TSMC ANNUAL REPORT 2012 (I)
TSMC VISION & CORE VALUES
TABLE OF CONTENTS
TSMC’s Vision
Our vision is to be the most advanced and largest technology and foundry services provider to fabless
companies and IDMs, and in partnership with them, to forge a powerful competitive force in the
semiconductor industry.
To realize our vision, we must have a trinity of strengths:
(1) be a technology leader, competitive with the leading IDMs
(2) be the manufacturing leader
(3) be the most reputable, service-oriented and maximum-total-benefits silicon foundry.
TSMC Core Values
Integrity – Integrity is our most basic and most important core value. We tell the truth. We believe the record
of our accomplishments is the best proof of our merit. Hence, we do not brag. We do not make commitments
lightly. Once we make a commitment, we devote ourselves completely to meeting that commitment. We
compete to our fullest within the law, but we do not slander our competitors and we respect the intellectual
property rights of others. With vendors, we maintain an objective, consistent, and impartial attitude. We do
not tolerate any form of corrupt behavior or politicking. When selecting new employees, we place emphasis
on the candidates’ qualifications and character, not connections or access.
Commitment – TSMC is committed to the welfare of customers, suppliers, employees, shareholders, and
society. These stakeholders all contribute to TSMC’s success, and TSMC is dedicated to serving their best
interests. In return, TSMC hopes all these stakeholders will make a mutual commitment to the Company.
Innovation – Innovation is the wellspring of TSMC’s growth, and is a part of all aspects of our business, from
strategic planning, marketing and management, to technology and manufacturing. At TSMC, innovation
means more than new ideas, it means putting ideas into practice.
Customer Trust – At TSMC, customers come first. Their success is our success, and we value their ability to
compete as we value our own. We strive to build deep and enduring relationships with our customers, who
trust and rely on us to be part of their success over the long term.
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1. Letter to Shareholders
2. Company Profile
2.1 An Introduction to TSMC
2.2 Market/Business Summary
2.3 Organization
2.4 Board Members
2.5 Management Team
3. Corporate Governance
3.1 Board of Directors
3.2 Major Resolutions of Shareholders’
Meeting and Board Meetings
3.3 Taiwan Corporate Governance
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5. Operational Highlights
5.1 Business Activities
5.2 Technology Leadership
5.3 Manufacturing Excellence
5.4 Customer Trust
5.5 Employees
5.6 Material Contracts
6. Financial Highlights
6.1 Financial Status and Operating Results
6.2 Risk Management
7. Corporate Social Responsibility
7.1 Environmental, Safety and Health (ESH)
Implementation as Required by the Taiwan
Management
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7.2 TSMC Education and Culture
Foundation
7.3 TSMC Volunteer Program
7.4 Social Responsibility Implementation
Status as Required by the Taiwan
Financial Supervisory Commission
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8. Subsidiary Information and
Other Special Notes
8.1 Subsidiaries
8.2 Status of TSMC Common Shares and
ADRs Acquired, Disposed of, and
Held by Subsidiaries
8.3 Special Notes
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Financial Supervisory Commission
3.4 Code of Ethics and Business Conduct
3.5 Regulatory Compliance
3.6 Internal Control System Execution Status
3.7 Status of Personnel Responsible for the
Company’s Financial and Business
Operation
3.8 Information Regarding TSMC’s
Independent Auditor
3.9 Material Information Management
Procedure
4. Capital and Shares
4.1 Capital and Shares
4.2 Issuance of Corporate Bonds
4.3 Preferred Shares
4.4 Issuance of American Depositary Shares
4.5 Status of Employee Stock Option Plan
4.6 Status of Employee Restricted Stock
4.7 Status of New Share Issuance in Connection
with Mergers and Acquisitions
4.8 Financing Plans and Implementation
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1. Letter to Shareholders
Dear Shareholders,
In 2012 TSMC achieved record revenue and net profit, despite a decline in world semiconductor industry revenue related to slower
global economic growth. Our performance was driven largely by the growing global demand for mobile IC products, such as tablets and
smartphones. Designers of these products are rapidly migrating to 28-nanometer technology, where TSMC has commanded a very strong
position among the semiconductor foundry players.
As we continued to expand our technology leadership with multiple years of intensified R&D and capital investment, our leadership position
in mobile IC was strengthened by our close partnerships with customers, who count on TSMC to deliver the advanced technology nodes that
enable their innovative designs with higher speed, lower power consumption and smaller form factor. We believe TSMC is well positioned to
meet the strong demand for mobile products in the next several years.
In 2012 we accelerated the installation of 28-nanometer capacity and production at an unprecedented pace in order to meet customers’
strong demand. As a result, TSMC’s shipment of 28-nanometer wafers increased thirty-fold in 2012 from its 2011 level. Other achievements
in 2012 include:
● Our total wafer shipments reached 14.04 million 8-inch equivalent wafers.
● Our advanced technologies (65-nanometer and beyond) reached 62 percent of total wafer revenue.
● Our share of the total semiconductor foundry segment increased for the third consecutive year and reached 45 percent.
2012 Financial Performance
Capacity Plan
17%
14%
11%
2011
2012
2013
Sales Breakdown by Technology
Outlook
13.22 million
15.09 million
16.71 million
2011
2012
2013
44%
38%
33%
56%
62%
67%
Innovations in mobile computing products have changed the way people live, and advancement of semiconductor technologies enabled these
changes. Through our efforts in the past 25 years, TSMC has achieved technology leadership, manufacturing excellence, and the trust of our
customers. Allied with our customers, suppliers, and ecosystem partners, we believe TSMC is well positioned to expand the technology frontier,
enable innovations further, and to fulfill our mission as the trusted technology and capacity provider for the global logic IC industry for years to
come.
Annual Growth Rate
Capacity: 8-inch equivalent wafers
≥ 90nm
2013 wafer shipment is expected to be
≤ 65nm
approximately 15 million 8-inch equivalent wafers.
TSMC became the world’s first foundry to provide a full system integration, turn-key solution to customers in 2012. Our backend technologies
included advanced interconnect, production-ready fine pitch silicon interposer with through silicon via (TSV) and chip stacking, and advanced
wafer-level-chip scale packaging (WLCSP). We can offer customers design tools, technology and mass production capability.
TSMC has gained important customer wins and segment share not only through manufacturing excellence, but also through other key
competitive advantages, not the least of which is our open design ecosystem, the Open Innovation Platform® (OIP). OIP becomes an even more
important competitive advantage for TSMC as customers engage the exploration-solution-validation design cycle at 20- and 16-nanometer
geometries, which represent a new frontier in precision technology manufacturing.
Consolidated revenue totaled NT$506.25 billion, an increase of 18.5 percent over NT$427.08 billion in 2011. Net income was NT$166.16
billion and diluted earnings per share were NT$6.41, both increased 23.8 percent from the 2011 level of NT$134.20 billion net income and
Corporate Developments
NT$5.18 diluted EPS.
In US dollars, TSMC generated net income of US$5.62 billion on consolidated revenue of US$17.12 billion, compared with net income of
US$4.57 billion on consolidated revenue of US$14.54 billion for 2011.
To accelerate the development of key next-generation lithographic technology, in August 2012 TSMC joined the ASML Holding N.V. Customer
Co-Investment Program. The program’s scope includes development of extreme ultraviolet (EUV) lithography technology and 450-millimeter
lithography tools. Under the agreement with ASML, TSMC made an investment of €838 million to acquire 5 percent of ASML’s equity, and will
commit €277 million, spread over five years, to ASML’s R&D program.
Gross profit margin was 48.1 percent compared with 45.4 percent in 2011, and operating profit margin reached 35.8 percent compared
with 33.1 percent a year earlier. Net profit margin was 32.8 percent, an increase of 1.4 percentage points from the previous year’s 31.4
Honors and Awards
percent.
Technological Developments
We are augmenting our strong position in 28-nanometer technology with the development of our 20-nanometer System-on-Chip (20-SoC)
and 16-nanometer FinFET, or field-effect transistor with three-dimensional architecture. Both 20-nanometer and 16-nanometer FinFET
are making progress in R&D and represent state-of-the-art leading-edge technologies, not just in foundry but in the whole semiconductor
industry. In November 2012, we began to accept customers’ test chips for our 20-nanometer SoC technology, and volume production
is scheduled to begin in 2014. In 2012, we completed the 16-nanometer FinFET technology definition and began development, and
we successfully taped out process development test vehicle and demonstrated functional yield on the FinFET-based SRAM bit-cells. Risk
production of TSMC’s 16-FinFET is expected to follow 20-SoC by one year. This is a somewhat faster cadence than our previous generations,
enabled by the similarity in interconnect density shared between 20-SoC and 16-FinFET. At the same time, pathfinding for 10-nanometer
node has started with multiple patterning on immersion scanners. Innovative processes are being developed to deal with the unique
challenges of this technology node.
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TSMC in 2012 received numerous honors and awards for our efforts in sustainability, corporate governance, investor relations, and innovation
from Corporate Governance Asia, EuroMoney, FinanceAsia, Institutional Investor, IR Magazine, CommonWealth Magazine, and Global Views
Magazine.
As a leader in green manufacturing, we were honored that TSMC’s Fab 12, Phases 1 and 2, manufacturing facility earned the world’s first LEED1
“Platinum” certification for a semiconductor wafer fab.
Dow Jones Sustainability Indexes (DJSI) not only included TSMC in its index for the 12th consecutive year, but also named TSMC the
semiconductor sector leader for the second time since 2010, highlighting our dedication to corporate social responsibility, leadership in adopting
international sustainability management standards, and continued innovation in the economic, environmental, and social dimensions.
Morris Chang
Morris Chang
Chairman and Chief Executive Officer
Chairman and Chief Executive Officer
Footnote 1: LEED stands for the “Leadership in Energy and Environmental Design,” a rating system run by the U.S. Green Building Council that
conducts the certifi cation process.
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506.2
2012 Revenues NT$ Billion
Reaching Another Record High
2008 Revenues NT$ Billion
Exceeding US$10 Billion for the First Time
333.2
166.2
2000 Revenues NT$ Billion
Exceeding NT$100 Billion for the First Time
1997 Revenues NT$ Billion
ADRs Listed on New York Stock Exchange
43.9
19.3
1994 Revenues NT$ Billion
Listed on Taiwan Stock Exchange
1988 Revenues NT$ Billion
First Profitable Year
1.0
1987 TSMC Founded
2. Company Profile
2.1 An Introduction to TSMC
TSMC’s subsidiaries “TSMC Solid State Lighting Ltd.” and “TSMC
Solar Ltd.” also respectively engage in the researching, developing,
TSMC is the world’s largest pure-play semiconductor foundry.
designing, manufacturing and selling of solid state lighting devices as
Founded on February 21, 1987 and headquartered in Hsinchu,
well as related products and systems, and solar-related technologies
Taiwan, TSMC pioneered the business model of focusing solely on
and products.
manufacturing customers’ semiconductor designs. As a pure-play
semiconductor foundry, the Company does not design, manufacture,
The Company is listed on the Taiwan Stock Exchange (TWSE) under
or market semiconductor products under its own brand name,
ticker number 2330, and its American Depositary Shares trade on the
ensuring that TSMC does not compete directly with its customers.
New York Stock Exchange (NYSE) under the symbol “TSM”.
With a diverse global customer base, TSMC-manufactured microchips
are used in a broad variety of applications that cover various
segments of the computer, communications, consumer, industrial
and other electronics markets.
2.2 Market/Business Summary
2.2.1 TSMC Achievements
● 16nm FinFET technology (16FF) is under development to provide
best value in speed/power optimization to meet next generation
● 0.18μm BCD second generation is in risk production stage. It
offers worldwide competitive power LDMOS Rds(on) performance
products requirements in CPU (Central Processing Unit), GPU
and with wide voltage spectrum from 6V to 70V for multiple
(Graphics Processing Unit), APU (Accelerated Processing Unit),
applications in Computing, Communication and Consumer markets.
FPGA (Field-Programmable Gate Array), Networking and mobile
computing applications, including smartphones, tablets and
● 0.18μm and 0.25μm high-precision analog process was fully
released, and offers TFR (Thin Film Resistor) and high linearity
high-end SoC (System-on-Chip) devices.
MIM (Metal-Insulator-Metal) for performance-driven mixed-signal
● 20nm System-on-Chip technology (20-SoC) is under
applications.
development to provide the migration path from 28nm for both
performance-driven products and mobile computing applications.
In addition, TSMC further strengthened its comprehensive
● 28nm High Performance (28HP) technology for performance-driven
development of specialty technologies in 2012, including the release
markets like CPU, GPU, APU, FPGA and high-speed networking
of 0.5μm ultra high voltage power IC technology, 90nm/65nm
applications.
smartcard, 40nm automotive and Backside Illumination CMOS Image
● 28nm High Performance Mobile computing (28HPM) technology
Sensor (BSI CIS), which successfully migrated to 65nm from 0.11μm
for tablets, smartphones, and high-end SoC applications.
and to volume production in 12-inch fabs. In 2012, TSMC offered
● 28nm Low Power (28LP & 28HPL) and RF (28HPL-RF) technology
a motion sensor 3D modular MEMS (Micro Electro Mechanical
for mainstream smartphones, application processors, tablets, home
Systems) with 30μm thick MEMS structure and wafer level bonding
entertainment and digital consumer applications.
for hermetic seal of the MEMS device. These first wave customers
● 40nm general purpose technology for performance-driven markets
like CPU, GPU, FPGA, HDD, Game Console, Network Processor and
have adapted the modular MEMS structure with separate ASIC driver
chip for accelerometer application and are now in production. TSMC
Annual capacity of the manufacturing facilities managed by TSMC,
segment of the global semiconductor industry, with an estimated
including subsidiaries and joint ventures, totaled 15.09 million 8-inch
market segment share of 45%. TSMC achieved this result amid
● 40nm low power and RF technology for smartphones, DTV (Digital
rule in the first quarter 2013 as a general offering. These specialty
Television), STB (Set-Top-Box), game and wireless connectivity
technologies are key differentiators from our competitors and provide
equivalent wafers in 2012. In Taiwan, TSMC operates three advanced
intense competition from both established players and relatively new
applications.
customers more added value.
In 2012, TSMC maintained its leading position in the total foundry
Gigabit Ethernet applications.
will offer fully integrated CMOS 3D modular MEMS with design
12-inch wafer fabs, four 8-inch wafer fabs, and one 6-inch wafer fab.
entrants to the business.
TSMC also manages two 8-inch fabs at wholly owned subsidiaries:
WaferTech in the United States and TSMC China Company Limited. In
Leadership in advanced process technologies is a key factor in TSMC’s
addition, TSMC obtains 8-inch wafer capacity from other companies
strong market position. In 2012, 77% of TSMC’s wafer revenue
in which the Company has an equity interest.
came from manufacturing processes with geometries of 0.13μm and
below; 62% of TSMC’s wafer revenue came from 65nm processes
TSMC provides customer service through its account management
and below.
and engineering services offices in North America, Europe, Japan,
China, South Korea, and India. The Company employed more than
37,000 people worldwide as of the end of 2012.
With TSMC’s focus on customer trust, the Company continuously
strengthened its Open Innovation Platform® (OIP) initiative
in 2012 with additional innovative services. During the 2012
TSMC continued to lead the foundry segment of the semiconductor
TSMC Technology Symposium and the 2012 Design Automation
industry in both advanced and “More-than-Moore” process
technologies. Already the first foundry to provide 65nm and 40nm
production capacity, TSMC in 2012 also reached full volume
Conference of IEEE/ACM, the Company revealed TSMC 20nm
Reference Flow, CoWoSTM Reference Flow, the fourth revision of
radio frequency (RF) reference design kit, and 20nm Custom Design
production of 28nm featuring 28HP & 28HPM for high performance
Reference Flow, to highlight the success of design enablement
and 28LP & 28HPL for low power, and began the initial customer
tape out of 20nm technology. In addition to general-purpose logic
through OIP. The OIP Ecosystem Forum, which was held in October
2012 at San Jose, California, was well attended by both customers
process technology, TSMC supports the wide-ranging needs of its
and ecosystem partners to demonstrate the value of collaboration
customers with embedded non-volatile memory, embedded DRAM,
through OIP to foster innovations.
Mixed Signal/RF, high voltage, CMOS image sensor, MEMS, silicon
● 40nm eFlash for non-volatile memory technologies under joint
development for high-end automotive application.
● 55nm low power RF technology for WLAN (Wireless Local Area
2.2.2 Market Overview
Network), Bluetooth and other handheld applications.
We estimate that the worldwide semiconductor market in 2012
● 55nm & 65nm 5V LDMOS (Laterally Diffused Metal Oxide
reached US$308 billion in revenue, a 2% decline compared to 2011.
Semiconductor) for power management application.
Total foundry, a manufacturing sub-segment of the semiconductor
● 55nm and 85nm ultra-low power technology for flash controller
industry, generated total revenues of US$34 billion in 2012, or 16%
applications.
YoY growth.
● 65nm joint developed eFlash technology qualified and in
production for industrial/automotive microcontroller and smartcard
applications.
● 80nm & 0.11μm high voltage process for high resolution HD720
and FHD display driver IC, which could support Retina to Super
Retina display quality in smartphones.
● 90nm uLL (Ultra Low Leakage) eFlash technology qualified and in
production for ASIC (Application-Specific Integrated Circuit) and
microcontroller applications.
● 0.13μm new generation BCD (Binary Coded Decimal) process for
mobile computing is in risk production stage. It offers worldwide
competitive power LDMOS Rds(on) performance for better power
efficiency and allows micro controller integration to further increase
germanium technologies and automotive service packages.
TSMC continued to advance the semiconductor roadmap in 2012.
battery life.
Examples of technologies the Company either developed or rolled out
include:
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2.2.3 Industry Outlook, Opportunities and Threats
Requirements of lower power, higher performance and integration
2.2.4 TSMC Position, Differentiation and Strategy
To address the dual challenges of falling wafer prices and fiercer
Industry Demand and Supply Outlook
Following 5% growth in 2011, foundry segment growth accelerated
significantly by 16% in 2012, mainly driven by fabless market share
gain over IDM and process technology advancement.
We forecast total semiconductor market to grow 3% YoY in 2013.
Longer term, increasing semiconductor content in electronics devices,
continuing market share gain of fabless, and increasing in-house ASIC
from system companies, foundry sales are expected to display much
stronger growth than the projected 4% compound annual growth
rate (CAGR) for the total semiconductor industry from 2012 through
2017.
As an upstream supplier in the semiconductor supply chain, the
condition of the foundry segment is tightly correlated with the
market health of the 3Cs: communications, computer and consumer.
● Communications
The communications sector, particularly the handset segment, posted
a modest 5% growth in unit shipments for 2012. Smartphones,
which have much higher semiconductor content, have been leading
the growth of the sector.
The continuing transition to 4G/LTE handsets will bring positive
momentum to the market. Smartphones with increasing
for key computer components such as CPU, GPU, Chipset,
etc., should drive product design demand for leading process
technologies.
● Consumer
After flat sales in 2011, the consumer sector lost momentum in
2012 with a decline of 2% in aggregated unit shipment growth YoY.
Economic uncertainties have stifled buyers’ appetite for consumer
electronics products, and the growth of mobile computing devices
has also impacted the consumer electronics sales.
Moving forward, new product launches such as the introduction of a
new generation of game consoles will stimulate new interest in video
games. Low-priced, large screen TVs will kindle end-consumer buying
interest. And, government subsidy programs in multiple countries
should drive the adoption of DTV.
Meanwhile, increasing innovations in the consumer sector have also
encouraged new usage models, such as integration of touch sensing,
motion recognition, high-resolution and 3D display. Besides the need
for advanced technologies, “More-than-Moore” technologies such
as CMOS Image Sensor (CIS), High-Voltage (HV) drivers, embedded
memory, micro-controller and MEMS are becoming prominent
requirements. With its comprehensive technology portfolio, TSMC
will be able to capitalize on these trends.
performance, lower power and more intelligent features will continue
Emerging Applications
to propel the buying interest of new handsets in 2013. The growing
Emerging new applications such as tablets are increasing
popularity of low-end smartphones in the emerging countries is also
contributions to foundry segment revenue. Led by Apple’s iPad,
a new catalyst driving the growth of the sector.
around 155 million tablets shipped in 2012 compared with 68
Low power IC is an essential requirement among handset
2013 as more models are introduced by other OEMs. We forecast the
manufacturers. The System-on-Chip (SoC) design for more optimized
tablet market will grow with a 23% CAGR from 2012 through 2017,
cost, power and form-factor (i.e. device footprint), plus the appetite
and become a strong growth driver for both the semiconductor
million units in 2011. The strong sales momentum will continue in
for higher performance to run complicated software, will continue to
industry and foundry segment.
accelerate the migration to advanced process technologies in which
TSMC is already the leader.
Supply Chain
● Computer
The computer sector’s unit shipment growth declined 3% YoY
in 2012 after a close to flat year in 2011. Cautious spending in
developed countries and budget competition from tablet products
were among the factors causing the weak demand.
Moving into 2013, PC market will decline. While pessimism regarding
the economic outlook will overhang the sector, new innovative
features and form-factors such as detachable keyboard, hybrid
notebook and the introduction of the new Windows 8 operating
system are expected to stimulate PC demand.
The electronics industry consists of a long and complex supply chain,
the elements of which are highly dependent and correlated with
each other. At the upstream IC manufacturing level, it is important
for IC vendors to have sufficient and flexible supply to support
the dynamic market situation. The foundry vendors are playing an
important role to ensure the health of the supply chain. As a leader
in the foundry segment, TSMC provides leading technologies and
large-scale capacity to complement the innovations created along the
downstream chain.
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competition from other semiconductor manufacturing companies,
TSMC continually strengthens its core competitiveness and properly
deploys its short-term and long-term technology and business
development plans in order to enhance its Return on Investment
(ROI) and growth objectives.
● Short-term semiconductor business development plan
1) Substantially ramp up the business and sustain market segment
share of advanced technologies with further investment in
capacity.
2) Maintain market segment share of mainstream technology by
expanding business into new customer and market segments with
off-the-shelf technologies.
3) Grow business with IDMs by establishing a closer relationship on
technology development.
● Long-term semiconductor business development plan
1) Continue developing the leading edge technologies consistent
with Moore’s law.
2) Broaden “More-than-Moore” business contribution by further
developing derivative technologies.
3) Further expand TSMC’s business and service infrastructure into
emerging and developing markets.
Position
As the leader in the semiconductor foundry segment, TSMC
commanded a 45% share of this segment in 2012, with total
consolidated revenue of US$17.1 billion. In terms of geographic
distribution of net sales, 69% came from companies headquartered
in North America; 14% from the Asia Pacific region, excluding China
and Japan; 9% from Europe; 5% from China; and 3% from Japan.
By end product application, 19% of TSMC’s net sales came from the
computer sector, 50% from communications, 9% from consumer
products, and 22% from industrial and standard products.
Differentiation
TSMC’s leadership position is based on a trinity of key differentiating
strengths: technology leadership, manufacturing excellence, and
customer trust. As a technology leader, TSMC has consistently been
first among pure-play foundries in developing the next generation
of leading-edge technologies. As a manufacturing leader, TSMC
is renowned for its yield management, and offers best-in-class
designer/developer support services to expedite time-to-market and
time-to-volume. As to customer trust, TSMC works closely with
its customers on end-to-end collaboration to optimize design and
manufacturing efficiencies. And as a pure-play foundry, TSMC does
not compete with its customers. TSMC continually builds on this
trinity of strengths to provide the best overall value to its customers.
Strategy
TSMC is confident its differentiating strengths will enable it to
leverage the attractive growth opportunities in the foundry sector
going forward. TSMC works constantly to ensure that these strengths
are maintained and improved. For example, TSMC is intensively
working on the leading-edge 20nm and 16nm FinFET technologies
to maintain its technology leadership position. Numerous efforts
are also underway to ensure manufacturing excellence, such as
continuing enhancement of Design-For-Manufacturing (DFM)
support services to increase yield and efficiency. TSMC also expanded
its Open Innovation Platform® initiative, a set of ecosystem interfaces
and collaborative components initiated and supported by TSMC that
efficiently empowers innovation throughout the supply chain to
enhance timely innovation. TSMC conducted customer reviews and
surveys throughout 2012 to better understand customer needs and
wants, and accordingly may adjust its offerings in response, thereby
further strengthening its relationship with customers.
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2.3 Organization
2.3.1 Organization Chart
Audit Committee
Compensation
Committee
Shareholders’
Meeting
Board of Directors
Chairman
Vice Chairman
CEO
Internal Audit
Finance and Spokesperson
Co-COO Office
Legal
Research and Development
Information Technology
Materials Management and
Risk Management
Operations
Human Resources
Worldwide Sales and Marketing
Business Development
North America
Corporate Planning Organization
Quality and Reliability
Note: Senior Vice President of R&D Dr. Shang-yi Chiang, Senior Vice President of Operations Dr. Mark Liu, and Senior Vice President of Business Development Dr. C.C. Wei were appointed as
Executive Vice Presidents and Co-Chief Operating Officers of TSMC on March 2, 2012. Following these appointments, the three Executive VPs and Co-COOs, as well as TSMC’s Finance and
Legal organizations, will report directly to the Chairman and Chief Executive Officer Dr. Morris Chang. All other organizations will report to the three Executive VPs and Co-COOs. The new
organizational structure became effective on March 5, 2012.
2.3.2 Major Corporate Functions
North America
Research and Development
● Advanced and mainstream technology research and development,
● Sales operations, market development, field technical support and
service for North America customers
exploratory research and development, design services and
Corporate Planning Organization
technology platform development
Information Technology
● Operation resources planning, production and demand planning,
and business process integration
● Technology system integration, business system integration, IT
Quality and Reliability
infrastructure and communication service, IT security, IT productivity
● Quality and reliability management
and quality management
Materials Management and Risk Management
● Purchasing, warehousing, import and export, logistics support,
environmental protection, industrial safety, health management,
and risk management
Operations
Finance and Spokesperson
● Corporate finance, accounting, investor relations, public relations,
tax, financial planning, investment management, and strategic
program
● Corporate spokesperson
Legal
● Product development, manufacturing technology, mainstream fabs,
300mm fabs, affiliate fabs, and back-end technology and service
● Corporate legal affairs, litigation, commercial transactions, patents
and other intellectual property management, compliance and
Human Resources
regulatory work
● Human resources management and organizational development
Internal Audit
● Proprietary information protection (PIP) and physical security
● Internal control risk monitoring and independent assessment of
management
compliance
Worldwide Sales and Marketing
● Brand management, market analysis & forecast, customer service
and regional sales operations or service and field technical support
for Japan, Asia, China and Europe
Business Development
● Develop semiconductor foundry business in mobile computing,
computer, consumer electronics, communication and industrial
related products; identify new applications and markets, and solidify
customer relationship
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2.4 Board Members
2.4.1 Information Regarding Board Members
Title/Name
Chairman
Morris Chang
Vice Chairman
F.C. Tseng
Date Elected
Term Expires
Date First
Elected
06/12/2012
06/11/2015
12/10/1986
Shareholding When Elected
Current Shareholding
Spouse & Minor Shareholding
Shares
123,137,914
%
0.48%
Shares
123,137,914
%
0.47%
Shares
135,217
%
0.00%
Selected Education, Past Positions & Current Positions at Non-profit Organizations
B.S. and M.S. degrees in Mechanical Engineering, MIT
Ph.D. in Electrical Engineering, Stanford University
Former Group Senior Vice-President, Texas Instruments Inc.
Former President & COO, General Instrument Corporation
Former Chairman, Industrial Technology Research Institute
Life Member Emeritus of MIT Corporation
Member of National Academy of Engineering, U.S.
06/12/2012
06/11/2015
05/13/1997
34,662,675
0.13%
34,662,675
0.13%
132,855
0.00%
Ph.D. in Electrical Engineering, National Chengkung University, Taiwan
Former President, Vanguard International Semiconductor Corp.
Former President, TSMC
Former Deputy CEO, TSMC
Chairman, TSMC Education and Culture Foundation
As of 02/28/2013
Selected Current Positions at TSMC and Other
Companies
CEO, TSMC
Chairman of:
- TSMC China Company Ltd.
- Global Unichip Corp.
Director of:
- TSMC Solar Ltd.
- TSMC Solid State Lighting Ltd.
- Vanguard International Semiconductor Corp.
- digimax, Inc.
Independent Director, Compensation Committee
member & Chairman of the Financial Statement
and Internal Control Review Committee, Acer Inc.
Director
National Development Fund, Executive Yuan
(Note 1)
Representative:
Johnsee Lee
06/12/2012
06/11/2015
12/10/1986
1,653,709,980
6.38%
1,653,709,980
6.38%
08/06/2010
(Note 2)
-
-
-
-
06/12/2012
06/11/2015
06/03/2003
33,665,046
0.13%
32,687,046
0.13%
06/12/2012
06/11/2015
05/07/2002
-
-
-
-
-
-
-
-
-
-
Ph.D. in Chemical Engineering, Illinois Institute of Technology
MBA, University of Chicago
Graduate of Harvard Business School’s Advanced Management Program
Independent Director of:
- Taiwan Polysilicon Corp.
- Zhen Ding Technology Holding Ltd.
- Far Eastern New Century Corp.
Former Principal Investigator, Argonne National Laboratory
Former Senior Manager, Johnson Matthey Inc.
Former President, Industrial Technology Research Institute
Chairman, Development Center for Biotechnology
President, Taiwan Bio Industry Organization
-
Ph.D. in Material Science, Cornell University, U.S.
Former President, Vanguard International Semiconductor Corp.
Former Executive Vice President, Worldwide Marketing and Sales, TSMC
Former COO, TSMC
Former President & CEO, TSMC
Former President of New Businesses, TSMC
Advisor, Executive Yuan, R.O.C.
-
Honours Degree in Engineering, Loughborough University
Fellow of the Royal Academy of Engineering
Chair of Council and Senior Pro-Chancellor, Loughborough University, UK
Former Chairman and CEO, ICL Plc
Former CEO and Chairman of the Executive Committee, British Telecommunications Plc
Former Vice President, the British Quality Foundation
Chairman & CEO, TSMC Solar Ltd.
Chairman & CEO, TSMC Solid State Lighting Ltd.
Director, TSMC subsidiary
President, TSMC subsidiaries
Director, Motech Industries, Inc.
Chairman, NXP Semiconductors N.V., the
Netherlands
Director of:
- Sony Corporation, Japan
- L.M. Ericsson, Sweden
- Mentor Graphics Corporation Inc., Oregon, U.S.
Member of:
- The Longreach Group Advisory Board
- The Sony Corporation Advisory Board
- New Venture Partners LLP Advisory Board
Advisor to Apax Partners LLP
Board Mentor, CMi
Senior Advisor to Rothschild, London
06/12/2012
06/11/2015
04/14/2000
1,480,286
0.01%
1,480,286
0.01%
16,116
0.00%
BSEE and MSEE in National Chiao Tung University, Taiwan
Honorary EE Ph.D. in National Chiao Tung University, Taiwan
Honorary Doctor of Technology, The Hong Kong Polytechnic University
Honorary Fellowship, University of Wales, Cardiff, UK
Honorary Doctor of International Law, Thunderbird, American Graduate School of International
Management, U.S.
Group Chairman, iD SoftCapital
Director of:
- Acer Inc.
- Qisda Corp.
- Wistron Corp.
- Nan Shan Life Insurance Co., Ltd.
Co-Founder, Chairman Emeritus, Acer Group
Former Chairman & CEO, Acer Group
Chairman, National Culture and Arts Foundation, R.O.C.
(Continued)
017
Director
Rick Tsai
Independent Director
Sir Peter Leahy Bonfield
Independent Director
Stan Shih
2
0
1
2
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S
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A
N
N
U
A
L
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016
Title/Name
Date Elected
Term Expires
Date First
Elected
Independent Director
Thomas J. Engibous
06/12/2012
06/11/2015
06/10/2009
Independent Director
Gregory C. Chow
06/12/2012
06/11/2015
06/09/2011
Shareholding When Elected
Current Shareholding
Shares
-
-
%
-
-
Shares
-
-
%
-
-
Spouse & Minor Shareholding
Shares
-
-
%
-
-
Selected Education, Past Positions & Current Positions at Non-profit Organizations
Bachelor Degree in Electrical Engineering, Purdue University
Master Degree in Electrical Engineering, Purdue University
Honorary Doctorate in Engineering, Purdue University
Member, National Academy of Engineering
Member, Texas Business Hall of Fame
Woodrow Wilson Award
Former Executive Vice President and President of the Semiconductor Group, Texas Instruments Inc.
Former President and CEO, Texas Instruments Inc.
Former Chairman of the Board, Texas Instruments Inc.
Former Chairman of the Board of Catalyst
Honorary Director of Catalyst
Honorary Trustee, Southwestern Medical Foundation
Bachelor Degree in Economics, Cornell University, 1951
Master Degree in Economics, Chicago University, 1952
Ph.D. in Economics, Chicago University, 1955
Academician, Academia Sinica, R.O.C.
Member, American Philosophical Society
Fellow of the American Statistical Association
Fellow of the Econometric Society
Former President, Society of Economic Dynamics and Control
Honorary Doctor’s, Zhongshan University
L.L.D., Lingnan University
Hon. Dr. of Business Adm, Hong Kong University of Science and Technology
Honorary Professor of Fudan, Guangxi, Hainan, Nankai, Shandong, Remin, Huazhong U of Science
and Tech, Graduate School of Management of Chinese Academy of Sciences, Zhongshan Universities
and the City University of Hong Kong
Assistant Professor, M.I.T., 1955-1959
Associate Professor, Cornell University, 1959-1962
Research Staff Member and Manager of Economics Research, IBM Thomas Watson Research Center,
1962-1970
Adjunct Professor, Columbia University, 1964-1970
Professor and Director, Econometric Research Program, Princeton University, 1970-2001 (In 2001
Princeton University renamed the Program the Gregory C. Chow Econometric Research Program in
his honor.)
Class of 1913 Professor of Political Economy, Princeton University, 1976-2001
Chairman of the American Economic Association’s Committee on Exchanges in Economics with the
People’s Republic of China, 1981-1994
Co-chairman of the U.S. Committee on Economics Education and Research in China, 1985-1994
Advisor to Prime Ministers and Chairmen of the Economic Planning and Development Council of the
Executive Yuan in Taiwan on economic policy from the mid 1960’s to the early 1980’s
Advisor to the Prime Minister and the State Commission for Restructuring the Economic System on
economic reform in China, 1985-1989
Professor of Economics and Class of 1913 Professor of Political Economy, Emeritus, Princeton
University, 2001-Present
Lecturer with the Rank of Professor, Princeton University
Independent Director
Kok-Choo Chen
06/12/2012
06/11/2015
06/09/2011
-
-
-
-
5,120
0.00%
2
0
1
2
T
S
M
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A
N
N
U
A
L
R
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P
O
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018
Remarks:
1. No member of the Board of Directors held TSMC shares by nominee arrangement.
2. No member of the Board of Directors had a spouse or relative within two degrees of consanguinity serving as a manager or director at TSMC.
Note 1: Major Shareholder of TSMC’s Director that is an Institutional Shareholder.
Director that is an Institutional Shareholder of TSMC
National Development Fund, Executive Yuan
Major institutional shareholders of National Development Fund: Not applicable.
Note 2: Mr. Johnsee Lee was appointed as the representative of National Development Fund on August 6, 2010.
Top 10 Shareholders
Not Applicable
Inns of Court School of Law, England
Barrister-at-law, England
Advocate & Solicitor, Singapore
Attorney-at-law, California, U.S.
Senior Vice-President & General Counsel, TSMC, 1997-2001
President, National Culture & Arts Foundation, R.O.C., 1995-1997
Vice-President, Echo Publishing, Taiwan, 1992-1995
Partner, Chen & Associates Law Offices, Taiwan, 1988-1992
Partner, Ding & Ding Law Offices, Taiwan, 1975-1988
Lawyer, Heller, Erhman, White & McAuliffe, San Francisco, California, U.S., 1974-1975
Lawyer, Sullivan & Cromwell, New York, U.S., 1971-1974
Lawyer, Tan, Rajah & Cheah, Singapore, 1969-1970
Professor, Soochow University, 2001-2008
Professor, National Chengchi University, 2001-2004
Chair Professor, National Tsing Hua University, 1999-2002
Associate Professor, Soochow University, 1981-1998
Lecturer, Nanyang University, Singapore, 1970-1971
Sponsor and Founder, two Taiwan heritage site museums (Taipei Story House and Futai Street Mansion)
Advisor, Executive Yuan, R.O.C.
Advisor, Taipei City Government
Director of TSMC Education and Culture Foundation
Director of National Culture and Arts Foundation, R.O.C.
Director of Republic of China Female Cancer Foundation
Selected Current Positions at TSMC and Other
Companies
Chairman, J. C. Penney Company Inc.
None
None
019
2.4.2 Remuneration Paid to Directors (Note 1)
Director's Remuneration
Base Compensation (A)
Severance Pay and
Pensions (B) (Note 4)
Compensation to
Directors (C)
Allowances (D)
(Note 6)
Total Remuneration
(A+B+C+D) as a % of
2012 Net Income
Compensation Earned by a Director Who is an Employee of TSMC or of TSMC’s Consolidated Entities
Base Compensation,
Bonuses, and Allowances (E)
(Note 7)
Severance Pay and
Pensions (F) (Note 4)
Employee Profit Sharing (G)
(Note 8)
Exercisable Employee
Stock Options (H)
(Note 9)
Granted Employee
Restricted Stock (I)
(Note 10)
Total Compensation
(A+B+C+D+E+F+G) as
a % of 2012 Net Income
(Note 11)
From TSMC
From All
Consolidated
Entities
From TSMC
From All
Consolidated
Entities
From TSMC
(Note 5)
From All
Consolidated
Entities
From TSMC
From All
Consolidated
Entities
From TSMC
From All
Consolidated
Entities
From TSMC
From All
Consolidated
Entities
From TSMC
From All
Consolidated
Entities
From TSMC
From All Consolidated
Entities
Cash
Stock (Fair
Market
Value)
Cash
Stock (Fair
Market
Value)
From TSMC
From All
Consolidated
Entities
From TSMC
From All
Consolidated
Entities
From
TSMC
From All
Consolidated
Entities
Compensation
Paid to Directors
from Non-
consolidated
Affiliates
(J)
30,347
30,347
731
731
71,351
71,351
3,894
3,894
0.06%
0.06%
105,844
158,749
0
561
105,751
0
105,751
0
0
0
0
0
0.19%
0.22%
2,490
Unit: NT$ thousands
Title/Name
Chairman & CEO
Morris Chang (Note 2)
Vice Chairman
F.C. Tseng
Director
Rick Tsai (Note 3)
Independent Director
Sir Peter Leahy Bonfield
Independent Director
Stan Shih
Independent Director
Thomas J. Engibous
Independent Director
Gregory C. Chow
Independent Director
Kok-Choo Chen
Director
Na tional Development Fund, Executive
Yuan
Representative:
Johnsee Lee
Note 1: Remuneration policies, standards/packages, procedures, the linkage to operating performance and future risk exposure: The base compensation for the Chairman, Vice-Chairman and directors are determined in accordance with
the procedures set forth in TSMC’s Articles of Incorporation. The Articles of Incorporation also provides that the compensation to directors shall be no more than 0.3% of earnings available for distribution and directors who
also serve as executive officers of TSMC are not entitled to receive compensation to directors. The distribution of compensation to directors shall be made in accordance with TSMC’s “Rules for Distribution of Compensation to
Directors”.
Note 2: No compensation to directors was paid to Dr. Morris Chang.
Note 3: Mr. Rick Tsai is currently the Chairman and CEO of two TSMC subsidiaries, TSMC Solar Ltd. and TSMC Solid State Lighting Ltd.
Note 4: Pensions funded according to applicable law.
Note 5: TSMC Board adopted a proposal that includes 2012 compensation to TSMC’s directors in the amount of NT$71,351 thousand at its meeting on February 5, 2013.
Note 6: The above-mentioned figures include the expense for company cars and gasoline reimbursement, but does not include compensation paid to company drivers (totaled NT$4,743 thousand).
Note 7: The above-mentioned figures include the employees’ cash bonuses distributed in June, August, November 2012 and February 2013.
Note 8: The above-mentioned figures are preliminary and the proposed employee profit sharing distribution will be processed after the approval of the same by shareholders at the Annual Shareholders’ Meeting on June 11, 2013.
Note 9: Represents the number of cumulative employee stock options exercisable as of the date of this Annual Report.
Note 10: TSMC did not issue employee restricted stock in 2012, and as of the date of this Annual Report.
Note 11: Total remuneration and compensation paid to TSMC’s directors in 2011 was NT$343,815 thousand, accounting for 0.26% of 2011 net income.
Remuneration Paid to Directors
Total Remuneration (A+B+C+D)
Total Compensation (A+B+C+D+E+F+G+J)
From TSMC
From All Consolidated Entities
From TSMC
From All Consolidated Entities and
Non-consolidated Affiliates
2012
Under NT$2,000,000
NT$2,000,000 ~ NT$4,999,999
Rick Tsai
NT$5,000,000 ~ NT$9,999,999
National Development Fund, Executive Yuan
National Development Fund, Executive Yuan
NT$10,000,000 ~ NT$14,999,999
Sir Peter Leahy Bonfield, Stan Shih, Thomas J. Engibous, Gregory C. Chow,
Kok-Choo Chen
Sir Peter Leahy Bonfield, Stan Shih, Thomas J. Engibous, Gregory C. Chow,
Kok-Choo Chen
NT$15,000,000 ~ NT$29,999,999
Morris Chang, F.C. Tseng
F.C. Tseng
NT$30,000,000 ~ NT$49,999,999
NT$50,000,000 ~ NT$99,999,999
Over NT$100,000,000
Total
9
Rick Tsai
Morris Chang
9
2
0
1
2
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A
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020
021
2.5 Management Team
2.5.1 Information Regarding Management Team
Title
Name
Chairman & CEO
Morris Chang
On-board Date
(Note 1)
01/01/1987
Shareholding
Spouse & Minor
Shareholding
123,137,914
%
0.47%
Shareholding
%
135,217
0.00%
Executive Vice President & Co-Chief Operating Officer
Shang-yi Chiang (Note 2)
07/07/1997
1,062,481
0.00%
Executive Vice President & Co-Chief Operating Officer
Mark Liu (Note 2)
11/15/1993
13,127,114
0.05%
-
-
-
-
Executive Vice President & Co-Chief Operating Officer
C.C. Wei (Note 2)
02/01/1998
8,460,207
0.03%
261
0.00%
12/16/1996
14,425,064
0.06%
01/02/2002
869,892
0.00%
-
-
-
-
06/01/1999
6,381,080
0.02%
110,268
0.00%
TSMC Shareholding by
Nominee Arrangement
(Shares)
Education & Selected Past Positions
Selected Current Positions at Other
Companies
As of 02/28/2013
Managers Who are Spouses or within Second-degree
Relative of Consanguinity to Each Other
Title
Name
Relation
-
-
-
-
-
-
-
Ph.D., Electrical Engineering, Stanford University, U.S.
Chairman, Industrial Technology Research Institute
President & Chief Operation Officer, General Instrument Corporation
Group Senior Vice-President, Texas Instruments Inc.
Ph.D., Electrical Engineering, Stanford University, U.S.
Senior Vice President, Research and Development, TSMC
Chairman, VisEra Technologies Company and Xintec Inc.
Ph.D., Electrical Engineering & Computer Science, University of California, Berkeley, U.S.
Senior Vice President of Operations, TSMC
Senior Vice President, Advanced Technology Business, TSMC
Vice President, South Site Operation, TSMC
President, Worldwide Semiconductor Manufacturing Corp.
Director, TSMC affiliate
Ph.D., Electrical Engineering, Yale University, U.S.
Senior Vice President of Business Development, TSMC
Senior Vice President, Mainstream Technology Business, TSMC
Vice President, South Site Operation, TSMC
Senior Vice President, Chartered Semiconductor Manufacturing Ltd.
Ph.D., Materials Science & Engineering, University of California, Berkeley, U.S.
President, WaferTech, LLC
Senior Vice President, Operations, TSMC
General Manager of CVD Products, Applied Material
J.D., Rutgers School of Law, State University of New Jersey, U.S.
Ph.D., History, University of Virginia, U.S.
Partner, Haynes Boone, LLP
Vice President Corporate Staff, Assistant General Counsel, Texas Instruments Inc.
Director, TSMC subsidiary
Director, TSMC affiliates
Director, TSMC subsidiary
Director, TSMC subsidiaries
Director, TSMC affiliate
Master, Business Administration, National Taiwan University, Taiwan
Director, Accounting, TSMC
Vice President& CFO, TI-Acer Semiconductor Manufacturing Corp.
Director and/or Supervisor, TSMC subsidiaries
Director, TSMC affiliates
President, TSMC subsidiaries
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
03/31/2005
27,320
0.00%
122
0.00%
2,000,000
Master, Business Administration, University of Missouri-Columbia, U.S.
Vice President & Co-Director of Worldwide Sales & Marketing Group, Intel
Director, TSMC subsidiaries
Me mber of Joint Management Committee,
01/01/1987
7,592,595
0.03%
07/01/2004
1,913,127
0.01%
06/02/1997
4,402,831
0.02%
-
-
-
-
-
-
01/01/1987
7,540,122
0.03%
2,194,107
0.01%
03/01/2000
2,051,180
0.01%
1,103,253
0.00%
-
-
-
-
-
Master, Applied Chemistry, Chungyuan University, Taiwan
Vice President, Mainstream Technology Business, TSMC
Senior Director, Fab 2 Operation, TSMC
Ph.D., Solid State Physics & Surface Chemistry, University of California, Berkeley, U.S.
Vice President, Advanced Technology Business, TSMC
Vice President, Research & Development, TSMC
Vice President, Operation II, TSMC
Director, Advanced Technology Development & CTM Plant Manager, Intel
Ph.D., Electrical Engineering, University of Illinois at Urbana-Champaign, U.S.
Vice President, Research and Development, TSMC
Senior Director, Logic Technology Division, TSMC
Senior Manager of R&D, International Business Machines (IBM)
Master, Electrical Engineering, National Cheng Kung University, Taiwan
Vice President, Advanced Technology Business, TSMC
Senior Director, Product Engineering & Services, TSMC
Ph.D., Material Science, Massachusetts Institute of Technology, U.S.
Senior Director, Assembly Test Technology & Service, TSMC
Vice President, Operations, Vanguard International Semiconductor Corp.
TSMC affiliate
Director, TSMC subsidiaries
Department
Manager
M.J. Tzeng
Siblings
-
-
-
-
-
-
-
-
-
-
-
-
(Continued)
023
Senior Vice President & Chief Information Officer
Information Technology & Materials Management
and Risk Management
Stephen T. Tso
Senior Vice President & General Counsel
Legal
Richard Thurston
Senior Vice President, Chief Financial Officer &
Spokesperson
Finance
Lora Ho
Senior Vice President
Worldwide Sales and Marketing
Jason C.S. Chen
Vice President
Operations/Affiliate Fabs
M.C. Tzeng
Vice President
Research and Development
Wei-Jen Lo
Vice President & Chief Technology Officer
Research and Development
Jack Sun
Vice President
Operations/Product Development
Y.P. Chin
Vice President
Quality and Reliability
N.S. Tsai
2
0
1
2
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022
Title
Name
Vice President &
President of TSMC North America
Rick Cassidy
Vice President
Human Resources
L.C. Tu (Note 3)
Vice President
Operations/Mainstream Fabs and Manufacturing
Technology
J.K. Lin
Vice President
Operations/300mm Fabs
J.K. Wang
Vice President
Corporate Planning Organization
Irene Sun
Vice President
Research and Development
Burn J. Lin
Vice President
Research and Development
Y.J. Mii
Vice President
Research and Development
Cliff Hou
On-board Date
(Note 1)
11/14/1997
Shareholding
Spouse & Minor
Shareholding
-
%
-
Shareholding
-
%
-
01/01/1987
9,347,440
0.04%
1,252,481
0.00%
01/01/1987
12,507,018
0.05%
1,663,036
0.01%
02/11/1987
2,553,947
0.01%
160,844
0.00%
10/01/2003
960,709
0.00%
-
-
04/26/2000
2,997,746
0.01%
1,024,933
0.00%
11/14/1994
1,000,419
0.00%
-
-
12/15/1997
752,532
0.00%
60,802
0.00%
TSMC Shareholding by
Nominee Arrangement
(Shares)
Education & Selected Past Positions
Selected Current Positions at Other
Companies
Managers Who are Spouses or within Second-degree
Relative of Consanguinity to Each Other
Title
Name
Relation
-
-
-
-
-
-
-
-
Bachelor, Engineering Technology, United States Military Academy at West Point, U.S.
Vice President of TSMC North America Account Management
Director, TSMC North America
Master, Business Administration, Tulane University, U.S.
Senior Director, Corporate Planning Organization, TSMC
Senior Director, Fab 5 Operation, TSMC
Bachelor, Science, National Changhua University of Education, Taiwan
Senior Director, Mainstream Fabs, TSMC
Master, Chemical Engineering, National Cheng Kung University, Taiwan
Senior Director, 300mm fab operations, TSMC
Ph.D., Materials Science and Engineering, Cornell University, U.S.
Senior Director, Corporate Planning Organization, TSMC
Ph.D., Electrical Engineering, Ohio State University
Senior Director, Nanopatterning Technology Division, TSMC
Ph.D., Electrical Engineering, University of California, Los Angeles
Senior Director, R&D Platform I Division, TSMC
Ph.D., Electrical Engineering, Syracuse University
Senior Director, Design and Technology Platform, TSMC
Director, TSMC subsidiaries
Director, TSMC affiliate
President, TSMC subsidiaries
-
-
-
-
-
-
-
-
-
Manager
J.J. Wang
Siblings
Manager
Thomas T. Sun
Siblings
-
-
-
-
-
-
-
-
-
Note 1: On-board date means the offical date joining TSMC.
Note 2: On March 2, 2012, Senior Vice President of R&D Dr. Shang-yi Chiang, Senior Vice President of Operations Dr. Mark Liu, and Senior Vice President of Business Development Dr. C.C. Wei were appointed as Executive Vice Presidents
and Co-Chief Operating Officers, effective March 5, 2012.
Note 3: On March 5, 2013, Vice President of Human Resources Mr. L.C. Tu was appointed as the President of TSMC China, effective March 15, 2013.
2
0
1
2
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024
025
2.5.2 Compensation Paid to CEO and Executive Officers (Note 1)
Unit: NT$ thousands
Salary (A)
Severance Pay and
Pensions (B) (Note 4)
Bonuses and Allowances (C)
(Note 5)
From TSMC
From All
Consoildated
Entities
From TSMC
From All
Consoildated
Entities
From TSMC
From All
Consoildated
Entities
Employee Profit Sharing (D) (Note 6)
From TSMC
Cash
Stock (Fair
Market
Value)
From All Consoildated Entities
Stock (Fair
Market
Value)
Cash
Total Compensation as a % of
2012 Net Income (A,B,C,D)
(Note 7)
Exercisable Employee Stock
Options (K shares) (Note 8)
Exercisable Employee
Restricted Stock (K shares)
(Note 9)
From TSMC
From All
Consoildated
Entities
From TSMC
From All
Consoildated
Entities
From TSMC
From All
Consoildated
Entities
Compensation
Received from
Non-consoildated
Affiliates
81,386
112,347
2,278
2,604
567,997
608,437
538,077
0
538,077
0
0.72%
0.76%
0
0
0
0
135
Title
Name
Chairman & CEO
Executive Vice President & Co-Chief Operating Officer
Executive Vice President & Co-Chief Operating Officer
Executive Vice President & Co-Chief Operating Officer
Senior Vice President & Chief Information Officer
Information Technology & Materials Management and Risk
Management
Senior Vice President & General Counsel
Legal
Senior Vice President, Chief Financial Officer & Spokesperson
Finance
Senior Vice President
Worldwide Sales and Marketing
Vice President
Operations/Affiliate Fabs
Vice President
Research and Development
Vice President & Chief Technical Officer
Research and Development
Vice President
Operations/Product Development
Vice President
Quality and Reliability
Vice President &
President of TSMC North America
Vice President
Human Resources
Vice President
Operations/Mainstream Fabs and Manufacturing Technology
Vice President
Operations/300mm Fabs
Vice President
Corporate Planning Organization
Vice President
Research and Development
Vice President
Research and Development
Vice President
Research and Development
Morris Chang
Shang-yi Chiang
(Note 2)
Mark Liu (Note 2)
C.C. Wei (Note 2)
Stephen T. Tso
Richard Thurston
Lora Ho
Jason C.S. Chen
M.C. Tzeng
Wei-Jen Lo
Jack Sun
Y.P. Chin
N.S. Tsai
Rick Cassidy
L.C. Tu (Note 3)
J.K. Lin
J.K. Wang
Irene Sun
Burn J. Lin
Y.J. Mii
Cliff Hou
Note 1: Compensation Policy: The cash compensation and profit sharing paid to CEO and each executive officer are also reviewed by the Compensation Committee individually based on their job responsibility, contribution, and
projected future risks facing the Company before the compensation and profit sharing proposals are submitted to the Board of Directors for approval.
Note 2: On March 2, 2012, Senior Vice President of R&D Dr. Shang-yi Chiang, Senior Vice President of Operations Dr. Mark Liu, and Senior Vice President of Business Development Dr. C.C. Wei were appointed as Executive Vice
Presidents and Co-Chief Operating Officers, effective March 5, 2012.
Note 3: On March 5, 2013, Vice President of Human Resources Mr. L.C. Tu was appointed as the President of TSMC China, effective March 15, 2013.
Note 4: Pensions funded according to applicable law.
Note 5: The above-mentioned figures include the expense for the employees’ cash bonuses distributed in June, August, November 2012 and February 2013, company cars and gasoline reimbursement, but does not include
compensation paid to company drivers (totaled NT$5,491 thousand).
Note 6: The above-mentioned figures are preliminary and the proposed employee profit sharing distribution will be processed after the approval of the same by shareholders at the Annual Shareholders’ Meeting on June 11, 2013.
Note 7: Total compensation paid to TSMC’s CEO and Executive Officers in 2011 was NT$1,101,388 thousand, accounting for 0.82% of 2011 net income.
Note 8: Represents cumulative employee stock options exercisable as of the date of this Annual Report.
Note 9: TSMC did not issue employee restricted stock in 2012, and as of the date of this Annual Report.
Compensation Paid to CEO and Executive Officers
Under NT$2,000,000
NT$2,000,000 ~ NT$4,999,999
NT$5,000,000 ~ NT$9,999,999
NT$10,000,000 ~ NT$14,999,999
NT$15,000,000 ~ NT$29,999,999
NT$30,000,000 ~ NT$49,999,999
NT$50,000,000 ~ NT$99,999,999
Over NT$100,000,000
Total
From TSMC
Rick Cassidy
2012
From All Consolidated Entities and Non-consoildated Affiliates
Irene Sun, Y.J. Mii, Cliff Hou
M.C. Tzeng, Jack Sun, Y.P. Chin, N.S. Tsai, L.C. Tu, J.K. Lin, J.K. Wang,
Burn J. Lin
Shang-yi Chiang, Mark Liu, C.C. Wei, Stephen T. Tso, Richard Thurston,
Lora Ho, Jason C.S. Chen, Wei-Jen Lo
Morris Chang
21
Irene Sun, Y.J. Mii, Cliff Hou
M.C. Tzeng, Jack Sun, Y.P. Chin, N.S. Tsai, L.C. Tu, J.K. Lin, J.K. Wang,
Burn J. Lin
Shang-yi Chiang, Mark Liu, C.C. Wei, Stephen T. Tso, Richard Thurston,
Lora Ho, Jason C.S. Chen, Wei-Jen Lo, Rick Cassidy
Morris Chang
21
2
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027
2.5.3 Employee Profit Sharing Granted to Management Team (Note 1)
Unit: NT$ thousands
Title
Chairman & CEO
Executive Vice President & Co-Chief Operating Officer
Executive Vice President & Co-Chief Operating Officer
Executive Vice President & Co-Chief Operating Officer
Senior Vice President & Chief Information Officer
Information Technology & Materials Management and Risk Management
Senior Vice President & General Counsel
Legal
Senior Vice President, Chief Financial Officer & Spokesperson
Finance
Senior Vice President
Worldwide Sales and Marketing
Vice President
Operations/Affiliate Fabs
Vice President
Research and Development
Vice President & Chief Technical Officer
Research and Development
Vice President
Operations/Product Development
Vice President
Quality and Reliability
Vice President &
President of TSMC North America
Vice President
Human Resources
Vice President
Operations/Mainstream Fabs and Manufacturing Technology
Vice President
Operations/300mm Fabs
Vice President
Corporate Planning Organization
Vice President
Research and Development
Vice President
Research and Development
Vice President
Research and Development
Senior Director
Finance
Name
Morris Chang
Shang-yi Chiang (Note 2)
Mark Liu (Note 2)
C.C. Wei (Note 2)
Stephen T. Tso
Richard Thurston
Lora Ho
Jason C.S. Chen
M.C. Tzeng
Wei-Jen Lo
Jack Sun
Y.P. Chin
N.S. Tsai
Rick Cassidy
L.C. Tu (Note 3)
J.K. Lin
J.K. Wang
Irene Sun
Burn J. Lin
Y.J. Mii
Cliff Hou
Jan Kees van Vliet (Note 4)
Note 1: The above-mentioned figures are preliminary and the proposed employee profit sharing distribution will be processed after the approval of the same by shareholders at the Annual Shareholders’ Meeting on June 11, 2013.
Note 2: On March 2, 2012, Senior Vice President of R&D Dr. Shang-yi Chiang, Senior Vice President of Operations Dr. Mark Liu, and Senior Vice President of Business Development Dr. C.C. Wei were appointed as Executive Vice
Presidents and Co-Chief Operating Officers, effective March 5, 2012.
Note 3: On March 5, 2013, Vice President of Human Resources Mr. L.C. Tu was appointed as the President of TSMC China, effective March 15, 2013.
Note 4: Mr. Jan Kees van Vliet voluntarily retired on September 7, 2012.
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Stock
(Fair Market Value)
Cash
Total Employee Profit Sharing
Total Employee Profit Sharing Paid to
Management Team as a % of 2012 Net
Income
0
538,077
538,077
0.32%
029
R.O.C. Securities & Futures Institute
Ranked A++ in Information Disclosure
by Public Companies
FinanceAsia
Best Managed Company - Ranked No. 1 in Taiwan
Asian Corporate Governance Association
Number 1 Corporate
Governance Ranking in Asia Pacific
Euromoney
Asia Best Managed
Company-Technology Sector
CommonWealth Magazine
The Most Admired Company in Taiwan
FinanceAsia
Best Corporate Governance Company -
Ranked No.1 in Taiwan
CommonWealth Magazine
Corporate Citizenship Award
3. Corporate Governance
TSMC advocates and acts upon the principles of operational
In the spirit of Chairman Chang’s approach to corporate governance,
transparency and respect for shareholder rights. We believe that
a board of directors’ primary duty is to supervise. The Board should
the basis for successful corporate governance is a sound and
supervise the Company’s: compliance with relevant laws and
effective Board of Directors. In line with this principle, the TSMC
regulations; financial transparency; timely disclosure of material
Board delegates various responsibilities and authority to two Board
information, and maintaining of the highest integrity within the
Committees, Audit Committee and Compensation Committee.
Company.
Each Committee has a written charter approved by the Board. Each
Committee’s chairperson regularly reports to the Board on the
TSMC’s Board of Directors strives to perform these responsibilities
activities and actions of the relevant committee. The Audit Committee
through the Audit Committee and the Compensation Committee, the
and Compensation Committee consist solely of independent
hiring of a financial expert for the Audit Committee, and coordination
directors.
with the Internal Audit department.
2012 Corporate Governance Awards
Organization
Awards
Corporate Governance Asia
8th Recognition Awards 2012
- The Best of Asia - Taiwan Companies
FinanceAsia
- Asia’s Best Managed Companies in Hong Kong and
Taiwan
- Best Managed Company - Ranked No. 1 in Taiwan
- Best Corporate Governance Company - Ranked No.
1 in Taiwan
The second duty of the Board of Directors is to provide guidance
to the management team of the Company. Quarterly, TSMC’s
management reports to the Board on a variety of subjects. The
management also reviews the Company’s business strategies with
the Board, and updates TSMC’s Board on the progress of those
strategies, obtaining Board guidance as appropriate.
The third duty of the Board of Directors is to evaluate the
No. 1 Corporate Governance Ranking in Asia Pacific
management’s performance and to dismiss officers of the Company
Asian Corporate Governance
Association (ACGA)
R.O.C. Securities & Futures Institute
9th Information Disclosure of Public Companies
Ranking - Ranked A++
when necessary. TSMC’s management has maintained a healthy and
functional communication with the Board of Directors, has been
devoted in executing guidance of the Board, and is dedicated in
running the business operations, all to achieve the best interests for
TSMC shareholders.
Directors’ Compensation
Currently, TSMC Directors’ compensation consists exclusively of
fixed compensation. TSMC’s Articles of Incorporation restricts the
amount of compensation payable to its directors that the Company
may make from its distributable earnings (defined as net income
after required regulatory provisions). Over the years, TSMC directors’
compensation declined from 1% of TSMC’s distributable earnings to
0.3%, before being capped to no more than 0.3% of its distributable
compensation. Because director’s compensation is capped at 0.3%
of distributable earnings, currently, TSMC Directors’ compensation
consists exclusively of fixed compensation which is in line with
international best practice on board compensation. In 2012, total
compensation paid to TSMC’s directors only accounted for 0.06%
of our 2012 net income. In addition, directors who also serve as
executive officers of the Company are not entitled to receive any
director compensation.
3.1 Board of Directors
Board Structure
TSMC’s 12th Board of Directors was elected at TSMC’s 2012 Annual
Shareholders’ Meeting. All Directors continue in office. TSMC’s
Board of Directors consists of nine distinguished members with
a great breadth of experience as world-class business leaders or
scholars. We rely on them for their diverse knowledge, personal
perspectives, and solid business judgment. Five of the nine members
are independent directors: former British Telecommunications Chief
Executive Officer, Sir Peter Bonfield; former Acer Group Chairman,
Mr. Stan Shih; former Texas Instruments Inc. Chairman of the Board,
Mr. Thomas J. Engibous; Professor of Princeton University, Gregory
C. Chow; and advisor to the Taiwan Executive Yuan and the Taipei
City Government, Ms. Kok-Choo Chen. The number of Independent
Directors is more than 50% of the total number of Directors.
Board Responsibilities
Under the leadership of Chairman Morris Chang, TSMC’s Board of
Directors takes a serious and forthright approach to its duties and is a
dedicated, competent and independent Board.
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Directors’ Professional Qualifications and Independent Analysis
According to the relevant requirements set by Taiwan’s Securities and Futures Bureau, the professional qualifications and independence status of
the Company’s Board members are listed in the table below.
Meet the Following Professional Qualification Requirements,
Together with at Least Five Years Work Experience
Criteria (Note)
An Instructor or
Higher Position in
a Department of
Commerce, Law,
Finance, Accounting,
or Other Academic
Department Related
to the Business Needs
of the Company in
a Public or Private
Junior College,
College or University
A Judge, Public
Prosecutor, Attorney,
Certified Public
Accountant, or
Other Professional or
Technical Specialists
Who Has Passed a
National Examination
and Been Awarded
a Certificate in a
Profession Necessary
for the Business of
the Company
Have Work
Experience in the
Area of Commerce,
Law, Finance, or
Accounting, or
Otherwise Necessary
for the Business of
the Company
1
2
3
4
5
6
7
8
9
10
Number of Other
Taiwanese Public
Companies
Concurrently Serving
as an Independent
Director
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
0
1
3
0
0
0
0
0
0
Name/Criteria
Morris Chang
Chairman
F.C. Tseng
Vice Chairman
Johnsee Lee
Director
Rick Tsai
Director
Sir Peter Leahy
Bonfield
Independent Director
Stan Shih
Independent Director
Thomas J. Engibous
Independent Director
Gregory C. Chow
Independent Director
Kok-Choo Chen
Independent Director
Note:
Directors, during the two years before being elected and during the term of office, meet any of the following situations, please tick the appropriate corresponding boxes:
1. Not an employee of the company or any of its affiliates;
2. Not a director or supervisor of the company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary in which the
company holds, directly or indirectly, more than 50 percent of the voting shares;
3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one percent or more of the total
number of issued shares of the company or ranks as one of its top ten shareholders;
4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the above persons in the preceding three subparagraphs;
5. Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the company or ranks as one of its top five shareholders;
6. Not a director, supervisor, officer, or shareholder holding five percent or more of the shares of a specified company or institution that has a financial or business relationship with the company;
7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation
to the company or to any affiliate of the company, or a spouse thereof, provided that this restriction does not apply to any member of the compensation committee who exercises powers pursuant to Article 7 of the “Regulations
Governing the Establishment and Exercise of Powers of Compensation Committees of Companies whose Stock is Listed on the TWSE or Traded on the GTSM”;
8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the company;
9. Not been a person of any conditions defined in Article 30 of the Company Law; and
10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.
3.1.1 Audit Committee
The Audit Committee assists the Board in fulfilling its oversight of the quality and integrity of the accounting, auditing, reporting, and financial
control practices of the Company. The Audit Committee is responsible to review the Company’s: financial reports; auditing and accounting
policies and procedures; internal control systems; material asset or derivatives transactions; material lending funds, endorsements or guarantees;
offering or issuance of any equity-type securities; legal compliance; related-party transactions and potential conflicts of interests involving
executive officers and directors; Ombudsman reports; corporate risk management; hiring or dismissal of an attesting CPA, or the compensation
given thereto; and appointment or discharge of financial, accounting, or internal auditing officers.
033
Under R.O.C. law, the membership of Audit Committee shall consist of all independent Directors. TSMC’s Audit Committee satisfies this statutory
requirement. The Committee also engaged a financial expert consultant in accordance with the rules of the U.S. Securities and Exchange
3.1.3 Directors and Committees Members’ Attendance
Commission. The Audit Committee annually conducts self-evaluation to assess the Committee’s performance and identify areas for further
Each Director is expected to attend every Board meeting and the committees meeting on which he or she serves. In 2012, the average Board
attention.
Meeting attendance rate was 83% and the attendance rate for the Audit Committee and Compensation Committee’s Meetings were 100%.
TSMC’s Audit Committee is empowered by its Charter to conduct any study or investigation it deems appropriate to fulfill its responsibilities.
Board of Directors Meeting Status
It has direct access to TSMC’s internal auditors, the Company’s independent auditors, and all employees of the Company. The Committee
is authorized to retain and oversee special legal, accounting, or other consultants as it deems appropriate to fulfill its mandate. The Audit
Committee Charter is available on TSMC’s corporate website.
3.1.2 Compensation Committee
The Compensation Committee assists the Board in discharging its responsibilities related to TSMC’s compensation and benefits policies, plans and
programs, and in the evaluation and compensation of TSMC’s directors of the Board and executives.
The members of the Compensation Committee are appointed by the Board as required by R.O.C. law. According to TSMC’s Compensation
Committee Charter, the Committee shall consist of no fewer than three independent directors of the Board. Currently, the Compensation
Committee is comprised of all five independent directors; the Chairman of the Board, Dr. Morris Chang, is invited by the Committee to attend all
meetings and is excused from the Committee’s discussion of his own compensation.
TSMC’s Compensation Committee is authorized by its Charter to retain an independent consultant to assist in the evaluation of CEO, or executive
officer compensation. The Compensation Committee Charter is available on TSMC’s corporate website.
Compensation Committee Members’ Professional Qualifications and Independent Analysis
According to the relevant requirements set by Taiwan’s Securities and Futures Bureau, the professional qualifications and independence status of
the Company’s Compensation Committee members are listed in the table below.
Meet the Following Professional Qualification Requirements, Together with at Least
Five Years Work Experience
Criteria (Note)
An Instructor or Higher
Position in a Department of
Commerce, Law, Finance,
Accounting, or Other
Academic Department
Related to the Business
Needs of the Company
in a Public or Private
Junior College, College or
University
A Judge, Public Prosecutor,
Attorney, Certified Public
Accountant, or Other
Professional or Technical
Specialists Who Has Passed
a National Examination
and Been Awarded a
Certificate in a Profession
Necessary for the Business
of the Company
Have Work Experience in
the Area of Commerce,
Law, Finance, or
Accounting, or Otherwise
Necessary for the Business
of the Company
1
2
3
4
5
6
7
8
Number of Other
Taiwanese Public
Companies
Concurrently Serving
as a Compensation
Committee Member in
Taiwan
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
0
0
0
0
0
ˇ
ˇ
ˇ
Name Title/Criteria
Stan Shih
Independent Director
Sir Peter Leahy
Bonfield
Independent Director
Thomas J. Engibous
Independent Director
Gregory C. Chow
Independent Director
Kok-Choo Chen
Independent Director
Note:
Compensation Committee Members, during the two years before being elected or during the term of office, meet any of the following situations, please tick the appropriate corresponding boxes:
1. Not an employee of the company or any of its affiliates;
2. Not a director or supervisor of the company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary in which the
company holds, directly or indirectly, more than 50 percent of the voting shares;
3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one percent or more of the total number
of issued shares of the company or ranks as one of its top ten shareholders;
4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the above persons in the preceding three subparagraphs;
5. Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the company or ranks as one of its top five shareholders;
6. Not a director, supervisor, officer, or shareholder holding five percent or more of the shares of a specified company or institution that has a financial or business relationship with the company;
7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to
the company or to any affiliate of the company, or a spouse thereof;
8. Not been a person of any conditions defined in Article 30 of the Company Law.
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Dr. Morris Chang, the Chairman of the Board of Directors, convened four regular meetings and three special meetings in 2012. The directors’
attendance status is as follows:
Title
Name
Chairman
Morris Chang
Vice Chairman
F. C. Tseng
Director
Director
Independent
Director
Independent
Director
Independent
Director
Independent
Director
Independent
Director
National Development Fund,
Executive Yuan
Representative: Johnsee Lee
Rick Tsai
Sir Peter Leahy Bonfield
Stan Shih
Thomas J. Engibous
Gregory C. Chow
Kok-Choo Chen
Attendance
in Person
By Proxy
Attendance Rate
in Person (%)
Notes
7
6
7
7
4
6
4
4
7
0
1
0
0
3
1
3
3
0
100%
Renewal of office (Note)
86%
Renewal of office (Note)
100%
Renewal of office (Note)
100%
Renewal of office (Note)
57%
Renewal of office (Note)
Sir Peter Bonfield participated in the discussion through telephone at
two Special Meetings, represented by proxy.
86%
Renewal of office (Note)
57%
57%
Renewal of office (Note)
Mr. Thomas J. Engibous participated in the discussion through
telephone at one Special Meeting, represented by proxy.
Renewal of office (Note)
Mr. Gregory C. Chow participated in the discussion through telephone
at one Special Meeting, represented by proxy.
100%
Renewal of office (Note)
Annotations:
1. There were no written or otherwise recorded resolutions on which an independent director had a dissenting opinion or qualified opinion in 2012.
2. There were no recusals of Directors due to conflicts of interests in 2012.
3. Measures taken to strengthen the functionality of the Board: We believe that the basis for successful corporate governance is a sound and effective Board of Directors. In line with this principle,
TSMC’s Board of Directors has established an Audit Committee and a Compensation Committee to assist the Board in carrying out its various duties.
Note: TSMC’s 12th Board of Directors was elected at TSMC’s Annual Shareholders’ Meeting on June 12, 2012. All Directors continue to serve in office. Their respective tenures are from June 12, 2012 to June 11, 2015.
Audit Committee Meeting Status
Sir Peter Bonfield, Chairman of the Audit Committee, convened four regular meetings in 2012. The Committee members and consultant’s
attendance status is shown in the following table. In addition to these meetings, the Committee members and consultant participated in
five telephone conferences to discuss the Company’s Annual Report to be filed with the Taiwan and U.S. authorities and investor conference
materials with management.
Title
Chair
Member
Member
Member
Member
Name
Sir Peter Leahy Bonfield
Stan Shih
Thomas J. Engibous
Gregory C. Chow
Kok-Choo Chen
Financial Expert
J. C. Lobbezoo
Attendance
in Person
By Proxy
Attendance Rate
in Person (%)
Notes
4
4
4
4
4
4
0
0
0
0
0
0
100%
Renewal of office (Note)
100%
Renewal of office (Note)
100%
Renewal of office (Note)
100%
Renewal of office (Note)
100%
Renewal of office (Note)
100%
None
Annotations:
1. There was no Securities and Exchange Act §14-5 resolution which was not approved by the Audit Committee but was approved by two thirds or more of all directors in 2012.
2. There were no recusals of independent directors due to conflicts of interests in 2012.
3. Descriptions of the communications between the independent directors, the internal auditors, and the independent auditors in 2012 (e.g. the channels, items and/or results of the audits on the
corporate finance and/or operations, etc.):
(1) The internal auditors have sent the audit reports to the members of the Audit Committee periodically, and presented the findings of all audit reports in the quarterly meetings of the Audit
Committee. The head of Internal Audit will immediately report to the members of the Audit Committee any material matters. During 2012, the head of Internal Audit did not report any such
material matters. The communication channel between the Audit Committee and the internal auditor functioned well.
(2) The Company’s independent auditors have presented the findings of their quarterly review or audits on the Company’s financial results. Under applicable laws and regulations, the independent
auditors are also required to immediately communicate to the Audit Committee any material matters that they have discovered. During 2012, the Company’s independent auditors did not report
any irregularity. The communication channel between the Audit Committee and the independent auditors functioned well.
Note: Sir Peter Leahy Bonfield, Stan Shih, Thomas J. Engibous, Gregory C. Chow and Kok-Choo Chen were elected as TSMC’s independent directors and became members of the Audit Committee on June 12, 2012. Their respective
tenures are from June 12, 2012 to June 11, 2015.
035
Compensation Committee Meeting Status
Mr. Stan Shih, Chairman of the Compensation Committee, convened four regular meetings in 2012. The Committee members’ attendance status
is as follows:
Title
Chair
Member
Member
Member
Member
Name
Stan Shih
Sir Peter Leahy Bonfield
Thomas J. Engibous
Gregory C. Chow
Kok-Choo Chen
Attendance
in Person
By Proxy
Attendance Rate
in Person (%)
Notes
4
4
4
4
4
0
0
0
0
`0
100%
Renewal of office (Note)
100%
Renewal of office (Note)
100%
Renewal of office (Note)
100%
Renewal of office (Note)
100%
Renewal of office (Note)
Annotation:
1. There was no recommendation of the Compensation Committee which was not adopted or was modified by the Board of Directors in 2012.
2. There were no written or otherwise recorded resolutions on which a member of the Compensation Committee had a dissenting opinion or qualified opinion.
Note: At the meeting of June 12, 2012, TSMC’s Board of Directors approved the appointment of all five Independent Directors, Stan Shih, Sir Peter Leahy Bonfield, Thomas J. Engibous, Gregory C. Chow and Kok-Choo Chen, as members
of the Compensation Committee. Their respective tenures are from June 12, 2012 to June 11, 2015.
3.2 Major Resolutions of Shareholders’ Meeting and Board Meetings
3.2.1 Major Resolutions of Shareholders’ Meeting and Implementation Status
TSMC’s 2012 Annual Shareholders’ Meeting was held in Hsinchu, Taiwan on June 12, 2012. At the meeting, shareholders present in person or
by proxy approved the following resolutions:
(1) The 2011 Business Report and Financial Statements;
(2) The distribution of 2011 profits;
(3) The revisions to the Articles of Incorporation;
(4) The revisions to the Rules for Election of Directors; and
(5) Election of nine directors (including five independent directors).
Implementation Status
All the resolutions of the Shareholders’ Meeting have been fully implemented in accordance with the resolutions.
The nine newly elected directors were Morris Chang, F.C. Tseng, Sir Peter Leahy Bonfield (Independent Director), Stan Shih (Independent
Director), Thomas J. Engibous (Independent Director), Gregory C. Chow (Independent Director), Kok-Choo Chen (Independent Director), Johnsee
Lee (representative of National Development Fund, Executive Yuan) and Rick Tsai.
3.2.2 Major Resolutions of Board Meetings
During the 2012 calendar year, and as of the date of this Annual
Report, major resolutions approved at Board meetings are
● approving capital appropriations of US$3,176.65 million;
● approving R&D capital appropriation of US$233.2 million; and
● approving issuance of an unsecured straight corporate bond
in the domestic market for an amount not exceeding NT$45
summarized below:
billion.
(1) Regular Board Meeting of February 13 & 14, 2012:
(5) Regular Board Meeting of August 13 & 14, 2012:
● approving 2011 business report and financial statements;
● approving 2012 semi-annual financial statements; and
● approving distribution of 2011 profits, and cash dividends,
● approving capital appropriations of US$2,786.53 million.
employee cash bonus and employee profit sharing;
(6) Regular Board Meeting of November 12 & 13, 2012:
● approving capital appropriations of US$1,395.49 million;
● approving capital appropriations of US$2,975 million;
● approving R&D capital appropriation of US$239.6 million; and
● approving R&D capital appropriation and 2013 sustaining
● convening the 2012 Annual Shareholders’ Meeting, at which
shareholders will hold an election for TSMC’s nine-member
Board of Directors, including five independent directors.
capital appropriation totaling approximately US$209.5 million;
● approving issuance of an unsecured straight corporate bond
in the domestic market for an amount not exceeding NT$45
(2) Special Board Meeting of March 2, 2012:
billion;
● approving the appointment of Senior Vice President of R&D Dr.
Shang-yi Chiang, Senior Vice President of Operations Dr. Mark
● approving the subscription of NT$1,243 million in new shares
to be issued by TSMC Solid State Lighting Ltd. in 2013; and
Liu, and Senior Vice President of Business Development Dr.
● approving the subscription of NT$636 million in new shares to
C.C. Wei as Executive Vice Presidents and Co-Chief Operating
Officers of TSMC.
be issued by TSMC Solar Ltd. in 2013.
(7) Regular Board Meeting of February 4 & 5, 2013:
Following these appointments, the three Executive Vice
● approving 2012 business report and financial statements;
Presidents and Co-COOs, as well as TSMC’s Finance and Legal
● approving distribution of 2012 profits, and cash dividends,
organizations, will report directly to Chairman and Chief
employee cash bonus and employee profit sharing;
Executive Officer Dr. Morris Chang. All other organizations will
● approving capital appropriations of US$2,714.76 million;
report to the three Executive Vice Presidents and Co-COOs. The
● approving R&D capital appropriations of US$103.6 million;
new organizational structure will take effect on March 5, 2012.
● approving the provision of a loan guarantee to
(3) Special Board Meeting of April 26, 2012:
wholly-owned subsidiary TSMC Global for its issuance of US
● approving capital appropriations of US$1,814.2 million; and
dollar-denominated senior unsecured corporate bonds for an
● listing five qualified candidates for independent directors
amount not to exceed US$1.5 billion; and
to stand for election at TSMC’s 2012 Annual Shareholders’
● convening the 2013 Annual Shareholders’ Meeting.
Meeting.
(4) Regular Board Meeting of June 12 & 13, 2012:
3.2.3 Major Issues of Record or Written Statements
● re-election of Dr. Morris Chang as the Chairman and Dr. F.C.
Tseng as the Vice Chairman of the Board of Directors;
● approving the appointment of the five independent Directors,
Stan Shih, Sir Peter Leahy Bonfield, Thomas J. Engibous, Gregory
C. Chow and Kok-Choo Chen, as members of the Compensation
Committee;
Made by Any Director Dissenting to
Important Resolutions Passed by the Board
of Directors during the 2012 Calendar Year
and as of the Date of this Annual Report:
None.
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3.3 Taiwan Corporate Governance Implementation as Required by the Taiwan
Continuing Education/Training of Directors in 2012
Financial Supervisory Commission
Item
Implementation Status
1. Shareholding Structure & Shareholders’ Rights
(1) Method of handling shareholder suggestions or complaints
TSMC has designated appropriate departments, such as Corporate
Communication Division, the SEC Compliance Department, Legal Department,
etc., to handle shareholder suggestions or complaints.
(2) The Company’s possession of a list of major shareholders and a list of
ultimate owners of these major shareholders
TSMC tracks the shareholdings of directors, officers, and shareholders holding
more than 10% of the outstanding shares of TSMC.
(3) Risk management mechanism and “firewall” between the Company and its
affiliates
TSMC has established appropriate guidelines in its “Internal Control System” and
“TSMC Invested Entity Governance and Management Policy”.
Non-implementation and
Its Reason(s)
None
2. Composition and Responsibilities of the Board of Directors
(1) Independent Directors
(2) Regular evaluation of external auditors’ independence
3. Communication Channel with Stakeholders
4. Information Disclosure
(1) Establishment of a corporate website to disclose information regarding the
Company’s financials, business and corporate governance status
(2) Other information disclosure channels (e.g. maintaining an English-
language website, designating people to handle information collection
and disclosure, appointing spokespersons, webcasting investors conference
etc.)
None
None
None
Sir Peter Leahy Bonfield, Mr. Stan Shih, Mr. Thomas J. Engibous, Mr. Gregory C.
Chow and Ms. Kok-Choo Chen are the independent directors of TSMC.
The TSMC Audit Committee regularly evaluates the independence of external
auditors.
TSMC has designated appropriate departments, such as Corporate
Communication Division, the SEC Compliance Department, etc., to communicate
with stakeholders on a case by case basis, as needed. Furthermore, the contact
information providing access to the Company’s spokesperson and relevant
departments is available on TSMC’s website.
TSMC discloses information through its website (in both Chinese and English)
http://www.tsmc.com.
Since TSMC is a foreign private issuer with American Depository Receipts listed
on the New York Stock Exchange (NYSE), TSMC is subject to various NYSE
regulations, one of which requires TSMC to disclose the significant ways in which
its corporate governance practices differ from those followed by U.S. domestic
companies under NYSE listing standards. Such disclosure information may be
found at the following web address:
http://www.tsmc.com/download/english/e03_governance/NYSE_Section_303A.pdf
TSMC has designated appropriate departments (e.g. Corporate Communication
Division, the SEC Compliance Department, etc.) to handle the collection and
disclosure of information as required by the relevant laws and regulations of
Taiwan and other jurisdictions.
TSMC has designated spokespersons as required by relevant regulations.
TSMC webcasts live investor conferences.
5. Operations of the Company’s Nomination Committee or other committees of
the Board of Directors
TSMC’s Board of Directors has established an Audit Committee and a
Compensation Committee. Please refer to “3. Corporate Governance” on page
32-45 of this Annual Report for details.
None
6. If the Company has established corporate governance policies based on TSE Corporate Governance Best Practice Principles, please describe any discrepancy between the policies and their
implementation.
TSMC advocates and acts upon the principles of operational transparency and respect for shareholder rights. We believe that the basis for successful corporate governance is a sound and effective
Board of Directors. In line with this principle, TSMC’s Board of Directors established an Audit Committee in 2002 and a Compensation Committee in 2003. For the status of TSMC’s corporate
governance, please refer to “3. Corporate Governance” on page 32-45 of this Annual Report.
7. Other important information to facilitate better understanding of the Company’s corporate governance practices (e.g., employee rights, employee wellness, investor relations, supplier relations,
rights of stakeholders, directors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing
insurance for directors):
(1) Status of employee rights and employee wellness: Please refer to “5.5 Employees” on page 75-78 of this Annual Report.
(2) Status of investor relations, supplier relations and rights of stakeholders: Please refer to “7. Corporate Social Responsibility” on page 98-109 of this Annual Report.
(3) Directors’ training records: Please refer to page 39 of this Annual Report for details.
(4) Status of Risk Management Policies and Risk Evaluation: Please refer to “6.2 Risk Management” on page 86-95 of this Annual Report.
(5) Status of Customer Relations Policies: Please refer to “5.4 Customer Trust” on page 73-75 of this Annual Report.
(6) TSMC maintains D&O Insurance for its directors and officers.
8. If the Company has a self corporate governance evaluation or has authorized any other professional organization to conduct such an evaluation, the evaluation results, major deficiencies or
suggestions, and improvements are stated as follows: None
TSMC’s corporate governance won international recognition in 2012: Corporate Governance Asia honored TSMC with its “Corporate Governance Asia Recognition Awards 2012”. FinancialAsia
honored TSMC with its “Best Corporate Governance Company – Ranked No. 1 in Taiwan”. Asian Corporate Governance Association honored TSMC with its “Top 1 Corporate Governance Raking in
Asia Pacific”. Securities & Futures Institute’s 9th Information Disclosure of Public Companies Ranking ranked TSMC “A++”. Commonwealth Magazine honored TSMC with its “Most Admired Company
in Taiwan”.
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Name
Morris Chang (Note)
Date
10/25
Host by
Training/Speech Title
The Economic Daily News
2012 Master Forum - Far away from the Storm and Sailing alone Steady
- a panel discussion with visiting 2011 Nobel Economics Prize winner Christopher
Sims
06/25
The United Daily New Group
A Critical Two Years for Taiwan’s Economic Development Forum
- a panel discussion: The Priority of The Critical Two Years
F.C. Tseng
Stan Shih (Note)
08/16
04/18
Global Unichip Corp.
Executive Compensation and Long-Term Incentive Program
Taiwan Corporate Governance
Association
Speech: Enterprise Management & Corporate Governance
10/25
Securities & Future Institute
11/30
Kok-Choo Chen
05/22
Taiwan Corporate Governance
Association
Taiwan Corporate Governance
Association
Johnsee Lee
05/23
Securities & Future Institute
The 8th Taipei Corporate Governance Forum
Speech: Wangdao & Corporate Governance
International Corporate Governance Forum
Speech: Wangdao & Corporate Governance
Function Performance of Independent Directors and Practice of Audit Committee
3 hours
Directors and Supervisors Practice Advanced Seminar: Financial Forecast and Risk
Management
3 hours
Duration
40 minutes
1.5 hours
1 hour
2 hours
20 minutes
3 hours
11/07
Global Views Monthly Magazine
The Chinese Enterprise Leader Forum - Global Change and New Leadership
2 days
1. From time to time, TSMC provides directors with information concerning regulatory requirements and developments as related to directors’ activities. TSMC management also regularly presents
updates on the Company’s business and other information to directors.
2. Regular regulatory update reports are provided by TSMC’s General Counsel and by the Company’s independent auditors at the Audit Committee meetings.
Note: Selected speeches on corporate governance and related topics.
Continuing Education/Training of Management in 2012
Name/Title
Jessica Chou
Director,
Accounting Division
John Liang
Director, Internal
Audit
Date
02/20
02/20
11/20
11/21
12/10
12/10
11/20
12/20
Host by
Training
Accounting Research and Development
Foundation
Guiding principles of amending regulations of financial statements preparation
under IFRS (International Financial Reporting Standard)
Accounting Research and Development
Foundation
Conference on business finance and tax: Case study of administrative proceedings
regarding enterprise income tax and business tax
Accounting Research and Development
Foundation
The legal responsibility and case study of environmental protection (development
and sustainable environment) for enterprise
Accounting Research and Development
Foundation
Case study of “Transfer Pricing” audit in China, and the latest development in
value added tax in China
Accounting Research and Development
Foundation
Analysis of 2012 International Financial Reporting Standard -Chapter one:
Preparation of financial statements
Accounting Research and Development
Foundation
Analysis of 2012 International Financial Reporting Standard -Chapter two:
Revenue and inventory
The Institute of Internal Auditors,
R.O.C.
The Institute of Internal Auditors,
Taiwan
Supervision of Subsidiary
Audit for Newly Added Items of Internal Control System
Duration
3 hours
3 hours
3 hours
3 hours
3 hours
3 hours
7 hours
7 hours
Note: In 2012, Our Management attended various external, internal training programs, and speech presentations, such as the one conducted by our Sr. Vice President & CFO, Lora Ho on “TSMC Corporate Income Tax”.
3.4 Code of Ethics and Business Conduct
Ethics Values
Integrity is the most important core value of TSMC’s culture. TSMC is committed to acting ethically in all aspects of our business; constantly and
vigilantly promoting integrity, honesty, fairness, accuracy, and transparency in all that we say and do.
At the heart of our corporate governance culture is TSMC’s Code of Ethics and Business Conduct (the “Code”) that applies to TSMC and its
subsidiaries, and this Code requires that each employee bears a heavy personal responsibility to preserve and to protect TSMC’s ethical values and
reputation and to comply with various applicable laws and regulations.
039
In so doing, each of us:
● must not advance our personal interests at the expense of, or in conflict with the Company;
● must refrain from corruption, unfair competition, fraud, waste and abuse;
● must not undertake any practices detrimental to TSMC, the environment and to society;
● must procure all of our raw materials from socially responsible sources;
● must abide by both the spirit and letter of all applicable laws, rules and regulations; and
conduct when dealing with us or our officers and employees; we also promote our ethical culture to our business partners through regular
live seminars to prevent any unethical conduct. We have established an online “hotline” that any relevant person may use to report any ethical
irregularities to be investigated personally by designated senior management of TSMC.
The internal auditors of TSMC regularly audit the compliance by the Company, our vendors, suppliers, and customers, of relevant rules and
regulations.
● must avoid any efforts improperly to influence the decisions of anyone, including government officials, agencies, and courts, as well as our
customers, suppliers, and vendors.
TSMC Internal Audit assists the Board of Directors and Management in inspecting and reviewing whether TSMC’s internal control system is
In order to continue to build an environment of innovation, technology leadership, and sustainable profitable growth, the Code requires that we
1. Financial, managerial, and operating information is accurate, reliable, and timely.
must promote business relationships founded upon an unwavering respect for the intellectual property rights, proprietary information and trade
2. Legislative or regulatory issues impacting the organization are recognized and addressed properly.
secrets of TSMC, our customers, and others; and the proper use of the Company’s assets, not for personal use, but for achieving TSMC’s vision
3. Employee’s actions are in compliance with policies, standards, procedures, and applicable laws and regulations.
for many years to come.
4. Resources are acquired economically, used efficiently, and adequately protected.
adequate in design and effective in operation to ensure:
All employees, officers and Board members must whole-heartedly embrace and practice the Code. TSMC’s management must set the best
To achieve the above objectives, Internal Audit submits an annual audit plan incorporating the regulatory compliance audit projects to the
example of integrity and ethical conduct. TSMC’s officers, especially our CEO, CFO, and General Counsel, with oversight from our Board, are
Board of Directors for approval. Subsequent to the audits, Internal Audit reports the audit findings along with issue follow-up to the Board and
responsible for the full, fair, accurate, timely, and understandable financial accounting and financial disclosure in reports and documents filed by
Management on a regular basis.
the Company with securities authorities and in all TSMC public communications and disclosures.
Code Administration and Disciplinary Action
Compliance Activities
Prevention
- Employee declaration
- Employee education
- Continuing promotion
- Stakeholder promotion/cooperation
Detection
- Internal auditor
- Internal/external hotline
- Administrative discipline/legal action
Enhancement
- Monitor and analyze outcomes
- Propose improved procedures
- Implement enhanced management
system
All employees, officers and managers must comply with the Code and other policies and procedures. TSMC expects our customers, suppliers,
vendors, advisors and others with which we come into contact to understand and respect the Company’s ethics standards and culture.
As part of our ethics compliance program, all employees must disclose any matters that have or may have the appearance of undermining the
Code, such as any actual or potential conflict of interest. Key employees and senior officers must periodically declare their compliance status
with the Code. To encourage an open culture of ethics compliance, we also have implemented several related policies that allow employees or
any whistleblowers with relevant evidence to report any financial, legal, or ethical irregularities through the “Complaint Policy and Procedures
for Certain Accounting and Legal Matters” or “Procedures for Ombudsman System”. When an employee finds or suspects a breach of this Code,
he/she should report it immediately to any of the following persons: their supervisor; the Function Head of Human Resources; the Company’s
Ombudsman; or to the Chairman of the Company’s Audit Committee, depending on the nature of the suspected breach.
In order to promote a culture of awareness, we have made all of our various policies available through easy access on our intranet and require all
employees to be trained on our core values and compliance regime. Our compliance program for all employees includes regular live seminars and
online training on various topics on ethics, including the requirements to prevent bribery and to protect our intellectual property. Our intranet
website posts various guidelines and informative articles on ethics and honorable business conduct. We also require our stakeholders such as our
suppliers, vendors and other partners to accept and abide by the same high ethical standard to which we hold all of our officers and employees.
For example, we require all of our suppliers, vendors and partners to declare in writing that they will not engage in any fraud or any unethical
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We have a “zero tolerance” rule for any violation of any ethics rule. Simply put, any officer or employee regardless of their seniority will be
severely punished (including immediate dismissal and judicial prosecution as appropriate) to the full extent of our policies and the law, for any
violation of our ethical standards. For example, the Company prosecuted one legal action against former employees for misappropriation of
the Company’s intellectual property in 2012. Additionally, TSMC terminated 4 employees during 2012 for violating our Proprietary Information
Protection (“PIP”) and other ethics Rules.
3.4.1 Taiwan Corporate Conduct and Ethics Implementation as Required by the Taiwan Financial
Supervisory Commission
Non-implementation and
Its Reason(s)
None
Item
Implementation Status
1. Establishment of Corporate Conduct and Ethics Policy and Implementation
Measures
(1) The company’s guidelines on corporate conduct and ethics are provided
in internal policies and disclosed publicly. The Board of Directors and the
management team demonstrate their commitments to implement the
policies.
(2) The company establishes relevant policies for preventing any unethical
conduct. The implementation of the relevant procedures, guidelines and
training mechanism are provided in the policies.
(3) The company establishes appropriate measures for preventing bribery and
illegal political contribution for higher potential unethical conduct in the
relevant policies.
Integrity is the most important core value of TSMC’s culture. TSMC is committed
to acting ethically in all aspects of our business. TSMC has established the Code
of Ethics and Business Conduct (the “Code”) to require that each employee
bears a heavy personal responsibility to uphold TSMC’s ethics value. All details
of the Code and the measures that the Board and the management team take
to ensure compliance of the Code are reported in TSMC’s annual report and the
Corporate Social Responsibility Report.
In order to promote a culture of awareness, we have made available through
easy access all of our various policies on our intranet and require all employees to
be trained periodically on our core values and compliance regime.
We also require our stakeholders such as our suppliers, vendors and other
partners to accept and abide by the same high ethical standard to which we hold
all of our officers and employees.
The internal auditors of TSMC regularly audit compliance by the Company, our
vendors, suppliers, and customers, of relevant rules and regulations.
In order to prevent any unethical conduct, all employees must disclose any
matters that have or may have the appearance of undermining the Code, such
as any actual or potential conflict of interest. Key employees and senior officers
must periodically declare their compliance status with the Code.
TSMC requires all of our suppliers, vendors and partners to declare in writing
that they will not engage in any fraud or provide unethical conduct when
dealing with us or our officers and employees. We have established internal and
external online “hotline” that any relevant person may use to report any ethical
irregularities to be investigated personally by designated senior management of
TSMC.
(Continued)
041
Non-implementation and
Its Reason(s)
None
Item
Implementation Status
2. Corporate Conduct and Ethics Compliance Practice
(1) The company shall prevent doing business with whom has unethical
records and include business conduct and ethics related clauses in the
business contracts.
(2) The company sets up dedicated unit in charge of promotion and execution
of the company’s corporate conduct and ethics. The board of directors
supervises such execution and compliance of the policies.
(3) The company establishes policies to prevent conflict of interest and provides
appropriate communication and complaint channels.
(4) The company establishes effective accounting and internal control systems
for the implementation of policies, and the internal auditors audit such
execution and compliance.
TSMC requires our stakeholders such as our suppliers, vendors and other partners
to accept and abide by the same high ethical standard to which we hold all of
our officers and employee. For example, we require all of our suppliers, vendors
and partners to declare in writing that they will not engage in any fraud or
provide unethical conduct when dealing with us or our officers and employees.
We also promote our ethical culture to our business partners through regular live
seminars to prevent any unethical conduct.
Integrity is the most important core value of TSMC’s culture. TSMC’s Board,
under the leadership of the Chairman, the Company’s Ombudsman and
other internal functions of the Company including Legal Department, Human
Resources and Internal Auditors fully promote the code values of the Company
from the various perspectives. All employees, officers, and Board members must
whole-heartedly embrace and practice the Code. TSMC’s management must set
the best example of integrity and ethical conduct. TSMC’s officers, especially our
CEO, CFO, and General Counsel, with oversight from our Board, are responsible
for the full, fair, accurate, timely, and understandable financial accounting and
financial disclosure in reports/documents filed by the Company with securities
authorities and in all TSMC public communications/disclosures.
TSMC requires each new hiring employee to declare if there is any conflict of
interest, and asks all employees to disclose any matters that have, or may have
the appearance of undermining the Code, such as any actual or potential conflict
of interest. Key employees and senior officers must periodically declare their
compliance status with the Code.
TSMC requires all of our suppliers, vendors and partners to declare in writing that
they will not engage in any fraud or provide unethical conduct when dealing
with us or our officers and employees.
We have established internal and external online “hotline” that any relevant
person may use to report any ethical irregularities to be investigated personally
by designated senior management of TSMC.
TSMC continues maintaining the integrity of its financial reporting processes
and controls and establishes appropriate internal control systems for preventing
higher potential unethical conduct. The Internal auditors formulate annual audit
plans based on the results of the risk assessment and report to the Board its
audit report.
3. The company establishes the channels for reporting any ethical irregularities
and sets up punishment for violations of the policies.
TSMC has established internal and external online “hotline” that any employee
or relevant person may use to report any ethical irregularities to be investigated
personally by designated senior management of TSMC.
None
4. Information Disclosure
(1) To set up a corporate website that publishes information relating to
company’s corporate conduct and ethics.
(2) Other information disclosure channels (e.g. maintaining an English website,
designating personnel to handle information collection and disclosure)
Any officer or employee will be severely punished (including immediate dismissal
and judicial prosecution as appropriate) and prosecuted to the full extent
of our policies and the law, for any violation of our ethical standards. For
example, the Company prosecuted a legal action against former employee for
misappropriation of the Company’s intellectual property in 2012. Additionally,
TSMC terminated 4 employees during 2012 for violating our PIP and other
ethical rules.
Our intranet website posts various guidelines and informative articles on ethics
and honorable business conduct for employees’ reference (in both Chinese and
English).
TSMC discloses the relevant information in its’ Annual Report and CSR Report
which are available in TSMC external website (http://www.tsmc.com, in both
Chinese and English)
None
5. If the company has established corporate governance policies based on TSE Corporate Conduct and Ethics Best Practice Principles, please describe any discrepancy between the policies and their
implementation.
TSMC has established the Code of Ethics and Business Conduct (the “Code”) to require that all employees, officers and board members comply with the Code and the other policies and procedures.
For details on the implementation of TSMC’s Corporate Conduct and Ethics, please refer to “3.4 Code of Ethics and Business Conduct” on page 39-42 of this Annual Report.
6. Other important information to facilitate better understanding of the company’s corporate conduct and ethics compliance practices (e.g., promote and demonstrate the company’s commitment to
ethical standard and provide training to its business partners; review the company’s corporate conduct and ethics policy).
For details on the implementation of TSMC’s Corporate Conduct and Ethics, please refer to “3.4 Code of Ethics and Business Conduct” on page 39-42 of this Annual Report.
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3.5 Regulatory Compliance
● Live seminars are offered for topics related to Anti-bribery/
corruption, Anti-harassment and discrimination, Antitrust, PIP,
TSMC operates in many countries; in order to achieve compliance
Insider Trading, Export Control, Financial Reporting, Contract
with governing legislation, applicable laws, regulations and
Management, Intellectual Property, and Privacy Law. The Privacy
regulatory expectations, we closely monitor domestic and foreign
Protection course has been updated and reworked to reflect the
government policies and regulatory developments that could have a
newly adoption of Taiwan’s Personal Information Protection Act.
material impact on TSMC’s business and financial operations.
These courses are mandatory to managers and certain employees
because of the nature of the business activities they perform.
In addition to TSMC’s Code of Ethics and Business Conduct, TSMC
● Members of our legal team regularly attend outside training in
has also established policies, guidelines and procedures in other
Taiwan and abroad to receive legal updates and new development
policy areas, including: Anti-bribery/corruption, Anti-harassment/
in compliance and other areas.
discrimination, Antitrust (unfair competition), Environment, Export
● Inviting legal professionals and industry experts to lecture
Control, Financial Reporting/Internal controls, Insider Trading,
on new areas of knowledge and the latest developments on
Intellectual Property, PIP, Privacy, as well as procuring of raw
industry-specific compliance matters.
materials from socially responsible sources and so forth. With respect
● To enhance compliance and risk management to our subsidiaries
to “PIP,” it is one of the six key strategies of TSMC as announced in
and affiliates, we regularly hold compliance meetings with them to
June 2010.
ensure that all of our subsidiaries and affiliates (as appropriate) are
aligned with the compliance standards at TSMC headquarters.
TSMC and our employees are expected to comply with all laws and
regulations that govern our business. Training is a major component
To increase awareness of all employees in relation to the various
of our compliance program and is conducted throughout the year
compliance topics, various trainings and resources are available
to refresh employees’ commitment to ethical conduct, and to get
through our intranet, including Company’s latest internal policies.
updated information on any changes to the law. Highlights of our
Furthermore, compliance education and articles are published
compliance training program include the following:
regulatory on TSMC’s Legal Organization website. Actively promoting
● A wide range of on-line learning programs are designed to provide
employees with an understanding of the law and key compliance
issues. Topics available via on-line learning including competition
law (antitrust), environmental protection, insider trading, export
control management, PIP and more.
the right behavior is our key focus. For example, through various
promotion campaigns, we have raised awareness of behavior
associated with anti-bribery in 2012.
043
3.6 Internal Control System Execution Status
3.7 Status of Personnel Responsible for the Company’s Financial and Business
Operation
Taiwan Semiconductor Manufacturing Company Limited
Statement of Internal Control System
3.7.1 Resignation or Dismissal of Personnel Responsible for the Company’s Financial and Business
Operation during the 2012 Calendar Year and as of the Date of this Annual Report: None.
Date: February 5, 2013
3.7.2 Certification Details of Employees Whose Jobs are Related to the Release of the Company’s Financial
Based on the findings of a self-assessment, Taiwan Semiconductor Manufacturing Company Limited (TSMC) states the following with
regard to its internal control system during the year 2012:
1. TSMC’s Board of Directors and Management are responsible for establishing, implementing, and maintaining an adequate internal
control system. Our internal control is a process designed to provide reasonable assurance over the effectiveness and efficiency of our
operations (including profitability, performance, and safeguarding of assets), reliability of our financial reporting, and compliance with
applicable laws and regulations.
2. An internal control system has inherent limitations. No matter how perfectly designed, an effective internal control system can
provide only reasonable assurance of accomplishing its stated objectives. Moreover, the effectiveness of an internal control system
may be subject to changes due to extenuating circumstances beyond our control. Nevertheless, our internal control system contains
self-monitoring mechanisms, and TSMC takes immediate remedial actions in response to any identified deficiencies.
3. TSMC evaluates the design and operating effectiveness of its internal control system based on the criteria provided in the Regulations
Governing the Establishment of Internal Control Systems by Public Companies (herein below, the “Regulations”). The criteria adopted
by the Regulations identify five key components of managerial internal control: (1) control environment, (2) risk assessment, (3) control
activities, (4) information and communication, and (5) monitoring.
4. TSMC has evaluated the design and operating effectiveness of its internal control system according to the aforesaid Regulations.
5. Based on the findings of such evaluation, TSMC believes that, on December 31, 2012, we have maintained, in all material respects, an
effective internal control system (that includes the supervision and management of our subsidiaries), to provide reasonable assurance
over our operational effectiveness and efficiency, reliability of financial reporting, and compliance with applicable laws and regulations.
6. This Statement will be an integral part of TSMC’s Annual Report for the year 2012 and Prospectus, and will be made public. Any
falsehood, concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171, and 174 of the
Securities and Exchange Law.
Information
Certification
Certified Public Accountants (CPA)
U.S. Certified Public Accountants (U.S. CPA)
Certified Internal Auditor (CIA)
Chartered Financial Analyst (CFA)
Certified Management Accountant (CMA)
Financial Risk Manager (FRM)
Cerficate in Financial Management (CFM)
Certification in Control Self-Assessment (CCSA)
Certified Information Systems Auditor (CISA)
BS7799/ISO 27001 Lead Auditor
Number of Employees
Internal Audit
Finance
2
2
9
0
0
0
0
3
3
1
21
10
6
2
2
1
1
0
0
0
Note
Note 1
3.8 Information Regarding TSMC’s Independent Auditor
3.8.1 Audit Fees
Unit: NT$ thousands
Accounting Firm
Name of CPA
Audit Fee
Non-audit Fee
Whether the CPA’s Audit Period Covers an
Entire Fiscal Year
System
Design
Company
Registration
Human
Resource
Others
(Note 2)
Subtotal
Yes
No
Audit
Period
Deloitte & Touche
Hung-Peng Lin,
Shu-Chieh
Huang,
and others
66,048
-
370
-
2,470
2,840
V
Note 1: Article 10-4 of Regulation Governing Information to be published in Annual Report of Public Companies was not applicable to TSMC.
Note 2: Fees mainly related to R.O.C. IFRS adoption project.
7. This Statement has been passed by the Board of Directors in their meeting held on February 5, 2013, with none of the nine attending
3.8.2 TSMC did not Replace Its Independent Auditor during 2011, 2012, and as of February 28, 2013.
directors expressing dissenting opinions, and the remainder all affirming the content of this Statement.
Taiwan Semiconductor Manufacturing Company Limited
Morris Chang,
Chairman and Chief Executive Officer
3.8.3 TSMC’s Chairman, Chief Executive Officer, Chief Financial Officer, and Managers in Charge of Its
Finance and Accounting Operations did not Hold Any Positions within TSMC’s Independent Audit
Firm or Its Affiliates during 2012.
3.9 Material Information Management Procedure
TSMC has established relevant procedures for material information management and disclosure. All relevant departments and employees are
required to comply with the procedures and other applicable regulations when they become aware of any potential material information and the
disclosure thereof.
045
2
0
1
2
T
S
M
C
A
N
N
U
A
L
R
E
P
O
R
T
044
Advanced Technologies 65nm and beyond Reached
of Total Wafer Revenues
62%
Share of the Total Semiconductor
Foundry Market Reached
45%
More than Customers Worldwide
600
Wafer Shipments Reached Million
8-inch Equivalent Wafers
14.04
4. Capital and Shares
Distribution Profile of Share Ownership
Common Share
Shareholder Ownership (Unit: Share)
Number of Shareholders
4.1 Capital and Shares
4.1.1 Capitalization
Unit: Share/NT$
Authorized Share Capital
Capital Stock
Month/
Year
Issue Price
(Per Share)
Shares
Amount
Shares
Amount Sources of Capital
Remark
Capital Increase by
Assets Other than
Cash
03/2012
10 28,050,000,000
280,500,000,000 25,916,222,575
259,162,225,750 Exercise of Employee Stock
None
Options: NT$20,733,670
07/2012
10 28,050,000,000
280,500,000,000 25,920,604,605
259,206,046,050 Exercise of Employee Stock
None
Options: NT$43,820,300
09/2012
10 28,050,000,000
280,500,000,000 25,920,709,359
259,207,093,590 Exercise of Employee Stock
None
Options: NT$1,047,540
12/2012
10 28,050,000,000
280,500,000,000 25,922,047,578
259,220,475,780 Exercise of Employee Stock
None
Options: NT$13,382,190
4.1.2 Capital and Shares
Unit: Share
Type of Stock
Common Stock
Shelf Registration: None.
4.1.3 Composition of Shareholders
As of 02/28/2013
Date of Approval &
Approval Document No.
03/22/2012 Yuan Shang Tzu
No.1010008872
07/09/2012 Yuan Shang Tzu
No.1010020130
09/04/2012 Yuan Shang Tzu
No.1010027766
12/17/2012 Yuan Shang Tzu
No.1010039355
As of 02/28/2013
Total
179,839
146,222
32,754
13,134
5,653
6,415
2,944
1,813
3,518
1,863
1,173
479
268
203
1,398
397,676
1 ~ 999
1,000 ~ 5,000
5,001 ~ 10,000
10,001 ~ 15,000
15,001 ~ 20,000
20,001 ~ 30,000
30,001 ~ 40,000
40,001 ~ 50,000
50,001 ~ 100,000
100,001 ~ 200,000
200,001 ~ 400,000
400,001 ~ 600,000
600,001 ~ 800,000
800,001 ~ 1,000,000
Over 1,000,001
Total
Preferred Share: None.
4.1.4 Major Shareholders
Common Share
Shareholders
ADR-Taiwan Semiconductor Manufacturing Company, Ltd.
JPMorgan Chase Bank N.A. Taipei Branch in custody for Saudi Arabian Monetary Agency
Government of Singapore
JPMorgan Chase Bank N.A. Taipei Branch in custody for EuroPacific Growth Fund
JPMorgan Chase Bank N.A. Taipei Branch in custody for ABU DHABI Investment Authority
Cathay Life Insurance Co.,Ltd.
Polaris Taiwan Top 50 Tracker Fund
iShares MSCI Emerging Markets Index Fund
National Westminster Bank plc as Depositary of First State Asia Pacific Leaders Fund a sub fund of First
State Investments ICVC
Authorized Share Capital
Issued Shares
Listed
Non-listed
Total
Unissued
Shares
25,926,367,175
0
25,926,367,175
2,123,632,825
28,050,000,000
National Development Fund, Executive Yuan
Common Share
Type of Shareholders
Number of Shareholders
Shareholding
Holding Percentage (%)
Government
Agencies
11
Financial
Institutions
252
Other Juridical
Persons
Foreign Institutions
& Natural Persons
Domestic Natural
Persons
1,000
3,315
393,098
Total
397,676
1,653,736,247
808,520,232
1,193,067,566
19,662,338,939
2,603,046,375
25,920,709,359
6.38%
3.12%
4.60%
75.86%
10.04%
100.00%
As of 07/10/2012 (last record date)
2
0
1
2
T
S
M
C
A
N
N
U
A
L
R
E
P
O
R
T
048
Ownership
40,386,381
322,008,654
231,441,009
158,402,696
98,500,500
154,591,336
101,246,006
81,277,324
243,418,575
256,673,695
330,352,824
233,532,296
185,504,687
181,682,616
23,301,690,760
25,920,709,359
Total Shares Owned
5,458,510,828
1,653,709,980
813,105,396
496,005,919
413,565,136
271,795,529
255,515,235
237,011,423
229,265,000
226,137,807
As of 07/10/2012 (last record date)
Ownership (%)
0.16%
1.24%
0.89%
0.61%
0.38%
0.60%
0.39%
0.31%
0.94%
0.99%
1.27%
0.90%
0.72%
0.70%
89.90%
100.00%
As of 07/10/2012 (last record date)
Ownership (%)
21.06%
6.38%
3.14%
1.91%
1.60%
1.05%
0.99%
0.91%
0.88%
0.87%
049
4.1.5 Net Change in Shareholding and Net Change in Shares Pledged by Directors, Management and
Shareholders with 10% Shareholdings or More
Unit: Share
Title
Name
Chairman & CEO
Morris Chang
Vice Chairman
F.C. Tseng
Director
National Development Fund, Executive Yuan
Representative:
Johnsee Lee
Director
Rick Tsai
Independent Director
Sir Peter Leahy Bonfield
Independent Director
Stan Shih
Independent Director
Thomas J. Engibous
Independent Director
Gregory C. Chow
Independent Director
Kok-Choo Chen
Executive Vice President & Co-Chief Operating Officer
Shang-yi Chiang (Note 2)
Executive Vice President & Co-Chief Operating Officer
Mark Liu (Note 2)
Executive Vice President & Co-Chief Operating Officer
C.C. Wei (Note 2)
Senior Vice President & Chief Information Officer
Information Technology & Materials Management and Risk
Management
Stephen T. Tso
Senior Vice President & General Counsel
Legal
Richard Thurston
Senior Vice President, Chief Financial Officer &
Spokesperson
Finance
Lora Ho
Senior Vice President
Worldwide Sales and Marketing
Jason C.S. Chen
Vice President
Operations/Affiliate Fabs
M.C. Tzeng
Vice President
Research and Development
Wei-Jen Lo
Vice President & Chief Technology Officer
Research and Development
Jack Sun
Vice President
Operations/Product Development
Y.P. Chin
Vice President
Quality and Reliability
N.S. Tsai
Vice President &
President of TSMC North America
Rick Cassidy
2
0
1
2
T
S
M
C
A
N
N
U
A
L
R
E
P
O
R
T
050
2012
01/01/2013 ~ 02/28/2013
Net Change in Shareholding
Net Change in Shares
Pledged (Note 1)
Net Change in Shareholding
Net Change in Shares
Pledged (Note 1)
-
-
-
-
(1,124,000)
-
-
-
-
-
(1,080,000)
(385,000)
-
(350,000)
(720,000)
-
(270,000)
-
(357,000)
(224,000)
(265,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(170,000)
-
-
-
-
-
(50,000)
(35,000)
276,882
(130,000)
-
-
(50,000)
(26,000)
(76,000)
-
(80,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(Continued)
Title
Name
Vice President
Human Resources
L.C. Tu (Note 3)
Vice President
Operations/Mainstream Fabs and Manufacturing
Technology
J.K. Lin
Vice President
Operations/300mm Fabs
J.K. Wang
Vice President
Corporate Planning Organization
Irene Sun
Vice President
Research and Development
Burn J. Lin
Vice President
Research and Development
Y.J. Mii
Vice President
Research and Development
Cliff Hou
2012
01/01/2013 ~ 02/28/2013
Net Change in Shareholding
Net Change in Shares
Pledged (Note 1)
Net Change in Shareholding
Net Change in Shares
Pledged (Note 1)
-
324,900
-
(300,000)
(5,000)
565,578
-
-
-
-
-
-
-
-
(24,000)
-
-
(89,000)
(24,000)
-
-
-
-
-
-
-
-
-
Note 1: This refers to the creation of security interest over TSMC shares in favor of creditors, usually in connection with a shareholder’s own financing activities.
Note 2: On March 2, 2012, Senior Vice President of R&D Dr. Shang-yi Chiang, Senior Vice President of Operations Dr. Mark Liu, and Senior Vice President of Business Development Dr. C.C. Wei were appointed as Executive Vice
Presidents and Co-Chief Operating Officers, effective March 5, 2012.
Note 3: On March 5, 2013, Vice President of Human Resources Mr. L.C. Tu was appointed as the President of TSMC China, effective March 15, 2013.
4.1.6 Stock Trade with Related Party: None.
4.1.7 Stock Pledge with Related Party: None.
4.1.8 Related Party Relationship among Our 10 Largest Shareholders
Common Share
Name
Current Shareholding
Spouse & Minor
Shareholding
TSMC Shareholding by
Nominee Arrangement
As of 07/10/2012 (last record date)
Name and Relationship
between TSMC’s
Shareholders as Defined in
the Statement of Financial
Accounting Standards No.6
Shares
%
Shares
ADR-Taiwan Semiconductor Manufacturing Company, Ltd.
5,458,510,828
National Development Fund, Executive Yuan
Representatives: Johnsee Lee
1,653,709,980
-
21.06%
6.38%
-
JPMorgan Chase Bank N.A. Taipei Branch in custody for
Saudi Arabian Monetary Agency
813,105,396
3.14%
Government of Singapore
JPMorgan Chase Bank N.A. Taipei Branch in custody for
EuroPacific Growth Fund
JPMorgan Chase Bank N.A. Taipei Branch in custody for
ABU DHABI Investment Authority
Cathay Life Insurance Co.,Ltd.
Chairman: Homg-Tu Tsai
Polaris Taiwan Top 50 Tracker Fund
iShares MSCI Emerging Markets Index Fund
National Westminster Bank plc as Depositary of First
State Asia Pacific Leaders Fund a sub fund of First State
Investments ICVC
496,005,919
413,565,136
1.91%
1.60%
271,795,529
1.05%
255,515,235
0.99%
237,011,423
229,265,000
226,137,807
0.91%
0.88%
0.87%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Shares
%
Name
Relationship
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
None
None
None
None
None
None
N/A
None
N/A
None
N/A
N/A
N/A
None
None
None
None
None
None
None
None
None
None
None
None
None
None
051
4.1.9 Long-term Investment Ownership
Ownership by TSMC (1)
Ownership by Directors, Managers and
Directly/indirectly Owned Subsidiaries (2)
Total Ownership
(1) + (2)
Shares
%
Shares
%
Shares
Long-term Investment
Equity Method:
TSMC Partners, Ltd.
TSMC Global Ltd.
TSMC North America
TSMC Europe B.V.
TSMC Japan Limited
TSMC Korea Limited
988,268,244
1,284
11,000,000
200
6,000
80,000
100%
100%
100%
100%
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
988,268,244
1,284
11,000,000
200
6,000
80,000
Not Applicable (Note 1)
Not Applicable (Note 1)
TSMC China Company Limited
Not Applicable (Note 1)
100% Not Applicable (Note 1)
TSMC Guang Neng Investment, Ltd.
Not Applicable (Note 1)
100% Not Applicable (Note 1)
TSMC Solar Ltd.
TSMC Solid State Lighting Ltd.
1,118,000,000
430,400,000
Systems on Silicon Manufacturing Co. Pte Ltd.
313,603
Vanguard International Semiconductor Corp.
628,223,493
Xintec Inc.
Global UniChip Corporation
94,950,005
46,687,859
98.58%
95.01%
38.79%
40.47%
40.20%
34.84%
5,794,000
4,919,500
-
0.51%
1.09%
-
1,123,794,000
435,319,500
313,603
279,239,917
17.99% (Note 2)
907,463,410
-
15,000
-
-
-
-
94,950,005
46,702,859
Not Applicable (Note 1)
Not Applicable (Note 1)
Emerging Alliance Fund, L.P.
Not Applicable (Note 1)
99.50% Not Applicable (Note 1)
VentureTech Alliance Fund II, L.P.
Not Applicable (Note 1)
98.00% Not Applicable (Note 1)
VentureTech Alliance Fund III, L.P.
Not Applicable (Note 1)
50.25% Not Applicable (Note 1)
48.73% Not Applicable (Note 1)
Cost Method:
Non-publicly Traded
United Industrial Gases Co., Ltd.
Shin-Etsu Handotai Taiwan Co., Ltd.
W.K. Technology Fund IV
Funds
19,300,377
10,500,000
4,000,000
9.75%
7.00%
1.89%
-
-
-
Horizon Ventures Fund I, L.P.
Not Applicable (Note 1)
12.11% Not Applicable (Note 1)
Crimson Asia Capital Ltd., L.P.
Not Applicable (Note 1)
1.07% Not Applicable (Note 1)
Note 1: Not applicable. These firms do not issue shares. TSMC’s investment is measured as a percentage of ownership.
Note 2: TSMC’s Director, National Development Fund of Executive Yuan, holds 17.65% while other Directors and Management hold 0.34%.
4.1.10 Share Information
-
-
-
-
-
19,300,377
10,500,000
4,000,000
Not Applicable (Note 1)
Not Applicable (Note 1)
TSMC’s earnings per share increased 23.8% in 2012 to NT$6.41 per share. The following table details TSMC’s net worth, earnings, dividends and
market price per common share in 2012, as well as other data regarding return on investment.
Net Worth, Earnings, Dividends, and Market Price Per Common Share
Unit: NT$, except for weighted average shares and return on investment ratios
Item
Market Price Per Share (Note 1)
Highest Market Price
Lowest Market Price
Average Market Price
Net Worth Per Share
Before Distribution
After Distribution
Earnings Per Share
2011
78.00
63.30
72.09
24.29
21.29
2012
01/01/2013 ~ 02/28/2013
99.20
74.30
84.08
27.90
(Note 5)
Weighted Average Shares (thousand shares)
Diluted Earnings Per Share
25,924,682
5.18
25,927,936
6.41 (Note 5)
As of 12/31/2012
%
100%
100%
100%
100%
100%
100%
100%
100%
99.09%
96.10%
38.79%
58.46%
40.20%
34.84%
99.50%
98.00%
98.98%
9.75%
7.00%
1.89%
12.11%
1.07%
109.00
99.00
102.27
-
-
-
-
(Continued)
2
0
1
2
T
S
M
C
A
N
N
U
A
L
R
E
P
O
R
T
052
Item
Dividends Per Share
Cash Dividends
Accumulated Undistributed Dividend
Return on Investment
Price/Earnings Ratio (Note 2)
Price/Dividend Ratio (Note 3)
Cash Dividend Yield (Note 4)
Note 1: Referred to TWSE website
Note 2: Price/Earnings Ratio = Average Market Price/Diluted Earnings Per Share
Note 3: Price/Dividend Ratio = Average Market Price/Cash Dividends Per Share
Note 4: Cash Dividend Yield = Cash Dividends Per Share/Average Market Price
Note 5: Pending shareholders’ approval
4.1.11 Dividend Policy
2011
3.00
-
13.92
24.03
4%
2012
01/01/2013 ~ 02/28/2013
3.00 (Note 5)
-
(Note 5)
(Note 5)
(Note 5)
-
-
-
-
-
TSMC’s profits may be distributed by way of cash dividend and/or stock dividend. The preferred method of distributing profits is by way of an
annual cash dividend. Under TSMC’s Articles of Incorporation, stock dividends shall not exceed 50% of the total dividend distribution in any given
fiscal year. TSMC does not pay dividends when there is no profit or retained earnings.
4.1.12 Distribution of Profit
The Board adopted a proposal for 2012 profit distribution at its Meeting on February 5, 2013. The proposal will be effected according to the
relevant regulations, upon the approval of shareholders at the Annual Shareholders’ Meeting on June 11, 2013.
In addition, according to the Company’s Articles of Incorporation, TSMC shall allocate no more than 0.3% of earnings available for distribution
(net income after a regulatory required deduction for prior years’ losses and contributions to legal and special reserves) as compensation to
directors, and not less than 1% as a bonus to employees. Profit sharing to employees, to be distributed after the 2013 Annual Shareholders’
Meeting, was recorded as a charge to earnings of proximately 6.7% of net income in year 2012; compensation to directors were expensed
based on estimated amount of payment. The proposal will be effected according to the relevant regulations, upon the approval of shareholders
at the Annual Shareholders’ Meeting on June 11, 2013. If the actual amounts subsequently resolved by the shareholders differ from the above
estimated amounts, the differences will be recorded in the year of shareholders’ resolution as a change in accounting estimate.
Proposal to Distribute 2012 Profits
Unit: NT$
Cash Dividends to Common Shareholders (NT$3.0 per share)
Note: Employees’ cash bonus and profit sharing and compensation to directors for the year 2012 which have been expensed under the Company’s income statements are listed below:
－NT$11,115,239,773 distributed employees’ cash bonus
－NT$11,115,239,772 employees’ cash profit sharing to be distributed after 2013 Annual Shareholders’ Meeting
－NT$71,351,700 directors’ compensation
2011 Directors’ Compensation and Employee Profit Sharing
77,773,307,004
Directors’ Compensation (Cash)
Employee’s Cash Profit Sharing
Total
Board Resolution (02/14/2012)
Actual Result (Note)
Amount (NT$)
62,323,764
8,990,026,475
9,052,350,239
Amount (NT$)
62,323,764
8,990,026,475
9,052,350,239
Note: Each of the above two items, being approved by the Board, has been expensed at the same amount under the Company’s 2011 income statements.
4.1.13 Impact to 2013 Business Performance and EPS Resulting from Stock Dividend Distribution: Not
applicable.
4.1.14 Buyback of Common Stock: None.
053
4.2 Issuance of Corporate Bonds
4.2.1 Corporate Bonds
Issuance
Issuing Date
Denomination
Offering Price
Total Amount
Coupon
Tenor and Maturity Date
Guarantor
Trustee
Underwriter
Legal Counsel
Auditor
Repayment
Outstanding
Redemption or Early Repayment Clause
Covenants
Credit Rating
Other Rights of
Bondholders
Conversion Right
None
Amount of Converted or
Exchanged Common Shares,
ADRs or Other Securities
Not Applicable
Dilution Effect and Other Adverse Effects on Existing
Shareholders
Custodian
None
None
4.2.2 Convertible Bond: None.
4.2.3 Exchangeable Bond: None.
4.2.4 Shelf Registration: None.
4.2.5 Bond with Warrants: None.
2
0
1
2
T
S
M
C
A
N
N
U
A
L
R
E
P
O
R
T
054
Domestic Unsecured Bond (100-1)
Domestic Unsecured Bond (100-2)
Domestic Unsecured Bond (101-1)
Domestic Unsecured Bond (101-2)
Domestic Unsecured Bond (101-3)
Domestic Unsecured Bond (101-4)
Domestic Unsecured Bond (102-1)
As of 02/28/2013
09/28/2011
NT$10,000,000
Par
NT$18,000,000,000
Tranche A: 1.40% p.a.
Tranche B: 1.63% p.a.
Tranche A: 5 years
Maturity: 09/28/2016
Tranche B: 7 years
Maturity: 09/28/2018
01/11/2012
NT$10,000,000
Par
NT$17,000,000,000
Tranche A: 1.29% p.a.
Tranche B: 1.46% p.a.
Tranche A: 5 years
Maturity: 01/11/2017
Tranche B: 7 years
Maturity: 01/11/2019
08/02/2012
NT$10,000,000
Par
NT$18,900,000,000
Tranche A: 1.28% p.a.
Tranche B: 1.40% p.a.
Tranche A: 5 years
Maturity: 08/02/2017
Tranche B: 7 years
Maturity: 08/02/2019
09/26/2012
NT$10,000,000
Par
NT$21,700,000,000
Tranche A: 1.28% p.a.
Tranche B: 1.39% p.a.
Tranche A: 5 years
Maturity: 09/26/2017
Tranche B: 7 years
Maturity: 09/26/2019
10/09/2012
NT$10,000,000
Par
NT$4,400,000,000
1.53% p.a.
Tenor: 10 years
Maturity: 10/09/2022
None
None
None
None
None
01/04/2013
NT$10,000,000
Par
NT$23,600,000,000
Tranche A: 1.23% p.a.
Tranche B: 1.35% p.a.
Tranche C: 1.49% p.a.
Tranche A: 5 years
Maturity: 01/04/2018
Tranche B: 7 years
Maturity: 01/04/2020
Tranche C: 10 years
Maturity: 01/04/2023
None
02/06/2013
NT$10,000,000
Par
NT$21,400,000,000
Tranche A: 1.23% p.a.
Tranche B: 1.38% p.a.
Tranche C: 1.50% p.a.
Tranche A: 5 years
Maturity: 02/06/2018
Tranche B: 7 years
Maturity: 02/06/2020
Tranche C: 10 years
Maturity: 02/06/2023
None
Mega International Commercial Bank
Mega International Commercial Bank
Mega International Commercial Bank
Taipei Fubon Commercial Bank
Taipei Fubon Commercial Bank
Taipei Fubon Commercial Bank
Taipei Fubon Commercial Bank
Not Applicable
Modern Law Office
Deloitte & Touche
Bullet
Not Applicable
Modern Law Office
Deloitte & Touche
Bullet
Not Applicable
Modern Law Office
Deloitte & Touche
Bullet
NT$18,000,000,000
NT$17,000,000,000
NT$18,900,000,000
None
None
None
None
None
None
Not Applicable
Modern Law Office
Deloitte & Touche
Bullet
NT$21,700,000,000
None
None
Not Applicable
Modern Law Office
Deloitte & Touche
Bullet
NT$4,400,000,000
None
None
Not Applicable
Modern Law Office
Deloitte & Touche
Bullet
NT$23,600,000,000
None
None
Not Applicable
Modern Law Office
Deloitte & Touche
Bullet
NT$21,400,000,000
None
None
twAAA
(Taiwan Ratings Corporation, 08/24/2011)
twAAA
(Taiwan Ratings Corporation, 12/06/2011)
twAAA
(Taiwan Ratings Corporation, 07/02/2012)
twAAA
(Taiwan Ratings Corporation, 08/23/2012)
twAAA
(Taiwan Ratings Corporation, 09/04/2012)
twAAA
(Taiwan Ratings Corporation, 11/29/2012)
twAAA
(Taiwan Ratings Corporation, 12/18/2012)
None
Not Applicable
None
None
None
Not Applicable
None
None
None
Not Applicable
None
None
None
Not Applicable
None
None
None
Not Applicable
None
None
None
Not Applicable
None
None
055
4.3 Preferred Shares
4.3.1 Preferred Share: None.
4.3.2 Preferred Share with Warrants: None.
4.4 Issuance of American Depositary Shares
Issuing Date
10/08/1997
11/20/1998
01/12/1999 -
01/14/1999
07/15/1999
08/23/1999 -
09/09/1999
02/22/2000 -
03/08/2000
04/17/2000
06/07/2000 -
06/15/2000
05/14/2001 -
06/11/2001
06/12/2001
11/27/2001
02/07/2002 -
02/08/2002
11/21/2002 -
12/19/2002
07/14/2003 -
07/21/2003
11/14/2003
08/10/2005 -
09/08/2005
05/23/2007
Issuance & Listing
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
Total Amount (US$)
594,720,000
184,554,440
35,500,000
296,499,641
158,897,089
379,134,599
224,640,000
1,167,873,850
240,999,660
297,649,640
320,600,000
1,001,650,000
160,097,914
908,514,880
1,077,000,000
1,402,036,500
2,563,200,000
Offering Price Per ADS
(US$)
24.78
15.26
17.75
24.516
28.964
57.79
56.16
35.75
20.63
20.63
16.03
16.75
8.73
10.40
10.77
8.6
10.68
Units Issued
24,000,000
12,094,000
2,000,000
12,094,000
5,486,000
6,560,000
4,000,000
32,667,800
11,682,000
14,428,000
20,000,000
59,800,000
18,348,000
87,357,200
100,000,000
163,027,500
240,000,000
Underlying Securities
TSMC Common
Shares from Selling
Shareholders
TSMC Common
Shares from Selling
Shareholders
TSMC Common
Shares from Selling
Shareholders
TSMC Common
Shares from Selling
Shareholders
TSMC Common
Shares from Selling
Shareholders
(Pursuant to ADR
Conversion Sale
Program)
TSMC Common
Shares from Selling
Shareholders
(Pursuant to ADR
Conversion Sale
Program)
TSMC Common
Shares from Selling
Shareholders
Cash Offering and
TSMC Common
Shares from Selling
Shareholders
TSMC Common
Shares from Selling
Shareholders
(Pursuant to ADR
Conversion Sale
Program)
TSMC Common
Shares from Selling
Shareholders
TSMC Common
Shares from Selling
Shareholders
TSMC Common
Shares from Selling
Shareholders
TSMC Common
Shares from Selling
Shareholders
(Pursuant to ADR
Conversion Sale
Program)
TSMC Common
Shares
from Selling
Shareholders
TSMC Common
Shares from Selling
Shareholders
TSMC Common
Shares from Selling
Shareholders
TSMC Common
Shares from Selling
Shareholders
Common Shares
Represented
Rights & Obligations of
ADS Holders
120,000,000
60,470,000
10,000,000
60,470,000
27,430,000
32,800,000
20,000,000
163,339,000
58,410,000
72,140,000
100,000,000
299,000,000
91,740,000
436,786,000
500,000,000
815,137,500
1,200,000,000
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Trustee
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Depositary Bank
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Citibank, N.A. –
New York
Custodian Bank (Note 1)
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
Citibank, N.A. –
Taipei Branch
ADSs Outstanding
(Note 2)
Apportionment of
Expenses for Issuance &
Maintenance
Terms and Conditions in
the Deposit Agreement
& Custody Agreement
24,000,000
46,222,650
48,222,650
71,407,859
76,893,859
83,453,859
87,453,859
144,608,739
156,290,739
170,718,739
259,006,235
318,806,235
369,019,413
485,898,166
585,898,166
864,210,597
1,128,739,639
(Note 3)
See Deposit
Agreement
and Custody
Agreement
for Details
See Deposit
Agreement
and Custody
Agreement
for Details
See Deposit
Agreement
and Custody
Agreement
for Details
See Deposit
Agreement
and Custody
Agreement
for Details
See Deposit
Agreement
and Custody
Agreement
for Details
See Deposit
Agreement
and Custody
Agreement
for Details
See Deposit
Agreement
and Custody
Agreement
for Details
(Note 4)
See Deposit
Agreement
and Custody
Agreement
for Details
See Deposit
Agreement
and Custody
Agreement
for Details
See Deposit
Agreement
and Custody
Agreement
for Details
See Deposit
Agreement
and Custody
Agreement
for Details
See Deposit
Agreement
and Custody
Agreement
for Details
(Note 3)
See Deposit
Agreement
and Custody
Agreement
for Details
See Deposit
Agreement
and Custody
Agreement
for Details
See Deposit
Agreement and
Custody Agreement
for Details
See Deposit
Agreement and
Custody Agreement
for Details
See Deposit
Agreement and
Custody Agreement
for Details
Closing Price Per ADS
(US$)
2012
01/01/2013 -
02/28/2013
High
Low
Average
High
Low
Average
17.27
12.57
14.56
19.15
17.52
18.14
Note 1: Citibank, N.A., Taipei Branch has changed its name to “Citibank Taiwan Limited” on August 1, 2009.
Note 2: TSMC has in aggregate issued 813,544,500 ADSs since 1997, which, if taking into consideration stock dividend distributed over the period, would amount to 1,147,835,205 ADSs. Stock dividends distributed in 1998, 1999,
2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008 and 2009 was 45%, 23%, 28%, 40%, 10%, 8%, 14.08668%, 4.99971%, 2.99903%, 0.49991%, 0.50417% and 0.49998% respectively. As of February 28, 2013, total
number of outstanding ADSs was 1,091,467,817 after 56,367,388 ADSs were redeemed.
Note 3: All fees and expenses such as underwriting fees, legal fees, listing fees and other expenses related to issuance of ADSs were borne by the selling shareholders, while maintenance expenses such as annual listing fees and
accountant fees were borne by TSMC.
Note 4: All fees and expenses such as underwriting fees, legal fees, listing fees and other expenses related to issuance of ADSs were borne by TSMC and the selling shareholders, while maintenance expenses such as annual listing
feesand accountant fees were borne by TSMC.
2
0
1
2
T
S
M
C
A
N
N
U
A
L
R
E
P
O
R
T
056
057
4.5 Status of Employee Stock Option Plan
4.5.1 Issuance of Employee Stock Options
ESOP Granted
Approval Date
Issue (Grant) Date
Number of Options Granted
Percentage of Shares Exercisable to Outstanding Common Shares
Option Duration
Source of Option Shares
Vesting Schedule
Shares Exercised
Value of Shares Exercised (NT$)
Shares Unexercised
Original Grant Price Per Share (NT$)
Adjusted Exercise Price Per Share (NT$)
Percentage of Shares Unexercised to Outstanding Common Shares
Impact to Shareholders’ Equity
First Grant
06/25/2002
08/22/2002
18,909,700
0.10154%
10 years
Second Grant
06/25/2002
11/08/2002
1,085,000
0.00583%
10 years
Third Grant
06/25/2002
03/07/2003
6,489,514
0.03485%
10 years
Fourth Grant
06/25/2002
06/06/2003
23,090,550
0.12399%
10 years
Fifth Grant
10/29/2003
12/03/2003
842,900
0.00416%
10 years
Sixth Grant
10/29/2003
02/19/2004
15,720
0.00008%
10 years
Seventh Grant
10/29/2003
05/11/2004
11,167,817
0.05510%
10 years
Eighth Grant
10/29/2003
08/11/2004
135,300
0.00058%
10 years
Ninth Grant
01/06/2005
05/17/2005
10,742,350
0.04620%
10 years
As of 02/28/2013
New Common Share
New Common Share
New Common Share
New Common Share
New Common Share
New Common Share
New Common Share
New Common Share
New Common Share
2nd Year: up to 50%
3rd Year: up to 75%
4th Year: up to 100%
2nd Year: up to 50%
3rd Year: up to 75%
4th Year: up to 100%
2nd Year: up to 50%
3rd Year: up to 75%
4th Year: up to 100%
2nd Year: up to 50%
3rd Year: up to 75%
4th Year: up to 100%
2nd Year: up to 50%
3rd Year: up to 75%
4th Year: up to 100%
2nd Year: up to 50%
3rd Year: up to 75%
4th Year: up to 100%
2nd Year: up to 50%
3rd Year: up to 75%
4th Year: up to 100%
2nd Year: up to 50%
3rd Year: up to 75%
4th Year: up to 100%
2nd Year: up to 50%
3rd Year: up to 75%
4th Year: up to 100%
20,585,621
696,435,850
0
NT$53.0
NT$25.6
0.00000%
1,416,203
45,875,186
0
NT$51.0
NT$24.6
0.00000%
7,385,017
170,789,855
199,537
NT$41.6
NT$20.2
0.00077%
23,363,569
807,621,328
1,475,410
NT$58.5
NT$28.3
0.00569%
522,185
26,754,961
60,926
NT$66.5
NT$50.1
0.00023%
12,251
592,895
3,165
NT$63.5
NT$47.8
0.00001%
9,561,511
423,881,664
783,017
NT$57.5
NT$43.2
0.00302%
128,014
4,982,968
0
NT$43.8
NT$38.0
0.00000%
7,445,854
354,649,036
1,491,228
NT$54.3
NT$47.2
0.00575%
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
2
0
1
2
T
S
M
C
A
N
N
U
A
L
R
E
P
O
R
T
058
059
4.5.2 Employee Stock Options Granted to Management Team and to Top 10 Employees
Title
Name
Number of Options Granted
(Note 3)
% of Shares Exercisable to
Outstanding Common Shares
Exercised
Unexercised
Shares Exercised
Exercise Price Per
Share
Value of Shares
Exercised (NT$)
% of Shares
Exercised to
Outstanding
Common Shares
Shares Unexercised
Adjusted Grant
Price Per Share
Value of Shares
Unexercised (NT$)
As of 02/28/2013
% of Shares
Unexercised to
Outstanding
Common Shares
Chairman &Chief Executive Officer
Executive Vice President & Co-Chief Operating Officer
Executive Vice President & Co-Chief Operating Officer
Morris Chang (Note 1)
Mark Liu (Note 1)
C.C. Wei (Note 1)
Senior Vice President & Chief Information Officer
Stephen T. Tso (Note 1)
Directors
Senior Vice President &General Counsel
Richard Thurston (Note 1)
Vice President & Chief Technical Officer
Jack Sun (Note 1)
Vice President & President of TSMC North America
Rick Cassidy
Vice President
Vice President
Vice President
Director
Director
Sr. Vice President of TSMC North America
L.C. Tu (Note 1 & 2)
J.K. Lin (Note 1)
Burn J. LIN (Note 1)
Jessica Chou
Lie-Szu Juang
Pan-Wei Lai
Sr. Vice President of TSMC North America
Bradford Paulsen
Employees
Sr. Vice President of TSMC North America
Vice President of TSMC North America
President of WaferTech
Director of WaferTech
Program Director of WaferTech
Deputy FAB Manager of WaferTech
David Keller
Sajiv Dalal
Kuo Chin Hsu
Charlton Ku
Wayne Yeh
Tsung Kuo
5,610,424
0.02164%
5,610,424
24.8
139,177,343
0.02164%
0
0.0
0
0.00000%
7,674,288
0.02960%
7,167,464
43.7
313,329,626
0.02765%
506,824
47.2
23,922,093
0.00195%
Note 1: TSMC granted options to certain of its officers (as listed above) as a result of their voluntary selection to exchange part of their profit sharing for stock options in 2003. This includes a voluntary exchange by Chairman Morris
Chang in his capacity as Chief Executive Officer.
Note 2: On March 5, 2013, Vice President of Human Resources Mr. L.C. Tu was appointed as the President of TSMC China, effective March 15, 2013.
Note 3: Number of options granted includes the additional shares due to stock dividend distributed in 2004, 2005, 2006, 2007, 2008 and 2009.
4.6 Status of Employee Restricted Stock
TSMC did not issue employee restricted stock in 2012, and as of the date of this Annual Report.
4.6.1 Status of Employee Restricted Stock: Not applicable.
4.6.2 Employee Restricted Stock Granted to Management Team and to Top 10 Employees: Not applicable.
4.7 Status of New Share Issuance in Connection with Mergers and Acquisitions
TSMC did not issue new shares in connection with mergers or acquisitions during 2012, and as of the date of this Annual Report.
4.8 Financing Plans and Implementation: Not applicable.
2
0
1
2
T
S
M
C
A
N
N
U
A
L
R
E
P
O
R
T
060
061
20
nm
2012
28
nm
2010
40
nm
2008
65
nm
2005
90
nm
2004
0.13
µm
2001
5. Operational Highlights
5.1 Business Activities
5.1.1 Business Scope
As the founder and a leader of the dedicated semiconductor foundry segment, TSMC has built its reputation by offering advanced and
“More-than-Moore” wafer production processes and unparalleled manufacturing efficiency. TSMC strives to provide the best overall value to its
5.1.4 Production in 2012 and 2011
Unit: Capacity / Output (8-inch equivalent wafers) / Amount (NT$ thousands)
Year
2012
2011
5.2 Technology Leadership
5.2.1 R&D Organization and Investment
Wafers
Capacity
15,090,605
13,221,316
Output
13,875,440
12,019,882
Amount
270,740,990
204,927,905
Amount: NT$ thousands
R&D Expenditures
customers, and the success of TSMC’s business is manifested in the success of its customers.
TSMC further expanded many aspects of Research and Development
TSMC provides a full range of integrated semiconductor foundry services that fulfill the increasing variety of customer needs. In the process, it
has experienced strong growth by building close relationships with customers. Semiconductor suppliers from around the world trust TSMC with
their manufacturing needs, thanks to its unique integration of cutting-edge process technologies, pioneering design services, manufacturing
budget was 8.0% of total revenue. This level of R&D investment equals
or exceeds that of many leading-edge technology companies. Along
with the budget increase, the R&D organization increased staffing by
2012
40,402,138
in 2012 to strengthen Technology Leadership. In 2012, the total R&D
2011
33,829,880
productivity and product quality.
over 27.5%.
01/01/2013~
02/28/2013
6,990,383
In May 2009, TSMC established the New Businesses organization to explore non-foundry related business opportunities. In August 2011, the
TSMC recognizes that the technology challenge required to extend
New Businesses organization was formally separated from the main TSMC organization as two subsidiaries, TSMC Solid State Lighting Ltd. and
Moore’s Law, the business law behind CMOS scaling, is getting increasingly complex. R&D Vice Presidents bring their rich industry experiences to
TSMC Solar Ltd., responsible for solid state lighting and solar business activities, respectively.
5.1.2 Customer Applications
lead the strengthening of the R&D team and to navigate through the technological and competitive challenges ahead. In 2012, TSMC worked
intensively on ramping 28nm technology, which contributed close to 22% of fourth quarter 2012 revenue and will further increase in 2013.
TSMC accelerated the development of advanced transistors, especially 3D transistors using FinFET structure for 16nm process node, embedded
Over the past 25 years, more than 600 customers worldwide have relied on TSMC to manufacture chips that are used across the entire spectrum
memories, and copper (Cu)/low-K interconnect technologies. During 2012, the R&D organization once again proved its capabilities by developing
of electronic applications, including computers and peripherals, information appliances, wired and wireless communications systems, automotive
20nm technology as well as establishing 16nm transistor leadership capabilities. Furthermore, TSMC broadened the horizon of transistor research
and industrial equipment, consumer electronics such as DVDs, digital TVs, game consoles, digital still cameras (DSCs), and many other
by investing R&D in alternative high-speed and low-power channel materials other than silicon, such as germanium and III-V compounds.
applications.
The rapid evolution of end products drives our customers to utilize TSMC’s innovative technologies and services, while at the same time spurring
IMEC in Belgium, the respected European R&D consortium. TSMC also has strategic agreements with IP providers to enable the development of
TSMC also expanded its external R&D partnerships and alliances with world-class research institutions. For example, TSMC is a core partner of
TSMC’s own development of technology. As always, success depends on leading rather than following industry trends.
5.1.3 Unconsolidated Shipments and Gross Sales in 2012 and 2011
Unit: Shipments (8-inch equivalent wafers) / Gross Sales (NT$ thousands)
Wafer
Package
Other
Total
Domestic
Export
Domestic
Export
Domestic
Export
Domestic
Export
2012
2011
Shipments
2,348,115
11,508,104
0
143,267
2,348,115
11,651,371
Gross Sales
64,958,354
401,877,584
0
6,124,451
4,180,117
29,557,232
69,138,471
437,559,267
Shipments
2,077,487
10,411,227
0
24,881
2,077,487
10,436,108
Gross Sales
49,039,389
340,588,566
0
1,045,714
4,499,828
26,298,590
53,539,217
367,932,870
2
0
1
2
T
S
M
C
A
N
N
U
A
L
R
E
P
O
R
T
064
reusable IPs through the advanced technology nodes. TSMC strengthened its collaborations with key development partners on design-process
optimization, and provides funding for nanotechnology researches at leading research universities worldwide to promote innovations and the
advancement of technology.
These research efforts enable the Company to continuously offer its customers the foundry-leading, first-to-market technologies and design
solutions that contribute to their product success in today’s complex and challenging market environment.
5.2.2 R&D Accomplishments in 2012
R&D Highlights
● 28nm Technology
In 2012, TSMC’s 28nm technology offering added 28nm High Performance Plus (28HPP) and 28nm High Performance Triple-Gate (28HPT).
28HPP and 28HPT achieved 10% faster speed than that in previous 28nm High Performance (28HP) and 28nm High Performance Mobile
Computing (28HPM) offered in 2011. 28HPP was qualified and demonstrated first silicon success in early production. 28HPT received first
customer tape out in December 2012, and was scheduled to deliver first silicon success by April 2013.
● 20nm Technology
In 2012, TSMC continued to focus on 20nm technology development, including process baseline setup and yield learning, design rule
definition and enhancement, SPICE model generation, and reliability evaluation. To offer a leading-edge technology for both digital and analog
applications, the Company adopted an advanced lithography process for smaller feature size. With the second generation of high-K metal-gate,
more Si strain, and new device structure, the intrinsic transistor performance continues to enhance following Moore’s Law. Meanwhile, external
resistance can be effectively reduced and controlled by a specially designed process technique. The back-end-of-line (BEOL) interconnect process
065
features extreme low-K inter-metal dielectric materials and copper
topography with the 3D device structures. In addition, TSMC has also
lithography not only has the potential for imaging critical layers, it
metallization with the novel low-resistance scheme. The logic
developed the patterning solution to delineate the tightest single
also offers cost reduction potential for non-critical layers and 450mm
transistor and SRAM bit-cell offering, using the 20nm process, can
patterning pitch of 80nm for the metal layer enabling further increase
wafers.
satisfy high performance System-on-Chip (SoC) applications.
of pattern density for customers. Building on the learning of the
Development of 20nm technology will create superior gate density
control that enable fast cycle time for SRAM development and yield
20nm node, TSMC has automated the in-line pilot run process and its
● Mask Technology
Mask technology is an integral part of advanced lithography
● Advanced Package Development
To provide innovative and cost competitive lead-free bumping
and packaging solutions in 2012, TSMC developed and qualified
28nm technology node Bump-on-Trace packaging technology with
ultra-fine pitch array (100μm pitch) Cu-bump for mobile devices.
The Company expanded the lead-free packaging technology
and chip performance. The cost and complexity of advanced
learning.
technology will continue to escalate for customers. In 2012, TSMC
technology. In 2012, TSMC completed the development of the
envelope to 20nm node and offered a wide variety of lead-free flip
mask technology for the 20nm node to enable double patterning.
chip packaging technologies for both mobile/handheld and high
successfully taped out the process development test vehicle, defect
The pathfinding for 10nm node has been started on immersion
TSMC’s R&D mask facility received more state-of-the-art mask
performance applications to enhance customers’ competitiveness.
reduction vehicle and product-like yield learning vehicle, on which the
scanners. This technology will become more sophisticated and play
advanced ARM-core block was included. With the vehicle and process
a key role as the process baseline, based on considerations of cost
development, TSMC provided V1.0 process flow, design kits (design
and next-generation tool availability. Innovative processes are being
rules, SPICE models, and PDK files) and intellectual property (IP) to
developed to deal with the process control challenges brought with
help reduce foundry-access costs in 2012. The Company achieved
this technology node. Optical proximity correction has solved the
processing tools to enable engineers to complete the development
of mask technologies for the 16nm and 10nm nodes in the coming
years. Development of mask technology for EUV lithography has
been underway with its unique requirements in e-beam writing,
etching, inspection, repair, and verification. As a core member of
its outstanding transistor performance target and demonstrated
process problem. Both cost and measurement accuracy were greatly
SEMATECH and a joint-development partner of EIDEC, TSMC is an
● 3D IC
In 2012, R&D completed CoWoSTM process and package
qualifications and transferred the technology for production.
CoWoSTM solution provides a simple integration process for
customers to realize their products with the optimized cost and
the functional and natural yield of the leading-edge SRAM bit-cells
improved with this change.
as planned. Besides the internal test vehicles, the Company also
active participant in the development of key infrastructure pieces for
cycle time. We have also developed the 3D IC 28HPM through
EUV masks such as the actinic repair verification tool and the actinic
transistor stacking (TTS) technology, that can enable customers for
launched two public cyber shuttles in April and November 2012.
Development of EUV lithography and multiple e-beam direct write is
inspection tool of EUV blanks.
More than 10 customers took the shuttles and verified their IPs.
TSMC’s high-performance 20nm process enters risk production in
aimed at the 7nm node because of late availability. Nevertheless, the
10nm node will be used to exercise these technologies.
first quarter of 2013.
At the front of specialty technology, R&D lithography has further
● 16nm Technology
TSMC completed 16nm technology definition and began 16nm
extended the limitation of scanners in the 8-inch fabs, to shrink the
design rules and help customers gain more gross dies per wafer to
technology development in 2012. In order to further extend
reduce the die cost. R&D has transferred multiple eFlash technologies
Moore’s Law, the FinFET transistor, an advanced 3D device structure,
for manufacturing and delivered eMRAM and eRRAM lithography
was introduced in the 16nm technology in addition to the third
technologies. For MEMS, R&D has developed and transferred the
generation of high-K metal gate, the fifth generation of strain
manufacturing technology for microphones and accelerometers.
technology and advanced 193nm lithography. As a result, the 16nm
technology offers substantial power reduction for the same chip
TSMC continues to work with exposure-tool partner ASML in the
performance, a must for advanced mobile applications as compared
development of immersion and EUV lithographic technologies. Faced
to technologies built with the traditional planar structure.
with delays in the EUV source technology, capabilities of 193nm
immersion scanners are being extended with more resolution-
In 2012, TSMC achieved significant progress on test vehicle
enhancement features, tighter specifications, and higher throughput
generation, process baseline setup, design rule definition, SPICE
to enable multiple patterning. In the meantime, using NXE3100
model generation and reliability evaluation. TSMC successfully
beta-tool in Fab 12, we have been developing single-patterning EUV
taped out a process development test vehicle, provided customers
processes for 10nm and 7nm applications, with associated mask
early design kits (design rules and SPICE models) and demonstrated
and resist technologies. However, the application of EUV lithography
functional yield on the FinFET-based SRAM bit-cells according to plan.
in high-volume manufacturing of these nodes will depend on the
success of the EUV source technology to reach over 100 wafers per
● Lithography
20nm lithography progressed steadily in 2012. There has been
hour.
continuous learning and improvement in material quality, process
The KLA-Tencor REBL multiple-e-beam direct-write tool is being
recipe robustness, and litho-cell maintenance that resulted in robust
extensively studied for feasibility, performance, and improvements.
patterning solutions. The achieved defect learning and D0 goals
A TSMC team from the design, CMOS, MEMS, and packaging areas
enable successful yield learning on SRAM qualification vehicles and
is jointly developing and fabricating the dynamic pattern generation
several key customer tape-outs.
Lithography for the 16nm node signifies the introduction of novel
patterning techniques to achieve 48nm pitch FinFET, especially to
chip for the REBL system. Two test stands for qualification of
dynamic pattern generation and resist testing are being built and
will be delivered to the TSMC Fab 12 GIGAFABTM facility in 2013.
Two scanner companies are performing sizing feasibility for multiple
ensure sufficient coverage and planarization of high aspect ratio
e-beam direct-write lithography. Multiple e-beam direct-write
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Integrated Interconnect and Packaging
In 2012, TSMC became the world’s first foundry to provide
full system integration turn-key solutions to customers. The
Company developed and delivered backend technologies starting
from advanced back-end-of-line (BEOL) interconnect, to the
production-ready fine pitch silicon interposer with through
silicon via (TSV) & chip stacking, and all the way to the advanced
wafer-level-chip scale packaging (WLCSP) including fan-in and
fan-out, and ultra fine pitch large die lead-free flip chip packaging.
applications requiring small form factor, high performance and low
power dissipation. Realizing the critical nature of 3D IC thermal
management, TSMC has also developed thermal solutions associated
with the CoWoSTM process and TTS technologies. Overall, TSMC
delivers technology solutions to enable SiP design that includes
package design, electrical analysis of package extraction, timing,
signal integrity, IR drop, and thermal to physical verification of design
rule check (DRC) and layout verification of schematic (LVS). Such
integrated solution for product realization is available to customers.
Advanced Transistor Research
TSMC can offer our customers corresponding design tools,
Continuous quest for high performance and low power drives
technology and mass production capability. Such options were made
innovation and research in transistor architecture in advanced logic
available to customers in 2012. Advanced BEOL interconnection is
technologies across all segments. TSMC invested heavily in alternative
further refined and extended with innovative damascene processes.
high speed and low power channel materials other than silicon, such
And the flip chip packaging technology envelope was expanded to
as germanium and III-V compounds. New concepts of transistor
larger chip size and finer bump pitches for advanced technology
structures employing innovative nanotechnology are also under
nodes (28nm and 20nm). Efforts are also made to include fan-in
intensive investigation.
and fan-out wafer level packaging technology in our offerings to
customers. The solution has been qualified by selective customers.
Spectrum of Technology
● Advanced Interconnect
Advanced interconnects with low resistance/capacitance RC delay
continued to be the primary focus of TSMC BEOL technology
development in 2012. For 16nm node and beyond, we have
developed a new interconnect scheme to achieve minimum pitch and
a new metal patterning to minimize resistance/capacitance RC delay.
At the 20nm node, the effective resistivity of our Cu lines is highly
competitive and lower than that projected by the International
Technology Roadmap for Semiconductors (ITRS).
In addition to CMOS logic technology, TSMC continues to conduct
research and development on a broad mix of capabilities. The
Company enhanced its SoC roadmap, with higher integration and
more variants.
● Mixed Signal/Radio Frequency (MS/RF) Technology
TSMC developed full scope 28nm oxi-nitride and poly-Si based
RFCMOS technology for next generation RF transceivers (ex. 4G LTE)
with the advantages of low power & low cost. Besides standard-Vt
and low-Vt devices, extreme-low-Vt devices were also included for
larger design margins and smaller active-power consumption. TSMC
delivered a CMOS process compatible technology for enabling cellular
RF switch applications on Si to compete with traditional compound
067
semiconductor- based process. TSMC enabled production of the
In October 2012, TSMC announced full delivery of 20nm design
IPD (Integrated Passive Device) technology, specifically for rapidly
ecosystem through OIP collaboration. TSMC’s 20nm design
expanding mobile devices.
ecosystem is ready with foundation design collaterals such as DRC,
LVS, and PDKs; foundation IPs, including standard-cell libraries,
In 2011, TSMC set up a dedicated quality management system
to drive for highest quality assurance for soft-IP continuing the
successful story of excellent quality records as seen in hard-IP.
Customers can access soft-IP9000 assessment status reports of
CoWoSTM Reference Flow was announced in October 2012. The
emerging 3D integration and process technologies allow the designs
with multi-technology support. CoWoSTM Reference Flow enables
heterogeneous integration across multiple technologies and memory
standard I/O, e-Fuse and memory compilers; and standard interface
soft-IPs through TSMC Online. In 2012, the new soft-IP Handoff
integration through Wide-IO. In order to satisfy the demands of
and the first product from a partner customer has shipped
technology requirements.
timing, and congestion) and advanced formal lint checks.
● Power IC/BCD Technology
In 2012, TSMC’s HV/ Power technologies collectively shipped more
IPs such as USB, PCI, and DDR/LPDDR. Customers can conveniently
than 1 million wafers to customers. On top of the production base,
download these materials at TSMC Online. In addition, new design
R&D team released the second generation of 0.18 BCD technology,
enablement of EDA tools is updated regularly to satisfy 20nm
engineering samples to system customer.
● Panel Driver Technology
In 2012, 80HV for smartphone display driver chips was released to
production. And a customized derivative of the technology has also
supported partner customer’s lead product design. Other than small
panel for smartphone, we also have been developing a 0.11μm
TSMC addressed the most critical design challenges through two
technology- specific Reference Flows in 2012: 20nm Reference Flow
and CoWoSTM Reference Flow. Through these two new reference
flows, customers gain access to needed solutions in order to design
in TSMC 20nm technology and CoWoSTM technology.
technology specifically for tablet applications.
In October 2012, TSMC also announced the foundry segment’s 20nm
● Micro-electromechanical Systems (MEMS) Technology
In 2012, TSMC’s modular MEMS technology for accelerometer
was released and supported the partner customer production
Custom Design Reference Flow, and the fourth revision of the Radio
Frequency Reference Design Kit (RF RDK), providing needed design
enablement for custom design and RF design.
ramping. A microphone project for high-resolution noise cancellation
To ensure timely enhancement of OIP Ecosystem partners’ tool
applications was executed.
compliance with new process requirements, TSMC works with EDA
partners to proactively certify EDA tool readiness and publish a report
● Flash/Embedded Flash Technology
In 2012, TSMC achieved several milestones in embedded flash
on TSMC online.
technologies at 65/55nm node. The split-gate cell at the 65nm node
Starting from 20nm, the coverage of EDA certification further
was qualified for automotive process and is currently in production.
expanded from DRC, LVS, RC extraction, placement and routing, to
For other NOR-type cells, a customer is shipping several prototypes
static timing analysis, electro-migration, IR drop and custom design.
for sampling. For hybrid cells, products for 100k chip card application
are in sampling.
In order to lower the barrier of technology adoption for customers,
TSMC introduced the Integrated Sign-Off Flow (ISF) in 65nm/55nm
At the 40nm node, TSMC has engaged with leading IDMs to develop
in 2009, announced 40nm ISF in 2011 and 28nm in 2012. ISF
nitride film storage flash cell and NOR type cell for both automotive
is a production-proven design flow based on TSMC’s expertise
and consumer applications.
5.2.3 Technology Platform
accumulated over the years. ISF started to bear fruit in 2010,
and enabled a large number of first-time customers to leapfrog
from 0.13μm node to 65nm/55nm node. The introduction of
40nm ISF has further helped customers seize more business
TSMC equips modern IC designers with a comprehensive design
opportunities to jumpstart their product solutions, with examples
infrastructure required to optimize productivity and cycle time.
of successful tape-outs for mobile processor application and 3G/4G
This includes design flow for electronic design automation (EDA),
silicon-proven building blocks such as libraries and IPs, simulation and
communication from China in 2011. The newly revealed 28nm ISF in
2012 helped customers seize opportunities in mobile communication
verification design kits such as process design kit (PDK) and tech-files.
with designs in 28nm node.
All these are built on top of the technology foundation, and each
technology needs its own design infrastructure to be usable for
The Soft-IP Alliance Program aims to improve soft-IP readiness for
designers. This is the concept of a technology platform.
advanced technology nodes and to drive earlier time-to-market.
Soft-IP has historically been process technology independent
TSMC’s technology platforms reflect the culmination of years of work
and therefore not optimized for power, performance, and area
by TSMC and its alliance partners. The Company has added additional
deliverables to its Open Innovation Platform® initiative to further
enhance its technology platforms every year since OIP was launched
in 2008.
considerations. Given the ever-increasing need of first-time silicon
success and early time-to-market for highly integrated circuits, such
as System-on-Chip (SoC), close technical collaboration between the
foundry and the IP provider is imperative to emphasize this critical
trade-off.
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Package (the soft-IP Kit 2.0) is ready for soft-IP Partners. Soft-IP Kit
2.0 provides an enhanced set of checks that covers such additional
design checks as early physical implementation aspects (e.g., area,
emerging systems for scaling, performance and functionality, the
CoWoSTM Reference Flow provides a complete analysis suite for
power integrity, thermal analysis, simultaneously switching noise
5.2.4 Design Enablement
Customers can design directly using TSMC technologies through
and innovative DFT and place-and-route solution. With cooperating
TSMC ecosystem partners, CoWoSTM design methodology provides
the most cost-effective solution for the TSMC recommended design
environment. The CoWoSTM design platform can take all benefits of
advanced nodes and mature technologies in a very flexible way to
the Company’s internal design team as well as via alliance partners.
achieve target design requirements.
TSMC’s technology platform provides a solid foundation for design
enablement.
Tech File and PDK
Because of TSMC’s broader, earlier, and deeper collaboration with
customers through the OIP initiative, customers gain greater benefit
from TSMC tech-files and process design kit (PDK). The benefits
are evidenced by a significant increase to more than 100,000
downloads in 2012, from 50,000 downloads in 2011. TSMC also
increased resources to meet the high demand on PDK for specialty
technologies.
Library and IP
TSMC and its alliance partners offer TSMC’s customers a rich portfolio
of libraries and IPs. These reusable building blocks are essential for
many design projects. In 2012, over 60% of new tape-outs at TSMC
adopted one or more libraries or IPs from TSMC and/or its IP partners.
To support the high demand, TSMC also invested resources to
expand its library and silicon IP portfolio. The total number of library
or IP content in the portfolio, including soft IPs, increased to 5,400 in
2012, compared with 3,740 in 2011.
Design Methodology and Flow
TSMC announced in October 2012 the full delivery of 20nm support
within Open Innovation Platform® (OIP) design infrastructure.
TSMC’s 20nm deign ecosystem is ready with foundation design
collaterals such as DRC, LVS, and PDKs; foundation IPs, including
standard-cell libraries, standard I/O, e-Fuse & memory compilers; and
standard interface IPs such as USB, PCI, and DDR/LPDDR. Customers
can download these files at TSMC Online. Collaboration with the EDA
community for 20nm has been very thorough in order to achieve tool
consistency for improved design results.
20nm Reference Flow features new design solutions/capabilities
in place-and-route, RC extraction, DRC, timing analysis, electro
migration and IR-drop to enable 20nm designs in double patterning
and with characteristics that closely match silicon behavior.
20nm Custom Design Reference Flow enables double patterning
capability. It provides solutions to process requirements that are
significant in 20nm, including a direct link with simulators for the
verification of voltage-dependent DRC rules, an integrated layout-
dependent-effect solutions and handling of high-K metal-gate edge
effect.
The updated RF RDK provides a solution to address common
challenges that RF designers encounter. RF RDK 4.0 offers flexible
five-terminal MOS device and accurate noise model for slow wave
transmission line. RDK4.0 also offers comprehensive electro-magnetic
work flow for radio-frequency passive device synthesis through
integrated-passive-device, 60GHz and scalable VCO reference
example to assist customers in inductor design.
5.2.5 Intellectual Property
A strong portfolio of intellectual property rights strengthens TSMC’s
technology leadership and protects our advanced and leading edge
technologies. In 2012, TSMC received a record breaking 647 U.S.
patents, as well as 300+ issued patents in Taiwan and the PRC,
and other patents issued in various other countries. In 2012, TSMC
achieved a patent milestone: breaking into the “Top 50” U.S. patent
grants in 2012. TSMC’s patent portfolio is now approximately 20,000
patents worldwide (includes patent applications in queue). We
continue to implement a unified strategic plan for TSMC’s intellectual
capital management. Strategic considerations and close alignment
with the business objectives drive the timely creation, management
and use of our intellectual property.
At TSMC, we have built a process to extract value from our
intellectual property by aligning our intellectual property strategy
with our R&D, business objectives, marketing, and corporate
development strategies. Intellectual property rights protect our
freedom to operate, enhance our competitive position, and give us
leverage to participate in many profit-generating activities.
069
We have worked continuously to improve the quality of our
5.2.7 Future R&D Plans
intellectual property portfolio and to reduce the costs of maintaining
5.3 Manufacturing Excellence
5.3.3 Precision and Lean Operations
it. We plan to continue investing in our intellectual property portfolio
In light of the significant accomplishments of TSMC’s advanced
and intellectual property management system to ensure that we
technologies in 2012, the Company plans to continue to grow its
5.3.1 GIGAFABTM Facilities
TSMC’s unique manufacturing infrastructure is tailored for a high
product mix foundry environment. Following its commitment to
protect our technology leadership and receive maximum business
R&D investments. The Company plans to reinforce its exploratory
TSMC’s 12-inch fabs are a key part of its manufacturing strategy.
manufacturing excellence, TSMC has equipped a sophisticated
value from our intellectual property rights.
development work on new transistors and technologies, such as 3D
scheduling and dispatching system, implemented industry-leading
5.2.6 TSMC University Shuttle Program
structures, strained-layer CMOS, high mobility materials and novel 3D
IC devices. These studies of the fundamental physics of nanometer
CMOS transistors are core aspects of our efforts to improve the
TSMC currently operates three 12-inch GIGAFABTM fabrication
facilities – Fab 12, Fab 14, and Fab 15 – whose combined capacity
automated materials handling systems, and employed
Lean Manufacturing approaches to provide customers with
reached 3,936,000 12-inch wafers in 2012. Production within
on-time-delivery and best-in-class cycle time. Real-time equipment
The TSMC University Shuttle Program was established to handle
understanding and guide the design of transistors at advanced
these three facilities supports 0.13μm, 90nm, 65nm, 40nm, 28nm,
performance and productivity monitoring, analysis, diagnosis
MPW (Multi-Project Wafer) access requests by qualified professors at
nodes. The findings of these studies are being applied to ensure our
and 20nm process technologies, and their sub-nodes. Part of the
and control minimize production interruption and maximize cost
leading research universities worldwide. To participating professors,
continued industry leadership at the 28nm and 20nm nodes and to
capacity is reserved for research and development work and currently
effectiveness.
TSMC University Shuttle Program provides annual pre-approved
extend our leadership to the 10nm and 7nm nodes. One of TSMC’s
supports 16nm, 10nm and beyond technology development. TSMC
access to quality technologies, including 65nm, 40nm process nodes
goals is to extend Moore’s Law through both innovative in-house
has developed a centralized fab manufacturing management for the
5.3.4 450mm Wafer Manufacturing Transition
for analog/mixed-signal circuits and RF design, and 0.11μm/0.18μm
work and by collaborating with industry leaders and academia. We
customers’ benefit of consistent quality and reliability performance,
process nodes for micro-electromechanical system designs. For very
seek to push the envelope in finding cost-effective technologies and
greater flexibility of demand fluctuations, faster yield learning and
TSMC joined the Global 450mm Consortium (G450C) located in
advanced logic design and SRAM researches, the 28nm process
manufacturing solutions.
node is provided to special university projects. To TSMC, the key
performance indices are the 3Rs: Recruiting, Research results transfer
from universities to TSMC, and Recognition.
TSMC intends to continue working closely with international
consortia and lithography equipment suppliers to ensure the
time-to-volume, and minimized costly product re-qualification. It
the College of Nanoscale Science and Engineering (CNSE) of New
enables Fab 15 to fast ramp 28nm capacity from zero to 50,000
York University at Albany, New York. The consortium includes five IC
wafers output per month in eight months to satisfy customers’
demand.
makers and CNSE (which represents New York State and provides the
clean room facility), as well as key 450mm tool suppliers as associate
timely development of 193nm high-NA scanner technology, EUV
members.
Participations in the TSMC University Shuttle Program include the
lithography, and massively parallel e-beam direct-write technologies.
active participation of major university research groups: in the U.S.,
These technologies are increasingly important to TSMC’s process
5.3.2 Engineering Performance Optimization
Currently, TSMC has 16 experienced employees working in the
M.I.T., Stanford University, UC Berkeley, Harvard University, and
development efforts at the 10nm, 7nm, and smaller nodes.
Highly sophisticated information technology (IT) solutions, such
consortium. TSMC has assumed the Operation GM position in the
UCLA; in Taiwan, National Taiwan University, National Chiao-Tung
as advanced equipment control, fault detection and diagnosis,
consortium and commits to lead the industry for a cost-effective
University, and National Tsing-Hua University; in China, Tsing Hua
TSMC continues to work with mask writing and inspection
engineering big data mining, and centralized operation platforms,
450mm transition. The clean room of G450C in Albany has been
University in Beijing, and Hong Kong University of Science and
equipment suppliers to develop viable mask making technology to
are implemented to optimize TSMC equipment, process and yield
ready for tool installation since Q1 2013. The majority of the tools
Technology, and in Singapore, Nanyang Technological University.
help ensure that the Company maintains its leadership position in
performance. They also improve production efficiency, effectiveness,
will be installed in 2013.
The TSMC University Shuttle Program serves as an effective bridge to
prototyping and production requirements.
optimization and automation.
mask quality & cycle time and continues to meet aggressive R&D,
and engineering capability via information integration, workflow
link motivated professors and graduate students in leading research
Besides 450mm tool readiness, TSMC is also developing novel
450mm operation to bring the maximum value of semiconductor
universities worldwide with enthusiastic directors and managers
With a highly competent and dedicated R&D team and its
Advanced analytical methods identify critical equipment and process
wafer fabrication to customers, including advanced quality and the
at TSMC to contribute to newer level of excellence in advancing
unwavering commitment to innovation, TSMC is confident of its
parameters that are linked to device performance. Methodologies
most competitive cycle time in advanced technology. 450mm will be
technologies and in nurturing new generations of talent in the
ability to deliver the best and most cost-effective SoC technologies
such as virtual metrology, yield dissection and management integrate
a new era of semiconductor manufacturing with new manufacturing
semiconductor field.
for its customers, thereby supporting the Company’s business growth
Advanced Process Control (APC), Fault Detection Classification (FDC),
capability advanced from today’s leading edge technology.
and profitability.
Statistical Process Control (SPC), and Circuit Probe data in order to
TSMC’s University Shuttle Program has been very effective and is
praised by professors around the world. They have recognized that
TSMC R&D Future Major Project Summary
this Program allows their graduate students to implement exciting
designs ranging from low-power memories, analog-to-digital
Project Name
Description
Risk Production
(Estimated Target
Schedule)
converters and digital designs to advanced radio-frequency
and mixed-signal bio-medical systems. This is a truly “win-win”
collaboration. In 2012, TSMC received specific letters of appreciation
from professors at M.I.T., Stanford University, UC Berkeley,
Harvard University, UCLA, National Taiwan University and National
Chiao-Tung University.
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16nm logic platform
technology and
applications
10nm logic platform
technology and
applications
3D IC
Next-generation
lithography
Long-term research
Next-generation technology for
both digital and analog products
Exploratory technology for both
digital and analog products
2013
2015
Cost-effective solution with better
form factor and performance for SIP
2013 - 2014
EUV and multiple e-beam to extend
Moore’s Law
2014 – 2016
Special SoC technology (including
new NVM, MEMS, RF, analog) and
10nm transistors
2013 – 2015
The above plans account for roughly 70% of the total R&D budget in 2013, while total R&D
budget is currently estimated to be around 8% of 2013 revenue.
optimize equipment performance to match device performance.
5.3.5 Raw Materials and Supply Chain Risk
Management
Accurate modeling and control at each process stage drives
intelligent module loop control. The process control hierarchy
In 2012, TSMC continued Supply Chain Risk Management meetings
dispatched via sophisticated computer-integrated manufacturing
systems enables optimization from equipment to end product,
periodically to integrate Company resources from materials
management, fab operations, risk management and quality
which achieves precision and lean operation in a high product mix
management. TSMC worked with its suppliers to enhance the
semiconductor manufacturing environment.
performance of quality, delivery, risk management, and to support
green procurement, environmental protection and safety.
071
Raw Materials Supply
Major Materials
Major Suppliers
Market Status
Procurement Strategy
Raw Wafers
F.S.T.
MEMC
S.E.H.
Siltronic
SUMCO
These five suppliers together provide over
90% of the world’s wafer supply.
Each supplier has multiple manufacturing
sites in order to meet customer demand,
including plants in North America, Asia, and
Europe.
● TSMC’s suppliers of silicon wafers are required to pass stringent quality certification procedures.
● TSMC procures wafers from multiple sources to ensure adequate supplies for volume manufacturing
and to appropriately manage supply risk.
● TSMC maintains competitive price and service agreements with its wafer suppliers, and, when
necessary, enters into strategic and collaborative agreements with key suppliers.
● TSMC regularly reviews the quality, delivery, cost and service performance of its wafer suppliers. The
results of these reviews are incorporated into TSMC’s subsequent purchasing decisions.
● A periodic audit of each wafer supplier’s quality assurance systems ensures that TSMC can maintain
the highest quality in its own products.
Chemicals
Litho Materials
Gases
Slurry, Pad, Disk
Air Products
ATMI
BASF
Dow
KANTO-PPC
MGC
AZ
Dow
JSR
Nissan
Shin-Etsu Chemical
Sumitomo
T.O.K.
Air Liquide
Air Products
Linde
Taiyo Nippon Sanso
Asahi Glass
Cabot Microelectronics
DA Nano
Dow Chemical
Fujifilm Planar Solutions
Fujimi
Hitachi Chemical
Kinik
3M
These six companies are the major suppliers
for bulk and specialty chemicals.
● Most suppliers have relocated many of their operations closer to TSMC’s major manufacturing
facilities, thereby significantly improving procurement logistics.
● The suppliers’ products are regularly reviewed to ensure that TSMC’s specifications are met and
product quality is satisfactory.
These seven companies are the major
suppliers for worldwide litho materials
● TSMC works closely with its suppliers to develop materials able to meet application and cost
requirements.
● TSMC and suppliers periodically conducts improvement programs of their quality, delivery,
sustainability and green policy, to ensure continuous progress of TSMC’s supply chain.
These four companies are the major suppliers
of specialty gases.
● The majority of the four suppliers are located in different geographic locations, minimizing supply
risk to TSMC.
● TSMC conducts periodic audits of the suppliers’ quality assurance systems to ensure that they meet
TSMC’s standards.
These nine companies are the major suppliers
for CMP materials.
● TSMC works closely with its suppliers to develop materials able to meet application and cost
requirements.
● TSMC and suppliers periodically conducts improvement programs of their quality, delivery,
sustainability and green policy, to ensure continuous progress of TSMC’s supply chain.
Suppliers Accounted for at Least 10% of Annual Consolidated Net Procurement
Unit: NT$ thousands
Supplier
Company A
Company B
VIS
SSMC
Others
Total Net Procurement
2012
2011
Procurement
Amount
As % of 2012 Total
Net Procurement
Relation to TSMC
Procurement
Amount
As % of 2011 Total
Net Procurement
Relation to TSMC
6,708,942
5,846,449
4,475,674
3,638,633
20,710,694
41,380,392
None
None
Investee accounted for using
equity method
Investee accounted for using
equity method
16%
14%
11%
9%
50%
100%
5,549,444
3,035,441
5,597,895
3,949,176
6,775,433
24,907,389
None
None
Investee accounted for using
equity method
Investee accounted for using
equity method
22%
12%
22%
16%
28%
100%
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5.3.6 Quality and Reliability
chemical analysis and fault isolation equipment were added at a
record pace in 2012 to support development activities of the 20nm
A characteristic of TSMC’s industry reputation is its commitment to
and 16nm technology nodes.
providing customers with the best quality wafers and service for their
products. Quality and Reliability (Q&R) services aim to achieve “quality
In compliance with the electronic industry’s lead-free and green
on demand” to fulfill customers’ needs regarding time-to-market,
IC package policy, Q&R qualified and released lead-free bumping
reliable quality, and market competition over a broad range of
to satisfy customer demands, and made lead-free bump package
products.
possible for 0.13μm, 45nm, 40nm and 28nm technology products
by collaborating with the major outsource assembly & testing
Q&R technical services assist customers in the technology
subcontractors (OSAT). This enabled TSMC customers to introduce
development and product design stage to design-in their product
and ramp lead-free products with excellent assembly quality. In 2012,
reliability requirements. Since 2008, Q&R has worked with R&D to
TSMC Q&R ramped wafer-level Chip Scale Package (CSP) to 20K
successfully establish and implement new qualification methodology
per month and lead-free to 40K per month without major quality
for High-k/Metal Gate (HKMG). Q&R also works with design
issues. For mainstream technologies, Q&R qualified ultra, extreme
services on embedded memory, high voltage, e-Fuse and MEMS IP
low leakage and high endurance embedded Flash IP, IPD (Integrated
developments to expand TSMC’s design portfolio. Since 2009, Q&R
Passive Device), hybrid of Copper, Copper-Aluminum technology
has worked with R&D and the design service team to improve the
with customers. Q&R continues to build reliability testing and
quality of design kits through integrated R&D and design quality
monitoring to ensure excellent manufacturing quality of automotive,
platform. In 2012, Q&R continued to work with R&D and the design
team to develop DRM infrastructure with iEDA layout platform. Q&R
high-voltage products, CMOS image sensors and embedded-Flash
memory products.
also deployed an SRAM cell review system to improve bit cell change
quality of third parties and customers. Q&R has been collaborating
TSMC Q&R is also responsible for leading the Company towards
with SEMI to establish an IC Quality Committee since May in order
the ultimate goal of zero-defect production through the use of
to enhance product quality of the semiconductor supply chain. For
continuous improvement programs. Periodic customer feedback
backend technology development, Q&R worked with R&D, BTSD
indicates that products shipped from TSMC have consistently met
(Backend Technology and Service Division) and Product Engineering
to complete the CoWoSTM technology development and production
transfer. After establishing Power Cycling capability and methodology
or exceeded their field quality and reliability requirements. In 2012,
a third-party audit verified the effectiveness of the TSMC quality
management system (including R&D labs) in compliance with ISO/TS
in 2011, Q&R will further extend backend characterization by adding
16949:2009 and IECQ QC 080000 certificates requirements.
system-level temperature cycling, bending, drop and vibration tests in
2013.
5.4 Customer Trust
Q&R has deployed systems to ensure robust quality in managing
5.4.1 Customers
production and in design services, including third-party IP
management, to meet the business requirements of customers. Q&R
TSMC’s worldwide customers have diverse product specialties
also implemented innovative statistical matching methodologies
and excellent performance records in various segments of the
to enhance manufacturing quality, including matching of facility,
semiconductor industry. Fabless customers include: Advanced Micro
metrology and process tools, wafer acceptance test (WAT) data
Devices, Inc., Altera Corporation, Broadcom Corporation, Marvell
and reliability performance. In 2011, Q&R tightened the post-fab
Semiconductor Inc., MediaTek Inc., NVIDIA Corporation, OmniVision
outgoing visual inspection criteria for wafer quality improvement to
Technologies and Qualcomm Inc. IDM customers include: Analog
AQL 0.4% from AQL 0.65%.
Devices Inc., STMicroelectronics and Texas Instruments Inc. etc.
To sustain production quality and to minimize risk to customers
Customer Service
when deviations occur, manufacturing quality monitoring and event
management span all critical stages – from raw material supply, mask
making, and real-time in-process monitoring, to bumping, wafer sort
and reliability performance. Advanced failure and materials analysis
techniques are also developed and effectively deployed in process
development, customer new product development and product
manufacturing. In addition to adapting analytical techniques to aid
in the release and monitoring of advanced Fab tools and processes
for advanced technology nodes, state-of-the-art electron microscopy,
TSMC believes that providing superior customer service is critical
to enhancing customer satisfaction and loyalty, which is the path
to retaining existing customers, attracting new customers, and
strengthening customer relationships. With a dedicated customer
service team as a main contact window for coordination and
facilitation, TSMC strives to provide world-class, high-quality, efficient
and professional services in design support, masking, manufacturing,
and backend to achieve optimum experience for our customers and,
in return, to gain customer’s trust and sustain Company profitability.
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To facilitate customer interaction and information access on a real-time basis, TSMC’s EFOUNDRY® services offer a suite of web-based
applications that provide a more active role in design, engineering, and logistics. Designers have 24-hour a day, seven-day-a-week access
to critical information and are able to create custom reports through EFOUNDRY® online services. Design Collaboration focuses on content
availability and accessibility, with close attention to complete, accurate, and current information at each level of the wafer design life cycle.
Engineering Collaboration includes online access to engineering lots, wafer yields, wafer acceptance test (WAT) analysis, and quality reliability
data. Logistics Collaboration provides access to data updated three times a day on any given wafer lot’s status in order, fabrication, assembly and
testing, and shipping.
Customer Satisfaction
To assess customer satisfaction and to ensure that as many as possible of our customers’ needs and wants are adequately addressed, TSMC
conducts an annual customer satisfaction survey (ACSS) with all active customers, either by web or interview survey, through an independent
consultancy.
Complementary with ACSS, quarterly-based business reviews (QBRs) are also performed by the customer service team to survey customers’
satisfaction during their visits on technical and business related services offered. Through both surveys and intensive interaction with customers
by account team, TSMC is able to maintain close touch with customers for better service and collaboration.
All customer feedback is routinely reviewed by executives and developed into improvement plans to become an integral part of this survey
process with a complete closed-loop. TSMC has maintained a focus on customer survey data as one key indicator of corporate performance – not
just of past performance, but also as a leading indicator of future performance. TSMC has acted on the belief that satisfaction leads to loyalty,
and customer loyalty leads to higher levels of retention and expansion.
Customers Accounted for at Least 10% of Annual Consolidated Net Sales
Unit: NT$ thousands
Customer
Customer A
Others
Total Net Sales
2012
2011
Net Sales
As % of 2012 Total
Net Sales
Relation to TSMC
Net Sales
As % of 2011 Total
Net Sales
Relation to TSMC
85,357,353
420,891,227
506,248,580
None
17%
83%
100%
59,203,844
367,876,801
427,080,645
None
14%
86%
100%
5.4.2 Open Innovation Platform® (OIP) Initiative
Innovation has long been both an exciting and challenging proposition. Competition among semiconductor companies is becoming more
active and intense in the face of increasing customer consolidation and the commoditization of technology at more mature, conventional levels.
Companies must find ways to continue innovating in order to prosper further. Companies innovating openly from the “outside in” as well as
from the “inside out” accelerate innovation through active collaborations with external partners. This active collaboration of TSMC with external
partners is known as Open Innovation. TSMC has adopted this path to innovate via the Open Innovation Platform® (OIP) initiative.
The TSMC Open Innovation Platform® (OIP) initiative is a comprehensive design technology infrastructure that encompasses all critical IC
implementation areas to reduce design barriers and improve first-time silicon success. OIP promotes the speedy implementation of innovation
amongst the semiconductor design community and its ecosystem partners with TSMC’s IPs, design implementation and DFM capabilities, process
technology and backend services.
A key element of OIP is a set of ecosystem interfaces and collaborative components initiated and supported by TSMC that more efficiently
empowers innovation throughout the supply chain and, in turn, drives the creation and sharing of newly-created revenue and profits. TSMC’s
Active Accuracy Assurance (AAA) initiative is critical to OIP, providing the accuracy and quality required by the ecosystem interfaces and
collaborative components.
TSMC’s Open Innovation model brings together the innovative thinking of customers and partners under the common goal of shortening design
time, minimizing time-to-volume and speeding time-to-market and, ultimately, time-to-revenue:
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the needed design infrastructure with timely enhancement of EDA
Education
● The foundry segment’s largest, most comprehensive and robust
silicon-proven intellectual properties (IPs) and library portfolio;
● Advanced design methodology delivery through reference flows,
design for manufacturing (DFM), and process design kits; and
● Comprehensive design ecosystem alliance programs covering
market-leading EDA, library, IPs, and design service partners.
TSMC’s OIP Alliance consists of 30 electronic design automation
(EDA) partners, 41 IP partners, and 26 design service partners.
TSMC and its partners proactively work together, and engage
much earlier and deeper than before in order to address mounting
design challenges at advanced technology nodes. Through this
early and intensive collaboration effort, TSMC OIP is able to deliver
tools, early availability of critical IPs and quality design services when
customers need them. This is critical to success for the customers
to take full advantage of the process technologies once they reach
production-ready maturity.
In October 2012, TSMC hosted OIP Ecosystem Forum at San Jose
Convention Center in California, with keynote addresses from the
executives of TSMC as well as OIP ecosystem partners. The forum
was well attended by both customers and ecosystem partners and
demonstrated the value of collaboration through OIP to nurture
innovations.
TSMC’s OIP Partner Management Portal facilitates communication
with our ecosystem partners for efficient business productivity.
This portal is designed with an intuitive interface and can be linked
directly from TSMC-Online.
5.5 Employees
5.5.1 Human Capital
Human capital is one of the most important assets of TSMC. The
Company strives to provide employees with a challenging, enjoyable
and rewarding work environment. In 2012, TSMC was named the
“Most Admired Company in Taiwan” by CommonWealth Magazine
for the 16th consecutive year.
At the end of 2012, TSMC had over 37,000 employees worldwide,
including 3,614 managers and 15,264 professionals. Female
managers comprised 11.4% of all managers, and non-Taiwanese
nationals comprised 8.5% of all TSMC managers and professionals.
In addition, when consolidating TSMC and all its subsidiaries, we
had over 39,000 employees at the end of 2012. The following table
summarized TSMC workforce structure at the end of February, 2013:
TSMC Workforce Structure
12/31/2011
12/31/2012
02/28/2013
Job
Total
Gender
Managers
Professionals
Assistant Engineer/
Clerical
Technician
Male
Female
Ph.D.
Master’s
Bachelor’s
Other Higher
Education
High School
Average Age (years)
Average Years of Service (years)
5.5.2 Recruitment
3,374
13,111
2,745
14,439
33,669
54.1%
45.9%
3.5%
32.8%
25.9%
13.9%
23.9%
33.0
6.2
3,614
15,264
3,006
15,265
37,149
56.2%
43.8%
3.6%
35.3%
25.6%
13.0%
22.5%
33.3
6.4
3,652
15,594
3,084
15,199
37,529
56.7%
43.3%
3.7%
35.7%
25.7%
12.7%
22.2%
33.4
6.4
TSMC advocates equal opportunity employment, and its practices
center on the principles of open-and-fair recruitment. We consider
the candidate according to his/her qualification as related to the
requirement of each position, rather than race, gender, age, religion,
nationality, or political affiliation.
Although facing a stagnated global economy, TSMC’s continuous
growth requires constant talent sourcing and recruitment activities
to support its business. We recruited over 3,600 managers and
professionals, and 2,000 assistants and technicians in 2012.
In order to cultivate a young talent pipeline for recruitment
around the world, TSMC deploys a number of recruiting activities
and university programs, including Joint Development Programs,
University Shuttle Program, Summer Internship; Job Fairs in Taiwan,
U.S., Singapore and India, Fresh Graduate Career Symposium, and
Outstanding Student Research Award. These programs also advance
novel or innovative academic semiconductor research.
5.5.3 People Development
TSMC has committed to cultivating a continuous and diversified
learning environment. Under this mission, we established the
Procedure of Employee Training and Education to ensure the
Company’s and individuals’ development objectives can be achieved
through internal and external training resources.
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The Company provides employees with a wide range of on-site
To enrich employees’ work experience, the Company continuously
In 2012, TSMC employees continued to be recognized through a host of prestigious external awards, including Top 10 National Outstanding
general, professional and management training programs. In
implements programs to enhance employee caring, benefits, rewards
Managers Award, Outstanding Engineer Award, Outstanding Young Engineer Award, as well as National Industrial Innovation Award.
addition to external experts engaged as trainers, hundreds of
and communication. The various initiatives include the following:
TSMC employees are trained as qualified instructors for delivering
valuable know-how in internal training courses. During 2012, TSMC
Employee Benefit Programs
● Diverse employee welfare programs: employees can enjoy 70
hobby clubs, 45 speeches covering diverse topics (in 2012), Sports
Day, Family Day and so on. In addition, holiday bonuses, marriage
bonuses, condolence allowances and emergency subsidies are also
Employee Communication
TSMC values two-way communication and is committed to keeping the communication channels between the management level and
their subordinates, as well as among peers, open and transparent. Our continuous efforts lie in reinforcing mutual and timely employee
communication, based on multiple channels and platforms, which in turn fosters harmonious labor relations and creates a win-win situation for
the Company and the employees.
conducted 1,377 internal training sessions, for a company-wide total
of over 780,000 training hours and a total of 520,000 attendees
participating. Employees on average attended 21 hours of training.
The total training expenses were almost NT$60 million. TSMC’s
training programs include:
● New Employee Training: includes new employee basic training
and job orientation. Furthermore, newcomers’ manager and
our well-established Buddy System are actively engaged in the
assimilation process.
● General Training: refers to training required by government
regulations and/or Company policies. Such training includes
subjects of industry-specific safety, workplace health and safety,
quality, fab emergency response, languages, and personal
effectiveness training.
● Professional/Functional Training: provides technical and professional
training required by various functions within the Company.
We offer training courses on equipment engineering, process
engineering, accounting, and information technology, and so forth.
● Management Training: programs tailored to the needs of managers
at all levels, including New, Experienced, and Senior Manager
programs, as well as other elective courses.
● Direct Labor (DL) Training: enables production line employees to
acquire the knowledge, skills and attitudes they need to perform
their job well and to pass the certification for operating equipment.
Training includes DL Skill Training, Technician “Train-the-Trainer”
Training, and Manufacturing Leader Training.
Based on individual job nature, work performance and career
development track, a tailor-made Individual Development Plan
(IDP) is established for each employee. Meanwhile, our employees
are provided with a comprehensive network of learning resources,
including on-the-job training, coaching, mentoring, job rotation,
on-site training and e-learning. They are also subsidized when taking
external short-term courses, credit courses and degrees.
5.5.4 Employee Satisfaction
TSMC is committed to providing above-industry-average quality jobs
to its employees, and it is dedicated to foster a dynamic and fun work
environment. The Company encourages employees to maintain a
healthy and well-balanced life, apart from their time spent working.
TSMC’s commitment in employee caring and its unceasing efforts
as an advocator of employees’ work-life balance has earned it the
prestigious first place as the “Happiest Corporation” of the Top 10
Happy Corporations, released by China Credit Information Service
(CCIS), under its survey released in the second half of 2012.
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available to cater for employees’ needs.
A host of channels, including both face-to-face and virtual, are leveraged to maintain the unobstructed flow of information between the
● Convenient on-site services: cafeteria, dry-cleaning, convenience
store, travel, banking, haircutting service, housing, and commuting
assistance are accessible for employees in the fabs, ensuring the
highest convenience of daily-life necessities for employees at work.
● Comprehensive health enhancement programs: physical care and
psychological consultation services are available to employees
to ensure their well-being. Five free counseling sessions are
offered to TSMC employees on an annual basis, with extension
available depending on the individual’s needs. Additional health
management level of the Company and the employees, including:
● Regular communication meetings held for the various levels of managers and employees.
● Periodic employee satisfaction surveys and follow-up actions based on the survey findings.
● Enhanced corporate employee portal (myTSMC 2.0):
– Corporate messages, executive interviews, employee activities and so on are posted on the intranet for employees’ timely reference.
– Important talks from Chairman are webcasted via the intranet to reach employees worldwide.
● eSilicon Garden: The website hosting TSMC’s internal publication, available in both Chinese and English, is updated on a bi-weekly basis with its
content ranging from work to run.
enhancement programs provided by TSMC include weight control,
To ensure that employees’ opinions and voices are heard, and their issues are addressed and solved, impartial and smooth voice submission
medical check-up, smoking secession, exercise camp, massage
service, sleep assistance, abdominal and neck x-ray, female care,
blood donation, liver disease prevention, monthly seminar, etc.
● Premium Sports Center: with a variety of workout facilities to all
employees and their families, as well as exercise sessions conducted
mechanisms, including quarterly labor-management communication meetings, are in place to provide timely support.
● Complaints regarding major management, financial and auditing issues are directed to the following channels, which handle the complaints
with high level of confidentiality:
– The independent Audit Committee; and
by professional instructors available for employees’ choices to
– Ombudsman system led by an appointed Vice President.
promote a healthier lifestyle.
● Flexible Preschool Service: the service, operated as per employees’
working time to meet their need for childcare, is available in Hsinchu
● The Suggestion Box provides a channel for employees to express their opinions regarding their work and the overall work environment.
● Employee care teams in each fab take care of the issues related to employees’ work and personal life.
and Tainan. In 2012, TSMC’s preschool was recognized as the
The Company also sets and promotes policies and measures to ensure gender equity in accordance with employment laws and sexual harassment
“Premium Corporate Facility” by Taiwan’s Council of Labor Affairs.
prevention policies to foster a fair work environment for employees of both genders.
Employee Recognition
TSMC sponsors various award programs to recognize employees’
outstanding achievement, both as a team or on the individual level.
With these award programs, TSMC aims to encourage employees’
sustainable development that in turn adds to the Company’s
competitive advantage.
The various award programs sponsored by TSMC include:
● TSMC Medal of Honor, presented exclusively by Chairman,
recognizes those who contribute to the Company’s business
performance significantly.
● TSMC Academy recognizes outstanding TSMC scientists and
engineers whose individual technical capabilities make significant
contributions to the Company.
● Outstanding Engineer Award for each fab and Total Quality
Excellence Conference Award recognize employees’ continuous
efforts in creating value for the Company.
● Service Award represents TSMC’s appreciation toward senior
employees’ dedication and commitment to the Company.
● Excellent Instructor Award praises the outstanding performance
and contribution of the Company’s internal instructors in training
courses.
All in all, the comprehensive communication channels provided by TSMC can be showcased by the following chart:
All TSMC Employees
Face-to-Face Meeting:
Functional/Work Unit/Skip-Level
Announcement
Fab/Functional Activity
Employee Portal
Employee Voice Channels
Employee Survey
Employee Recognition
HR Area Service Team
Communication Meeting by Request
eSilicon Garden
Announcement
Company-Wide Activity
Ombudsman System
Sexual Harassment Investigation
Committee
Internal Communication Structure
Managers of All
Levels
Employee Assistance Program
● Employee Emergency Reaction Center
● Wellness Center
● Counseling Service
● EWC Emergency Assistance
● Sexual Harassment Prevention Policy
Human Resources
Chairman’s Executive
Communication Meeting
System
Committee Chair
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5.5.5 Retention
5.5.7 Retirement Policy
From the employee’s initial adaptation to professional and career
TSMC’s retirement policy is set according to the Labor Standards Act
development, TSMC works proactively to retain outstanding
and Labor Pension Act of the Republic of China. With the Company’s
employees through creating an innovative, challenging, and fun
sound financial system, TSMC ensures employees a solid pension
environment. All these efforts contributed to a healthy turnover rate
contribution and payments, which encourages employees to set
of 5.7% for 2012.
long-term career plans and raises their commitment to TSMC.
Manufacturing, License, and Technology Transfer
Agreement
Term of Agreement:
Research and Development Funding Agreement
Term of Agreement:
10/31/2012 - 12/31/2017
04/01/2004 - 03/31/2006, automatically renewable for successive
Contracting Party:
one-year terms until and unless both parties decide otherwise by
ASML Holding N.V. (ASML)
mutual consent in writing
Contracting Party:
Summary:
TSMC will provide EUR277 million to ASML’s research and
Vanguard International Semiconductor Corporation (VIS)
development programs from 2013 to 2017.
5.5.6 Compensation
5.6 Material Contracts
Summary:
TSMC provides a diversified and competitive compensation program
Shareholders Agreement
that is competitive externally, fair internally, and adapted locally.
TSMC upholds the philosophy of sharing wealth with employees
in order to attract, retain, develop, motivate and reward talented
employees. With excellent operating performance, employment at
TSMC entitles employees to a comprehensive compensation and
benefits program above the industry average.
TSMC’s compensation program includes a monthly salary, an
employee cash bonus based on quarterly business results, and
employee profit sharing when the Company distributes its profit
each year.
The purpose of the employee cash bonus and profit sharing
programs is to reward employee contributions appropriately, to
encourage employees to work consistently toward ensuring the
success of TSMC, and to link employees’ interests with those of
TSMC’s shareholders. The Company determines the amount of
the cash bonus and profit sharing based on operating results and
industry practice in the Republic of China. The amount and form
of the employee cash bonus and profit sharing are determined by
the Board of Directors based on the Compensation Committee’s
recommendation, and the employee profit sharing is subject to
shareholders’ approval at the Annual Shareholders’ Meeting.
Individual awards are based on each employee’s job responsibility,
contribution and performance.
In addition to providing employees of TSMC’s overseas subsidiaries
with a locally competitive base salary, the Company grants short-term
and long-term bonuses as a part of total compensation. The
performance bonus is a short-term incentive and is granted in line
with local regulations, market practices, and the overall operating
performance of each subsidiary. The long-term incentive bonus is
awarded based on TSMC’s financial performance and is vested over
the course of several years in order to encourage long-term employee
commitment and development within the Company.
Term of Agreement:
Effective as of 03/30/1999 and may be terminated as provided in the
agreement
Contracting Parties:
Koninklijke Philips Electronics N.V. (Philips) and EDB Investments Pte
Ltd. (EDBI)
(In September 2006, Philips assigned its rights and obligations under
this agreement to Philips Semiconductors International B.V. which
has now been renamed NXP B.V. In November 2006, NXP B.V. and
TSMC purchased all SSMC shares owned by EDBI; EDBI is no longer a
contracting party to this agreement.)
Summary:
TSMC, Philips and EDBI had formed a Singapore joint venture
“Systems on Silicon Manufacturing Company Pte Ltd.” (SSMC) for
providing semiconductor foundry services. Philips Semiconductor
(now NXP B.V.) and TSMC are committed to purchasing a certain
percentage of SSMC’s capacity.
Technology Cooperation Agreement
Term of Agreement:
03/30/1999 - 03/29/2004, automatically renewable for successive
five-year terms until and unless either party gives written notice to
terminate one year before the end of then existing term
Contracting Party:
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
Summary:
TSMC agreed to transfer certain process technologies to SSMC, and
SSMC agreed to pay TSMC a certain percentage of the net selling
price of SSMC products.
Patent License Agreement
Term of Agreement:
12/20/2007 - 12/31/2017
Contracting Party:
A multinational company
Summary:
The parties entered into a cross licensing arrangement for certain
semiconductor patents. TSMC pays license fees to the contracting
company.
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VIS reserves certain capacity to manufacture TSMC products on
Note: TSMC is not currently party to any other material contract,
mutually agreed terms. TSMC may also transfer certain technologies
other than contracts entered into in the ordinary course of
to VIS, for which it will in return receive royalties from VIS.
our business. The Company’s “Significant Commitments and
Contingencies” are disclosed in Annual Report (II), Financial
Patent License Agreement
Information, page 68-69.
Term of Agreement:
11/01/2002 - 10/31/2012
Contracting Party:
A multinational company
Summary:
The parties entered into a cross licensing arrangement for certain
semiconductor patents. TSMC pays license fees to the contracting
party.
Amended Research and Development Collaboration
Agreement
Term of Agreement:
01/01/2009 - 12/31/2009, renewable on annual basis upon mutual
agreement
Contracting Party:
NXP B.V.
Summary:
The parties entered into research and development collaboration to
develop advanced semiconductor technologies.
Investment Agreement & Shareholder Agreement
Term of Investment Agreement:
08/05/2012 - 04/15/2013
Term of Shareholder Agreement:
Effective as of 10/31/2012 and may be terminated as provided in the
agreement
Contracting Party:
ASML Holding N.V. (ASML)
Summary:
TSMC joined the Customer Co-Investment Program of ASML Holding
N.V. (ASML) and entered into the investment agreement and
shareholder agreement. The agreements include an investment of
EUR837,815,664 by TSMC Global to acquire a non-voting 5% in
ASML’s equity with a lock-up period of 2.5 years.
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ISO 50001
Energy Management System
QC 080000
Hazardous Substance Process
Management System
ISO 14001
Environmental Management System
OHSAS 18001
Occupational Health and Safety Management System
TOSHMS
Taiwan Occupational Safety and Health
Management System
6. Financial Highlights
6.1 Financial Status and Operating Results
6.1.1 Financial Status
Unconsolidated
Unit: NT$ thousands
Item
Current Assets
Fixed Assets
Other Assets
Total Assets
Current Liabilities
Long-term Liabilities
Total Liabilities
Capital Stock
Capital Surplus
Retained Earnings
Total Shareholders’ Equity
2012
207,815,340
586,603,294
12,006,629
946,173,183
138,795,878
84,179,591
222,975,469
259,244,357
56,137,809
410,601,289
723,197,714
2011
158,563,352
454,373,533
19,070,145
761,407,874
109,514,430
22,299,930
131,814,360
259,162,226
55,846,357
322,191,155
629,593,514
Difference
49,251,988
132,229,761
(7,063,516)
184,765,309
29,281,448
61,879,661
91,161,109
82,131
291,452
88,410,134
93,604,200
%
31%
29%
-37%
24%
27%
277%
69%
0%
1%
27%
15%
● Analysis of Deviation over 20%
The increase in current assets was mainly due to increase in cash and cash equivalents and receivables from related parties.
The increase in fixed assets was mainly due to acquisition of advanced technology equipment during 2012.
The decrease in other assets was mainly due to return of refundable deposits and decrease in deferred income tax assets.
The increase in total assets was mainly due to increase in fixed assets.
The increase in current liabilities was mainly due to increase in payables to contractors and equipment suppliers, short-term loans and income tax
payable.
The increase in long-term liabilities was mainly due to issuance of corporate bonds of $62 billion in 2012.
The increase in total liabilities was mainly due to increase in long-term liabilities.
The increase in retained earnings was mainly due to net income of 2012, partially offset by distribution of 2011 earnings.
● Major Impact on Financial Position
The above deviations had no major impact on TSMC’s financial position.
● Future Plan on Financial Position: Not applicable.
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Consolidated
Unit: NT$ thousands
Item
Current Assets
Fixed Assets
Other Assets
Total Assets
Current Liabilities
Long-term Liabilities
Total Liabilities
Capital Stock
Capital Surplus
Retained Earnings
Equity Attributable to Shareholders of the Parent
Total Shareholders’ Equity
2012
252,288,635
617,529,446
19,430,182
955,034,605
142,435,944
86,844,962
229,280,906
259,244,357
56,137,809
410,601,289
723,197,714
725,753,699
2011
225,260,396
490,374,916
24,171,126
774,264,942
117,006,687
25,214,704
142,221,391
259,162,226
55,846,357
322,191,155
629,593,514
632,043,551
Difference
27,028,239
127,154,530
(4,740,944)
180,769,663
25,429,257
61,630,258
87,059,515
82,131
291,452
88,410,134
93,604,200
93,710,148
%
12%
26%
-20%
23%
22%
244%
61%
0%
1%
27%
15%
15%
● Analysis of Deviation over 20%
The increase in fixed assets was mainly due to acquisition of advanced technology equipment during 2012.
The decrease in other assets was mainly due to return of refundable deposits and decrease in deferred income tax assets.
The increase in total assets was mainly due to increase in fixed assets and long-term investments.
The increase in current liabilities was mainly due to increase in payables to contractors and equipment suppliers, short-term loans and income tax
payable.
The increase in long-term liabilities was mainly due to issuance of corporate bonds of NT$62 billion in 2012.
The increase in total liabilities was mainly due to increase in long-term liabilities.
The increase in retained earnings was mainly due to net income of 2012, partially offset by distribution of 2011 earnings.
● Major Impact on Financial Position
The above deviations had no major impact on TSMC’s financial position.
● Future Plan on Financial Position: Not applicable.
6.1.2 Financial Performance
Unconsolidated
Unit: NT$ thousands
Item
Gross Sales
Sales Returns & Allowances
Net Sales
Cost of Sales
Gross Profit before Affiliates Elimination
Realized (Unrealized) Gross Profit from Affiliates
Gross Profit
Operating Expenses
Income from Operations
Non-operating Income & Gains
Non-operating Expenses & Losses
Income before Income Tax
Income Tax Expenses
Net Income
2012
506,697,738
(6,825,851)
499,871,887
265,538,540
234,333,347
(25,029)
234,308,318
57,506,548
176,801,770
11,188,077
4,359,899
183,629,948
(17,471,146)
166,158,802
2011
421,472,087
(3,226,594)
418,245,493
233,083,068
185,162,425
398,440
185,560,865
46,655,102
138,905,763
7,287,046
1,484,965
144,707,844
(10,506,565)
134,201,279
Difference
85,225,651
(3,599,257)
81,626,394
32,455,472
49,170,922
(423,469)
48,747,453
10,851,446
37,896,007
3,901,031
2,874,934
38,922,104
(6,964,581)
31,957,523
%
20%
112%
20%
14%
27%
-106%
26%
23%
27%
54%
194%
27%
66%
24%
083
● Analysis of Deviation over 20%
Increase in gross sales and net sales: The increase was the result of higher wafer shipment and growth in 28-nanometer technology during 2012.
Increase in sales returns and allowance: The increase was mainly due to higher provision of sales returns and allowances resulting from
higher sales.
Increase in gross profit before affiliates elimination and gross profit: The increase was mainly due to higher wafer shipment during 2012.
Increase in unrealized gross profit from affiliates: The increase was due to higher sales to affiliates in 4Q’12.
Increase in operating expenses: The increase was mainly due to higher research and development expenditures for advanced technologies.
Increase in income from operations: The increase was mainly due to realized gross profit increased at a higher rate than the increase in operating
expenses.
Increase in non-operating income and gains: The increase was primarily due to increase in earnings of equity method investees.
Increase in non-operating expenses and losses: The increase was primarily due to impairment loss of financial assets recognized in 2012.
Increase in income before income tax: The increase was mainly due to higher income from operations.
Increase in income tax expenses: The increase was mainly due to higher taxable income and tax rate.
Increase in net income: The increase was mainly due to higher income before income tax.
● Sales Volume Forecast and Related Information
For additional details, please refer to "Letter to Shareholders" on pages 5-7 of this Annual Report.
Consolidated
Unit: NT$ thousands
Item
Gross Sales
Sales Returns & Allowances
Net Sales
Cost of Sales
Gross Profit before Affiliates Elimination
Unrealized Gross Profit from Affiliates
Gross Profit
Operating Expenses
Income from Operations
Non-operating Income & Gains
Non-operating Expenses & Losses
Income before Income Tax
Income Tax Expenses
Net Income
Net Income Attributable to Shareholders of the Parent
2012
513,435,603
(7,187,023)
506,248,580
262,628,681
243,619,899
(25,029)
243,594,870
62,537,677
181,057,193
6,782,037
6,285,254
181,553,976
(15,590,287)
165,963,689
166,158,802
2011
430,490,500
(3,409,855)
427,080,645
232,937,388
194,143,257
(74,029)
194,069,228
52,511,810
141,557,418
5,358,527
1,768,268
145,147,677
(10,694,417)
134,453,260
134,201,279
Difference
82,945,103
(3,777,168)
79,167,935
29,691,293
49,476,642
49,000
49,525,642
10,025,867
39,499,775
1,423,510
4,516,986
36,406,299
(4,895,870)
31,510,429
31,957,523
%
19%
111%
19%
13%
25%
-66%
26%
19%
28%
27%
255%
25%
46%
23%
24%
● Analysis of Deviation over 20%
Increase in sales returns and allowance: The increase was mainly due to higher provision of sales returns and allowances resulting from
higher sales.
Increase in gross profit before affiliates elimination and gross profit: The increase was mainly due to higher wafer shipment during 2012.
Decrease in unrealized gross profit from affiliates: The decrease was due to lower sales to affiliates in 4Q’12.
Increase in income from operations: The increase was mainly due to gross profit increased at a higher rate than the increase in operating
expenses.
Increase in non-operating income and gains: The increase was primarily due to increase in earnings of equity method investees.
Increase in non-operating expenses and losses: The increase was primarily due to higher impairment loss of financial assets.
Increase in income before income tax: The increase was mainly due to higher income from operations.
Increase in income tax expenses: The increase was mainly due to higher taxable income and tax rate.
Increase in net income and net income attributable to shareholders of the parent: The increase was mainly due to higher income before income tax.
● Sales Volume Forecast and Related Information
For additional details, please refer to “Letter to Shareholders“on pages 5-7 of this Annual Report.
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6.1.3 Cash Flow
Unconsolidated
Unit: NT$ thousands
Cash Balance 12/31/2011
Net Cash Provided by Operating
Activities in 2012
Net Cash Used in Investing and
Financing Activities in 2012
Cash Balance 12/31/2012
Remedy for Cash Shortfall
Investment Plan
Financing Plan
85,262,521
277,288,704
(253,400,415)
109,150,810
-
-
● Analysis of Cash Flow
NT$277.3 billion net cash provided by operating activities: Mainly from net income and depreciation/amortization.
NT$241.9 billion net cash used in investing activities: Primarily for capital expenditures.
NT$11.5 billion net cash used in financing activities: Mainly for payment of cash dividends, partially offset by issuance of corporate bonds.
● Remedial Actions for Cash Shortfall: In view of positive operating cash flow and cash on-hand, remedial actions are not required.
● Cash Flow Projection for Next Year: Not applicable.
Consolidated
Unit: NT$ thousands
Cash Balance 12/31/2011
Net Cash Provided by Operating
Activities in 2012
Net Cash Used in Investing and
Financing Activities in 2012
Cash Balance 12/31/2012
Remedy for Cash Shortfall
Investment Plan
Financing Plan
143,472,277
289,063,801
(289,125,490)
143,410,588
-
-
● Analysis of Cash Flow
NT$289.1 billion net cash provided by operating activities: Mainly from net income and depreciation/amortization.
NT$273.2 billion net cash used in investing activities: Primarily for capital expenditures.
NT$13.8 billion net cash used in financing activities: Mainly for payment of cash dividends, partially offset by issuance of corporate bonds.
● Remedial Actions for Cash Shortfall: As a result of positive operating cash flows and cash on-hand, remedial actions are not required.
● Cash Flow Projection for Next Year: Not applicable.
6.1.4 Major Capital Expenditure
Major Capital Expenditures and Sources of Funding
Unit: NT$ thousands
Plan
Production Facilities and
Equipment
R&D Equipment
Others
Total
Expected Future Benefits
Actual or Planned Source of
Capital
Total Amount as of 12/31/2012
Actual Use of Capital
2009
2010
2011
2012
Cash flow generated from
operations and issuance of
corporate bonds
Cash flow generated from
operations
Cash flow generated from
operations
Cash flow generated from
operations
675,249,808
80,923,392
174,490,585
196,936,605
222,899,226
54,510,161
6,371,056
11,235,029
15,909,970
20,994,106
5,069,022
490,458
1,218,589
1,115,946
2,244,029
734,828,991
87,784,906
186,944,203
213,962,521
246,137,361
Based on capital expenditures listed above and projected for 2013, it is estimated that TSMC’s annual production capacity will increase by
approximately 1.62 million 8-inch equivalent wafers in 2013.
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6.1.5 Long-term Investment Policy and Results
● RM Steering Committee
Reports to Audit Committee;
TSMC’s long-term investments, accounted for under the equity
Is composed of functional heads;
method, were all made for strategic purposes; however, when
Reviews risk control progress; and
technologies and rapidly develop new and innovative technologies,
competitive activities may decrease TSMC’s customer base, or
or if the Company’s competitors unforeseeably gain sudden
TSMC’s average selling prices, or both.
access to more advanced technologies, TSMC may not be able to
provide foundry services on competitive terms. In addition, TSMC’s
Over the past few years, TSMC has seen the rise of certain companies
the strategic value of an investment is no longer valid, it may be
Identifies and approves the prioritized risk lists.
customers have significantly decreased the time in which their
with the capability of providing foundry services. These companies
considered a financial investment. In 2012, the investment gain
from these investments amounted to NT$8,127,748 thousands
(NT$2,028,611 thousands on consolidated basis), increasing
● RM Working Committee
Is composed of representatives from each function;
significantly compared to 2011 mainly due to the high growth
Aligns functional ERM activities; and
of mobile computing products. For future investments, TSMC
Follows up the risk control action plan.
will continue to focus on strategic purposes through prudent
assessments.
6.2 Risk Management
TSMC and its subsidiaries are committed to proactively and cost
effectively integrating and managing strategic, operational,
financial and hazardous risks together with potential consequences
to operations and revenue. TSMC established its Enterprise Risk
Management (ERM) program based on both its corporate vision and
its long-term sustainability and responsibility to both industry and
society. ERM seeks to provide for the appropriate management of
risks by TSMC on behalf of all stakeholders.
To reduce TSMC’s supply chain risks, a cross-function taskforce
comprised of members from fab operations, material management,
risk management and quality system management worked with
TSMC’s primary suppliers to develop business continuity plans, and
effectively manage the risks faced by its suppliers. As a result of those
efforts, there was no interruption in TSMC’s supply lines in 2012.
As TSMC continued to expand production capacity in 2012, risk
treatment practices and green factory projects were initiated and
implemented, beginning in the design phase for all new fabs.
products or services are launched into the market. If it is unable
are committed to attracting TSMC’s customers. If TSMC is unable to
to meet these shorter product time-to-market, TSMC risks losing
compete with these new competitors with better technologies and
these customers. These challenges also place greater demands on
manufacturing capacity and capabilities, it risks losing customers to
its research and development capabilities. If TSMC is unable to
these new contenders.
innovate new technologies that meet the demands of its customers,
its revenues may decline significantly. Although it has concentrated
The Company competes primarily on the basis of process technology,
on maintaining a competitive edge in research and development, if
quality and service. The level of competition differs according to
TSMC fails to achieve advances in technologies or processes, or to
the process technology involved. For example, in more mature
obtain access to advanced technologies or processes developed by
technologies, the number of competitors tends to be more numerous
● RM Program
Coordinates the RM Working Committee activities;
Facilitates functional risk management activities; and
6.2.2 Strategic Risks
Industry Developments
Consolidates ERM reports into the RM Steering Committee.
others, it may become less competitive.
and specialized. Some companies compete with TSMC in selected
geographic regions or application end markets. In recent years,
Decrease in Demand and Average Selling Price
substantial investments have been made by others to establish new
A vast majority of the Company’s revenue is derived from customers
who use TSMC’s services in communication devices, personal
pure-play foundry companies in mainland China and elsewhere, or to
spin off integrated device manufacturers’ manufacturing operations
and transform them into a pure-play foundry company.
The electronics industries and semiconductor market have historically
computers, consumer electronics products and industrial/standard
been cyclical and subject to significant, and often rapid, increases
and decreases in product demand. TSMC’s semiconductor foundry
business is affected by market conditions in such highly cyclical
product. Any significant decrease in the demand for one of these
products may decrease the demand for such other products as
well as overall global semiconductor foundry services, including
Risks Associated with Changes in the Government
Policies and Regulatory Environment
electronics and semiconductor industries, within which most of its
TSMC’s services, and may adversely affect the Company’s revenues.
TSMC management closely monitors all domestic and foreign
customers operate. Variations in order levels from customers result in
Further, a significant portion of TSMC’s operating costs is fixed
governmental policies and regulations that might impact TSMC’s
volatility in the Company’s revenues and earnings.
because the Company owns most of its manufacturing capacities.
business and financial operations. As of February 28, 2013, the
From time to time, the electronics industries and semiconductor
industries have experienced significant, and sometimes prolonged,
periods of downturns and overcapacity. Because TSMC is, and will
continue to be, dependent on the requirements of electronics and
In general, these costs do not decline when customer demand or
following changes or developments in governmental policies and
TSMC’s capacity utilization rates drop, and thus declines in customer
regulations may influence the Company’s business operations:
demand, among other factors, may significantly decrease margins.
Conversely, as product demand rises and factory utilization increases,
The Taiwan Financial Supervisory Commission (FSC) requires
the fixed costs are spread over increased output, which can improve
listed companies, starting from January 1, 2013, to prepare their
semiconductor companies for its services, periods of downturn and
TSMC’s margins. Additionally, the historical and current trend
consolidated financial statements in accordance with Taiwan’s
overcapacity in the general electronics and semiconductor industries
of declining average selling prices of end-use applications places
“Guidelines Governing the Preparation of Financial Reports by
could lead to reduced demand for overall semiconductor foundry
services, including TSMC’s services. If it cannot take appropriate
downward pressure on the prices of the components that go into
Securities Issuers” and the following FSC endorsed standards and
such applications. If the average selling prices of end-use applications
interpretations: “International Financial Reporting Standards,”
6.2.1 Risk Management (RM) Organization Chart
actions such as reducing TSMC’s costs to sufficiently offset declines in
continue to decrease, the pricing pressure on components produced
“International Accounting Standards,” and relevant Interpretations
Audit Committee
CEO
demand, the Company’s revenues, margins and earnings will suffer
during periods of downturn and overcapacity. Furthermore, due to
the increasingly complex technological nature of its products and
services and the ever uncertain global economic environment, TSMC
may need to provide higher accounting provisions on potential sales
returns and allowances by its customers that may adversely affect the
results of its operations.
Changes in Technology
RM Steering Committee
Materials Management
and Risk Management
The semiconductor industry and its technologies are constantly
changing. TSMC competes by developing process technologies
RM Working Committee
RM Program
using increasingly advanced nodes and on manufacturing products
with more functions. TSMC also competes by developing new
derivative technologies. If it does not anticipate these changes in
by the Company may lead to a reduction of TSMC’s revenues, margin
(collectively, “IFRSs”). TSMC has already set up an IFRSs project team
and earnings.
Competition
TSMC competes internationally and domestically with other foundry
service providers, as well as with integrated device manufacturers
that devote a significant portion of their manufacturing capacity
to foundry operations. Some of these companies may have access
to more advanced technologies and greater financial and other
resources than TSMC, such as the possibility of receiving direct
or indirect government bailout/economic stimulus funds or other
incentives that are unavailable to us. The Company’s competition
may, from time to time, also decide to undertake aggressive pricing
initiatives in one or more technology nodes. Increases in these
in 2009 and is currently implementing its IFRSs adoption plan. In
addition, the progress of such adoption is regularly reported to the
Board. The impact of IFRSs adoption may include certain changes in
the accounting treatment for certain types of transactions and certain
modifications to the presentation of financial statements. TSMC will
keep monitoring IFRSs updates and the development of related laws
and regulations in Taiwan and evaluate the respective impact to the
Company. According to FSC’s requirements, TSMC has disclosed its
IFRSs project plan, status and the effects arising from the significant
differences between IFRSs and its current accounting policy in its
2012 annual and interim consolidated financial statements.
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The Taiwan “National Health Insurance Act” was amended in January
Other than the above laws and regulations, it is not expected that
customers who are successfully exploiting this new business model
provides its projected demand for various items to many of its
2011, to create an obligation for employers and employees to pay an
other governmental policies or regulatory changes would materially
paradigm. Also, in order to respond to the new business model
equipment suppliers to help them plan their production in advance.
extra 2% “supplementary premium,” effective from January 1, 2013.
impact TSMC’s operations and financial condition.
paradigm, TSMC has seen the nature of its customers’ business
The Company has purchased used tools and continues to seek
TSMC will need to pay such extra 2% “supplementary premium”
when TSMC distributes employees’ profit sharing and variable bonus.
6.2.3 Operational Risks
TSMC will continue participating in the seminars and briefings held
by the National Health Insurance Bureau to understand the details
Risks Associated with Capacity Expansion
TSMC performs regular long term market demand forecasts to
estimate market and general economic conditions for its products
and services. Based upon these estimates, TSMC manages its overall
capacity in accordance with market demand. Because market
conditions may vary significantly and unexpectedly, our market
demand forecast may change significantly at any time. Further,
since certain manufacturing lines or tools in some of TSMC’s
manufacturing facilities may be suspended or shut down temporarily
during periods of decreased demand, the Company may not be able
to ramp up in a timely manner during periods of increased demand.
Base on demand forecast, TSMC has been adding capacity to its
12-inch wafer fabs in the Hsinchu Science Park, Southern Taiwan
model changes. For example, there is a growing trend toward the
opportunities to acquire relevant used tools. Further, the growing
rise of system houses that operate in a manner which make their
complexities especially in next-generation lithographic technologies
products and services more marketable in a changing consumer
may delay the timely availability of the equipments and parts needed
market. The loss of, or significant curtailment of purchases by, one or
to exploit time sensitive business opportunities and also increase
more of the Company’s top customers, including curtailments due to
the market price for such equipment and parts. If TSMC is unable
increased competitive pressures, industrial consolidation, or change in
to obtain equipment in a timely manner to fulfill its customers’
their manufacturing sourcing policies or practices of these customers,
orders, or at a reasonable cost, its financial condition and results of
or the timing of customer or distributor inventory adjustments, or
operations could be negatively impacted.
change in its major customers’ business models may adversely affect
TSMC’s results of operations and financial condition.
Risks Associated with Intellectual Property Rights
Risks Associated with Purchase Concentration
● Raw Materials
TSMC’s production operations require that it obtain adequate
The Company’s ability to compete successfully and to achieve
future growth will depend in part on the continued strength of its
intellectual property portfolio. While TSMC actively enforces and
protects its intellectual property rights, there can be no assurance
supplies of raw materials, such as silicon wafers, gases, chemicals and
that its efforts will be adequate to prevent the misappropriation
photoresist, on a timely basis. In the past, shortages in the supply of
or improper use of its proprietary technologies, trade secrets,
some materials, whether by specific vendors or by the semiconductor
software or know-how. Also, the Company cannot assure that, as
Science Park and Central Taiwan Science Park. Total monthly capacity
industry generally, have resulted in occasional industry-wide price
its business or business models expand into new areas, or otherwise,
of the Company’s 12-inch wafer fabs was increased from 290,100
adjustments and delivery delays. Also, since TSMC procures some of
it will be able to develop independently the technologies, trade
wafers as of December 31, 2011 to 366,800 wafers as of December
its raw materials from sole-source suppliers, there is a risk that its
secrets, patents, software or know-how necessary to conduct its
31, 2012. Overall, TSMC increased its annual production capacity
need for such raw materials may not be met when needed or that
business or that it can do so without unknowingly infringing the
by approximately 1.87 million 8-inch equivalent wafers in 2012. The
back-up supplies may not be readily obtainable. The Company’s
intellectual property rights of others. As a result, TSMC may have
total average billing utilization rate for 2012 was 91%. Expansion
revenue and earnings could decline if it is unable to obtain adequate
to rely increasingly on licensed technologies and patent licenses
and modification of the Company’s production facilities will, among
supplies of the necessary raw materials in a timely manner or if there
from others. To the extent that the Company relies on licenses from
other factors, increase TSMC’s costs. For example, the Company
will need to purchase additional equipment, and hire and train
additional personnel to operate the new equipment. If TSMC cannot
are significant increases in the costs of raw materials that it cannot
others, there can be no assurance that it will be able to obtain any
pass on to its customers.
or all of the necessary licenses in the future on terms it considers
reasonable or at all. The lack of necessary licenses could expose TSMC
generate higher revenue to offset these higher costs, TSMC’s financial
To reduce the supply chain risk and to manage the cost actively,
to claims for damages and/or injunctions from third parties, as well
performance may be adversely affected.
TSMC is committing resources toward developing new supply
as claims for indemnification by its customers in instances where it
sources. In addition, the Company encourages its suppliers to reduce
has contractually agreed to indemnify its customers against damages
TSMC has established systems and processes to evaluate and forecast
their supply chain risk by decentralizing production plants, and to
resulting from infringement claims.
market demand and refers to these forecasts and evaluations when
considering whether to expand or reduce capacity. As of the date
of this Annual Report, the benefits brought about by such capacity
expansion were in line with TSMC’s expectations.
Risks Associated with Sales Concentration
Over the years, TSMC’s customer profile and the nature of its
customers’ business have changed dramatically. While it generates
revenue from hundreds of customers worldwide, TSMC’s ten largest
customers accounted for approximately 56% and 59% of net sales
in 2011 and 2012, respectively, and the Company’s largest customer
accounted for approximately 14% and 17% of net sales in 2011 and
2012, respectively. This customer concentration results in part from
the changing dynamics of the electronics industry with the structural
shift to mobile devices and applications and software that provide
the content for such devices. There are only a limited number of
intensify their cost competitiveness by moving their production site
to Taiwan from high-cost areas. The Company believes this benefits
TSMC has received, from time-to-time, communications from third
both suppliers and TSMC. Moreover, the Company continually refines
parties asserting that its technologies, manufacturing processes,
its planning system and monitors its inventory and replenishment on
the design of the integrated circuits made by TSMC or the use by
a daily basis so as to sustain an optimal level with rational cost.
its customers of semiconductors made by TSMC may infringe upon
● Equipment
The Company’s operations and ongoing expansion plans depend
their patents or other intellectual property rights. Because of the
nature of the industry, the Company may continue to receive such
communications in the future. In some instances, these disputes have
on its ability to obtain an appropriate amount of equipment and
resulted in litigation. Recently, there has been a notable increase
related services from a limited number of suppliers in a market
in the number of claims or lawsuits initiated by certain litigious,
that is characterized from time to time by limited supply and long
non-practicing entities and these non-practicing entities are also
delivery cycles. During such times, supplier-specific or industry-wide
becoming more aggressive in their monetary demands and requests
lead times for delivery can be as long as six months or more. To
for court-issued injunctions. Such lawsuits or claims may increase
better manage its supply chain, the Company has implemented
TSMC’s cost of doing business and may potentially be extremely
various business models and risk management contingencies
disruptive if the plaintiffs succeed in blocking the trade of its products
with suppliers to shorten the procurement lead time. TSMC also
and services. If TSMC fail to obtain or maintain certain government,
089
related to the implementation and take the necessary managerial and
financial precautionary steps with respect to such amendment.
According to the “Income Basic Tax Act“ (i.e., Alternative Minimum
Tax, “AMT”) amended in August, 2012, effective on January 1,
2013, the corporate income tax rate of AMT will be increased from
10% to 12%. As a result of this change, and changes in the various
tax credit incentives and exemptions available to the Company,
TSMC anticipates its effective tax rate for 2013 will be 14.0%, an
increase from 8.7% in 2012, which is anticipated to negatively affect
its net income in 2013. TSMC has evaluated the impact of these
amendments on its financial statements and will ensure compliance
in accordance with the relevant laws.
The “Personal Information Protection Act,“ as amended and
promulgated in May 2010, for the most part took effect on October
1, 2012. All nature persons, legal entities and other organizations
that collect, process and use personal information are now subject
to this new law which expands the scope of protected personal
information to include both electronically and paper-stored data.
Appropriate protective measures must be taken to prevent personal
information security breaches. TSMC has had adequate mechanisms
in place to properly process and retain personal information and will
continue to protect and manage personal information in compliance
with applicable laws and regulations.
In addition, the Taiwan legislative authority has been studying
relevant laws relating to environmental protection and employee
safety and health protection (e.g. “Greenhouse Gas Reduction Act,”
“Energy Tax Act” and “Labor Safety and Health Act”). Though the
“Greenhouse Gas Reduction Act” has not been passed, TSMC has
been implementing various long-term energy saving and carbon
reduction programs since 2000. As to the proposed “Energy Tax
Act,“ there has been no concrete guidance or law issuing from
the Taiwan government as of yet, so the impacts of such law are
indeterminable at the moment. However, it is very likely that such
law may increase the operating costs of the Company. The “Labor
Safety and Health Act” will be amended (and renamed “Occupational
Safety and Health Act”) to increase the duties of employers to protect
the physical and mental health of their employees. TSMC has already
developed relevant initiatives and implemented various policies and
will continuously improve and maintain the safety and health of its
workplace and employees.
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technologies or intellectual property licenses and, if litigation relating
Risks Associated with Mergers and Acquisitions
to alleged intellectual property matters occurs, it could prevent
it from manufacturing or selling particular products or applying
particular technologies, which could reduce its opportunities to
generate revenues.
TSMC has taken other measures to minimize potential loss of
shareholder value arising from intellectual property claims and
litigation filed against the Company. These measures include:
obtaining licenses from certain semiconductor and other technology
companies; timely securing of intellectual property rights for
defensive and/or offensive protection of TSMC technology and
business; aggressively defending against frivolous litigation; and
acquiring or licensing strategic intellectual property rights necessary
to protect its technologies and business offerings.
Risks Associated with Litigation
As is the case with many companies in the semiconductor industry,
TSMC has received from time-to-time communications from third
parties asserting that its technologies, manufacturing processes,
the design of the integrated circuits made by it or the use by its
customers of semiconductors made by it may infringe upon patents
or other intellectual property rights of others. In some instances,
these disputes have resulted in litigation by or against the Company
and certain settlement payments by it in some cases. Irrespective of
the validity of these claims, TSMC could incur significant costs in the
defense thereof or could suffer adverse effects on its operations.
In June 2010, Keranos, LLC. filed a lawsuit in the U.S. District
Court for the Eastern District of Texas alleging that TSMC, TSMC
North America, and several other leading technology companies
infringe three expired U.S. patents. In response, TSMC, TSMC North
America, and several co-defendants in the Texas case filed a lawsuit
against Keranos in the U.S. District Court for the Northern District
of California in November 2010, seeking a judgment declaring that
they did not infringe the asserted patents, and that those patents are
invalid. These two litigations have been consolidated into a single
case in the U.S. District Court for the Eastern District of Texas. The
outcome cannot be determined at this time.
In December 2010, Ziptronix, Inc. filed a complaint in the U.S. District
Court for the Northern District of California accusing TSMC, TSMC
North America and one other company of infringing several U.S.
patents. The outcome cannot be determined at this time.
Other than the matters described above, TSMC was not involved in
any other material litigation in 2012 and are not currently involved in
any material litigation.
As of the date of this Annual Report, there were no such risks for
TSMC.
Risks Associated with Recruiting and Retaining Qualified
Personnel
The Company depends on the continued services and contributions
of its executive officers and skilled technical and other personnel.
TSMC’s business could suffer if it lost, for whatever reasons, the
services and contributions of some of these personnel and it cannot
adequately replace them. The Company may be required to increase
or reduce the number of employees in connection with any business
expansion or contraction, in accordance with market demand for
its products and services. Since there is intense competition for the
recruitment of these personnel, the Company cannot ensure it will be
able to fulfill its personnel requirements in a timely manner during an
economic upturn.
Therefore, TSMC provides a varied and competitive compensation
programs, and is generous in sharing the Company’s long-term
business achievements with its employees. Furthermore, in order
to attract and retain talent, the Compensation Committee of the
Board of Directors decided to enhance the compensation system
and provide a timely distribution of employees’ cash bonus from
the Company’s profits. TSMC believes that by rewarding employees’
hard work in a timely fashion, it not only encourages employees to
contribute consistently to ensure the success of TSMC, but also links
their interests with those of TSMC’s shareholders.
Future R&D Plans and Expected R&D Spending
For additional details, please refer to “5.2.7 Future R&D Plans” on
page 70 of this Annual Report.
Changes in Corporate Image and Impact on Company’s
Crisis Management
TSMC has established an excellent corporate image around the world
based on its core values of “Integrity, Commitment, Innovation,
and Customer Trust,” as well as its outstanding operations,
rigorous corporate governance, and dedication to corporate social
responsibility to pursue sustainable development, equality and justice,
and a harmonious society to live and work.
TSMC’s corporate image was further strengthened in 2012 with a
number of awards. The Company was once again recognized as
Semiconductor Sector Leader by the Dow Jones Sustainability Index,
and was selected as an index component for a 12th consecutive year.
In addition, TSMC received the R.O.C. Environmental Protection
6.2.4 Financial Risks
Administration (EPA) National Enterprise Environmental Protection
Award, the EPA Energy Conservation and Carbon Reduction Action
Internal Management of Economic Risks
Mark, and the Science Park Low-Carbon Enterprise Achievement
Award. TSMC was also recognized as the Most Admired Company in
Taiwan by CommonWealth Magazine, and won the CommonWealth
Corporate Citizenship Award as well as the first prize in the
Environmental Protection category for the GlobalViews Magazine
Corporate Social Responsibility Award. The Company was named
as “Best Managed Company in Asia - Technology Sector” by
Euromoney, the Most Recognized Foundry in the EETimes China
Fabless Awards, ranked first place in the China Credit Information
Service poll of “Top 10 Happiest Companies” in Taiwan, first
place in the Asia Corporate Governance Association and CLSA
Asia-Pacific Markets survey of Corporate Governance in Asia, and
received the “Best-Managed Company in Taiwan and Hong Kong,”
“Best Corporate Governance, Taiwan,” and “Best Corporate Social
Responsibility, Taiwan” Awards from FinanceAsia.
In addition, TSMC has departments such as Brand Management,
Customer Service, Public Relations, Employee Relations, Investor
Relations, Risk Management, Fab Industrial Safety and Environmental
Protection, Internal Audit, and the TSMC Foundation to coordinate
the Company’s resources and further enhance TSMC’s positive
corporate image. To address potential events that may affect the
Company’s public image, including natural disasters, fires, workplace
accidents, power outages, water shortages and workplace injuries,
these departments have established emergency response procedures,
hold regular drills, and continue to improve emergency performance.
In the event of emergencies, early warning procedures eliminate
or reduce casualties and minimize impact on the surrounding
environment, company property, and manufacturing operations.
The Public Relations department is also involved in the first stage
of emergency response to communicate with stakeholders and act
as a single point of contact with outside parties to maintain the
Company’s reputation.
Risks Associated with Change in Management
● Interest Rate Fluctuation
TSMC’s exposure to interest rate risks derives primarily from
short-term borrowing and long-term debt obligations incurred in the
normal course of business. In order to limit its exposure to interest
rate risks, TSMC finances its funding needs primarily through internal
generation of cash and the issuance of long-term, fixed-rate debt. On
the asset side, we place our cash on hand mainly in very short tenor
time deposits. Furthermore, the primary objective of TSMC’s cash
investments in fixed income securities is to preserve principal in highly
liquid markets. In order to maintain the Company’s liquidity profile,
the majority of fixed income securities are at the short end of the
yield curve.
● Foreign Exchange Volatility
Over one-half of TSMC’s capital expenditures and manufacturing
costs are denominated in currencies other than NT dollars, primarily
in US dollars, Japanese yen and Euros. In 2012, more than 90% of
the Company’s sales were denominated in US dollars and currencies
other than NT dollars. Therefore, any significant fluctuation to its
disadvantage in such exchange rates would have an adverse effect
on TSMC’s financial condition. For example, during the period from
September 1, 2010 to December 30, 2010, the US dollar depreciated
8.9% against the NT dollar, which had a negative impact on the
Company’s results of operations. Specifically, based on TSMC’s 2012
results, every 1% depreciation of the US dollar against the NT dollar
exchange rate may result in approximately 0.4 percentage point
decrease in TSMC’s operating margin. TSMC utilizes short-term
debt denominated in foreign currencies and derivative financial
instruments, including currency forward contracts and cross currency
swaps, to hedge our currency exposure.
Fluctuations in the exchange rate between the US dollar and the
NT dollar may affect the US dollar value of the Company’s common
shares and the market price of the Company’s American Depositary
Shares (ADSs) and of any cash dividends paid in NT dollars on TSMC’s
As of the date of this Annual Report, there were no such risks for
common shares represented by ADSs.
TSMC.
● Inflation & Deflation
The world economy is becoming more vulnerable to sudden
unexpected fluctuations in inflationary and deflationary market
expectations and conditions. For example, certain structural changes
that resulted from the global financial crisis in 2008-2009 and EU
sovereign debt crises, such as highly accommodative monetary
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policies by major central banks worldwide, may cause variations
The financial transactions of a “derivative” nature that TSMC entered
purchases, assets purchases, licensing of major intellectual property
manufacturing fabs have been ISO 14001 certified (Environmental
in the expectation of inflation or deflation. Both high inflation
into were strictly for hedging purposes and not for any trading or
rights, joint investments or research and development projects,
Management System), OHSAS 18001 certified (Occupational
and deflation adversely affect an economy, at both the macro and
speculative purpose. For more information, please refer to page 53
outright mergers and acquisitions, private equity transactions or
Health and Safety Management System) and QC 080000
micro levels, by reducing economic efficiency, disrupting saving
and 55 of Annual Report (II), Financial Information. The fair market
receiving investments from a consortium of large institutional, public
certified (Hazardous Substance Process Management System); all
and investment decisions and reducing the efficiency of the market
value of our trading and available for sale financial securities are
or private investors, etc. Any such investment will incur risks, which
manufacturing fabs in Taiwan have also been TOSHMS (Taiwan
prices as a mechanism to allocate resources. Such fluctuations may
subject to prevailing market conditions and may fluctuate from
may result in losses if not carefully managed. Any such loss resulting
Occupational Safety and Health Management System) certified. The
negatively affect the costs of TSMC’s operations and the business
TSMC’s carrying value from time to time, which may impact the
from such investments may result in significant impairment charges,
new fabs will also acquire the above certificates within 18 months
operations of its customers who may be forced to plan their
returns of those securities.
lower profit margin and ultimately lower distributable earnings.
after mass production.
purchases of TSMC’s goods and services within an uncertain macro
and micro economy. Therefore, the demand for TSMC’s products
To control various types of financial transactions, the Company has
Risks Associated with Impairment Charges
The Company pays special attention to preparedness for emergencies
and services could unexpectedly fluctuate severely in accordance with
established internal policies and procedures based on sound financial
market and consumer expectations of inflation or deflation.
and business practices, all in compliance with the relevant rules and
Risks Associated with External Financing
Capital requirements are difficult to plan in the highly dynamic,
cyclical and rapidly changing semiconductor industry. From time to
time and increasingly so for the foreseeable next few years, TSMC
will continue to need significant capital to fund its operations and
manage its capacity in accordance with market demand. TSMC’s
regulations issued by the Taiwan Securities and Futures Bureau. TSMC
policies and procedures include “Policies and Procedures for Financial
Derivative Transactions,” “Procedures for Lending Funds to Other
Parties,” “Procedures for Acquisition or Disposal of Assets,” and
“Procedures for Endorsement and Guarantee”.
Risks Associated with Strategic Investments
Under Generally Accepted Accounting Principles (GAAP) of both
the Republic of China and the United States, TSMC is required to
evaluate its investments, long-lived assets and intangible assets for
impairment whenever triggering events or changes in circumstances
indicate that the asset may be impaired. If certain criteria are met,
TSMC is required to record an impairment charge. TSMC is also
required under R.O.C. GAAP and U.S. GAAP to evaluate goodwill for
impairment at least on an annual basis or more frequently whenever
triggering events or changes in circumstances indicate that goodwill
continued ability to obtain sufficient external financing is subject to a
From time to time, TSMC has made or will make a series of strategic
may be impaired and the carrying value may not be recoverable.
variety of uncertainties, including:
investments that serve two major purposes. Firstly, some of TSMC’s
For example, TSMC holds certain investments in publicly listed
● its future financial condition, results of operations and cash flow;
Company open new sources of revenues and innovate alternative
● general market conditions for financing activities;
business models that target to generate additional shareholders’
● market conditions for financing activities of semiconductor
value going forward in the future. For example, in order to help
companies; and
the Company grow into next generation business areas, TSMC has
● social, economic, financial, political and other conditions in Taiwan
invested to develop potential businesses in solid state lighting, solar
major strategic investments were (or will be) made to help the
companies, some of which have incurred certain impairment charges
disclosed in Annual Report (II), Financial Information, page 54-55.
The determination of an impairment charge at any given time is based
significantly on the expected results of the Company’s operations over
a number of years subsequent to that time. As a result, an impairment
and elsewhere.
power and other renewable sources of energy. The Company believes
charge is more likely to occur during a period when the Company’s
these investments into these areas will generate new sources of
operating results are otherwise already depressed.
Sufficient external financing may not be available to the Company
revenues as the transition into consuming cleaner sources of power
on a timely basis, on reasonable market terms, or at all. As a result,
is generally expected gradually. For further information on these
TSMC has established the process and system to closely monitor and
TSMC may be forced to curtail its expansion and modification plans
investments, please refer to “8. Subsidiary Information and Other
assess the risk of any impairment charge. However, management
or delay the deployment of new or expanded services until it obtains
Special Notes” on page 112-117 of this Annual Report. Secondly,
such financing.
some of TSMC’s significant strategic investments were (or will be)
currently is unable to estimate the extent or timing of any impairment
charge for future years. Any impairment charge required may have a
made to help the Company grow its existing business by augmenting
material adverse effect on the Company’s net income.
Risks Associated with High-risk/High-leveraged
Investment; Lending, Endorsements, and Guarantees for
Other Parties; and Financial Derivative Transactions
key technology development. For example, to accelerate the
development of next-generation lithographic technology, in August
2012, TSMC joined the ASML Holding N.V. Customer Co-Investment
6.2.5 Hazardous Risks
TSMC did not make high-risk or high-leveraged financial investments
during 2012 and up to the date of this report. The Board approved
TSMC’s provision of a guarantee to TSMC Global, a wholly-owned
subsidiary of TSMC, for its issuance of US dollar-denominated senior
unsecured corporate bonds for an amount not to exceed US$1,500
million at its Meeting on February 5, 2013. As of February 28, 2013,
TSMC had an intercompany loan of US$160.5 million arranged
among the Company’s subsidiaries, which was in compliance with
relevant rules and regulations.
Program (along with other major technology firms). The program’s
TSMC maintains a comprehensive risk management system
scope includes development of extreme ultraviolet (EUV) lithography
dedicated to the conservation of natural resources, the safety of
technology and 450-millimeter (450mm) lithography tools. Under the
people, and the protection of property. In order to effectively handle
agreement with ASML, TSMC invested EUR838 million to acquire 5%
emergencies and natural disasters at each facility, management has
of ASML’s equity and has committed EUR277 million to be spread
over five years, to ASML’s research and development program. The
Company is exposed to share price fluctuations arising from the
developed comprehensive plans and procedures that focus on risk
prevention, emergency response, crisis management, and business
continuity. TSMC has adopted local and international standards
investments in ASML, especially when its equity investment is subject
for Environmental, Safety & Health (ESH) management. All TSMC
to a lock-up period of 2.5 years. In the future, TSMC may make
more strategic investments in various forms, whether through stock
or disasters, such as typhoons, floods, droughts caused by climate
change, earthquakes, environmental contamination, large-scale
product returns, service disruption of IT systems, strikes, pandemics
(such as H1N1 influenza), and sudden and unexpected disruptions
to the supply of raw materials or water, electricity, and other public
utilities. TSMC has established a company-wide task force dedicated
to managing the risk of water shortage that might arise due to
climate change. This task force keeps watch on the external supply
and internal demand for water. Cross-company consolidations and
external collaborations with public agencies are also ongoing in the
industrial parks to ensure and sustain a stable water supply.
TSMC has further strengthened its business continuity plans,
which include periodic risk assessment, risk mitigation , and
implementation through the establishment of emergency task forces
when necessary, combined with the preparation of a thorough
analysis of the emergency, its impact, alternative actions, and
solutions for each possible scenario together with appropriate
precautionary and/or recovery measures. Each task force is given
the responsibility of ensuring TSMC’s ability to conduct business
while minimizing personal injury, business disruption, and financial
impact under the circumstances. TSMC’s business continuity plan
is periodically reviewed according to results of test scenarios or
practical implementation for ensuring effective and successful
business continuity. Customers are informed of TSMC’s strong
business continuity capability in order to establish resilience and
flexibility in both their supply chain and insurance placement. For
the year 2012, and up to the date of this Annual Report, there
have been no reportable material events that have necessitated
the activation of such contingency plans. The Company has also
conducted a continuous improvement project, including evaluating
building anti-seismic capability, holding earthquake response drills
and enhancing tool anchorage, and has improved TSMC business
continuity procedures with reference to BS 25999 business continuity
management.
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6.2.7 Other Risks
Potential Impact and Risks Associated with Sales of
Significant Numbers of Shares by TSMC’s Directors, and/
or Major Shareholders Who Own 10% or More of
TSMC’s Total Outstanding Shares
The value of TSMC shareholders’ investment may be reduced
by possible future sales of TSMC shares owned by the major
shareholders.
One or more of our existing shareholders may, from time to time,
dispose of significant numbers of our common shares or ADSs. For
example, the National Development Fund, which owned 6.4% of
TSMC’s outstanding shares as of February 28, 2013, sold our shares
in the form of ADSs in several transactions during the period between
1997 and 2005.
Currently no shareholder owns 10% or more of TSMC’s total
outstanding shares.
Other Material Risks
During 2012 and as of the date of this Annual Report, TSMC’s
management is not aware of any other risk event that could impart a
potentially material impact on the financial status of the Company.
TSMC and many of its suppliers use highly combustible and toxic
gas emissions” programs, or “carbon credit trading” programs; (c)
materials in its manufacturing processes and are therefore subject
modify our product designs and manufacturing processes, or incur
to the risk of loss arising from explosion, fire, or environmental
other significant expenses associated with such laws and regulations
influences which cannot be completely eliminated. Although the
such as obtaining substitute raw materials or chemicals that may cost
Company maintains many overlapping risk prevention and protection
more or be less available for our operations. It is still unclear whether
systems, as well as comprehensive fire and casualty insurance,
such necessary actions would affect the reliability or efficiency of our
including insurance for loss of property and loss of profit resulting
products and services.
from business interruption, TSMC’s risk management and insurance
coverage may not be sufficient to cover all of the Company’s
Any of the above contingencies resulting from the actual and
potential losses. If any of TSMC’s fabs or vendor facilities were
potential impact of local or international laws and regulations as well
to be damaged, or cease operations as a result of an explosion,
as international accords on environmental or climate change, could
fire or environmental influences, it could reduce the Company’s
harm the Company’s business and operational results by increasing
manufacturing capacity and may cause it to lose important
expenses or requiring TSMC to alter its manufacturing, assembly and
customers, thereby having a potentially adverse and material
test processes.
impact on TSMC’s financial performance. In addition to periodic fire
protection system inspection and firefighting drills, the Company has
Increasing climate change and environmental concerns could affect
also carried out a corporate-wide fire risk mitigation project focused
the results of TSMC’s operations if any of its customers request that
on management and hardware improvements.
TSMC exceed any standard(s) set for environmentally compliant
Changes may cause unpredictable interruption to production. In
products and services. For example, TSMC has been working on an
on-going basis with our suppliers, customers, and several industry
order to reduce such uncertainty, TSMC has adopted a number
consortia to develop and provide products that are compliant
of standards to maintain operational continuity, ranging from
with the EU “RoHS” (European Union Restriction of Hazardous
design, procurement and construction of facilities, to operation and
Substances) Directive. Even though TSMC are entitled to rely on
decommission.
6.2.6 Climate Change Risks
various exemptions under RoHS, some of our customers might
request that we provide products that exceed the legal standard set
by RoHS without using any of the exemptions still permitted under
RoHS. If TSMC is unable to offer such products or offer products that
The manufacturing, assembling and testing of our products require
are compliant, but are not as reliable due to the lack of reasonably
the use of chemicals and materials that are subject to environmental,
available alternative technologies or materials, it may lose market
climate-related, and health and safety laws and regulations issued
share to our competitors.
worldwide. Although TSMC may be eligible for various exemptions
and/or extensions of time for compliance, our failure to comply with
Further, energy costs in general could increase significantly due to
any of these applicable laws or regulations could result in:
future climate change and other regulations. Therefore, TSMC’s
● significant penalties and legal liabilities, such as the denial of import
pass on their costs, either fully or partially, such as those associated
permits;
with carbon taxes, emission caps and carbon credit trading programs.
● the temporary or permanent suspension of production of the
affected products;
To mitigate risks resulting from climate change, TSMC continues to
● unfavorable alterations in our manufacturing, fabrication and
carry out energy conservation measures, implementing voluntary
energy costs may increase significantly if utility or power companies
assembly and test processes; and
● restrictions on our operations or sales.
PFC emission reduction projects and conducting GHG inventory and
verification each year. TSMC has publicly disclosed climate change
information every year since 2005 through participation in an annual
Existing and future environmental and climate related laws and
survey conducted by the nonprofit Carbon Disclosure Project (CDP),
regulations as well as applicable international accords to which
which includes greenhouse gas emission and reduction information
TSMC are subject, could also require it, among other things, to do
for all TSMC fabs.
the following: (a) purchase, use or install expensive pollution control,
reduction or remediation equipment; (b) implement climate change
mitigation programs and “abatement or reduction of greenhouse
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095
Dow Jones Sustainability Indexes
Semiconductor
Sector Leader
First Certified Green Campus in Taiwan
The World’s First LEED Platinum
Certification for a Semiconductor Wafer Fab
Globalviews Magazine
1st Prize in Environmental Protection,
CSR Award
Taiwan EEWH Diamond Certification
First to Gain Taiwan
Green Factory Mark
7. Corporate Social Responsibility
TSMC is an important part of the technology industry. As we look to the future, we not only aim to maintain our leadership in worldwide
competition and promote Taiwan’s globalization and economic growth, we also will continue to carry out our corporate social responsibility and
do our utmost to be good corporate citizens.
Our 10 principles for practicing corporate social responsibility are important standards for continuing to support positive change in society:
1. We insist on honesty and integrity. We are honest to our shareholders, employees, customers, and to the public alike.
2. We respect the rule of law and always obey the law.
3. We abhor cronyism. We do not seek favoritism from the government or any government official, and we do not bribe.
7.1 Environmental, Safety and Health
(ESH) Management
computing data center. In 2012, Fab 12 Phase 4/5 and Fab 14 Phase
3/4 also earned the ISO 50001 certifications.
TSMC believes its environmental, safety and health practices must
TSMC regularly communicates with suppliers and contractors
not only comply with legal requirements, but also measure up to or
regarding environmental, safety and health issues and encourages
exceed recognized international practices. In 2010, the Company’s
them to improve their ESH performance. In line with this policy,
ESH policy was renewed and endorsed by Chairman and Chief
TSMC uses priority work management and self-management to
Executive Officer Dr. Morris Chang. The policy aims to reach the goals
govern work performed by contractors. TSMC requires contractors
of “zero incident” and “sustainable development,” and to make
performing high-risk operations to complete certification for
TSMC a world-class company in environmental, safety and health
technicians, and to establish their own OHSAS 18001 safety and
management. The Company’s strategies for reaching these goals are
health management system before bidding on contracts. This
to comply with regulations, promote safety and health, strengthen
self-management is aimed at increasing the sense of responsibility of
recycling and pollution prevention, manage ESH risks, instill an ESH
TSMC’s contractors, with the goal of promoting safety awareness and
culture, establish a green supply chain, and fulfill its related corporate
technical improvement for all contractors in the industry.
4. We practice good corporate governance, and balance the interests of shareholders, employees, and all stakeholders in the Company.
social responsibilities.
5. We do not engage in politics.
6. We provide good job opportunities with a safe, comfortable, and intellectually challenging environment to give our employees both physical
comfort and mental stimulation.
7. We contribute our part in controlling climate change and place great importance on the protection of the environment.
8. We emphasize and reward innovation, and actively manage the risks that innovation may bring.
9. We invest in green businesses such as solid state lighting and solar to contribute to a greener world.
10. We support educational and cultural activities, and provide long-term care to communities.
TSMC fulfills its social responsibilities to all stakeholders. As we carry out the principles listed above, it is our firm belief that customers will trust
us more because of our honesty and integrity, respect for the law, and good corporate governance. Investors will be more willing to invest over
the long term because of our clear core values, and employees will feel closer to the Company as they identify with those values. Carrying out
TSMC’s social responsibilities brings us greater competitive advantage, creates greater value for shareholders, and benefits all of our stakeholders.
All TSMC manufacturing facilities have received ISO 14001:2004
Company’s supply chain regarding ESH-related issues such as carbon
certification for environmental management systems and OHSAS
and water footprinting, and conflict mineral management. TSMC not
18001:2007 certification for occupational safety and health
management systems. All fabs in Taiwan have also been TOSHMS
only performs on-site ESH audits at its suppliers manufacturing sites,
but also proactively assists them with improving ESH performance.
TSMC collaborates with suppliers to improve the sustainability of the
(Taiwan Occupational Safety and Health Management System)
certified since 2009.
Reducing the carbon and water footprints of TSMC’s supply chain
is essential to the Company’s green supply chain ideals. Since 2009,
TSMC strives for continuous improvement and actively seeks to
TSMC has required suppliers to set up carbon inventory procedures.
enhance pollution prevention, power and resource conservation,
In 2010 TSMC led 15 selected suppliers to join the carbon footprint
waste reduction, safety and health management, fire and explosion
development project, which was sponsored by the Taiwan Industrial
prevention and minimize the impact of other risks, such as
Development Bureau and assisted by the Industrial Technology
earthquakes, in order to reduce the overall environmental, safety and
Research Institute. In this project, the Company completed a carbon
Corporate Social Responsibility: Uplift Society
health risk.
TSMC
Society
Morality
Business Ethics
Economy
Rule of Law
Sustainability
Work/Life Balance
Happiness
Philanthropy
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Integrity
Law Compliance
Anti-Corruption
Anti-Bribery
Anti-Cronyism
Environmental Protection
Climate Control
Energy Conservation
Corporate Governance
Provide Well-paying Jobs
Good Shareholder Return
Employees’ Work-life Balance
Encourage Innovation
Good Work Environment
Volunteers Organization
Education and Culture Foundation
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footprint of both TSMC and suppliers’ products. In addition to
12-inch, TSMC continued to set up 8-inch wafer and 6-inch wafer
In 2006, TSMC began to adopt the IECQ QC 080000 Hazardous
product carbon footprints and received PAS2050 certifications in
Substance Process Management (HSPM) System in order to meet
2011 and 2012.
regulatory and customer needs for the management of hazardous
materials. All TSMC manufacturing facilities have been QC 080000
TSMC also monitors potential water shortages in the supply chain
certified since 2007. By practicing QC 080000, TSMC ensures that
and investigates the supply chain’s water inventory. TSMC is
its products comply with regulatory and customer requirements,
also preparing to work with suppliers on water footprinting and
including the European Union’s Restriction of Hazardous Substances
conservation plans. The ESH management programs of TSMC
(RoHS) Directive, EU REACH (Registration, Evaluation, Authorization
suppliers are tied to a sustainability index that includes three
and Restriction of Chemicals), Montreal Protocol on substances that
components: the Green Index, the Social Index and the Risk Index.
deplete the ozone layer, halogen free in electronic products, and
The “Green Index” includes environmental management systems,
Perfluorooctane Sulfonates (PFOS) restriction standards.
regulatory compliance, hazardous substance management, conflict
mineral investigation, greenhouse gas inventory, carbon footprinting,
In 2011, TSMC adopted ISO 50001 Energy Management System
water footprinting and other green activities. The “Social Index”
for the continuous improvement of energy conservation. TSMC,
includes labor and ethical conduct and participation in social
represented by Fab 12 Phase 4 data center, has become Taiwan’s
activities. The “Risk Index” includes safety and health management,
first company to earn the ISO 50001 certification for a high density
fire prevention, natural disaster mitigation, IT interruption recovery,
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transportation reliability, supply chain management, pandemic
Air and Water Pollution Control
response planning and a business continuity plan. This sustainability
index is applied to TSMC’s critical suppliers.
7.1.1 Environmental Protection
Greenhouse Gas (GHG) Emission Reduction
TSMC has installed effective air and water pollution control
equipment in each wafer fab to meet regulatory emissions standards.
In addition, TSMC maintains backup pollution control systems,
including emergency power supplies, to lower the risk of pollutant
emission in the event of equipment breakdown. TSMC centrally
monitors the operations of air and water pollution control equipment
TSMC is an active participant in international environmental
around the clock and tracks system effectiveness to ensure the quality
regulatory and protection programs. TSMC achieved its voluntary
of emitted air and discharged water.
PFC emissions reduction goal as per its commitment to the World
to promote economically efficient programs. With environmental costs expected to continue growing, environmental accounting can help us
manage more effectively. TSMC’s environmental accounting measures are to define the various environmental costs and set up independent
environmental account codes, then provide these to all units for use in annual budgeting. This online system can output data for environmental
cost statistics.
Our economic benefit evaluation calculates cost savings for reduction of energy, water or wastes and waste recycling benefits according to our
environmental protection programs.
The environmental benefits disclosed in this report include real income from projects such as waste recycling and savings from major
environmental projects. In 2012, 101 environmental projects were completed and the total benefits including waste recycling are more than
Semiconductor Council (WSC) and the Taiwan Environmental
To make the most effective use of Taiwan’s limited water resources,
NT$1,368 million.
Protection Administration (EPA) in 2010.
all TSMC fabs make an effort to increase water reclamation rates
by adjusting the water usage of manufacturing equipment and
In 2005, TSMC was Taiwan’s first semiconductor company to make
improving wastewater reclamation systems. New fabs are able to
a complete inventory of its GHG emissions and to gain ISO 14064
reclaim more than 85% of process water, meeting or exceeding the
certification for its processes and outputs. The purpose of the
standards of the each Science Park Administration and outperforming
inventory was to serve as a baseline reference for TSMC’s strategy
most semiconductor fabs around the world. TSMC also strives to
to reduce GHG emissions, to meet future domestic regulatory
reduce non-manufacturing-related water consumption, including
requirements, and to prepare for carbon trading and corporate
water used in air conditioning systems, sanitary facilities, cleaning,
carbon asset management. All TSMC facilities continue to conduct
landscaping and kitchens. TSMC uses an intranet website to collect
a GHG inventory on an annual basis. The inventory result shows
and measure water recycling volumes company wide.
that the major direct GHG emissions are perfluorinated compounds
2012 Environmental Cost of TSMC Fabs in Taiwan
Unit: NT$ thousands
Classification
Description
1. Direct Cost for Reducing Environmental Impact
(1) Pollution Control
Fees for air pollution control, water pollution control, and others
(2) Resource Conservation
Costs for resource (e.g. water) conservation
(3) Waste Disposal and Recycling
Costs for waste treatment (including recycling, incineration and landfill)
2. Indirect Cost for Reducing Environmental
Impact (Managerial Cost)
(1) Cost of training (2) Environmental management system and certification
expenditures (3) Environmental measurement and monitoring fees (4)
Environmental protection product costs (5) Environmental protection
organization fees
(1) Costs for decontamination and remediation (2) Environmental damage
insurance and environmental taxes (3) Costs related to environmental
settlement, compensations, penalties and lawsuits
Investment
Expense
3,799,276
1,420,032
0
217,302
2,579,410
85,522
411,730
170,893
0
0
5,436,610
3,247,555
(PFCs), which are used in the semiconductor manufacturing process.
Since water resources are inherently local, TSMC shares its water
3. Other Environment-Related Costs
The primary indirect GHG emission is electricity consumption.
saving experiences with other semiconductor companies through
the Association of Science-Based Industrial Park to promote water
4.Total
TSMC is also taking measures to reduce its emission of GHGs. TSMC
conservation. At the same time, TSMC collaborates with the Science
endorsed a memorandum of understanding between the Taiwan
Park Administrations to assist small facilities in each Science Park with
Semiconductor Industry Association, the Taiwan EPA, and the WSC,
water resource management in order to achieve the Science Park’s
whereby TSMC committed to reducing PFC emissions to 10% below
goals and ensure a long-term balance of supply and demand.
the average of 1997 and 1999 by 2010, a commitment that it
was proud to achieve. This emissions target remains fixed as TSMC
Waste Management and Recycling
continues to grow and expand its manufacturing facilities.
TSMC continues its active participation in WSC’s activities to set
up a global voluntary PFC emissions reduction goal for the next 10
years and integrated past experience to develop best practices. The
implementation of best practices for new semiconductor fabs has
been adopted by WSC for the major element of the 2020 goal.
Coal-fired power generators are the major source of electricity in
Taiwan and emit large amounts of carbon dioxide (CO2). TSMC
has not only adopted energy-conserving designs for both its
manufacturing fabs and offices, but has also continuously improved
the energy efficiency of facilities during operation. These efforts
simultaneously reduce both carbon dioxide gas emissions and costs.
TSMC has established a designated unit responsible for waste
recycling and disposal. To meet the goal of sustainable resource
utilization, TSMC’s first priority is to reduce process waste before
considering recycling or disposal. TSMC carefully selects waste
disposal and recycling contractors and performs annual audits of
certification documents, site operations and transportation routes
to ensure the legal and proper disposal of waste. TSMC achieved a
92% waste recycling rate in 2012, surpassing its goal of 90%. The
Company’s landfill rate has been remained less than 1% since 2008.
Environmental Accounting
The purpose of TSMC’s environmental accounting system is to
identify and calculate environmental costs for internal management.
At the same time, we can also evaluate the cost reduction or
economic benefits of environmental protection programs so as
2012 Environmental Efficiency of TSMC Fabs in Taiwan
Unit: NT$ thousands
Catrgory
Cost Saving of Environmental Protection
Projects
Description
Energy saving: completed 37 projects
Water saving: completed 6 projects
Waste reduction: completed 8 projects
Material reduction: completed 50 projects
Real Income of Industrial Waste Recycling
Recycling of used chemicals, wafers, targets, batteries, lamps, packaging materials, paper cardboard, metals,
plastics, and other wastes
Total
Other Environmental Protection Programs
Efficiency
607,300
70,400
26,900
467,700
195,722
1,368,022
TSMC conducts “Product Life Cycle Assessments” (Product LCA), collecting and analyzing data from the entire semiconductor manufacturing
chain from raw materials suppliers to finished products, including statistics for such items as energy, raw material consumption, and pollution.
The Product LCA study has established “Eco-Profiles” for all TSMC fabs and will help the Company to meet future international regulations,
such as the European Union’s “Energy-Using Product” directive. These “Eco-Profiles” can also be provided to customers who require such
documentation.
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TSMC also maintains “green procurement” procedures, requiring raw
7.1.2 Safety and Health
materials suppliers to declare that the materials they supply to TSMC
do not contain any prohibited substances. This ensures that products
Safety and Health Management
TSMC’s safety and health management is built on the framework of
the OHSAS 18001 system, and adheres to the management principle
of “Plan, Do, Check, Act” to prevent accidents and protect employee
safety and health as well as Company assets. TSMC fabs in Taiwan
have also received TOSHMS (Taiwan Occupational Safety and Health
Management System) certification.
Besides accident prevention, TSMC has established emergency
response procedures to protect the lives of employees and
contractors if disasters should occur, as well as to minimize the
negative impact on society and the environment. TSMC continually
communicates with its suppliers to ensure that potential risk in the
operation of production equipment is minimized, and rigorously
follows safety control procedures when installing production
equipment. The Company places stringent controls on high-risk
operations and also evaluates the seismic tolerance of its facilities and
equipment to reduce the risk of earthquake damage.
manufactured by TSMC comply with customer requirements and the
regulatory requirements of the European Union’s RoHS Directive.
TSMC also encourages employees to use “Green Mark” products
in offices, such as recycled paper, desktop PCs, LCD monitors, and
batteries.
TSMC has adopted both the Taiwan “Green Building” and the U.S.
Leadership in Energy and Environmental Design (LEED) standards
for new fab and office building designs since 2006 to achieve better
energy and resource efficiency than conventional designs. At the same
time, TSMC planed to upgrade existing office buildings to comply
with the LEED standard each year. From 2008 to 2012, seven of
TSMC’s fabs and office buildings (Fab 14 Phase 3&4 manufacturing
facility, Fab 14 Phase 3 office building, Fab 12 Phase 4 manufacturing
facility and office building, and Fab 12 Phase 1&2 manufacturing
facility and office building) achieved LEED certifications. Four of
them also won Taiwan’s EEWH Diamond class certification. For
these projects, TSMC invited Dr. Kath Williams, former vice president
of the United States Green Building Council (USGBC) to serve as
a consultant, and also consulted experts from leading Taiwan
universities. TSMC believes that manufacturing companies should
convert their facilities into green factories to effectively improve
the environment and lower construction costs. Therefore, TSMC
freely shares its practical experience with industry, government, and
academia. As of the end of 2012, more than 4,628 visitors from 112
different industry, government, academia and general community
groups contacted TSMC to gain understanding on the Company’s
green factory practices. TSMC led industry to support the Taiwan
government to establish “Green Factory Labeling System” from 2009,
a system that included “Clean Production Evaluation System” and
“Green Factory Evaluation System”. In 2012, TSMC received Taiwan’s
first “Green Factory Label” from the government and three labels in
total for Fab 12 Phase 4, Fab 14 Phase 3 and Fab 14 Phase 4.
Environmental Compliance Record
in the field of occupational health. Under this MOU, both TSMC
and NTU held the second Workplace Health Improvement Forum
on October 12, 2012, inviting representatives from government,
industry, and academia to join an in-depth discussion on improving
occupational health. The forum has become an important platform
for dialog. The theme of 2012 forum is “New Labor Health Policies
and Prevention of Occupational Illness” and “Promoting Work/Life
As of February 28, 2013, TSMC had not received any environmental
Balance,” focusing industry and academic attention on a timely issue
penalties or fines during or related to 2012 and early 2013.
of public concern in the fields of employee health and safety and
human resources.
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TSMC also developed occupational management tools tailored for
TSMC by industry-academic cooperation, including the promotion
● Working Environment Measurement
TSMC conducts workplace hazard assessment and interventions to
of personnel stress management and the measurement of radio
provide a comfortable and safe workplace to Company employees.
frequency (RF) exposure to wireless network antennas and
TSMC also requests employees to use personal protective equipment
mobile phone in the offices. TSMC offers annual employee health
(PPE) to prevent hazard exposures.
examinations and consultation services as well as on-site clinics and a
dental clinic for a better access to medical assistance.
As office work is primarily performed on computers, TSMC launched
In order to avoid infectious disease epidemics, TSMC has established
chairs and desks to meet the needs of taller or shorter employees.
company-level prevention committees and procedures for emergency
Whenever new employees of significantly above or below-average
response to infectious diseases outbreak.
height enter the Company, the assessment and intervention will be
an office ergonomics program to adjust the height of office
Working Environment and Employee Safety Protection
TSMC’s ESH policy is committed to establishing a safe working
environment, preventing occupational injury and illness, keeping
employees healthy, enhancing every employee’s awareness and sense
of accountability to ESH, and building an ESH culture. TSMC safety
and health management operations apply to:
● Hardware Equipment Safety and Health Management
In addition to meeting regulatory requirements and internal
“New Chemical Review Committee” to ensure that environmental and
safety and health concerns are well controlled, including engineering
control, the installation of personal protection equipment, and
operational safety training during storage, transportation, usage, and
disposal.
● General Safety Management, Training and Audit
All TSMC manufacturing facilities hold environmental, safety
and health committee meetings on a monthly basis. TSMC takes
preventive measures such as controls on high-risk work, contractor
management, chemical safety management, personal protective
equipment requirements, and safety audit management. In addition,
TSMC also maintains detailed disaster response procedures and
performs regular drills designed to minimize harm to employees and
property, as well as the impact on society and the environment in the
event of a disaster.
initiated proactively by site ESH professionals.
TSMC requires that all new tools meet SEMI-S8 requirements and
that appropriate supplementary control measures be taken to
reduce ergonomic risk. Moreover, TSMC endeavors to automate
300mm front-opening unified pod (FOUP) transportation to prevent
accumulative damage caused by long-term manual handling
of 300mm FOUPs. TSMC 300mm fabs have achieved 99.9% in
automatic transportation.
TSMC performs semi-annual workplace environment assessments
of physical and chemical hazards, including CO2 concentration,
illumination, noise, and hazardous chemical substances regulated by
domestic laws. When abnormal measurements or events happen, site
ESH professionals will conduct onsite observation and interventions
to ensure exposure risk acceptable. TSMC also conducts Indoor Air
Quality Program to set up indoor air quality standard, measurement,
and control measures to provide a more comfortable and safer
workplace continuously.
● Emerging Infectious Disease Response
TSMC has a dedicated corporate ESH organization which monitors
emerging infectious diseases around the world, assesses any potential
impact on the workplace and provides a strategic response plan. In
previous outbreaks (such as SARS in 2003 and the H1N1 influenza
outbreak in 2009), TSMC convened the Corporate Influenza Response
Committee to develop the Company’s strategies. These strategies
include educating employees in prevention and response, publishing
guidelines for managers, establishing guidelines for employee sick
leave due to flu, and installing alcohol-based hand sanitizers at
appropriate locations. The Committee also monitors the status of
employee leave due to illness and, at the same time, develops a
continuous plan to address manpower shortages as well as minimize
business impact.
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TSMC believes that employees’ physical and mental health is not only
standards as well as mitigating ESH-related risks when building or
fundamental to maintaining normal business operations but also part
rebuilding facilities, TSMC also maintains procedures governing new
of a corporation’s responsibility.
In 2012, TSMC strengthened industry-academy cooperation to
enhance the Company’s capability on occupational management.
TSMC and the National Taiwan University (NTU) College of Public
Health signed a memorandum of understanding (MOU) to
equipment and raw materials, safety approvals for bringing new tools
online, updating safety rules, seismic protection measures, and other
safety measures.
● Environmental, Safety and Health Evaluation of Hazardous
Chemical Substances
collaborate on occupational health enhancement. This MOU marked
Any new chemical substance introduced to TSMC – from the R&D
as an important step in the long-term industry-academy cooperation
phase to mass production – is carefully reviewed before use by the
● Emergency Response
The planning and execution of an effective emergency response
must lay out clearly defined safety precautions and preventative
measures. In addition, contractors working on high-risk engineering
requires big-picture thinking, continuous improvement and practice
projects must establish OHSAS 18001 systems and the workers must
7.2 TSMC Education and Culture
Foundation
As part of TSMC’s aesthetic education plan, the TSMC Foundation
continued to support the Taipei Fine Arts Museum to expand the
“TSMC Children’s Art Education Center,” which will be the most
drills. TSMC’s emergency response plans include procedures for rapid
successfully complete work skill training.
The TSMC Education and Culture Foundation, established in 1998
important base for promoting children’s art education in Taiwan.
response to accidents and disaster recovery as well as establishing
response procedures for potential disasters.
● Supply Chain Sustainability
As one of the global leaders in semiconductor industry, TSMC
corporate social responsibility, continues to devote its resources
At the high school level, TSMC emphasizes the need for a
towards education, promotion of art and culture events, community
balanced education in both science and the humanities. In science,
to coordinate the Company’s sponsorship as part of its efforts in
All TSMC fabs conduct major annual emergency response exercises
has been working together with our suppliers in several fields of
building, and the employee volunteer program.
collaborating with the Education Prime Minister and the Wu
and evacuation drills. TSMC’s Tainan-site fabs initiated quarterly spot
sustainable development, such as greening our supply chain, carbon
Chien-Shiung Foundation, the TSMC Foundation continued the
drills, which have been recognized as good practices. TSMC’s on-site
management for climate change, ESH management and business
In 2012, the TSMC Foundation continued to contribute NT$63
project “Lifting the Ability of High School Physics Experiments”
service contractors also participate in emergency response planning
continuity plans for natural disasters. In 2012, TSMC announced our
million to its long-term projects of promoting education and arts.
for the third consecutive year. One week’s training offered science
and exercises to ensure cooperation in handling accidents and to
sustainability standard for suppliers and encouraged our suppliers to
In science education, “Lifting the Ability of High School Physics
teachers a chance to enhance their teaching skills and experimental
effectively minimize any damage caused by disasters.
create sustainable value in these fields. To enhance the supply chain
Experiments,” cooperated with Wu Chien-shiung Education
abilities. As of the end of 2012, the program has provided
sustainability and partnership with our suppliers, TSMC also shared its
Foundation and the Ministry of Education, this public/private
professional development for 159 science teachers, reaching over
In addition to the regular emergency response drills held by
experience and practice at the TSMC 2012 Supply Chain Sustainability
partnership gained overwhelmingly responses from school teachers.
30,000 high school students nationwide. In addition to the teachers’
engineering and facilities departments each quarter, the Company’s
and Risk Management Forum.
laboratory, canteen, dormitory, and shuttle bus personnel also hold
emergency response drills to prepare for events such as earthquakes,
chemical leakage, ammonia release, fires and automobile accidents.
● Employee Health Enhancement
Workplace stress and employee health have recently become new
topics of concern for the government, society, employers, and
employees as areas that require further attention and effort. The
TSMC Employee Assistance Program (EAP) provides free individual
Environmental, Safety and Health-related Awards in
2012
TSMC was honored to be chosen for membership in the Dow Jones
Sustainability World Index for a 12th consecutive year in 2012, and be
the semiconductor sector leader in 2010 and 2012. The Company’s
Environmental, Safety and Health-related Awards in 2012 are listed
as follows.
counseling sessions, group sharing, workshops, and mental
TSMC Fab
Governmental
Organization
Award
assessment, as well as lectures on personal and family issues to take
care of employees’ well-being.
Health promotion activities for employees include fitness programs,
women’s health care programs, mother’s rooms, body weight control
Environmental Protection
F5, F12 P4
Taiwan EPA
F12 P1/P4, F14, F15
Taiwan EPA
programs, sleep problem management, massage and chiropractic
F12 P1
Taiwan EPA
Enterprise Environmental Protection
Award
Energy Conservation and Carbon
Reduction Action Mark
Excellence in Waste Resource Management
Award
services, hepatitis and flu vaccinations, and health lectures. TSMC
believes employees who are physically and mentally fit can enjoy a
better quality of life and be more productive.
Supplier and Contractor Management
● Supplier Management
As a means of enhancing its supply chain management, TSMC is
committed to communicating with and encouraging its contractors
F14
F2&5, F3
F3
F2&5, F8
F6
F8
Taiwan MOEA
Energy Conservation Award
Taiwan MOEA
Excellence in Greenhouse Gas Reduction
Award
Taiwan MOEA
Water Conservation Award
Hsinchu SPA
Tainan SPA
Low Carbon Enterprise Award
Excellence in Environmental Protection
Award
Hsinchu City EPB
National Environmental Education Award
and suppliers to improve their quality, cost effectiveness, delivery
Safety and Health
performance and sustainability on environmental protection, safety
F2&5, F8
Hsinchu SPA
and health. By means of communication between senior managers,
site audits and experience sharing, TSMC collaborates with major
suppliers and contractors to enhance partnership and ensure
continual improvement for better performance and increased joint
contributions to society. Contractors performing high-risk activities
F14
Tainan Site
Tainan Site
Taiwan BHP
Taiwan BHP
Taiwan BHP
Note:
1. EPA: Environmental Protection Administration
2. MOEA: Ministry of Economic Affairs
3. SPA: Science Park Administration
4. EPB: Environmental Protection Bureau
5. BHP: Bureau of Health Promotion
Excellence in Labor Safety and Hygiene
Award
Health Leading Award
Annual Special Contribution Award
Outstanding Work Place for Weight Loss
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The TSMC Foundation also supported National Tsing-hua University
training, TSMC brought science knowledge to the campuses.
to hold “Senior High School Academic Train” to promote lecture
This year the TSMC Foundation supported National Tsing-hua
courses for academic knowledge in senior high schools. In art
University to launch the “Senior High School Academic Train,”
education, TSMC brought 10,000 students to visit the exhibition
“King Wu Ding and Lady Hao: Art and Culture of the Late Shang
inviting professors from the University to introduce senior high
school students to the latest knowledge of technology and common
Dynasty” in National Palace Museum. And the TSMC Foundation
knowledge for daily life and science. The courses will be held in
continued its support of the Taipei Fine Arts Museum to build up
twelve senior high schools located in northern, central, southern,
the “TSMC Children’s Art Education Center,” which will be operated
eastern and Kinmen areas. At the same time the TSMC Foundation
in 2013. Aside from financial sponsorships, the TSMC Foundation
continued to sponsor science camps for talented science students to
supports TSMC Volunteer Society, organizing the employees to
meet with world-class scholars for inspiring their scientific potential.
devote themselves to the caring of the underprivileged of the
communities.
In the humanities, the TSMC Foundation organized the fifth “TSMC
Youth Calligraphy Contest,” holding three workshops at three high
Commitment to Aesthetic and Scientific Education
schools to inspire the students to appreciate the beauty and cultural
Talents are essential to the development of the economy. As a leader
of Taiwan’s knowledge-based industry, TSMC regards cultivating
talented people for society as a core responsibility. Thus the TSMC
Foundation tailors various programs to target a whole range of
education needs at different age levels.
richness of calligraphy. The TSMC Foundation also continued the
TSMC Youth Literature Award to encourage talented young writer
to create new works for nine years. In addition to the competition,
we also invited famous writers to held lectures for students and the
public to increase their appreciation for literature.
At the primary-school level, the TSMC Foundation’s focus is on
aesthetic education. To bridge the urban-rural gap, we launched
the “TSMC Aesthetic Tour” to take children from remote townships
to visit National Palace Museum, Taipei Fine Arts Museum, and the
exhibitions for inspiring their interest in art. This year, in addition
to the annual visitation plan, the TSMC Foundation took more than
10,000 students from junior high schools and primary schools to visit
the exhibition “King Wu Ding and Lady Hao: Art and Culture of the
Late Shang Dynasty” for increasing their understanding of Chinese
Ancient Art and Culture. Over the last 10 years, over 70,000 students
have participated in the tour to cultivate their appreciation of art.
At the college level, in 2012 the TSMC Foundation continued
its “TSMC Mentor Scholarship” to support and encourage
underprivileged students of National Tsing Hua University and
National Central University. In addition to providing financial
assistance, the TSMC Foundation recruited senior TSMC employees
to mentor the students regularly. We hope that the rich practical
experience of TSMC employees can provide productive consultations
for the students both in schools and future career paths. In the
meantime, the TSMC Foundation continued to endow chair
professorships to enhance academic research of Taiwan universities.
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Promotion of Arts and Culture
Fantastique” at Hsinchu, and National Taiwan Symphony Orchestra
As many as 194 people volunteered in 2004. Youth volunteers were
In 2012, TSMC expanded its service scope to eight schools from five.
with the French Pianist Jean-Yves Thibaudet performed E. Grieg piano
added in 2006, and employees were encouraged to invite their high
Today, 318 volunteers read books with children in Hsinchu, Taichung
concerto in a minor. In addition to the theater performances, the
school children to join the Volunteer Docent Program. In 2007, the
and Tainan. They have served for eight consecutive years and will
TSMC Foundation also organized two activities at the public space of
program was expanded to recruit new blood from TSMC-affiliated
continue to help pave the road for these underprivileged children’s
our communities, the children concert “The Animal Festival” held at
companies, including Vanguard, VisEra, Xintec, and Global Unichip.
future.
Hsinchu Zoo Park, and the children drama “Visiting Little Confucius”
The docent’s enthusiasm and professionalism have been highly
The TSMC Education and Culture Foundation has for years devoted
its efforts to the promotion of Taiwan Art Groups. This year, the
TSMC Foundation supported the National Symphony Orchestra to
perform Opera Australia Production “Madama Butterfly,” one of
Giacomo Puccini’s masterpieces. The performance showcased not
only Taiwan Artists’ phenomenal performance but also the paradigm
of sino-western art and culture exchange.
Promoting Chinese Philosophy is also the core program of the
TSMC Foundation. After Confucius Analects, the TSMC Foundation
Tainan.
continued to promote another Chinese Classic, Chung-tzu. We
invited Professor Hsin Yih-yun to produce the broadcasting program
“Analects in Chung-tzu’s View”. Through Professor Hsin Yih-yun’s
rich knowledge and vivid examples, the TSMC Foundation hopes
that more people can understand Chung-tzu’s philosophy, and gain
wisdom from it. Noting the importance of preserving historic sites,
the TSMC Foundation continued to sponsor the Taipei Story House’s
Literature Salon. Cultural activities such as regular author readings
on the site gave the old building a new life and attracted the general
public to this cultural heritage site.
Community Building
The TSMC Foundation continues to promote arts and cultural
activities in our site communities. Every year we organize the TSMC
Hsin-chu Art Festival to bring cultural activities to these high-tech
cities and encourage a greater art appreciation in the communities.
This year is the 10th anniversary of the TSMC Hsin-chu Arts Festival.
In past years, through the TSMC Foundation’s invitation, numerous
masters had been gathered at the festival. Such as Chinese Opera
performers Pai Hsien-yung, Wu Hsing-kuo, Wei Hai-ming, and Li
Bao-chun as well as the great classical music masters Lin Cho-liang,
Li Yun-di, Ann-Sophie Mutter, James Galway and Kun Woo Paik
brought the inhabitants marvelous performances and concerts.
For the last ten years, more than 230,000 participants enjoyed the
programs presented by the TSMC Hsin-chu Festival.
This year, following the steps of TSMC’s building sites, the Hsin-chu
Art Festival was held not only at Hsinchu and Tainan, but also
Taichung. For Chinese opera fans the TSMC Foundation hosted
the “One Hundred Years on Stage” performed by the Guoguang
Opera Company. Gathering together Taiwan’s most fantastic
performers, the play led the audience to look at the history of
Chinese opera through a web of love, lust and hatred among
operatic performers/characters on and off the stage. Two Taiwan
major orchestras gathered at the festival for the first time. National
Symphony Orchestra performed H. Berlioz’s masterpiece “Symphonie
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held at the Confucius Temples located at both Hsinchu and Tainan.
By infusing the art energy, TSMC hopes to revive the public space
of our homes. More than 40 performances of the 2012 Hsin-chu
Festival nurtured over 15,000 inhabitants of Hsinchu, Taichung and
7.3 TSMC Volunteer Program
Social responsibility has been a feature of TSMC’s culture since its
founding. The TSMC Foundation is dedicated to promoting education
and culture, providing aid for the underprivileged, advocating energy
saving, and caring for communities. The TSMC Foundation launched
an employee volunteer program in 2003 as a channel through which
its most valuable asset, high-tech professional employees, give to the
society. Employees and their family members have been invited to
participate in the following programs:
TSMC Volunteer Docent Program
TSMC Book Reading Volunteer Program
TSMC Energy-saving Volunteer Program
TSMC Community Volunteer Program
TSMC Ecology Volunteer Program (2012 new initiative)
appreciated by visitors, and each year the group is recognized as an
TSMC Energy Saving Volunteer Program
“Outstanding Volunteer Team” by the National Museum of Science.
When the new “The World of Semiconductor” opened in 2011 the
TSMC volunteer program recruited around 500 volunteers. In 2012,
the number grew to more than 700 volunteers.
With global warming and the depletion of limited natural resources
and fossil fuel, saving energy has become a global common goal.
TSMC recruited employees with expertise in energy conservation to
start the Energy-Saving Volunteer Program, and has provided schools
in the Hsinchu and Tainan areas with professional consulting service.
The team helps to come up with plans for schools to improve power
TSMC Book Reading Volunteer Program
efficiency and reduce carbon emissions.
TSMC believes the future hope and competitiveness of Taiwan lies in
the children of the next generation, and education is the key to the
Formed in 2008 by 25 TSMC employees, the Energy-Saving Volunteer
development of these children. Hoping to help reduce the disparity
Program initially served neighborhood schools. Two high schools in
of educational resources between rural and urban schools, TSMC
Hsinchu were chosen, and a team was sent to each school to assist
Foundation has sponsored the Hope Reading Program organized by
in lowering water, electricity and telecommunication bills, as well as
the CommonWealth Magazine since 2004. Besides donating 20,000
improving environmental safety and air-conditioning. After assessing
books annually to 200 schools in remote rural areas, the TSMC
the facilities, collecting data, and evaluating power efficiency, the
Foundation recruited employees and their family members to form
teams proposed energy-saving plans and ways to reduce carbon
a volunteer team to read to children in the hope of sparking their
emissions to the schools
interest in reading.
During the first year, 49 volunteers joined and started serving two
the Company and Taiwan but also wish to do what they can to
elementary schools in the remote townships in Hsinchu. Now more
preserve the earth. The program expanded service to Taichung in
than 100 people travel to the remote schools to tell stories to the
2011 in to achieve its promise: “Where TSMC is, their volunteers are
children on a regular basis. With increasing participants, the program
also”. In 2012, volunteers input 950 hours in the Hsinchu, Taichung
The Energy-Saving volunteers not only endeavor to save energy for
TSMC Volunteer Docent Program
was extended to Tainan in 2006. Volunteers encourage children
and Tainan areas.
One important way in which a corporation can serve and respond to
to read and to make use of the books donated through the Hope
its communities is to share its knowledge. The spread of knowledge
Reading Program.
furthers people’s understanding of their environment and may inspire
the future generations and bring forth change in society.
Volunteers prepare plays or plan activities during holidays to further
encourage children’s interest in reading. Working regularly with
To promote science education and to further people’s understanding
the children over the long term, many volunteers have developed
of the IC industry, TSMC made a donation to the National Museum
profound friendships with the children.
of Natural Science (Taichung) in 1997 to set up an exhibition hall
– The World of the Integrated Circuits. In 2003 and 2011, TSMC
The selfless service of Book Reading Volunteer Program participants
sponsored the renovation of the hall, adding interactive displays that
has been greatly appreciated by the schools and the children. This
explain semiconductor principles, the development of integrated
circuits, and the important role the IC industry plays in daily life.
In 2004, TSMC Foundation recruited employees and their family
members to serve as volunteer docents at the exhibition hall on
weekends and holiday.
program has become a great model frequently reported by the mass
media, which has helped to spread the spirit of encouraging reading
through reading aloud.
TSMC Community Volunteer Program
When the TSMC Community Volunteer Program started recruiting
employees, a central focus was to continually deploy their expertise to
help those who need them the most.
When Typhoon Morakot struck southern Taiwan in 2009, TSMC
employees, deeply saddened by the suffering it caused, immediately
established the Typhoon Morakot Project Team and provided
assistance and relief measures to the typhoon victims. The experience
prompted TSMC employees to ponder what else could be done to
help the community and, consequently, the Typhoon Morakot Project
Team became the Community Volunteer Program in 2010, aiming to
reach out to the needy.
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The needy, the elderly and children are the focus of TSMC
Community volunteers partly because Taiwan is an aging society
● Summer Camps: During summer vacation, volunteers accompanied
the children to three-day camps in Kaohsiung. The children have
with more than two million people over the age of 65, among
thus become closer to the volunteers.
whom one fifth need nursing care. Because of rapid changes in
society, it is critical for children – the future of the country – to build
● Tom’s Bear & McDonald Happy Hour: All the children were invited
to Tom’s Bear amusement @ Big City Mall in Hsinchu for a treat,
their characters at an early age. It is important for children to have
and they spent one happy afternoon participating in all sorts of
productive interactions with their parents, something often lacking
activities.
in dysfunctional families, whose children need warmth, care and
company.
Taitung Project activities: There are 36 volunteers accompanied with
children in Taitung who suffered type 1 diabetes. 2012 results as
TSMC Community Volunteer Program mainly serves the elderly at
following:
Hsinchu Veterans Home and the children at St. Teresa Children
● First contact: Volunteers hosted a gathering between volunteers
Center. In 2010, when we first recruited volunteers, 156 people
and children in April in Taitung, first mixing as one mass and then
joined. In 2012, there are 404 volunteers. The elderly, the children,
reforming into five subgroups (families). Each family developed their
and the volunteers are closely linked through regular activities.
own activities to maintain close connection.
Hsinchu Veterans Home activities: In 2012, a total of 308 TSMC
● Summer vacation activities: Each family hosted their own summer
camps in July and August. After that, their sensibilities become
volunteers visited Hsinchu Veterans Home every weekend to spend
tighter then before.
time with the elderly veterans. Volunteers are divided into three
groups:
● Dream come true plan: Qualified children were invited to join
two-day events: “Dream come true activity” in early 2013.
● The Energetic Group: Volunteers exercise with the elderly veterans.
Volunteers play croquet with them every other week and hold little
contests occasionally. The elderly veterans get to stretch their bodies
and enjoy the exciting matches.
● The Warm, Romantic Group: Volunteers sing songs to the physically
handicapped veterans or play interactive games with them. When
they sing karaoke together, joy seems to float with the notes
among all of them.
● The Art Group: In some art classes, volunteers and the veterans
create artistic works such as rock-painting. The veterans get to
enjoy the beauty of arts, and volunteers and the veterans get to
understand each other through chatting. We hope that the elderly
veterans tell us their wishes and that someday we may be able to
make their wishes come true.
In 2012, TSMC Volunteer Program organized one holiday volunteer
event on December 8 in Hsinchu Veterans Home. Over 200
employees and families participated to join lunch banquet. TSMC
Volunteer Program also invited symphony to perform for the elderly.
St. Teresa Children Center activities: There are 62 volunteers serving
at the Center, giving warm and timely care to the children. Among
their accomplishments:
● One-on-one companionship: During the monthly family day at the
Center, volunteers spend a wonderful weekend going on an outing
with the children or reading to them in the Center.
TSMC Ecology Volunteer Program
In 2012, TSMC launched a new volunteer initiative: the Ecology
Volunteer Program. Two groups of employees who are interested
in natural ecology donate their time to environmental protection
service at ecology parks in Taichung & Tainan. Volunteers are trained
as ecology docents popularize natural ecology concepts with school
children and the public visiting the two parks.
● Taichung Fab 15 ecology park docent: With 47 employees joining
the subgroup, TSMC Volunteer Program hosted three advanced
training courses to enhance skills and abilities of the volunteers.
Their task is to be docents to guide visitors to Fab 15 ecology park
in Taichung. They guided Ju-Liu elementary school through Fab 15
ecology park for the first visit at the end of 2012.
● Tainan Jacana ecology education park docent: TSMC Volunteer
Program recruited 91 employees and their family members to serve
as volunteer docents at the Jacana ecology education park on
weekends and holidays.
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7.4 Social Responsibility Implementation Status as Required by the Taiwan Financial
Supervisory Commission
Item
Implemention Status
1. Implementation of Corporate Governance
(1) Corporate social responsibility policy and performance evaluation
(1) Please refer to “7. Corporate Social Responsibility” on page 98-109 of this
Annual Report.
(2) Dedicated organization for the promotion and execution of corporate social
(2) TSMC follows the ten principles of corporate social responsibility set by the
Non-implentation and
Its Reason(s)
None
responsibility
Chairman, Dr. Morris Chang. Each unit in TSMC incorporates corporate social
responsibility principals into daily operations. All issues of stakeholders’ concerns
are collected regularly or through ad hoc communication channels. Each unit
will assess and identify material issues, and incorporate them into execution
plans and daily operations.
(3) Regular training and promotion of corporate ethics among employees and
the Board of Directors, and integration with the employee performance
appraisal system
(3) Please refer to “3.4 Code of Ethics and Business Conduct” on page 39-42 of this
Annual Report.
2. Sustainable Environment Development
(1) Commitment to improving resources utilization and the use of renewable
Please refer to “7.1.1 Environmental Protection” on page 100-102 of this Annual
Report.
None
materials
(2) Environmental management system designed to industry characteristics
(3) Dedicated environmental management unit or personnel
(4) Company strategy for climate change, energy conservation and greenhouse
gas reduction
3. Promotion of social welfare
(1) Compliance with labor regulations, international recognized human right
principles, protection of employee rights and employment fairness, and
appropriate management measures and procedures
(1) Please refer to “5.5 Employees” on page 75-78 of this Annual Report.
None
(2) Safety and health in working environment
(2) Please refer to “7.1.2 Safety and Health” on page 102-104 of this Annual
Report.
(3) Mechanism of periodical communication with employees, and reasonable
(3) Please refer to “5.5 Employees” on page 75-78 of this Annual Report.
notice measures regarding significant operational changes which might cause
signifigant impacts to employees.
(4) Disclosure of consumer rights policy, and official channel for consumer
(4) Please refer to “5.4 Customer Trust” on page 73-75 of this Annual Report.
complaints
(5) Collaboration with suppliers
(5) TSMC brought together fab operations, materials management, risk
management, and quality system management in an internal committee
dedicated to managing our supply chain. The focuses of the committee are
risk mitigation and supply chain improvement. The steering team, including a
senior vice president and managers, sets goals annually and reviews progress
each quarter. The committee’s working team assists suppliers in lowering
production and transportation risks by sharing risk management practices and
helping suppliers improve quality systems, green procurement, protection of the
environment, and safety. At the same time, we monitor the financial situation
of key suppliers through regular communication or public information, and the
inventory of supply chain, with corresponding backup plans. The working team
holds monthly meetings to monitor progress and actively handle suppliers’
issues. Please refer to TSMC’s website for additional information:
http://www.tsmc.com/english/csr/supply_chain_management.htm
(6) Participation in community development and charities through commercial
(6) Please refer to “7. Corporate Social Responsibility” on page 98-109 of this
activities, donations or volunteers
4. Enhancement of Information Disclosure
(1) Disclosure of corporate social responsibility related information with
significance and reliability.
(2) Published corporate social responsibility report and disclosure of
implementation of corporate social responsibility
Annual Report.
TSMC has published “Corpoarte Social Responsibility Report” since 2008, which
has been verified by third party in compliance with the requirements of Global
Reporting Initiative (GRI) G3.1 level A+ and AA1000AS: 2008 standard.
None
5. If the company has established its corporate social responsibility code of practice according to “Listed Companies Corporate Social Responsibility Code of Practice,” please describe the operational
status and differences.
TSMC does not establish the code for corporate social responsibility. For our corporate social responsibility operational status, please refer to “7. Corporate Social Responsibility” on page 98-109 of
this Annual Report and our corporate social responsibility related information in our website: http://www.tsmc.com/english/csr/index.htm
6. Other important information to facilitate better understanding of the Company’s implementation of corporate social responsibility (e.g., environmental protection, community participation, social
contribution, social services, social welfare, consumers’ rights, human rights and safety and health):
Please refer to TSMC’s website for our corporate social responsibility implementation status: http://www.tsmc.com/english/csr/index.htm
7. Other information regarding products or “Corporate Social Responsibility Report” which are verified by certification bodies:
(1) TSMC obtained Integrated Circuit carbon footprint and Type 3 Environmental Product Label verification, which comply with PAS2050 and ISO14025 standards.
(2) TSMC Corporate Social Responsibility Report is compliant with the requirements of Global Reporting Initiative (GRI) G3.1 level A+ and AA1000AS:2008 standard.
109
More than
37,000
Employees Worldwide
Three Advanced 12-inch GIGAFAB™ Facilities,
Four 8-inch Fabs, and One 6-inch Fab in Taiwan
TSMC Serves Customers through Offices in America, Canada,
Europe, Japan, China, South Korea, and India
WaferTech, LLC
Shareholding: 100%
TSMC China Company Limited
Aug. 04, 2003
Shanghai, China
RMB 4,502,080 Manufacturing and selling of integrated circuits at the
order of and pursuant to product design specifications
provided by customers
8. Subsidiary Information and Other
Special Notes
8.1 Subsidiaries
8.1.1 TSMC Subsidiaries Chart
As of 12/31/2012
Taiwan
Semiconductor
Manufacturing
Company Limited
TSMC North America
Shareholding: 100%
TSMC Europe B.V.
Shareholding: 100%
TSMC Japan Limited
Shareholding: 100%
TSMC Korea Limited
Shareholding: 100%
TSMC China Company Limited
Shareholding: 100%
TSMC Partners, Ltd.
Shareholding: 100%
TSMC Global Ltd.
Shareholding: 100%
Xintec Inc.
Shareholding: 40.20%
Emerging Alliance Fund, L.P.
Shareholding: 99.5%
VentureTech Alliance Fund II, L.P.
Shareholding: 98%
VentureTech Alliance Fund III, L.P.
Shareholding: 50.25%
TSMC Solar Ltd.
Shareholding: 98.58%
TSMC Technology, Inc.
Shareholding: 100%
TSMC Development, Inc.
Shareholding: 100%
InveStar Semiconductor
Development Fund, Inc.
Shareholding: 97.09%
InveStar Semiconductor
Development Fund, Inc. (II) LDC.
Shareholding: 97.09%
TSMC Design
Technology Canada Inc.
Shareholding: 100%
VentureTech Alliance Holdings, LLC
Shareholding: 100%
Mutual-Pak Technology Co., Ltd.
Shareholding: 58.33%
Growth Fund Limited
Shareholding: 100%
VentureTech Alliance Fund III, L.P.
Shareholding: 48.73%
TSMC Solar North America, Inc.
Shareholding: 100%
TSMC Solar Europe B.V.
Shareholding: 100%
TSMC Solar Europe GmbH
Shareholding: 100%
TSMC Solid State Lighting Ltd.
Shareholding: 95.01%
TSMC Lighting North America, Inc.
Shareholding: 100%
TSMC Guang Neng Investment, Ltd
Shareholding: 100%
TSMC Solar Ltd.
Shareholding: 0.38%
TSMC Solid State Lighting Ltd.
Shareholding: 0.75%
Remarks: TSMC Guang Neng Investment, Ltd was established in January 2012.
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8.1.2 Business Scope of TSMC and Its Subsidiaries
TSMC and its subsidiaries strive to provide the best foundry services in the industry. Sales or engineering support offices in North America,
Europe, Japan, China, and South Korea are dedicated to servicing TSMC customers worldwide. WaferTech in the United States and TSMC China
Company Limited provide additional 8-inch wafer capacity. Other subsidiaries support the Company’s core foundry business with related services
such as design service and back-end assembly and test services, and invest in start-up companies involved in design, manufacturing, and other
related businesses in the semiconductor industry. Beginning in 2010, TSMC’s subsidiaries also engage in the researching, developing, designing,
manufacturing and selling of solid state lighting devices and related products and systems, and solar-related technologies and products.
8.1.3 TSMC Subsidiaries
Unit: NT(USD, EUR, JPY, KRW, RMB, CAD)$ thousands
Company
TSMC North America
TSMC Europe B.V.
TSMC Japan Limited
TSMC Korea Limited
Date of
Incorporation
Jan. 18, 1988
Place of Registration
Capital Stock
Business Activities
San Jose, California, U.S.
US$ 11,000
Selling and marketing of integrated circuits and
semiconductor devices
Mar. 04, 1994
Amsterdam, the Netherlands
EUR 100 Marketing and engineering supporting activities
Sep. 10, 1997
May 02, 2006
Yokohama, Japan
JPY 300,000 Marketing activities
Seoul, Korea
KRW 400,000
Customer service and technical supporting activities
As of 12/31/2012
TSMC Technology, Inc.
Feb. 20, 1996
InveStar Semiconductor Development Fund, Inc.
Sep. 10, 1996
Delaware, U.S.
Cayman Islands
US$ 0.001
Engineering support activities
US$ 811
Investing in new start-up technology companies
InveStar Semiconductor Development Fund, Inc.
(II) LDC.
Aug. 25, 2000
Cayman Islands
US$ 14,578
Investing in new start-up technology companies
TSMC Development, Inc.
WaferTech, LLC
Feb. 16, 1996
Jun. 03, 1996
Delaware, U.S.
Washington, U.S.
US$ 0.001
Investment activities
US$ 280,000 Manufacturing, selling, testing and computer-aided
designing of integrated circuits and other semiconductor
devices
TSMC Partners, Ltd.
Mar. 26, 1998
Tortola, British Virgin Islands
US$ 988,268
Investing in companies involved in the design,
manufacture, and other related business in the
semiconductor industry
TSMC Design Technology Canada Inc.
TSMC Global Ltd.
Xintec Inc.
May 28, 2007
Jul. 13, 2006
Ontario, Canada
CAD 2,434
Engineering support activities
Tortola, British Virgin Islands
US$ 1,284,000
Investment activities
Sep. 11, 1998
Taoyuan, Taiwan
NT$ 2,362,079 Wafer level chip size packaging service
Mutual-Pak Technology Co., Ltd.
Mar. 22, 2006
Taipei, Taiwan
NT$ 268,184 Manufacturing and selling of electronic parts and
researching, developing and testing of RFID
Emerging Alliance Fund, L.P.
VentureTech Alliance Fund II, L.P.
Jan. 10, 2001
Feb. 27, 2004
Cayman Islands
Cayman Islands
US$ 24,507
Investing in new start-up technology companies
US$ 18,106
Investing in new start-up technology companies
VentureTech Alliance Fund III, L.P.
Mar. 25, 2006
Cayman Islands
US$ 115,111
Investing in new start-up technology companies
Growth Fund Limited
VentureTech Alliance Holdings, LLC
May 30, 2007
Apr. 25, 2007
Cayman Islands
Delaware, U.S.
US$ 1,830
Investing in new start-up technology companies
N/A
Investing in new start-up technology companies
TSMC Solar Ltd.
Aug. 16, 2011
Tai-Chung, Taiwan
NT$ 11,341,000
Researching, developing, designing, manufacturing
and selling renewable energy and energy saving related
technologies and products
TSMC Solar North America, Inc.
TSMC Solar Europe B.V.
TSMC Solar Europe GmbH
Sep. 03, 2010
Sep. 29, 2010
Dec. 17, 2010
Delaware, U.S.
US$ 1
Selling and marketing of solar related products
Amsterdam, the Netherlands
EUR 100
Investing in solar related business
Hamburg , Germany
EUR 100
TSMC Solid State Lighting Ltd.
Aug. 16, 2011
Hsin-Chu, Taiwan
NT$ 4,530,000
TSMC Lighting North America, Inc.
Sep. 03, 2010
Delaware, U.S.
US$ 1
Selling of solar related products and providing customer
service
Researching, developing, designing, manufacturing and
selling solid state lighting devices and related products
and systems
Selling and marketing of solid state lighting related
products
TSMC Guang Neng Investment, Ltd.
Jan. 19, 2012
Taipei, Taiwan
NT$ 100,000
Investment activities
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8.1.4 Common Shareholders of TSMC and Its Subsidiaries with Actual of Deemed Control: None.
8.1.5 Rosters of Directors, Supervisors, and Presidents of TSMC’s Subsidiaries
Unit: NT$(USD/EUR), except shareholding
Company
Title
Name
TSMC North America
TSMC Europe B.V.
TSMC Japan Limited
TSMC Korea Limited
TSMC China Company Limited
TSMC Technology, Inc.
InveStar Semiconductor Development
Fund, Inc.
InveStar Semiconductor Development
Fund, Inc. (II) LDC.
TSMC Development, Inc.
WaferTech, LLC
TSMC Partners, Ltd.
TSMC Design Technology Canada Inc.
TSMC Global Ltd.
Director
Director
President
Director
Director
Director
President
Director
Director
Supervisor
President
Director
Director
Director
Chairman
Director
Director
Supervisor
President
Chairman
Director
Director
President
Director
Director
Chairman
Director
President
Director
Director
President
Director
Director
President
Director
Director
Director
President
Director
Director
Jason Chen
Rick Cassidy
Rick Cassidy
Jason Chen
Wendell Huang
Maria Marced
Maria Marced
Jason Chen
Makoto Onodera
Lora Ho
Makoto Onodera
Shing-Wha Lin
Chih-Chun Tsai
Wendell Huang
F.C. Tseng
M.C. Tzeng
Jason Chen
Lora Ho
C.H. Chen
Lora Ho
Richard Thurston
Cliff Hou
Cliff Hou
Wendell Huang
Wendell Huang
Lora Ho
Richard Thurston
Lora Ho
M.C. Tzeng
Steve Tso
Kuo-Chin Hsu
Lora Ho
Richard Thurston
Lora Ho
Cliff Hou
Sreedhar Natarajan
Richard Thurston
Cliff Hou
Lora Ho
Richard Thurston
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Shareholding
Shares (Investment Amount)
-
-
-
TSMC holds 11,000,000 shares
-
-
-
-
TSMC holds 200 shares
-
-
-
-
TSMC holds 6,000 shares
-
-
-
TSMC holds 80,000 shares
-
-
-
-
-
(TSMC’s investment US$596,000,000)
-
-
-
-
TSMC Partners, Ltd. holds 10 shares
-
TSMC Partners, Ltd. holds 786,907 shares
-
TSMC Partners, Ltd. holds 14,152,996 shares
-
-
-
TSMC Partners, Ltd. holds 10 shares
-
-
-
TSMC Development, Inc.holds
293,636,833 shares
-
-
-
TSMC holds 988,268,244 shares
-
-
-
-
TSMC Partners, Ltd. holds 2,300,000 shares
-
-
TSMC holds 1,284 shares
Company
Xintec Inc.
As of 12/31/2012
% (Investment
Holding%)
-
-
-
100%
-
-
-
-
100%
-
-
-
-
100%
-
-
-
100%
-
-
-
-
-
(100%)
-
-
-
-
100%
-
97.09%
-
97.09%
-
-
-
100%
-
-
-
100%
-
-
-
100%
-
-
-
-
100%
-
-
100%
(Continued)
Mutual-Pak Technology Co., Ltd.
Emerging Alliance Fund, L.P.
VentureTech Alliance Fund II, L.P.
VentureTech Alliance Fund III, L.P.
Growth Fund Limited
VentureTech Alliance Holdings, LLC
TSMC Solar Ltd.
TSMC Solar North America, Inc.
TSMC Solar Europe B.V.
TSMC Solar Europe GmbH
TSMC Solid State Lighting Ltd.
TSMC Lighting North America, Inc.
TSMC Guang Neng Investment, Ltd.
Title
Name
Shareholding
Shares (Investment Amount)
% (Investment
Holding%)
Chairman
Director
Director
Director
Director
Supervisor
Supervisor
President
Chairman
Director
Director
Supervisor
President
None
None
None
None
None
Chairman
Director
Director
Supervisor
President
Director
Director
President
Director
Director
Director
Director
Director
Director
Director
Chairman
Director
Director
Supervisor
President
Director
Director
President
Director
Director
Representative of TSMC: Robert Kuan
Representative of TSMC: C.C. Wei
Representative of TSMC: Lora Ho
Re presentative of OmniVision Investment
Holding Inc.: Xiaoying Hong
Tzun Eing Chen
Re presentative of VisEra Holding Company:
Cheng Ho
Re presentative of VisEra Holding Company:
W.M. Sheng
Robert Kuan
Hsu-Tung Chen
Lewis Hwang
Re prsentative of VentureTech Alliance Fund III,
L.P.: Juine-Kai Tseng
Wei-Pong Lin
Lewis Hwang
None
None
None
None
None
Rick Tsai
F.C. Tseng
Richard Thurston
Lora Ho
Ying-Chen Chao
Lora Ho
Richard Thurston
Rick Tsai
Lora Ho
Richard Thurston
Rick Tsai
Lora Ho
Richard Thurston
Stephen Mckenery
Ying-Chen Chao
Rick Tsai
F.C. Tseng
Richard Thurston
Lora Ho
Jacob Tarn
Lora Ho
Richard Thurston
Rick Tsai
Lora Ho
Richard Thurston
94,950,005 shares
94,950,005 shares
94,950,005 shares
9,809,211 shares
882,350 shares
37,235,172 shares
37,235,172 shares
0 shares
1,107,010 shares
2,508,000 shares
15,643,347 shares
30,000 shares
2,508,000 shares
(TSMC’s investment US$24,384,811)
(TSMC’s investment US$17,743,610)
(TSMC’s investment US$57,840,721)
(TSMC Solar Ltd.’s investment
US$56,090,001)
(VentureTech Alliance Fund III, L.P.’s
investment US$1,830,000)
None
1,500,000 shares
-
-
-
TSMC holds 1,118,000,000 shares
TSMC Guang Neng Investment, Ltd. holds
4,294,000 shares
1,200,000 shares
-
-
-
TSMC Solar Ltd. holds 1,000 shares
-
-
TSMC Solar Ltd. holds 200 shares
-
-
-
-
-
TSMC Solar Europe B.V. holds 200 shares
1,500,000 shares
-
-
-
TSMC holds 430,400,000 shares
TSMC Guang Neng Investment, Ltd. holds
3,419,500 shares
1,100,000 shares
-
-
-
TSMC Solid State Lighting Ltd. holds
1,000 shares
-
-
(TSMC’s investment NT$100,000,000)
40.20%
40.20%
40.20%
4.15%
0.37%
15.76%
15.76%
0.00%
4.13%
9.35%
58.33%
0.11%
9.35%
(99.5%)
(98%)
(50.25%)
(48.73%)
(100%)
(100%)
0.13%
-
-
-
98.58%
0.38%
0.11%
-
-
-
100%
-
-
100%
-
-
-
-
-
100%
0.33%
-
-
-
95.01%
0.75%
0.24%
-
-
-
100%
-
-
100%
115
8.1.6 Operational Highlights of TSMC Subsidiaries (Note)
Unit: NT$ thousands, except EPS ($)
Company
Capital Stock
Assets
Liabilities
Net Worth
Net Sales
As of 12/31/2012
Income
(Loss) from
Operation
Net Income
(Loss)
Basic Earning
(Loss) Per Share
Subsidiaries: None.
8.3 Special Notes
8.2 Status of TSMC Common Shares and ADRs Acquired, Disposed of, and Held by
319,418
45,816,861
42,607,573
3,209,288
329,949,024
251,575
312,232
28.38
8.3.1 Private Placement Securities in 2012 and as of the Date of this Annual Report: None.
8.3.2 Regulatory Authorities’ Legal Penalties to the Company or Its Employees, and the Company’s
Resulting Punishment on Its Employees for Violations of Internal Control System Provisions, Principal
Deficiencies, and the State of Any Efforts to Make Improvements in 2012 and as of the Date of this
Annual Report
The competent authorities fined a minor fine totaling NT$109,200 for very few isolated incidents of administrative errors and noncompliance
with relevant rules concerning employee attendance. After communicating with the authorities, TSMC has been implementing relevant remedial
measures.
8.3.3 Any Events in 2012 and as of the Date of this Annual Report that Had Significant Impacts on
Shareholders’ Right or Security Prices as Stated in Item 2 Paragraph 2 of Article 36 of Securities and
Exchange Law of Taiwan: None.
8.3.4 Other Necessary Supplement: None.
TSMC North America
TSMC Europe B.V.
TSMC Japan Limited
TSMC Korea Limited
3,839
100,560
10,840
323,400
190,387
28,534
87,639
47,975
1,599
235,761
142,412
26,935
396,350
271,084
20,146
42,231
12,294
1,844
3,786
2,602
34,931
174,653.71
TSMC China Company Limited
20,979,693
24,868,744
6,982,430
17,886,314
15,846,546
4,483,920
4,757,121
TSMC Technology, Inc.
InveStar Semiconductor Development Fund,
Inc.
InveStar Semiconductor Development Fund,
Inc. (II) LDC.
0.03
23,536
437,624
271,037
97,261
37,592
340,363
233,445
738,589
87,483
35,171
73,766
32,721
73,740
423,304
313,560
159
313,401
2,257
(3,564)
(3,564)
TSMC Development, Inc.
0.03
17,549,612
-
17,549,612
4,253,142
4,270,444
4,269,368
426,936,768.69
WaferTech, LLC
TSMC Partners, Ltd.
8,130,640
8,656,151
747,096
7,909,055
8,008,777
2,218,336
4,216,650
28,697,333
38,635,609
-
38,635,609
5,089,829
5,089,586
5,088,931
TSMC Design Technology Canada Inc.
71,142
167,761
34,504
133,257
37,284,792
49,954,509
123
49,954,386
469,933
365,991.08
2,362,079
6,029,008
2,172,281
3,856,727
3,139,385
TSMC Global Ltd.
Xintec Inc.
Mutual-Pak Technology Co., Ltd.
Emerging Alliance Fund, L.P.
VentureTech Alliance Fund II, L.P.
VentureTech Alliance Holdings, LLC
TSMC Solar North America, Inc.
TSMC Lighting North America, Inc.
TSMC Solar Europe B.V.
TSMC Solar Europe GmbH
TSMC Solar Ltd.
VentureTech Alliance Fund III, L.P.
3,342,597
2,370,773
Growth Fund Limited
53,140
12,184
268,184
711,644
525,754
74,268
168,276
573,979
-
29
29
3,839
3,839
-
67,289
2,904
175,286
185,765
15,543
76
5,745
2,550
1,482
-
23,252
40
270
14,182
58,725
168,200
568,234
2,368,223
10,702
-
44,037
2,864
175,016
171,583
TSMC Solid State Lighting Ltd.
4,530,000
3,119,709
581,824
2,537,885
TSMC Guang Neng Investment, Ltd.
100,000
65,007
-
65,007
11,341,000
7,857,963
1,763,356
6,094,607
208,086
474,384
24,703
43,558
272,644
272,034
-
-
18,917
470,909
(82,101)
(39,094)
30,430
92,641
12,472
(91,177)
(42,056)
(2,940)
62,349
(177,152)
(177,152)
(3,453)
(4,185)
-
-
1,890
(64,961)
(65,268)
(65,268.07)
-
-
50,149
88,455
54,223
-
(7)
(263)
(7)
(7.00)
(119,668)
(598,341.12)
(48,041)
(119,403)
(597,015.78)
(1,050,889)
(4,037,825)
(1,485,589)
(1,466,733)
(57)
(24,928)
(3.56)
(3.24)
N/A
631.02
32.52
N/A
3,272,090.62
93.72
(0.25)
14.36
5.15
5.42
(0.39)
(2.03)
N/A
N/A
N/A
N/A
N/A
Note: Foreign exchange rates for balance sheet amounts are as follows: $1 USD = $29.038 NT, $1 EUR = $38.39 NT, $1 JPY = $0.3552 NT, $1 RMB = $4.66 NT, $1 KRW = $0.0271 NT, $1 CAD = $29.23 NT
Foreign exchange rates for income statement amounts are as follows: $1 USD = $29.580 NT, $1 EUR = $38.11 NT, $1 JPY = $0.372 NT, $1 RMB = $4.69 NT, $1 KRW = $0.0263 NT, $1 CAD = $29.63 NT
2
0
1
2
T
S
M
C
A
N
N
U
A
L
R
E
P
O
R
T
116
117
TABLE OF CONTENTS
1. Condensed Balance Sheet
2. Condensed Statement of Income
3. Financial Analysis
4. Auditors’ Opinions from 2008 to 2012
5. Audit Committee’s Report
6. Financial Difficulties
7. Financial Statements for the Years Ended
December 31, 2012 and 2011 and
Independent Auditors’ Report
8. Consolidated Financial Statements for the
Years Ended December 31, 2012 and 2011 and
Independent Auditors’ Report
9. U.S. GAAP Financial Information
2
3
4
6
6
6
7
42
94
1. Condensed Balance Sheet
1.1 Condensed Balance Sheet from 2008 to 2012 (Unconsolidated)
1.2 Condensed Balance Sheet from 2008 to 2012 (Consolidated)
Unit: NT$ thousands
Unit: NT$ thousands
Item
Current Assets
2008
2009
2010
2011
2012
Item
2008
2009
2010
2011
2012
179,849,479
185,831,537
192,234,282
158,563,352
207,815,340
Current Assets
252,618,431
259,803,748
261,519,317
225,260,396
252,288,635
Long-term Investments
124,184,663
118,427,813
117,913,756
129,400,844
139,747,920
Long-term Investments
39,981,515
37,845,503
39,775,528
34,458,504
65,786,342
Fixed Assets
Other Assets
Total Assets
Current Liabilities
Before distribution
After distribution
Long-term Liabilities
Other Liabilities
Capital Stock
Capital Surplus
Retained Earnings
Before distribution
After distribution
219,282,502
254,751,526
366,854,299
454,373,533
586,603,294
17,242,603
18,415,746
24,237,329
19,070,145
12,006,629
540,559,247
577,426,622
701,239,666
761,407,874
946,173,183
53,099,467
72,571,095
118,022,260
109,514,430
138,795,878
129,975,779
150,279,215
195,752,496
187,263,098
*
Fixed Assets
Other Assets
Total Assets
Current Liabilities
Before distribution
After distribution
243,645,350
273,674,787
388,444,023
490,374,916
617,529,446
22,671,293
23,372,182
29,190,036
24,171,126
19,430,182
558,916,589
594,696,220
718,928,904
774,264,942
955,034,605
56,806,756
79,133,288
123,191,113
117,006,687
142,435,944
133,683,068
156,841,408
200,921,349
194,755,355
*
5,431,252
4,916,390
4,500,000
18,000,000
80,054,000
Long-term Liabilities
16,191,041
11,388,479
12,050,755
20,458,493
82,161,490
5,651,417
4,856,425
4,572,488
4,299,930
4,125,591
256,254,373
259,027,066
259,100,787
259,162,226
259,244,357
49,875,255
55,486,010
55,698,434
55,846,357
56,137,809
170,053,667
181,882,682
265,779,571
322,191,155
410,601,289
92,664,846
104,174,562
188,049,335
244,442,487
*
Other Liabilities
Capital Stock
Capital Surplus
Retained Earnings
Before distribution
After distribution
5,546,325
5,125,905
4,982,631
4,756,211
4,683,472
256,254,373
259,027,066
259,100,787
259,162,226
259,244,357
49,875,255
55,486,010
55,698,434
55,846,357
56,137,809
170,053,667
181,882,682
265,779,571
322,191,155
410,601,289
92,664,846
104,174,562
188,049,335
244,442,487
*
Cumulative Transaction Adjustments
481,158
(1,766,667)
(6,543,163)
(6,433,369)
(10,753,763)
Cumulative Transaction Adjustments
481,158
(1,766,667)
(6,543,163)
(6,433,369)
(10,753,763)
Net Loss Not Recognized as Pension Cost
-
-
-
-
(5,299)
Net Loss Not Recognized as Pension Cost
-
-
-
-
(5,299)
Unrealized Gain/Loss on Financial
Instruments
Total Liabilities
Before distribution
After distribution
Total Equity
Before distribution
After distribution
*Pending shareholders’ approval
(287,342)
453,621
109,289
(1,172,855)
7,973,321
64,182,136
82,343,910
127,094,748
131,814,360
222,975,469
141,058,448
160,052,030
204,824,984
209,563,028
*
476,377,111
495,082,712
574,144,918
629,593,514
723,197,714
399,500,799
417,374,592
496,414,682
551,844,846
*
Unrealized Gain/Loss on Financial
Instruments
Total Liabilities
Before distribution
After distribution
Equity Attributable to Shareholders of the
Parent
Before distribution
After distribution
Minority Interests
Total Equity
Before distribution
After distribution
*Pending shareholders’ approval
(287,342)
453,621
109,289
(1,172,855)
7,973,321
78,544,122
95,647,672
140,224,499
142,221,391
229,280,906
155,420,434
173,355,792
217,954,735
219,970,059
*
476,377,111
495,082,712
574,144,918
629,593,514
723,197,714
399,500,799
417,374,592
496,414,682
551,844,846
*
3,995,356
3,965,836
4,559,487
2,450,037
2,555,985
480,372,467
499,048,548
578,704,405
632,043,551
725,753,699
403,496,155
421,340,428
500,974,169
554,294,883
*
2
2. Condensed Statement of Income
2.1 Condensed Statement of Income from 2008 to 2012 (Unconsolidated)
Unit: NT$ thousands (Except EPS: NT$)
2.2 Condensed Statement of Income from 2008 to 2012 (Consolidated)
Unit: NT$ thousands (Except EPS: NT$)
Item
Net Sales
Gross Profit
2008
2009
2010
2011
2012
321,767,083
285,742,868
406,963,312
418,245,493
499,871,887
Item
Net Sales
2008
2009
2010
2011
2012
333,157,660
295,742,239
419,537,911
427,080,645
506,248,580
138,177,615
126,475,970
196,989,302
185,560,865
234,308,318
Gross Profit
141,749,561
129,328,611
207,053,591
194,069,228
243,594,870
Income from Operations
106,290,232
94,522,353
154,846,508
138,905,763
176,801,770
Income from Operations
104,435,368
91,961,886
159,175,335
141,557,418
181,057,193
Non-operating Income and Gains
6,725,625
4,121,509
15,907,968
7,287,046
11,188,077
Non-operating Income and Gains
10,821,449
5,653,548
13,136,072
5,358,527
6,782,037
Non-operating Expenses and Losses
2,257,039
3,662,840
1,464,272
1,484,965
4,359,899
Non-operating Expenses and Losses
3,784,571
2,152,787
2,041,012
1,768,268
6,285,254
Interest Revenue
Interest Expense
2,728,892
1,117,374
355,056
142,026
764,027
214,641
697,196
445,887
867,227
945,114
Interest Revenue
Interest Expense
5,373,823
2,600,925
1,665,193
1,479,514
1,645,036
614,988
391,479
425,356
626,725
1,020,422
Income before Income Tax
110,758,818
94,981,022
169,290,204
144,707,844
183,629,948
Income before Income Tax
111,472,246
95,462,647
170,270,395
145,147,677
181,553,976
99,933,168
89,217,836
161,605,009
134,201,279
166,158,802
Net Income
100,523,237
89,466,223
162,281,930
134,453,260
165,963,689
Net Income
Basic Earnings Per Share
Adjusted Basic Earnings Per Share
Capitalized Interest
* Based on weighted average shares outstanding in each year
** Retroactively adjusted for stock dividends for earning year 2008
3.86 *
3.84 **
-
3.45 *
3.45
-
6.24 *
6.24
-
5.18 *
5.18
-
6.41 *
-
-
Net Income Attributable to Shareholders
of the Parent
Basic Earnings Per Share
Adjusted Basic Earnings Per Share
Capitalized Interest
99,933,168
89,217,836
161,605,009
134,201,279
166,158,802
3.86 *
3.84 **
-
3.45 *
3.45
-
6.24 *
6.24
-
5.18 *
5.18
9,093
6.41 *
-
6,442
* Based on weighted average shares outstanding in each year
** Retroactively adjusted for stock dividends for earning year 2008
3
3. Financial Analysis
3.1 Financial Analysis from 2008 to 2012 (Unconsolidated)
Capital Structure Analysis
Debt Ratio (%)
Liquidity Analysis
Long-term Fund to Fixed Assets Ratio (%)
Current Ratio (%)
Quick Ratio (%)
Times Interest Earned (times)
Operating Performance Analysis
Average Collection Turnover (times)
Days Sales Outstanding
Average Inventory Turnover (times)
Average Inventory Turnover Days
Average Payment Turnover (times)
Fixed Assets Turnover (times)
Total Assets Turnover (times)
Return on Total Assets (%)
Return on Equity (%)
Operating Income to Paid-in Capital Ratio (%)
Pre-tax Income to Paid-in Capital Ratio (%)
Net Margin (%)
Basic Earnings Per Share (NT$) (Note)
Diluted Earnings Per Share (NT$) (Note)
Cash Flow Ratio (%)
Cash Flow Adequacy Ratio (%)
Cash Flow Reinvestment Ratio (%)
Operating Leverage
Financial Leverage
Profitability Analysis
Cash Flow
Leverage
Analysis of deviation of 2012 vs. 2011 over 20% :
1. The debt ratio increased by 36% as a result of increase in bonds payable.
2. The times interest earned decreased by 40%, primarily due to increase in interest expense.
3. The operating income to paid-in capital ratio increased by 27%, mainly due to increase in operating income.
4. The pre-tax income to paid-in capital ratio increased by 27%, primarily due to increase in pre-tax income.
5. The basic and diluted earnings per share both increased by 24%, mainly due to increase in net income.
Note: Retroactively adjusted for stock dividends for earning year 2008.
2008
11.87
219.72
338.70
312.83
312.95
11.08
32.93
10.86
33.59
20.40
1.47
0.60
18.35
20.74
41.48
43.22
31.06
3.84
3.81
399.16
134.79
12.95
2.50
1.00
2009
14.26
196.27
256.07
228.94
669.76
11.17
32.66
10.06
36.29
18.46
1.12
0.49
15.98
18.37
36.49
36.67
31.22
3.45
3.44
214.83
122.02
6.99
2.46
1.00
2010
18.12
157.73
162.88
140.07
789.71
10.93
33.40
9.44
38.67
16.89
1.11
0.58
25.31
30.23
59.76
65.34
39.71
6.24
6.23
188.12
109.98
11.20
2.17
1.00
2011
17.31
142.52
144.79
122.41
325.54
10.40
35.09
9.61
37.97
18.17
0.92
0.55
18.40
22.30
53.60
55.84
32.09
5.18
5.18
217.99
99.13
11.07
2.54
1.00
2012
23.57
136.93
149.73
122.85
195.29
11.01
33.14
9.13
39.97
18.23
0.85
0.53
19.56
24.57
68.20
70.83
33.24
6.41
6.41
199.78
93.47
11.53
2.37
1.01
*Glossary
1. Capital Structure Analysis
(1) Debt Ratio
(2) Long-term Fund to Fixed Assets Ratio
2. Liquidity Analysis
(1) Current Ratio
(2) Quick Ratio
(3) Times Interest Earned
3. Operating Performance Analysis
(1) Average Collection Turnover
(2) Days Sales Outstanding
(3) Average Inventory Turnover
= Total Liabilities / Total Assets
= (Shareholders’ Equity + Long-term Liabilities) / Net Fixed
Assets
= Current Assets / Current Liabilities
= (Current Assets - Inventories - Prepaid Expenses) / Current
Liabilities
(4) Average Inventory Turnover Days
(5) Average Payment Turnover
(6) Fixed Assets Turnover
(7) Total Assets Turnover
4. Profitability Analysis
(1) Return on Total Assets
= 365 / Average Inventory Turnover
= Cost of Sales / Average Trade Payables
= Net Sales / Net Fixed Assets
= Net Sales / Total Assets
5. Cash Flow
(1) Cash Flow Ratio
(2) Cash Flow Adequacy Ratio
= (Net Income + Interest Expenses * (1 - Effective Tax Rate))
/ Average Total Assets
(3) Cash Flow Reinvestment Ratio
(2) Return on Equity
(3) Operating Income to Paid-in Capital
= Net Income / Average Shareholders’ Equity
= Operating Income / Paid-in Capital
= Earnings before Interest and Taxes / Interest Expenses
Ratio
= Net Sales / Average Trade Receivables
= 365 / Average Collection Turnover
= Cost of Sales / Average Inventory
(4) Pre-tax Income to Paid-in Capital Ratio
(5) Net Margin
(6) Earnings Per Share
= Income before Tax / Paid-in Capital
= Net Income / Net Sales
= (Net Income - Preferred Stock Dividend) /
WeightedAverage Number of Shares Outstanding
6. Leverage
(1) Operating Leverage
(2) Financial Leverage
= Net Cash Provided by Operating Activities / Current
Liabilities
= Five-year Sum of Cash from Operations / Five-year Sum
of Capital Expenditures, Inventory Additions, and Cash
Dividend
= (Cash Provided by Operating Activities - Cash Dividends)
/ (Gross Fixed Assets + Investments + Other Assets +
Working Capital)
= (Net Sales - Variable Cost) / Income from Operations
= Income from Operations / (Income from Operations -
Interest Expenses)
4
3.2 Financial Analysis from 2008 to 2012 (Consolidated)
Capital Structure Analysis
Debts Ratio (%)
Liquidity Analysis
Long-term Fund to Fixed Assets (%)
Current Ratio (%)
Quick Ratio (%)
Times Interest Earned (times)
Operating Performance Analysis
Average Collection Turnover (times)
Days Sales Outstanding
Average Inventory Turnover (times)
Average Inventory Turnover Days
Average Payment Turnover (times)
Fixed Assets Turnover (times)
Total Assets Turnover (times)
Return on Total Assets (%)
Return on Equity (%)
Operating Income to Paid-in Capital Ratio (%)
Pre-tax Income to Paid-in Capital Ratio (%)
Net Margin (%)
Basic Earnings Per Share (NT$) (Note 1)
Diluted Earnings Per Share (NT$) (Note 1)
Cash Flow Ratio (%)
Cash Flow Adequacy Ratio (%)
Cash Flow Reinvestment Ratio (%)
Operating Leverage
Financial Leverage
Profitability Analysis
Cash Flow
Leverage
2008
14.05
203.81
444.70
415.32
182.26
10.73
34.01
9.88
36.94
20.02
1.37
0.60
17.89
20.74
40.75
43.50
30.17
3.84
3.81
389.91
139.50
12.98
2.53
1.01
2009
16.08
186.51
328.31
300.15
244.85
10.78
33.86
9.30
39.25
18.77
1.08
0.50
15.57
18.37
35.50
36.85
30.25
3.45
3.44
202.15
126.39
6.90
2.53
1.00
2010
19.50
152.08
212.29
187.57
401.30
10.57
34.54
8.62
42.36
17.23
1.08
0.58
24.77
30.23
61.43
65.72
38.68
6.24
6.23
186.28
113.91
11.13
2.12
1.00
2011
18.37
133.06
192.52
170.06
229.27
10.06
36.29
8.75
41.70
18.77
0.87
0.55
18.08
22.30
54.62
56.01
31.48
5.18
5.18
211.60
101.93
11.12
2.50
1.00
2012
24.01
130.83
177.12
149.81
177.80
10.77
33.89
8.38
43.55
19.39
0.82
0.53
19.30
24.57
69.84
70.03
32.78
6.41
6.41
202.94
95.97
11.69
2.31
1.01
Industry Specific Key Performance Indicator
Billing Utilization Rate (%)
88 (Note 2)
75 (Note 2)
101 (Note 2)
91 (Note 2)
91 (Note 2)
Advanced Technologies (65-nanometer and below) Percentage of Wafer Sales (%)
Sales Growth (%)
Net Income Growth (%)
21
3.3
-8.5
33
-11.2
-10.7
46
41.9
81.1
56
1.8
-17.0
62
18.5
23.8
Analysis of deviation of 2012 vs. 2011 over 20% :
1. The debt ratio increased by 31% as a result of increase in bonds payable.
2. The times interest earned decreased by 22%, primarily due to increase in interest expense.
3. The operating income to paid-in capital ratio increased by 28%, mainly due to increase in operating income.
4. The pre-tax income to paid-in capital ratio increased by 25%, primarily due to increase in pre-tax income.
5. The basic and diluted earnings per share both increased by 24%, mainly due to increase in net income.
Note 1: Retroactively adjusted for stock dividends for earning year 2008.
Note 2: Capacity includes wafers committed by Vanguard and SSMC.
*Glossary
1. Capital Structure Analysis
(1) Debt Ratio
(2) Long-term Fund to Fixed Assets Ratio
2. Liquidity Analysis
(1) Current Ratio
(2) Quick Ratio
(3) Times Interest Earned
3. Operating Performance Analysis
(1) Average Collection Turnover
(2) Days Sales Outstanding
(3) Average Inventory Turnover
= Total Liabilities / Total Assets
= (Shareholders’ Equity + Long-term Liabilities) / Net Fixed
Assets
= Current Assets / Current Liabilities
= (Current Assets - Inventories - Prepaid Expenses) / Current
Liabilities
= Earnings before Interest and Taxes / Interest Expenses
= Net Sales / Average Trade Receivables
= 365 / Average Collection Turnover
= Cost of Sales / Average Inventory
(4) Average Inventory Turnover Days
(5) Average Payment Turnover
(6) Fixed Assets Turnover
(7) Total Assets Turnover
4. Profitability Analysis
(1) Return on Total Assets
= 365 / Average Inventory Turnover
= Cost of Sales / Average Trade Payables
= Net Sales / Net Fixed Assets
= Net Sales / Total Assets
5. Cash Flow
(1) Cash Flow Ratio
(2) Cash Flow Adequacy Ratio
= (Net Income + Interest Expenses * (1 - Effective Tax Rate))
/ Average Total Assets
(3) Cash Flow Reinvestment Ratio
(2) Return on Equity
(3) Operating Income to Paid-in Capital Ratio = Operating Income / Paid-in Capital
= Income before Tax / Paid-in Capital
(4) Pre-tax Income to Paid-in Capital Ratio
= Net Income / Net Sales
(5) Net Margin
= (Net Income - Preferred Stock Dividend) / Weighted
(6) Earnings Per Share
= Net Income / Average Shareholders’ Equity
Average Number of Shares Outstanding
6. Leverage
(1) Operating Leverage
(2) Financial Leverage
= Net Cash Provided by Operating Activities / Current
Liabilities
= Five-year Sum of Cash from Operations / Five-year Sum
of Capital Expenditures, Inventory Additions, and Cash
Dividend
= (Cash Provided by Operating Activities - Cash Dividends)
/ (Gross Fixed Assets + Investments + Other Assets +
Working Capital)
= (Net Sales - Variable Cost) / Income from Operations
= Income from Operations / (Income from Operations -
Interest Expenses)
5
4. Auditors’ Opinions from 2008 to 2012
6. Financial Difficulties
The Company should disclose the financial impact to the Company if the Company and its affiliated
companies have incurred any financial or cash flow difficulties in 2012 and as of the date of this Annual
Report: None
Year
2008
2009
2010
2011
2012
CPA
Hung-Peng Lin, Shu-Chieh Huang
Hung-Peng Lin, Shu-Chieh Huang
Hung-Peng Lin, Shu-Chieh Huang
Hung-Peng Lin, Shu-Chieh Huang
Hung-Peng Lin, Shu-Chieh Huang
Deloitte & Touche
12F, No. 156, Sec. 3, Min-Sheng E. Rd., Taipei, Taiwan, R.O.C.
Tel: 886-2-2545-9988
5. Audit Committee’s Report
Audit Opinion
An Unqualified Opinion with explanatory paragraph
referring to adoption of new accounting standards
An Unqualified Opinion with explanatory paragraph
referring to adoption of new accounting standards
An Unqualified Opinion
An Unqualified Opinion
An Unqualified Opinion
The Board of Directors has prepared the Company’s 2012 Business Report, Financial Statements, and
proposal for allocation of profits. The CPA firm of Deloitte & Touche was retained to audit TSMC’s Financial
Statements and has issued an audit report relating to the Financial Statements. The Business Report,
Financial Statements, and profit allocation proposal have been reviewed and determined to be correct and
accurate by the Audit Committee members of Taiwan Semiconductor Manufacturing Company Limited.
According to Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Law, we
hereby submit this report.
Taiwan Semiconductor Manufacturing Company Limited
Chairman of the Audit Committee: Sir Peter Leahy Bonfield
February 5, 2013
6
7. Financial Statements for the Years Ended December 31, 2012 and 2011 and Independent Auditors’ Report
INDEPENDENT AUDITORS’ REPORT
Notice to Readers
The accompanying financial statements are intended only to present the financial position, results of
operations and cash flows in accordance with accounting principles and practices generally accepted in the
Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit
such financial statements are those generally accepted and applied in the Republic of China.
For the convenience of readers, the auditors’ report and the accompanying financial statements have been
translated into English from the original Chinese version prepared and used in the Republic of China. If
there is any conflict between the English version and the original Chinese version or any difference in the
interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall
prevail.
The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company Limited
We have audited the accompanying balance sheets of Taiwan Semiconductor Manufacturing Company
Limited as of December 31, 2012 and 2011, and the related statements of income, changes in shareholders’
equity and cash flows for the years then ended. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by
Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules
and standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of Taiwan Semiconductor Manufacturing Company Limited as of December 31, 2012 and 2011,
and the results of its operations and its cash flows for the years then ended in conformity with the Guidelines
Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting
Law and Guidelines Governing Business Accounting with respect to financial accounting standards, and
accounting principles generally accepted in the Republic of China.
We have also audited, in accordance with the Rules Governing the Audit of Financial Statements by Certified
Public Accountants and auditing standards generally accepted in the Republic of China, the consolidated
financial statements of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of and
for the year ended December 31, 2012 and 2011 on which we have issued an unqualified opinion.
February 5, 2013
7
Taiwan Semiconductor Manufacturing Company Limited
BALANCE SHEETS
DECEMBER 31, 2012 AND 2011
(In Thousands of New Taiwan Dollars, Except Par Value)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 2 and 4)
Financial assets at fair value through profit or loss (Notes 2, 5 and 23)
Available-for-sale financial assets (Notes 2, 6 and 23)
Held-to-maturity financial assets (Notes 2, 7 and 23)
Receivables from related parties (Notes 3 and 24)
Notes and accounts receivable (Note 3)
Allowance for doubtful receivables (Notes 2, 3 and 8)
Allowance for sales returns and others (Notes 2 and 8)
Other receivables from related parties (Notes 3 and 24)
Other financial assets
Inventories (Notes 2 and 9)
Deferred income tax assets (Notes 2 and 17)
Prepaid expenses and other current assets
Total current assets
LONG-TERM INVESTMENTS (Notes 2, 7, 10, 11 and 23)
Investments accounted for using equity method
Held-to-maturity financial assets
Financial assets carried at cost
Total long-term investments
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 12 and 24)
Cost
Buildings
Machinery and equipment
Office equipment
Accumulated depreciation
Advance payments and construction in progress
Net property, plant and equipment
INTANGIBLE ASSETS
Goodwill (Note 2)
Deferred charges, net (Notes 2 and 13)
Total intangible assets
OTHER ASSETS
Refundable deposits
Deferred income tax assets (Notes 2 and 17)
Others (Notes 2 and 24)
Total other assets
2012
Amount
$ 109,150,810
38,824
1,845,052
701,146
40,987,444
15,726,431
(474,037)
(5,732,738)
274,963
175,261
35,296,391
7,728,464
2,097,329
207,815,340
139,264,161
-
483,759
139,747,920
173,344,932
1,202,761,097
16,683,484
1,392,789,513
(924,961,566)
118,775,347
586,603,294
1,567,756
4,882,081
6,449,837
2,394,826
2,244,947
917,019
5,556,792
2011
Amount
$ 85,262,521
14,925
2,617,134
701,136
24,777,534
19,894,386
(485,120)
(4,887,879)
188,028
122,010
22,853,397
5,779,544
1,725,736
158,563,352
128,200,718
702,291
497,835
129,400,844
%
11
-
-
-
3
3
-
-
-
-
3
1
-
21
17
-
-
17
149,495,478
984,978,666
13,824,434
1,148,298,578
(804,740,797)
110,815,752
20
129
2
151
(106)
14
454,373,533
59
1,567,756
4,719,244
6,287,000
4,491,735
7,221,824
1,069,586
12,783,145
-
1
1
1
1
-
2
%
12
-
-
-
4
2
-
(1)
-
-
4
1
-
22
15
-
-
15
18
127
2
147
(98)
13
62
-
1
1
-
-
-
-
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
2012
2011
Amount
%
Amount
%
Short-term loans (Note 14)
Financial liabilities at fair value through profit or loss (Notes 2, 5 and 23)
Accounts payable
Payables to related parties (Note 24)
Income tax payable (Notes 2 and 17)
Accrued profit sharing to employees and bonus to directors (Note 19)
Payables to contractors and equipment suppliers
Accrued expenses and other current liabilities (Note 23)
Current portion of bonds payable (Notes 15 and 23)
$ 34,714,929
6,274
13,392,221
3,230,342
15,196,399
11,186,591
44,371,108
16,698,014
-
4
-
1
-
2
1
5
2
-
$ 25,926,528
-
9,522,688
2,992,582
10,647,797
9,055,704
33,811,970
13,057,161
4,500,000
3
-
1
-
1
1
5
2
1
Total current liabilities
138,795,878
15
109,514,430
14
LONG-TERM LIABILITIES
Bonds payable (Notes 15 and 23)
Other long-term payables (Note 23)
Total long-term liabilities
OTHER LIABILITIES
Accrued pension cost (Notes 2 and 16)
Guarantee deposits
Total other liabilities
Total liabilities
CAPITAL STOCK - NT$10 PAR VALUE (Note 19)
Authorized: 28,050,000 thousand shares
Issued: 25,924,435 thousand shares in 2012
25,916,222 thousand shares in 2011
CAPITAL SURPLUS (Notes 2 and 19)
RETAINED EARNINGS (Note 19)
Appropriated as legal capital reserve
Appropriated as special capital reserve
Unappropriated earnings
OTHERS
Cumulative translation adjustments (Note 2)
Net loss not recognized as pension cost
Unrealized gain/loss on financial instruments (Notes 2 and 23)
Total shareholders’ equity
80,000,000
54,000
80,054,000
3,926,276
199,315
4,125,591
9
-
9
-
-
-
18,000,000
-
18,000,000
3,860,898
439,032
4,299,930
2
-
2
1
-
1
222,975,469
24
131,814,360
17
259,244,357
56,137,809
115,820,123
7,606,224
287,174,942
410,601,289
(10,753,763)
(5,299)
7,973,321
(2,785,741)
723,197,714
27
6
12
1
30
43
(1)
-
1
-
76
259,162,226
55,846,357
102,399,995
6,433,874
213,357,286
322,191,155
(6,433,369)
-
(1,172,855)
(7,606,224)
629,593,514
34
8
13
1
28
42
(1)
-
-
(1)
83
TOTAL
$ 946,173,183
100
$ 761,407,874
100
TOTAL
$ 946,173,183
100
$ 761,407,874
100
The accompanying notes are an integral part of the financial statements.
8
Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
GROSS SALES (Notes 2 and 24)
$ 506,697,738
$ 421,472,087
NON-OPERATING EXPENSES AND LOSSES
2012
2011
Amount
%
Amount
%
2012
2011
Amount
%
Amount
%
SALES RETURNS AND ALLOWANCES (Notes 2 and 8)
6,825,851
3,226,594
NET SALES
499,871,887
100
418,245,493
100
COST OF SALES (Notes 9, 18 and 24)
GROSS PROFIT BEFORE AFFILIATES ELIMINATION
REALIZED (UNREALIZED) GROSS PROFIT FROM AFFILIATES (Note 2)
GROSS PROFIT
OPERATING EXPENSES (Notes 18 and 24)
Research and development
General and administrative
Marketing
Total operating expenses
INCOME FROM OPERATIONS
NON-OPERATING INCOME AND GAINS
Equity in earnings of equity method investees, net (Notes 2 and 10)
Settlement income (Note 26)
Interest income
Technical service income (Note 24)
Valuation gain on financial instruments, net (Notes 2, 5 and 23)
Others (Notes 2 and 24)
Total non-operating income and gains
265,538,540
234,333,347
(25,029)
234,308,318
38,788,245
16,330,060
2,388,243
57,506,548
176,801,770
8,127,748
883,845
867,227
497,638
-
811,619
11,188,077
53
47
-
47
8
3
-
11
36
2
-
-
-
-
-
2
233,083,068
185,162,425
398,440
185,560,865
31,594,034
12,715,339
2,345,729
46,655,102
138,905,763
3,778,083
947,340
697,196
408,153
801,195
655,079
7,287,046
56
44
-
44
7
3
1
11
33
1
1
-
-
-
-
2
(Continued)
Impairment loss of financial assets (Notes 2, 6 and 23)
Interest expense (Note 24)
Impairment loss on idle assets (Note 2)
Loss on disposal of property, plant and equipment (Notes 2 and 24)
Foreign exchange loss, net (Note 2)
Others (Note 2)
$ 2,677,529
945,114
418,330
146,647
-
172,279
Total non-operating expenses and losses
INCOME BEFORE INCOME TAX
INCOME TAX EXPENSE (Notes 2 and 17)
4,359,899
183,629,948
17,471,146
1
-
-
-
-
-
1
37
4
$ -
445,887
-
202,901
673,085
163,092
1,484,965
144,707,844
10,506,565
NET INCOME
$ 166,158,802
33
$ 134,201,279
-
-
-
-
-
-
-
35
3
32
EARNINGS PER SHARE (NT$, Note 22)
Basic earnings per share
Diluted earnings per share
2012
2011
Before
Income Tax
After
Income Tax
Before
Income Tax
After
Income Tax
$ 7.08
$ 7.08
$ 6.41
$ 6.41
$ 5.58
$ 5.58
$ 5.18
$ 5.18
The accompanying notes are an integral part of the financial statements.
(Concluded)
9
Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
(In Thousands of New Taiwan Dollars, Except Dividends Per Share)
Capital Stock - Common Stock
Retained Earnings
Shares
(In Thousands)
Capital Surplus
Amount
Legal Capital
Reserve
Special Capital
Reserve
Unappropriated
Earnings
Total
Cumulative
Translation
Adjustments
Others
Net Loss Not
Recognized
as Pension
Cost
Unrealized
Gain/Loss
on Financial
Instruments
Treasury Stock
Total
Shareholders’
Equity
BALANCE, JANUARY 1, 2011
25,910,078
$ 259,100,787
$ 55,698,434
$ 86,239,494
$ 1,313,047
$ 178,227,030
$ 265,779,571
$ (6,543,163)
$ -
$ 109,289
$ -
$ 574,144,918
Appropriations of prior year’s earnings
Legal capital reserve
Special capital reserve
Cash dividends to shareholders - NT$3.00 per share
Net income in 2011
Adjustment arising from changes in percentage of ownership
in equity method investees
Translation adjustments
Issuance of stock from exercising employee stock options
Net changes of valuation gain/loss on available-for-sale
financial assets
Net change in shareholders’ equity from equity method
investees
Acquisition of treasury stock - shareholders executed the
appraisal right
Retirement of treasury stock
Effect of spin-off
-
-
-
-
-
-
7,144
-
-
-
(1,000)
-
-
-
-
-
-
-
71,439
-
-
-
(10,000)
-
-
-
-
-
16,160,501
-
-
-
-
5,120,827
-
-
(16,160,501)
(5,120,827)
(77,730,236)
134,201,279
-
-
(77,730,236)
134,201,279
59,898
-
146,258
-
-
-
(2,139)
(56,094)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(59,459)
-
-
(59,459)
-
-
-
-
-
-
(112,326)
-
-
-
-
-
222,120
BALANCE, DECEMBER 31, 2011
25,916,222
259,162,226
55,846,357
102,399,995
6,433,874
213,357,286
322,191,155
(6,433,369)
Appropriations of prior year’s earnings
Legal capital reserve
Special capital reserve
Cash dividends to shareholders - NT$3.00 per share
Net income in 2012
Adjustment arising from changes in percentage of ownership
in equity method investees
Translation adjustments
Issuance of stock from exercising employee stock options
Net changes of valuation gain/loss on available-for-sale
financial assets
Net change in shareholders’ equity from equity method
investees
-
-
-
-
-
-
8,213
-
-
-
-
-
-
-
-
82,131
-
-
-
-
-
-
13,420,128
-
-
-
-
1,172,350
-
-
(13,420,128)
(1,172,350)
(77,748,668)
166,158,802
-
-
(77,748,668)
166,158,802
131,095
-
160,357
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,320,394)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,112,995)
(165,851)
-
-
(3,298)
(1,172,855)
-
-
-
-
-
-
-
1,998,347
(5,299)
7,147,829
-
-
-
-
-
-
-
-
-
(71,598)
71,598
-
-
-
-
-
-
-
-
-
-
-
-
-
(77,730,236)
134,201,279
59,898
(112,326)
217,697
(1,112,995)
(165,851)
(71,598)
-
162,728
629,593,514
-
-
(77,748,668)
166,158,802
131,095
(4,320,394)
242,488
1,998,347
7,142,530
BALANCE, DECEMBER 31, 2012
25,924,435
$ 259,244,357
$ 56,137,809
$ 115,820,123
$ 7,606,224
$ 287,174,942
$ 410,601,289
$ (10,753,763)
$ (5,299)
$ 7,973,321
$ -
$ 723,197,714
The accompanying notes are an integral part of the financial statements.
10
Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
(In Thousands of New Taiwan Dollars)
2012
2011
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$ 166,158,802
$ 134,201,279
Depreciation and amortization
Unrealized (realized) gross profit from affiliates
Amortization of premium/discount of financial assets
Gain on disposal of available-for-sale financial assets
Loss on disposal of financial assets carried at cost
Equity in earnings of equity method investees, net
Cash dividends received from equity method investees
Loss on disposal of property, plant and equipment and other assets, net
Impairment loss of financial assets
Impairment loss on idle assets
Deferred income tax
Changes in operating assets and liabilities:
Financial assets and liabilities at fair value through profit or loss
Receivables from related parties
Notes and accounts receivable
Allowance for doubtful receivables
Allowance for sales returns and others
Other receivables from related parties
Other financial assets
Inventories
Prepaid expenses and other current assets
Accounts payable
Payables to related parties
Income tax payable
Accrued profit sharing to employees and bonus to directors
Accrued expenses and other current liabilities
Accrued pension cost
124,399,879
25,029
2,281
(110,634)
269
(8,127,748)
1,688,878
125,488
2,677,529
418,330
2,618,657
(17,625)
(16,209,910)
4,167,955
(11,083)
844,859
(89,347)
(53,251)
(12,442,994)
(371,593)
1,361,012
(67,770)
4,548,602
2,130,887
3,556,824
65,378
102,925,423
(398,440)
9,860
(35,151)
-
(3,778,083)
2,941,548
99,884
-
-
(493,026)
(22,759)
956,440
2,356,519
(2,880)
(2,453,565)
(38,049)
138,196
2,775,646
(382,852)
(1,805,422)
418,132
3,538,928
(1,903,765)
(410,047)
96,880
Net cash provided by operating activities
277,288,704
238,734,696
CASH FLOWS FROM INVESTING ACTIVITIES
Cash contributed related to spin-off
Acquisitions of:
Property, plant and equipment
Investments accounted for using equity method
Financial assets carried at cost
Proceeds from return of capital by investees
Proceeds from disposal or redemption of:
Available-for-sale financial assets
Held-to-maturity financial assets
Financial assets carried at cost
Property, plant and equipment and other assets
Increase in deferred charges
Decrease in refundable deposits
Decrease in other assets
-
(1,270,340)
(242,063,668)
(2,259,244)
(1,093)
587,902
612,834
700,000
14,900
93,984
(1,743,043)
2,096,909
17,600
(202,757,541)
(7,390,883)
-
320,013
1,035,151
4,789,000
-
4,650,078
(1,658,296)
4,147,014
27,600
Net cash used in investing activities
(241,942,919)
(198,108,204)
(Continued)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term loans
Cash dividends
Proceeds from issuance of bonds
Repayment of bonds
Decrease in guarantee deposits
Proceeds from exercise of employee stock options
Acquisition of treasury stock
$ 8,788,401
(77,748,668)
62,000,000
(4,500,000)
(239,717)
242,488
-
$ (4,982,109)
(77,730,236)
18,000,000
-
(308,855)
217,697
(71,598)
Net cash used in financing activities
(11,457,496)
(64,875,101)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
23,888,289
85,262,521
(24,248,609)
109,511,130
CASH AND CASH EQUIVALENTS, END OF YEAR
$ 109,150,810
$ 85,262,521
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid
Income tax paid
INVESTING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS
Acquisition of property, plant and equipment
Decrease (increase) in payables to contractors and equipment suppliers
Increase in payables to related parties
Nonmonetary exchange trade-out price
Cash paid
Disposal of property, plant and equipment and other assets
Decrease in other receivables to related parties
Decrease in other financial assets
Nonmonetary exchange trade-out price
Cash received
Acquisition of deferred charges
Increase in accounts payable
Increase in payables to related parties
Increase in other long-term payables
Cash paid
NON-CASH INVESTING AND FINANCING ACTIVITIES
Idle assets reclassified from property, plant and equipment
Current portion of other long-term payables (under accrued expenses and other
current liabilities)
Current portion of bonds payable
$ 670,165
$ 10,312,114
$ 369,085
$ 7,454,386
$ 255,108,068
(12,764,075)
(280,256)
(69)
$ 242,063,668
$ 195,932,728
6,827,106
-
(2,293)
$ 202,757,541
$ 91,641
2,412
-
(69)
$ 93,984
$ 3,370,165
1,124,206
158,000
(2,293)
$ 4,650,078
$ 2,184,901
(303,584)
(25,274)
(113,000)
$ 1,743,043
$ 1,658,296
-
-
-
$ 1,658,296
$ 418,330
$ -
$ 59,000
$ -
$ -
$ 4,500,000
(Continued)
11
SUPPLEMENTAL INFORMATION FOR SPIN-OFF BUSINESSES
Taiwan Semiconductor Manufacturing Company Limited
In August 2011, the Company transferred the solid state lighting and solar businesses into its wholly-owned, newly incorporated subsidiaries, TSMC
Solid State Lighting Ltd. (TSMC SSL) and TSMC Solar Ltd. (TSMC Solar), respectively. The relevant information about spin-off was as follows:
Acquired investments accounted for using equity method
Non-cash items transferred
Current assets
Long-term investments
Property, plant and equipment
Other assets
Current liabilities
Other liabilities
Capital surplus
Unrealized gain/loss on financial instruments
Cumulative translation adjustments
TSMC SSL
TSMC Solar
Total
$ 2,270,000
$ 11,180,000
$ 13,450,000
36,050
2,872
1,929,563
234,696
(292,728)
(36,272)
-
-
256
(1,874,437)
18,807
7,912,710
2,372,214
201,677
(337,439)
(25,218)
(56,094)
(3,298)
221,864
(10,305,223)
54,857
7,915,582
4,301,777
436,373
(630,167)
(61,490)
(56,094)
(3,298)
222,120
(12,179,660)
Cash contributed related to spin-off
$ 395,563
$ 874,777
$ 1,270,340
The accompanying notes are an integral part of the financial statements.
(Concluded)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
1. GENERAL
Taiwan Semiconductor Manufacturing Company Limited (the “Company” or “TSMC”), a Republic of China
(R.O.C.) corporation, was incorporated on February 21, 1987. The Company is a dedicated foundry in
the semiconductor industry which engages mainly in the manufacturing, selling, packaging, testing and
computer-aided design of integrated circuits and other semiconductor devices and the manufacturing
of masks. Beginning in 2010, the Company also engages in the researching, developing, designing,
manufacturing and selling of solid state lighting devices and related applications products and systems,
and renewable energy and efficiency related technologies and products. In August 2011, the Company
transferred its solid state lighting and solar businesses into its wholly-owned, newly incorporated
subsidiaries, TSMC SSL and TSMC Solar, respectively.
On September 5, 1994, its shares were listed on the Taiwan Stock Exchange (TWSE). On October 8, 1997,
TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American
Depositary Shares (ADSs).
As of December 31, 2012 and 2011, the Company had 33,341 and 30,113 employees, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements are presented in conformity with the Guidelines Governing the Preparation of
Financial Reports by Securities Issuers, Business Accounting Law, Guidelines Governing Business Accounting,
and accounting principles generally accepted in the R.O.C.
For the convenience of readers, the accompanying financial statements have been translated into English
from the original Chinese version prepared and used in the R.O.C. If there is any conflict between the English
version and the original Chinese version or any difference in the interpretation of the two versions, the
Chinese-language financial statements shall prevail.
Significant accounting policies are summarized as follows:
Foreign-currency Transactions
Foreign-currency transactions other than derivative contracts are recorded in New Taiwan dollars at the rates
of exchange in effect when the transactions occur. Exchange gains or losses derived from foreign-currency
transactions or monetary assets and liabilities denominated in foreign currencies are recognized in earnings.
At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are revalued at
prevailing exchange rates with the resulting gains or losses recognized in earnings.
12
Use of Estimates
The preparation of financial statements in conformity with the aforementioned guidelines, law and principles
requires management to make reasonable assumptions and estimates of matters that are inherently
uncertain. The actual results may differ from management’s estimates.
If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a
subsequent period, the amount of the impairment loss decreases and the decrease is clearly attributable to
an event which occurred after the impairment loss was recognized, the previously recognized impairment
loss is reversed to the extent of the decrease. The reversal may not result in a carrying amount that exceeds
the amortized cost that would have been determined as if no impairment loss had been recognized.
Classification of Current and Noncurrent Assets and Liabilities
Current assets are assets held for trading purposes and assets expected to be converted to cash, sold or
consumed within one year from the balance sheet date. Current liabilities are obligations incurred for trading
purposes and obligations expected to be settled within one year from the balance sheet date. Assets and
liabilities that are not classified as current are noncurrent assets and liabilities, respectively.
Cash Equivalents
Repurchase agreements collateralized by corporate bonds, short-term commercial paper and government
bonds acquired with maturities of less than three months from the date of purchase are classified as cash
equivalents. The carrying amount approximates fair value due to their short term nature.
Financial Assets/Liabilities at Fair Value Through Profit or Loss
Derivatives that do not meet the criteria for hedge accounting are initially recognized at fair value, with
transaction costs expensed as incurred. The derivatives are remeasured at fair value subsequently with
changes in fair value recognized in earnings. A regular way purchase or sale of financial assets is accounted
for using settlement date accounting.
Fair value is estimated using valuation techniques incorporating estimates and assumptions that are
consistent with prevailing market conditions. When the fair value is positive, the derivative is recognized as a
financial asset; when the fair value is negative, the derivative is recognized as a financial liability.
Available-for-sale Financial Assets
Available-for-sale financial assets are initially recognized at fair value plus transaction costs that are directly
attributable to the acquisition. Changes in fair value from subsequent remeasurement are reported as a
separate component of shareholders’ equity. The corresponding accumulated gains or losses are recognized
in earnings when the financial asset is derecognized from the balance sheet. A regular way purchase or sale
of financial assets is accounted for using settlement date accounting.
The fair value of overseas publicly traded stock is determined using the closing prices at the end of the year.
If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. For equity
securities, if the fair value subsequently increases, the increase in value is recorded in shareholders’ equity.
Held-to-maturity Financial Assets
Debt securities for which the Company has a positive intention and ability to hold to maturity are
categorized as held-to-maturity financial assets and are carried at amortized cost. Those financial assets are
initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Gains
or losses are recognized at the time of derecognition, impairment or amortization. A regular way purchase
or sale of financial assets is accounted for using settlement date accounting.
Financial Assets Carried at Cost
Investments for which the Company does not exercise significant influence and that do not have a quoted
market price in an active market and whose fair value cannot be reliably measured, such as non-publicly
traded stocks and mutual funds, are carried at their original cost. The costs of non-publicly traded stocks
and mutual funds are determined using the weighted-average method. If there is objective evidence which
indicates that a financial asset is impaired, a loss is recognized. A subsequent reversal of such impairment
loss is not allowed.
Cash dividends are recognized as investment income upon resolution of shareholders of an investee. Stock
dividends are recorded as an increase in the number of shares held and do not affect investment income.
The cost per share is recalculated based on the new total number of shares.
Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided based on a review of the collectability of receivables. The
Company assesses the collectability of receivables by performing the account aging analysis and examining
current trends in the credit quality of its customers.
The Company’s provision was originally set at 1% of the amount of outstanding receivables. On January
1, 2011, the Company adopted the third revision of Statement of Financial Accounting Standards (SFAS)
No. 34, “Financial Instruments: Recognition and Measurement (SFAS No. 34).” One of the main revisions
is that the impairment of receivables originated by the Company is subject to the provisions of SFAS No.
34. Accordingly, the Company evaluates for indication of impairment of accounts receivable based on an
individual and collective basis at the end of each reporting period. When objective evidence indicates that
the estimated future cash flow of accounts receivable decreases as a result of one or more events that
occurred after the initial recognition of the accounts receivable, such accounts receivable are deemed to be
impaired.
Because of the Company’s short average collection period, the amount of the impairment loss recognized is
the difference between the carrying amount of accounts receivable and estimated future cash flows without
considering the discounting effect. Changes in the carrying amount of the allowance account are recognized
as bad debt expense which is recorded in the operating expenses - general and administrative. When
accounts receivable are considered uncollectable, the amount is written off against the allowance account.
Inventories
Inventories are recorded at standard cost and adjusted to approximate weighted-average cost on the
balance sheet date.
Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made on an
item-by-item basis, except where it may be appropriate to group similar or related items. Net realizable value
is the estimated selling price of inventories less all estimated costs of completion and necessary selling costs.
13
Investments Accounted for Using Equity Method
Investments in companies wherein the Company exercises significant influence over the operating and
financial policy decisions are accounted for using the equity method. The Company’s share of the net
income or net loss of an investee is recognized in the “equity in earnings/losses of equity method investees,
net” account. The cost of an investment shall be analyzed and the cost of investment in excess of the fair
value of identifiable net assets acquired, representing goodwill, shall not be amortized. If the fair value
of identifiable net assets acquired exceeds the cost of investment, the excess shall be proportionately
allocated as reductions to fair values of non-current assets (except for financial assets other than investments
accounted for using the equity method and deferred income tax assets). When an indication of impairment
is identified, the carrying amount of the investment is reduced, with the related impairment loss recognized
in earnings.
When the Company subscribes for additional investee’s shares at a percentage different from its existing
ownership percentage, the resulting carrying amount of the investment in the investee differs from the
amount of the Company’s share of the investee’s equity. The Company records such a difference as an
adjustment to long-term investments with the corresponding amount charged or credited to capital
surplus. Cash dividends received from an investee shall reduce the carrying amount of the investment. Stock
dividends are recorded as an increase in the number of shares held and do not affect investment income.
Gains or losses on sales from the Company to equity method investees are deferred in proportion to
the Company’s ownership percentages in the investees until such gains or losses are realized through
transactions with third parties. The entire amount of the gains or losses on sales to investees over which the
Company has a controlling interest is deferred until such gains or losses are realized through subsequent
sales of the related products to third parties. Gains or losses on sales from equity method investees to the
Company are deferred in proportion to the Company’s ownership percentages in the investees until they are
realized through transactions with third parties. Gains or losses on sales between equity method investees
over each of which the Company has control are deferred in proportion to the Company’s weighted-average
ownership percentage in the investee which records gains or losses. In transactions between equity method
investees over either or both of which the Company has no control, gains or losses on sales are deferred in
proportion to the multiplication of the Company’s weighted-average ownership percentages in the investees.
Such gains or losses are deferred until they are realized through transactions with third parties.
If an investee’s functional currency is a foreign currency, differences will result from the translation of the
investee’s financial statements into the reporting currency of the Company. Such differences are charged or
credited to cumulative translation adjustments, a separate component of shareholders’ equity.
Property, Plant and Equipment, Assets Leased to Others and Idle Assets
Property, plant and equipment and assets leased to others are stated at cost less accumulated depreciation.
When an indication of impairment is identified, any excess of the carrying amount of an asset over its
recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period,
the amount previously recognized as impairment would be reversed and recognized as a gain. However,
the adjusted amount may not exceed the carrying amount that would have been determined, net of
depreciation, as if no impairment loss had been recognized. Significant additions, renewals and betterments
incurred during the construction period are capitalized. Maintenance and repairs are expensed as incurred.
Depreciation is computed using the straight-line method over the following estimated service lives: buildings
- 10 to 20 years; machinery and equipment - 5 years; and office equipment - 3 to 5 years.
Upon sale or disposal of property, plant and equipment and assets leased to others, the related cost and
accumulated depreciation are deducted from the corresponding accounts, with any gain or loss recorded as
non-operating gains or losses in the year of sale or disposal.
When property, plant and equipment are determined to be idle or useless, they are transferred to idle assets
at the lower of the net realizable value or carrying amount. Depreciation on the idle assets is provided
continuously, and the idle assets are tested for impairment on a periodical basis.
Intangible Assets
Goodwill represents the excess of the consideration paid for acquisition over the fair value of identifiable
net assets acquired. Goodwill is no longer amortized and instead is tested for impairment annually, or more
frequently if events or changes in circumstances suggest that the carrying amount may not be recoverable.
If an event occurs or circumstances change which indicate that the fair value of goodwill is more likely than
not below its carrying amount, an impairment loss is recognized. A subsequent reversal of such impairment
loss is not allowed.
Deferred charges consist of technology license fees, software and system design costs and patent and
others. The amounts are amortized over the following periods: Technology license fees - the estimated life of
the technology or the term of the technology transfer contract; software and system design costs - 3 years;
patent and others - the economic life or contract period. When an indication of impairment is identified,
any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the
recoverable amount increases in a subsequent period, the previously recognized impairment loss would be
reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that
would have been determined, net of amortization, as if no impairment loss had been recognized.
Expenditures related to research activities and those related to development activities that do not meet the
criteria for capitalization are charged to expense when incurred.
Pension Costs
For employees who participate in defined contribution pension plans, pension costs are recorded based on
the actual contributions made to employees’ individual pension accounts during their service periods. For
employees who participate in defined benefit pension plans, pension costs are recorded based on actuarial
calculations.
Income Tax
The Company applies an inter-period allocation for its income tax whereby deferred income tax assets
and liabilities are recognized for the tax effects of temporary differences and unused tax credits. Valuation
allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets
will not be realized. A deferred tax asset or liability is classified as current or noncurrent in accordance with
the classification of its related asset or liability. However, if a deferred tax asset or liability does not relate to
an asset or liability in the financial statements, then it is classified as either current or noncurrent based on
the expected length of time before it is realized or settled.
14
Any tax credits arising from purchases of machinery and equipment, research and development expenditures
and personnel training expenditures are recognized using the flow-through method.
3. ACCOUNTING CHANGES
Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
Income tax on unappropriated earnings at a rate of 10% is expensed in the year of shareholder approval
which is the year subsequent to the year the earnings are generated.
Stock-based Compensation
Employee stock options that were granted or modified in the period from January 1, 2004 to December
31, 2007 are accounted for by the interpretations issued by the Accounting Research and Development
Foundation of the Republic of China. The Company adopted the intrinsic value method and any
compensation cost determined using this method is recognized in earnings over the employee vesting
period. Employee stock option plans that were granted or modified after December 31, 2007 are accounted
for using fair value method in accordance with SFAS No. 39, “Accounting for Share-based Payment.” The
Company did not grant or modify any employee stock options since January 1, 2008.
Treasury Stock
Treasury stock represents the outstanding shares that the Company buys back from market, which is stated
at cost and shown as a deduction in shareholders’ equity. When the Company retires treasury stock, the
treasury stock account is reduced and the common stock as well as the capital surplus - additional paid-in
capital are reversed on a pro rata basis. When the book value of the treasury stock exceeds the sum of
the par value and additional paid-in capital, the difference is charged to capital surplus - treasury stock
transactions and to retained earnings for any remaining amount. While disposing of the treasury stock,
the treasury stock shall be reversed, and if the disposal value is greater than the book value, the amount in
excess of the book value shall be credited to additional paid-in capital - treasury stock.
Revenue Recognition and Allowance for Sales Returns and Others
The Company recognizes revenue when evidence of an arrangement exists, the rewards of ownership
and significant risk of the goods has been transferred to the buyer, price is fixed or determinable, and
collectability is reasonably assured. Provisions for estimated sales returns and other allowances are recorded
in the year the related revenue is recognized, based on historical experience, management’s judgment, and
any known factors that would significantly affect the allowance.
Sales prices are determined using fair value taking into account related sales discounts agreed to by the
Company and its customers. Sales agreements typically provide that payment is due 30 days from invoice
date for a majority of the customers and 30 to 45 days after the end of the month in which sales occur for
some customers. Since the receivables from sales are collectible within one year and such transactions are
frequent, fair value of the receivables is equivalent to the nominal amount of the cash to be received.
Spin-off
For the Company’s organization realignment, when the Company contributes net assets, including cash,
to the newly formed subsidiaries in exchange for all of the shares of those subsidiaries, the net assets
transferred are reflected at their net book value without recognizing any gain or loss.
On January 1, 2011, the Company prospectively adopted the newly revised SFAS No. 34, “Financial
Instruments: Recognition and Measurement.” The main revisions include (1) finance lease receivables are
now covered by SFAS No. 34; (2) the scope of the applicability of SFAS No. 34 to insurance contracts
is amended; (3) loans and receivables originated by the Company are now covered by SFAS No. 34; (4)
additional guidelines on impairment testing of financial assets carried at amortized cost when the debtor
has financial difficulties and the terms of obligations have been modified; and (5) accounting treatment by a
debtor for modifications in the terms of obligations. This accounting change did not have a significant effect
on the Company’s financial statements as of and for the year ended December 31, 2011.
On January 1, 2011, the Company adopted the newly issued SFAS No. 41, “Operating Segments.” The
statement requires identification and disclosure of operating segments on the basis of how the Company’s
chief operating decision maker regularly reviews information in order to allocate resources and assess
performance. This statement supersedes SFAS No. 20, “Segment Reporting” and it only changes the
disclosure of segment reporting due to the adoption. The Company has conformed to the disclosure
requirement and provided the operating segments disclosure in the consolidated financial statements.
4. CASH AND CASH EQUIVALENTS
Cash and deposits in banks
Repurchase agreements collateralized by corporate bonds
Repurchase agreements collateralized by short-term commercial paper
Repurchase agreements collateralized by government bonds
$ 105,873,048
2,660,042
349,341
268,379
December 31
2012
2011
$ 81,467,607
-
-
3,794,914
$ 109,150,810
$ 85,262,521
5. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Trading financial assets
Forward exchange contracts
Cross currency swap contracts
Trading financial liabilities
Forward exchange contracts
Cross currency swap contracts
December 31
2012
2011
$ 37,877
947
$ 14,925
-
$ 38,824
$ 14,925
$ 3,572
2,702
$ -
-
$ 6,274
$ -
15
The Company entered into derivative contracts during the years ended December 31, 2012 and 2011 to
manage exposures due to fluctuations of foreign exchange rates. The derivative contracts entered into by
the Company did not meet the criteria for hedge accounting. Therefore, the Company did not apply hedge
accounting treatment for its derivative contracts.
Outstanding forward exchange contracts consisted of the following:
Maturity Date
Contract Amount
(In Thousands)
8. ALLOWANCES FOR DOUBTFUL RECEIVABLES, SALES RETURNS AND OTHERS
Movements of the allowance for doubtful receivables were as follows:
Balance, beginning of year
Write-off
Balance, end of year
Years Ended December 31
2012
2011
$ 485,120
(11,083)
$ 488,000
(2,880)
$ 474,037
$ 485,120
January 2013
NT$9,417,062/EUR246,000
Movements of the allowance for sales returns and others were as follows:
Balance, beginning of year
Provision
Write-off
Balance, end of year
9. INVENTORIES
Finished goods
Work in process
Raw materials
Supplies and spare parts
Years Ended December 31
2012
2011
$ 4,887,879
6,825,851
(5,980,992)
$ 7,341,444
3,226,594
(5,680,159)
$ 5,732,738
$ 4,887,879
December 31
2012
$ 5,936,018
24,442,123
3,666,048
1,252,202
2011
$ 3,250,637
16,971,209
1,593,393
1,038,158
$ 35,296,391
$ 22,853,397
Write-down of inventories to net realizable value in the amount of NT$1,341,041 thousand was included
in the cost of sales for the year ended December 31, 2012. The reserve for inventory write-downs in the
amount of NT$74,861 thousand was reversed in the cost of sales for the year ended December 31, 2011
when the related inventory items were scrapped or sold.
December 31, 2012
Sell NT$/Buy EUR
December 31, 2011
Sell EUR/Buy NT$
January 2012
EUR38,600/NT$1,528,206
Outstanding cross currency swap contracts consisted of the following:
Maturity Date
December 31, 2012
Contract Amount
(In Thousands)
Range of Interest Rates Paid
Range of Interest Rates
Received
January 2013
US$275,000/NT$7,986,190
0.14%-0.17%
-
For the years ended December 31, 2012 and 2011, a net loss on derivative financial instruments was
NT$152,814 thousand and a net gain on derivative financial instruments was NT$801,195 thousand,
respectively.
6. AVAILABLE-FOR-SALE FINANCIAL ASSETS
Available-for-sale financial assets held by the Company are overseas publicly traded stock. For the year ended
December 31, 2012, the Company recognized an impairment loss on available-for-sale financial assets of
NT$2,677,529 thousand due to the significant decline in fair value.
7. HELD-TO-MATURITY FINANCIAL ASSETS
December 31
2012
2011
$ 701,146
(701,146)
$ 1,403,427
(701,136)
$ -
$ 702,291
Corporate bonds
Current portion
16
10. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
For the years ended December 31, 2012 and 2011, equity in earnings of equity method investees was
December 31
a net gain of NT$8,127,748 thousand and NT$3,778,083 thousand, respectively.
2012
2011
As of December 31, 2012 and 2011, the quoted market price of publicly traded stocks in unrestricted
Carrying
Amount
% of
Ownership
Carrying
Amount
% of
Ownership
investments accounted for using the equity method (VIS and GUC) were NT$17,350,833 thousand
and NT$11,273,200 thousand, respectively.
TSMC Global Ltd. (TSMC Global)
TSMC Partners, Ltd. (TSMC Partners)
TSMC China Company Limited (TSMC China)
Vanguard International Semiconductor Corporation (VIS)
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
TSMC Solar
TSMC North America
TSMC SSL
Xintec Inc. (Xintec)
Global UniChip Corporation (GUC)
VentureTech Alliance Fund III, L.P. (VTAF III)
VentureTech Alliance Fund II, L.P. (VTAF II)
TSMC Europe B.V. (TSMC Europe)
Emerging Alliance Fund, L.P. (Emerging Alliance)
TSMC Japan Limited (TSMC Japan)
TSMC Guang Neng Investment, Ltd. (TSMC GN)
TSMC Korea Limited (TSMC Korea)
$ 49,954,386
38,635,129
17,828,683
9,462,038
6,710,956
6,031,369
3,209,288
2,411,212
1,550,313
1,222,972
1,047,285
563,056
235,761
167,359
142,412
65,007
26,935
100
100
100
40
39
99
100
95
40
35
50
98
100
99
100
100
100
$ 44,071,845
34,986,964
13,542,181
8,988,007
6,289,429
10,153,244
2,981,639
1,746,893
1,606,694
1,157,188
1,311,044
762,135
205,171
213,235
161,601
-
23,448
100
100
100
39
39
100
100
100
40
35
53
98
100
99
100
-
100
$ 139,264,161
$ 128,200,718
Movements of the difference between the cost of investments and the Company’s share in investees’ net
assets allocated to depreciable assets were as follows:
Balance, beginning of year
Amortizations
Effect of spin-off
Balance, end of year
Years Ended December 31
2012
2011
$ 275,584
(172,492)
-
$ 2,504,496
(721,482)
(1,507,430)
$ 103,092
$ 275,584
Movements of the difference allocated to goodwill were as follows:
In the second half year of 2011, the Company continually increased its investment in TSMC China for
the amount of NT$6,759,300 thousand, and the Company has received the approval from the
Investment Commission of Ministry of Economic Affairs.
Balance, beginning of year
Effect of spin-off
Balance, end of year
To foster a stronger sense of corporate entrepreneurship and facilitate business specializations in
11. FINANCIAL ASSETS CARRIED AT COST
order to strengthen overall profitability and operational efficiency, the Company transferred its solid
state lighting and solar businesses into its wholly-owned, newly incorporated subsidiaries, TSMC SSL
and TSMC Solar, in August 2011. Furthermore, the Company adjusted its investment structure by
transferring TSMC Lighting North America, Inc. (TSMC Lighting NA) to TSMC SSL and transferring
Motech Industries, Inc. (Motech), TSMC Solar Europe B.V. (TSMC Solar Europe), TSMC Solar North
America, Inc. (TSMC Solar NA) and part of VTAF III to TSMC Solar. As of August 1, 2011, the net
book values of the Company’s certain assets, liabilities and shareholders’ equity, including cash,
contributed to TSMC SSL and TSMC Solar in exchange for all the shares of TSMC SSL and TSMC Solar
amounted to NT$2,270,000 thousand and NT$11,180,000 thousand, respectively.
In January 2012, the Company invested NT$100,000 thousand and established a wholly-owned
subsidiary, TSMC GN, which engages mainly in investment activities. In February 2012, the Company
participated directly or through TSMC GN in the issuance of new shares by TSMC SSL and TSMC Solar
for cash. As of December 31, 2012, the Company’s percentages of ownership in TSMC SSL and TSMC
Solar were 95% and 99%, respectively.
Non-publicly traded stocks
Mutual funds
Years Ended December 31
2012
2011
$ 1,061,885
-
$ 1,415,565
(353,680)
$ 1,061,885
$ 1,061,885
December 31
2012
2011
$ 338,584
145,175
$ 338,584
159,251
$ 483,759
$ 497,835
17
12. PROPERTY, PLANT AND EQUIPMENT
Cost
Buildings
Machinery and equipment
Office equipment
Accumulated depreciation
Buildings
Machinery and equipment
Office equipment
Advance payments and construction in progress
Year Ended December 31, 2012
Balance,
Beginning of
Year
Additions
Disposals
Reclassification
Balance,
End of Year
$ 149,495,478
984,978,666
13,824,434
1,148,298,578
$ 23,886,199
219,868,105
3,348,864
$ 247,103,168
$ (25,671)
(1,649,440)
(489,814)
$ (2,164,925)
$ (11,074)
(436,234)
-
$ (447,308)
$ 173,344,932
1,202,761,097
16,683,484
1,392,789,513
90,274,267
704,885,017
9,581,513
804,740,797
110,815,752
$ 9,428,212
111,325,894
1,617,053
$ 122,371,159
$ 8,004,900
$ (24,403)
(1,607,195)
(489,814)
$ (2,121,412)
$ (45,305)
$ (164)
(28,814)
-
$ (28,978)
$ -
99,677,912
814,574,902
10,708,752
924,961,566
118,775,347
$ 454,373,533
$ 586,603,294
Year Ended December 31, 2011
Balance,
Beginning of
Year
Additions
Disposals
Reclassification
Effect of
Spin-off
Balance,
End of Year
$ 128,646,942
852,733,592
11,730,537
993,111,071
$ 22,343,302
135,641,295
2,495,001
$ 160,479,598
$ (36,929)
(2,079,115)
(362,032)
$ (2,478,076)
$ (388)
(17,225)
-
$ (17,613)
$ (1,457,449)
(1,299,881)
(39,072)
$ (2,796,402)
$ 149,495,478
984,978,666
13,824,434
1,148,298,578
81,347,877
616,495,207
8,762,361
706,605,445
$ 8,966,377
90,613,430
1,184,310
$ 100,764,117
$ (14,293)
(2,025,728)
(362,031)
$ (2,402,052)
$ (55)
(5,569)
-
$ (5,624)
$ (25,639)
(192,323)
(3,127)
$ (221,089)
90,274,267
704,885,017
9,581,513
804,740,797
Cost
Buildings
Machinery and equipment
Office equipment
Accumulated depreciation
Buildings
Machinery and equipment
Office equipment
Ad vance payments and
construction in progress
80,348,673
$ 35,453,130
$ (3,259,587)
$ -
$ (1,726,464)
110,815,752
$ 366,854,299
$ 454,373,533
No interest was capitalized during the years ended December 31, 2012 and 2011.
13. DEFERRED CHARGES, NET
Year Ended December 31, 2012
Balance,
Beginning of
Year
Additions
Amortization
Reclassification
Balance,
End of Year
Technology license fees
Software and system design costs
Patent and others
$ 1,617,310
2,316,571
785,363
$ -
1,772,958
411,943
$ (390,723)
(1,117,478)
(513,863)
$ -
(57,438)
57,438
$ 1,226,587
2,914,613
740,881
$ 4,719,244
$ 2,184,901
$ (2,022,064)
$ -
$ 4,882,081
Technology license fees
So ftware and system design
costs
Patent and others
Year Ended December 31, 2011
Balance,
Beginning of
Year
Additions
Amortization
Disposals
Effect of
Spin-off
Balance,
End of Year
$ 2,277,832
$ 10,308
$ (670,830)
$ -
$ -
$ 1,617,310
2,075,935
1,102,660
1,324,958
323,030
(1,064,884)
(416,630)
(46)
-
(19,392)
(223,697)
2,316,571
785,363
$ 5,456,427
$ 1,658,296
$ (2,152,344)
$ (46)
$ (243,089)
$ 4,719,244
14. SHORT-TERM LOANS
Unsecured loans:
US $1,195,500 thousand, due in January 2013, and annual
interest at 0.39%-0.58% in 2012; US$856,000 thousand, due
by February 2012, and annual interest at 0.45%-1.00% in
2011
15. BONDS PAYABLE
December 31
2012
2011
$ 34,714,929
$ 25,926,528
Domestic unsecured bonds:
Issued in September 2011 and repayable in September 2016,
1.40% interest payable annually
$ 10,500,000
$ 10,500,000
December 31
2012
2011
Issued in September 2011 and repayable in September 2018,
1.63% interest payable annually
Issued in January 2012 and repayable in January 2017, 1.29%
interest payable annually
Issued in January 2012 and repayable in January 2019, 1.46%
interest payable annually
Issued in August 2012 and repayable in August 2017, 1.28%
interest payable annually
Issued in August 2012 and repayable in August 2019, 1.40%
interest payable annually
Issued in September 2012 and repayable in September 2017,
1.28% interest payable annually
Issued in September 2012 and repayable in September 2019,
1.39% interest payable annually
Issued in October 2012 and repayable in October 2022, 1.53%
interest payable annually
Issued in January 2002 and repayable in January 2012, 3.00%
interest payable annually
Current portion
7,500,000
10,000,000
7,000,000
9,900,000
9,000,000
12,700,000
9,000,000
4,400,000
-
80,000,000
-
7,500,000
-
-
-
-
-
-
-
4,500,000
22,500,000
(4,500,000)
$ 80,000,000
$ 18,000,000
With the approval from the Financial Supervisory Commission, the Company issued domestic unsecured
bonds in the amount of NT$23,600,000 thousand in January 2013 and is expected to issue domestic
unsecured bonds in the amount of NT$21,400,000 thousand in February 2013.
18
The provision of a loan guarantee to TSMC Global, a subsidiary of TSMC, for its issuance of unsecured
corporate bonds for an amount not to exceed US$1,500,000 thousand had been approved in the meeting
of the Board of Directors of TSMC held on February 5, 2013.
c. Actuarial assumptions at December 31, 2012 and 2011
16. PENSION PLANS
The pension mechanism under the Labor Pension Act (the “Act”) is deemed a defined contribution plan.
Pursuant to the Act, the Company has made monthly contributions equal to 6% of each employee’s monthly
salary to employees’ pension accounts and recognized pension costs of NT$1,205,642 thousand and
NT$1,119,717 thousand for the years ended December 31, 2012 and 2011, respectively.
The Company has a defined benefit plan under the Labor Standards Law that provides benefits based on an
employee’s length of service and average monthly salary for the six-month period prior to retirement. The
Company contributes an amount equal to 2% of salaries paid each month to a pension fund (the Fund),
which is administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in
the Committee’s name in the Bank of Taiwan.
Due to the spin-off (Note 27), the Company transferred the pension fund and the accrued pension cost in
the amount of NT$46,884 thousand and NT$60,583 thousand, respectively, to TSMC SSL and TSMC Solar in
August 2011.
Pension information on the defined benefit plan is summarized as follows:
a. Components of net periodic pension cost for the year
Service cost
Interest cost
Projected return on plan assets
Amortization
Net periodic pension cost
2012
2011
$ 125,895
156,773
(61,664)
62,694
$ 131,975
164,372
(67,051)
73,306
Discount rate used in determining present values
Future salary increase rate
Expected rate of return on plan assets
d. Contributions to the Fund for the year
e. Payments from the Fund for the year
17. INCOME TAX
2012
1.75%
3.00%
2.00%
2011
1.75%
3.00%
2.00%
2012
2011
$ 214,782
$ 209,260
2012
2011
$ 26,119
$ 7,339
a. A reconciliation of income tax expense based on “income before income tax” at the statutory rates and
income tax currently payable was as follows:
Income tax expense based on “income before income tax” at statutory
rate (17%)
Tax effect of the following:
Tax-exempt income
Temporary and permanent differences
Additional income tax under the Alternative Minimum Tax Act
Additional tax at 10% on unappropriated earnings
Income tax credits used
Years Ended December 31
2012
2011
$ 31,217,091
$ 24,600,334
(8,360,834)
(2,852,308)
-
4,186,013
(9,580,742)
(13,231,821)
(1,429,188)
286,827
6,259,344
(6,259,344)
$ 283,698
$ 302,602
Income tax currently payable
$ 14,609,220
$ 10,226,152
b. Reconciliation of funded status of the plans and accrued pension cost at December 31, 2012 and 2011
b. Income tax expense consisted of the following:
Benefit obligation
Vested benefit obligation
Nonvested benefit obligation
Accumulated benefit obligation
Additional benefits based on future salaries
Projected benefit obligation
Fair value of plan assets
Funded status
Unrecognized net transition obligation
Prior service cost
Unrecognized net loss
Accrued pension cost
Vested benefit
2012
2011
$ 375,523
5,971,564
6,347,087
3,584,608
9,931,695
(3,264,786)
6,666,909
(65,429)
138,133
(2,813,337)
$ 280,629
5,356,405
5,637,034
3,389,649
9,026,683
(3,039,871)
5,986,812
(73,599)
145,259
(2,197,574)
$ 3,926,276
$ 3,860,898
$ 420,158
$ 312,213
Income tax currently payable
Income tax adjustments on prior years
Other income tax adjustments
Net change in deferred income tax assets
Investment tax credits
Temporary differences
Valuation allowance
Effect of spin-off
Income tax expense
Years Ended December 31
2012
2011
$ 14,609,220
48,609
194,660
$ 10,226,152
464,078
309,361
7,067,886
81,752
(4,530,981)
-
1,795,254
27,284
(2,314,671)
(893)
$ 17,471,146
$ 10,506,565
19
c. Deferred income tax assets consisted of the following:
d. Integrated income tax information:
December 31
2012
2011
The balance of the imputation credit account as of December 31, 2012 and 2011 was NT$8,130,060
thousand and NT$4,003,228 thousand, respectively.
Current deferred income tax assets
Investment tax credits
Temporary differences
Allowance for sales returns and others
Unrealized loss on inventories
Unrealized loss on financial instruments, net
Others
Noncurrent deferred income tax assets
Investment tax credits
Temporary differences
Depreciation
Others
Valuation allowance
$ 6,179,000
$ 4,892,158
687,929
359,823
224,694
277,018
488,788
-
308,929
89,669
$ 7,728,464
$ 5,779,544
$ 6,933,074
$ 15,287,802
819,231
299,752
(5,807,110)
2,044,680
227,433
(10,338,091)
$ 2,244,947
$ 7,221,824
Effective in May 2010, the Article 5 of the Income Tax Law of the Republic of China was amended, in
which the income tax rate of profit-seeking enterprises would be reduced from 20% to 17%. The last
amended income tax rate of 17% is retroactively applied on January 1, 2010.
The estimated and actual creditable ratios for distribution of earnings of 2012 and 2011 were 7.92% and
6.69%, respectively.
The imputation credit allocated to shareholders is based on its balance as of the date of the dividend
distribution. The estimated creditable ratio may change when the actual distribution of the imputation
credit is made.
e. All earnings generated prior to December 31, 1997 have been appropriated.
f. As of December 31, 2012, investment tax credits consisted of the following:
Law/Statute
Item
Statute for Upgrading
Purchase of machinery and
Industries
equipment
Total Creditable
Amount
Remaining
Creditable Amount
Expiry Year
$ 6,503,176
7,006,655
482,351
$ 916,499
7,006,655
482,351
2013
2014
2015
$ 13,992,182
$ 8,405,505
Under the Article 10 of the Statute for Industrial Innovation (SII), effective in May 2010, a profit-seeking
enterprise may deduct up to 15% of its research and development expenditures from its income tax
payable for the year in which these expenditures are incurred, but this deduction should not exceed 30%
of the income tax payable for that year. This incentive is retroactive to January 1, 2010 and effective until
December 31, 2019.
Statute for Upgrading
Research and development
Industries
expenditures
$ 1,148,374
4,706,569
$ -
4,706,569
2012
2013
$ 5,854,943
$ 4,706,569
Statute for Upgrading
Personnel training expenditures
$ 17,391
$ -
2012
Under the Income Basic Tax Act amended in August 2012, the standard deduction and the tax rate of
Alternative Minimum Tax were amended from NT$1,000 thousand to be NT$500 thousand and from
10% to 12%, respectively. The amended Income Basic Tax Act is effective on January 1, 2013.
The Company has evaluated the impact from above amendments and adjusted the deferred tax assets
with the resulting differences recorded as income tax expense for the year ended December 31, 2012. In
addition, the Company evaluated the effect of Alternative Minimum Tax and the applicable year of the
profits generated from projects exempt from income tax for a five-year period. As the Company plans to
apply the tax-exempt income in later years, income tax payable is anticipated to increase and the Company
will utilize available investment tax credits as an offset against income taxes. Since more investment tax
credits can be utilized, valuation allowance has been adjusted down accordingly.
Industries
Statute for Industrial
Innovation
Research and development
$ 2,828,300
$ -
2012
expenditures
g. The profits generated from the following projects are exempt from income tax for a five-year period:
Construction and expansion of 2004
Construction and expansion of 2005
Construction and expansion of 2006
Tax-exemption Period
2008 to 2012
2010 to 2014
2011 to 2015
h. The tax authorities have examined income tax returns of the Company through 2009. All investment tax
credit adjustments assessed by the tax authorities have been recognized accordingly.
20
18. LABOR COST, DEPRECIATION AND AMORTIZATION
Capital surplus consisted of the following:
Labor cost
Salary and bonus
Labor and health insurance
Pension
Meal
Welfare
Others
Depreciation
Amortization
Labor cost
Salary and bonus
Labor and health insurance
Pension
Meal
Welfare
Others
Depreciation
Amortization
Year Ended December 31, 2012
Classified as
Cost of Sales
Classified as
Operating
Expenses
Total
$ 27,681,298
1,509,487
946,117
678,279
259,656
36,051
$ 19,198,385
920,024
543,174
293,917
153,907
57,676
$ 46,879,683
2,429,511
1,489,291
972,196
413,563
93,727
$ 31,110,888
$ 21,167,083
$ 52,277,971
$ 111,929,312
$ 1,273,689
$ 10,441,847
$ 748,375
$ 122,371,159
$ 2,022,064
Additional paid-in capital
From merger
From convertible bonds
From long-term investments
Donations
December 31
2012
$ 23,934,607
22,804,510
8,892,847
505,790
55
2011
$ 23,774,250
22,804,510
8,892,847
374,695
55
$ 56,137,809
$ 55,846,357
The Company’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, the
Company shall first offset its losses in previous years and then set aside the following items accordingly:
a. Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve equals the
Company’s paid-in capital;
Year Ended December 31, 2011
Classified as
Cost of Sales
Classified as
Operating
Expenses
b. Special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in
Total
charge;
$ 23,511,116
1,225,757
899,039
640,257
230,762
294,010
$ 16,780,285
713,298
523,178
273,002
137,019
143,151
$ 40,291,401
1,939,055
1,422,217
913,259
367,781
437,161
$ 26,800,941
$ 18,569,933
$ 45,370,874
$ 93,898,048
$ 1,407,787
$ 6,858,236
$ 744,557
$ 100,756,284
$ 2,152,344
c. Bonus to directors and profit sharing to employees of the Company of not more than 0.3% and not less
than 1% of the remainder, respectively. Directors who also serve as executive officers of the Company
are not entitled to receive the bonus to directors. The Company may issue profit sharing to employees in
stock of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly
authorized by the Board of Directors;
d. Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.
The Company’s Articles of Incorporation also provide that profits of the Company may be distributed by way
of cash dividend and/or stock dividend. However, distribution of profits shall be made preferably by way of
cash dividend. Distribution of profits may also be made by way of stock dividend; provided that the ratio for
stock dividend shall not exceed 50% of the total distribution.
Any appropriations of the profits are subject to shareholders’ approval in the following year.
19. SHAREHOLDERS’ EQUITY
As of December 31, 2012, 1,091,468 thousand ADSs of the Company were traded on the NYSE. The
number of common shares represented by the ADSs was 5,457,339 thousand (one ADS represents five
common shares).
Capital surplus can be used to offset a deficit under the Company Law. However, the capital surplus
generated from donations and the excess of the issuance price over the par value of capital stock (including
the stock issued for new capital, mergers, convertible bonds and the surplus from treasury stock transactions)
may be appropriated as stock dividends, which are limited to a certain percentage of the Company’s paid-in
capital. In addition, the capital surplus from long-term investments may not be used for any purpose.
However, according to the revised Company Law, effective January 2012, the aforementioned capital surplus
generated from donations and the excess of the issuance price over the par value of capital stock can also be
used to distribute cash in proportion to original shareholders’ holding.
The Company accrued profit sharing to employees based on certain percentage of net income during the
year, which amounted to NT$11,115,240 thousand and NT$8,990,026 thousand for the years ended
December 31 2012 and 2011, respectively. Bonuses to directors were expensed based on estimated amount
of payment. If the actual amounts subsequently resolved by the shareholders differ from the estimated
amounts, the differences are recorded in the year of shareholders’ resolution as a change in accounting
estimate. If profit sharing is resolved to be distributed to employees in stock, the number of shares is
determined by dividing the amount of profit sharing by the closing price (after considering the effect of
dividends) of the shares on the day preceding the shareholders’ meeting.
21
The Company no longer has supervisors since January 1, 2007. The required duties of supervisors are being
fulfilled by the Audit Committee.
According to the revised Company Law, effective January 2012, the appropriation for legal capital reserve
shall be made until the reserve equals the Company’s paid-in capital. The reserve may be used to offset a
deficit, or be distributed as dividends in cash or stocks for the portion in excess of 25% of the paid-in capital
if the Company incurs no loss.
A special capital reserve equivalent to the net debit balance of the other components of shareholders’ equity
(for example, cumulative translation adjustments, unrealized loss on financial instruments and net loss not
recognized as pension cost, but excluding treasury stock) shall be made from unappropriated earnings
pursuant to existing regulations promulgated by the Securities and Futures Bureau (SFB). Any special reserve
appropriated may be reversed to the extent that the net debit balance reverses.
The Board of Directors also resolved to appropriate profit sharing to employees and bonus to directors in
the amounts of NT$11,115,240 thousand and NT$71,351 thousand in cash for 2012, respectively. There is
no significant difference between the aforementioned resolved amounts and the amounts charged against
earnings of 2012.
The appropriations of earnings, profit sharing to employees and bonus to directors for 2012 are to be
resolved in the shareholders’ meeting held on June 11, 2013 (expected).
The information about the appropriations of profit sharing to employees and bonus to directors is available
at the Market Observation Post System website.
Under the Integrated Income Tax System that became effective on January 1, 1998, R.O.C. resident
shareholders are allowed a tax credit for their proportionate share of the income tax paid by the Company
on earnings generated since January 1, 1998.
The appropriations of earnings for 2011 and 2010 had been approved in the shareholders’ meetings held on
June 12, 2012 and June 9, 2011, respectively. The appropriations and dividends per share were as follows:
20. STOCK-BASED COMPENSATION PLANS
Appropriation of Earnings
Dividends Per Share (NT$)
For Fiscal
Year 2011
For Fiscal
Year 2010
For Fiscal
Year 2011
For Fiscal
Year 2010
Legal capital reserve
Special capital reserve
Cash dividends to shareholders
$ 13,420,128
1,172,350
77,748,668
$ 16,160,501
5,120,827
77,730,236
$ 92,341,146
$ 99,011,564
$ 3.00
$ 3.00
The Company’s profit sharing to employees and bonus to directors in the amounts of NT$8,990,026
thousand and NT$62,324 thousand in cash for 2011, respectively, and profit sharing to employees and
bonus to directors in the amounts of NT$10,908,338 thousand and NT$51,131 thousand in cash for 2010,
respectively, had been approved in the shareholders’ meeting held on June 12, 2012 and June 9, 2011,
respectively. The resolved amounts of the profit sharing to employees and bonus to directors were consistent
with the resolutions of meeting of the Board of Directors held on February 14, 2012 and February 15, 2011
and same amount had been charged against earnings of 2011 and 2010, respectively.
The appropriations of earnings for 2012 had been resolved in the meeting of the Board of Directors held on
February 5, 2013. The appropriations and dividends per share were as follows:
Appropriation of Earnings
Dividends Per Share (NT$)
For Fiscal Year 2012
For Fiscal Year 2012
$ 16,615,880
(4,820,483)
77,773,307
$ 89,568,704
$ 3.00
Legal capital reserve
Special capital reserve
Cash dividends to shareholders
22
The Company’s Employee Stock Option Plans, consisting of the 2004 Plan, 2003 Plan and 2002 Plan, were
approved by the SFB on January 6, 2005, October 29, 2003 and June 25, 2002, respectively. The maximum
number of options authorized to be granted under the 2004 Plan, 2003 Plan and 2002 Plan was 11,000
thousand, 120,000 thousand and 100,000 thousand, respectively, with each option eligible to subscribe for
one common share when exercised. The options may be granted to qualified employees of the Company
or any of its domestic or foreign subsidiaries, in which the Company’s shareholding with voting rights,
directly or indirectly, is more than fifty percent (50%). The options of all the plans are valid for ten years
and exercisable at certain percentages subsequent to the second anniversary of the grant date. Under the
terms of the plans, the options are granted at an exercise price equal to the closing price of the Company’s
common shares listed on the TWSE on the grant date.
Options of the plans that had never been granted or had been granted but subsequently canceled had
expired as of December 31, 2012.
Information about outstanding options for the years ended December 31, 2012 and 2011 was as follows:
Year ended December 31, 2012
Balance, beginning of year
Options exercised
Options canceled
Balance, end of year
Year ended December 31, 2011
Balance, beginning of year
Options exercised
Balance, end of year
Number of Options
(In Thousands)
Weighted-average
Exercise Price (NT$)
14,293
(8,213)
(135)
5,945
21,437
(7,144)
14,293
$ 31.4
29.5
34.6
34.6
$ 31.4
30.5
32.1
The number of outstanding options and exercise prices have been adjusted to reflect the distribution of
earnings in accordance with the plans.
22. EARNINGS PER SHARE
EPS is computed as follows:
As of December 31, 2012, information about outstanding options was as follows:
Range of Exercise Price (NT$)
$20.2-$28.3
38.0- 50.1
Options Outstanding
Number of Options
(In Thousands)
Weighted-average Remaining
Contractual Life (Years)
3,362
2,583
5,945
0.4
2.0
1.1
Weighted-average
Exercise Price (NT$)
$ 25.9
45.8
34.6
As of December 31, 2012, all of the above outstanding options were exercisable.
No compensation cost was recognized under the intrinsic value method for the years ended December 31,
2012 and 2011. Had the Company used the fair value based method to evaluate the options using the
Black-Scholes model, the valuation assumptions at the various grant dates and pro forma results of the
Company for the years ended December 31, 2012 and 2011 would have been as follows:
Amounts (Numerator)
Before
Income Tax
After
Income Tax
Number of
Shares
(Denominator)
(In Thousands)
EPS (NT$)
Before
Income Tax
After
Income Tax
Year ended December 31, 2012
Basic EPS
Earnings available to common shareholders
Effect of dilutive potential common shares
$ 183,629,948
-
$ 166,158,802
-
25,920,735
7,201
$ 7.08
$ 6.41
Diluted EPS
Earnings available to common shareholders
(including effect of dilutive potential common
shares)
Year ended December 31, 2011
Basic EPS
$ 183,629,948
$ 166,158,802
25,927,936
$ 7.08
$ 6.41
Earnings available to common shareholders
Effect of dilutive potential common shares
$ 144,707,844
-
$ 134,201,279
-
25,914,076
10,606
$ 5.58
$ 5.18
Valuation assumptions:
Expected dividend yield
Expected volatility
Risk free interest rate
Expected life
Net income:
Net income as reported
Pro forma net income
Earnings per share (EPS) - after income tax (NT$):
Basic EPS as reported
Pro forma basic EPS
Diluted EPS as reported
Pro forma diluted EPS
21. TREASURY STOCK
Purpose of Treasury Stock
Year ended December 31, 2011
1.00%-3.44%
43.77%-46.15%
3.07%-3.85%
5 years
Diluted EPS
Earnings available to common shareholders
(including effect of dilutive potential common
shares)
$ 144,707,844
$ 134,201,279
25,924,682
$ 5.58
$ 5.18
Years Ended December 31
2012
2011
$ 166,158,802
165,986,009
$ 134,201,279
134,146,490
$ 6.41
6.40
6.41
6.40
$ 5.18
5.18
5.18
5.17
If the Company may settle the obligation by cash, by issuing shares, or in combination of both cash and
shares, profit sharing to employees which will be settled in shares should be included in the weighted
average number of shares outstanding in calculation of diluted EPS, if the shares have a dilutive effect. The
number of shares is estimated by dividing the amount of profit sharing to employees in stock by the closing
price (after considering the dilutive effect of dividends) of the common shares on the balance sheet date.
Such dilutive effect of the potential shares needs to be included in the calculation of diluted EPS until the
shares of profit sharing to employees are resolved in the shareholders’ meeting in the following year.
23. DISCLOSURES FOR FINANCIAL INSTRUMENTS
a. Fair values of financial instruments were as follows:
Number of Shares,
Beginning of Year
Addition
Retirement
(Shares in Thousands)
Number of Shares,
End of Year
Assets
December 31
2012
2011
Carrying Amount
Fair Value
Carrying Amount
Fair Value
Shareholders executed the appraisal right
-
1,000
(1,000)
-
In August 2011, at the option of the shareholders of the Company, certain shareholders requested the
Company to buy back their shares pursuant to the Company Law, which shares were subsequently retired in
November 2011.
Financial assets at fair value through profit or loss
Available-for-sale financial assets
Held-to-maturity financial assets
Financial assets carried at cost
$ 38,824
1,845,052
701,146
483,759
$ 38,824
1,845,052
708,973
-
$ 14,925
2,617,134
1,403,427
497,835
$ 14,925
2,617,134
1,426,474
-
Liabilities
Financial liabilities at fair value through profit or loss
Bonds payable (including current portion)
Other long-term payables (including current portion)
6,274
80,000,000
113,000
6,274
80,343,413
113,000
-
22,500,000
-
-
22,597,115
-
23
b. Methods and assumptions used in the estimation of fair values of financial instruments
1) The aforementioned financial instruments do not include cash and cash equivalents, receivables, other
financial assets, refundable deposits, short-term loans, payables and guarantee deposits. The carrying
amounts of these financial instruments approximate their fair values due to their short maturities.
2) Except for derivatives, available-for-sale and held-to-maturity financial assets were based on their
quoted market prices.
Year Ended December 31, 2011
From
Available-for-sale
Financial Assets
Equity-method
Investments
Total
Balance, beginning of year
Recognized directly in shareholders’ equity
Removed from shareholders’ equity and recognized in earnings
Effect of spin-off
$ (395,306)
(1,077,844)
(35,151)
-
$ 504,595
(165,851)
-
(3,298)
$ 109,289
(1,243,695)
(35,151)
(3,298)
Balance, end of year
$ (1,508,301)
$ 335,446
$ (1,172,855)
3) The fair values of those derivatives are determined using valuation techniques incorporating estimates
and assumptions that were consistent with prevailing market conditions.
f. Information about financial risks
4) Financial assets carried at cost have no quoted prices in an active market and entail an unreasonably
high cost to obtain verifiable fair values. Therefore, no fair value is presented.
5) Fair value of bonds payable was based on their quoted market price.
6) Fair value of other long-term payables was based on the present value of expected cash flows, which
approximates their carrying amount.
1) Market risk. The derivative financial instruments categorized as financial assets/liabilities at fair
value through profit or loss are mainly used to hedge the market exchange rate fluctuations of
foreign-currency assets and liabilities; therefore, the market exchange rate risk of derivatives will be
offset by the foreign exchange risk of these hedged items. Available-for-sale financial assets and
held-to-maturity financial assets held by the Company are mainly fixed-interest-rate debt securities and
overseas publicly traded stock; therefore, the fluctuations in market interest rates and market prices will
result in changes in fair values of these debt securities and the fluctuations in market prices will result
in changes in fair values of overseas publicly traded stock.
c. Valuation gains/losses arising from changes in fair value of derivatives contracts determined using
2) Credit risk. Credit risk represents the potential loss that would be incurred by the Company if the
valuation techniques were recognized as net gains of NT$32,550 thousand and NT$14,925 thousand for
the years ended December 31, 2012 and 2011, respectively.
d. As of December 31, 2012 and 2011, financial assets exposed to fair value interest rate risk were
NT$739,970 thousand and NT$1,418,352 thousand, respectively, financial liabilities exposed to fair value
interest rate risk were NT$114,721,203 thousand and NT$48,426,528 thousand, respectively.
e. Movements of the unrealized gains or losses on financial instruments for the years ended December 31,
2012 and 2011 were as follows:
Year Ended December 31, 2012
From
Available-for-sale
Financial Assets
Equity-method
Investments
Total
Balance, beginning of year
Recognized directly in shareholders’ equity
Removed from shareholders’ equity and recognized in earnings
$ (1,508,301)
(132,176)
2,130,523
$ 335,446
7,147,829
-
$ (1,172,855)
7,015,653
2,130,523
counter-parties or third-parties breached contracts. Financial instruments with positive fair values at
the balance sheet date are evaluated for credit risk. The Company evaluated whether the financial
instruments for any possible counter-parties or third-parties are reputable financial institutions, business
enterprises, and government agencies and accordingly, the Company believed that the Company’s
exposure to credit risk was not significant.
3) Liquidity risk. The Company has sufficient operating capital and bank facilities to meet cash needs upon
settlement of derivative financial instruments and bonds payable. Therefore, the liquidity risk is low.
4) Cash flow interest rate risk. The Company mainly invests in fixed-interest-rate debt securities. Therefore,
cash flows are not expected to fluctuate significantly due to changes in market interest rates.
24. RELATED PARTY TRANSACTIONS
The Company engages in business transactions with the following related parties:
Balance, end of year
$ 490,046
$ 7,483,275
$ 7,973,321
a. Subsidiaries
24
TSMC China
TSMC Solar
TSMC Europe
TSMC Global
TSMC Japan
TSMC North America
b. Investees
Xintec (holding a controlling financial interest)
VIS (accounted for using the equity method)
GUC (accounted for using the equity method)
SSMC (accounted for using the equity method)
c. Indirect subsidiaries
TSMC Design Technology Canada, Inc. (TSMC Canada)
TSMC Technology, Inc. (TSMC Technology)
WaferTech, LLC (WaferTech)
d. Indirect investees
VisEra Technology Company, Ltd. (VisEra) (accounted for using the equity method)
e. Others
Related parties over which the Company has control or exercises significant influence but with which the
Company had no material transactions.
Transactions with the aforementioned parties, other than those disclosed in other notes, are summarized as
follows:
Research and development expenses
TSMC Technology (primarily consulting fee)
TSMC Canada (primarily consulting fee)
TSMC Europe (primarily consulting fee)
VIS (rent)
Others
Marketing expenses - commission
TSMC Europe
TSMC Japan
TSMC China
Others
Sales of property, plant and equipment and other assets
TSMC China
VIS
VisEra
Others
Purchases of property, plant and equipment and other assets
TSMC China
GUC
TSMC Solar
VIS
Others
2012
2011
Amount
%
Amount
%
Non-operating income and gains
For the year
Sales
TSMC North America
Others
Purchases
TSMC China
WaferTech
VIS
SSMC
Others
Manufacturing expenses
Xintec (outsourcing and rent)
VisEra (outsourcing)
VIS (rent)
Others
$ 326,768,469
4,567,656
$ 331,336,125
$ 15,708,447
8,026,114
4,475,674
3,638,633
-
$ 31,848,868
$ 180,768
14,586
-
230
$ 195,584
64
1
65
26
14
8
6
-
54
-
-
-
-
-
$ 234,902,043
3,882,801
$ 238,784,844
$ 10,392,189
7,305,879
5,577,762
3,949,176
124,673
$ 27,349,679
$ 260,250
14,588
5,902
-
$ 280,740
56
1
57
21
15
12
8
-
56
-
-
-
-
-
(Continued)
VIS (primarily technical service income)
SSMC (primarily technical service income)
TSMC China (primarily technical service income and gains on disposal
$ 261,780
221,210
of property, plant and equipment)
Others
Non-operating expenses and losses
TSMC China (losses on disposal of property, plant and equipment)
Xintec (settlement loss)
Others
984
14,746
$ 498,720
$ 18,699
-
132
$ 18,831
As of December 31
Receivables
TSMC North America
Others
$ 40,748,905
238,539
99
1
$ 24,661,104
116,430
99
1
$ 40,987,444
100
$ 24,777,534
100
(Continued)
25
2012
2011
Amount
%
Amount
%
$ 713,323
206,894
49,763
-
18,373
$ 988,353
$ 345,906
277,374
72,373
20,643
$ 716,296
$ 46,941
14,531
9,000
10
$ 70,482
$ 216,084
47,051
14,448
-
1,224
$ 278,807
2
1
-
-
-
3
14
12
3
1
30
51
16
10
-
77
-
-
-
-
-
-
2
2
-
-
4
-
-
-
-
$ 534,804
192,616
45,489
1,984
30,605
$ 805,498
$ 357,582
284,644
64,907
22,049
$ 729,182
$ 2,885,847
36,008
-
73,133
$ 2,994,988
$ 70,491
1,812
-
45,473
-
$ 117,776
$ 227,024
193,781
96,050
11,211
$ 528,066
$ -
19,686
-
$ 19,686
2
1
-
-
-
3
15
12
3
1
31
86
1
-
2
89
-
-
-
-
-
-
3
3
1
-
7
-
1
-
1
2012
Amount
$ 122,893
88,827
56,799
2,686
1,594
2,164
2011
Amount
$ 87,507
23,887
34,260
23,688
14,196
4,490
%
45
32
21
1
1
-
%
46
13
18
13
8
2
The Company borrowed funds from related parties (classified under other payables to related parties).
Additional disclosures consisted of the following:
Financing Name
Maximum Balance
(In Thousands)
Ending
Balance
Interest
Rate
Interest
Expense
Interest
Payable
TSMC Global
$ 5,807,600
$ -
0.3911%
$ 4,870
$ -
Year Ended December 31, 2012
(US$ 200,000)
$ 274,963
100
$ 188,028
100
Year Ended December 31, 2011
Other receivables
VIS
TSMC North America
SSMC
TSMC China
WaferTech
Others
Payables
TSMC China
WaferTech
VIS
SSMC
Others
Deferred credits (other assets)
TSMC China
VIS
VisEra
Others
$ 1,616,342
580,064
364,790
351,389
317,757
50
18
11
11
10
$ 946,826
420,459
987,937
336,037
301,323
32
14
33
11
10
$ 3,230,342
100
$ 2,992,582
100
$ 17,271
(7,806)
948
8
2
(1)
-
-
$ (1,493)
-
-
-
$ 10,421
1
$ (1,493)
-
-
-
-
-
(Concluded)
The sales prices and payment terms to related parties were not significantly different from those of sales
to third parties. For other related party transactions, prices and terms were determined in accordance with
mutual agreements.
The Company leased certain buildings, facilities, and machinery and equipment from Xintec. The lease terms
and prices were determined in accordance with mutual agreements. The rental expense was paid monthly
and the related expenses were classified under manufacturing expenses. The lease expired in June 2011.
The Company leased certain office space and facilities from VIS. The lease terms and prices were determined
in accordance with mutual agreements. The rental expense was paid monthly and the related expenses were
classified under research and development expenses and manufacturing expenses. The lease expired in April
2011.
The Company deferred the disposal gains/losses (classified under other assets and deferred credits) derived
from sales of property, plant and equipment and other assets to TSMC China, VIS, VisEra and others, and
then recognized such gains/losses (classified under non-operating gains and losses) over the depreciable lives
of the disposed assets.
26
Financing Name
Maximum Balance
(In Thousands)
Ending
Balance
Interest
Rate
Interest
Expense
Interest
Payable
TSMC Global
$ 24,684,000
$ -
0.3544%
$ 22,293
$ -
(US$ 850,000)
Compensation of directors and management personnel:
Salaries, incentives and special compensation
Bonus
Years Ended December 31
2012
2011
$ 757,984
538,077
$ 654,972
445,681
$ 1,296,061
$ 1,100,653
The information about the compensation of directors and management personnel is available in the annual
report for the shareholders’ meeting. Total compensation expense for the year ended December 31, 2012
includes estimated profit sharing to employees and bonus to directors of the Company that relate to
2012 but will be paid in the following year. The actual amount will be finalized and approved upon the
resolution of the shareholders’ meeting in 2013. The total compensation for the year ended December 31,
2011 included the bonuses appropriated from earnings of 2011 which was approved by the shareholders’
meeting held in 2012.
25. SIGNIFICANT LONG-TERM LEASES
The Company leases several parcels of land from the Science Park Administration. These operating leases
expire on various dates from March 2013 to July 2032 and can be renewed upon expiration.
As of December 31, 2012, future lease payments were as follows:
Year
2013
2014
2015
2016
2017
2018 and thereafter
Amount
$ 485,963
468,143
457,694
447,531
409,829
3,655,825
$ 5,924,985
26. SIGNIFICANT COMMITMENTS AND CONTINGENCIES
Significant commitments and contingencies of the Company as of December 31, 2012, excluding those
disclosed in other notes, were as follows:
a. Under a technical cooperation agreement with Industrial Technology Research Institute, the R.O.C.
Government or its designee approved by the Company can use up to 35% of the Company’s capacity if
the Company’s outstanding commitments to its customers are not prejudiced. The term of this agreement
is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of
five years unless otherwise terminated by either party with one year prior notice.
b. Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March
30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry
in Singapore. The Company’s equity interest in SSMC was 32%. Nevertheless, Philips parted with its
semiconductor company which was renamed as NXP B.V. in September 2006. The Company and NXP B.V.
purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the Shareholders
Agreement on November 15, 2006. After the purchase, the Company and NXP B.V. currently own
approximately 39% and 61% of the SSMC shares respectively. The Company and Philips (now NXP B.V.)
are required, in the aggregate, to purchase at least 70% of SSMC’s capacity, but the Company alone is
not required to purchase more than 28% of the capacity. If any party defaults on the commitment and
the capacity utilization of SSMC fall below a specific percentage of its capacity, the defaulting party is
required to compensate SSMC for all related unavoidable costs.
c. In August 2006, TSMC filed a lawsuit against Semiconductor Manufacturing International Corporation,
SMIC (Shanghai) and SMIC Americas (aggregately referred to as “SMIC”) in the Superior Court of California
for Alameda County for breach of a 2005 agreement that settled an earlier trade secret misappropriation
and patent infringement litigation between the parties, as well as for trade secret misappropriation,
seeking injunctive relief and monetary damages. In September 2006, SMIC filed a cross-complaint against
TSMC in the same court alleging breach of settlement agreement, implied covenant of good faith and
fair dealing. SMIC also filed a civil action against TSMC in November 2006 with the Beijing People’s High
Court alleging defamation and breach of good faith. On June 10, 2009, the Beijing People’s High Court
ruled in favor of TSMC and dismissed SMIC’s lawsuit. On November 4, 2009, after a two-month trial,
a jury in the California action found SMIC to have both breached the 2005 settlement agreement and
misappropriated TSMC’s trade secrets. TSMC has subsequently settled both lawsuits with SMIC. Pursuant
to the new settlement agreement, the parties have agreed to the entry of a stipulated judgment in favor
of TSMC in the California action, and to the dismissal of SMIC’s appeal against the Beijing High Court’s
finding in favor of TSMC. Under the new settlement agreement and the related stipulated judgment,
SMIC has agreed to make cash payments by installments to TSMC totaling US$200 million, which are
in addition to the US$135 million previously paid to TSMC under the 2005 settlement agreement, and,
conditional upon relevant government regulatory approvals, to issue to TSMC a total of 1,789,493,218
common shares of Semiconductor Manufacturing International Corporation and a three-year warrant
to purchase 695,914,030 common shares (subject to adjustment) of Semiconductor Manufacturing
International Corporation at HK$1.30 per share (subject to adjustment). TSMC has acquired the above
mentioned common shares in July 2010, which are recorded within available for sale financial assets, and
obtained the subsequent cash settlement income in accordance with the agreement.
d. In June 2010, Keranos, LLC. filed a lawsuit in the U.S. District Court for the Eastern District of Texas
alleging that TSMC, TSMC North America, and several other leading technology companies infringe
three expired U.S. patents. In response, TSMC, TSMC North America, and several co-defendants in the
Texas case filed a lawsuit against Keranos in the U.S. District Court for the Northern District of California
in November 2010, seeking a judgment declaring that they did not infringe the asserted patents, and
that those patents are invalid. These two litigations have been consolidated into a single case in the U.S.
District Court for the Eastern District of Texas. The outcome cannot be determined at this time.
e. In December 2010, Ziptronix, Inc. filed a complaint in the U.S. District Court for the Northern District of
California accusing TSMC, TSMC North America and one other company of allegedly infringing several U.S.
patents. The outcome cannot be determined at this time.
f. The Company joined the Customer Co-Investment Program of ASML Holding N.V. (ASML) and entered
into the investment agreement in August 2012. The agreement includes an investment of EUR837,816
thousand by TSMC Global to acquire 5% of ASML’s equity with a lock-up period of 2.5 years. TSMC
Global has acquired the aforementioned equity in October 2012. Both parties also signed the research and
development funding agreement and the Company will provide EUR277,000 thousand to ASML’s research
and development programs from 2013 to 2017.
27. SPIN-OFF BUSINESS INFORMATION
To foster a stronger sense of corporate entrepreneurship and facilitate business specializations in order to
strengthen overall profitability and operational efficiency, the Company transferred its solid state lighting
and solar businesses into its wholly-owned, newly incorporated subsidiaries, TSMC SSL and TSMC Solar,
on August 1, 2011. As of August 1, 2011, the net book values transferred to TSMC SSL and TSMC Solar
amounted to NT$2,270,000 thousand and NT$11,180,000 thousand, respectively.
The book values of transferred assets and liabilities were as follows:
Current assets
Long-term investments
Property, plant and equipment
Other assets
Current liabilities
Other liabilities
Capital surplus
Unrealized gain/loss on financial instruments
Cumulative translation adjustments
TSMC SSL
TSMC Solar
Total
$ 431,613
2,872
1,929,563
234,696
(292,728)
(36,272)
-
-
256
$ 893,584
7,912,710
2,372,214
201,677
(337,439)
(25,218)
(56,094)
(3,298)
221,864
$ 1,325,197
7,915,582
4,301,777
436,373
(630,167)
(61,490)
(56,094)
(3,298)
222,120
$ 2,270,000
$ 11,180,000
$ 13,450,000
27
28. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS
h. Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital:
AND LIABILITIES
Please see Table 6 attached;
The significant financial assets and liabilities denominated in foreign currencies were as follows:
December 31
2012
2011
Foreign Currencies
(In Thousands)
Exchange Rate
(Note)
Foreign Currencies
(In Thousands)
Exchange Rate
(Note)
$ 2,255,391
117,136
35,290,837
492,014
3,445,339
6,141
424,858
3,838,265
2,171,316
245,237
43,052,403
29.038
38.39
0.3352
3.75
29.038
38.39
0.3352
4.66
29.038
38.39
0.3352
$ 1,566,212
124,425
33,073,336
671,060
2,983,866
5,225
414,680
2,823,953
1,626,129
106,931
34,942,421
30.288
39.27
0.3897
3.90
30.288
39.27
0.3897
4.81
30.288
39.27
0.3897
Financial assets
Monetary items
USD
EUR
JPY
Non-monetary items
HKD
Investments accounted for using equity method
USD
EUR
JPY
RMB
Financial liabilities
Monetary items
USD
EUR
JPY
i. Names, locations, and related information of investees over which the Company exercises significant
influence: Please see Table 7 attached;
j. Information about derivatives of investees over which the Company has a controlling interest:
Do not meet the criteria for hedge accounting
1) TSMC China
TSMC China entered into forward exchange contracts during the year ended December 31, 2012 to
manage exposures due to foreign exchange rate fluctuations. Outstanding forward exchange contracts
as of December 31, 2012 consisted of the following:
Sell US$/Buy RMB
Maturity Date
January 2013
Contract Amount
(In Thousands)
US$20,000/RMB124,735
For the year ended December 31, 2012, net losses arising from forward exchange contracts of TSMC
China amounted to NT$5,068 thousand.
Note: Exchange rate represents the number of N.T. dollars for which one foreign currency could be exchanged.
2) Xintec
29. ADDITIONAL DISCLOSURES
Following are the additional disclosures required by the SFB for the Company and its investees:
a. Financings provided: Please see Table 1 attached;
b. Endorsement/guarantee provided: None;
c. Marketable securities held: Please see Table 2 attached;
Xintec entered into forward exchange contracts during the year ended December 31, 2012 to manage
exposures due to foreign exchange rate fluctuations. Outstanding forward exchange contracts as of
December 31, 2012 consisted of the following:
Sell US$/Buy NT$
January 2013 to March 2013
US$13,700/NT$398,239
Maturity Date
Contract Amount
(In Thousands)
For the year ended December 31, 2012, net gains arising from forward exchange contracts of Xintec
amounted to NT$19,339 thousand.
d. Marketable securities acquired and disposed of at costs or prices of at least NT$100 million or 20% of the
paid-in capital: Please see Table 3 attached;
3) TSMC Partners
e. Acquisition of individual real estate properties at costs of at least NT$100 million or 20% of the paid-in
capital: Please see Table 4 attached;
TSMC Partners entered into forward exchange contracts during the year ended December 31, 2012
to manage exposures due to foreign exchange rate fluctuations. No forward exchange contract was
outstanding as of December 31, 2012.
f. Disposal of individual real estate properties at prices of at least NT$100 million or 20% of the paid-in
capital: None;
g. Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital:
For the year ended December 31, 2012, net losses arising from forward exchange contracts of TSMC
Partners amounted to NT$62,282 thousand.
Please see Table 5 attached;
28
4) TSMC Solar
TSMC Solar entered into derivative contracts during the year ended December 31, 2012 to manage
exposures due to foreign exchange rate fluctuations. Outstanding forward exchange contracts as of
December 31, 2012 consisted of the following:
Sell NT$/Buy US$
Sell NT$/Buy JPY
Maturity Date
January 2013
January 2013
Contract Amount
(In Thousands)
NT$457,394/US$15,800
NT$22,055/JPY65,000
Outstanding cross currency swap contracts as of December 31, 2012 consisted of the following:
Maturity Date
January 2013
Contract Amount
(In Thousands)
Range of Interest Rates Paid
Range of Interest Rates
Received
NT$1,025,039/US$35,280
-
0.06%
For the year ended December 31, 2012, net losses arising from derivative financial instruments of TSMC
Solar amounted to NT$37,824 thousand.
5) TSMC SSL
TSMC SSL entered into derivative contracts during the year ended December 31, 2012 to manage
exposures due to foreign exchange rate fluctuations. Outstanding forward exchange contracts as of
December 31, 2012 consisted of the following:
Sell NT$/Buy US$
Sell NT$/Buy JPY
Maturity Date
January 2013
January 2013
Contract Amount
(In Thousands)
NT$133,009/US$4,600
NT$22,055/JPY65,000
Outstanding cross currency swap contracts as of December 31, 2012 consisted of the following:
Xintec is exposed to interest rate risk because its long-term bank loans bear floating interest rates.
Accordingly, Xintec enters into interest rate swap contract to hedge such a cash flow interest rate risk.
The interest rate swap contract of Xintec was due in August 2012.
For the year ended December 31, 2012, the adjustment to shareholder’s equity amounted to a net
gain of NT$5 thousand for the above Xintec’s interest rate swap contract. The amount removed from
shareholder’s equity and recognized as a loss amounted to NT$227 thousand.
2) TSMC Global
TSMC Global monitors and manages the financial risk through the analysis of business environment
and evaluation of entity’s financial risks. Further, TSMC Global seeks to reduce the effects of future cash
flow related exchange rate exposures by primarily using derivative financial instruments.
TSMC Global entered into forward exchange contracts to hedge cash flow risk arising from foreign
exchange rate fluctuations of an expected equity transaction. The forward exchange contracts of TSMC
Global were due in October 2012.
For the year ended December 31, 2012, the adjustment to shareholder’s equity amounted to a net gain
of NT$8,833 thousand for the above TSMC Global’s forward exchange contracts.
k. Information on investment in Mainland China
1) The name of the investee in Mainland China, the main businesses and products, its issued capital,
method of investment, information on inflow or outflow of capital, percentage of ownership, equity
in the net gain or net loss, ending balance, amount received as dividends from the investee, and the
limitation on investee: Please see Table 8 attached.
2) Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized
gain or loss, and other related information which is helpful to understand the impact of investment in
Mainland China on financial reports: Please see Note 24.
Maturity Date
January 2013
Contract Amount
(In Thousands)
NT$58,100/US$2,000
Range of Interest Rates Paid
Range of Interest
Rates Received
-
0.06%
30. OPERATING SEGMENTS INFORMATION
For the year ended December 31, 2012, net losses arising from derivative financial instruments of TSMC
SSL amounted to NT$13,882 thousand.
Meet the criteria for hedge accounting
1) Xintec
Xintec monitors and manages the financial risk through the analysis of business environment and
evaluation of entity’s financial risks. Further, Xintec seeks to reduce the effects of future cash flow
related interest rate exposures by primarily using derivative financial instruments.
The Company has provided the operating segments disclosure in the consolidated financial statements.
31. THE AUTHORIZATION OF FINANCIAL STATEMENTS
The financial statements were approved by the Board of Directors and authorized for issue on February 5,
2013.
29
TABLE 1
Taiwan Semiconductor Manufacturing Company Limited and Investees
FINANCINGS PROVIDED
FOR THE YEAR ENDED DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
No.
Financing
Company
Counter-
party
Financial Statement
Account
1
TSMC Partners
TSMC China
TSMC Solar
TSMC SSL
TSMC Solar
TSMC SSL
2
TSMC
Development
Other receivables from
related parties
Other receivables from
related parties
Other receivables from
related parties
Other receivables from
related parties
Other receivables from
related parties
Maximum
Balance for the
Period (US$ in
Thousands)
(Note 4)
$ 7,259,500
(US$ 250,000)
1,161,520
(US$ 40,000)
871,140
(US$ 30,000)
2,323,040
(US$ 80,000)
2,613,420
(US$ 90,000)
Ending Balance
(US$ in
Thousands)
(Note 4)
Amount Actually
Drawn (US$ in
Thousands)
$ 3,774,940
(US$ 130,000)
-
$ 3,774,940
(US$ 130,000)
-
-
-
0.25%-0.26% The need for short-
term financing
The need for short-
term financing
The need for short-
term financing
-
-
2,323,040
(US$ 80,000)
2,613,420
(US$ 90,000)
1,495,457
(US$ 51,500)
203,266
(US$ 7,000)
0.21%-0.23% The need for short-
term financing
0.24% The need for short-
term financing
3
TSMC Global
TSMC
Other receivables from
related parties
5,807,600
(US$ 200,000)
-
-
-
The need for short-
term financing
Interest Rate
Nature for
Financing
Transaction
Amounts
Reason for Financing
Allowance
for Bad
Debt
Collateral
Item
Value
Financing
Limits for Each
Borrowing
Company
Financing
Company’s Total
Financing Amount
Limits (Note 3)
$ -
Purchase equipment
$ -
-
-
-
-
-
Operating capital
Operating capital
Operating capital
Operating capital
Support the parent
company’s short-term
operation requirement
-
-
-
-
-
-
-
-
-
-
-
$ -
-
-
-
-
-
$ 38,635,609
(Note 1)
15,454,244
(Note 1)
15,454,244
(Note 1)
5,322,907
(Notes 1 and 5)
5,322,907
(Notes 1 and 5)
49,954,386
(Note 2)
$ 38,635,609
38,635,609
38,635,609
13,307,266
(Note 5)
13,307,266
(Note 5)
49,954,386
Note 1: The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of TSMC Partners and TSMC Development, respectively. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. TSMC or
offshore subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC are not subject to the above restrictions. The restriction of thirty percent (30%) of the borrower’s net worth will not apply to subsidiaries whose voting shares are 90% or more owned, directly or indirectly, by TSMC. However, financing limits for
those subsidiaries shall be no more than forty percent (40%) of the lender’s net worth.
Note 2: The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of TSMC Global. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. TSMC or offshore subsidiaries whose voting shares
are 100% owned, directly or indirectly, by TSMC are not subject to the above restrictions.
Note 3: The total amount available for lending purpose shall not exceed the net worth of TSMC Partners, TSMC Development and TSMC Global, respectively.
Note 4: The maximum balance for the period and ending balance represents the amounts approved by Board of Directors.
Note 5: The amount was determined based on the audited financial statements in accordance with local accounting principles.
30
TABLE 2
Taiwan Semiconductor Manufacturing Company Limited and Investees
MARKETABLE SECURITIES HELD
DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Held Company Name
Marketable Securities Type and Name
Relationship with the Company
Financial Statement Account
December 31, 2012
Shares/Units
(In Thousands)
Carrying Value
(Foreign Currencies
in Thousands)
Percentage of
Ownership (%)
Market Value or Net
Asset Value
(Foreign Currencies
in Thousands)
Note
Held-to-maturity financial assets
〃
-
-
$ 549,881
151,265
N/A
N/A
$ 557,900
151,073
TSMC
Corporate bond
Nan Ya Plastics Corporation
China Steel Corporation
Stock
Semiconductor Manufacturing International Corporation
TSMC Global
-
-
-
Subsidiary
TSMC Partners
VIS
SSMC
TSMC Solar
TSMC North America
TSMC SSL
Xintec
GUC
TSMC Europe
TSMC Japan
TSMC Korea
United Industrial Gases Co., Ltd.
Shin-Etsu Handotai Taiwan Co., Ltd.
W.K. Technology Fund IV
Fund
Horizon Ventures Fund
Crimson Asia Capital
Capital
TSMC China
VTAF III
VTAF II
Emerging Alliance
TSMC GN
Stock
Motech
TSMC Solar Europe
TSMC Solar NA
TSMC Solar
Available-for-sale financial assets
Investments accounted for using
equity method
Subsidiary
Investee accounted for using equity
method
Investee accounted for using equity
method
Subsidiary
Subsidiary
Subsidiary
Investee with a controlling financial
interest
Investee accounted for using equity
〃
〃
〃
〃
〃
〃
〃
〃
method
Subsidiary
Subsidiary
Subsidiary
-
-
-
-
-
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
〃
〃
〃
Financial assets carried at cost
〃
〃
Financial assets carried at cost
〃
Investments accounted for using
equity method
〃
〃
〃
〃
1,277,958
1
988,268
628,223
1,845,502
49,954,386
38,635,129
9,462,038
314
6,710,956
1,118,000
11,000
430,400
94,950
46,688
-
6
80
19,300
10,500
4,000
-
-
-
-
-
-
-
6,031,369
3,209,288
2,411,212
1,550,313
1,222,972
235,761
142,412
26,935
193,584
105,000
40,000
89,916
55,259
17,828,683
1,047,285
563,056
167,359
65,007
Investee accounted for using equity
Investments accounted for using
87,480
2,998,413
method
Subsidiary
Subsidiary
equity method
〃
〃
-
1
175,016
44,037
4
100
100
40
39
99
100
95
40
35
100
100
100
10
7
2
12
1
100
50
98
99
100
20
100
100
1,845,052
49,954,386
38,635,609
12,658,703
6,496,972
6,008,087
3,209,288
2,411,212
1,550,313
4,692,130
253,761
142,412
26,935
390,210
341,742
34,221
89,916
55,259
17,886,314
1,025,275
556,869
167,359
65,007
2,761,393
175,016
44,037
(Continued)
31
Held Company Name
Marketable Securities Type and Name
Relationship with the Company
Financial Statement Account
December 31, 2012
Shares/Units
(In Thousands)
Carrying Value
(Foreign Currencies
in Thousands)
Percentage of
Ownership (%)
Market Value or Net
Asset Value
(Foreign Currencies
in Thousands)
Note
TSMC Solar
TSMC SSL
TSMC GN
Capital
VTAF III
Stock
TSMC Lighting NA
Stock
TSMC Solar
TSMC SSL
Investee accounted for using equity
Investments accounted for using
-
$ 1,322,024
49
$ 1,322,024
method
equity method
Subsidiary
Investments accounted for using
equity method
1
2,864
100
2,864
Investee accounted for using equity
Investments accounted for using
method
equity method
Investee accounted for using equity
〃
4,294
3,420
23,076
19,157
-
1
23,076
19,157
TSMC Partners
Stock
TSMC Development, Inc. (TSMC Development)
method
Subsidiary
Investments accounted for using
equity method
VisEra Holding Company
TSMC Technology
InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)
InveStar Semiconductor Development Fund, Inc. (ISDF)
TSMC Canada
Mcube Inc.
Investee accounted for using equity
method
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Investee accounted for using equity
method
〃
〃
〃
〃
〃
〃
-
US$ 604,367
100
US$ 604,367
43,000
US$ 104,540
49
US$ 104,540
-
14,153
787
2,300
6,333
US$ 11,721
US$ 10,479
US$ 7,805
US$ 4,589
-
100
97
97
100
25
6
-
US$ 11,721
US$ 10,479
US$ 7,805
US$ 4,589
-
US$ 5,000
US$ 3,753
-
-
Financial assets carried at cost
-
US$ 5,000
Available-for-sale financial assets
270
US$ 3,753
Subsidiary
Investments accounted for using
293,637
US$ 262,053
100
US$ 262,053
equity method
TSMC North America
TSMC Development
Emerging Alliance
Fund
Shanghai Walden Venture Capital Enterprise
Stock
Spansion Inc.
Stock
WaferTech
Common stock
Audience, Inc.
Global Investment Holding Inc.
RichWave Technology Corp.
Preferred stock
Next IO, Inc.
QST Holdings, LLC
-
-
-
-
-
Capital
VentureTech Alliance Holdings, LLC (VTA Holdings)
Subsidiary
VTAF II
Common stock
Audience, Inc.
Sentelic
Aether Systems, Inc.
RichWave Technology Corp.
-
-
-
-
32
Available-for-sale financial assets
Financial assets carried at cost
〃
32
11,124
4,074
US$ 335
US$ 3,065
US$ 1,545
Financial assets carried at cost
〃
Investments accounted for using
equity method
Available-for-sale financial assets
Financial assets carried at cost
〃
〃
8
-
-
US$ 500
US$ 142
-
203
1,806
1,800
1,267
US$ 2,107
US$ 2,607
US$ 1,701
US$ 1,036
-
6
10
-
4
7
1
9
23
3
US$ 335
US$ 3,065
US$ 1,545
US$ 500
US$ 142
-
US$ 2,107
US$ 2,607
US$ 1,701
US$ 1,036
(Continued)
Held Company Name
Marketable Securities Type and Name
Relationship with the Company
Financial Statement Account
December 31, 2012
Shares/Units
(In Thousands)
Carrying Value
(Foreign Currencies
in Thousands)
Percentage of
Ownership (%)
Market Value or Net
Asset Value
(Foreign Currencies
in Thousands)
Note
VTAF II
VTAF III
ISDF
ISDF II
Xintec
TSMC Solar Europe
Preferred stock
5V Technologies, Inc.
Aquantia
Cresta Technology Corporation
Impinj, Inc.
Next IO, Inc.
QST Holdings, LLC
Capital
VTA Holdings
Common stock
Mutual-Pak Technology Co., Ltd.
InvenSense, Inc.
Accton Wireless Broadband Corp.
Preferred stock
BridgeLux, Inc.
GTBF, Inc.
LiquidLeds Lighting Corp.
Neoconix, Inc.
Powervation, Ltd.
Stion Corp.
Tilera, Inc.
Validity Sensors, Inc.
Capital
Growth Fund Limited (Growth Fund)
VTA Holdings
Common stock
Integrated Memory Logic, Inc.
Memsic, Inc.
Preferred stock
Sonics, Inc.
Common stock
Memsic, Inc.
Alchip Technologies Limited
Sonics, Inc.
Goyatek Technology, Corp.
Auden Technology MFG. Co., Ltd.
Preferred stock
Sonics, Inc.
Capital
Compositech Ltd.
Stock
TSMC Solar Europe GmbH
-
-
-
-
-
-
Financial assets carried at cost
〃
〃
〃
〃
〃
Subsidiary
Investments accounted for using
equity method
2,890
4,556
92
711
179
-
-
US$ 2,168
US$ 4,316
US$ 28
US$ 1,100
US$ 1,219
US$ 593
-
4
2
-
-
1
13
31
US$ 2,168
US$ 4,316
US$ 28
US$ 1,100
US$ 1,219
US$ 593
-
Subsidiary
Investments accounted for using
15,643
US$ 2,120
58
US$ 2,120
-
-
-
-
-
-
-
-
-
-
equity method
Available-for-sale financial assets
Financial assets carried at cost
Financial assets carried at cost
〃
〃
〃
〃
〃
〃
〃
Subsidiary
Subsidiary
Investments accounted for using
equity method
〃
93
2,249
US$ 1,037
US$ 315
-
6
US$ 1,037
US$ 315
7,522
1,154
1,600
4,147
509
8,152
3,890
11,192
-
-
US$ 9,379
US$ 1,500
US$ 800
US$ 4,841
US$ 7,938
US$ 45,467
US$ 3,025
US$ 4,197
3
N/A
11
4
16
15
2
4
US$ 9,379
US$ 1,500
US$ 800
US$ 4,841
US$ 7,938
US$ 45,467
US$ 3,025
US$ 4,197
US$ 368
100
US$ 368
-
-
-
-
-
-
-
-
-
-
-
Available-for-sale financial assets
〃
1,402
1,286
US$ 4,322
US$ 4,294
Financial assets carried at cost
230
US$ 497
Available-for-sale financial assets
Financial assets carried at cost
〃
〃
〃
1,072
7,520
278
745
1,035
US$ 3,581
US$ 3,664
US$ 10
US$ 163
US$ 220
Financial assets carried at cost
264
US$ 455
Financial assets carried at cost
587
-
62
2
5
2
4
14
3
6
3
3
3
-
US$ 4,322
US$ 4,294
US$ 497
US$ 3,581
US$ 3,664
US$ 10
US$ 163
US$ 220
US$ 455
-
Subsidiary
Investments accounted for using
equity method
-
EUR 4,469
100
EUR 4,469
(Continued)
33
Held Company Name
Marketable Securities Type and Name
Relationship with the Company
Financial Statement Account
December 31, 2012
Shares/Units
(In Thousands)
Carrying Value
(Foreign Currencies
in Thousands)
Percentage of
Ownership (%)
Market Value or Net
Asset Value
(Foreign Currencies
in Thousands)
Note
TSMC Global
Stock
ASML
Money market fund
Ssga Cash Mgmt Global Offshore
Corporate bond
Aust + Nz Banking Group
Commonwealth Bank of Australia
Commonwealth Bank of Australia
Deutsche Bank AG London
JP Morgan Chase + Co.
Westpac Banking Corp.
-
-
-
-
-
-
-
-
Available-for-sale financial assets
20,993
US$ 1,334,501
5
US$ 1,334,501
Available-for-sale financial assets
50
US$ 50
N/A
US$ 50
Held-to-maturity financial assets
〃
〃
〃
〃
〃
20,000
25,000
25,000
20,000
35,000
25,000
US$ 19,999
US$ 25,000
US$ 25,000
US$ 19,999
US$ 35,006
US$ 25,000
N/A
N/A
N/A
N/A
N/A
N/A
US$ 20,033
US$ 25,006
US$ 25,043
US$ 20,007
US$ 34,956
US$ 25,013
(Concluded)
34
TABLE 3
Taiwan Semiconductor Manufacturing Company Limited and Investees
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Company
Name
Marketable Securities Type and
Name
Financial Statement
Account
Counter-party
Nature of
Relationship
Beginning Balance
Acquisition
Disposal
Ending Balance (Note)
Shares/Units
(In Thousands)
Amount
(Foreign
Currencies in
Thousands)
Shares/Units
(In Thousands)
Amount
(Foreign
Currencies in
Thousands)
Shares/Units
(In Thousands)
Amount
(Foreign
Currencies in
Thousands)
Carrying Value
(Foreign
Currencies in
Thousands)
Gain/Loss on
Disposal
(Foreign
Currencies in
Thousands)
Shares/Units
(In Thousands)
Amount
(Foreign
Currencies in
Thousands)
TSMC
Corporate bond
Nan Ya Plastics Corporation
China Steel Corporation
Stock
Semiconductor Manufacturing
International Corporation
TSMC SSL
Capital
TSMC GN
TSMC Partners
Corporate bond
General Elec Cap Corp. Mtn
VTAF II
VTAF III
General Elec Cap Corp. Mtn
Preferred stock
Power Analog Microelectronics
Stock
InvenSense, Inc.
TSMC Global
Stock
ASML
Government bond
Societe De Financement De Lec
Held-to-maturity financial
assets
〃
Available-for-sale
financial assets
Investments accounted
for using equity
method
Investments accounted for
using equity method
Held-to-maturity financial
assets
〃
Financial assets carried at
cost
Available-for-sale financial
assets
Available-for-sale financial
assets
Held-to-maturity financial
assets
Corporate bond
Nationwide Building Society-UK
Government Guarantee
Held-to-maturity financial
assets
Westpac Banking Corp. 12/12 Frn 〃
ISDF
Common stock
Integrated Memory Logic, Inc.
TS MC Solar
Europe
Stock
TSMC Solar Europe GmbH
Available-for-sale financial
assets
Investments accounted for
using equity method
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$ 1,099,629
303,798
1,789,493
2,617,134
-
-
-
$ -
-
-
Subsidiary
227,000
1,746,893
203,400
2,034,000
Subsidiary
-
-
- US$ 20,012
- US$ 20,059
7,330 US$ 3,482
796 US$ 7,932
-
-
-
-
-
100,000
-
-
-
-
-
-
$ 550,000
$ 550,000
$ -
150,000
150,000
-
-
-
$ 549,881
151,265
511,535
612,834
502,200
110,634
1,277,958
1,845,052
-
-
-
-
-
-
- US$ 20,000 US$ 20,000
- US$ 20,000 US$ 20,000
-
-
-
-
7,330 US$ 3,345 US$ 3,482 US$ (137)
430,400
2,411,212
-
-
-
-
65,007
-
-
-
703 US$ 7,460 US$ 861 US$ 6,599
93 US$ 1,037
-
-
20,993 US$ 1,085,474
-
-
-
15,000 US$ 15,000
8,000 US$ 8,000
5,000 US$ 5,000
-
-
-
2,161 US$ 6,289
127
-
-
-
-
15,000 US$ 15,000 US$ 15,000
8,000 US$ 8,000 US$ 8,000
5,000 US$ 5,000 US$ 5,000
-
-
-
-
20,993 US$ 1,334,501
-
-
-
-
-
-
886 US$ 3,152 US$ 207 US$ 2,945
1,402 US$ 4,322
Note: The ending balance includes the amortization of premium/discount on bonds investments, translation adjustments, equity in earnings/losses of equity method investees and other adjustments to long-term investments accounted for using equity method.
35
Subsidiary
-
EUR 5,103
-
EUR 2,500
-
-
-
-
-
EUR 4,469
TABLE 4
Taiwan Semiconductor Manufacturing Company Limited and Investees
ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars)
Company Name
Types of Property
Transaction Date
Transaction
Amount
Payment Term
Counter-party
Nature of
Relationships
Prior Transaction of Related Counter-party
Owner
Relationships
Transfer
Date
Amount
Price Reference
Purpose of Acquisition
Other
Terms
TSMC
Fab
Fab
Fab
Fab
Fab
Fab
Fab
Fab
Land
Fe bruary 7, 2012 to
$ 249,912
By the construction
MandarTech Interiors
December 27, 2012
Fe bruary 7, 2012 to
December 27, 2012
Fe bruary 13, 2012 to
December 28, 2012
Fe bruary 13, 2012 to
December 27, 2012
Ma rch 19, 2012 to
December 27, 2012
March 19, 2012 to July
27, 2012
May 28, 2012 to
November 27, 2012
August 28, 2012 to
December 26, 2012
November 21, 2012
progress
Inc.
219,807
By the construction
I Domain Industrial
progress
Co., Ltd.
5,015,656
By the construction
Da Cin Construction
progress
Co., Ltd.
1,766,332
By the construction
Fu Tsu Construction
progress
Co., Ltd.
2,958,930
By the construction
China Steel Structure
progress
185,115
By the construction
progress
320,705
By the construction
progress
Co., Ltd.
Toko Steel Structure
Corporation
Tasa Construction
Corporation
131,678
By the construction
Shiny G&M Associated
963,600
progress
By the contract
Co., Ltd.
Miaoli County
Government
-
-
-
-
-
-
-
-
-
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
36
TABLE 5
Taiwan Semiconductor Manufacturing Company Limited and Investees
TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Transaction Details
Abnormal Transaction
Notes/Accounts Payable or Receivable
Company Name
Related Party
Nature of Relationships
Purchases/Sales
Amount
(US$ in Thousands)
% to Total
Payment Terms
Unit Price
(Note)
Payment Terms
(Note)
TSMC
TSMC North America
GUC
VIS
TSMC China
WaferTech
VIS
SSMC
Subsidiary
Investee accounted for using equity method
Investee accounted for using equity method
Subsidiary
Indirect subsidiary
Investee accounted for using equity method
Investee accounted for using equity method
Sales
Sales
Sales
Purchases
Purchases
Purchases
Purchases
TSMC North
America
GUC
Investee accounted for using equity method
Sales
Mcube Inc.
Investee accounted for using equity method
Sales
by TSMC
by TSMC
$ 326,768,469
4,370,617
177,331
15,708,447
8,026,114
4,475,674
3,638,633
509,890
(US$ 17,238)
249,375
(US$ 8,431)
64
1
-
26
14
8
6
-
-
Net 30 days after invoice date
Net 30 days after monthly closing
Net 30 days after monthly closing
Net 30 days after monthly closing
Net 30 days after monthly closing
Net 30 days after monthly closing
Net 30 days after monthly closing
Net 30 days after invoice date
Net 60 days after invoice date
Xintec
OmniVision
Parent company of director (represented for
Sales
1,261,163
40
Net 30 days after monthly closing
Xintec)
Note: The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Ending Balance
(US$ in
Thousands)
$ 40,748,905
238,380
-
(1,616,342)
(580,064)
(364,790)
(351,389)
35,032
(US$ 1,206)
80,212
(US$ 2,762)
215,403
Note
% to Total
72
-
-
10
3
2
2
-
-
50
37
TABLE 6
Taiwan Semiconductor Manufacturing Company Limited and Investees
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Company Name
Related Party
Nature of Relationships
Ending Balance
(US$ in Thousands)
Turnover Days (Note 1)
Overdue
Amount
Action Taken
TSMC
TSMC North America
GUC
VIS
Subsidiary
Investee accounted for using equity method
Investee accounted for using equity method
$ 40,837,732
238,380
122,893
TSMC Partners
TSMC China
The same parent company
TSMC
TSMC Solar
The same parent company
Development
TSMC SSL
The same parent company
3,793,421
(US$ 130,636)
1,496,194
(US$ 51,525)
203,277
(US$ 7,000)
Xintec
OmniVision
Parent company of director (represented for
215,403
Xintec)
TSMC Technology
TSMC
Parent company
WaferTech
TSMC
Parent company
117,283
(US$ 4,039)
580,064
(US$ 19,976)
Note 1: The calculation of turnover days excludes other receivables from related parties.
Note 2: The ending balance is primarily consisted of other receivables, which is not applicable for the calculation of turnover days.
37
15
(Note 2)
(Note 2)
(Note 2)
(Note 2)
66
(Note 2)
16
$ 15,905,710
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Amounts Received in Subsequent
Period
$ 17,191,890
-
-
Allowance for Bad Debts
$ -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
38
TABLE 7
Taiwan Semiconductor Manufacturing Company Limited and Investees
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Investor
Company
TSMC
Investee Company
Location
Main Businesses and Products
Original Investment Amount
Balance as of December 31, 2012
December 31,
2012
(Foreign
Currencies in
Thousands)
December 31,
2011
(Foreign
Currencies in
Thousands)
Shares
(In Thousands)
Percentage of
Ownership
Carrying Value
(Foreign
Currencies in
Thousands)
Net Income
(Losses) of the
Investee (Foreign
Currencies in
Thousands)
Equity in the
Earnings (Losses)
(Note 1)
(Foreign
Currencies in
Thousands)
Note
TSMC Global
TSMC Partners
Tortola, British Virgin Islands
Tortola, British Virgin Islands
Investment activities
Investing in companies involved in the design,
$ 42,327,245
31,456,130
$ 42,327,245
31,456,130
1
988,268
100
100
$ 49,954,386
38,635,129
$ 469,933
5,088,931
$ 469,933
5,088,451
Subsidiary
Subsidiary
manufacture, and other related business in the
semiconductor industry
TSMC China
Shanghai, China
Manufacturing and selling of integrated circuits
18,939,667
18,939,667
-
100
17,828,683
4,757,121
4,740,524
Subsidiary
at the order of and pursuant to product design
specifications provided by customers
VIS
SSMC
Hsin-Chu, Taiwan
Research, design, development, manufacture,
13,232,288
13,232,288
628,223
packaging, testing and sale of memory integrated
circuits, LSI, VLSI and related parts
Singapore
Fabrication and supply of integrated circuits
5,120,028
5,120,028
314
TSMC Solar
Tai-Chung, Taiwan
Engaged in researching, developing, designing,
11,180,000
11,180,000
1,118,000
TSMC North America
San Jose, California, U.S.A.
TSMC SSL
Hsin-Chu, Taiwan
manufacturing and selling renewable energy and
saving related technologies and products
Selling and marketing of integrated circuits and
semiconductor devices
Engaged in researching, developing, designing,
manufacturing and selling solid state lighting
devices and related applications products and
systems
333,718
333,718
11,000
4,304,000
2,270,000
430,400
Xintec
GUC
VTAF III
VTAF II
TSMC Europe
Emerging Alliance
TSMC Japan
TSMC GN
TSMC Korea
Taoyuan, Taiwan
Wafer level chip size packaging service
1,357,890
1,357,890
Hsin-Chu, Taiwan
Researching, developing, manufacturing, testing and
386,568
386,568
Cayman Islands
Cayman Islands
Amsterdam, the Netherlands
Cayman Islands
Yokohama, Japan
Taipei, Taiwan
Seoul, Korea
marketing of integrated circuits
Investing in new start-up technology companies
Investing in new start-up technology companies
Marketing and engineering supporting activities
Investing in new start-up technology companies
Marketing activities
Investment activities
Customer service and technical supporting activities
1,896,914
704,447
15,749
852,258
83,760
100,000
13,656
2,074,155
949,267
15,749
892,855
83,760
-
13,656
94,950
46,688
-
-
-
-
6
-
80
TSMC Solar
Motech
Taipei, Taiwan
Manufacturing and sales of solar cells, crystalline
silicon solar cell, and test and measurement
instruments and design and construction of solar
power systems
6,228,661
6,228,661
87,480
VTAF III
Cayman Islands
Investing in new start-up technology companies
1,801,918
1,795,131
TSMC Solar Europe
TSMC Solar NA
Amsterdam, the Netherlands
Delaware, U.S.A.
Investing in solar related business
Selling and marketing of solar related products
504,107
205,772
411,032
147,686
TSMC SSL
TSMC Lighting NA
Delaware, U.S.A.
Selling and marketing of solid state lighting related
3,133
3,133
products
-
-
1
1
40
39
99
100
95
40
35
50
98
100
99
100
100
100
20
49
100
100
100
9,462,038
2,329,808
770,379
6,710,956
4,721,908
1,831,634
Investee accounted for
using equity method
Investee accounted for
using equity method
6,031,369
(4,037,825)
(4,044,944)
Subsidiary
3,209,288
312,232
312,232
Subsidiary
2,411,212
(1,466,733)
(1,397,589)
Subsidiary
1,550,313
(91,177)
(49,604)
Investee with a controlling
1,222,972
612,369
209,312
financial interest
Investee accounted for
using equity method
1,047,285
563,056
235,761
167,359
142,412
65,007
26,935
(177,152)
62,349
34,931
(2,940)
3,786
(24,928)
2,602
122,852
61,102
34,931
(2,925)
3,786
(24,928)
2,602
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
2,998,413
(5,037,203)
Note 2
1,322,024
(177,152)
Note 2
Investee accounted for
using equity method
Investee accounted for
using equity method
175,016
44,037
2,864
(119,668)
(65,268)
Note 2
Note 2
Subsidiary
Subsidiary
(7)
Note 2
Subsidiary
(Continued)
39
Investor
Company
Investee Company
Location
Main Businesses and Products
Original Investment Amount
Balance as of December 31, 2012
December 31,
2012
(Foreign
Currencies in
Thousands)
December 31,
2011
(Foreign
Currencies in
Thousands)
Shares
(In Thousands)
Percentage of
Ownership
Carrying Value
(Foreign
Currencies in
Thousands)
Net Income
(Losses) of the
Investee(Foreign
Currencies in
Thousands)
Equity in the
Earnings (Losses)
(Note 1)
(Foreign
Currencies in
Thousands)
Note
TSMC Partners
TSMC Development
VisEra Holding Company
Delaware, U.S.A.
Cayman Islands
Investment activities
Investing in companies involved in the design,
US$ 0.001 US$ 0.001
US$ 43,000 US$ 43,000
TSMC Technology
ISDF II
ISDF
TSMC Canada
Mcube Inc.
Delaware, U.S.A.
Cayman Islands
Cayman Islands
Ontario, Canada
Delaware, U.S.A.
manufacturing, and other related businesses in
the semiconductor industry
Engineering support activities
Investing in new start-up technology companies
Investing in new start-up technology companies
Engineering support activities
Research, development, and sale of micro-
semiconductor device
US$ 0.001 US$ 0.001
US$ 14,153 US$ 14,153
US$ 787 US$ 787
US$ 2,300 US$ 2,300
US$ 1,800 US$ 1,800
-
43,000
-
14,153
787
2,300
6,333
100 US$ 604,367 US$ 144,333
49 US$ 104,540 US$ 30,091
100 US$ 11,721 US$ 1,106
97 US$ 10,479 US$ (121)
97 US$ 7,805 US$ 2,493
100 US$ 4,589 US$ 422
US$ (12,599)
-
25
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Subsidiary
Investee accounted for
using equity method
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Investee accounted for
using equity method
TSMC
WaferTech
Washington, U.S.A.
Manufacturing, selling, testing and computer-
US$ 280,000 US$ 280,000
293,637
100 US$ 262,053 US$ 142,551
Note 2
Subsidiary
Development
VTAF III
Mutual-Pak Technology Co.,
Taipei, Taiwan
Ltd.
Growth Fund
VTA Holdings
Cayman Islands
Delaware, U.S.A.
aided designing of integrated circuits and other
semiconductor devices
Manufacturing and selling of electronic parts and
researching, developing, and testing of RFID
Investing in new start-up technology companies
Investing in new start-up technology companies
VTAF II
VTA Holdings
Delaware, U.S.A.
Investing in new start-up technology companies
Emerging Alliance
VTA Holdings
Delaware, U.S.A.
Investing in new start-up technology companies
US$ 5,212 US$ 3,937
15,643
58 US$ 2,120
US$ (1,422)
Note 2
Subsidiary
US$ 1,830 US$ 1,830
-
-
-
-
-
-
-
-
-
-
-
100 US$ 368
-
62
US$ (141)
-
Note 2
Note 2
Subsidiary
Subsidiary
31
7
-
-
-
-
Note 2
Subsidiary
Note 2
Subsidiary
100
EUR 4,469
EUR (3,133)
Note 2
Subsidiary
TSMC Solar Europe
TSMC Solar Europe GmbH
Hamburg, Germany
Selling of solar related products and providing
EUR 12,400
EUR 9,900
customer service
TSMC GN
TSMC Solar
Tai-Chung, Taiwan
Engaged in researching, developing, designing,
$ 42,945
$ -
4,294
-
$ 23,076
$ (4,037,825)
Note 2
TSMC SSL
Hsin-Chu, Taiwan
manufacturing and selling renewable energy and
saving related technologies and products
Engaged in researching, developing, designing,
manufacturing and selling solid state lighting
devices and related applications products and
systems
34,266
-
3,420
1
19,157
(1,466,733)
Note 2
Note 1:Equity in earnings/losses of investees includes the effect of unrealized gross profit from affiliates.
Note 2:The equity in the earnings/losses of the investee company is not reflected herein as such amount is already included in the equity in the earnings/losses of the investor company.
Investee accounted for
using equity method
Investee accounted for
using equity method
(Concluded)
40
TABLE 8
Taiwan Semiconductor Manufacturing Company Limited and Investees
INFORMATION ON INVESTMENT IN MAINLAND CHINA
FOR THE YEAR ENDED DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Investee Company
Main Businesses and Products
TSMC China
Ma nufacturing and selling of
integrated circuits at the order
of and pursuant to product
design specifications provided by
customers
Total Amount of Paid-in Capital
(Foreign Currencies in
Thousands)
Method of Investment
$ 18,939,667
(RMB 4,502,080)
(Note 1)
Accumulated Outflow of
Investment from Taiwan as of
January 1, 2012
(US$ in Thousands)
$ 18,939,667
(US$ 596,000)
Investment Flows
Outflow
Inflow
$ -
$ -
Accumulated Outflow of
Investment from Taiwan as of
December 31, 2012
(US$ in Thousands)
$ 18,939,667
(US$ 596,000)
Sh anghai Walden Venture Capital
Investing in new start-up technology
Enterprise
companies
2,324,062
(US$ 78,791)
(Note 2)
147,485
(US$ 5,000)
-
-
147,485
(US$ 5,000)
Investee Company
Percentage of Ownership
Equity in the Earnings (Losses)
TSMC China
Sh anghai Walden Venture Capital
Enterprise
100%
6%
$ 4,740,524
(Note 3)
Carrying Value as of
December 31, 2012
(US$ in Thousands)
$ 17,828,683
Accumulated Inward Remittance of Earnings as of
December 31, 2012
$ -
(Note 4)
145,190
(US$ 5,000)
-
Accumulated Investment in Mainland China as of
December 31, 2012 (US$ in Thousands)
Investment Amounts Authorized by Investment Commission,
MOEA (US$ in Thousands)
Upper Limit on Investment (US$ in Thousands)
$ 19,087,152
(US$ 601,000)
$ 19,087,152
(US$ 601,000)
$ 19,087,152
(US$ 601,000)
Note 1: TSMC directly invested US$596,000 thousand in TSMC China.
Note 2: TSMC indirectly invested in China company through third region, TSMC Partners.
Note 3: Amount was recognized based on the audited financial statements.
Note 4: TSMC Partners invested in financial assets carried at cost, equity in the earnings from which was not recognized.
41
8. Consolidated Financial Statements for the Years Ended December 31, 2012 and 2011 and Independent Auditors’ Report
REPRESENTATION LETTER
The entities that are required to be included in the combined financial statements of Taiwan Semiconductor
Manufacturing Company Limited as of and for the year ended December 31, 2012, under the Criteria
Governing the Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial
Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements
prepared in conformity with the Statement of Financial Accounting Standards No. 7, “Consolidated Financial
Statements.” In addition, the information required to be disclosed in the combined financial statements
is included in the consolidated financial statements. Consequently, Taiwan Semiconductor Manufacturing
Company Limited and Subsidiaries do not prepare a separate set of combined financial statements.
Very truly yours,
Taiwan Semiconductor Manufacturing Company Limited
By
MORRIS CHANG
Chairman
February 5, 2013
42
INDEPENDENT AUDITORS’ REPORT
Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated financial
position, results of operations and cash flows in accordance with accounting principles and practices
generally accepted in the Republic of China and not those of any other jurisdictions. The standards,
procedures and practices to audit such consolidated financial statements are those generally accepted and
applied in the Republic of China.
For the convenience of readers, the auditors’ report and the accompanying consolidated financial statements
have been translated into English from the original Chinese version prepared and used in the Republic of
China. If there is any conflict between the English version and the original Chinese version or any difference
in the interpretation of the two versions, the Chinese-language auditors’ report and consolidated financial
statements shall prevail.
The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company Limited
We have audited the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing
Company Limited and subsidiaries as of December 31, 2012 and 2011, and the related consolidated
statements of income, changes in shareholders’ equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by
Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules
and standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Taiwan Semiconductor Manufacturing Company Limited
and subsidiaries as of December 31, 2012 and 2011, and the results of their consolidated operations and
their consolidated cash flows for the years then ended in conformity with the Guidelines Governing the
Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the
Republic of China.
February 5, 2013
43
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2012 AND 2011
(In Thousands of New Taiwan Dollars, Except Par Value)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 2 and 4)
Financial assets at fair value through profit or loss (Notes 2, 5 and 26)
Available-for-sale financial assets (Notes 2, 6 and 26)
Held-to-maturity financial assets (Notes 2, 7 and 26)
Receivables from related parties (Notes 3 and 27)
Notes and accounts receivable (Note 3)
Allowance for doubtful receivables (Notes 2, 3 and 8)
Allowance for sales returns and others (Notes 2 and 8)
Other receivables from related parties (Notes 3 and 27)
Other financial assets (Note 28)
Inventories (Notes 2 and 9)
Deferred income tax assets (Notes 2 and 20)
Prepaid expenses and other current assets
Total current assets
LONG-TERM INVESTMENTS (Notes 2, 6, 7, 10, 12 and 26)
Investments accounted for using equity method
Available-for-sale financial assets
Held-to-maturity financial assets
Financial assets carried at cost
Total long-term investments
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 13 and 27)
Cost
Land and land improvements
Buildings
Machinery and equipment
Office equipment
Leased assets
Accumulated depreciation
Advance payments and construction in progress
2012
Amount
$ 143,410,588
39,554
2,410,635
5,056,973
353,811
58,257,798
(480,212)
(6,038,003)
185,550
473,833
37,830,498
8,001,202
2,786,408
252,288,635
23,430,020
38,751,245
-
3,605,077
65,786,342
2011
Amount
$ 143,472,277
15,360
3,308,770
3,825,680
185,764
46,321,240
(490,952)
(5,068,263)
122,292
617,142
24,840,582
5,936,490
2,174,014
225,260,396
24,900,332
-
5,243,167
4,315,005
34,458,504
%
15
-
-
1
-
6
-
(1)
-
-
4
1
-
26
3
4
-
-
7
%
19
-
-
1
-
6
-
(1)
-
-
3
1
-
29
3
-
1
1
5
1,527,124
197,314,677
1,279,167,719
19,973,722
766,732
1,498,749,974
(1,000,284,504)
119,063,976
-
21
134
2
-
157
(105)
13
1,541,128
172,872,550
1,057,588,736
16,969,266
791,480
1,249,763,160
(876,252,220)
116,863,976
-
22
137
2
-
161
(113)
15
Net property, plant and equipment
617,529,446
65
490,374,916
63
INTANGIBLE ASSETS
Goodwill (Note 2)
Deferred charges, net (Notes 2 and 14)
Total intangible assets
OTHER ASSETS
Deferred income tax assets, net (Notes 2 and 20)
Refundable deposits (Note 27)
Others (Notes 2 and 27)
Total other assets
5,523,707
5,435,862
10,959,569
4,776,015
2,426,712
1,267,886
8,470,613
1
-
1
1
-
-
1
5,693,999
5,167,564
10,861,563
7,436,717
4,518,863
1,353,983
13,309,563
1
-
1
1
1
-
2
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Short-term loans (Note 15)
Financial liabilities at fair value through profit or loss (Notes 2, 5 and 26)
Hedging derivative financial liabilities (Notes 2, 11 and 26)
Accounts payable
Payables to related parties (Note 27)
Income tax payable (Notes 2 and 20)
Salary and bonus payable
Accrued profit sharing to employees and bonus to directors and supervisors
(Notes 2 and 22)
Payables to contractors and equipment suppliers
Accrued expenses and other current liabilities (Notes 13, 18, 26 and 30)
Current portion of bonds payable and long-term bank loans (Notes 16, 17 and 26)
2012
Amount
$ 34,714,929
15,625
-
14,490,429
748,613
15,635,594
7,535,296
11,186,591
44,831,798
13,148,944
128,125
2011
Amount
$ 25,926,528
13,742
232
10,530,487
1,328,521
10,656,124
6,148,499
9,081,293
35,540,526
13,218,235
4,562,500
%
4
-
-
1
-
2
1
1
5
1
-
%
3
-
-
1
-
1
1
1
5
2
1
Total current liabilities
142,435,944
15
117,006,687
15
LONG-TERM LIABILITIES
Bonds payable (Notes 16 and 26)
Long-term bank loans (Notes 17, 26 and 28)
Other long-term payables (Notes 18, 26 and 30)
Obligations under capital leases (Notes 2, 13 and 26)
Total long-term liabilities
OTHER LIABILITIES
Accrued pension cost (Notes 2 and 19)
Guarantee deposits
Others (Note 27)
Total other liabilities
Total liabilities
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock - NT$10 par value (Note 22)
Authorized: 28,050,000 thousand shares
Issued: 25,924,435 thousand shares in 2012
25,916,222 thousand shares in 2011
Capital surplus (Notes 2 and 22)
Retained earnings (Note 22)
Appropriated as legal capital reserve
Appropriated as special capital reserve
Unappropriated earnings
Others
Cumulative translation adjustments (Note 2)
Net loss not recognized as pension cost (Note 2)
Unrealized gain/loss on financial instruments (Notes 2, 11 and 26)
Equity attributable to shareholders of the parent
MINORITY INTERESTS (Note 2)
Total shareholders’ equity
80,000,000
1,359,375
54,000
748,115
82,161,490
3,979,541
203,890
500,041
4,683,472
9
-
-
-
9
-
-
-
-
18,000,000
1,587,500
-
870,993
20,458,493
3,908,508
443,983
403,720
4,756,211
3
-
-
-
3
-
-
-
-
229,280,906
24
142,221,391
18
259,244,357
56,137,809
115,820,123
7,606,224
287,174,942
410,601,289
(10,753,763)
(5,299)
7,973,321
(2,785,741)
723,197,714
2,555,985
725,753,699
27
6
12
1
30
43
(1)
-
1
-
76
-
76
259,162,226
55,846,357
102,399,995
6,433,874
213,357,286
322,191,155
(6,433,369)
-
(1,172,855)
(7,606,224)
629,593,514
2,450,037
632,043,551
33
7
13
1
28
42
(1)
-
-
(1)
81
1
82
TOTAL
$ 955,034,605
100
$ 774,264,942
100
TOTAL
$ 955,034,605
100
$ 774,264,942
100
The accompanying notes are an integral part of the consolidated financial statements.
44
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
2012
2011
Amount
%
Amount
%
GROSS SALES (Notes 2 and 27)
$ 513,435,603
$ 430,490,500
NON-OPERATING EXPENSES AND LOSSES
SALES RETURNS AND ALLOWANCES (Notes 2 and 8)
7,187,023
3,409,855
NET SALES (Note 34)
506,248,580
100
427,080,645
100
COST OF SALES (Notes 9, 21 and 27)
GROSS PROFIT BEFORE AFFILIATES ELIMINATION
UNREALIZED GROSS PROFIT FROM AFFILIATES (Note 2)
GROSS PROFIT
OPERATING EXPENSES (Notes 21 and 27)
Research and development
General and administrative
Marketing
Total operating expenses
INCOME FROM OPERATIONS (Note 34)
NON-OPERATING INCOME AND GAINS
Equity in earnings of equity method investees, net (Notes 2 and 10)
Interest income
Settlement income (Note 30)
Foreign exchange gain, net (Note 2)
Gain on settlement and disposal of financial assets, net (Notes 2 and 26)
Technical service income (Note 27)
Valuation gain on financial instruments, net (Notes 2, 5 and 26)
Others (Notes 2 and 27)
Total non-operating income and gains
262,628,681
243,619,899
(25,029)
243,594,870
40,402,138
17,638,088
4,497,451
62,537,677
181,057,193
2,028,611
1,645,036
883,845
582,498
541,089
496,654
-
604,304
6,782,037
52
48
-
48
8
3
1
12
36
1
-
-
-
-
-
-
-
1
232,937,388
194,143,257
(74,029)
194,069,228
33,829,880
14,164,114
4,517,816
52,511,810
141,557,418
897,611
1,479,514
947,340
-
233,214
407,089
507,432
886,327
5,358,527
55
45
-
45
8
3
1
12
33
-
1
-
-
-
-
-
-
1
(Continued)
Impairment of financial assets (Notes 2, 6, 10, 12 and 26)
Interest expense
Impairment loss on idle assets (Note 2)
Loss on disposal of property, plant and equipment (Note 2)
Foreign exchange loss, net (Note 2)
Others (Notes 2, 5 and 26)
Total non-operating expenses and losses
INCOME BEFORE INCOME TAX
INCOME TAX EXPENSE (Notes 2 and 20)
NET INCOME
ATTRIBUTABLE TO:
Shareholders of the parent
Minority interests
EARNINGS PER SHARE (NT$, Note 25)
Basic earnings per share
Diluted earnings per share
2012
2011
Amount
%
Amount
%
$ 4,231,602
1,020,422
444,505
31,816
-
556,909
6,285,254
181,553,976
15,590,287
1
-
-
-
-
-
1
36
3
$ 265,515
626,725
98,009
200,673
185,555
391,791
1,768,268
145,147,677
10,694,417
$ 165,963,689
33
$ 134,453,260
$ 166,158,802
(195,113)
$ 165,963,689
33
-
33
$ 134,201,279
251,981
$ 134,453,260
2012
2011
-
-
-
-
-
-
-
34
3
31
31
-
31
Income Attributable to
Shareholders of the Parent
Income Attributable to
Shareholders of the Parent
Before
Income Tax
After
Income Tax
Before
Income Tax
After
Income Tax
$ 7.01
$ 7.01
$ 6.41
$ 6.41
$ 5.59
$ 5.59
$ 5.18
$ 5.18
The accompanying notes are an integral part of the consolidated financial statements.
(Concluded)
45
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
(In Thousands of New Taiwan Dollars, Except Dividends Per Share)
Capital Stock - Common Stock
Retained Earnings
Others
Equity Attributable to Shareholders of the Parent
Shares
(In Thousands)
Capital Surplus
Amount
Legal Capital
Reserve
Special Capital
Reserve
Unappropriated
Earnings
Total
Cumulative
Translation
Adjustments
Net Loss not
Recognized
as Pension Cost
Unrealized
Gain/Loss
on Financial
Instruments
Treasury
Stock
Total
Minority
Interests
Total
Shareholders’
Equity
BALANCE, JANUARY 1, 2011
25,910,078 $ 259,100,787 $ 55,698,434 $ 86,239,494 $ 1,313,047 $ 178,227,030 $ 265,779,571 $ (6,543,163) $ - $ 109,289 $ - $ 574,144,918 $ 4,559,487 $ 578,704,405
Appropriations of prior year’s earnings
Legal capital reserve
Special capital reserve
Cash dividends to shareholders - NT$3.00 per share
Net income in 2011
Adjustment arising from changes in percentage of
ownership in equity method investees
Translation adjustments
Issuance of stock from exercising employee stock
-
-
-
-
-
-
-
-
-
-
-
-
59,898
-
options
7,144
71,439
146,258
Net changes of valuation gain/loss on available-for-
sale financial assets
Net change in shareholders’ equity from equity
method investees
Net change in unrealized gain/loss on hedging
derivative financial instruments
Acquisition of treasury stock - shareholders executed
the appraisal right
Retirement of treasury stock
Decrease in minority interests
Effect of changes in consolidated entities
-
-
-
-
-
-
-
(1,000)
-
-
-
(10,000)
-
-
-
(56,094)
-
-
(2,139)
-
-
-
-
-
-
16,160,501
-
-
-
-
5,120,827
-
-
(16,160,501)
(5,120,827)
(77,730,236)
134,201,279
-
-
(77,730,236)
134,201,279
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(59,459)
-
-
-
(59,459)
-
-
BALANCE, DECEMBER 31, 2011
25,916,222
259,162,226
55,846,357
102,399,995
6,433,874
213,357,286
322,191,155
(6,433,369)
Appropriations of prior year’s earnings
Legal capital reserve
Special capital reserve
Cash dividends to shareholders - NT$3.00 per share
Net income in 2012
Adjustment arising from changes in percentage of
ownership in equity method investees
Translation adjustments
Net loss not recognized as pension cost
Issuance of stock from exercising employee stock
options
Stock option compensation cost
Net changes of valuation gain/loss on available-for-
sale financial assets
Net change in shareholders’ equity from equity
method investees
Net change in unrealized gain/loss on hedging
derivative financial instruments
Increase in minority interests
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,213
-
82,131
-
-
-
-
-
-
-
-
-
-
-
-
-
13,420,128
-
-
-
-
1,172,350
-
-
(13,420,128)
(1,172,350)
(77,748,668)
166,158,802
-
-
(77,748,668)
166,158,802
-
-
-
-
128,595
-
-
160,357
2,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,320,394)
-
-
-
(4,416)
(1,172,855)
-
-
-
-
-
-
-
-
-
9,128,633
(883)
17,450
-
-
93
-
-
-
-
-
-
109,794
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,241,249)
(41,133)
238
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(71,598)
71,598
-
-
-
-
(77,730,236)
134,201,279
59,898
109,794
217,697
-
-
-
251,981
1,152
7,587
-
-
(77,730,236)
134,453,260
61,050
117,381
-
217,697
(1,241,249)
(3,325)
(1,244,574)
(97,227)
238
(71,598)
-
-
-
-
344
-
-
(379,334)
(1,987,855)
(97,227)
582
(71,598)
-
(379,334)
(1,987,855)
629,593,514
2,450,037
632,043,551
-
-
(77,748,668)
166,158,802
128,595
(4,320,394)
(4,416)
242,488
2,500
-
-
-
(195,113)
(38,233)
52,900
-
-
3,719
-
-
(77,748,668)
165,963,689
90,362
(4,267,494)
(4,416)
242,488
6,219
9,128,633
(3,664)
9,124,969
16,567
-
16,567
93
-
139
286,200
232
286,200
-
-
-
-
-
-
-
-
-
-
-
-
-
-
BALANCE, DECEMBER 31, 2012
25,924,435 $ 259,244,357 $ 56,137,809 $ 115,820,123 $ 7,606,224 $ 287,174,942 $ 410,601,289 $ (10,753,763) $ (5,299) $ 7,973,321 $ - $ 723,197,714 $ 2,555,985 $ 725,753,699
The accompanying notes are an integral part of the consolidated financial statements.
46
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
(In Thousands of New Taiwan Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income attributable to shareholders of the parent
Net income (loss) attributable to minority interests
Adjustments to reconcile net income to net cash provided by operating activities:
2012
2011
$ 166,158,802
(195,113)
$ 134,201,279
251,981
Depreciation and amortization
Unrealized gross profit from affiliates
Amortization of premium/discount of financial assets
Stock option compensation cost
Impairment loss of financial assets
Gain on disposal of available-for-sale financial assets, net
Gain on disposal of financial assets carried at cost, net
Equity in earnings of equity method investees, net
Cash dividends received from equity method investees
Gain on disposal of property, plant and equipment and other assets, net
Settlement income from receiving equity securities
Impairment loss on idle assets
Deferred income tax
Changes in operating assets and liabilities:
Financial assets and liabilities at fair value through profit or loss
Receivables from related parties
Notes and accounts receivable
Allowance for doubtful receivables
Allowance for sales returns and others
Other receivables from related parties
Other financial assets
Inventories
Prepaid expenses and other current assets
Accounts payable
Payables to related parties
Income tax payable
Salary and bonus payable
Accrued profit sharing to employees and bonus to directors and
supervisors
Accrued expenses and other current liabilities
Accrued pension cost
131,349,289
25,029
4,850
6,219
4,231,602
(399,598)
(141,491)
(2,028,611)
2,088,472
(103)
(886)
444,505
573,234
(22,311)
(168,047)
(11,936,558)
(10,633)
975,853
(63,258)
122,322
(12,989,916)
(626,405)
1,395,907
(605,182)
4,979,470
1,386,797
2,105,298
2,337,647
66,617
107,681,521
74,029
24,711
-
265,515
(212,442)
(20,772)
(897,611)
2,848,141
(3,286)
(158,779)
98,009
(491,122)
(13,734)
123,265
3,627,110
(12,844)
(2,478,001)
2,294
376,342
2,611,297
(403,762)
(1,968,820)
462,578
3,490,268
(275,565)
(1,925,594)
212,128
98,915
Net cash provided by operating activities
289,063,801
247,587,051
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Property, plant and equipment
Available-for-sale financial assets
Held-to-maturity financial assets
Financial assets carried at cost
Proceeds from disposal or redemption of:
Available-for-sale financial assets
Held-to-maturity financial assets
Financial assets carried at cost
Property, plant and equipment and other assets
Increase in deferred charges
Decrease in refundable deposits
Decrease in other assets
(246,137,361)
(31,525,876)
-
(56,512)
964,367
2,711,440
353,656
157,484
(1,782,299)
2,092,151
26,688
(213,962,521)
(35,088,394)
(584,280)
(403,908)
59,305,023
4,789,000
226,226
698,055
(1,715,892)
4,149,543
63,723
Net cash used in investing activities
(273,196,262)
(182,523,425)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term loans
Cash dividends
Proceeds from long-term bank loans
Repayment of long-term bank loans
Proceeds from issuance of bonds
Repayment of bonds
Decrease in obligations under capital leases
Decrease in other long-term payables
Decrease in guarantee deposits
Proceeds from exercise of employee stock options
Acquisition of treasury stock
Increase (decrease) in minority interests
2012
2011
$ 8,788,401
(77,748,668)
50,000
(212,500)
62,000,000
(4,500,000)
(108,863)
(2,367,866)
(240,093)
242,488
-
286,200
$ (5,287,416)
(77,730,236)
2,250,000
(1,142,968)
18,000,000
-
-
(3,633,052)
(342,242)
217,697
(71,598)
(118,226)
Net cash used in financing activities
(13,810,901)
(67,858,041)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
EFFECT OF CHANGES IN CONSOLIDATED ENTITIES
2,056,638
(2,118,327)
-
(2,794,415)
(147,682)
(1,472,581)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
143,472,277
147,886,955
CASH AND CASH EQUIVALENTS, END OF YEAR
$ 143,410,588
$ 143,472,277
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid
Capitalized interest
Interest paid (excluding capitalized interest)
Income tax paid
INVESTING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS
Acquisition of property, plant and equipment
Decrease (increase) in payables to contractors and equipment suppliers
Nonmonetary exchange trade-out price
Increase in other liabilities
Cash paid
Disposal of property, plant and equipment and other assets
Decrease in other financial assets
Nonmonetary exchange trade-out price
Cash received
Acquisition of deferred charges
Increase in accounts payable
Increase in payables to related parties
Increase in other long-term payables
Cash paid
NON-CASH INVESTING AND FINANCING ACTIVITIES
Idle assets reclassified from property, plant and equipment
Current portion of other long-term payables (under accrued expensesand other
current liabilities)
Current portion of bonds payable
Current portion of long-term bank loans
(Continued)
The accompanying notes are an integral part of the consolidated financial statements.
$ 736,607
(6,442)
$ 730,165
$ 11,312,039
$ 257,689,153
(11,551,723)
(69)
-
$ 246,137,361
$ 157,553
-
(69)
$ 157,484
$ 2,253,722
(303,584)
(25,274)
(142,565)
$ 1,782,299
$ 540,611
(9,093)
$ 531,518
$ 7,677,085
$ 207,175,565
6,846,682
(3,164)
(56,562)
$ 213,962,521
$ 543,219
158,000
(3,164)
$ 698,055
$ 1,715,892
-
-
-
$ 1,715,892
$ 444,505
$ 98,009
$ 913,485
$ -
$ 128,125
$ 3,399,855
$ 4,500,000
$ 62,500
(Concluded)
47
Taiwan Semiconductor Manufacturing Company Limited and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
1. GENERAL
Taiwan Semiconductor Manufacturing Company Limited (TSMC), a Republic of China (R.O.C.) corporation,
was incorporated on February 21, 1987. TSMC is a dedicated foundry in the semiconductor industry which
engages mainly in the manufacturing, selling, packaging, testing and computer-aided design of integrated
circuits and other semiconductor devices and the manufacturing of masks. Beginning in 2010, TSMC also
engages in the researching, developing, designing, manufacturing and selling of solid state lighting devices
and related applications products and systems, and renewable energy and efficiency related technologies
and products. In August 2011, TSMC transferred its solid state lighting and solar businesses into its
wholly-owned, newly incorporated subsidiaries, TSMC Solid State Lighting Ltd. (TSMC SSL) and TSMC Solar
Ltd. (TSMC Solar), respectively.
The consolidated entities were as follows:
Name of Investor
Name of Investee
Percentage of Ownership
December 31
Remark
TSMC
TSMC North America
TSMC Japan Limited (TSMC Japan)
TSMC Partners, Ltd. (TSMC Partners)
TSMC Korea Limited (TSMC Korea)
TSMC Europe B.V. (TSMC Europe)
TSMC Global, Ltd. (TSMC Global)
TSMC China Company Limited (TSMC China)
VentureTech Alliance Fund III, L.P. (VTAF III)
VentureTech Alliance Fund II, L.P. (VTAF II)
Emerging Alliance Fund, L.P. (Emerging Alliance)
Global Unichip Corporation (GUC)
Xintec Inc. (Xintec)
TSMC SSL
TSMC Solar
TSMC Guang Neng Investment, Ltd. (TSMC GN)
TSMC Design Technology Canada Inc. (TSMC Canada)
TSMC Technology, Inc. (TSMC Technology)
TSMC Development, Inc. (TSMC Development)
InveStar Semiconductor Development Fund, Inc. (ISDF)
InveStar Semiconductor Development Fund, Inc. (II)
LDC. (ISDF II)
2012
100%
100%
100%
100%
100%
100%
100%
50%
98%
99.5%
(Note 2)
40%
2011
100%
100%
100%
100%
100%
100%
100%
53%
98%
99.5%
(Note 2)
40%
95%
100%
99%
100%
100%
100%
100%
100%
97%
97%
100%
58%
100%
-
100%
100%
100%
97%
97%
100%
57%
100%
-
-
-
-
-
-
-
(Note 1)
-
-
-
TSMC obtained three out of
five director positions and has a
controlling interest in Xintec
Established in August 2011
TSMC and TSMC GN aggregately
have a controlling interest of
96% in TSMC SSL
Established in August 2011
TSMC and TSMC GN aggregately
have a controlling interest of
99% in TSMC Solar
Established in January 2012
-
-
-
-
-
-
-
-
-
-
-
-
-
-
On September 5, 1994, TSMC’s shares were listed on the Taiwan Stock Exchange (TWSE). On October
8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of
American Depositary Shares (ADSs).
TSMC Partners
As of December 31, 2012 and 2011, TSMC and its subsidiaries had 39,267 and 35,457 employees,
respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
TSMC Development
WaferTech, LLC (WaferTech)
The consolidated financial statements are presented in conformity with the Guidelines Governing the
Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the
R.O.C.
For the convenience of readers, the accompanying consolidated financial statements have been translated
into English from the original Chinese version prepared and used in the R.O.C. If there is any conflict
between the English version and the original Chinese version or any difference in the interpretation of the
two versions, the Chinese-language consolidated financial statements shall prevail.
Significant accounting policies are summarized as follows:
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of all directly and indirectly
majority owned subsidiaries of TSMC, and the accounts of investees in which TSMC’s ownership percentage
is less than 50% but over which TSMC has a controlling interest. All significant intercompany balances and
transactions are eliminated upon consolidation.
48
VTAF III
Mutual-Pak Technology Co., Ltd. (Mutual-Pak)
Growth Fund Limited (Growth Fund)
VTAF III, VTAF II and
Emerging Alliance
GUC
VentureTech Alliance Holdings, LLC (VTA Holdings)
100%
100%
Global Unichip Corp.-NA (GUC-NA)
Global Unichip Japan Co., Ltd. (GUC-Japan)
Global Unichip Europe B.V. (GUC-Europe)
Global Unichip (BVI) Corp.(GUC-BVI)
Global Unichip (Shanghai) Company, Limited
(Note 2)
(Note 2)
(Note 2)
(Note 2)
(Note 2)
(Note 2)
(Note 2)
(Note 2)
GUC-BVI
(GUC-Shanghai)
(Note 2)
(Note 2)
TSMC SSL
(TSMC Lighting NA)
TSMC Lighting North America, Inc.
TSMC Solar
TSMC Solar North America, Inc. (TSMC Solar NA)
TSMC Solar Europe B.V. (TSMC Solar Europe)
VentureTech Alliance Fund III, L.P.
(VTAF III)
TSMC Solar Europe
TSMC Solar Europe GmbH
100%
100%
100%
49%
100%
100%
(Note 1)
100%
100%
(Note 1)
(Note 1)
46%
(Note 1)
100%
(Note 1)
Note 1: In August 2011, TSMC adjusted its investment structure by transferring TSMC Lighting NA to TSMC SSL and transferring TSMC Solar Europe, TSMC Solar NA
and part of VTAF III to TSMC Solar.
Note 2: Since July 2011, TSMC is no longer deemed to be a controlling entity of GUC and its subsidiaries due to the termination of a Shareholders’ Agreement. As a
result, GUC and its subsidiaries are no longer consolidated and are accounted for using the equity method.
The following diagram presents information regarding the relationship and ownership percentages between
TSMC and its consolidated investees as of December 31, 2012:
TSMC
100%
100%
100%
100%
100%
100%
100%
50%
98%
99.5%
95%
40%
99%
100%
TSMC North
America
TSMC Japan
TSMC Partners
TSMC Korea
TSMC Europe
TSMC Global
TSMC China
VTAF III
VTAF II
Emerging
Alliance
TSMC SSL
Xintec
TSMC Solar
TSMC GN
100%
100%
100%
97%
97%
58%
100%
100%
100%
100%
49%
1%
0.4%
TSMC Canada
TSMC
Technology
TSMC
Development
ISDF
ISDF II
Mutual-Pak
Growth
Fund
VTA
Holdings
TSMC
Lighting NA
TSMC
Solar NA
TSMC Solar
Europe
VTAF III
TSMC SSL
TSMC Solar
62%
31%
7%
100%
WaferTech
100%
TSMC Solar
Europe GmbH
Since July 2011, TSMC is no longer deemed to be a controlling entity of GUC and its subsidiaries due to the
termination of a Shareholders’ Agreement. As a result, GUC and its subsidiaries are no longer consolidated
and are accounted for using the equity method.
TSMC North America is engaged in selling and marketing of integrated circuits and semiconductor
devices. TSMC Japan, TSMC Korea and TSMC Europe are engaged mainly in marketing or customer service,
engineering and technical supporting activities. TSMC Partners is engaged in investment in companies
involved in the design, manufacture, and other related business in the semiconductor industry. TSMC
Global, TSMC Development and TSMC GN are engaged in investing activities. TSMC China is engaged
in the manufacturing and selling of integrated circuits pursuant to the orders from and product design
specifications provided by customers. Emerging Alliance, VTAF II, VTAF III, VTA Holdings, ISDF, ISDF
II and Growth Fund are engaged in investing in new start-up technology companies. TSMC Canada
and TSMC Technology are engaged mainly in engineering support activities. WaferTech is engaged
in the manufacturing, selling, testing and computer-aided designing of integrated circuits and other
semiconductor devices. Xintec is engaged in the provision of wafer packaging service. TSMC SSL is engaged
in researching, developing, designing, manufacturing and selling solid state lighting devices and related
applications products and systems. TSMC Lighting NA is engaged in selling and marketing of solid state
lighting related products. TSMC Solar is engaged in researching, developing, designing, manufacturing and
selling renewable energy and energy saving related technologies and products. TSMC Solar NA is engaged
in selling and marketing of solar related products. TSMC Solar Europe is engaged in investing activities of
solar related business. TSMC Solar Europe GmbH is engaged in the selling and customer service of solar cell
modules and related products. Mutual-Pak is engaged in the manufacturing and selling of electronic parts
and researching, developing and testing of RFID.
TSMC together with its subsidiaries are hereinafter referred to collectively as the “Company.”
Minority interests in the aforementioned subsidiaries are presented as a separate component of shareholders’
equity.
Foreign-currency Transactions and Translation of Foreign-currency Financial Statements
Foreign-currency transactions other than derivative contracts are recorded in New Taiwan dollars at the rates
of exchange in effect when the transactions occur. Exchange gains or losses derived from foreign-currency
transactions or monetary assets and liabilities denominated in foreign currencies are recognized in earnings.
At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are revalued at
prevailing exchange rates with the resulting gains or losses recognized in earnings.
49
The financial statements of foreign subsidiaries are translated into New Taiwan dollars at the following
exchange rates: Assets and liabilities - spot rates at year-end; shareholders’ equity - historical rates; income
and expenses - average rates during the year. The resulting translation adjustments are recorded as a
separate component of shareholders’ equity.
Cash dividends are recognized as investment income upon resolution of shareholders of an investee. Stock
dividends are recorded as an increase in the number of shares held and do not affect investment income.
The cost per share is recalculated based on the new total number of shares.
Use of Estimates
The preparation of consolidated financial statements in conformity with the aforementioned guidelines
and principles requires management to make reasonable assumptions and estimates of matters that are
inherently uncertain. The actual results may differ from management’s estimates.
Classification of Current and Noncurrent Assets and Liabilities
Current assets are assets held for trading purposes and assets expected to be converted to cash, sold or
consumed within one year from the balance sheet date. Current liabilities are obligations incurred for trading
purposes and obligations expected to be settled within one year from the balance sheet date. Assets and
liabilities that are not classified as current are noncurrent assets and liabilities, respectively.
Cash Equivalents
Repurchase agreements collateralized by corporate bonds, short-term commercial paper and government
bonds acquired with maturities of less than three months from the date of purchase are classified as cash
equivalents. The carrying amount approximates fair value due to their short term nature.
Financial Assets/Liabilities at Fair Value through Profit or Loss
Derivatives that do not meet the criteria for hedge accounting are initially recognized at fair value, with
transaction costs expensed as incurred. The derivatives are remeasured at fair value subsequently with
changes in fair value recognized in earnings. A regular way purchase or sale of financial assets is accounted
for using settlement date accounting.
Fair value is estimated using valuation techniques incorporating estimates and assumptions that are
consistent with prevailing market conditions. When the fair value is positive, the derivative is recognized as a
financial asset; when the fair value is negative, the derivative is recognized as a financial liability.
Available-for-sale Financial Assets
Available-for-sale financial assets are initially recognized at fair value plus transaction costs that are directly
attributable to the acquisition. Changes in fair value from subsequent remeasurement are reported as a
separate component of shareholders’ equity. The corresponding accumulated gains or losses are recognized
in earnings when the financial asset is derecognized from the balance sheet. A regular way purchase or sale
of financial assets is accounted for using settlement date accounting.
Fair value is determined as follows: Money market funds - net asset values at the end of the year; and
publicly traded stocks - closing prices at the end of the year.
If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. For equity
securities, if the fair value subsequently increases, the increase in value is recorded in shareholders’ equity.
Held-to-maturity Financial Assets
Debt securities for which the Company has a positive intention and ability to hold to maturity are
categorized as held-to-maturity financial assets and are carried at amortized cost. Those financial assets are
initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Gains
or losses are recognized at the time of derecognition, impairment or amortization. A regular way purchase
or sale of financial assets is accounted for using settlement date accounting.
If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a
subsequent period, the amount of the impairment loss decreases and the decrease is clearly attributable to
an event which occurred after the impairment loss was recognized, the previously recognized impairment
loss is reversed to the extent of the decrease. The reversal may not result in a carrying amount that exceeds
the amortized cost that would have been determined as if no impairment loss had been recognized.
Hedging Derivative Financial Instruments
Hedge derivatives are mainly derivatives instruments that are for cash flow hedge purposes and determined
to be an effective hedge. The portion of the gain or loss on the hedging instrument that is determined to be
an effective hedge is recognized in shareholders’ equity. The amount recognized in shareholders’ equity is
recognized in profit or loss in the same year or year during which the hedged forecast transaction or an asset
or liability arising from the hedged forecast transaction affects profit or loss. However, if all or a portion of a
loss recognized in shareholders’ equity is not expected to be recovered in the future, the amount that is not
expected to be recovered is reclassified into profit or loss.
Financial Assets Carried at Cost
Investments for which the Company does not exercise significant influence and that do not have a quoted
market price in an active market and whose fair value cannot be reliably measured, such as non-publicly
traded stocks and mutual funds, are carried at their original cost. The costs of non-publicly traded stocks
and mutual funds are determined using the weighted-average method. If there is objective evidence which
indicates that a financial asset is impaired, a loss is recognized. A subsequent reversal of such impairment
loss is not allowed.
The accounting treatment for cash dividends and stock dividends arising from financial assets carried at cost
is the same as that for cash and stock dividends arising from available-for-sale financial assets.
50
Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided based on a review of the collectability of receivables. The
Company assesses the collectability of receivables by performing the account aging analysis and examining
current trends in the credit quality of its customers.
TSMC’s provision was originally set at 1% of the amount of outstanding receivables. On January 1, 2011, the
Company adopted the third revision of Statement of Financial Accounting Standards (SFAS) No. 34, “Financial
Instruments: Recognition and Measurement (SFAS No. 34).” One of the main revisions is that the impairment
of receivables originated by the Company is subject to the provisions of SFAS No. 34. Accordingly, the
Company evaluates for indication of impairment of accounts receivable based on an individual and collective
basis at the end of each reporting period. When objective evidence indicates that the estimated future
cash flow of accounts receivable decreases as a result of one or more events that occurred after the initial
recognition of the accounts receivable, such accounts receivable are deemed to be impaired.
Because of the Company’s short average collection period, the amount of the impairment loss recognized is
the difference between the carrying amount of accounts receivable and estimated future cash flows without
considering the discounting effect. Changes in the carrying amount of the allowance account are recognized
as bad debt expense which is recorded in the operating expenses - general and administrative. When
accounts receivable are considered uncollectable, the amount is written off against the allowance account.
Inventories
Inventories are recorded at standard cost and adjusted to approximate weighted-average cost on the
balance sheet date.
Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made on an
item-by-item basis, except where it may be appropriate to group similar or related items. Net realizable value
is the estimated selling price of inventories less all estimated costs of completion and necessary selling costs.
Investments Accounted for Using Equity Method
Investments in companies wherein the Company exercises significant influence over the operating and
financial policy decisions are accounted for using the equity method. The Company’s share of the net
income or net loss of an investee is recognized in the “equity in earnings/losses of equity method investees,
net” account. The cost of an investment shall be analyzed and the cost of investment in excess of the fair
value of identifiable net assets acquired, representing goodwill, shall not be amortized. If the fair value
of identifiable net assets acquired exceeds the cost of investment, the excess shall be proportionately
allocated as reductions to fair values of non-current assets (except for financial assets other than investments
accounted for using the equity method and deferred income tax assets).
When an indication of impairment is identified, the carrying amount of the investment is reduced by the
difference of the carrying amount (including goodwill) of each investment and its own recoverable amount,
with the related impairment loss recognized in earnings. If the recoverable amount increases in a subsequent
period, the amount previously recognized as impairment would be reversed and recognized as a gain.
When the Company subscribes for additional investee’s shares at a percentage different from its existing
ownership percentage, the resulting carrying amount of the investment in the investee differs from the
amount of the Company’s share of the investee’s equity. The Company records such a difference as an
adjustment to long-term investments with the corresponding amount charged or credited to capital
surplus. Cash dividends received from an investee shall reduce the carrying amount of the investment. Stock
dividends are recorded as an increase in the number of shares held and do not affect investment income.
Gains or losses on sales from the Company to equity method investees or from equity method investees to
the Company are deferred in proportion to the Company’s ownership percentages in the investees until such
gains or losses are realized through transactions with third parties.
If an investee’s functional currency is a foreign currency, differences will result from the translation of the
investee’s financial statements into the reporting currency of the Company. Such differences are charged or
credited to cumulative translation adjustments, a separate component of shareholders’ equity.
Property, Plant and Equipment, Assets Leased to Others and Idle Assets
Property, plant and equipment and assets leased to others are stated at cost less accumulated depreciation.
Properties covered by agreements qualifying as capital leases are carried at the lower of the leased
equipment’s market value or the present value of the minimum lease payments at the inception date of
the lease, with the corresponding amount recorded as obligations under capital leases. Borrowing costs
directly attributable to the acquisition or construction of property, plant and equipment are capitalized
as part of the cost of those assets. When an indication of impairment is identified, any excess of the
carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount
increases in a subsequent period, the amount previously recognized as impairment would be reversed and
recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have
been determined, net of depreciation, as if no impairment loss had been recognized. Significant additions,
renewals and betterments incurred during the construction period are capitalized. Maintenance and repairs
are expensed as incurred.
Depreciation is computed using the straight-line method over the following estimated service lives: land
improvements - 20 years; buildings - 10 to 20 years; machinery and equipment - 3 to 5 years; office
equipment - 3 to 15 years; and leased assets - 20 years.
Upon sale or disposal of property, plant and equipment and assets leased to others, the related cost and
accumulated depreciation are deducted from the corresponding accounts, with any gain or loss recorded as
non-operating gains or losses in the year of sale or disposal.
When property, plant and equipment are determined to be idle or useless, they are transferred to idle assets
at the lower of the net realizable value or carrying amount. Depreciation on the idle assets is provided
continuously, and the idle assets are tested for impairment on a periodical basis.
51
Intangible Assets
Goodwill represents the excess of the consideration paid for acquisition over the fair value of identifiable
net assets acquired. Goodwill is no longer amortized and instead is tested for impairment annually, or more
frequently if events or changes in circumstances suggest that the carrying amount may not be recoverable.
If an event occurs or circumstances change which indicate that the fair value of goodwill is more likely than
not below its carrying amount, an impairment loss is recognized. A subsequent reversal of such impairment
loss is not allowed.
Deferred charges consist of technology license fees, software and system design costs and patent and others.
The amounts are amortized over the following periods: Technology license fees - the estimated life of the
technology or the term of the technology transfer contract; software and system design costs - 2 to 5 years;
patent and others - the economic life or contract period. When an indication of impairment is identified,
any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the
recoverable amount increases in a subsequent period, the previously recognized impairment loss would be
reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that
would have been determined, net of amortization, as if no impairment loss had been recognized.
Expenditures related to research activities and those related to development activities that do not meet the
criteria for capitalization are charged to expense when incurred.
Pension Costs
For employees who participate in defined contribution pension plans, pension costs are recorded based on
the actual contributions made to employees’ individual pension accounts during their service periods. For
employees who participate in defined benefit pension plans, pension costs are recorded based on actuarial
calculations.
If additional accrued pension cost based on actuarial calculation is not in excess of the sum of the
unamortized balance of prior service costs and unrecognized net transition obligation, “deferred pension
cost” will be debited. Otherwise, the excess amount should be debited to “net loss not recognized as
pension cost” as a deduction in stockholders’ equity.
Income Tax
The Company applies an inter-period allocation for its income tax whereby deferred income tax assets and
liabilities are recognized for the tax effects of temporary differences, net operating loss carryforwards and
unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not
that deferred income tax assets will not be realized. A deferred tax asset or liability is classified as current
or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred tax
asset or liability does not relate to an asset or liability in the financial statements, then it is classified as either
current or noncurrent based on the expected length of time before it is realized or settled.
Any tax credits arising from purchases of machinery and equipment, research and development expenditures
and personnel training expenditures are recognized using the flow-through method.
Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
Income tax on unappropriated earnings (excluding earnings from foreign consolidated subsidiaries) at a rate
of 10% is expensed in the year of shareholder approval which is the year subsequent to the year the earnings
are generated.
Stock-based Compensation
Employee stock options that were granted or modified in the period from January 1, 2004 to December
31, 2007 are accounted for by the interpretations issued by the Accounting Research and Development
Foundation of the Republic of China. The Company adopted the intrinsic value method and any
compensation cost determined using this method is recognized in earnings over the employee vesting
period. Employee stock option plans that were granted or modified after December 31, 2007 are accounted
for using fair value method in accordance with SFAS No. 39, “Accounting for Share-based Payment.”
Under the statement, the value of the stock options granted, which is equal to the best available estimate
of the number of stock options expected to vest multiplied by the grant-date fair value, is expensed on a
straight-line basis over the vesting period, with a corresponding adjustment to capital surplus - employee
stock options. The estimate is revised if subsequent information indicates that the number of stock options
expected to vest differs from previous estimates.
Treasury Stock
Treasury stock represents the outstanding shares that the Company buys back from market, which is stated
at cost and shown as a deduction in shareholders’ equity. When the Company retires treasury stock, the
treasury stock account is reduced and the common stock as well as the capital surplus - additional paid-in
capital are reversed on a pro rata basis. When the book value of the treasury stock exceeds the sum of
the par value and additional paid-in capital, the difference is charged to capital surplus - treasury stock
transactions and to retained earnings for any remaining amount. While disposing of the treasury stock,
the treasury stock shall be reversed, and if the disposal value is greater than the book value, the amount in
excess of the book value shall be credited to additional paid-in capital - treasury stock.
Revenue Recognition and Allowance for Sales Returns and Others
The Company recognizes revenue when evidence of an arrangement exists, the rewards of ownership
and significant risk of the goods has been transferred to the buyer, price is fixed or determinable, and
collectability is reasonably assured. Provisions for estimated sales returns and other allowances are recorded
in the year the related revenue is recognized, based on historical experience, management’s judgment, and
any known factors that would significantly affect the allowance.
Sales prices are determined using fair value taking into account related sales discounts agreed to by the
Company and its customers. Sales agreements typically provide that payment is due 30 days from invoice
date for a majority of the customers and 30 to 45 days after the end of the month in which sales occur for
some customers. Since the receivables from sales are collectible within one year and such transactions are
frequent, fair value of the receivables is equivalent to the nominal amount of the cash to be received.
52
3. ACCOUNTING CHANGES
On January 1, 2011, the Company prospectively adopted the newly revised SFAS No. 34, “Financial
Instruments: Recognition and Measurement.” The main revisions include (1) finance lease receivables are
now covered by SFAS No. 34; (2) the scope of the applicability of SFAS No. 34 to insurance contracts
is amended; (3) loans and receivables originated by the Company are now covered by SFAS No. 34; (4)
additional guidelines on impairment testing of financial assets carried at amortized cost when the debtor
has financial difficulties and the terms of obligations have been modified; and (5) accounting treatment by a
debtor for modifications in the terms of obligations. This accounting change did not have a significant effect
on the Company’s consolidated financial statements as of and for the year ended December 31, 2011.
On January 1, 2011, the Company adopted the newly issued SFAS No. 41, “Operating Segments.” The
statement requires identification and disclosure of operating segments on the basis of how the Company’s
chief operating decision maker regularly reviews information in order to allocate resources and assess
performance. This statement supersedes SFAS No. 20, “Segment Reporting” and the Company conformed
to the disclosure requirement and provided the operating segments disclosure in the consolidated financial
statements accordingly.
4. CASH AND CASH EQUIVALENTS
Cash and deposits in banks
Repurchase agreements collateralized by corporate bonds
Repurchase agreements collateralized by short-term commercial paper
Repurchase agreements collateralized by government bonds
$ 140,072,294
2,691,042
349,341
297,911
December 31
2012
2011
$ 139,637,363
-
-
3,834,914
$ 143,410,588
$ 143,472,277
5. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Trading financial assets
Forward exchange contracts
Cross currency swap contracts
Trading financial liabilities
Forward exchange contracts
Cross currency swap contracts
December 31
2012
2011
$ 38,607
947
$ 15,360
-
$ 39,554
$ 15,360
$ 12,174
3,451
$ 13,623
119
$ 15,625
$ 13,742
The Company entered into derivative contracts during the years ended December 31, 2012 and 2011 to
manage exposures due to fluctuations of foreign exchange rates. The derivative contracts entered into by
the Company did not meet the criteria for hedge accounting. Therefore, the Company did not apply hedge
accounting treatment for derivative contracts.
Outstanding forward exchange contracts consisted of the following:
December 31, 2012
Sell NT$/Buy EUR
Sell US$/Buy RMB
Sell US$/Buy NT$
Sell NT$/Buy US$
Sell NT$/Buy JPY
December 31, 2011
Sell EUR/Buy NT$
Sell US$/Buy NT$
Sell US$/Buy EUR
Sell US$/Buy JPY
Sell RMB/Buy US$
Sell NT$/Buy US$
Maturity Date
Contract Amount
(In Thousands)
January 2013
January 2013
January 2013 to March 2013
January 2013
January 2013
NT$9,417,062/EUR246,000
US$20,000/RMB124,735
US$13,700/NT$398,239
NT$590,403/US$20,400
NT$44,110/JPY130,000
January 2012
January 2012 to February 2012
January 2012
January 2012
January 2012
January 2012 to February 2012
EUR38,600/NT$1,528,206
US$16,900/NT$510,122
US$2,082/EUR1,591
US$3,335/JPY259,830
RMB1,118,705/US$177,000
NT$163,491/US$5,400
Outstanding cross currency swap contracts consisted of the following:
Contract Amount
(In Thousands)
Range of
Interest Rates Paid
Range of
Interest Rates Received
US$275,000/NT$7,986,190
NT$1,083,139/US$37,280
0.14%-0.17%
-
Maturity Date
December 31, 2012
January 2013
January 2013
December 31, 2011
January 2012
NT$420,431/US$13,880
-
For the years ended December 31, 2012 and 2011, a net loss on derivative financial instruments was
NT$252,531 thousand and a net gain on derivative financial instruments was NT$507,432 thousand,
respectively.
-
0.06%
0.48%
53
6. AVAILABLE-FOR-SALE FINANCIAL ASSETS
Movements of the allowance for sales returns and others were as follows:
Publicly traded stocks
Money market funds
Current portion
December 31
2012
$ 41,160,437
1,443
41,161,880
(2,410,635)
2011
$ 3,306,248
2,522
3,308,770
(3,308,770)
$ 38,751,245
$ -
In October 2012, the Company invested ASML Holding N.V. (ASML) for EUR837,816 thousand to acquire 5%
of equity with a lock-up period of 2.5 years.
For the year ended December 31, 2012, the Company recognized an impairment loss on some of the
overseas publicly traded stocks in the amount of NT$2,677,529 thousand due to the significant decline in
fair value.
7. HELD-TO-MATURITY FINANCIAL ASSETS
Balance, beginning of year
Provision
Write-off
Effect of exchange rate changes
Balance, end of year
9. INVENTORIES
Finished goods
Work in process
Raw materials
Supplies and spare parts
Years Ended December 31
2012
2011
$ 5,068,263
7,187,023
(6,211,170)
(6,113)
$ 7,546,264
3,409,855
(5,890,416)
2,560
$ 6,038,003
$ 5,068,263
December 31
2012
$ 6,244,824
25,713,217
3,864,105
2,008,352
2011
$ 3,347,849
17,940,960
1,808,615
1,743,158
$ 37,830,498
$ 24,840,582
Corporate bonds
Government bonds
Current portion
December 31
2012
$ 5,056,973
-
5,056,973
(5,056,973)
2011
$ 8,614,527
454,320
9,068,847
(3,825,680)
$ -
$ 5,243,167
8. ALLOWANCES FOR DOUBTFUL RECEIVABLES, SALES RETURNS AND OTHERS
Movements of the allowance for doubtful receivables were as follows:
Balance, beginning of year
Provision (reversal)
Write-off
Effect of changes in consolidated entities
Effect of exchange rate changes
Years Ended December 31
2012
2011
$ 490,952
450
(11,083)
-
(107)
$ 504,029
(3,130)
(9,707)
(233)
(7)
Balance, end of year
$ 480,212
$ 490,952
Write-down of inventories to net realizable value in the amount of NT$1,558,915 thousand and NT$35,316
thousand, respectively, were included in the cost of sales for the years ended December 31, 2012 and 2011.
10. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
Vanguard International Semiconductor Corporation (VIS)
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
Motech Industries, Inc. (Motech)
VisEra Holding Company (VisEra Holding)
GUC
Mcube Inc. (Mcube)
December 31
2012
2011
Carrying
Amount
% of
Ownership
Carrying
Amount
% of
Ownership
$ 9,462,038
6,710,956
2,998,413
3,035,641
1,222,972
-
40
39
20
49
35
25
$ 8,988,007
6,289,429
5,612,344
2,853,364
1,157,188
-
39
39
20
49
35
25
$ 23,430,020
$ 24,900,332
Since July 2011, TSMC is no longer deemed to be a controlling entity of GUC and its subsidiaries due to the
termination of a Shareholders’ Agreement. As a result, GUC and its subsidiaries are no longer consolidated
and are accounted for using the equity method.
54
For the year ended December 31, 2012, the Company recognized an impairment loss in the amount of
NT$1,186,674 thousand, due to the lower estimated recoverable amount compared with the carrying
amount of its investments in stocks traded on the Taiwan GreTai Securities Market.
The Company’s long-term bank loans bear floating interest rates; therefore, changes in the market interest
rate may cause future cash flows to be volatile. Accordingly, the Company entered into an interest rate swap
contract in order to hedge cash flow risk caused by floating interest rates. The interest rate swap contract of
the Company was due in August 2012.
For the years ended December 31, 2012 and 2011, equity in earnings of equity method investees was a net
gain of NT$2,028,611 thousand and NT$897,611 thousand, respectively.
The outstanding interest rate swap contract consisted of the following:
As of December 31, 2012 and 2011, the quoted market price of publicly traded stocks in unrestricted
investments accounted for using the equity method (VIS and GUC) were NT$17,350,833 thousand and
NT$11,273,200 thousand, respectively.
Movements of the difference between the cost of investments and the Company’s share in investees’ net
assets allocated to depreciable assets were as follows:
Balance, beginning of year
Amortization
Balance, end of year
Years Ended December 31
2012
2011
$ 1,645,810
(501,779)
$ 2,491,891
(846,081)
$ 1,144,031
$ 1,645,810
Contract Amount
(In Thousands)
December 31, 2011
Maturity Date
Range of Interest
Rates Paid
Range of Interest Rates
Received
NT$80,000
August 31, 2012
1.38%
0.63%-0.86%
For the years ended December 31, 2012 and 2011, the adjustment to shareholders’ equity amounted to
a net gain of NT$5 thousand and a net loss of NT$98 thousand, respectively; and the amount removed
from shareholders’ equity and recognized as a loss from the above interest rate swap contract amounted to
NT$227 thousand and NT$680 thousand, respectively.
12. FINANCIAL ASSETS CARRIED AT COST
As of December 31, 2012 and 2011, balance of the aforementioned difference allocated to goodwill was
NT$1,415,565 thousand. There was no acquisition or impairment in goodwill for the years ended December
31, 2012 and 2011.
Non-publicly traded stocks
Mutual funds
December 31
2012
2011
$ 3,314,713
290,364
$ 4,004,314
310,691
$ 3,605,077
$ 4,315,005
11. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS
December 31
2012
2011
The common stock of InvenSense, Inc. and Audience, Inc. was listed on the NYSE and NASDAQ in November
2011 and in May 2012, respectively. Thus, the Company reclassified the aforementioned investments from
financial assets carried at cost to available-for-sale financial assets.
Hedging derivative financial liabilities
Interest rate swap contract
$ -
$ 232
For the years ended December 31, 2012 and 2011, the Company recognized impairment on financial assets
carried at cost of NT$367,399 thousand and NT$265,515 thousand, respectively.
The Company entered into forward exchange contracts to hedge cash flow risk arising from foreign
exchange rate fluctuations of an expected equity security transaction. The forward exchange contract was
due in October 2012. For the year ended December 31, 2012, the adjustment to shareholders’ equity
amounted to a net gain of NT$8,833 thousand for the above forward exchange contracts.
55
13. PROPERTY, PLANT AND EQUIPMENT
Cost
Land and land improvements
Buildings
Machinery and equipment
Office equipment
Leased asset
Accumulated depreciation
Land and land improvements
Buildings
Machinery and equipment
Office equipment
Leased asset
Advance payments and construction in progress
Cost
Land and land improvements
Buildings
Machinery and equipment
Office equipment
Leased asset
Accumulated depreciation
Land and land improvements
Buildings
Machinery and equipment
Office equipment
Leased asset
Advance payments and construction in progress
Balance,
Beginning of Year
$ 1,541,128
172,872,550
1,057,588,736
16,969,266
791,480
1,249,763,160
355,555
101,004,047
762,774,355
11,820,728
297,535
876,252,220
116,863,976
$ 490,374,916
Year Ended December 31, 2012
Additions
Disposals
Reclassification
Effect of Exchange Rate
Changes
Balance,
End of Year
$ 18,500
25,183,927
226,497,664
3,658,525
-
$ 255,358,616
$ 26,983
11,148,134
116,070,821
1,875,785
40,135
$ 129,161,858
$ 2,330,537
$ -
(26,789)
(2,024,948)
(563,454)
-
$ (2,615,191)
$ -
(24,528)
(1,886,797)
(555,485)
-
$ (2,466,810)
$ -
$ -
(11,074)
(456,577)
35
-
$ (467,616)
$ -
(164)
(45,137)
8
-
$ (45,293)
$ (30,707)
$ (32,504)
(703,937)
(2,437,156)
(90,650)
(24,748)
$ (3,288,995)
$ (15,169)
(390,192)
(2,127,820)
(74,689)
(9,601)
$ (2,617,471)
$ (99,830)
$ 1,527,124
197,314,677
1,279,167,719
19,973,722
766,732
1,498,749,974
367,369
111,737,297
874,785,422
13,066,347
328,069
1,000,284,504
119,063,976
$ 617,529,446
Year Ended December 31, 2011
Additions
Disposals
Reclassification
Effect of Changes in
Consolidated Entities
Effect of Exchange Rate
Changes
Balance,
End of Year
$ 652,011
26,592,895
146,048,745
2,825,159
56,562
$ 176,175,372
$ 26,805
10,343,346
93,499,249
1,430,941
34,646
$ 105,334,987
$ 31,000,193
$ -
(47,667)
(2,305,971)
(431,847)
-
$ (2,785,485)
$ -
(21,452)
(2,252,415)
(427,103)
-
$ (2,700,970)
$ (455,372)
$ -
(388)
(82,475)
(72,041)
-
$ (154,904)
$ -
(55)
(31,287)
(13,563)
-
$ (44,905)
$ (2,091)
$ -
(242,718)
(375,702)
(236,153)
-
$ (854,573)
$ -
(32,791)
(293,605)
(148,862)
-
$ (475,258)
$ -
$ (2,080)
604,404
1,148,887
27,566
33,366
$ 1,812,143
$ (42)
242,296
583,777
21,639
12,539
$ 860,209
$ 169,673
$ 1,541,128
172,872,550
1,057,588,736
16,969,266
791,480
1,249,763,160
355,555
101,004,047
762,774,355
11,820,728
297,535
876,252,220
116,863,976
$ 490,374,916
Balance,
Beginning of Year
$ 891,197
145,966,024
913,155,252
14,856,582
701,552
1,075,570,607
328,792
90,472,703
671,268,636
10,957,676
250,350
773,278,157
86,151,573
$ 388,444,023
The Company entered into agreements to lease buildings that qualify as capital leases. The term of the leases
is from December 2003 to November 2018.
During the years ended December 31, 2012 and 2011, the Company capitalized the borrowing costs
directly attributable to the acquisition or construction of property, plant and equipment. Information about
capitalized interest was as follows:
As of December 31, 2012, future lease payments were as follows:
Year
2013
2014
2015
2016
2017
2018 and thereafter
56
Capitalized interest
Capitalization rates
Amount
$ 27,042
27,042
27,042
27,042
27,042
729,566
$ 864,776
Years Ended December 31
2012
2011
$ 6,442
1.08%-1.20%
$ 9,093
1.07%-1.29%
14. DEFERRED CHARGES, NET
Technology license fees
Software and system design costs
Patent and others
Year Ended December 31, 2012
Balance,
Beginning of Year
$ 1,682,892
2,366,483
1,118,189
Additions
Amortization
Reclassification
$ 31,022
1,795,360
427,340
$ (442,467)
(1,143,493)
(594,815)
$ 191,580
(48,912)
57,438
Effect of Exchange Rate
Changes
$ (1,134)
(496)
(3,125)
Balance,
End of Year
$ 1,461,893
2,968,942
1,005,027
$ 5,167,564
$ 2,253,722
$ (2,180,775)
$ 200,106
$ (4,755)
$ 5,435,862
Technology license fees
Software and system design costs
Patent and others
Balance,
Beginning of Year
$ 2,455,348
2,333,271
1,238,466
Additions
Amortization
Disposals
Reclassification
Effect of Changes in
Consolidated Entities
Effect of Exchange Rate
Changes
$ 10,308
1,360,846
344,738
$ (716,067)
(1,152,331)
(469,172)
$ -
(46)
-
$ -
2,091
-
$ (66,186)
(177,916)
-
$ (511)
568
4,157
Balance,
End of Year
$ 1,682,892
2,366,483
1,118,189
$ 6,027,085
$ 1,715,892
$ (2,337,570)
$ (46)
$ 2,091
$ (244,102)
$ 4,214
$ 5,167,564
Year Ended December 31, 2011
December 31
2012
2011
interest payable annually
$ 12,700,000
$ -
Issued in September 2012 and repayable in September 2017, 1.28%
December 31
2012
2011
15. SHORT-TERM LOANS
Unsecured loans:
US$1,195,500 thousand, due in January 2013, and annual interest at
0.39%-0.58% in 2012; US$856,000 thousand, due by February 2012,
and annual interest at 0.45%-1.00% in 2011.
16. BONDS PAYABLE
$ 34,714,929
$ 25,926,528
December 31
2012
2011
Domestic unsecured bonds:
Issued in September 2011 and repayable in September 2016, 1.40%
interest payable annually
$ 10,500,000
$ 10,500,000
Issued in September 2011 and repayable in September 2018, 1.63%
interest payable annually
Issued in January 2012 and repayable in January 2017, 1.29% interest
payable annually
Issued in January 2012 and repayable in January 2019, 1.46% interest
payable annually
Issued in August 2012 and repayable in August 2017, 1.28% interest
payable annually
Issued in August 2012 and repayable in August 2019, 1.40% interest
payable annually
7,500,000
10,000,000
7,000,000
9,900,000
9,000,000
7,500,000
-
-
-
-
(Continued)
Issued in September 2012 and repayable in September 2019, 1.39%
interest payable annually
Issued in October 2012 and repayable in October 2022, 1.53% interest
payable annually
Issued in January 2002 and repayable in January 2012, 3.00% interest
payable annually
Current portion
9,000,000
4,400,000
-
80,000,000
-
-
-
4,500,000
22,500,000
(4,500,000)
$ 80,000,000
$ 18,000,000
With the approval from the Financial Supervisory Commission (FSC), the Company issued domestic
unsecured bonds in the amount of NT$23,600,000 thousand in January 2013 and is expected to issue
domestic unsecured bonds in the amount of NT$21,400,000 thousand in February 2013.
The provision of a loan guarantee to TSMC Global, a subsidiary of TSMC, for its issuance of unsecured
corporate bonds for an amount not to exceed US$1,500,000 thousand had been approved in the meeting
of the Board of Directors of TSMC held on February 5, 2013.
57
17. LONG-TERM BANK LOANS
As of December 31, 2012, future payments for other long-term payables were as follows:
December 31
2012
2011
$ 550,000
$ 650,000
Year of Payment
2013
2014
2015
2016
Amount
$ 913,485
18,000
18,000
18,000
$ 967,485
Bank loans for working capital:
Repayable in full in one lump sum payment in June 2016, annual
interest at 1.08%-1.21% in 2012 and 1.00%-1.08% in 2011
Repayable in full in one lump sum payment in March 2014, annual
interest at 1.16%-1.18% in 2012 and 1.02%-1.16% in 2011
Repayable from July 2012 in 16 quarterly installments, annual interest
at 1.21%-1.24% in 2012 and 1.11%-1.21% in 2011
Repayable from September 2012 in 16 quarterly installments, annual
interest at 1.21%-1.24% in 2012 and 1.13%-1.21% in 2011
Repayable from October 2013 in 16 quarterly installments, annual
interest at 1.23%-1.24% in 2012
Current portion
450,000
262,500
175,000
50,000
1,487,500
(128,125)
500,000
300,000
200,000
-
1,650,000
(62,500)
$ 1,359,375
$ 1,587,500
Pursuant to the loan agreements, financial ratios calculated based on semi-annual and annual financial
statements of Xintec must comply with predetermined financial covenants. As of December 31, 2012, Xintec
was in compliance with all such financial covenants.
As of December 31, 2012, future principal repayments for the long-term bank loans were as follows:
Year of Repayment
2013
2014
2015
2016
2017
Amount
$ 128,125
587,500
137,500
625,000
9,375
$ 1,487,500
18. OTHER LONG-TERM PAYABLES
Payables for acquisition of property, plant and equipment (Note 30g)
Payables for software and system design costs
Payables for technology transfer
Current portion (classified under accrued expenses and other current
liabilities)
December 31
2012
$ 825,447
113,000
29,038
967,485
2011
$ 3,399,855
-
-
3,399,855
(913,485)
(3,399,855)
$ 54,000
$ -
58
19. PENSION PLANS
The pension mechanism under the Labor Pension Act (the “Act”) is deemed a defined contribution plan.
Pursuant to the Act, TSMC, GUC, Xintec, Mutual-Pak, TSMC SSL and TSMC Solar have made monthly
contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts. Furthermore,
TSMC North America, TSMC China, TSMC Europe, TSMC Canada, TSMC Solar NA and TSMC Solar Europe
GmbH are required by local regulations to make monthly contributions at certain percentages of the
basic salary of their employees. Pursuant to the aforementioned Act and local regulations, the Company
recognized pension costs of NT$1,403,507 thousand and NT$1,297,583 thousand for the years ended
December 31, 2012 and 2011, respectively.
TSMC, GUC, Xintec, TSMC SSL and TSMC Solar have defined benefit plans under the Labor Standards Law
that provide benefits based on an employee’s length of service and average monthly salary for the six-month
period prior to retirement. The aforementioned companies contribute an amount equal to 2% of salaries
paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension
Fund Supervisory Committee (the Committee) and deposited in the Committee’s name in the Bank of
Taiwan.
Pension information on the defined benefit plans is summarized as follows:
a. Components of net periodic pension cost for the year
Service cost
Interest cost
Projected return on plan assets
Amortization
Net periodic pension cost
2012
2011
$ 129,217
160,018
(63,279)
65,146
$ 132,995
167,911
(68,067)
74,814
$ 291,102
$ 307,653
b. Reconciliation of funded status of the plans and accrued pension cost at December 31, 2012 and 2011
20. INCOME TAX
Benefit obligation
Vested benefit obligation
Nonvested benefit obligation
Accumulated benefit obligation
Additional benefits based on future salaries
Projected benefit obligation
Fair value of plan assets
Funded status
Unrecognized net transition obligation
Prior service cost
Unrecognized net loss
Additional liability
Accrued pension cost
Vested benefit
2012
2011
a. A reconciliation of income tax expense based on “income before income tax” at the statutory rates and
$ 427,874
6,069,738
6,497,612
3,635,749
10,133,361
(3,352,567)
6,780,794
(66,444)
140,324
(2,879,665)
4,532
$ 313,463
5,456,913
5,770,376
3,443,749
9,214,125
(3,120,665)
6,093,460
(74,766)
147,564
(2,257,750)
-
$ 3,979,541
$ 3,908,508
$ 479,621
$ 349,981
income tax currently payable was as follows:
Income tax expense based on “income before income tax” at statutory
rates
Tax effect of the following:
Tax-exempt income
Temporary and permanent differences
Additional income tax under the Alternative Minimum Tax Act
Additional tax at 10% on unappropriated earnings
Net operating loss carryforwards used
Investment tax credits used
Years Ended December 31
2012
2011
$ 33,654,070
$ 25,964,235
(9,830,280)
(3,020,685)
-
4,193,497
(647,755)
(9,588,226)
(13,832,239)
(1,597,357)
286,827
6,293,384
(395,258)
(6,318,215)
Income tax currently payable
$ 14,760,621
$ 10,401,377
Net loss not recognized as pension cost
$ 4,532
$ -
b. Income tax expense consisted of the following:
c. Actuarial assumptions at December 31, 2012 and 2011
Discount rate used in determining present values
Future salary increase rate
Expected rate of return on plan assets
d. Contributions to the Funds for the year
e. Payments from the Funds for the year
2012
1.50%-1.75%
2.00%-3.00%
1.75%-2.00%
2011
1.75%
2.50%-3.00%
2.00%
2012
2011
$ 221,063
$ 211,963
2012
2011
$ 26,119
$ 7,339
Income tax currently payable
Income tax adjustments on prior years
Other income tax adjustments
Net change in deferred income tax assets
Investment tax credits
Net operating loss carryforwards
Temporary differences
Valuation allowance
Effect of changes in consolidated entities
Years Ended December 31
2012
2011
$ 14,760,621
55,313
201,119
$ 10,401,377
470,376
312,999
7,102,848
182,797
74,324
(6,786,735)
-
2,304,884
224,141
(71,013)
(2,873,378)
(74,969)
Income tax expense
$ 15,590,287
$ 10,694,417
c. Net deferred income tax assets consisted of the following:
Current deferred income tax assets
Investment tax credits
Temporary differences
Allowance for sales returns and others
Unrealized loss on inventories
Unrealized loss on financial instruments, net
Others
Valuation allowance
December 31
2012
2011
$ 6,214,708
$ 4,913,791
718,044
416,555
224,618
473,688
(46,411)
506,172
44,013
308,929
304,066
(140,481)
$ 8,001,202
$ 5,936,490
(Continued)
59
December 31
2012
2011
e. All of TSMC’s earnings generated prior to December 31, 1997 have been appropriated.
f. As of December 31, 2012, investment tax credits of TSMC, Xintec, Mutual-Pak and TSMC SSL consisted of
Noncurrent deferred income tax assets
Investment tax credits
Net operating loss carryforwards
Temporary differences
Depreciation
Others
Valuation allowance
$ 6,995,793
2,224,264
$ 15,399,558
2,491,708
the following:
1,420,778
759,698
(6,624,518)
2,280,923
654,672
(13,390,144)
$ 4,776,015
$ 7,436,717
Law/Statute
Item
Statute for Upgrading
Purchase of machinery and
Industries
equipment
Total
Creditable
Amount
Remaining
Creditable
Amount
Expiry Year
$ 6,961
6,514,226
7,045,590
505,215
$ -
927,549
7,045,590
505,215
2012
2013
2014
2015
$ 14,071,992
$ 8,478,354
Effective in May 2010, the Article 5 of the Income Tax Law of the Republic of China was amended, in
which the income tax rate of profit-seeking enterprises would be reduced from 20% to 17%. The last
amended income tax rate of 17% is retroactively applied on January 1, 2010.
Under the Article 10 of the Statute for Industrial Innovation (SII), effective in May 2010, a profit-seeking
enterprise may deduct up to 15% of its research and development expenditures from its income tax
payable for the year in which these expenditures are incurred, but this deduction should not exceed 30%
of the income tax payable for that year. This incentive is retroactive to January 1, 2010 and effective until
December 31, 2019.
Statute for Upgrading
Research and development
Industries
expenditures
$ 1,179,808
4,732,147
$ -
4,732,147
2012
2013
$ 5,911,955
$ 4,732,147
Statute for Upgrading
Personnel training expenditures
$ 17,406
$ -
2012
Industries
Statute for Industrial
Innovation
Research and development
$ 2,828,300
$ -
2012
expenditures
Under the Income Basic Tax Act amended in August 2012, the standard deduction and the tax rate of
Alternative Minimum Tax were amended from NT$1,000 thousand to be NT$500 thousand and from
10% to 12%, respectively. The amended Income Basic Tax Act is effective on January 1, 2013.
g. The profits generated from the following projects of TSMC and Xintec are exempt from income tax for a
five-year period:
The Company has evaluated the impact from above amendments and adjusted the deferred tax assets
with the resulting differences recorded as income tax expense for the year ended December 31, 2012. In
addition, the Company evaluated the effect of Alternative Minimum Tax and the applicable year of the
profits generated from projects exempt from income tax for a five-year period. As the Company plans to
apply the tax-exempt income in later years, income tax payable is anticipated to increase and the Company
will utilize available investment tax credits as an offset against income taxes. Since more investment tax
credits can be utilized, valuation allowance has been adjusted down accordingly.
As of December 31, 2012, the net operating loss carryforwards generated by WaferTech, Xintec,
Mutual-Pak, TSMC SSL and TSMC Solar would expire on various dates through 2023.
d. Integrated income tax information:
The balance of the imputation credit account of TSMC as of December 31, 2012 and 2011 was
NT$8,130,060 thousand and NT$4,003,228 thousand, respectively.
The estimated and actual creditable ratios for distribution of TSMC’s earnings of 2012 and 2011 were
7.92% and 6.69%, respectively.
The imputation credit allocated to shareholders is based on its balance as of the date of the dividend
distribution. The estimated creditable ratio may change when the actual distribution of the imputation
credit is made.
60
Construction and expansion of 2004 by TSMC
Construction and expansion of 2005 by TSMC
Construction and expansion of 2006 by TSMC
Construction and expansion of 2003 and 2006 by Xintec
Tax-exemption Period
2008 to 2012
2010 to 2014
2011 to 2015
2010 to 2014
h. The tax authorities have examined income tax returns of TSMC through 2009. All investment tax credit
adjustments assessed by the tax authorities have been recognized accordingly.
21. LABOR COST, DEPRECIATION AND AMORTIZATION
Labor cost
Salary and bonus
Labor and health insurance
Pension
Meal
Welfare
Others
Classified as Cost of Sales
$ 31,326,400
1,618,274
1,053,125
765,476
747,446
96,385
Year Ended December 31, 2012
Classified as
Operating Expenses
$ 23,070,244
1,153,028
641,435
314,279
277,803
305,116
Total
$ 54,396,644
2,771,302
1,694,560
1,079,755
1,025,249
401,501
$ 35,607,106
$ 25,761,905
$ 61,369,011
Depreciation
Amortization
$ 118,313,581
$ 1,344,819
$ 10,848,277
$ 835,956
$ 129,161,858
$ 2,180,775
Year Ended December 31, 2011
b. Special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in
Labor cost
Salary and bonus
Labor and health insurance
Pension
Meal
Welfare
Others
Classified as Cost of Sales
$ 26,548,111
1,316,726
971,263
710,547
714,628
341,156
Classified as
Operating Expenses
$ 20,686,957
923,645
634,476
297,762
266,891
372,673
Total
charge;
$ 47,235,068
2,240,371
1,605,739
1,008,309
981,519
713,829
c. Bonus to directors and profit sharing to employees of TSMC of not more than 0.3% and not less than
1% of the remainder, respectively. Directors who also serve as executive officers of TSMC are not entitled
to receive the bonus to directors. TSMC may issue profit sharing to employees in stock of an affiliated
company meeting the conditions set by the Board of Directors or, by the person duly authorized by the
Board of Directors;
$ 30,602,431
$ 23,182,404
$ 53,784,835
d. Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.
Depreciation
Amortization
$ 98,065,992
$ 1,463,405
$ 7,261,159
$ 874,165
$ 105,327,151
$ 2,337,570
22. SHAREHOLDERS’ EQUITY
As of December 31, 2012, 1,091,468 thousand ADSs of TSMC were traded on the NYSE. The number
of common shares represented by the ADSs was 5,457,339 thousand (one ADS represents five common
shares).
Capital surplus can be used to offset a deficit under the Company Law. However, the capital surplus
generated from donations and the excess of the issuance price over the par value of capital stock
(including the stock issued for new capital, mergers, convertible bonds and the surplus from treasury stock
transactions) may be appropriated as stock dividends, which are limited to a certain percentage of TSMC’s
paid-in capital. In addition, the capital surplus from long-term investments may not be used for any purpose.
However, according to the revised Company Law, effective January 2012, the aforementioned capital surplus
generated from donations and the excess of the issuance price over the par value of capital stock can also be
used to distribute cash in proportion to original shareholders’ holding.
Capital surplus consisted of the following:
Additional paid-in capital
From merger
From convertible bonds
From long-term investments
From employee stock options
Donations
December 31
2012
$ 23,934,607
22,804,510
8,892,847
503,290
2,500
55
2011
$ 23,774,250
22,804,510
8,892,847
374,695
-
55
$ 56,137,809
$ 55,846,357
TSMC’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, TSMC shall
first offset its losses in previous years and then set aside the following items accordingly:
TSMC’s Articles of Incorporation also provide that profits of TSMC may be distributed by way of cash
dividend and/or stock dividend. However, distribution of profits shall be made preferably by way of cash
dividend. Distribution of profits may also be made by way of stock dividend; provided that the ratio for stock
dividend shall not exceed 50% of the total distribution.
Any appropriations of the profits are subject to shareholders’ approval in the following year.
TSMC accrued profit sharing to employees based on certain percentage of net income during the year, which
amounted to NT$11,115,240 thousand and NT$8,990,026 thousand for the years ended December 31,
2012 and 2011, respectively. Bonuses to directors were expensed based on estimated amount of payment.
If the actual amounts subsequently resolved by the shareholders differ from the estimated amounts, the
differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If profit
sharing is resolved to be distributed to employees in stock, the number of shares is determined by dividing
the amount of profit sharing by the closing price (after considering the effect of dividends) of the shares on
the day preceding the shareholders’ meeting.
TSMC no longer has supervisors since January 1, 2007. The required duties of supervisors are being fulfilled
by the Audit Committee.
According to the revised Company Law, effective January 2012, the appropriation for legal capital reserve
shall be made until the reserve equals the Company’s paid-in capital. The reserve may be used to offset a
deficit, or be distributed as dividends in cash or stocks for the portion in excess of 25% of the paid-in capital
if the Company incurs no loss.
A special capital reserve equivalent to the net debit balance of the other components of shareholders’ equity
(for example, cumulative translation adjustments, unrealized loss on financial instruments and net loss not
recognized as pension cost, but excluding treasury stock) shall be made from unappropriated earnings
pursuant to existing regulations promulgated by the Securities and Futures Bureau (SFB). Any special reserve
appropriated may be reversed to the extent that the net debit balance reverses.
a. Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve equals
TSMC’s paid-in capital;
The appropriations of earnings for 2011 and 2010 had been approved in the TSMC’s shareholders’ meetings
held on June 12, 2012 and June 9, 2011, respectively. The appropriations and dividends per share were as
follows:
61
Appropriation of Earnings
Dividends Per Share (NT$)
23. STOCK-BASED COMPENSATION PLANS
For Fiscal
Year 2011
For Fiscal
Year 2010
For Fiscal
Year 2011
For Fiscal
Year 2010
a. Under Intrinsic Value Method
Legal capital reserve
Special capital reserve
Cash dividends to shareholders
$ 13,420,128
1,172,350
77,748,668
$ 16,160,501
5,120,827
77,730,236
$ 92,341,146
$ 99,011,564
$ 3.00
$ 3.00
TSMC’s profit sharing to employees and bonus to directors in the amounts of NT$8,990,026 thousand and
NT$62,324 thousand in cash for 2011, respectively, and profit sharing to employees and bonus to directors
in the amounts of NT$10,908,338 thousand and NT$51,131 thousand in cash for 2010, respectively,
had been approved in the shareholders’ meeting held on June 12, 2012 and June 9, 2011, respectively.
The resolved amounts of the profit sharing to employees and bonus to directors were consistent with the
resolutions of meeting of the Board of Directors held on February 14, 2012 and February 15, 2011 and
same amount had been charged against earnings of 2011 and 2010, respectively.
TSMC’s appropriations of earnings for 2012 had been resolved in the meeting of the Board of Directors held
on February 5, 2013. The appropriations and dividends per share were as follows:
Appropriation of Earnings
Dividends Per Share (NT$)
For Fiscal Year 2012
For Fiscal Year 2012
TSMC’s Employee Stock Option Plans, consisting of the TSMC 2004 Plan, TSMC 2003 Plan and TSMC 2002
Plan, were approved by the SFB on January 6, 2005, October 29, 2003 and June 25, 2002, respectively. The
maximum number of options authorized to be granted under the TSMC 2004 Plan, TSMC 2003 Plan and
TSMC 2002 Plan was 11,000 thousand, 120,000 thousand and 100,000 thousand, respectively, with each
option eligible to subscribe for one common share of TSMC when exercised. The options may be granted to
qualified employees of TSMC or any of its domestic or foreign subsidiaries, in which TSMC’s shareholding
with voting rights, directly or indirectly, is more than fifty percent (50%). The options of all the plans are
valid for ten years and exercisable at certain percentages subsequent to the second anniversary of the grant
date. Under the terms of the plans, the options are granted at an exercise price equal to the closing price of
TSMC’s common shares listed on the TWSE on the grant date.
Options of the plans that had never been granted or had been granted but subsequently canceled had
expired as of December 31, 2012.
Information about TSMC’s outstanding options for the years ended December 31, 2012 and 2011 was as
follows:
Legal capital reserve
Special capital reserve
Cash dividends to shareholders
$ 16,615,880
(4,820,483)
77,773,307
$ 89,568,704
$ 3.00
Year ended December 31, 2012
The Board of Directors of TSMC also resolved to appropriate profit sharing to employees and bonus
to directors in the amounts of NT$11,115,240 thousand and NT$71,351 thousand in cash for 2012,
respectively. There is no significant difference between the aforementioned resolved amounts and the
amounts charged against earnings of 2012.
The appropriations of earnings, profit sharing to employees and bonus to directors for 2012 are to be
resolved in the TSMC’s shareholders’ meeting held on June 11, 2013 (expected).
Balance, beginning of year
Options exercised
Options canceled
Balance, end of year
Year ended December 31, 2011
Balance, beginning of year
Options exercised
Balance, end of year
Number of Options
(In Thousands)
Weighted-average
Exercise Price (NT$)
14,293
(8,213)
(135)
5,945
21,437
(7,144)
14,293
$ 31.4
29.5
34.6
34.6
$ 31.4
30.5
32.1
The information about the appropriations of TSMC’s profit sharing to employees and bonus to directors is
available at the Market Observation Post System website.
The numbers of outstanding options and exercise prices have been adjusted to reflect the distribution of
earnings by TSMC in accordance with the plans.
Under the Integrated Income Tax System that became effective on January 1, 1998, the R.O.C. resident
shareholders are allowed a tax credit for their proportionate share of the income tax paid by TSMC on
earnings generated since January 1, 1998.
As of December 31, 2012, information about TSMC’s outstanding options was as follows:
Range of Exercise Price
(NT$)
$20.2-$28.3
38.0- 50.1
Options Outstanding
Number of Options
(In Thousands)
Weighted-average Remaining
Contractual Life (Years)
3,362
2,583
5,945
0.4
2.0
1.1
Weighted-average
Exercise Price (NT$)
$ 25.9
45.8
34.6
62
As of December 31, 2012, all of the above outstanding options were exercisable.
Xintec’s Employee Stock Option Plans, consisting of the Xintec 2007 Plan and Xintec 2006 Plan, were
approved by the SFB on June 26, 2007 and July 3, 2006, respectively. The maximum number of options
authorized to be granted under the Xintec 2007 Plan and Xintec 2006 Plan was 6,000 thousand each,
with each option eligible to subscribe for one common share of Xintec when exercised. The options may
be granted to qualified employees of Xintec or any of its subsidiaries. The options of Xintec 2007 Plan and
Xintec 2006 Plan are valid for ten years and exercisable at certain percentages subsequent to the second
anniversary of the grant date.
Information about Xintec’s outstanding options for the years ended December 31, 2012 and 2011 was as
follows:
Year ended December 31, 2012
Balance, beginning of year
Options exercised
Options canceled
Balance, end of year
Year ended December 31, 2011
Balance, beginning of year
Options exercised
Options canceled
Balance, end of year
Number of Options
(In Thousands)
Weighted-average
Exercise Price (NT$)
825
(291)
(19)
515
1,832
(967)
(40)
825
$ 15.0
17.1
15.0
13.8
$ 14.4
14.4
17.4
15.1
The exercise prices have been adjusted to reflect the distribution of earnings by Xintec in accordance with
the plans.
As of December 31, 2012, information about Xintec’s outstanding and exercisable options was as follows:
Range of
Exercise Price (NT$)
$10.7-$12.5
14.8- 18.6
Number of
Options
(In Thousands)
Options Outstanding
Weighted-average
Remaining
Contractual Life
(Years)
Options Exercisable
Weighted-average
Exercise Price
(NT$)
Number of
Options
(In Thousands)
Weighted-average
Exercise Price
(NT$)
201
314
515
3.7
4.6
4.2
$ 10.7
15.8
13.8
198
314
512
$ 10.7
15.8
No compensation cost was recognized under the intrinsic value method for the years ended December 31,
2012 and 2011. Had the Company used the fair value based method to evaluate the options using the
Black-Scholes model, the valuation assumptions at the various grant dates and pro forma results of the
Company for the years ended December 31, 2012 and 2011 would have been as follows:
Valuation assumptions:
Expected dividend yield
Expected volatility
Risk free interest rate
Expected life
Net income attributable to shareholders of the parent:
As reported
Pro forma
Earnings per share (EPS) - after income tax (NT$):
Basic EPS as reported
Pro forma basic EPS
Diluted EPS as reported
Pro forma diluted EPS
b. Under Fair Value Method
TSMC
Xintec
1.00%- 3.44%
43.77%- 46.15%
3.07%- 3.85%
5 years
0.80%
31.79%- 47.42%
1.88%- 2.45%
3 years
Years Ended December 31
2012
2011
$ 166,158,802
165,986,009
$ 134,201,279
134,146,490
$ 6.41
6.40
6.41
6.40
$ 5.18
5.18
5.18
5.17
The Board of Directors of TSMC SSL and TSMC Solar resolved on November 21, 2011 to issue new shares for
cash and reserved 17,175 thousand shares and 12,341 thousand shares, respectively, for their employees
to subscribe to, according to the Company Law. The aforementioned shares were fully vested on the grant
date.
Information about TSMC SSL’s and TSMC Solar’s employee stock options related to the aforementioned new
shares issued was as follows:
Year ended December 31, 2012
Balance, beginning of year
Options granted
Options exercised
TSMC SSL
TSMC Solar
Number of
Options
(In Thousands)
Weighted-average
Exercise Price
(NT$)
Number of
Options
(In Thousands)
Weighted-average
Exercise Price
(NT$)
-
17,175
(17,175)
$ -
10.0
10.0
-
12,341
(12,341)
$ -
10.0
10.0
13.8
Balance, end of year
-
-
-
-
63
The grant date of aforementioned stock options was January 9, 2012. TSMC SSL and TSMC Solar used the
Black-Scholes model to determine the fair value of the options. The valuation assumptions were as follows:
As of December 31, 2012, information about the outstanding and exercisable options of Xintec 2011 Plan
was as follows:
Valuation assumptions:
Stock price on grant date (NT$/share)
Exercise price (NT$/share)
Expected volatility
Expected life
Risk free interest rate
TSMC SSL
TSMC Solar
$ 8.9
$ 10.0
40.32%
40 days
0.76%
$ 9.0
$ 10.0
40.32%
40 days
0.76%
Range of
Exercise Price (NT$)
Number of
Options
(In Thousands)
Options Outstanding
Weighted-average
Remaining
Contractual Life
(Years)
Options Exercisable
Weighted-average
Exercise Price
(NT$)
Number of
Options
(In Thousands)
Weighted-average
Exercise Price
(NT$)
$ 22.1
5,528
4.5
$ 22.1
-
$ -
The stock price on grant date was determined based on the cost approach. The expected volatility was
calculated using the historical rate of return based on the TWSE Optoelectronic Index.
The grant date of Xintec 2011 Plan was June 14, 2012. Xintec used the Black-Scholes model to determine
the fair value of the option. The valuation assumptions were as follow:
The fair value of the aforementioned stock option was close to nil, and accordingly, no compensation cost
was recognized.
Xintec’s Employee Stock Option Plan was approved by the SFB on January 10, 2012 (the “Xintec 2011
Plan”). The maximum number of options authorized to be granted under the Xintec 2011 Plan was
6,000 thousand, with each option eligible to subscribe for one common share of Xintec when exercised.
The options may be granted to qualified employees of Xintec or any of its subsidiaries. The options of
Xintec 2011 Plan are valid for five years and exercisable at certain percentages subsequent to the second
anniversary of the grant date.
Valuation assumptions:
Stock price on grant date (NT$/share)
Exercise price (NT$/share)
Expected volatility
Expected life
Expected dividend yield
Risk free interest rate
Xintec
$ 19.42
$ 22.30
43.73%
3.875 years
-
0.96%
The stock price on grant date was determined based on the market approach. The expected volatility was
calculated based on the historical stock prices of the comparative companies of Xintec.
Year ended December 31, 2012
Balance, beginning of year
Options granted
Options canceled
Balance, end of year
Number of Options
(In Thousands)
Weighted-average
Exercise Price (NT$)
For the year ended December 31, 2012, Xintec recognized compensation costs of the above stock option in
the amount of NT$6,219 thousand.
-
6,000
(472)
5,528
$ -
22.3
22.1
24. TREASURY STOCK
22.1
Purpose of Treasury Stock
Number
of Shares,
Beginning of
Year
Addition
Retirement
(Shares in Thousands)
Number of
Shares,
End of Year
Weighted-average fair value of options granted (NT$)
$ 5.82
Year ended December 31, 2011
The exercise prices have been adjusted to reflect the distribution of earnings by Xintec in accordance with
the plan.
Shareholders executed the appraisal right
-
1,000
(1,000)
-
In August 2011, at the option of the shareholders of TSMC, certain shareholders requested TSMC to buy
back their shares pursuant to the Company Law, which shares were subsequently retired in November 2011.
64
25. EARNINGS PER SHARE
EPS is computed as follows:
26. DISCLOSURES FOR FINANCIAL INSTRUMENTS
a. Fair values of financial instruments were as follows:
Amounts (Numerator)
Before
Income Tax
After
Income Tax
Number of Shares
(Denominator)
(In Thousands)
EPS (NT$)
Before
Income Tax
After
Income Tax
December 31
2012
2011
Carrying Amount
Fair Value
Carrying Amount
Fair Value
Year ended December 31, 2012
Basic EPS
Earnings available to common
shareholders of the parent
Effect of dilutive potential
common shares
Diluted EPS
Earnings available to common
shareholders of the parent
(including effect of dilutive
potential common shares)
Year ended December 31, 2011
Basic EPS
Earnings available to common
shareholders of the parent
Effect of dilutive potential
common shares
Diluted EPS
Earnings available to common
shareholders of the parent
(including effect of dilutive
potential common shares)
$ 181,756,619
$ 166,158,802
25,920,735
$ 7.01
$ 6.41
-
-
7,201
$ 181,756,619
$ 166,158,802
25,927,936
$ 7.01
$ 6.41
$ 144,852,948
$ 134,201,279
25,914,076
$ 5.59
$ 5.18
-
-
10,606
$ 144,852,948
$ 134,201,279
25,924,682
$ 5.59
$ 5.18
If the Company may settle the obligation by cash, by issuing shares, or in combination of both cash and
shares, profit sharing to employees which will be settled in shares should be included in the weighted
average number of shares outstanding in calculation of diluted EPS, if the shares have a dilutive effect. The
number of shares is estimated by dividing the amount of profit sharing to employees in stock by the closing
price (after considering the dilutive effect of dividends) of the common shares on the balance sheet date.
Such dilutive effect of the potential shares needs to be included in the calculation of diluted EPS until the
shares of profit sharing to employees are resolved in the shareholders’ meeting in the following year.
Assets
Financial assets at fair value through profit or
loss
Available-for-sale financial assets
Held-to-maturity financial assets
Financial assets carried at cost
Liabilities
Financial liabilities at fair value through profit or
loss
Hedging derivative financial liabilities
Bonds payable (including current portion)
Long-term bank loans (including current portion)
Other long-term payables (including current
portion)
Obligations under capital leases (including
current portion)
$ 39,554
41,161,880
5,056,973
3,605,077
$ 39,554
41,161,880
5,066,363
-
$ 15,360
3,308,770
9,068,847
4,315,005
$ 15,360
3,308,770
9,128,063
-
15,625
-
80,000,000
1,487,500
967,485
756,305
15,625
-
80,343,413
1,487,500
967,485
756,305
13,742
232
22,500,000
1,650,000
13,742
232
22,597,115
1,650,000
3,399,855
3,399,855
870,993
870,993
b. Methods and assumptions used in the estimation of fair values of financial instruments
1) The aforementioned financial instruments do not include cash and cash equivalents, receivables, other
financial assets, refundable deposits, short-term loans, payables and guarantee deposits. The carrying
amounts of these financial instruments approximate their fair values due to their short maturities.
2) Except for derivatives, available-for-sale and held-to-maturity financial assets were based on their
quoted market prices.
3) The fair values of those derivatives are determined using valuation techniques incorporating estimates
and assumptions that were consistent with prevailing market conditions.
4) Financial assets carried at cost have no quoted prices in an active market and entail an unreasonably
high cost to obtain verifiable fair values. Therefore, no fair value is presented.
5) Fair value of bonds payable was based on their quoted market price.
6) Fair values of long-term bank loans, other long-term payables and obligations under capital leases were
based on the present value of expected cash flows, which approximate their carrying amounts.
65
c. Valuation gains/losses arising from changes in fair value of derivatives contracts determined using
2) Credit risk. Credit risk represents the potential loss that would be incurred by the Company if the
counter-parties or third-parties breached contracts. Financial instruments with positive fair values at
the balance sheet date are evaluated for credit risk. The Company evaluated whether the financial
instruments for any possible counter-parties or third-parties are reputable financial institutions, business
enterprises and government agencies and accordingly, the Company believed that the Company’s
exposure to credit risk was not significant.
3) Liquidity risk. The Company has sufficient operating capital and bank facilities to meet cash needs upon
settlement of derivative financial instruments, bonds payable and bank loans. Therefore, the liquidity
risk is low.
4) Cash flow interest rate risk. The Company mainly invests in fixed-interest-rate debt securities. Therefore,
cash flows are not expected to fluctuate significantly due to changes in market interest rates. The
long-term bank loans were floating-rate loans; therefore, changes in the market interest rates will result
in changes in the interest rate of the long-term bank loans, which will affect future cash flows.
g. The Company seeks to reduce the effects of future cash flow related interest rate changes by primarily
using derivative financial instruments.
The Company entered into forward exchange contracts to hedge cash flow risk arising from foreign
exchange rate fluctuations of an expected equity transaction. The forward exchange contract was due in
October 2012.
The Company’s long-term bank loans bear floating interest rates; therefore, changes in the market interest
rate may cause future cash flows to be volatile. Accordingly, the Company entered into an interest rate
swap contract in order to hedge cash flow risk caused by floating interest rates. The interest rate swap
contract of the Company was due in August 2012. Information about outstanding interest rate swap
contract consisted of the following:
Hedged Item
December 31, 2011
Hedging Financial
Instrument
Fair Value
Expected
Cash Flow
Generated Period
Expected Timing for the
Recognition of Gains or
Losses from Hedge
Long-term bank loans
Interest rate swap contract
$ (232)
2011 to 2012
2011 to 2012
valuation techniques were recognized as net gains of NT$23,929 thousand and NT$1,618 thousand for
the years ended December 31, 2012 and 2011, respectively.
d. As of December 31, 2012 and 2011, financial assets exposed to fair value interest rate risk were
NT$5,097,970 thousand and NT$9,086,729 thousand, respectively; financial liabilities exposed to fair
value interest rate risk were NT$116,312,306 thousand and NT$52,711,118 thousand, respectively;
and financial liabilities exposed to cash flow interest rate risks were NT$1,487,500 thousand and
NT$1,650,232 thousand, respectively.
e. Movements of the unrealized gains or losses on financial instruments for the years ended December 31,
2012 and 2011 were as follows:
Balance, beginning of year
Recognized directly in shareholders’ equity
Removed from shareholders’ equity and
recognized in earnings
Year Ended December 31, 2012
From Available-
for-sale Financial
Assets
Equity Method
Investments
Gain (Loss) on
Cash Flow Hedges
Total
$ (1,155,091)
7,282,331
$ (17,671)
17,450
$ (93)
2
$ (1,172,855)
7,299,783
1,846,302
-
91
1,846,393
Balance, end of year
$ 7,973,542
$ (221)
$ -
$ 7,973,321
Balance, beginning of year
Recognized directly in shareholders’ equity
Removed from shareholders’ equity and
recognized in earnings
Effect of changes in consolidated entities
Year Ended December 31, 2011
From Available-
for-sale Financial
Assets
Equity Method
Investments
Gain (Loss) on
Cash Flow Hedges
Total
$ 86,158
(1,034,446)
$ 23,462
(41,402)
$ (331)
(36)
$ 109,289
(1,075,884)
(206,534)
(269)
-
269
274
-
(206,260)
-
Balance, end of year
$ (1,155,091)
$ (17,671)
$ (93)
$ (1,172,855)
f. Information about financial risks
1) Market risk. The derivative financial instruments categorized as financial assets/liabilities at fair
value through profit or loss are mainly used to hedge the market exchange rate fluctuations of
foreign-currency assets and liabilities; therefore, the market exchange rate risk of derivatives will be
offset by the foreign exchange risk of these hedged items. Available-for-sale financial assets and
held-to-maturity financial assets held by the Company are mainly fixed-interest-rate debt securities and
publicly traded stocks; therefore, the fluctuations in market interest rates and market prices will result
in changes in fair values of these debt securities and the fluctuations in market prices will result in
changes in fair values of publicly traded stocks.
66
27. RELATED PARTY TRANSACTIONS
Except as disclosed in the consolidated financial statements and other notes, the following is a summary of
significant related party transactions:
a. Investees of TSMC
GUC (prior to July 2011, GUC was a subsidiary. Since July 2011, GUC is accounted for using the equity
method.)
VIS (accounted for using the equity method)
Research and development expenses
VisEra
GUC
VIS (rent)
Others
Sales of property, plant and equipment and other assets
VIS
VisEra
SSMC (accounted for using the equity method)
Purchase of property, plant and equipment and other assets
b. Indirect investees
VisEra Technology Company, Ltd. (VisEra) (accounted for using the equity method)
Mcube (accounted for using the equity method)
c. Others
Related parties over which the Company has significant influence but with which the Company had no
material transactions.
For the year
Sales
GUC
VIS
Others
Purchases
VIS
SSMC
Others
Manufacturing expenses
VisEra (primarily outsourcing and rent)
VIS (rent)
Others
2012
2011
Amount
%
Amount
%
$ 4,880,507
177,514
253,010
$ 5,311,031
$ 4,475,674
3,638,633
-
$ 8,114,307
$ 15,544
8,270
77
$ 23,891
1
-
-
1
2
1
-
3
-
-
-
-
$ 2,461,345
302,844
61,227
$ 2,825,416
$ 5,597,895
3,949,176
124,673
$ 9,671,744
$ 49,155
5,902
-
$ 55,057
1
-
-
1
2
2
-
4
-
-
-
-
GUC
VisEra
VIS
Non-operating income and gains
VIS (primarily technical service income)
SSMC (primarily technical service income)
Others
As of December 31
Receivables
GUC
Mcube
Others
Other receivables
VIS
SSMC
Others
Refundable deposits
VIS
Others
Payables
VIS
SSMC
Others
Deferred credits (other assets)
(Continued)
VIS
VisEra
2012
2011
Amount
%
Amount
%
$ 8,911
4,521
-
123
$ 13,555
$ 20,380
9,000
$ 29,380
$ 47,051
1,224
-
$ 48,275
$ 261,836
221,210
2,452
$ 485,498
-
-
-
-
-
13
6
19
-
-
-
-
4
3
-
7
$ 19,018
-
1,984
-
$ 21,002
$ 36,008
-
$ 36,008
$ 1,812
11,110
45,473
$ 58,395
$ 227,024
199,377
4,054
$ 430,455
-
-
-
-
-
7
-
7
-
-
-
-
4
4
-
8
$ 273,412
80,212
187
$ 353,811
$ 128,751
56,799
-
77
23
-
100
69
31
-
$ 154,086
31,466
212
$ 185,764
$ 87,507
34,260
525
83
17
-
100
72
28
-
$ 185,550
100
$ 122,292
100
$ 5,813
4
$ 5,817
$ 368,617
351,389
28,607
-
-
-
49
47
4
$ -
-
$ -
$ 987,937
336,037
4,547
-
-
-
75
25
-
$ 748,613
100
$ 1,328,521
100
$ (7,806)
948
$ (6,858)
(1)
-
(1)
$ -
-
$ -
-
-
-
(Concluded)
67
The sales prices and payment terms to related parties were not significantly different from those of sales
to third parties. For other related party transactions, prices and terms were determined in accordance with
mutual agreements.
The Company leased certain office space and facilities from VIS. The lease terms and prices were determined
in accordance with mutual agreements. The rental expense was paid monthly and the related expenses were
classified under research and development expenses and manufacturing expenses.
The Company leased certain factory building from VisEra. The lease terms and prices were determined in
accordance with mutual agreements. The rental expense was paid monthly and the related expenses were
classified under manufacturing expenses. The lease expired in June 2011.
The Company deferred the disposal gains/losses (classified under other assets and deferred credits) derived
from sales of property, plant and equipment and other assets to VIS and VisEra, and then recognized such
gains/losses (classified under non-operating gains and losses) over the depreciable lives of the disposed
assets.
Compensation of directors and management personnel:
29. SIGNIFICANT LONG-TERM LEASES
The Company leases several parcels of land, factory and office premises from the Science Park Administration
and Jhongli Industrial Park Service Center. These operating leases expire on various dates from March 2013
to July 2032 and can be renewed upon expiration.
The Company entered into lease agreements for its office premises and certain office equipment located in
the United States, Japan, Shanghai and Taiwan. These operating leases expire between 2013 and 2020 and
can be renewed upon expiration.
As of December 31, 2012, future lease payments were as follows:
Year
2013
2014
2015
2016
2017
2018 and thereafter
Amount
$ 693,758
651,339
639,099
625,243
562,762
4,221,524
$ 7,393,725
Salaries, incentives and special compensation
Bonus
$ 883,177
538,077
$ 752,767
445,681
$ 1,421,254
$ 1,198,448
Significant commitments and contingencies of the Company as of December 31, 2012, excluding those
disclosed in other notes, were as follows:
Years Ended December 31
2012
2011
30. SIGNIFICANT COMMITMENTS AND CONTINGENCIES
The information about the compensation of directors and management personnel is available in the annual
report for the shareholders’ meeting. Total compensation expense for the year ended December 31, 2012
includes estimated profit sharing to employees and bonus to directors of the Company that relate to
2012 but will be paid in the following year. The actual amount will be finalized and approved upon the
resolution of the shareholders’ meeting in 2013. The total compensation for the year ended December 31,
2011 included the bonuses appropriated from earnings of 2011 which was approved by the shareholders’
meeting held in 2012.
28. PLEDGED OR MORTGAGED ASSETS
The Company provided other financial assets as collateral mainly for building lease agreements. As of
December 31, 2012 and 2011, the aforementioned other financial assets amounted to NT$119,710
thousand and NT$121,140 thousand, respectively.
a. Under a technical cooperation agreement with Industrial Technology Research Institute, the R.O.C.
Government or its designee approved by TSMC can use up to 35% of TSMC’s capacity if TSMC’s
outstanding commitments to its customers are not prejudiced. The term of this agreement is for five years
beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless
otherwise terminated by either party with one year prior notice.
b. Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March
30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in
Singapore. TSMC’s equity interest in SSMC was 32%. Nevertheless, Philips parted with its semiconductor
company which was renamed as NXP B.V. in September 2006. TSMC and NXP B.V. purchased all the
SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the Shareholders Agreement on
November 15, 2006. After the purchase, TSMC and NXP B.V. currently own approximately 39% and
61% of the SSMC shares respectively. TSMC and Philips (now NXP B.V.) are required, in the aggregate, to
purchase at least 70% of SSMC’s capacity, but TSMC alone is not required to purchase more than 28%
of the capacity. If any party defaults on the commitment and the capacity utilization of SSMC fall below
a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related
unavoidable costs.
68
c. In August 2006, TSMC filed a lawsuit against Semiconductor Manufacturing International Corporation,
g. TSMC entered into an agreement with a counterparty in 2003 whereby TSMC China is obligated to
SMIC (Shanghai) and SMIC Americas (aggregately referred to as “SMIC”) in the Superior Court of California
for Alameda County for breach of a 2005 agreement that settled an earlier trade secret misappropriation
and patent infringement litigation between the parties, as well as for trade secret misappropriation,
seeking injunctive relief and monetary damages. In September 2006, SMIC filed a cross-complaint against
TSMC in the same court alleging breach of settlement agreement, implied covenant of good faith and
fair dealing. SMIC also filed a civil action against TSMC in November 2006 with the Beijing People’s High
Court alleging defamation and breach of good faith. On June 10, 2009, the Beijing People’s High Court
ruled in favor of TSMC and dismissed SMIC’s lawsuit. On November 4, 2009, after a two-month trial,
a jury in the California action found SMIC to have both breached the 2005 settlement agreement and
misappropriated TSMC’s trade secrets. TSMC has subsequently settled both lawsuits with SMIC. Pursuant
to the new settlement agreement, the parties have agreed to the entry of a stipulated judgment in favor
of TSMC in the California action, and to the dismissal of SMIC’s appeal against the Beijing High Court’s
finding in favor of TSMC. Under the new settlement agreement and the related stipulated judgment,
SMIC has agreed to make cash payments by installments to TSMC totaling US$200 million, which are
in addition to the US$135 million previously paid to TSMC under the 2005 settlement agreement, and,
conditional upon relevant government regulatory approvals, to issue to TSMC a total of 1,789,493,218
common shares of Semiconductor Manufacturing International Corporation and a three-year warrant
to purchase 695,914,030 common shares (subject to adjustment) of Semiconductor Manufacturing
International Corporation at HK$1.30 per share (subject to adjustment). TSMC has acquired the above
mentioned common shares in July 2010, which are recorded within available for sale financial assets, and
obtained the subsequent cash settlement income in accordance with the agreement.
d. In June 2010, Keranos, LLC. filed a lawsuit in the U.S. District Court for the Eastern District of Texas
alleging that TSMC, TSMC North America, and several other leading technology companies infringe
three expired U.S. patents. In response, TSMC, TSMC North America, and several co-defendants in the
Texas case filed a lawsuit against Keranos in the U.S. District Court for the Northern District of California
in November 2010, seeking a judgment declaring that they did not infringe the asserted patents, and
that those patents are invalid. These two litigations have been consolidated into a single case in the U.S.
District Court for the Eastern District of Texas. The outcome cannot be determined at this time.
e. In December 2010, Ziptronix, Inc. filed a complaint in the U.S. District Court for the Northern District of
California accusing TSMC, TSMC North America and one other company of allegedly infringing several U.S.
patents. The outcome cannot be determined at this time.
f. TSMC joined the Customer Co-Investment Program of ASML and entered into the investment agreement in
August 2012. The agreement includes an investment of EUR837,816 thousand by TSMC Global to acquire
5% of ASML’s equity with a lock-up period of 2.5 years. TSMC Global has acquired the aforementioned
equity in October 2012. Both parties also signed the research and development funding agreement and
TSMC will provide EUR277,000 thousand to ASML’s research and development programs from 2013 to
2017.
purchase certain property, plant and equipment at the agreed-upon price within the contract period.
If the purchase is not completed, TSMC China is obligated to compensate the counterparty for the loss
incurred. The property, plant and equipment have been in use by TSMC China since 2004 and are being
depreciated over their estimated service lives. The related obligation totaled NT$825,447 thousand and
NT$3,399,855 thousand as of December 31, 2012 and 2011, respectively, which is included in accrued
expenses and other current liabilities.
h. Amounts available under unused letters of credit as of December 31, 2012 were NT$99,671 thousand.
31. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS
AND LIABILITIES
The significant financial assets and liabilities denominated in foreign currencies were as follows:
December 31
2012
2011
Foreign Currencies
(In Thousands)
Exchange Rate
(Note)
Foreign Currencies
(In Thousands)
Exchange Rate
(Note)
$ 3,437,165
125,973
35,734,874
102,995
29.038
38.39-38.49
0.3352-0.3364
4.66
$ 3,744,817
135,857
37,276,671
201,385
30.288
39.18-39.27
0.3897-0.3906
4.81
1,611,474
492,014
328,281
29.038
3.75
29.038
141,498
671,060
294,797
30.288
3.90
30.288
2,193,343
247,052
43,311,360
205,930
29.038
38.39-38.49
0.3352-0.3364
4.66
1,744,746
111,750
35,349,169
278,877
30.288
39.18-39.27
0.3897-0.3906
4.81
Financial assets
Monetary items
USD
EUR
JPY
RMB
Non-monetary items
USD
HKD
Investments accounted for using equity method
USD
Financial liabilities
Monetary items
USD
EUR
JPY
RMB
Note: Exchange rate represents the number of N.T. dollars for which one foreign currency could be exchanged.
69
32. PRE-DISCLOSURE OF THE ADOPTION OF INTERNATIONAL FINANCIAL
b. Exemptions from IFRS 1
REPORTING STANDARDS
IFRS 1, “First-time Adoption of International Financial Reporting Standards,” establishes the procedures
for the Company’s first consolidated financial statements prepared in accordance with IFRSs. According
to IFRS 1, the Company is required to determine the accounting policies under IFRSs and retrospectively
apply those accounting policies in its opening balance sheet at the date of transition to IFRSs (January 1,
2012; the transition date); except for optional exemptions and mandatory exceptions to such retrospective
application provided under IFRS 1. The main optional exemptions the Company adopted are summarized
as follows:
1) Business combinations. The Company elected not to apply IFRS 3, “Business Combinations,”
retrospectively to business combinations occurred before January 1, 2012. Therefore, in the opening
balance sheet, the amount of goodwill generated from past business combinations remains the same
compared with the one under R.O.C. GAAP as of December 31, 2011.
2) Employee benefits. The Company elected to recognize all cumulative actuarial gains and losses in
retained earnings as of January 1, 2012. In addition, the Company elected to apply the exemption
disclosure requirement provided by IFRS 1, in which the amounts of present value of defined
benefit obligations, the fair value of plan assets, the surplus or deficit in the plan and the experience
adjustments are determined for each accounting period prospectively from the transition date.
3) Share-based payment. The Company elected to take the optional exemption from applying IFRS 2,
“Share-based Payment,” retrospectively for the shared-based payment transactions granted and vested
before January 1, 2012.
c. As of December 31, 2012, based on the Company’s assessment, the significant differences between the
Company’s current accounting policies under R.O.C. GAAP and the ones under IFRSs are stated as follows:
According to the Rule No. 0990004943 issued by the FSC on February 2, 2010, the Company is required to
provide pre-disclosure regarding the adoption of the International Financial Reporting Standards (IFRSs) in
the consolidated financial statements as follows.
a. On May 14, 2009, the FSC announced the roadmap of IFRSs adoption for R.O.C. companies. Accordingly,
starting 2013, companies with shares listed on the TWSE or traded on the Taiwan GreTai Securities Market
or Emerging Stock Market should prepare the consolidated financial statements in accordance with the
Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the IFRSs, International
Accounting Standards (IASs), interpretations as well as related guidance translated by Accounting
Research and Development Foundation (ARDF) and issued by the FSC. To comply with the aforementioned
amendments, the Company established a taskforce to monitor and execute the IFRSs adoption plan. The
important plan items, responsible divisions and plan progress are listed as follows.
Plan Item
1) Establish the IFRSs taskforce
Responsible Division
Accounting division
Plan Progress
Finished
2) Complete the identification of GAAP differences
Accounting division, finance division and employee
Finished
and impact
benefit and payroll section
3) Complete the identification of consolidated entities
Accounting division
Finished
under IFRSs
4) Evaluate potential effect to business operations
Accounting division, finance division, employee
Finished
benefit and payroll section and business system
integration division
5) Complete the preliminary evaluation of resources
Accounting division and business system integration
Finished
and budget needed for IFRSs adoption
division
6) Set up a work plan for IFRSs adoption
Accounting division and business system integration
Finished
division
7) Personnel training
Accounting division
Finished
8) Determine IFRSs accounting policies
Accounting division, finance division and employee
Finished
benefit and payroll section
9) Develop financial statement template under IFRSs
Accounting division and finance division
Finished
10) Complete evaluation, configuration and testing
Accounting division and business system integration
Finished
of the IT systems
division
11) Communicate with related departments on the
Accounting division
impact of IFRSs adoption
12) Complete the preparation of opening balance
Accounting division
sheet under IFRSs
Finished
Finished
13) Complete modification to the relevant internal
Accounting division and internal audit division
Finished
controls
14) Prepare comparative financial information under
Accounting division and finance division
In progress according to the plan
IFRSs for 2012
70
1) Reconciliation of consolidated balance sheet as of January 1, 2012
R.O.C. GAAP
Effect of Transition to IFRSs
IFRSs
Item
Current assets
Cash and cash equivalents
Financial assets at fair value through profit or loss
Available-for-sale financial assets
Held-to-maturity financial assets
Receivables from related parties
Notes and accounts receivable
Allowance for doubtful receivables
Allowance for sales returns and others
Other receivables from related parties
Other financial assets
Inventories
Deferred income tax assets
Prepaid expenses and other current assets
Total current assets
Long-term investments
Investments accounted for using equity method
Held-to-maturity financial assets
Financial assets carried at cost
Total long-term investments
Net property, plant and equipment
Intangible assets
Other assets
Deferred income tax assets
Refundable deposits
Others
Total other assets
Total
Current liabilities
Short-term loans
Financial liabilities at fair value through profit or loss
Hedging derivative financial liabilities
Accounts payable
Payables to related parties
Income tax payable
Salary and bonus payable
Accrued profit sharing to employees and bonus to directors
and supervisors
Payables to contractors and equipment suppliers
Accrued expenses and other current liabilities
Current portion of bonds payable and long-term bank loans
-
Total current liabilities
Long-term liabilities
Bonds payable
Long-term bank loans
Obligations under capital leases
Total long-term liabilities
Other liabilities
Accrued pension cost
Guarantee deposits
-
Others
Total other liabilities
Total liabilities
Amount
Recognition and
Measurement Difference
Presentation Difference
Amount
Item
$ 143,472,277
15,360
3,308,770
3,825,680
185,764
46,321,240
(490,952)
(5,068,263)
122,292
617,142
24,840,582
5,936,490
2,174,014
225,260,396
$ -
-
-
-
-
-
-
-
-
-
-
-
-
-
$ -
-
-
-
-
(490,952)
490,952
5,068,263
-
-
-
(5,936,490)
-
(868,227)
$ 143,472,277
15,360
3,308,770
3,825,680
185,764
45,830,288
-
-
122,292
617,142
24,840,582
-
2,174,014
224,392,169
Cash and cash equivalents
Financial assets at fair value through profit or loss
Available-for-sale financial assets
Held-to-maturity financial assets
Receivables from related parties
Notes and accounts receivable
-
-
Other receivables from related parties
Other financial assets
Inventories
-
Other current asset
Total current assets
24,900,332
5,243,167
4,315,005
34,458,504
490,374,916
10,861,563
7,436,717
4,518,863
1,353,983
13,309,563
(13,401)
-
-
(13,401)
-
-
231,011
-
-
231,011
-
-
-
-
47,237
-
5,936,490
-
(47,237)
5,889,253
24,886,931
5,243,167
4,315,005
34,445,103
490,422,153
10,861,563
Investments accounted for using equity method
Held-to-maturity financial assets
Financial assets carried at cost
Total long-term investments
Property, plant and equipment
Intangible assets
13,604,218
4,518,863
1,306,746
19,429,827
Deferred income tax assets
Refundable deposits
Others
Total other assets
$ 774,264,942
$ 217,610
$ 5,068,263
$ 779,550,815
Total
$ 25,926,528
13,742
232
10,530,487
1,328,521
10,656,124
6,148,499
9,081,293
$ -
-
-
-
-
-
-
-
$ -
-
-
-
-
-
-
-
$ 25,926,528
13,742
232
10,530,487
1,328,521
10,656,124
6,148,499
9,081,293
Short-term loans
Financial liabilities at fair value through profit or loss
Hedging derivative financial liabilities
Accounts payable
Payables to related parties
Income tax payable
Salary and bonus payable
Accrued profit sharing to employees and bonus to directors
35,540,526
13,218,235
4,562,500
-
117,006,687
18,000,000
1,587,500
870,993
20,458,493
3,908,508
443,983
-
403,720
4,756,211
142,221,391
-
-
-
-
-
-
-
-
-
2,332,516
-
-
-
2,332,516
2,332,516
-
-
-
5,068,263
5,068,263
-
-
-
-
-
-
2,889
(2,889)
-
5,068,263
and supervisors
35,540,526
13,218,235
4,562,500
5,068,263
122,074,950
Payables to contractors and equipment suppliers
Accrued expenses and other current liabilities
Current portion of bonds payable and long-term bank loans
Provisions
Total current liabilities
18,000,000
1,587,500
870,993
20,458,493
Bonds payable
Long-term bank loans
Obligations under capital leases
Total long-term liabilities
6,241,024
443,983
2,889
400,831
7,088,727
149,622,170
Accrued pension cost
Guarantee deposits
Provisions
Others
Total other liabilities
Total liabilities
Note
a)
b)
e)
c)
b), d)
c)
a)
d)
(Continued)
71
R.O.C. GAAP
Effect of Transition to IFRSs
IFRSs
Item
Equity attributable to shareholders of the parent
Capital stock
Capital surplus
Retained earnings
Others
Cumulative translation adjustments
Unrealized gain/loss on financial instruments
-
Equity attributable to shareholders of the parent
Minority interests
Total shareholders’ equity
Total
Amount
Recognition and
Measurement Difference
Presentation Difference
Amount
Item
$ 259,162,226
55,846,357
322,191,155
$ -
(374,695)
(1,726,828)
$ -
-
-
$ 259,162,226
55,471,662
320,464,327
Capital stock
Capital surplus
Retained earnings
(6,433,369)
(1,172,855)
-
(7,606,224)
629,593,514
2,450,037
632,043,551
5
-
-
5
(2,101,518)
(13,388)
(2,114,906)
-
93
(93)
-
-
-
-
(6,433,364)
(1,172,762)
(93)
(7,606,219)
627,491,996
2,436,649
629,928,645
Foreign currency translation reserve
Unrealized gain/loss from available-for-sales financial assets
Cash flow hedging reserve
Equity attributable to shareholders of the parent
Noncontrolling interests
Total shareholders’ equity
$ 774,264,942
$ 217,610
$ 5,068,263
$ 779,550,815
Total
2) Reconciliation of consolidated balance sheet as of December 31, 2012
R.O.C. GAAP
Effect of Transition to IFRSs
IFRSs
Item
Current assets
Cash and cash equivalents
Financial assets at fair value through profit or loss
Available-for-sale financial assets
Held-to-maturity financial assets
Receivables from related parties
Notes and accounts receivable
Allowance for doubtful receivables
Allowance for sales returns and others
Other receivables from related parties
Other financial assets
Inventories
Deferred income tax assets
Prepaid expenses and other current assets
Total current assets
Long-term investments
Investments accounted for using equity method
Available-for-sale financial assets
Financial assets carried at cost
Total long-term investments
Net property, plant and equipment
Intangible assets
Other assets
Deferred income tax assets
Refundable deposits
Others
Total other assets
Total
Current liabilities
Amount
Recognition and
Measurement Difference
Presentation
Difference
Amount
Item
$ 143,410,588
39,554
2,410,635
5,056,973
353,811
58,257,798
(480,212)
(6,038,003)
185,550
473,833
37,830,498
8,001,202
2,786,408
252,288,635
$ -
-
-
-
-
-
-
-
-
-
-
-
-
-
$ -
-
-
-
-
(480,212)
480,212
6,038,003
-
-
-
(8,001,202)
-
(1,963,199)
$ 143,410,588
39,554
2,410,635
5,056,973
353,811
57,777,586
-
-
185,550
473,833
37,830,498
-
2,786,408
250,325,436
Cash and cash equivalents
Financial assets at fair value through profit or loss
Available-for-sale financial assets
Held-to-maturity financial assets
Receivables from related parties
Notes and accounts receivable
-
-
Other receivables from related parties
Other financial assets
Inventories
-
Other current assets
Total current assets
23,430,020
38,751,245
3,605,077
65,786,342
617,529,446
10,959,569
4,776,015
2,426,712
1,267,886
8,470,613
(69,102)
-
-
(69,102)
-
-
351,002
-
-
351,002
-
-
-
-
32,742
-
8,001,202
-
(32,742)
7,968,460
23,360,918
38,751,245
3,605,077
65,717,240
617,562,188
10,959,569
Investments accounted for using equity method
Available-for-sale financial assets
Financial assets carried at cost
Total long-term investments
Property, plant and equipment
Intangible assets
13,128,219
2,426,712
1,235,144
16,790,075
Deferred income tax assets
Refundable deposits
Others
Total other assets
$ 955,034,605
$ 281,900
$ 6,038,003
$ 961,354,508
Total
Note
e)
d), e)
e)
d)
Note
a)
b)
e)
c)
b), d)
c)
Short-term loans
Financial liabilities at fair value through profit or loss
Accounts payable
Payables to related parties
Income tax payable
$ 34,714,929
15,625
14,490,429
748,613
15,635,594
$ -
-
-
-
-
$ -
-
-
-
-
$ 34,714,929
15,625
14,490,429
748,613
15,635,594
Short-term loans
Financial liabilities at fair value through profit or loss
Accounts payable
Payables to related parties
Income tax payable
(Continued)
72
Item
Amount
Recognition and
Measurement Difference
Presentation
Difference
Amount
Item
R.O.C. GAAP
Effect of Transition to IFRSs
IFRSs
Salary and bonus payable
Accrued profit sharing to employees and bonus to directors and
$ 7,535,296
11,186,591
$ -
-
$ -
-
$ 7,535,296
11,186,591
Salary and bonus payable
Accrued profit sharing to employees and bonus to directors and
supervisors
Payables to contractors and equipment suppliers
Accrued expenses and other current liabilities
Current portion of bonds payable and long-term bank loans
-
Total current liabilities
Long-term liabilities
Bonds payable
Long-term bank loans
Other long-term payable
Obligations under capital leases
Total long-term liabilities
Other liabilities
Accrued pension cost
Guarantee deposits
-
Others
Total other liabilities
Total liabilities
Equity attributable to shareholders of the parent
Capital stock
Capital surplus
Retained earnings
Others
Cumulative translation adjustments
Net loss not recognized as pension cost
Unrealized gain/loss on financial instruments
Equity attributable to shareholders of the parent
Minority interests
Total shareholders’ equity
Total
44,831,798
13,148,944
128,125
-
142,435,944
80,000,000
1,359,375
54,000
748,115
82,161,490
3,979,541
203,890
-
500,041
4,683,472
229,280,906
259,244,357
56,137,809
410,601,289
(10,753,763)
(5,299)
7,973,321
(2,785,741)
723,197,714
2,555,985
725,753,699
-
-
-
-
-
-
-
-
-
-
2,941,693
-
-
-
2,941,693
2,941,693
-
(462,469)
(2,189,821)
(43)
5,299
-
5,256
(2,647,034)
(12,759)
(2,659,793)
-
-
-
6,038,003
6,038,003
-
-
-
-
-
-
-
4,891
(4,891)
-
6,038,003
-
-
-
-
-
-
-
-
-
-
44,831,798
13,148,944
128,125
6,038,003
148,473,947
80,000,000
1,359,375
54,000
748,115
82,161,490
6,921,234
203,890
4,891
495,150
7,625,165
238,260,602
supervisors
Payables to contractors and equipment suppliers
Accrued expenses and other current liabilities
Current portion of bonds payable and long-term bank loans
Provisions
Total current liabilities
Bonds payable
Long-term bank loans
Other long-term payable
Obligations under capital leases
Total long-term liabilities
Accrued pension cost
Guarantee deposits
Provisions
Others
Total other liabilities
Total liabilities
259,244,357
55,675,340
408,411,468
Capital stock
Capital surplus
Retained earnings
(10,753,806)
-
7,973,321
(2,780,485)
720,550,680
2,543,226
723,093,906
Foreign currency translation reserve
-
Unrealized gain/loss from available-for-sales financial assets
Equity attributable to shareholders of the parent
Noncontrolling interests
Total shareholders’ equity
$ 955,034,605
$ 281,900
$ 6,038,003
$ 961,354,508
Total
3) Reconciliation of consolidated statement of comprehensive income for the year ended December 31, 2012
R.O.C. GAAP
Effect of Transition to IFRSs
IFRSs
Item
Net sales
Cost of sales
Gross profit before affiliates elimination
Unrealized gross profit from affiliates
Gross profit
Operating expenses
Research and development
General and administrative
Marketing
Total operating expenses
-
Income from operations
Non-operating income and gains
Equity in earnings of equity method investees, net
Interest income
Amount
Recognition and
Measurement Difference
Presentation
Difference
Amount
Item
$ 506,248,580
262,628,681
243,619,899
(25,029)
243,594,870
$ -
(45,583)
45,583
-
45,583
$ 496,654
-
496,654
-
496,654
$ 506,745,234
262,583,098
244,162,136
(25,029)
244,137,107
Net sales
Cost of sales
Gross profit before affiliates elimination
Unrealized profit from affiliates
Gross profit
40,402,138
17,638,088
4,497,451
62,537,677
-
181,057,193
2,028,611
1,645,036
(18,943)
(6,394)
(1,465)
(26,802)
-
72,385
45,118
-
-
-
-
-
(449,364)
47,290
-
(1,645,036)
40,383,195
17,631,694
4,495,986
62,510,875
(449,364)
181,176,868
Research and development
General and administrative
Marketing
Other operating gains and losses
Income from operations
2,073,729
-
Equity in earnings of equity method investees, net
-
Note
a)
d)
e)
d), e)
e)
d)
d)
Note
f)
d)
d)
d)
d)
f)
e)
f)
(Continued)
73
R.O.C. GAAP
Effect of Transition to IFRSs
IFRSs
Item
Settlement income
Foreign exchange gain, net
Gain on settlement and disposal of financial assets, net
Technical service income
Others
-
-
Non-operating expenses and losses
Impairment of financial assets
Interest expense
Impairment loss on idle assets
Loss on disposal of property, plant and equipment
Others
Income before income tax
Income tax expense
Net income
Amount
Recognition and
Measurement Difference
Presentation
Difference
Amount
Item
$ 883,845
582,498
541,089
496,654
604,304
-
-
6,782,037
$ -
-
-
-
-
-
4,977
50,095
$ (883,845)
-
(541,089)
(496,654)
(604,304)
1,715,824
(2,857,018)
(5,312,122)
$ -
582,498
-
-
-
1,715,824
(2,852,041)
1,520,010
-
Foreign exchange gain, net
-
-
-
Other income
Other gains and losses
4,231,602
1,020,422
444,505
31,816
556,909
6,285,254
181,553,976
15,590,287
-
-
-
-
-
-
122,480
(37,633)
(4,231,602)
-
(444,505)
(31,816)
(556,909)
(5,264,832)
-
-
$ 165,963,689
$ 160,113
$ -
-
1,020,422
-
-
-
1,020,422
181,676,456
15,552,654
166,123,802
(4,322,697)
232
9,534,269
53,748
(685,978)
(326,942)
-
Finance cost
-
-
-
Income before income tax
Income tax expense
Net income
Exchange differences on translating foreign operations
Cash flow hedges
Net valuation gain on available-for-sale financial assets
Share of other comprehensive income of associates and joint venture
Actuarial loss from defined benefit pension
Income tax expense relating to components of other comprehensive
income
4,252,632
Other comprehensive income for the year, net of tax effect
$ 170,376,434
Total comprehensive income for the year
Note
f)
f)
f)
f)
f)
e), f)
f)
f)
f)
f)
d)
d)
d)
d)
4) Notes to the reconciliation of the significant differences:
b) Classifications of deferred income tax asset/liability and valuation allowance
a) Allowance for sales returns and others
Under R.O.C. GAAP, provisions for estimated sales returns and others are recognized as a reduction
in revenue in the period the related revenue is recognized based on historical experience. Allowance
for sales returns and others is recorded as a deduction in accounts receivable. Under IFRSs, the
allowance for sales returns and others is a present obligation with uncertain timing and an amount
that arises from past events and is therefore reclassified as provisions (classified under current
liabilities) in accordance with IAS No. 37, “Provisions, Contingent Liabilities and Contingent Assets.”
As of December 31, 2012 and January 1, 2012, the amounts reclassified from allowance for sales
returns and others to provisions were NT$6,038,003 thousand and NT$5,068,263 thousand,
respectively.
Under R.O.C. GAAP, a deferred tax asset and liability is classified as current or non-current in
accordance with the classification of its related asset or liability. However, if a deferred income tax
asset or liability does not relate to an asset or liability in the financial statements, it is classified as
either current or non-current based on the expected length of time before it is realized or settled.
Under IFRSs, a deferred tax asset and liability is classified as non-current asset or liability.
In addition, under R.O.C. GAAP, valuation allowances are provided to the extent, if any, that it is
more likely than not that deferred income tax assets will not be realized. In accordance with IAS No.
12, “Income Taxes,” deferred tax assets are only recognized to the extent that it is probable that
there will be sufficient taxable profits and the valuation allowance account is no longer used.
As of December 31, 2012 and January 1, 2012, the amounts reclassified from deferred income tax
assets to non-current assets were NT$8,001,202 thousand and NT$5,936,490 thousand, respectively.
74
c) The classification of leased assets and idle assets
Under R.O.C. GAAP, leased assets and idle assets are classified under other assets. Under IFRSs, the
aforementioned items are classified as property, plant and equipment according to their nature.
Leased assets are mainly dormitories leased to employees and factories leased to suppliers. In
accordance with IAS No. 40, “Investment Property,” the dormitories leased to employees are not
classified as investment properties; factories leased to suppliers are not considered as investment
properties since they cannot be sold separately and comprise only an insignificant portion of the
plant.
As of December 31, 2012 and January 1, 2012, the amounts reclassified from leased assets and
idle assets to property, plant and equipment were NT$32,742 thousand and NT$47,237 thousand,
respectively.
d) Employee benefits
The Company had previously applied an actuarial valuation on its defined benefit obligation and
recognized the related pension cost and retirement benefit obligation in conformity with R.O.C.
GAAP. Under IFRSs, the Company should carry out actuarial valuation on defined benefit obligation
in accordance with IAS No. 19, “Employee Benefits.”
In addition, under R.O.C. GAAP, it is not allowed to recognize actuarial gains and losses from defined
benefit plans directly to equity; instead, actuarial gains and losses should be accounted for under
the corridor approach which resulted in the deferral of gains and losses. When using the corridor
approach, actuarial gains and losses should be amortized over the expected average remaining
working lives of the participating employees.
Under IAS No. 19, “Employee Benefits,” the Company elects to recognize actuarial gains and
losses immediately in full in the period in which they occur, as other comprehensive income. The
subsequent reclassification to earnings is not permitted.
At the transition date, the Company performed the actuarial valuation under IAS No. 19, “Employee
Benefits,” and recognized the valuation difference directly to retained earnings under the
requirement of IFRS 1.
In addition, under R.O.C. GAAP, the minimum pension liability should be recognized in the balance
sheet. If the accrued pension cost is less than the minimum amount, the difference should be
recognized as an additional liability. Under IFRSs, there is no aforementioned requirement of
minimum pension liability.
As of December 31, 2012 and January 1, 2012, accrued pension cost of the Company was adjusted
from the aforementioned differences for an increase of NT$2,941,693 thousand and NT$2,332,516
thousand, respectively; deferred income tax assets were adjusted for an increase of NT$351,002
thousand and NT$231,011 thousand, respectively. As of December 31, 2012, net loss not recognized
as pension cost was adjusted for a decrease of NT$4,416 thousand. Pension cost and income tax
expense for the year ended December 31, 2012 were also adjusted for a decrease of NT$72,385
thousand and NT$37,633 thousand, respectively; actuarial loss from defined benefit plans and
associated tax benefit were recognized in the amount of NT$685,978 thousand and NT$82,358
thousand, respectively.
e) Investments accounted for using the equity method
The Company has evaluated significant differences between current accounting policies and IFRSs for
the Company’s associates and joint ventures accounted for using the equity method. The significant
difference is mainly due to the adjustment to employee benefits.
In addition, if the investing company subscribes for additional investee’s shares at a percentage
different from its existing ownership percentage that results in a decrease in the investing
company’s holding percentage in the investee, the resulting carrying amount of the investment
in the investee differs from the amount of its share in the investee’s equity. Under R.O.C. GAAP,
the investing company records such a difference as an adjustment to long-term investments with
the corresponding amount charged or credited to capital surplus. Under IFRSs, such transaction is
deemed a disposal and aforementioned difference is recognized in earnings accordingly.
As of December 31, 2012 and January 1, 2012, as a result of the differences mentioned above,
investment accounted for using the equity method was adjusted for a decrease of NT$69,102
thousand and NT$13,401 thousand, respectively; cumulative translation adjustments was adjusted
for a decrease of NT$43 thousand and an increase of NT$5 thousand, respectively; capital surplus
was adjusted for a decrease of NT$462,469 thousand and NT$374,695 thousand, respectively.
As of December 31, 2012, net loss not recognized as pension cost was adjusted for a decrease of
NT$883 thousand. In addition, equity in earnings of equity method investees and share of other
comprehensive income of associates and joint venture were adjusted for an increase of NT$45,118
thousand and for a decrease of NT$18,905 thousand, respectively; other gains and losses was
adjusted for a gain of NT$4,977 thousand due from the deemed disposal for the year ended
December 31, 2012.
75
f) The reclassification of line items in the consolidated statement of comprehensive income
d. Marketable securities acquired and disposed of at costs or prices of at least NT$100 million or 20% of the
paid-in capital: Please see Table 3 attached;
In accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers
before its amendment due to the adoption of IFRSs, income from operations in the consolidated
income statement only includes net sales, cost of sales and operating expenses. Under IFRSs, based
on the nature of operating transactions, technical service income is reclassified under net sales; rental
revenue, depreciation of rental assets, net gain or loss on disposal of property, plant and equipment
and other assets, and impairment loss on idle assets, are reclassified under other operating gains and
losses, which are reflected in income from operations.
Under IFRSs, based on the nature of operating transactions, the Company reclassified technical
service income of NT$496,654 thousand for the year ended December 31, 2012 to net sales, rental
revenue of NT$808 thousand, net gain on disposal of property, plant and equipment and other
assets of NT$103 thousand, other income of NT$886 thousand, depreciation of rental assets of
NT$6,656 thousand and impairment loss on idle assets of NT$444,505 thousand to other operating
gains and losses. In addition, interest income of NT$1,645,036 thousand and dividend income of
NT$70,788 thousand were also reclassified to other income; settlement income of NT$883,845
thousand, net gain of disposal of financial assets of NT$541,089 thousand, others of NT$499,903
thousand (under non-operating income and gains), net valuation loss on financial instruments of
NT$252,530 thousand, impairment of financial assets of NT$4,231,602 thousand as well as others
of NT$297,723 thousand (under non-operating expenses and losses) were reclassified to other gains
and losses for the year ended December 31, 2012.
d. The Company’s aforementioned assessment is based on the 2010 version of IFRSs translated by ARDF
and the Guidelines Governing the Preparation of Financial Reports by Securities Issuers issued by FSC
on December 22, 2011. However, the assessment result may be impacted as FSC may issue new rules
governing the adoption of IFRSs, and as other laws and regulations may be amended to comply with the
adoption of IFRSs. Actual results may differ from these assessments.
e. Acquisition of individual real estate properties at costs of at least NT$100 million or 20% of the paid-in
capital: Please see Table 4 attached;
f. Disposal of individual real estate properties at prices of at least NT$100 million or 20% of the paid-in
capital: None;
g. Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital:
Please see Table 5 attached;
h. Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital:
Please see Table 6 attached;
i. Names, locations, and related information of investees over which TSMC exercises significant influence:
Please see Table 7 attached;
j. Information on investment in Mainland China
1) The name of the investee in Mainland China, the main businesses and products, its issued capital,
method of investment, information on inflow or outflow of capital, percentage of ownership, equity
in the net gain or net loss, ending balance, amount received as dividends from the investee, and the
limitation on investee: Please see Table 8 attached.
2) Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized
gain or loss, and other related information which is helpful to understand the impact of investment in
Mainland China on financial reports: Please see Table 9 attached.
33. ADDITIONAL DISCLOSURES
k. Intercompany relationships and significant intercompany transactions: Please see Table 9 attached.
Following are the additional disclosures required by the SFB for TSMC and its investees in which all significant
intercompany balances and transactions are eliminated upon consolidation:
a. Financings provided: Please see Table 1 attached;
b. Endorsement/guarantee provided: None;
c. Marketable securities held: Please see Table 2 attached;
76
34. OPERATING SEGMENTS INFORMATION
b. Geographic information
The Company’s only reportable segment is the foundry segment. The foundry segment engages mainly in
the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other
semiconductor devices and the manufacturing of masks. The Company also had other operating segments
that did not exceed the quantitative threshold for separate reporting. These segments mainly engage in the
researching, developing, and providing SoC (System on Chip) design and also engage in the researching,
developing, designing, manufacturing and selling of solid state lighting devices and renewable energy and
efficiency related technologies and products.
Taiwan
United States
Asia
Europe
Others
Years Ended December 31
Sales to Other Than Consolidated Entities
Non-current Assets
2012
2011
2012
2011
$ 64,744,102
334,704,735
72,953,214
30,476,592
3,369,937
$ 49,798,532
250,811,666
75,946,671
48,982,743
1,541,033
$ 603,844,829
7,699,344
18,196,790
15,938
-
$ 472,168,728
8,284,575
22,121,979
15,180
-
$ 506,248,580
$ 427,080,645
$ 629,756,901
$ 502,590,462
The Company uses the operating profit as the measurement for segment profit and the basis of performance
assessment. There was no material inconsistency between the accounting policies of the operating segment
and the accounting policies described in Note 2.
The Company’s operating segment information was as follows:
The geographic information is presented by billed regions. Non-current assets include property, plant and
equipment, intangible assets and other assets, but do not include financial instruments and deferred income
tax assets.
c. Production information
a. Industry financial information
Year ended December 31, 2012
Sales from external customers
Sales among intersegments
Operating profit (loss)
Equity in earnings (losses) of equity method
investees, net
Income tax expense
Year ended December 31, 2011
Sales from external customers
Sales among intersegments
Operating profit (loss)
Equity in earnings (losses) of equity method
investees, net
Income tax expense
Foundry
Others
Elimination
Total
Production
$ 506,097,932
-
183,682,972
$ 150,648
14,678
(2,625,779)
$ -
(14,678)
-
$ 506,248,580
-
181,057,193
3,428,408
15,590,287
(1,399,797)
-
-
-
2,028,611
15,590,287
Wafer
Mask
Others
Years Ended December 31
2012
2011
$ 462,970,436
26,266,912
17,011,232
$ 384,632,494
23,818,656
18,629,495
$ 506,248,580
$ 427,080,645
d. Major customers representing at least 10% of gross sales
422,691,098
1,588,601
143,222,120
1,635,303
10,649,688
4,389,547
6,224
(1,664,702)
(737,692)
44,729
-
(1,594,825)
-
-
-
427,080,645
-
141,557,418
897,611
10,694,417
Customer A
Years Ended December 31
2012
Amount
$ 87,099,340
2011
Amount
$ 60,412,085
%
17
%
14
35. THE AUTHORIZATION OF FINANCIAL STATEMENTS
The financial statements were approved by the Board of Directors and authorized for issue on February 5,
2013.
77
TABLE 1
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
FINANCINGS PROVIDED
FOR THE YEAR ENDED DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
No.
Financing
Company
Counter-
party
Financial Statement
Account
1
TSMC Partners
TSMC China
TSMC Solar
TSMC SSL
TSMC Solar
TSMC SSL
2
TSMC
Development
Other receivables from
related parties
Other receivables from
related parties
Other receivables from
related parties
Other receivables from
related parties
Other receivables from
related parties
Maximum
Balance for the
Period (US$ in
Thousands)
(Note 4)
$ 7,259,500
(US$ 250,000)
1,161,520
(US$ 40,000)
871,140
(US$ 30,000)
2,323,040
(US$ 80,000)
2,613,420
(US$ 90,000)
Ending Balance
(US$ in
Thousands)
(Note 4)
Amount Actually
Drawn (US$ in
Thousands)
$ 3,774,940
(US$ 130,000)
-
$ 3,774,940
(US$ 130,000)
-
-
-
0.25%-0.26% The need for short-
term financing
The need for short-
term financing
The need for short-
term financing
-
-
2,323,040
(US$ 80,000)
2,613,420
(US$ 90,000)
1,495,457
(US$ 51,500)
203,266
(US$ 7,000)
0.21%-0.23% The need for short-
term financing
0.24% The need for short-
term financing
3
TSMC Global
TSMC
Other receivables from
related parties
5,807,600
(US$ 200,000)
-
-
-
The need for short-
term financing
Interest Rate
Nature for
Financing
Transaction
Amounts
Reason for Financing
Allowance
for Bad
Debt
Collateral
Item
Value
Financing
Limits for Each
Borrowing
Company
Financing
Company’s Total
Financing Amount
Limits (Note 3)
$ -
Purchase equipment
$ -
-
-
-
-
-
Operating capital
Operating capital
Operating capital
Operating capital
Support the parent
company’s short-term
operation requirement
-
-
-
-
-
-
-
-
-
-
-
$ -
-
-
-
-
-
$ 38,635,609
(Note 1)
15,454,244
(Note 1)
15,454,244
(Note 1)
5,322,907
(Notes 1 and 5)
5,322,907
(Notes 1 and 5)
49,954,386
(Note 2)
$ 38,635,609
38,635,609
38,635,609
13,307,266
(Note 5)
13,307,266
(Note 5)
49,954,386
Note 1: The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of TSMC Partners and TSMC Development, respectively. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. TSMC or
offshore subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC are not subject to the above restrictions. The restriction of thirty percent (30%) of the borrower’s net worth will not apply to subsidiaries whose voting shares are 90% or more owned, directly or indirectly, by TSMC. However, financing limits for
those subsidiaries shall be no more than forty percent (40%) of the lender’s net worth.
Note 2: The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of TSMC Global. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. TSMC or offshore subsidiaries whose voting shares
are 100% owned, directly or indirectly, by TSMC are not subject to the above restrictions.
Note 3: The total amount available for lending purpose shall not exceed the net worth of TSMC Partners, TSMC Development and TSMC Global, respectively.
Note 4: The maximum balance for the period and ending balance represents the amounts approved by Board of Directors.
Note 5: The amount was determined based on the audited financial statements in accordance with local accounting principles.
78
TABLE 2
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
MARKETABLE SECURITIES HELD
DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Held Company Name
Marketable Securities Type and Name
Relationship with the Company
Financial Statement Account
December 31, 2012
Shares/Units
(In Thousands)
Carrying Value
(Foreign Currencies
in Thousands)
Percentage of
Ownership (%)
Market Value or Net
Asset Value
(Foreign Currencies
in Thousands)
Note
Held-to-maturity financial assets
〃
-
-
$ 549,881
151,265
N/A
N/A
$ 557,900
151,073
TSMC
Corporate bond
Nan Ya Plastics Corporation
China Steel Corporation
Stock
Semiconductor Manufacturing International Corporation
TSMC Global
-
-
-
Subsidiary
TSMC Partners
VIS
SSMC
TSMC Solar
TSMC North America
TSMC SSL
Xintec
GUC
TSMC Europe
TSMC Japan
TSMC Korea
United Industrial Gases Co., Ltd.
Shin-Etsu Handotai Taiwan Co., Ltd.
W.K. Technology Fund IV
Fund
Horizon Ventures Fund
Crimson Asia Capital
Capital
TSMC China
VTAF III
VTAF II
Emerging Alliance
TSMC GN
Stock
Motech
TSMC Solar Europe
TSMC Solar NA
TSMC Solar
Available-for-sale financial assets
Investments accounted for using
equity method
Subsidiary
Investee accounted for using equity
method
Investee accounted for using equity
method
Subsidiary
Subsidiary
Subsidiary
Investee with a controlling financial
interest
Investee accounted for using equity
〃
〃
〃
〃
〃
〃
〃
〃
method
Subsidiary
Subsidiary
Subsidiary
-
-
-
-
-
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
〃
〃
〃
Financial assets carried at cost
〃
〃
Financial assets carried at cost
〃
Investments accounted for using
equity method
〃
〃
〃
〃
1,277,958
1
988,268
628,223
1,845,502
49,954,386
38,635,129
9,462,038
314
6,710,956
1,118,000
11,000
430,400
94,950
46,688
-
6
80
19,300
10,500
4,000
-
-
-
-
-
-
-
6,031,369
3,209,288
2,411,212
1,550,313
1,222,972
235,761
142,412
26,935
193,584
105,000
40,000
89,916
55,259
17,828,683
1,047,285
563,056
167,359
65,007
Investee accounted for using equity
Investments accounted for using
87,480
2,998,413
method
Subsidiary
Subsidiary
equity method
〃
〃
-
1
175,016
44,037
4
100
100
40
39
99
100
95
40
35
100
100
100
10
7
2
12
1
100
50
98
99
100
20
100
100
1,845,052
49,954,386
38,635,609
12,658,703
6,496,972
6,008,087
3,209,288
2,411,212
1,550,313
4,692,130
253,761
142,412
26,935
390,210
341,742
34,221
89,916
55,259
17,886,314
1,025,275
556,869
167,359
65,007
2,761,393
175,016
44,037
(Continued)
79
Held Company Name
Marketable Securities Type and Name
Relationship with the Company
Financial Statement Account
December 31, 2012
Shares/Units
(In Thousands)
Carrying Value
(Foreign Currencies
in Thousands)
Percentage of
Ownership (%)
Market Value or Net
Asset Value
(Foreign Currencies
in Thousands)
Note
TSMC Solar
TSMC SSL
TSMC GN
Capital
VTAF III
Stock
TSMC Lighting NA
Stock
TSMC Solar
TSMC SSL
Investee accounted for using equity
Investments accounted for using
-
$ 1,322,024
49
$ 1,322,024
method
equity method
Subsidiary
Investments accounted for using
equity method
1
2,864
100
2,864
Investee accounted for using equity
Investments accounted for using
method
equity method
Investee accounted for using equity
〃
4,294
3,420
23,076
19,157
-
1
23,076
19,157
TSMC Partners
Stock
TSMC Development, Inc. (TSMC Development)
method
Subsidiary
Investments accounted for using
equity method
VisEra Holding Company
TSMC Technology
InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)
InveStar Semiconductor Development Fund, Inc. (ISDF)
TSMC Canada
Mcube Inc.
Investee accounted for using equity
method
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Investee accounted for using equity
method
〃
〃
〃
〃
〃
〃
-
US$ 604,367
100
US$ 604,367
43,000
US$ 104,540
49
US$ 104,540
-
14,153
787
2,300
6,333
US$ 11,721
US$ 10,479
US$ 7,805
US$ 4,589
-
100
97
97
100
25
6
-
US$ 11,721
US$ 10,479
US$ 7,805
US$ 4,589
-
US$ 5,000
US$ 3,753
-
-
Financial assets carried at cost
-
US$ 5,000
Available-for-sale financial assets
270
US$ 3,753
Subsidiary
Investments accounted for using
293,637
US$ 262,053
100
US$ 262,053
equity method
TSMC North America
TSMC Development
Emerging Alliance
Fund
Shanghai Walden Venture Capital Enterprise
Stock
Spansion Inc.
Stock
WaferTech
Common stock
Audience, Inc.
Global Investment Holding Inc.
RichWave Technology Corp.
Preferred stock
Next IO, Inc.
QST Holdings, LLC
-
-
-
-
-
Capital
VentureTech Alliance Holdings, LLC (VTA Holdings)
Subsidiary
VTAF II
Common stock
Audience, Inc.
Sentelic
Aether Systems, Inc.
RichWave Technology Corp.
-
-
-
-
80
Available-for-sale financial assets
Financial assets carried at cost
〃
32
11,124
4,074
US$ 335
US$ 3,065
US$ 1,545
Financial assets carried at cost
〃
Investments accounted for using
equity method
Available-for-sale financial assets
Financial assets carried at cost
〃
〃
8
-
-
US$ 500
US$ 142
-
203
1,806
1,800
1,267
US$ 2,107
US$ 2,607
US$ 1,701
US$ 1,036
-
6
10
-
4
7
1
9
23
3
US$ 335
US$ 3,065
US$ 1,545
US$ 500
US$ 142
-
US$ 2,107
US$ 2,607
US$ 1,701
US$ 1,036
(Continued)
Held Company Name
Marketable Securities Type and Name
Relationship with the Company
Financial Statement Account
December 31, 2012
Shares/Units
(In Thousands)
Carrying Value
(Foreign Currencies
in Thousands)
Percentage of
Ownership (%)
Market Value or Net
Asset Value
(Foreign Currencies
in Thousands)
Note
VTAF II
VTAF III
ISDF
ISDF II
Xintec
Preferred stock
5V Technologies, Inc.
Aquantia
Cresta Technology Corporation
Impinj, Inc.
Next IO, Inc.
QST Holdings, LLC
Capital
VTA Holdings
Common stock
Mutual-Pak Technology Co., Ltd.
InvenSense, Inc.
Accton Wireless Broadband Corp.
Preferred stock
BridgeLux, Inc.
GTBF, Inc.
LiquidLeds Lighting Corp.
Neoconix, Inc.
Powervation, Ltd.
Stion Corp.
Tilera, Inc.
Validity Sensors, Inc.
Capital
Growth Fund Limited (Growth Fund)
VTA Holdings
Common stock
Integrated Memory Logic, Inc.
Memsic, Inc.
Preferred stock
Sonics, Inc.
Common stock
Memsic, Inc.
Alchip Technologies Limited
Sonics, Inc.
Goyatek Technology, Corp.
Auden Technology MFG. Co., Ltd.
Preferred stock
Sonics, Inc.
Capital
Compositech Ltd.
-
-
-
-
-
-
Financial assets carried at cost
〃
〃
〃
〃
〃
Subsidiary
Investments accounted for using
equity method
2,890
4,556
92
711
179
-
-
US$ 2,168
US$ 4,316
US$ 28
US$ 1,100
US$ 1,219
US$ 593
-
4
2
-
-
1
13
31
US$ 2,168
US$ 4,316
US$ 28
US$ 1,100
US$ 1,219
US$ 593
-
Subsidiary
Investments accounted for using
15,643
US$ 2,120
58
US$ 2,120
-
-
-
-
-
-
-
-
-
-
equity method
Available-for-sale financial assets
Financial assets carried at cost
Financial assets carried at cost
〃
〃
〃
〃
〃
〃
〃
Subsidiary
Subsidiary
Investments accounted for using
equity method
〃
93
2,249
US$ 1,037
US$ 315
-
6
US$ 1,037
US$ 315
7,522
1,154
1,600
4,147
509
8,152
3,890
11,192
-
-
US$ 9,379
US$ 1,500
US$ 800
US$ 4,841
US$ 7,938
US$ 45,467
US$ 3,025
US$ 4,197
3
N/A
11
4
16
15
2
4
US$ 9,379
US$ 1,500
US$ 800
US$ 4,841
US$ 7,938
US$ 45,467
US$ 3,025
US$ 4,197
US$ 368
100
US$ 368
-
-
-
-
-
-
-
-
-
-
-
Available-for-sale financial assets
〃
1,402
1,286
US$ 4,322
US$ 4,294
Financial assets carried at cost
230
US$ 497
Available-for-sale financial assets
Financial assets carried at cost
〃
〃
〃
1,072
7,520
278
745
1,035
US$ 3,581
US$ 3,664
US$ 10
US$ 163
US$ 220
Financial assets carried at cost
264
US$ 455
Financial assets carried at cost
587
-
62
2
5
2
4
14
3
6
3
3
3
-
US$ 4,322
US$ 4,294
US$ 497
US$ 3,581
US$ 3,664
US$ 10
US$ 163
US$ 220
US$ 455
-
(Continued)
81
Held Company Name
Marketable Securities Type and Name
Relationship with the Company
Financial Statement Account
December 31, 2012
Shares/Units
(In Thousands)
Carrying Value
(Foreign Currencies
in Thousands)
Percentage of
Ownership (%)
Market Value or Net
Asset Value
(Foreign Currencies
in Thousands)
Note
TSMC Solar Europe
Stock
TSMC Solar Europe GmbH
TSMC Global
Stock
ASML
Money market fund
Ssga Cash Mgmt Global Offshore
Corporate bond
Aust + Nz Banking Group
Commonwealth Bank of Australia
Commonwealth Bank of Australia
Deutsche Bank AG London
JP Morgan Chase + Co.
Westpac Banking Corp.
Subsidiary
Investments accounted for using
equity method
-
EUR 4,469
100
EUR 4,469
-
-
-
-
-
-
-
-
Available-for-sale financial assets
20,993
US$ 1,334,501
5
US$ 1,334,501
Available-for-sale financial assets
50
US$ 50
N/A
US$ 50
Held-to-maturity financial assets
〃
〃
〃
〃
〃
20,000
25,000
25,000
20,000
35,000
25,000
US$ 19,999
US$ 25,000
US$ 25,000
US$ 19,999
US$ 35,006
US$ 25,000
N/A
N/A
N/A
N/A
N/A
N/A
US$ 20,033
US$ 25,006
US$ 25,043
US$ 20,007
US$ 34,956
US$ 25,013
(Concluded)
82
TABLE 3
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Company
Name
Marketable Securities Type and
Name
Financial Statement
Account
Counter-party
Nature of
Relationship
Beginning Balance
Acquisition
Disposal
Ending Balance (Note)
Shares/Units
(In Thousands)
Amount
(Foreign
Currencies in
Thousands)
Shares/Units
(In Thousands)
Amount
(Foreign
Currencies in
Thousands)
Shares/Units
(In Thousands)
Amount
(Foreign
Currencies in
Thousands)
Carrying Value
(Foreign
Currencies in
Thousands)
Gain/Loss on
Disposal
(Foreign
Currencies in
Thousands)
Shares/Units
(In Thousands)
Amount
(Foreign
Currencies in
Thousands)
TSMC
Corporate bond
Nan Ya Plastics Corporation
China Steel Corporation
Stock
Semiconductor Manufacturing
International Corporation
TSMC SSL
Capital
TSMC GN
TSMC Partners
Corporate bond
General Elec Cap Corp. Mtn
VTAF II
VTAF III
General Elec Cap Corp. Mtn
Preferred stock
Power Analog Microelectronics
Stock
InvenSense, Inc.
TSMC Global
Stock
ASML
Government bond
Societe De Financement De Lec
Held-to-maturity financial
assets
〃
Available-for-sale
financial assets
Investments accounted
for using equity
method
Investments accounted for
using equity method
Held-to-maturity financial
assets
〃
Financial assets carried at
cost
Available-for-sale financial
assets
Available-for-sale financial
assets
Held-to-maturity financial
assets
Corporate bond
Nationwide Building Society-UK
Government Guarantee
Held-to-maturity financial
assets
Westpac Banking Corp. 12/12 Frn 〃
ISDF
Common stock
Integrated Memory Logic, Inc.
TS MC Solar
Europe
Stock
TSMC Solar Europe GmbH
Available-for-sale financial
assets
Investments accounted for
using equity method
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$ 1,099,629
303,798
1,789,493
2,617,134
-
-
-
$ -
-
-
Subsidiary
227,000
1,746,893
203,400
2,034,000
Subsidiary
-
-
- US$ 20,012
- US$ 20,059
7,330 US$ 3,482
796 US$ 7,932
-
-
-
-
-
100,000
-
-
-
-
-
-
$ 550,000
$ 550,000
$ -
150,000
150,000
-
-
-
$ 549,881
151,265
511,535
612,834
502,200
110,634
1,277,958
1,845,052
-
-
-
-
-
-
- US$ 20,000 US$ 20,000
- US$ 20,000 US$ 20,000
-
-
-
-
7,330 US$ 3,345 US$ 3,482 US$ (137)
430,400
2,411,212
-
-
-
-
65,007
-
-
-
703 US$ 7,460 US$ 861 US$ 6,599
93 US$ 1,037
-
-
20,993 US$ 1,085,474
-
-
-
15,000 US$ 15,000
8,000 US$ 8,000
5,000 US$ 5,000
-
-
-
2,161 US$ 6,289
127
-
-
-
-
15,000 US$ 15,000 US$ 15,000
8,000 US$ 8,000 US$ 8,000
5,000 US$ 5,000 US$ 5,000
-
-
-
-
20,993 US$ 1,334,501
-
-
-
-
-
-
886 US$ 3,152 US$ 207 US$ 2,945
1,402 US$ 4,322
Note: The ending balance includes the amortization of premium/discount on bonds investments, translation adjustments, equity in earnings/losses of equity method investees and other adjustments to long-term investments accounted for using equity method.
83
Subsidiary
-
EUR 5,103
-
EUR 2,500
-
-
-
-
-
EUR 4,469
TABLE 4
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars)
Company Name
Types of Property
Transaction Date
Transaction
Amount
Payment Term
Counter-party
Nature of
Relationships
Prior Transaction of Related Counter-party
Owner
Relationships
Transfer
Date
Amount
Price Reference
Purpose of Acquisition
Other
Terms
TSMC
Fab
Fab
Fab
Fab
Fab
Fab
Fab
Fab
Land
Fe bruary 7, 2012 to
$ 249,912
By the construction
MandarTech Interiors
December 27, 2012
Fe bruary 7, 2012 to
December 27, 2012
Fe bruary 13, 2012 to
December 28, 2012
Fe bruary 13, 2012 to
December 27, 2012
Ma rch 19, 2012 to
December 27, 2012
March 19, 2012 to July
27, 2012
May 28, 2012 to
November 27, 2012
August 28, 2012 to
December 26, 2012
November 21, 2012
progress
Inc.
219,807
By the construction
I Domain Industrial
progress
Co., Ltd.
5,015,656
By the construction
Da Cin Construction
progress
Co., Ltd.
1,766,332
By the construction
Fu Tsu Construction
progress
Co., Ltd.
2,958,930
By the construction
China Steel Structure
progress
185,115
By the construction
progress
320,705
By the construction
progress
Co., Ltd.
Toko Steel Structure
Corporation
Tasa Construction
Corporation
131,678
By the construction
Shiny G&M Associated
963,600
progress
By the contract
Co., Ltd.
Miaoli County
Government
-
-
-
-
-
-
-
-
-
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
N/A
Public bidding
Manufacturing purpose
None
84
TABLE 5
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Transaction Details
Abnormal Transaction
Notes/Accounts Payable or Receivable
Company Name
Related Party
Nature of Relationships
Purchases/Sales
Amount
(US$ in Thousands)
% to Total
Payment Terms
Unit Price
(Note)
Payment Terms
(Note)
TSMC
TSMC North America
GUC
VIS
TSMC China
WaferTech
VIS
SSMC
Subsidiary
Investee accounted for using equity method
Investee accounted for using equity method
Subsidiary
Indirect subsidiary
Investee accounted for using equity method
Investee accounted for using equity method
Sales
Sales
Sales
Purchases
Purchases
Purchases
Purchases
TSMC North
America
GUC
Investee accounted for using equity method
Sales
Mcube Inc.
Investee accounted for using equity method
Sales
by TSMC
by TSMC
$ 326,768,469
4,370,617
177,331
15,708,447
8,026,114
4,475,674
3,638,633
509,890
(US$ 17,238)
249,375
(US$ 8,431)
64
1
-
26
14
8
6
-
-
Net 30 days after invoice date
Net 30 days after monthly closing
Net 30 days after monthly closing
Net 30 days after monthly closing
Net 30 days after monthly closing
Net 30 days after monthly closing
Net 30 days after monthly closing
Net 30 days after invoice date
Net 60 days after invoice date
Xintec
OmniVision
Parent company of director (represented for
Sales
1,261,163
40
Net 30 days after monthly closing
Xintec)
Note: The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Ending Balance
(US$ in
Thousands)
$ 40,748,905
238,380
-
(1,616,342)
(580,064)
(364,790)
(351,389)
35,032
(US$ 1,206)
80,212
(US$ 2,762)
215,403
Note
% to Total
72
-
-
10
3
2
2
-
-
50
85
TABLE 6
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Company Name
Related Party
Nature of Relationships
Ending Balance
(US$ in Thousands)
Turnover Days (Note 1)
Overdue
Amount
Action Taken
TSMC
TSMC North America
GUC
VIS
Subsidiary
Investee accounted for using equity method
Investee accounted for using equity method
$ 40,837,732
238,380
122,893
TSMC Partners
TSMC China
The same parent company
TSMC
TSMC Solar
The same parent company
Development
TSMC SSL
The same parent company
3,793,421
(US$ 130,636)
1,496,194
(US$ 51,525)
203,277
(US$ 7,000)
Xintec
OmniVision
Parent company of director (represented for
215,403
Xintec)
TSMC Technology
TSMC
Parent company
WaferTech
TSMC
Parent company
117,283
(US$ 4,039)
580,064
(US$ 19,976)
Note 1: The calculation of turnover days excludes other receivables from related parties.
Note 2: The ending balance is primarily consisted of other receivables, which is not applicable for the calculation of turnover days.
37
15
(Note 2)
(Note 2)
(Note 2)
(Note 2)
66
(Note 2)
16
$ 15,905,710
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Amounts Received in Subsequent
Period
$ 17,191,890
-
-
Allowance for Bad Debts
$ -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
86
TABLE 7
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Investor
Company
TSMC
Investee Company
Location
Main Businesses and Products
Original Investment Amount
Balance as of December 31, 2012
December 31,
2012
(Foreign
Currencies in
Thousands)
December 31,
2011
(Foreign
Currencies in
Thousands)
Shares
(In Thousands)
Percentage of
Ownership
Carrying Value
(Foreign
Currencies in
Thousands)
Net Income
(Losses) of the
Investee (Foreign
Currencies in
Thousands)
Equity in the
Earnings (Losses)
(Note 1)
(Foreign
Currencies in
Thousands)
Note
TSMC Global
TSMC Partners
Tortola, British Virgin Islands
Tortola, British Virgin Islands
Investment activities
Investing in companies involved in the design,
$ 42,327,245
31,456,130
$ 42,327,245
31,456,130
1
988,268
100
100
$ 49,954,386
38,635,129
$ 469,933
5,088,931
$ 469,933
5,088,451
Subsidiary
Subsidiary
manufacture, and other related business in the
semiconductor industry
TSMC China
Shanghai, China
Manufacturing and selling of integrated circuits
18,939,667
18,939,667
-
100
17,828,683
4,757,121
4,740,524
Subsidiary
at the order of and pursuant to product design
specifications provided by customers
VIS
SSMC
Hsin-Chu, Taiwan
Research, design, development, manufacture,
13,232,288
13,232,288
628,223
packaging, testing and sale of memory integrated
circuits, LSI, VLSI and related parts
Singapore
Fabrication and supply of integrated circuits
5,120,028
5,120,028
314
TSMC Solar
Tai-Chung, Taiwan
Engaged in researching, developing, designing,
11,180,000
11,180,000
1,118,000
TSMC North America
San Jose, California, U.S.A.
TSMC SSL
Hsin-Chu, Taiwan
manufacturing and selling renewable energy and
saving related technologies and products
Selling and marketing of integrated circuits and
semiconductor devices
Engaged in researching, developing, designing,
manufacturing and selling solid state lighting
devices and related applications products and
systems
333,718
333,718
11,000
4,304,000
2,270,000
430,400
Xintec
GUC
VTAF III
VTAF II
TSMC Europe
Emerging Alliance
TSMC Japan
TSMC GN
TSMC Korea
Taoyuan, Taiwan
Wafer level chip size packaging service
1,357,890
1,357,890
Hsin-Chu, Taiwan
Researching, developing, manufacturing, testing and
386,568
386,568
Cayman Islands
Cayman Islands
Amsterdam, the Netherlands
Cayman Islands
Yokohama, Japan
Taipei, Taiwan
Seoul, Korea
marketing of integrated circuits
Investing in new start-up technology companies
Investing in new start-up technology companies
Marketing and engineering supporting activities
Investing in new start-up technology companies
Marketing activities
Investment activities
Customer service and technical supporting activities
1,896,914
704,447
15,749
852,258
83,760
100,000
13,656
2,074,155
949,267
15,749
892,855
83,760
-
13,656
94,950
46,688
-
-
-
-
6
-
80
TSMC Solar
Motech
Taipei, Taiwan
Manufacturing and sales of solar cells, crystalline
silicon solar cell, and test and measurement
instruments and design and construction of solar
power systems
6,228,661
6,228,661
87,480
VTAF III
Cayman Islands
Investing in new start-up technology companies
1,801,918
1,795,131
TSMC Solar Europe
TSMC Solar NA
Amsterdam, the Netherlands
Delaware, U.S.A.
Investing in solar related business
Selling and marketing of solar related products
504,107
205,772
411,032
147,686
TSMC SSL
TSMC Lighting NA
Delaware, U.S.A.
Selling and marketing of solid state lighting related
3,133
3,133
products
-
-
1
1
40
39
99
100
95
40
35
50
98
100
99
100
100
100
20
49
100
100
100
9,462,038
2,329,808
770,379
6,710,956
4,721,908
1,831,634
Investee accounted for
using equity method
Investee accounted for
using equity method
6,031,369
(4,037,825)
(4,044,944)
Subsidiary
3,209,288
312,232
312,232
Subsidiary
2,411,212
(1,466,733)
(1,397,589)
Subsidiary
1,550,313
(91,177)
(49,604)
Investee with a controlling
1,222,972
612,369
209,312
financial interest
Investee accounted for
using equity method
1,047,285
563,056
235,761
167,359
142,412
65,007
26,935
(177,152)
62,349
34,931
(2,940)
3,786
(24,928)
2,602
122,852
61,102
34,931
(2,925)
3,786
(24,928)
2,602
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
2,998,413
(5,037,203)
Note 2
1,322,024
(177,152)
Note 2
Investee accounted for
using equity method
Investee accounted for
using equity method
175,016
44,037
2,864
(119,668)
(65,268)
Note 2
Note 2
Subsidiary
Subsidiary
(7)
Note 2
Subsidiary
(Continued)
87
Investor
Company
Investee Company
Location
Main Businesses and Products
Original Investment Amount
Balance as of December 31, 2012
December 31,
2012
(Foreign
Currencies in
Thousands)
December 31,
2011
(Foreign
Currencies in
Thousands)
Shares
(In Thousands)
Percentage of
Ownership
Carrying Value
(Foreign
Currencies in
Thousands)
Net Income
(Losses) of the
Investee(Foreign
Currencies in
Thousands)
Equity in the
Earnings (Losses)
(Note 1)
(Foreign
Currencies in
Thousands)
Note
TSMC Partners
TSMC Development
VisEra Holding Company
Delaware, U.S.A.
Cayman Islands
Investment activities
Investing in companies involved in the design,
US$ 0.001 US$ 0.001
US$ 43,000 US$ 43,000
TSMC Technology
ISDF II
ISDF
TSMC Canada
Mcube Inc.
Delaware, U.S.A.
Cayman Islands
Cayman Islands
Ontario, Canada
Delaware, U.S.A.
manufacturing, and other related businesses in
the semiconductor industry
Engineering support activities
Investing in new start-up technology companies
Investing in new start-up technology companies
Engineering support activities
Research, development, and sale of micro-
semiconductor device
US$ 0.001 US$ 0.001
US$ 14,153 US$ 14,153
US$ 787 US$ 787
US$ 2,300 US$ 2,300
US$ 1,800 US$ 1,800
-
43,000
-
14,153
787
2,300
6,333
100 US$ 604,367 US$ 144,333
49 US$ 104,540 US$ 30,091
100 US$ 11,721 US$ 1,106
97 US$ 10,479 US$ (121)
97 US$ 7,805 US$ 2,493
100 US$ 4,589 US$ 422
US$ (12,599)
-
25
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Subsidiary
Investee accounted for
using equity method
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Investee accounted for
using equity method
TSMC
WaferTech
Washington, U.S.A.
Manufacturing, selling, testing and computer-
US$ 280,000 US$ 280,000
293,637
100 US$ 262,053 US$ 142,551
Note 2
Subsidiary
Development
VTAF III
Mutual-Pak Technology Co.,
Taipei, Taiwan
Ltd.
Growth Fund
VTA Holdings
Cayman Islands
Delaware, U.S.A.
aided designing of integrated circuits and other
semiconductor devices
Manufacturing and selling of electronic parts and
researching, developing, and testing of RFID
Investing in new start-up technology companies
Investing in new start-up technology companies
VTAF II
VTA Holdings
Delaware, U.S.A.
Investing in new start-up technology companies
Emerging Alliance
VTA Holdings
Delaware, U.S.A.
Investing in new start-up technology companies
US$ 5,212 US$ 3,937
15,643
58 US$ 2,120
US$ (1,422)
Note 2
Subsidiary
US$ 1,830 US$ 1,830
-
-
-
-
-
-
-
-
-
-
-
100 US$ 368
-
62
US$ (141)
-
Note 2
Note 2
Subsidiary
Subsidiary
31
7
-
-
-
-
Note 2
Subsidiary
Note 2
Subsidiary
100
EUR 4,469
EUR (3,133)
Note 2
Subsidiary
TSMC Solar Europe
TSMC Solar Europe GmbH
Hamburg, Germany
Selling of solar related products and providing
EUR 12,400
EUR 9,900
customer service
TSMC GN
TSMC Solar
Tai-Chung, Taiwan
Engaged in researching, developing, designing,
$ 42,945
$ -
4,294
-
$ 23,076
$ (4,037,825)
Note 2
TSMC SSL
Hsin-Chu, Taiwan
manufacturing and selling renewable energy and
saving related technologies and products
Engaged in researching, developing, designing,
manufacturing and selling solid state lighting
devices and related applications products and
systems
34,266
-
3,420
1
19,157
(1,466,733)
Note 2
Note 1:Equity in earnings/losses of investees includes the effect of unrealized gross profit from affiliates.
Note 2:The equity in the earnings/losses of the investee company is not reflected herein as such amount is already included in the equity in the earnings/losses of the investor company.
Investee accounted for
using equity method
Investee accounted for
using equity method
(Concluded)
88
TABLE 8
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
INFORMATION ON INVESTMENT IN MAINLAND CHINA
FOR THE YEAR ENDED DECEMBER 31, 2012
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Investee Company
Main Businesses and Products
TSMC China
Ma nufacturing and selling of
integrated circuits at the order
of and pursuant to product
design specifications provided by
customers
Total Amount of Paid-in Capital
(Foreign Currencies in
Thousands)
Method of Investment
$ 18,939,667
(RMB 4,502,080)
(Note 1)
Accumulated Outflow of
Investment from Taiwan as of
January 1, 2012
(US$ in Thousands)
$ 18,939,667
(US$ 596,000)
Investment Flows
Outflow
Inflow
$ -
$ -
Accumulated Outflow of
Investment from Taiwan as of
December 31, 2012
(US$ in Thousands)
$ 18,939,667
(US$ 596,000)
Sh anghai Walden Venture Capital
Investing in new start-up technology
Enterprise
companies
2,324,062
(US$ 78,791)
(Note 2)
147,485
(US$ 5,000)
-
-
147,485
(US$ 5,000)
Investee Company
Percentage of Ownership
Equity in the Earnings (Losses)
TSMC China
Sh anghai Walden Venture Capital
Enterprise
100%
6%
$ 4,740,524
(Note 3)
Carrying Value as of
December 31, 2012
(US$ in Thousands)
$ 17,828,683
Accumulated Inward Remittance of Earnings as of
December 31, 2012
$ -
(Note 4)
145,190
(US$ 5,000)
-
Accumulated Investment in Mainland China as of
December 31, 2012 (US$ in Thousands)
Investment Amounts Authorized by Investment Commission,
MOEA (US$ in Thousands)
Upper Limit on Investment(US$ in Thousands)
$ 19,087,152
(US$ 601,000)
$ 19,087,152
(US$ 601,000)
$ 19,087,152
(US$ 601,000)
Note 1: TSMC directly invested US$596,000 thousand in TSMC China.
Note 2: TSMC indirectly invested in China company through third region, TSMC Partners.
Note 3: Amount was recognized based on the audited financial statements.
Note 4: TSMC Partners invested in financial assets carried at cost, equity in the earnings from which was not recognized.
89
TABLE 9
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
A. For the year ended December 31, 2012
No.
0
Company Name
Counter Party
TSMC
TSMC North America
TSMC China
TSMC Japan
TSMC Europe
TSMC Korea
TSMC Technology
WaferTech
TSMC Canada
Xintec
TSMC SSL
90
Nature of
Relationship
(Note 1)
1
1
1
1
1
1
1
1
1
1
Financial Statements Item
Sales
Receivables from related parties
Other receivables from related parties
Payables to related parties
Sales
Purchases
Marketing expenses - commission
Disposal of property, plant and equipment
Purchases of property, plant and equipment
Loss on disposal of property, plant and equipment, net
Other receivables from related parties
Payables to related parties
Deferred credits
Marketing expenses - commission
Payables to related parties
Marketing expenses - commission
Research and development expenses
Payables to related parties
Marketing expenses - commission
Research and development expenses
Payables to related parties
Sales
Purchases
Payables to related parties
Research and development expenses
Payables to related parties
Manufacturing expenses
Research and development expenses
Payables to related parties
Miscellaneous revenue
Intercompany Transactions
Amount
Terms (Note 2)
Percentage of Consolidated Total
Gross Sales or Total Assets
$ 326,768,469
40,748,905
88,827
37,972
2,956
15,708,447
72,373
46,941
216,084
18,699
2,686
1,616,342
17,271
277,374
41,532
345,906
49,763
32,226
20,643
713,323
117,283
12,745
8,026,114
580,064
206,894
14,388
180,768
5,023
36,434
5,625
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
64%
4%
-
-
-
3%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2%
-
-
-
-
-
-
-
(Continued)
No.
Company Name
Counter Party
Nature of
Relationship
(Note 1)
Financial Statements Item
Amount
Terms (Note 2)
Percentage of Consolidated Total
Gross Sales or Total Assets
Intercompany Transactions
0
1
2
3
3
TSMC
TSMC Solar
TSMC Partners
TSMC Global
TSMC China
TSMC Solar
TSMC Solar
TSMC Solar Europe GmbH
TSMC SSL
TSMC Solar NA
TSMC Development
TSMC Development
TSMC Development
WaferTech
1
1
3
3
1
1
3
3
1
General and administrative expenses
Purchases of property, plant and equipment
Miscellaneous revenue
Payables to related parties
Interest expenses
Other receivables from related parties
Interest income
Interest income
Sales
Receivables from related parties
Sales
Other payable to related parties
Other payable to related parties
Other receivables from related parties
$ 2,694
14,448
5,625
7,373
4,870
3,793,421
16,905
2,558
23,771
3,659
3,897
1,496,194
203,277
35,416
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Note 1: No. 1 represents the transactions from parent company to subsidiary.
No. 3 represents the transactions between subsidiaries.
Note 2: The sales prices and payment terms of intercompany sales are not significantly different from those to third parties. For other intercompany transactions, prices and terms are determined in accordance with mutual agreements.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(Continued)
91
B. For the year ended December 31, 2011
No.
0
Company Name
Counter Party
TSMC
TSMC North America
TSMC China
TSMC Japan
TSMC Europe
TSMC Korea
GUC (Note 3)
TSMC Technology
WaferTech
TSMC Canada
Xintec
92
Nature of
Relationship
(Note 1)
1
1
1
1
1
1
1
1
1
1
Financial Statements Item
Sales
Receivables from related parties
Other receivables from related parties
Payables to related parties
Sales
Purchases
Marketing expenses - commission
Sales of property, plant and equipment
Purchases of property, plant and equipment
Gain on disposal of property, plant and equipment
Technical service income
Other receivables from related parties
Payables to related parties
Other assets
Marketing expenses - commission
Payables to related parties
Marketing expenses - commission
Research and development expenses
Payables to related parties
Marketing expenses - commission
Payables to related parties
Sales
Research and development expenses
Research and development expenses
Payables to related parties
Sales
Purchases
Sales of property, plant and equipment
Gain on disposal of property, plant and equipment
Other receivables from related parties
Payables to related parties
Research and development expenses
Payables to related parties
Manufacturing overhead
Research and development expenses
Settlement loss
Payables to related parties
Intercompany Transactions
Amount
Terms (Note 2)
Percentage of Consolidated Total
Gross Sales or Total Assets
$ 234,902,043
24,661,104
23,887
26,536
9,834
10,392,189
64,907
2,885,847
70,491
94,987
1,063
23,688
946,826
1,493
284,644
68,873
357,582
45,489
29,957
22,049
3,146
1,158,302
5,718
534,804
112,926
27,049
7,305,879
72,880
1,463
14,196
420,459
192,616
18,887
260,250
7,313
19,686
37,013
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
55%
3%
-
-
-
2%
-
1%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2%
-
-
-
-
-
-
-
-
-
-
(Continued)
Intercompany Transactions
Amount
Terms (Note 2)
Percentage of Consolidated Total
Gross Sales or Total Assets
No.
0
1
2
Company Name
Counter Party
TSMC
TSMC Solar Europe GmbH
TSMC SSL
TSMC Solar
GUC (Note 3)
TSMC Global
TSMC North America
TSMC Partners
GUC-NA
GUC-Japan
GUC-Shanghai
TSMC China
TSMC SSL
TSMC Solar
Nature of
Relationship
(Note 1)
1
1
1
1
3
3
3
3
3
3
3
Financial Statements Item
Sales
Miscellaneous revenue
Other receivables from related parties
Miscellaneous revenue
Other receivables from related parties
Interest expense
Purchases
Manufacturing overhead
Operating expenses
Manufacturing overhead
Operating expenses
Operating expenses
Long-term receivables from related parties
Interest income
Other receivables from related parties
Other receivables from related parties
$ 148,898
2,625
1,947
2,625
1,857
22,293
296,462
120,408
61,369
30,583
21,826
8,568
7,591,420
17,773
348,369
454,634
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Note 1: No. 1 represents the transactions from parent company to subsidiary.
No. 3 represents the transactions between subsidiaries.
Note 2: The sales prices and payment terms of intercompany sales are not significantly different from those to third parties. For other intercompany transactions, prices and terms are determined in accordance with mutual agreements.
Note 3: The Company has no controlling interest over the financial, operating and personnel hiring policy decisions of GUC and its subsidiaries since July 2011. As a result, GUC and its subsidiaries are no longer consolidated and are accounted for using the equity method.
-
-
-
-
-
-
-
-
-
-
-
-
1%
-
-
-
(Concluded)
93
9. U.S. GAAP Financial Information
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND
SUBSIDIARIES
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. AND
SUBSIDIARIES
U.S. GAAP RECONCILIATIONS OF SHAREHOLDERS’ EQUITY
December 31, 2012 and 2011
(In Thousand New Taiwan Dollars)
U.S. GAAP RECONCILIATIONS OF NET INCOME
For the Years Ended December 31, 2012 and 2011
(In Thousand New Taiwan Dollars)
Total shareholders’ equity based on R.O.C. GAAP
Adjustments
- U.S. GAAP adjustments on equity-method investees
- 10%tax on undistributed earnings
- Goodwill
- Carrying amount difference for 68% equity interest in TASMC’s
share acquisition
- Reversal of amortization of goodwill recognized under R.O.C.
GAAP
- Accrued pension cost
- Accrual for deferred pension loss
- Reversal of the increase in pension liability resulted from net loss not
recognized as pension cost under R.O.C. GAAP
- Gain from deconsolidation of GUC
- Income tax effect of U.S. GAAP adjustments
Net adjustment
2012
2011
$ 725,753,699
$ 632,043,551
(939,111)
(9,629,231)
52,212,732
(11,643,424)
(19,742)
(2,734,595)
4,416
4,304,106
107,197
31,662,348
Net income
Consolidated net income based on R.O.C. GAAP
Adjustments
- U.S. GAAP adjustments on equity-method investees
- 10% tax on undistributed earnings
- Profit sharing to employees - Fair market value adjustment of prior
52,212,732
year accrual
- Pension expense
- Stock-based compensation
- Gain from deconsolidation of GUC
- Income tax effect of U.S. GAAP adjustments
Net adjustment
(626,983)
(2,808,380)
(11,507,850)
(23,683)
(2,108,370)
-
4,304,106
127,484
39,569,056
2012
2011
$ 165,963,689
$ 134,453,260
(319,519)
(6,820,850)
-
3,940
(157,655)
-
(15,138)
(7,309,222)
(127,210)
(1,428,775)
(30,610)
3,762
(60,074)
4,304,106
(11,145)
2,650,054
Consolidated net income based on U.S. GAAP
$ 158,654,467
$ 137,103,314
Attributable to
Shareholders of the parent
Noncontrolling interests
158,849,580
(195,113)
$ 158,654,467
136,872,746
230,568
$ 137,103,314
Total equity based on U.S. GAAP
$ 757,416,047
$ 671,612,607
Attributable to
Shareholders of the parent
Noncontrolling interests
754,860,062
2,555,985
$ 757,416,047
669,162,570
2,450,037
$ 671,612,607
94
CONTACT INFORMATION
Corporate Headquarters & Fab 12
8, Li-Hsin Rd. 6, Hsinchu Science Park, Hsinchu 300-78, Taiwan
R.O.C.
Tel: 886-3-5636688 Fax: 886-3-5637000
TSMC Europe B.V.
World Trade Center, Zuidplein 60, 1077 XV Amsterdam
The Netherlands
Tel: 31-20-3059900 Fax: 31-20-3059911
Fab 2, Fab 5
121, Park Ave. 3, Hsinchu Science Park, Hsinchu 300-77, Taiwan
R.O.C.
Tel: 886-3-5636688 Fax: 886-3-5781546
TSMC Japan Limited
21F, Queen’s Tower C, 2-3-5, Minatomirai, Nishi-ku, Yokohama
Kanagawa, 220-6221, Japan
Tel: 81-45-6820670 Fax: 81-45-6820673
Fab 3
9, Creation Rd. 1, Hsinchu Science Park, Hsinchu 300-77, Taiwan
R.O.C.
Tel: 886-3-5636688 Fax: 886-3-5781548
TSMC China Company Limited
4000, Wen Xiang Road, Songjiang, Shanghai, China
Postcode: 201616
Tel: 86-21-57768000 Fax: 86-21-57762525
Fab 6
1, Nan-Ke North Rd., Tainan Science Park, Tainan 741-44, Taiwan
R.O.C.
Tel: 886-6-5056688 Fax: 886-6-5052057
TSMC Korea Limited
15F, AnnJay Tower, 718-2, Yeoksam-dong, Gangnam-gu
Seoul 135-080, Korea
Tel: 82-2-20511688 Fax: 82-2-20511669
Fab 8
25, Li-Hsin Rd., Hsinchu Science Park, Hsinchu 300-78, Taiwan
R.O.C.
Tel: 886-3-5636688 Fax: 886-3-5662051
TSMC Liaison Office in India
1st Floor, Pine Valley, Embassy Golf-Links Business Park
Bangalore-560071, India
Tel: 1-408-3827960 Fax: 1-408-3828008
Fab 14
1-1, Nan-Ke North Rd., Tainan Science Park, Tainan 741-44, Taiwan
R.O.C.
Tel: 886-6-5056688 Fax: 886-6-5051262
TSMC Design Technology Canada Inc.
535 Legget Dr., Suite 600, Kanata, ON K2K 3B8, Canada
Tel: 613-5761990 Fax: 613-5761999
Fab 15
1, Keya Rd. 6., Daya Dist., Taichung 428-82, Taiwan, R.O.C.
Tel: 886-4-27026688 Fax: 886-4-25607548
TSMC North America
2585 Junction Avenue, San Jose, CA 95134, U.S.A.
Tel: 1-408-3828000 Fax: 1-408-3828008
TSMC Spokesperson
Name: Lora Ho
Title: Senior Vice President & CFO
Tel: 886-3-5054602 Fax: 886-3-5670121
Email: cyhsu@tsmc.com
TSMC Deputy Spokesperson/Corporate
Communications
Name: Elizabeth Sun
Title: Director, TSMC Corporate Communication Division
Tel: 886-3-5682085 Fax: 886-3-5670121
Email: elizabeth_sun@tsmc.com
Auditors
Company: Deloitte & Touche
Auditors: Hung-Peng Lin, Shu-Chieh Huang
Address: 12F, 156, Sec. 3, Min-Sheng E. Rd., Taipei 105-96, Taiwan
R.O.C.
Tel: 886-2-25459988 Fax: 886-2-25459966
Website: http://www.deloitte.com.tw
Common Share Transfer Agent and Registrar
Company: The Transfer Agency Department of Chinatrust
Commercial Bank
Address: 5F, 83, Sec. 1, Chung-Ching S. Rd., Taipei 100-08, Taiwan
R.O.C.
Tel: 886-2-21811911 Fax: 886-2-23116723
Website: http://www.chinatrust.com.tw
ADR Depositary Bank
Company: Citibank, N.A.
Depositary Receipts Services
Address: 388 Greenwich Street, New York, NY 10013, U.S.A.
Website: http://www.citi.com/dr
Tel: 1-877-2484237 (toll free)
Tel: 1-781-5754555 (out of US)
Fax: 1-201-3243284
E-mail: citibank@shareholders-online.com
TSMC’s depositary receipts of the common shares are listed on New
York Stock Exchange (NYSE) under the symbol TSM. The information
relating to TSM is available at http://www.nyse.com and http://mops.
twse.com.tw
Copyright © 2013 by Taiwan Semiconductor Manufacturing Company, Ltd. All rights reserved.