decided to continue our existing material issue of the pursuit of happiness by human capital while further strengthening it.

Why does the TOK Group continue to focus intently on the material issue of the pursuit of happiness by human capital? Because we firmly believe that employee happiness is the driving force behind the company’s growth. We believe that when each employee is happy, the sum total of that happiness leads to corporate growth. Building on this belief, the Human Capital Division conducted extensive discussions based on engagement surveys and questionnaire results to understand when employees are happy.

The results showed that there are four main factors: having a sense of purpose, experiencing personal growth, feeling that one is contributing, and feeling economically prosperous. The TOK Group continues to pursue human capital happiness by expanding initiatives that help employees experience these four happiness factors more deeply, while focusing on continuous improvement through PDCA cycles that include KPI setting and monitoring through engagement surveys.

Policy on Utilizing Human Capital Since its founding, employees have been the greatest asset of the TOK Group. The company’s human capital policy is based on the following five principles derived from its long-held philosophy that human capital is one of the company’s most important assets. Never forget that business always starts with people. Any discrimination within the company and among employees is strictly prohibited. Ensure full compliance with applicable laws and regulations as well as fair and equal compensation. Educate personnel and promote creativity as a company that develops innovative technologies. Make sure that personnel systems are based upon performance while emphasizing and ensuring transparency.

Creating a major virtuous cycle through win-win relationships

Additionally, I consistently communicate that it’s not enough for the company to strengthen human capital initiatives as mentioned above for the TOK Group to continue achieving sustainable growth and corporate value enhancement, each employee must take ownership and strive for proactive career development. This effort accelerates personal growth and leads to self-actualization, and the successful experiences gained through proactive engagement generate new motivation to take on challenges and fulfill one’s career objectives. Such a corporate culture where employees can enthusiastically take on challenges accelerates the creation of new added value and leads to company growth, social contribution, and ultimately the realization of a happier society. Through these comprehensive initiatives, the TOK Group focuses on creating mechanisms that generate a major virtuous cycle of happiness encompassing all stakeholders, including employees.

Setting employee engagement indicators as quantitative targets in tok Medium-Term Plan 2027

As part of this effort, in the new tok Medium-Term Plan 2027 that started in 2025, employee engagement indicators were set as quantitative targets on par with ROE targets and other metrics. Since introducing employee engagement indicators as evaluation criteria in the executive compensation system in 2022 when the previous medium-term plan began, TOK has firmly established awareness for engagement improvement throughout the company through KPI setting and monitoring. Having reconfirmed the importance of human capital initiatives through the aforementioned discussions, TOK has now set these as quantitative targets in the medium-term plan. By setting these as evaluation criteria for executive compensation and as target values in the medium-term management plan where employees participate as stakeholders, TOK will strongly promote initiatives toward the newly formulated Human Capital Strategy Roadmap.

TOK set value creation ability as an indicator to quantitatively measure the degree of implementation

In implementing the Human Capital Strategy Roadmap, the TOK Group will pursue sustainable value creation by actively investing in human capital, which serves as the source of technology and human connections that build the value chain, while setting value creation ability as an indicator to quantitatively measure the degree of implementation and conducting monitoring. The overall aim of the company is to expand investment in human capital, which is the denominator, and further increase added value, which is the numerator, to maintain consistently high value creation ability. Similar to R&D efficiency, which is a KPI for the development divisions, and based on our corporate culture of long-term R&D and management philosophy, TOK set the numerator as the most recent five years and the denominator as the preceding five years while focusing on human capital management from a long-term perspective. In setting and operating these indicators, management will work closely with the HR, Accounting, Finance, and Corporate Communications/IR departments, incorporating financial insights and the latest knowledge from capital markets through repeated discussions to pursue the three-way integration and maximization of synergies among human capital, financial capital, and social and relationship capital.

FY 2024 employee engagement survey results

Within this, the fiscal year 2024 employee engagement survey results showed the following:

● Employee engagement improved by 1 point compared to 2021
● Employee-friendly environment improved by 4 points

While neither reached their target values, the company confirmed steady improvement with scores improving for 92% of the items of all survey questions. Also, in the following qualitative evaluations:

● Quality and customer orientation symbolized by high quality and close customer relationships
● Competitive compensation, benefits, and accompanying human capital system that are significantly higher than the average in Japan

achieved high scores again following the previous survey, including the new HR system introduced in 2022,

● Continuous improvement of HR systems

was newly recognized as a strength. In addition, last year’s challenges of

● Strategy/Direction and Leadership that drive the evolution of the whole company

showed significant improvement through reinforcement and transformed into strengths. The data confirms that management’s sincere intention to value people and draw out their potential, as mentioned at the beginning, is effectively reaching all employees.

On the other hand,

● Innovative ways of conducting business
● Resource shortages (especially ongoing human capital reinforcement)
● Cross-organizational collaboration

showed room for improvement. Therefore, TOK will accelerate the DX initiatives going forward, while continuing to focus on expanding recruitment and enhancing job rotation.

Addressing expanded risks and opportunities

Intensifying competition for human capital and the rise of emerging markets

The geopolitical risks surrounding the semiconductor industry described in last year’s integrated report have become increasingly acute as the company entered 2025 with semiconductors taking on a more pronounced character as strategic materials that significantly influence each nation’s economic security and national power. Strengthening domestic development and production, as well as risk diversification through multi-site expansion, are advancing in countries worldwide, and related industries, including TOK, continue to face intense borderless competition for talent acquisition both domestically and internationally.

Additionally, South Asian and Southeast Asian countries, such as India, Singapore, Thailand, and Malaysia, are rapidly gaining prominence as new manufacturing and supply players in the semiconductor industry. For the TOK Group, which implements a customer-oriented strategy, further diversification of Group human capital to appropriately respond to further customer diversification is becoming an urgent challenge.

Moreover, in Japan with its declining birth rate and an aging population, the transition from traditional membership-based employment to a job-based employment system is accelerating, especially for young people, and employment mobility is advancing because of the expansion of the job change market. Furthermore, against the backdrop of declining working-age population and extending healthy life expectancy, the further utilization of the skills and expertise of senior employees has become an essential issue for sustainable corporate growth and economic growth.

Strengthening initiatives to further leverage international human capital

In response to these multiple risks and opportunities, the TOK Group is accelerating efforts toward further activation of international human capital and strengthening diversity from a medium- to long-term perspective.

As part of this effort, the Tokyo Ohka Global Employees Shareholding Association plan, which was introduced in August 2023 to align all domestic and international human capital toward performance improvement and corporate value enhancement and to further promote Group-wide value creation, has been very well received by international employees with participation rates remaining at high levels.

Since launching the overseas customer-oriented strategy in earnest with the establishment of TOK Advanced Materials Co., Ltd. (Korea), in 2012, over ten years have passed, and the growth of local international human capital has become notable. The TOK Group is increasing opportunities for secondments and training from overseas locations to Japan as well as promoting cross-border activities by Group employees, such as from Taiwan or Korea to the United States.

As one initiative for strengthening diversity from the medium to long-term perspective, TOK started recruiting Indian engineers in the fiscal year ended December 2024. Although TOK initially approached Indian networks residing in Japan, this did not progress as expected. Through trial and error, the company ultimately achieved recruitment by holding seminars at local universities in India. TOK also gained new recruitment expertise by hiring multiple people to ensure psychological safety when working in Japan. The TOK Group is confident that these experiences will form the foundation for future global recruitment and retention strategies.

Continuing to expand the recruitment of younger employees while starting the operation of the 65-year retirement system with maintained compensation

In order to further strengthen domestic human capital, the Group started operating the 65-year retirement system with maintained compensation described in last year’s integrated report from 2025. In the innovative field of semiconductors, it is crucial to engage in long-term research and development spanning over ten years, alongside maintaining daily responsiveness. The intellectual capital and the technology and expertise accumulated by senior personnel will generate significant value in future business strategies.

This groundbreaking system that started after a three-year preparatory period maintains the same role-based salary for employees over the age of 60 as they received during their careers of active service. By fully utilizing this system, the company aims to enhance its ability to address increasingly complex business and technical challenges while also strengthening the effective transfer of intellectual capital from senior to younger employees, thereby creating a virtuous cycle in the human capital portfolio.

The foundation of talent acquisition has continued with over 100 hires annually for the past three consecutive years with consolidated and unconsolidated employee numbers in the talent pool reaching all-time highs in the fiscal year ended December 2024. By strengthening both new graduate and mid-career recruitment to increase young human capital, TOK successfully reduced the average employee age (unconsolidated) in the fiscal year ended December 2024 by 0.2 years compared to the previous year and by 2.4 years compared to 2019. Going forward, the TOK Group will pursue the realizationof tok Vision 2030 by strengthening the sustainability of human capital in both qualitative and quantitative aspects.

 

Launched executive study sessions focused on developing future management human capital

Since expanding the younger workforce alone is not sufficient for sustainable growth and corporate value enhancement, and developing the next generation of management is also crucial, TOK has been holding executive study sessions since 2023 with a view to cultivating human capital who will lead future management. These sessions target about ten candidates for next-generation management positions and are held four times per year with the president, outside directors, and former company executives as instructors. They function as a venue for cultivating next-generation management by imparting management perspectives, aspirations, and thinking, while also contributing to increased Group-wide synergies through deeper communication among the members.

Formulating the Human Capital Division’s overarching aspiration, ideal personnel profile, and divisional activity policy to continue winning at the world’s forefront

Through material issues, risks and opportunities, and the new medium-term plan initiatives communicated thus far, the Human Capital Division will provide maximum support from a human capital perspective for value creation that allows the TOK Group to continue winning at the world’s forefront. TOK has articulated the overarching aspiration, ideal personnel profile, and divisional activity policy for this purpose as follows with “providing robust support for the potential of those who take on challenges” as the key phrase. Under the tok Medium-Term Plan 2027, the Group will focus on human capital investment and four human capital strategies guided by this key phrase.

■ Overarching aspiration · Promote self-actualization through individual autonomous learning and action to solve more challenging social and technical issues · Provide opportunities and environments where individual capabilities can be fully utilized · Create a virtuous cycle where individual happiness increases from self-actualization and results in enhanced corporate value · Through the above, become a company where all employees can work with enthusiasm and pride ■ Desired candidate profile · People who can think, learn, judge, and act independently while continuing to take on challenges · People who can pursue expertise while maintaining a broad view of the entire business · People with human strengths (curiosity, boldness, integrity, respect, collaboration, completion)  ■ Division activity policy (excerpt) · Ensure formation of a talent pool that supports growth and development · Provide robust support for the potential of those who take on challenges and engage in human capital development · Develop broad-minded management personnel with human strengths and passion · Create environments where individual capabilities can be fully utilized

Further improving corporate value by expanding investment in human capital

The value chain of the TOK Group consists of its advanced technology and the human connections with customers and suppliers. Human capital is the source of these capabilities. Therefore, the TOK Group aims for sustainable added value creation and corporate value enhancement by actively investing in human capital to promote the evolution of technology and human connections.

Under this policy, TOK has expanded human capital investment, continuing annual wage increases of approximately 2% to 5% over the past ten years, and implementing wage increases exceeding 5% for three consecutive years since 2022.

The trend is for per-capita education and training expenses to also increase. Particularly in the fiscal year ended December 2024, TOK conducted DX Readiness training to enhance productivity with over 500 people, more than one-third of executives and domestic employees, gathering from headquarters, development sites, and manufacturing sites for large-scale, high-quality training, which resulted in a significant increase in per-capita education and training expenses. Going forward, under the divisional activity policy of providing robust support for the potential of those who take on challenges, TOK intends to invest generously in education and training that contributes to the TOK Group’s further growth and corporate value enhancement.

Furthermore, TOK expanded its award system to further promote a culture of praise. The Mukai Technology Award, which recognizes outstanding R&D, now features a prize amount maintained above the competitive benchmark, and the company also runs the TOK Shinka Award for fields other than R&D to further improve motivation. In the fiscal year ended December 2024, as part of the effort to strengthen global consolidated management, TOK expanded the award scope to include overseas Group companies, resulting in many overseas employees receiving awards and providing momentum for further strengthening the TOK Group’s global competitiveness.

Strengthening “Form a diverse talent pool” and “Promote DE&I” to realize a major virtuous cycle

As mentioned above, the TOK Group is working on human capital strategies of “Form a diverse talent pool” and “Promote DE&I” to realize a major virtuous cycle. Recognizing that diversification of ideas and risk-taking approaches are essential for continuing to practice the management philosophy and purpose, the TOK Group focuses on the further advancement of female human capital and the further evolution in utilizing international human capital.

The TOK Group achieved a record-high ratio of women in senior and middle management and a record-high ratio of women among the overall employees in the fiscal year ended December 2024 because of the effects of its continued efforts to recruit and retain female employees and its efforts to promote them to senior and middle management. The number of users of the overseas expatriate spouse accompanying leave system introduced in August 2023 is also increasing, which demonstrates the steady progress in building a culture and systems for further advancement of women. Moreover, the use of the male childcare leave system has accelerated over the past three years, reaching an all-time high in the fiscal year ended December 2024. The TOK Group will continue to promote a work environment that makes it easy to balance work and childcare regardless of gender.

The number and ratio of international employees remained at levels similar to the fiscal year ended December 2023, while the localization ratio of overseas managers, one of our material issue KPIs, reached an all-time high of 60.8%. TOK will further expand human capital exchange between Group companies and accelerate the creation of synergies from knowledge and values that transcend nationality.

Indices related to female employee participation (Unconsolidated)*1

	2020/12	2021/12	2022/12	2023/12	2024/12
Ratio of women among new hires (%)	38.5	17.0	26.4	22.4	32.1
Ratio of women among the overall employees (%)	13.7	14.0	14.6	15.3	16.1
Difference in average tenure figures for men and women (years)	9.1	8.4	8.1	7.9	8.2
Ratio of women in senior and middle management (%)	3.2	3.8	4.0	4.5	4.5
Ratio of women on the Board of Directors (%)*2	7.7	7.1	10.0*2	20.0*2	10.0

*1 Employees exclude those seconded from TOK to other companies and contract workers but include people seconded from other companies to TOK

*2 The ratio of women on the Board of Directors is as of April next year.

 

Wage difference between male and female employees(percentage of female wage to male)*1

 

	2020	2021	2022	2023	2024/12
All workers (%)	59.1	65.5	65.4	71.3	68.8
Permanent employees*2 (%)	67.4	69.4	68.2	70.0	67.5
Fixed-term employees*3 (%)	49.8	60.4	61.5	83.4	97.4

*1 Wage: Includes base salary, payment for overtime work, and bonuses but excludes retirement allowance,
commuting allowance, and other allowances
*2 Permanent employees: Secondees exclude those seconded from TOK to other companies
but include persons seconded from other companies to TOK
*3 Fixed-term employees: Include temporary employees but exclude dispatched temporary worker staff

Supplementary explanation concerning difference: Although no gender-based differences in the wage system or policies exist, gender disparities do exist in the distribution of personnel by grade, including management positions, which has led to differences in wages. In the coming years, TOK will promote the appointment of female managers with the goal of doubling the ratio of women in senior and middle management by 2030 (vs. 2020).

Number of users of childcare-related systems (Unconsolidated)

	2020	2021	2022	2023	2024/12
Childcare leave system (number of users)	19	27	31	40	43
Shorter working hours (number of users)	12	16	17	24	32
Childcare time (number of users)	16	13	15	23	69
Childcare leave system (number of male users)	5	8	12	24	29

Number of non-Japanese employees

	2020	2021	2022	2023	2024/12
Number of non-Japanese employees (non-consolidated)	18	18	24	16	15
Number of non-Japanese employees (consolidated)	424	476	524	457	483
Ratio of non-Japanese employees (consolidated, %)	24.2	26.2	26.9	24.3	24.2

* The decrease in 2023 was due to the restructuring of overseas consolidated subsidiaries.

 

Ensuring the health and safety of human capital

Promote health and productivity management

Since formulating the Health Management Declaration in June 2022, the TOK Group has been dedicated to health management. The Group will continue to foster an environment where individuals can achieve self-realization and enhance their well-being both mentally and physically. In the fiscal year ended December 2024, TOK advanced the visualization of presenteeism and will continue to evolve the following measures going forward.

As one of the ways to create an environment where employees can be physically and mentally healthy and to maximize their individuality and abilities, TOK continued to implement Collab Health for the prevention and identification of diseases in cooperation with the Tokyo Ohka Kogyo Health Insurance Society while encouraging officers and employees to maintain and promote their own health conditions. For example, the company launched the My Health Web as a portal to provide health-related information for improving health knowledge and awareness among officers and employees. The company also holds periodic walking festivals with the participation of the president and many officers and employees. In January 2025, TOK was designated a Sports Yell Company by the Japan Sports Agency for the fifth time.

TOK has also expanded the sites where public health nurses are appointed for counseling services on mental and physical health, working to reduce the percentage of employees who smoke while strengthening countermeasures against passive smoking. TOK will continue to enhance the PDCA cycle of health and productivity management through its aim to nourish a health culture where officers and employees autonomously manage their health.

These efforts have been appreciated, and TOK was recognized in the 2025 Certified Health and Productivity Management Outstanding Organizations Recognition Program by the Ministry of Economy, Trade and Industry and Nippon Kenko Kaigi in March 2025 for the seventh time.

By reinvesting the fruits of growth in human capital, TOK will continue to create a major virtuous cycle of corporate value improvement

Through the series of human capital initiatives described above, the TOK Group will continue to invest in human capital and promote the self-realization of each individual by enhancing their skills and capabilities. By contributing to solving complex social and technical challenges, TOK aims to further enhance the added value and competitiveness of our products.

This will allow the company to achieve further revenue growth to enhance corporate value. By reinvesting the fruits into human capital, TOK will continue to create a large virtuous cycle of improving the happiness of each individual and enhancing corporate value.