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TSE: 2330
NYSE: TSM
TSMC Annual Report 2013 (I)
●Taiwan Stock Exchange Market Observation Post System：http://mops.twse.com.tw
●TSMC annual report is available at
http://www.tsmc.com/english/investorRelations/annual_reports.htm
Printed on March 12, 2014
TSMC Vision, Mission & 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’s Mission
Our mission is to be the trusted technology and capacity provider of the global logic IC industry for years to come.
TSMC’s 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.
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 Overview
3.2 Board of Directors
3.3 Major Resolutions of Shareholders’ Meeting and
Board Meetings
3.4 Taiwan Corporate Governance Implementation as
Required by the Taiwan Financial Supervisory
Commission
3.5 Code of Ethics and Business Conduct
3.6 Regulatory Compliance
3.7
Internal Control System Execution Status
3.8 Status of Personnel Responsible for the Company’s
Financial and Business Operation
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 Overview
7.2 Environmental, Safety and Health (ESH)
Management
7.3 TSMC Education and Culture Foundation
7.4 TSMC Volunteer Program
7.5 Social Responsibility Implementation Status as
Required by the Taiwan Financial Supervisory
Commission
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6
6
8
12
14
20
28
29
30
34
35
36
40
42
43
3.9
Information Regarding TSMC’s Independent Auditor 43
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
3.10 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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45
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54
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56
58
58
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1. Letter to Shareholders
TSMC achieved record revenue
in 2013, and will continuously
invest in R&D and capacity to
help customers win market
opportunities.
Dear Shareholders,
In 2013, TSMC enjoyed another year of record revenue and profit as we continued to harvest the benefits of a shift in our strategy
that began in 2009. Four years ago, we began to invest heavily in research and development as well as capital expenditure when
we saw signs that the arrival of mobile computing devices such as smartphones and tablets could present promising opportunities
to the semiconductor industry. Today, mobile products are indeed driving a new wave of growth and the most successful ICs in
mobile computing come from TSMC customers, enabled by our process technologies and capacity buildup. TSMC’s investments
in R&D helped our customers to realize their design innovations, and TSMC’s capacity buildup paved the way for our customers
to maximize their market opportunities. We are now better positioned than any company engaging in the IC foundry business to
help IC designers benefit from the worldwide growth in demand for mobile products.
Rapid adoption of TSMC’s 28-nanometer process by IC designers seeking superior performance, lower power consumption, and
smaller die size for their mobile products drove a nearly threefold increase in shipments and revenue for our 28-nanometer wafers
in 2013. Thanks to our differentiated technologies and manufacturing excellence, we enjoyed a segment share of more than 80
percent in the served-available market for 28-nanometer technologies. Other achievements in 2013 include:
● Total wafer shipments reached 15.67 million 8-inch equivalent wafers versus 14.04 million in 2012.
● Advanced technologies (40/45-nanometer and beyond) accounted for 50 percent of total wafer revenue.
● TSMC’s market share in the total semiconductor foundry segment rose successively during the last four years and reached 49
percent.
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2013 Financial Performance
Consolidated revenue totaled NT$597.02 billion, an increase of 17.8
percent over NT$506.75 billion in 2012. Net income was NT$188.15
billion and diluted earnings per share were NT$7.26. Both increased
13.1 percent from the 2012 level of NT$166.32 billion net income
and NT$6.41 diluted EPS.
In US dollars, TSMC generated net income of US$6.34 billion on
consolidated revenue of US$20.11 billion, compared with net income
of US$5.62 billion on consolidated revenue of US$17.12 billion for
2012.
Gross profit margin was 47.1 percent compared with 48.2 percent
in 2012, and operating profit margin was 35.1 percent compared
with 35.8 percent a year earlier. Net profit margin was 31.5 percent,
a decrease of 1.3 percentage points from the previous year’s 32.8
In 2013, we also began the development work of our 10-nanometer
technology, which is scheduled to enter risk production in 2015
and volume production in 2016. This will be our third generation
of FinFET technology, following 16-FinFET and 16-FinFET+, and is
expected to deliver the industry’s leading performance and density.
TSMC’s design ecosystem, the Open Innovation Platform® (OIP)
continues to help our customers to rapidly adopt these advanced
technologies and shorten their time-to-market. This ecosystem
offers an increasingly important advantage to our customers as
technologies grow more complex and the need for first-time silicon
success and early time-to-market become more critical. In 2013,
the libraries and silicon IP portfolio available on TSMC’s OIP were
expanded to contain more than 6,300 items, representing the
world’s largest IP portfolio of its kind. Over 60% of new tape-outs by
our customers at TSMC adopted one or more libraries or IPs from this
percent.
Technological Developments
Following the ongoing success of our 28-nanometer technology,
our 20-nanometer System-on-Chip (20-SoC) has entered volume
production in 2014 after we began accepting customers’ product
tape-outs in 2013. TSMC’s 20-SoC technology possesses the highest
gate density of any 20-/22-nanometer process in volume production,
and we have received an enthusiastic response from customers with
dozens of product tape-outs scheduled in 2014. We expect our
20-nanometer production ramp to be faster than our 28-nanometer,
becoming a significant growth driver for TSMC in both 2014 and
2015.
Next in the pipeline is our 16-nanometer process, which features
a FinFET transistor structure for better performance. TSMC’s
16-nanometer (16-FinFET) entered risk production in November 2013
and is firmly on track to complete manufacturing qualification in
early 2014 and to meet our target of volume production in 2015,
just one year after 20-nanometer. TSMC’s 16-nanometer technology
has captured the vast portion of 16-/14-nanometer products in the
platform.
Corporate Developments
The Board of Directors appointed Dr. Mark Liu and Dr. C.C. Wei as
President and Co-Chief Executive Officer of TSMC on November 12.
Dr. Liu and Dr. Wei joined TSMC in 1993 and 1998 respectively, and
Worldwide Sales and Marketing, and Business Development. They
have also demonstrated seamless teamwork in the best traditions of
TSMC’s corporate culture.
Dr. S.Y. Chiang, formerly Executive Vice President and Co-Chief
Operating Officer, retired in October 2013 after 16 years of
distinguished service to the Company. Dr. Chiang continues to serve
the Company as Adviser to the Chairman of the Board.
I will continue to dedicate my full time and effort to the Company as
Chairman of the Board and maintain the ultimate responsibility for
the Company.
Honors and Awards
semiconductor foundry segment. More than 20 product tape-outs
In 2013, TSMC was honored for our achievements in sustainability,
already have been scheduled throughout 2014 from multiple
customers across a wide range of applications. Meanwhile, we
corporate governance, management, investor relations and
innovation by organizations including Barron’s, FinanceAsia,
are developing an enhanced transistor version of this technology,
Institutional Investor, IR Magazine, GlobalViews Magazine,
16-FinFET+, that will offer an additional 15% performance
CommonWealth Magazine, and Thomson Reuters.
improvement and which we believe will be the highest performance
technology among all available 16-/14-nanometer technologies in
2014.
have served TSMC in managerial positions including Operations, R&D,
in 2010 and 2012.
Capacity Plan
Sales Breakdown by Technology
2012
2013
2014
14%
11%
10%
14.83 million
16.45 million
18.09 million
2012
2013
2014
61%
50%
40%
39%
50%
60%
Annual Growth Rate
Capacity: 8-inch equivalent wafers
Note: Starting 2013, TSMC no longer includes SSMC’s capacity in this capacity tables.
> 40/45nm
2014 wafer shipment is expected to be
≤ 40/45nm
approximately 18 million 8-inch equivalent wafers.
The Dow Jones Sustainability Indexes (DJSI) recognized TSMC as
We have therefore been working on imaging and MEMS
the Semiconductors and Semiconductor Equipment Industry Group
(micro-electro-mechanical system) sensors, power management,
Leader in 2013, highlighting our leadership and continued progress
radio-frequency, embedded-flash, advanced packaging, and
in sustainability and corporate social responsibility. TSMC is the first
Taiwan company, and one of only four Asian companies, to win
ultra-low-power technologies. We have the experience and ability to
integrate all these technologies together to provide SoC (system on
the highest score among its industry peers in the DJSI’s 24 industry
chip) or SiP (system in package) solutions which will be key to our
groups, made up of 59 industries. In addition, TSMC is one of just
future success.
two semiconductor companies chosen as index components for 13
consecutive years, and was also named semiconductor industry leader
Moreover, as TSMC forges ahead in technology leadership, we play
Outlook
While world semiconductor market is expected to grow at only 3-5%
annually in the next five years, we expect to significantly out-grow
the semiconductor market during that period as we have done in
25 of the last 27 years since our founding. We have become the
basic technology and capacity supplier to the world semiconductor
industry, particularly the strong-growth part of that industry. Our
success has continued to contribute to the growth of the information
technology industry.
We are well on our way to a very competitive 10-nanometer
technology, and have started 7-nanometer development.
The future world of ubiquitous connectivity will require us to
integrate our advanced logic technology with many specialty
technologies.
a central role of a Grand Alliance with key suppliers, customers, and
our design ecosystem partners, forming the main open technology
platform for the widest range of product innovations in the
semiconductor industry today. Together with our Grand Alliance, we
believe TSMC will continue to capture the opportunities presented by
a world that values and rewards innovation.
Morris Chang
Chairman
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2. Company Profile
2.1 An Introduction to TSMC
Founded on February 21, 1987 and headquartered in Hsinchu, Taiwan, TSMC pioneered the foundry business model by focusing
solely on manufacturing customers’ semiconductor designs. As a pure-play semiconductor foundry, the Company does not
design, manufacture, or market semiconductor products under its own brand name, ensuring that TSMC does not compete
directly with its customers. Today, TSMC is the world’s largest pure-play semiconductor foundry, manufacturing more than 8,600
different products using 202 different technologies for over 440 different customers in 2013.
With a diverse global customer base, TSMC-manufactured semiconductors are used in a wide variety of applications covering
various segments of the computer, communications, consumer, industrial and standard semiconductor markets.
Annual capacity of the manufacturing facilities managed by TSMC and its subsidiaries totaled 16.4 million 8-inch equivalent
wafers in 2013. TSMC’s managed manufacturing facilities include three 12-inch wafer GIGAFABTM facilities, four 8-inch wafer fabs,
and one 6-inch wafer fab in Taiwan, as well as two 8-inch wafer fabs at wholly owned subsidiaries: WaferTech in the United States
and TSMC China Company Limited.
TSMC is the first foundry to
provide 28nm and 20nm production
capabilities. It captured 49% of
total foundry market segment
share in 2013.
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TSMC provides customer service through its account management
and engineering services offices in North America, Europe, Japan,
China, South Korea, and India. The Company employed more than
40,000 people worldwide at the end of 2013.
With TSMC’s focus on customer trust, the Company strengthened its
Open Innovation Platform® (OIP) initiative in 2013 with additional
services. During the 2013 Open Innovation Platform® (OIP) Ecosystem
Forum, the Company revealed 16nm FinFET Reference Flow (both
full-chip and IP Design) and 3D-IC Reference Flow, to highlight
TSMC continued to lead the foundry segment of the semiconductor
the success of design enablement through OIP. The OIP Ecosystem
industry in both advanced and specialty process technologies. By
Forum, which was held in October 2013 at San Jose, California,
leveraging the experience of 65nm and 40nm, TSMC successfully
was well attended by both customers and ecosystem partners
● 28nm High Performance Mobile Computing (28HPM) technology
2.2.2 Market Overview
for tablets, smartphones, and SoC applications with better power
efficiency requirement.
● 28nm Low Power (28LP and 28HPL) and RF (28HPL-RF and 28LP-RF)
technology for mainstream smartphones, application processors,
tablets, home entertainment and digital consumer applications.
● 40nm general purpose (40G) technology for performance-driven
markets like CPU, GPU, FPGA, HDD, Game Console, Network
reached volume production of 28nm with excellent yield performance
to demonstrate the value of collaboration through OIP to foster
Processor and Gigabit Ethernet applications.
in 2013 featuring 28HP and 28HPM for high performance and 28LP
innovations.
and 28HPL for low power. Furthermore, TSMC delivered 20nm SoC
● 40nm Low Power (40LP and 40LP+) and RF technology for
smartphones, DTV (Digital Television), STB (Set-Top-Box), game and
and 16nm FinFET technology nodes on-schedule and successfully
TSMC offers the foundry segment’s widest technology portfolio
wireless connectivity applications.
received initial customer tape-outs of 20nm technology. In addition
and continues to invest in advanced technologies and specialty
● 55nm low power RF technology for WLAN (Wireless Local Area
to general-purpose logic process technology, TSMC supports the
technologies, which is a key differentiator from our competitors and
Network), Bluetooth and other handheld applications.
wide-ranging needs of its customers with embedded non-volatile
provides customers more added value.
● 55nm and 85nm ultra-low power technology for mobile relevant
memory, embedded DRAM, Mixed Signal/RF, high voltage,
CMOS image sensor, MEMS, silicon germanium technologies and
Technologies which the Company either developed or rolled out in
automotive service packages.
2013 include:
applications.
Specialty Technology
TSMC’s subsidiaries TSMC Solid State Lighting Ltd. and TSMC
Advanced Technology
● 40nm eFlash is under development for general offerings.
● 55nm eFlash technology passed qualification; production is
Solar Ltd. also engage in researching, developing, designing,
manufacturing and selling solid state lighting devices and related
products and systems, and solar-related technologies and products,
respectively.
● 10nm FinFET technology is under development to keep TSMC’s
expected to start in 2014.
technology leadership position in the industry. It is expected to be
ready for production by end of 2015. 10nm can provide the best
● 55nm and 65nm 5V LDMOS (Laterally Diffused Metal Oxide
Semiconductor) for power management application.
density/cost benefit with desired speed/power performance to meet
● 65nm joint developed eFlash technology was qualified and entered
The Company is listed on the Taiwan Stock Exchange (TWSE) under
ticker number 2330, and its American Depositary Shares trade on the
New York Stock Exchange (NYSE) under the symbol “TSM“.
2.2 Market/Business Summary
2.2.1 TSMC Achievements
In 2013, TSMC maintained its leading position in the total foundry
segment of the global semiconductor industry, with an estimated
market segment share of 49%. TSMC achieved this result amid
intense competition from both established players and relatively new
entrants to the business.
Leadership in advanced process technologies is a key factor in TSMC’s
strong market position. In 2013, 50% of TSMC’s wafer revenue came
from manufacturing processes with geometries of 40/45nm and
below.
customers’ expectations. It can serve customers from all different
applications, such as APU (Accelerated Processing Unit), CPU
(Central Processing Unit), FPGA (Field-Programmable Gate Array),
into production for smartcard applications.
● 55nm and 80nm high voltage process for high resolution FHD and
WQXGA display driver IC, which could support Retina to Super
GPU (Graphics Processing Unit), Networking and mobile computing
Retina display quality in smartphones.
applications, including smartphones, tablets and high-end SoC
● 90nm eFlash technology passed automotive qualification;
devices.
production is expected to start in 2014.
● 16nm FinFET technology (16FF) passed qualification and entered
● 0.13μm BCD was qualified on 12-inch process in the third quarter
risk production stage on-schedule. It provides the best value in
speed/power optimization to meet next generation products
requirements in CPU, GPU, APU, FPGA, Networking and mobile
computing applications, including smartphones, tablets and
of 2013 and achieved one identical SPICE model for both 8-inch
and 12-inch processes. It allows TSMC to expand its capacity
support to our PMIC customers from 8-inch fab to 12-inch
GIGAFABTM facilities for high volume production.
high-end SoC devices. Meanwhile, we are developing an enhanced
● 0.18μm BCD second generation entered into production with
version of this technology, 16-FinFET+, which is expected to offer
multiple products from multiple customers. The technology also
an additional 15% performance improvement.
● 20nm System-on-Chip technology (20SoC) passed all qualification
items and entered into production stage with stable yield
passed automotive process qualification criteria. It offers worldwide
competitive power LDMOS Rds(on) performance and with wide
voltage spectrum from 6V to 70V for multiple applications in
performance. It provides better density and power value than 28nm
Computing, Communication- Consumer and automotive markets.
for both performance-driven products and mobile computing
● 40nm and 55nm high precision analog processes were released.
applications migration.
● 28nm High Performance (28HP) technology for performance-driven
They offer high speed data conversion applications like audio codec
with options to integrate advanced DSP function and 5V amplifier.
markets like CPU, GPU, APU, FPGA and high-speed networking
● Modular MEMS (Micro Electro Mechanical Systems) Service
applications.
delivered multiple accelerometer samples successfully for a few
customers, and much improved their product time-to-market.
TSMC estimates that the worldwide semiconductor market in 2013
reached US$322 billion in revenue, a 5% growth compared to 2012.
Total foundry, a manufacturing sub-segment of the semiconductor
industry, generated total revenues of US$37 billion in 2013, or 11%
YoY growth.
2.2.3 Industry Outlook, Opportunities and Threats
Industry Demand and Supply Outlook
Following 16% growth in 2012, foundry segment again posted
double-digit growth, to 11% in 2013, mainly driven by fabless market
share gains over IDM and process technology advancement.
TSMC forecasts total semiconductor market growth of 5% YoY
in 2014. Over the longer term, due to: increasing semiconductor
content in electronics devices; continuing market share gain of
fabless; and increasing in-house Application-Specific Integrated
Circuits (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
2013 through 2018.
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 4% growth in unit shipments for 2013. Smartphones,
which have much stronger growth and higher semiconductor
content, have been leading the growth of the sector.
The continuing transition to 4G/LTE and LTE-Advanced handsets
will bring positive momentum to the market. Smartphones with
increasing performance, lower power and more intelligent features
will continue to propel the buying interest of new handsets in 2014.
The growing popularity of mid- to low-end smartphones in the
emerging countries is also a new catalyst driving the growth of the
sector.
Low power IC is an essential requirement among handset
manufacturers. The SoC design for more optimized cost, power
and form-factor (i.e. device footprint), plus the appetite for higher
performance to run complicated software, will continue to accelerate
the migration to advanced process technologies in which TSMC is
already the leader.
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● Computer
The computer sector’s unit shipments dropped 10% YoY in 2013,
into emerging countries and more diversified applications of
tablets, such as Point-of-Sale (POS), education, and medical. TSMC
after a decline in 2012. Cautious spending in developed countries,
forecasts the tablet market will grow at a 16% CAGR from 2013
lack of innovation, and budget competition from tablets, were
through 2018, and become a strong growth driver for both the
among the factors causing the weak demand.
semiconductor industry and the foundry segment.
Moving into 2014, Personal Computer (PC) market will continue
Supply Chain
to decline. Meanwhile, increasing affordability of Ultrabooks, the
introduction of new operating systems, and corporate replacement
are expected to stimulate PC demand.
Requirements of lower power, higher performance and integration
for key computer components such as CPU, GPU, Chipset,
etc., should drive product design demand for leading process
technologies.
● Consumer
The consumer sector faced the sharpest decline ever in 2013:
aggregated unit shipments fell 7% YoY. The sales of handheld
consumer electronics, such as digital cameras, MP3 players, and
handheld game consoles, were significantly impacted by the growth
of mobile computing (e.g. smartphones, tablets, etc.), while the
home consumer electronics, such as DTV and DVD player, were
reaching the plateau of their sales.
Consumer electronics may start to regain growth momentum in
2014, thanks to the launch of new-generation game consoles and
the emerging smart wearable devices. Riding on the strong growth
of mobile computing and the support from the world’s leading
companies, smart wearable devices are expected to leap in the
coming years.
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.
2.2.4 TSMC Position, Differentiation and Strategy
Position
TSMC is the semiconductor foundry leader for both advanced and
specialty process technologies. As a result, the Company commanded
a 49% market share in 2013. In terms of TSMC’s net revenue
geographic distribution, 71% came from companies headquartered
in North America; 13% from the Asia Pacific region, excluding China
and Japan; 7% from Europe; 6% from China; and 3% from Japan. By
end product application, 15% of TSMC’s net revenue came from the
computer sector, 54% from communications, 10% from consumer
products, and 21% from industrial and standard products.
Differentiation
TSMC’s leadership position is based on three defining strengths
Meanwhile, increasing innovations in the consumer sector have also
and a business strategy rooted in the Company’s heritage. TSMC
encouraged new usage models, such as integration of touch sensing,
distinguishes itself from the competition through its technology
motion recognition, high-resolution and 3D display. Besides the need
leadership, manufacturing excellence and customer trust.
for advanced technologies, specialty technologies such as CMOS
Image Sensor (CIS), High-Voltage (HV) drivers, embedded memory,
As a technology leader, TSMC is consistently first among dedicated
micro-controller and MEMS are becoming prominent requirements.
foundries to develop next-generation leading-edge technologies.
With its comprehensive technology portfolio, TSMC will be able to
capitalize on these trends.
Tablets
As a fast-growing application, tablets are increasing their
contributions to foundry segment revenue. Led by major OEMs and
China tablet makers, around 256 million tablets were shipped in
2013 compared with 165 million units in 2012. The strong sales
momentum will continue in 2014, driven by increasing penetration
The Company has also established its technology leadership on
more mature technology nodes by applying the lessons learned
on leading-edge technology development to push its specialty
technologies to more advanced process nodes. Beyond process
technology, TSMC has established front-end and back-end
integration capabilities that result in faster time-to-production and
creates the best power, performance and area sweet spot.
TSMC has gained manufacturing acclaim for its industry-leading
To address challenges inherent in the electronic product life cycle
management, and is extending its leadership through the Open
Innovation Platform® and Grand Alliance initiatives. The TSMC
Open Innovation Platform® initiative hastens the pace of innovation
amongst the semiconductor design community, its ecosystem
and increased competition from other semiconductor manufacturing
companies, TSMC continually strengthens its core competitiveness
and deploys both short-term and long-term technology and business
development plans to meet Return on Investment (ROI) and growth
partners and TSMC’s IP, design implementation and design for
objectives.
manufacturing capabilities, process technology and backend services.
A key element is a set of ecosystem interfaces and collaborative
components initiated and supported by TSMC that more efficiently
● Short-term Semiconductor Business Development Plan
1. Substantially ramp the business and sustain advanced technology
empower innovation throughout the supply chain and that drive
market share through increased capacity investment.
the creation and sharing of newly-created revenue and profits.
2. Maintain mainstream technology market share by expanding
The TSMC Grand Alliance is one of the most powerful forces for
business into new customers and market segments with
innovation in the semiconductor industry, bringing together our
off-the-shelf technologies.
customers, electronic design automation (EDA) partners, IP partners,
3. Further expand TSMC’s business and service infrastructure into
and key equipment and materials suppliers at a new, higher level of
emerging and developing markets.
collaboration. Its objectives are to help our customers, the alliance
members and ourselves win business and stay competitive.
● Long-term Semiconductor Business Development Plan
1. Continue developing leading edge technologies consistent with
The foundation for customer trust is a commitment TSMC made
Moore’s law.
when it first opened for business over a quarter of a century ago:
2. Broaden specialty business contributions by further developing
to never compete with our customers. As a result, TSMC has never
derivative technologies.
owned nor marketed a single semiconductor product design, but
3. Provide more integrated services, beginning with technology
rather has focused all of its resources on becoming the dedicated
definition and design tool preparation then extending through
manufacturing resource of choice for the semiconductor industry.
wafer processing to complete backend services.
Strategy
TSMC is confident that its differentiating strengths will enable it to
leverage the foundry segment’s attractive growth opportunities.
TSMC has invested heavily in leading-edge 20nm and 16nm FinFET
technologies, which are in volume production and risk production,
respectively. The Company has also invested heavily in the 10nm
process node that is currently in technology development. We
maintain our technology leadership by collaborating in the
technology development process through early engagement and
technology definition that provides a smooth transition for our
advanced technology customers. At the same time, the Company
maintains its leadership in specialty technologies by broadening its
offerings and pushing them to more advanced process nodes.
Numerous other efforts are also underway to ensure manufacturing
excellence through product grade enhancements and manufacturing
technology innovation.
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2.3 Organization
2.3.1 Organization Chart
Audit Committee
Compensation
Committee
Shareholders’ Meeting
Board of Directors,
Chairman,
Vice Chairman
2.3.2 Major Corporate Functions
Quality and Reliability
Operations
● Quality and reliability management, customer service
● Product development, manufacturing technology, mainstream fabs,
300mm fabs, affiliate fabs, and back-end technology and service
Information Technology
02/28/2014
Human Resources
● Technology system integration, business system integration, IT
infrastructure and communication service, IT security and quality
● Human resources management and organizational development
● Proprietary information protection (PIP) and physical security
management
management
Asia
Materials Management and Risk Management
● Purchasing, warehousing, import and export, logistics support,
environmental protection, industrial safety, occupational health,
● Sales operations, market development, field technical support and
and risk management
service for Asia customers
Europe
● Technical marketing, field technical support and service for Europe
customers
North America
Research and Development
● Advanced and specialty technology development, exploratory
research and advanced development, design and technology
platform development
Finance and Spokesperson
● Corporate finance, accounting, corporate communication, financial
strategy and analysis, and corporate spokesperson
Research and Development
Co-CEO Office
Finance and
Spokesperson
Legal
Internal Audit
service for North America customers
● Sales operations, market development, field technical support and
Operations, Human Resources
Asia, Europe, North America, Business Development,
Corporate Planning Organization, Quality and Reliability,
Information Technology, Materials Management and Risk Management
Business Development
Legal
● Developing semiconductor foundry business in mobile computing,
computer, consumer electronics, communication and industrial
related products, identifying new applications and markets, and
solidifying customer relationship, brand management, embedded
flash business, CIS business
● Corporate legal affairs, litigation, commercial transactions, patents
and other intellectual property management, compliance and
regulatory work
Internal Audit
● Internal control risk monitoring and independent assessment of
Corporate Planning Organization
Compliance
● Operation resources planning, production and demand planning,
business process integration, corporate pricing and market analysis
and forecast
012
013
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
125,137,914
%
0.48%
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
Former CEO, TSMC
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%
34,472,675
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
Director, National Culture and Arts Foundation, R.O.C.
As of 02/28/2014
Selected Current Positions at TSMC and Other
Companies
None
Chairman of:
- TSMC China Company Ltd.
- Global Unichip Corp.
Vice Chairman, Vanguard International
Semiconductor Corp.
Director of:
- TSMC Solar Ltd.
- TSMC Solid State Lighting Ltd.
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)
-
-
-
-
Director
Rick Tsai (Resigned on 01/27/2014)
(Note 3)
06/12/2012
06/11/2015
06/03/2003
33,665,046
0.13%
31,877,046
0.12%
Independent Director
Sir Peter Leahy Bonfield
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
Independent Director
Stan Shih
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.
Chairman, Acer Inc.
Group Chairman, iD SoftCapital
Director of:
- 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.
Director, Public Television Service Foundation, R.O.C.
014
(Continued)
015
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
Spouse & Minor Shareholding
Shares
-
-
%
-
-
Shares
-
-
%
-
-
Shares
-
-
%
-
-
Independent Director
Kok-Choo Chen
06/12/2012
06/11/2015
06/09/2011
-
-
-
-
5,120
0.00%
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.
Top 10 Shareholders
Not Applicable
Note 2: Mr. Johnsee Lee was appointed as the representative of National Development Fund on August 6, 2010.
Note 3: Dr. Rick Tsai resigned as a director of TSMC effective January 27, 2014 and thereafter as directors and executives of TSMC’s subsidiaries. The shareholdings of himself and his spouse and minor were not disclosed after that
date.
016
Selected Current Positions at TSMC and Other
Companies
Chairman, J. C. Penney Company Inc.
None
None
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, The University of Chicago, 1952
Ph.D. in Economics, The University of Chicago, 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, Sun Yat-Sen University
L.L.D., Lingnan University
Hon. Dr. of Business Adm, The Hong Kong University of Science and Technology
Honorary Professor of Fudan, Guangxi, Hainan, Nankai, Shandong, Remin, Huazhong University of
Science and Technology, Graduate University of Management of Chinese Academy of Sciences, Sun
Yat-Sen Universities and City University of Hong Kong
Assistant Professor, MIT, 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
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 National Culture and Arts Foundation, R.O.C.
Director of Republic of China Female Cancer Foundation, R.O.C.
017
2.4.2 Remuneration Paid to Directors (Note 1)
Unit: NT$ thousands
Base Compensation (A)
Severance Pay and
Pensions (B) (Note 5)
Compensation to
Directors (C)
Allowances (D)
(Note 7)
Director’s Remuneration
Total Remuneration
(A+B+C+D) as a % of
2013 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 8)
Severance Pay and
Pensions (F) (Note 5)
Employee Profit Sharing (G)
(Note 9)
Exercisable Employee
Stock Options (H)
(Note 10)
Granted Employee
Restricted Stock (I)
(Note 11)
Total Compensation
(A+B+C+D+E+F+G) as
a % of 2013 Net Income
(Note 12)
From TSMC
From All
Consolidated
Entities
From TSMC
From All
Consolidated
Entities
From TSMC
(Note 6)
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)
31,352
31,352
775
775
104,136
104,136
4,090
4,090
0.07%
0.07%
89,110
109,547
-
650
89,067
-
89,067
-
-
-
-
-
0.17%
0.18%
2,720
Title/Name
Chairman
Morris Chang (Note 2 & 3)
Vice Chairman
F.C. Tseng
Director
Rick Tsai (Note 4)
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
National 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: Effective November 12, 2013, Chairman and Chief Executive Officer Dr. Morris Chang retired as Chief Executive Officer. Executive Vice Presidents and Co-Chief Operating Officers Drs. Mark Liu and C.C. Wei assumed the role
as Co-Chief Executive Officers.
Note 3: No “Compensation to Directors“ was paid to Dr. Morris Chang before November 12, 2013.
Note 4: Dr. Rick Tsai resigned as a director of TSMC effective January 27, 2014 and thereafter as directors and executives of TSMC’s subsidiaries.
Note 5: Pensions funded according to applicable law.
Note 6: TSMC Board adopted a proposal that includes 2013 compensation to TSMC’s directors in the amount of NT$104,136 thousand at its meeting on February 18, 2014.
Note 7: The above-mentioned figures include expenses for Company cars and gasoline reimbursement, but do not include compensation paid to Company drivers (totaled NT$4,855 thousand).
Note 8: The above-mentioned figures include the employees’ cash bonuses distributed in May, August, November 2013 and February 2014.
Note 9: 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 24, 2014.
Note 10: Represents the number of cumulative employee stock options exercisable as of the date of this Annual Report.
Note 11: TSMC did not issue employee restricted stock in 2013, and as of the date of this Annual Report.
Note 12: Total remuneration and compensation paid to TSMC’s directors in 2012 was NT$370,823 thousand, accounting for 0.22% of 2012 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
2013
Under NT$2,000,000
NT$2,000,000 ~ NT$4,999,999
None
None
Rick Tsai
None
None
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
F.C. Tseng
NT$30,000,000 ~ NT$49,999,999
None
NT$50,000,000 ~ NT$99,999,999
Morris Chang
Over NT$100,000,000
Total
None
9
F.C. Tseng, Rick Tsai
F.C. Tseng
None
None
Morris Chang
9
018
019
2.5 Management Team
2.5.1 Information Regarding Management Team
Title
Name
(Note 1)
President and Co-Chief Executive Officer
Mark Liu (Note 3)
On-board Date
(Note 2)
Shareholding
Spouse & Minor
Shareholding
%
Shareholding
11/15/1993
13,012,114
0.05%
-
%
-
President and Co-Chief Executive Officer
C.C. Wei (Note 3)
02/01/1998
8,460,207
0.03%
261
0.00%
Senior Vice President and Chief Information Officer
Information Technology, Materials Management
and Risk Management
Stephen T. Tso
Senior Vice President and General Counsel
Legal
Richard Thurston
Senior Vice President,
Chief Financial Officer and Spokesperson
Finance
Lora Ho
Senior Vice President
Research and Development
Wei-Jen Lo (Note 4)
Senior Vice President of TSMC and
President of TSMC North America
Rick Cassidy (Note 4)
Vice President
Operations/Affiliate Fabs
M.C. Tzeng
Vice President and 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
Operations/Mainstream Fabs and Manufacturing
Technology
J.K. Lin
12/16/1996
13,845,064
0.05%
01/02/2002
857,602
0.00%
-
-
-
-
06/01/1999
6,381,080
0.02%
110,268
0.00%
07/01/2004
1,600,127
0.01%
11/14/1997
-
-
01/01/1987
7,592,595
0.03%
06/02/1997
4,368,831
0.02%
-
-
-
-
-
-
-
-
01/01/1987
7,428,122
0.03%
2,194,107
0.01%
03/01/2000
2,051,180
0.01%
1,103,253
0.00%
01/01/1987
12,498,018
0.05%
1,618,036
0.01%
020
TSMC Shareholding by
Nominee Arrangement
(Shares)
Education & Selected Past Positions
-
-
-
-
-
-
-
-
-
-
-
-
Ph.D., Electrical Engineering & Computer Science, University of California, Berkeley, U.S.
Executive Vice President and Co-Chief Operating Officer, TSMC
Senior Vice President, Operations, TSMC
Senior Vice President, Advanced Technology Business, TSMC
Vice President, South Site Operation, TSMC
President, Worldwide Semiconductor Manufacturing Corp.
Ph.D., Electrical Engineering, Yale University, U.S.
Executive Vice President and Co-Chief Operating Officer, TSMC
Senior Vice President, 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.
Selected Current Positions at Other
Companies
Director, TSMC affiliate
Managers Who are Spouses or within Second-degree
Relative of Consanguinity to Each Other
Title
None
Name
None
Relation
None
As of 02/28/2014
None
None
None
None
Director, TSMC subsidiary
None
None
None
Director, TSMC subsidiaries
Director, TSMC affiliate
None
None
None
Master, Business Administration, National Taiwan University, Taiwan
Senior Director, Accounting, TSMC
Vice President & CFO, TI-Acer Semiconductor Manufacturing Corp.
Director and/or Supervisor, TSMC subsidiaries
Director, TSMC affiliates
President, TSMC subsidiaries
None
None
None
Ph.D., Solid State Physics and Surface Chemistry, University of California, Berkeley, U.S.
Vice President, Research and Development, TSMC
Vice President, Operations/ Manufacturing Technology, TSMC
Vice President, Advanced Technology Business, TSMC
Vice President, Operation II, TSMC
Director, Advanced Technology Development and CTM Plant Manager, Intel
Bachelor, Engineering Technology, United States Military Academy at West Point, U.S.
Vice President of TSMC North America Account Management
Master, Applied Chemistry, Chungyuan University, Taiwan
Vice President, Mainstream Technology Business, TSMC
Senior Director, Fab 2 Operation, TSMC
-
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 and 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.
Bachelor, Science, National Changhua University of Education, Taiwan
Senior Director, Mainstream Fabs, TSMC
None
None
None
None
Director, TSMC North America
None
None
None
Director, TSMC subsidiaries
Department
Manager
M.J. Tzeng
Siblings
None
None
None
Director, TSMC affiliates
None
None
None
None
None
None
None
None
None
None
None
None
(Continued)
021
Title
Name
(Note 1)
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
Vice President
Business Development
Been-Jon Woo (Note 5)
On-board Date
(Note 2)
Shareholding
Spouse & Minor
Shareholding
%
Shareholding
02/11/1987
2,553,947
0.01%
160,844
%
0.00%
10/01/2003
800,709
0.00%
-
-
04/26/2000
2,777,746
0.01%
1,024,933
0.00%
11/14/1994
1,000,419
0.00%
-
-
12/15/1997
652,532
0.00%
60,802
0.00%
04/30/2009
115,000
0.00%
42,000
0.00%
TSMC Shareholding by
Nominee Arrangement
(Shares)
Education & Selected Past Positions
Selected Current Positions at Other
Companies
-
-
-
-
-
-
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, U.S.
Senior Director, Nanopatterning Technology Division, TSMC
Ph.D., Electrical Engineering, University of California, Los Angeles, U.S.
Senior Director, R&D Platform I Division, TSMC
Ph.D., Electrical Engineering, Syracuse University, U.S.
Senior Director, Design and Technology Platform, TSMC
Ph.D., Chemistry, University of Southern California, U.S.
Director of Business Development, TSMC
Vice President of R&D, Grace Semiconductor Manufacturing Corp.
Director of Technology Integration, Intel Corp.
None
None
None
None
Director, TSMC subsidiaries
Director, TSMC affiliate
President, TSMC subsidiaries
None
Managers Who are Spouses or within Second-degree
Relative of Consanguinity to Each Other
Title
Manager
Name
J.J. Wang
Relation
Siblings
Manager
Thomas T. Sun
Siblings
None
None
None
None
None
None
None
None
None
None
None
None
Note 1: - Effective November 12, 2013, Chairman and Chief Executive Officer Dr. Morris Chang retired as Chief Executive Officer. Executive Vice Presidents and Co-Chief Operating Officers Drs. Mark Liu and C.C. Wei assumed the
role as Co-Chief Executive Officers.
- Executive Vice President and Co-Chief Operating Officer Dr. Shang-yi Chiang voluntarily retired, effective November 1, 2013.
- Senior Vice President of Worldwide Sales and Marketing Mr. Jason C.S. Chen resigned as the Executive Officer, effective November 23, 2013.
Note 2: On-board date means the official date joining TSMC.
Note 3: Executive Vice Presidents and Co-Chief Operating Officers Drs. Mark Liu and C.C. Wei were appointed as President and Co-Chief Executive Officer, effective November 12, 2013.
Note 4: Dr. Wei-Jen Lo and Mr. Rick Cassidy were promoted to Senior Vice President, effective February 18, 2014.
Note 5: Dr. Been-Jon Woo was promoted to Vice President, effective November 12, 2013.
022
023
2.5.2 Compensation Paid to CEO, President and Vice Presidents (Note 1)
Salary (A)
Severance Pay and Pensions (B)
(Note 9)
Bonuses and Allowances (C)
(Note 10)
From TSMC
From All
Consolidated
Entities
From TSMC
From All
Consolidated
Entities
From TSMC
From All
Consolidated
Entities
Employee Profit Sharing (D)
(Note 11)
Total Compensation as a % of
2013 Net Income (A, B, C, D)
(Note 12)
Exercisable Employee Stock
Options (K shares)
(Note 13)
Exercisable Employee
Restricted Stock (K shares)
(Note 14)
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
Received from
Non-consolidated
Affiliates
80,452
129,718
7,223
7,639
537,609
581,574
484,811
-
484,811
-
0.59%
0.64%
-
-
-
-
106
Unit: NT$ thousands
Title
Chairman
President and Co-Chief Executive Officer
President and Co-Chief Executive Officer
Executive Vice President and Co-Chief Operating Officer
Senior Vice President and Chief Information Officer
Information Technology, Materials Management and Risk
Management
Senior Vice President and General Counsel
Legal
Senior Vice President, Chief Financial Officer and Spokesperson
Finance
Senior Vice President
Worldwide Sales and Marketing
Senior Vice President
Research and Development
Senior Vice President of TSMC and
President of TSMC North America
Vice President
Operations/Affiliate Fabs
Vice President and Chief Technology Officer
Research and Development
Vice President
Operations/Product Development
Vice President
Quality and Reliability
President of TSMC China
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
Vice President
Business Development
Name
Morris Chang
(Note 2)
Mark Liu (Note 3)
C.C. Wei (Note 3)
Shang-yi Chiang
(Note 4)
Stephen T. Tso
Richard Thurston
Lora Ho
Jason C.S. Chen
(Note 5)
Wei-Jen Lo (Note 6)
Rick Cassidy
(Note 6)
M.C. Tzeng
Jack Sun
Y.P. Chin
N.S. Tsai
L.C. Tu (Note 7)
J.K. Lin
J.K. Wang
Irene Sun
Burn J. Lin
Y.J. Mii
Cliff Hou
Been-Jon Woo
(Note 8)
Note 1: Compensation Policy: The cash compensation and profit sharing paid to Chief Executive Officer 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: Effective November 12, 2013, Chairman and Chief Executive Officer Dr. Morris Chang retired as Chief Executive Officer. Executive Vice Presidents and Co-Chief Operating Officers Drs. Mark Liu and C.C. Wei assumed the role
as Co-Chief Executive Officers.
Note 3: Executive Vice Presidents and Co-Chief Operating Officers Drs. Mark Liu and C.C. Wei were appointed as President and Co-Chief Executive Officer, effective November 12, 2013.
Note 4: Executive Vice President and Co-Chief Operating Officer Dr. Shang-yi Chiang voluntarily retired, effective November 1, 2013.
Note 5: Senior Vice President of Worldwide Sales and Marketing Mr. Jason C.S. Chen resigned as the Executive Officer, effective November 23, 2013.
Note 6: Dr. Wei-Jen Lo and Mr. Rick Cassidy were promoted to Senior Vice President, effective February 18, 2014.
Note 7: Vice President of Human Resources Mr. L.C. Tu was appointed as President of TSMC China, effective March 15, 2013.
Note 8: Dr. Been-Jon Woo was promoted to Vice President, effective November 12, 2013.
Note 9: Pensions funded according to applicable law.
Note 10: The above-mentioned figures include the expense for the employees’ cash bonuses distributed in May, August, November 2013 and February 2014, Company cars and gasoline reimbursement, but does not include
compensation paid to Company drivers (totaled NT$5,851 thousand).
Note 11: 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 24, 2014.
Note 12: Total compensation paid to TSMC’s Chief Executive Officer and Executive Officers in 2012 was NT$1,261,465 thousand, accounting for 0.76% of 2012 net income.
Note 13: Represents cumulative employee stock options exercisable as of the date of this Annual Report.
Note 14: TSMC did not issue employee restricted stock in 2013, and as of the date of this Annual Report.
Compensation Paid to CEO, President and Vice Presidents
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
From TSMC
Rick Cassidy
Been-Jon Woo
L.C. Tu
None
2013
From All Consolidated Entities and Non-consolidated Affiliates
None
Been-Jon Woo
L.C. Tu
None
NT$15,000,000 ~ NT$29,999,999
Jason C.S. Chen, Cliff Hou
Jason C.S. Chen, Cliff Hou
NT$30,000,000 ~ NT$49,999,999
NT$50,000,000 ~ NT$99,999,999
M.C. Tzeng, Y.P. Chin, N.S. Tsai, J.K. Lin, Irene Sun, Burn J. Lin, Y.J. Mii,
J.K. Wang
Mark Liu, C.C. Wei, Shang-yi Chiang, Stephen T. Tso, Richard Thurston,
Lora Ho, Wei-Jen Lo, Jack Sun
M.C. Tzeng, Y.P. Chin, N.S. Tsai, J.K. Lin, Irene Sun, Burn J. Lin, Y.J. Mii,
J.K. Wang
Mark Liu, C.C. Wei, Shang-yi Chiang, Stephen T. Tso, Richard Thurston,
Lora Ho, Wei-Jen Lo, Jack Sun, Rick Cassidy
Over NT$100,000,000
Total
Morris Chang
22
Morris Chang
22
024
025
Stock
(Fair Market Value)
Cash
Total Employee Profit Sharing
Total Employee Profit Sharing Paid to
Management Team as a % of 2013
Net Income
-
484,811
484,811
0.26%
2.5.3 Employee Profit Sharing Granted to Management Team (Note 1)
Unit: NT$ thousands
Title
Chairman
President and Co-Chief Executive Officer
President and Co-Chief Executive Officer
Executive Vice President and Co-Chief Operating Officer
Senior Vice President and Chief Information Officer
Information Technology, Materials Management and Risk Management
Senior Vice President and General Counsel
Legal
Senior Vice President, Chief Financial Officer and Spokesperson
Finance
Senior Vice President
Worldwide Sales and Marketing
Senior Vice President
Research and Development
Senior Vice President of TSMC and
President of TSMC North America
Vice President
Operations/Affiliate Fabs
Vice President and Chief Technology Officer
Research and Development
Vice President
Operations/Product Development
Vice President
Quality and Reliability
President of TSMC China
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
Vice President
Business Development
Name
Morris Chang (Note 2)
Mark Liu (Note 3)
C.C. Wei (Note 3)
Shang-yi Chiang (Note 4)
Stephen T. Tso
Richard Thurston
Lora Ho
Jason C.S. Chen (Note 5)
Wei-Jen Lo (Note 6)
Rick Cassidy (Note 6)
M.C. Tzeng
Jack Sun
Y.P. Chin
N.S. Tsai
L.C. Tu (Note 7)
J.K. Lin
J.K. Wang
Irene Sun
Burn J. Lin
Y.J. Mii
Cliff Hou
Been-Jon Woo (Note 8)
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 24, 2014.
Note 2: Effective November 12, 2013, Chairman and Chief Executive Officer Dr. Morris Chang retired as Chief Executive Officer. Executive Vice Presidents and Co-Chief Operating Officers Drs. Mark Liu and C.C. Wei assumed the role
as Co-Chief Executive Officers.
Note 3: Executive Vice Presidents and Co-Chief Operating Officers Drs. Mark Liu and C.C. Wei were appointed as President and Co-Chief Executive Officer, effective November 12, 2013.
Note 4: Executive Vice President and Co-Chief Operating Officer Dr. Shang-yi Chiang voluntarily retired, effective November 1, 2013.
Note 5: Senior Vice President of Worldwide Sales and Marketing Mr. Jason C.S. Chen resigned as the Executive Officer, effective November 23, 2013.
Note 6: Dr. Wei-Jen Lo and Mr. Rick Cassidy were promoted to Senior Vice President, effective February 18, 2014.
Note 7: Vice President of Human Resources Mr. L.C. Tu was appointed as President of TSMC China, effective March 15, 2013.
Note 8: Dr. Been-Jon Woo was promoted to Vice President, effective November 12, 2013.
026
027
3. Corporate Governance
TSMC acts upon the principles of
operational transparency and
respect for shareholder rights. Over
half of our Board of Directors is
made up of Independent Directors.
3.1 Overview
TSMC advocates and acts upon the principles of operational transparency and respect for shareholder rights. We believe that one
basis for successful corporate governance is a sound and effective Board of Directors. In line with this principle, the TSMC Board
delegates various responsibilities and authority to two Board Committees, Audit Committee and Compensation Committee.
Each Committee has a written charter approved by the Board. Each Committee’s chairperson regularly reports to the Board
on the activities and actions of the relevant committee. The Audit Committee and Compensation Committee consist solely of
independent directors.
2013 Corporate Governance Awards
028
029
OrganizationAwardsFinanceAsiaAsia’s Best Managed Companies in Hong Kong, Korea and TaiwanBest Managed Company - Ranked No.1 in TaiwanBest Corporate Governance Company - Ranked No.1 in TaiwanEUROMONEYAsia Best Managed Companies - IT/software/technologyIR Magazine2013 Greater China Awards - Best corporate governance and disclosureBARRON’STop 100 World´s Most Respected CompaniesCommonWealth MagazineMost Admired Company - Ranked No.1 in TaiwanR.O.C. Securities & Futures Institute10th Information Disclosure of Public Companies Ranking - Ranked A+ 3.2 Board of Directors
Board Structure
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
TSMC’s Board of Directors consists of nineNote distinguished members
with a great breadth of experience as world-class business leaders or
management also reviews the Company’s business strategies with
the Board, and updates TSMC’s Board on the progress of those
scholars. TSMC relies on them for their diverse knowledge, personal
strategies, obtaining Board guidance as appropriate.
perspectives, and solid business judgment. Five of the nine members
are independent directors: former British Telecommunications Chief
The third duty of the Board of Directors is to evaluate the
Executive Officer, Sir Peter Bonfield; Acer Inc. Chairman, Mr. Stan
management’s performance and to dismiss officers of the Company
Shih; former Texas Instruments Inc. Chairman of the Board, Mr.
when necessary. TSMC’s management has maintained a healthy and
Thomas J. Engibous; Professor of Princeton University, Gregory C.
functional communication with the Board of Directors, has been
Chow; and advisor to the Taiwan Executive Yuan and the Taipei
devoted in executing guidance of the Board, and is dedicated in
City Government, Ms. Kok-Choo Chen. The number of Independent
running the business operations, all to achieve the best interests for
Directors is more than 50% of the total number of Directors.
TSMC shareholders.
Note: TSMC’s Board of Directors originally consisted of nine directors.
Directors’ Compensation
Since Dr. Rick Tsai resigned as a director of TSMC effective
January 27, 2014, currently the number of Directors is eight.
Board Responsibilities
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’
Under the leadership of Chairman Morris Chang, TSMC’s Board of
compensation declined from 1% of TSMC’s distributable earnings to
Directors takes a serious and forthright approach to its duties and is a
0.3%, before being capped to no more than 0.3% of its distributable
dedicated, competent and independent Board.
compensation. In addition, directors who also serve as executive
officers of the Company are not entitled to receive any director
In the spirit of Chairman Chang’s approach to corporate governance,
compensation.
a board of directors’ primary duty is to supervise. The Board should
supervise the Company’s: compliance with relevant laws and
regulations; financial transparency; timely disclosure of material
information, and maintaining of the highest integrity within the
Company.
TSMC’s Board of Directors strives to perform these responsibilities
through the Audit Committee and the Compensation Committee, the
hiring of a financial expert for the Audit Committee, and coordination
with the Internal Audit department.
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 1)
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
-
1
3
-
-
-
-
-
-
Name/Criteria
Morris Chang
Chairman
F.C. Tseng
Vice Chairman
Johnsee Lee
Director
Rick Tsai (Note 2)
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 1: 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.
Note 2: Dr. Rick Tsai resigned as a director of TSMC, effective January 27, 2014.
3.2.1 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; fraud investigation 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.
Under R.O.C. law, the membership of the 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 Commission. The Audit Committee annually conducts self-evaluation to assess the Committee’s performance and identify areas for
further attention.
030
031
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
Dr. Morris Chang, the Chairman of the Board of Directors, convened four regular meetings in 2013. The directors’ attendance status is as follows:
Committee Charter is available on TSMC’s corporate website.
3.2.2 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.
Title
Chairman
Vice Chairman
Director
Director
Independent Director
Independent Director
Independent Director
Independent Director
Independent Director
Name
Morris Chang
F.C. Tseng
Na tional 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
4
4
4
4
4
4
3
4
4
-
-
-
-
-
-
1
-
-
100%
100%
100%
100%
100%
100%
75%
100%
100%
None
None
None
None
None
None
None
None
None
Annotations:
1. There were no written or otherwise recorded resolutions on which an independent director had a dissenting opinion or qualified opinion in 2013.
2. Recusals of Directors due to conflicts of interests in 2013: Directors recused themselves from the discussion and voting of their compensation resolutions.
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.
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
Audit Committee Meeting Status
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)
Sir Peter Bonfield, Chairman of the Audit Committee, convened four regular meetings in 2013. 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
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
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.
3.2.3 Directors and Committees Members’ Attendance
Each Director is expected to attend every Board meeting and the committees meeting on which he or she serves. In 2013, the average Board
Meeting attendance rate was 97% and the attendance rate for the Audit Committee and Compensation Committee’s Meetings were 95%.
materials with management.
Title
Chair
Member
Member
Member
Member
Financial Expert
Name
Sir Peter Leahy Bonfield
Stan Shih
Thomas J. Engibous
Gregory C. Chow
Kok-Choo Chen
J.C. Lobbezoo
Attendance
in Person
By Proxy
Attendance Rate
in Person (%)
Notes
4
4
3
4
4
4
-
-
1
-
-
-
100%
100%
75%
100%
100%
100%
None
None
None
None
None
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 2013.
2. There were no recusals of independent directors due to conflicts of interests in 2013.
3. Descriptions of the communications between the independent directors, the internal auditors, and the independent auditors in 2013 (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 2013, 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 2013, the Company’s independent auditors did not report
any irregularity. The communication channel between the Audit Committee and the independent auditors functioned well.
Compensation Committee Meeting Status
Mr. Stan Shih, Chairman of the Compensation Committee, convened four regular meetings in 2013. 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
3
4
4
-
-
1
-
-
100%
100%
75%
100%
100%
None
None
None
None
None
Annotation:
1. There was no recommendation of the Compensation Committee which was not adopted or was modified by the Board of Directors in 2013.
2. There were no written or otherwise recorded resolutions on which a member of the Compensation Committee had a dissenting opinion or qualified opinion.
032
033
3.3 Major Resolutions of Shareholders’ Meeting and Board Meetings
3.4 Taiwan Corporate Governance Implementation as Required by the Taiwan Financial Supervisory
3.3.1 Major Resolutions of Shareholders’ Meeting and Implementation Status
Commission
TSMC’s 2013 Annual Shareholders’ Meeting was held in Hsinchu, Taiwan on June 11, 2013. At the meeting, shareholders present in person or
Item
Implementation Status
by proxy approved the following resolutions:
(1) The 2012 Business Report and Financial Statements;
(2) The distribution of 2012 profits;
(3) The revisions to the following internal rules:
● Procedures for Acquisition or Disposal of Assets
● Procedures for Lending Funds to Other Parties
● Procedures for Endorsement and Guarantee
Implementation Status
All of the resolutions of the Shareholders’ Meeting have been fully implemented in accordance with the resolutions.
3.3.2 Major Resolutions of Board Meetings
During the 2013 calendar year, and as of the date of this Annual Report, major resolutions approved at Board meetings are summarized below:
(1) Regular Board Meeting of February 4 & 5, 2013:
● approving 2012 business report and financial statements;
● approving distribution of 2012 profits, and cash dividends, employee cash bonus and employee profit sharing;
● approving capital appropriations of US$2,714.76 million;
● approving R&D capital appropriation of US$103.6 million;
● approving the provision of a loan guarantee to wholly-owned subsidiary TSMC Global for its issuance of US dollar-denominated senior
unsecured corporate bonds for an amount not to exceed US$1.5 billion; and
● convening the 2013 Annual Shareholders’ Meeting.
(2) Regular Board Meeting of May 13 & 14, 2013:
● approving capital appropriations of US$4,901.9 million (including R&D capital appropriation); and
● approving the issuance of an unsecured straight corporate bond in the domestic market for an amount not exceeding NT$45 billion.
(3) Regular Board Meeting of August 12 & 13, 2013:
● approving capital appropriations of US$1.925 billion; and
● approving R&D capital appropriation of US$37.8 million.
(4) Regular Board Meeting of November 11 & 12, 2013:
● approving capital appropriations of US$829.2 million;
● approving R&D capital appropriation and sustaining capital appropriation totaling US$178.4 million;
● approving the appointment of Drs. Mark Liu and C.C. Wei (in alphabetical order) as President and Co-Chief Executive Officer of TSMC. The
Presidents and the Co-Chief Executive Officers shall report to and perform such duties as designated by the Chairman of the Board. After
such appointment, Finance and Legal organizations continue to report to the Chairman;
● approving the promotion of Dr. Been-Jon Woo as Vice President; and
● approving the revision of TSMC’s “Procedure of Retirement“ and set the mandatory retirement age to 67.
(5) Regular Board Meeting of February 17 & 18, 2014:
● approving 2013 business report and financial statements;
● approving distribution of 2013 profits, and cash dividends, employee cash bonus and employee profit sharing;
● approving capital appropriations of US$257.1 million (including upgrading specialty technology capacity, R&D capital investments and
sustaining capital expenditures);
● approving the promotion of Mr. Rick Cassidy and Dr. Wei-Jen Lo as Senior Vice President; and
● convening the 2014 Annual Shareholders’ Meeting.
3.3.3 Major Issues of Record or Written Statements Made by Any Director Dissenting to Important Resolutions Passed
by the Board of Directors during the 2013 Calendar Year and as of the Date of this Annual Report: None.
Non-implementation and
Its Reason(s)
None
1. Shareholding Structure and 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“.
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
28-43 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 28-43 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 71-74 of this Annual Report.
(2) Status of investor relations, supplier relations and rights of stakeholders: Please refer to “7. Corporate Social Responsibility“ on page 92-109 of this Annual Report.
(3) Directors’ training records: Please refer to page 36 of this Annual Report for details.
(4) Status of Risk Management Policies and Risk Evaluation Measures: Please refer to “6.2 Risk Management“ on page 81-91 of this Annual Report.
(5) Status of Customer Relations Policies: Please refer to “5.4 Customer Trust“ on page 69-71 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 recognitions in 2013: FinancialAsia honored TSMC with its “Best Corporate Governance Company – Ranked No.1 in Taiwan“; IR Magazine honored
TSMC with its “2013 Greater China Awards - Best corporate governance and disclosure“; CommonWealth Magazine honored TSMC with its “Most Admired Company in Taiwan“; Securities & Futures
Institute’s 10th Information Disclosure of Public Companies Ranking ranked TSMC “A+“.
034
035
Continuing Education/Training of Directors in 2013
Name
Date
Host by
Training/Speech Title
Morris Chang (Note)
12/05
National Science Council
Science and Technology Development
Council
Speech: International Technical Cooperation and Talents Exchange Strategy
Forum
F.C. Tseng
05/09
Securities & Future Institute
Directors and Supervisors Practice Advanced Seminar: Strategy and Key
Performance Indicators
Stan Shih (Note)
Kok-Choo Chen
Johnsee Lee
07/30
09/10
11/04
04/30
05/10
06/21
The American Chamber of Commerce
in Taipei
Speech: Wangdao & Corporate Social Responsibility
Asia Pacific City Summit, APCS
Speech: Wangdao and Social Enterprise
The Institute of Internal Auditors,
R.O.C.
Taiwan Corporate Governance
Association
Council for Economic Planning and
Development
Speech: Wangdao Governance
Functions of Compensation Committee
Free Economic Pilot Zones Forum
National Development Fund, Executive
Yuan
Directors and Supervisors Practice Seminar – Principle on the Recusal of Conflict
of Interest for Government Functionary
Duration
1 hour
3 hours
1 hour
3.5 hours
1 hour
3 hours
2.5 hours
3 hours
● 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
● 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.
In order to continue to build an environment of innovation, technology leadership, and sustainable profitable growth, the Code requires that we
must promote business relationships founded upon an unwavering respect for the intellectual property rights, proprietary information and trade
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
for many years to come.
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 and documents filed by
the Company with securities authorities and in all TSMC public communications and disclosures.
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 such as:
Code Administration and Disciplinary Action
- Conflict-free Minerals
- Taiwan “Personal Information Protection Act“
- Fraud Detection Procedures
Note: Selected speeches on corporate governance and related topics.
Continuing Education/Training of Management in 2013
Name/Title
Jessica Chou
Director, Accounting
Division
John Liang
Director, Internal
Audit
Date
06/18
06/18
09/10
09/13
12/16
12/20
Host by
Training
Accounting Research and
Development Foundation
The Risk, Legal Responsibility, and Awareness of Economic Crime in Judicial
Cases, from The Perspective of Chief Accounting Officer
The Law and Practice of Contest Over Corporate Control
Introduction of “Illustrative International Financial Reporting Standards (IFRS)“
The Case Study of Significant Economic Crime and Related Legal Responsibilities
The Institute of Internal Auditors,
R.O.C.
Accounting Research and
Development Foundation
Audit Practice of Enterprise Bribery
Major Financial Fraud and Legal Risk
Duration
3 hours
3 hours
3 hours
3 hours
6 hours
6 hours
Compliance Activities
Prevention
Detection
Enhancement
- Employee declaration
- Employee education
- Continuing promotion
- Stakeholder promotion/cooperation
- Internal auditor
- Internal/external hotline
- Administrative discipline/legal action
- Monitor and analyze outcomes
- Propose improved procedures
- Implement enhanced management
system
In addition, various training programs and speech presentations were also provided by TSMC’s Legal Organization for Management and the
Code. TSMC expects our customers, suppliers, vendors, advisors and others with which we come into contact to understand and respect the
All employees, officers and managers must comply with the Code and the other Company policies, procedures, and regulations based on the
relevant divisions, such as:
● Insider Trading
● Protecting of TSMC’s Trade Secrets
● PIP and Handling “Indirect Customers“
● New Export Control Enhancement
3.5 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.
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
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
online training on various topics on ethics, including the requirements to prevent bribery and to protect our intellectual property. Our intranet
subsidiaries, and this Code requires that each employee bears a heavy personal responsibility to preserve and to protect TSMC’s ethical values and
website posts various guidelines and informative articles on ethics and honorable business conduct. We also require our stakeholders such as our
reputation and to comply with various applicable laws and regulations.
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;
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
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.
036
037
The internal auditors of TSMC regularly audit the compliance by the Company, our vendors, suppliers, and customers, of relevant rules and
regulations.
Item
Implementation Status
Non-implementation and
Its Reason(s)
None
TSMC Internal Audit assists the Board of Directors and Management in inspecting and reviewing whether TSMC’s internal control system is
adequate and effective in its design and operation to ensure that:
● Financial, managerial, and operating information is accurate, reliable, and timely.
● Legislative or regulatory issues impacting the organization are recognized and addressed properly.
● Employee’s actions are in compliance with policies, standards, procedures, and applicable laws and regulations.
● Resources are acquired economically, used efficiently, and adequately protected.
To achieve the above objectives, Internal Audit submits an annual audit plan incorporating the regulatory compliance audit projects to the
Board of Directors for approval. Subsequent to the audits, Internal Audit reports the audit findings along with issue follow-up to the Board and
Management on a regular basis.
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
violations of our ethical standards. For example, in 2013, there are two ongoing legal actions filed by the Company against former employees
for misappropriation of the Company’s intellectual property and violating other ethics rules. Additionally, the Company took severe disciplinary
action against 7 employees who committed major violations of our Proprietary Information Protection (“PIP“) rules, and terminated 1 employee
for violating other ethics rules.
3.5.1 Taiwan Corporate Conduct and Ethics Implementation as Required by the Taiwan Financial Supervisory
Commission
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 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.
Non-implementation and
Its Reason(s)
None
(Continued)
2. Corporate Conduct and Ethics Compliance Practice
(1) The company shall prevent doing business with whomever 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 conflicts 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 newly hired 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 an 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.
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
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, in
2013, there are two ongoing legal actions filed by the Company against former
employees for misappropriation of the Company’s intellectual property and
violating other ethics rules. Additionally, the Company took severe disciplinary
action against 7 employees who committed major violations of our Proprietary
Information Protection (“PIP“) rules and terminated 1 employee for violating
other ethics rules.
4. Information Disclosure
(1) To set up a corporate website that publishes information relating to
company’s corporate conduct and ethics.
Our intranet website posts various guidelines and informative articles on ethics
and honorable business conduct for employees’ reference (in both Chinese and
English).
None
(2) Other information disclosure channels (e.g. maintaining an English
website, designating personnel to handle information collection and
disclosure)
TSMC discloses the relevant information in its’ Annual Report and Corporate
Responsibility Report which are available in TSMC external website (http://www.
tsmc.com, in both Chinese and English)
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“) which requires that all employees, officers and board members comply with the Code and the other Company policies,
procedures and regulations based on the Code. For details on the implementation of TSMC’s Corporate Conduct and Ethics, please refer to “3.5 Code of Ethics and Business Conduct“ on page 36-39
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 “3.5 Code of Ethics and Business Conduct“ on page 36-39 of this Annual Report.
038
039
3.6 Regulatory Compliance
TSMC is committed to conducting business honestly and ethically.
This commitment to integrity, our most basic and most important
core value, has been the cornerstone of TSMC’s robust compliance
efforts, which is comprised of legislation monitoring, compliance
policies, training and an open reporting environment.
TSMC operates in many countries. Therefore, in order to achieve
compliance with governing legislation, applicable laws, regulations
and regulatory expectations, we closely monitor domestic and foreign
government policies and regulatory developments that could have a
material impact on TSMC’s business and financial operations. We are
add summaries of recent international antitrust investigations,
enforcement trend and court rulings. In combination with
promotional campaigns, we have successfully raised awareness of
improper behavior associated with antitrust laws in 2013.
● Live seminars are also offered for a variety of topics related to:
Anti-bribery/corruption; Anti-harassment and discrimination; PIP;
Insider Trading; Export Control; Financial Reporting; Contract
Management; Intellectual Property; Conflict-free Minerals; and
Privacy Law. A series of Export Control courses was introduced
in 2013 to give an overview to TSMC’s export management
system (“EMS“) and to introduce TSMC’s updated export control
policy. The above courses are mandatory to managers and certain
employees depending on the nature of the business activities they
also a proactive advocate for local legislative and regulatory reform
perform.
and have achieved remarkable results in strengthening trade secret
protection in Taiwan. TSMC is increasingly dedicated to identifying
regulatory issues and will continue to be involved in advocating
public policy changes that foster a positive and fair business
environment.
In addition to TSMC’s Code of Ethics and Business Conduct, TSMC
has also established policies, guidelines and procedures in other
policy areas, including: Anti-bribery/corruption, Anti-harassment/
discrimination, Antitrust (unfair competition), Environment, Export
Control, Financial Reporting/Internal Controls, Insider Trading,
Intellectual Property, Proprietary Information Protection (“PIP“),
Privacy, Record Retention and Disposal, as well as procuring raw
materials from socially responsible sources (“Conflict-free Minerals“).
With respect to PIP, it is one of the six key corporate strategies of
TSMC (as announced in June 2010). TSMC and its employees are
expected to comply with all laws and regulations that govern our
businesses.
Training is a major component of our compliance program,
conducted throughout the year to refresh TSMC’s employees’
commitment to ethical conduct, and to get updated information
on any changes to the law. Highlights of our compliance training
program include the following:
● 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 Antitrust,
Anti-harassment, Insider Trading, Export Control Management,
PIP, to name just a few. The Antitrust course addresses common
elements in antitrust and competition law that apply in the major
jurisdictions in which we operate. It was updated in 2013 to
● As directed by our General Counsel, members of TSMC’s legal
team regularly attend outside training in Taiwan and abroad to
receive legal updates and stay current with new laws and regulatory
developments. External legal professionals and industry experts
are constantly invited to lecture on new areas of knowledge and
the latest developments on industry-specific compliance matters.
Licensed lawyers, including the General Counsel, maintain
compliance with continuing legal education requirements of their
licensing jurisdictions.
● To enhance compliance and risk management for our subsidiaries
and affiliates, we regularly hold compliance meetings with them to
ensure that all of our subsidiaries and affiliates (as appropriate) are
aligned with the compliance standards of TSMC headquarters.
In addition to the above programs, a variety of resources and
compliance campaigns are made available to our employees. For
example, compliance education and articles on different topics
are published regularly on TSMC’s Legal Organization website.
Furthermore, employees can familiarize themselves with TSMC’s
internal policies through easy access to our intranet channels.
To ensure that our conduct meets the highest legal and ethical
standards, TSMC provides multiple resources for reporting business
conduct concerns. We encourage employees to report suspected
wrongdoing within the organization or any parties with whom we
do business. The system is also open to external reporting. Auditing
employees for PIP policy compliance is conducted regularly to ensure
protection of TSMC’s proprietary information, including information
that suppliers, customers and others have entrusted to us. Disciplinary
actions are taken against employees who have violated the policy.
Below is a summary of the Number of Reported Incidents:
Incidents Submitted to the Ombudsman System (Note 1)
Incidents Submitted to the Audit Committee Whistleblower System
Incidents Reported to the “Hotline“
which were treated as plausible
Sexual Harassment Investigation Committee
which were found after investigations
PIP Violations
which resulted in warnings (Note 2)
which resulted in dismissals
Note 1: There is no case for ethics, finance and accounting matters.
Note 2: More than one-third of the cases reported were for minor errors or noncompliance with our PIP Policy.
3.6.1 Major Accomplishments
FY 2012
FY 2013
20
-
8
3
6
-
108
104
4
35
-
19
1
7
5
84
84
-
In 2013, TSMC’s excellence in regulatory compliance achieved several major accomplishments, including:
● In addition to rigorously fulfilling our obligations to regulatory compliance matters, TSMC has discharged its civic duties as a responsible
corporate citizen by advising the local government on law and policy reform. TSMC regularly urged the Government to amend any outdated
laws and regulations, which may be inconsistent with global practice to improve our investment environment and economic development.
For example, after Taiwan’s legislature accepted TSMC’s advice of imposing criminal liability on trade secret misappropriation in 2012, TSMC
continued to be a strong advocate for heightening trade secret protection in 2013. We have been working closely with the relevant authorities,
and provided our recommendations to subsequent reinforcement of relevant laws and regulations.
● Throughout 2013, TSMC offered a wide range of education courses on various compliance topics, including 19 topics via on-line education and
36 topics via live seminars. These courses were developed and conducted by compliance and legal professionals. TSMC will regularly review and
update our training programs and identify additional areas of training if necessary.
● In order to prevent any unauthorized export of controlled items, a formal system, namely EMS, has existed for a number of years and
continuously updated and sustained to reinforce TSMC’s internal compliance measures, which measures are taken to ensure compliance
by TSMC and all of its subsidiaries with all applicable regulations covering the export of information, technologies, products, materials and
equipment. TSMC’s EMS allows TSMC to streamline its complicated SHTC (Strategic High-Tech Commodities) export process and creates
efficiency for both TSMC and its customers. TSMC’s EMS was certified in September 2012 by the Bureau of Foreign Trade, the Taiwan regulator,
as a qualified ICP (Internal Control Program) exporter. The successful implementation of TSMC’s EMS also earned recognition by Dutch export
control authority as best in class during its audit of TSMC’s European subsidiary in March 2013.
● To reflect and reinforce TSMC’s values of integrity, globalization, caring for employees and shareholders, and being a good corporate citizen,
TSMC took measures to comply with the Personal Information Protection Act of Taiwan that became effective in 2012. We prepared a privacy
policy that provides TSMC and its worldwide subsidiaries with global standards for handling personal data and respecting personal privacy
in the workplace. Furthermore, to educate TSMC individuals about the restrictions and procedures applicable to handling personal data and
respecting personal privacy in the workplace, TSMC rolled out several privacy awareness initiatives. For example, TSMC developed a variety of
training programs, including seminars, in-person training programs, and e-learning courses, which describe the policies and guidelines for
individuals to follow when handling personal data. Through its assertive privacy promotional campaigns, TSMC is dedicated to bring awareness
of the issues surrounding data protection and privacy to its employees and to create a culture whereby an individual’s personal data and privacy
are protected and handled in line with global standards.
040
041
3.7 Internal Control System Execution Status
3.8 Status of Personnel Responsible for the Company’s Financial and Business Operation
Taiwan Semiconductor Manufacturing Company Limited
Statement of Internal Control System
3.8.1 Resignation or Dismissal of Chairman, President, and Heads of Accounting, Finance, Internal Audit and R&D
during the 2013 Calendar Year and as of the Date of this Annual Report
Title
Name
Date Effective
Date Resigned/Dismissed
Reasons for Resignation or Dismissal
Date: February 18, 2014
Chairman & CEO
Morris Chang
12/10/1986
11/12/2013
(retired as CEO of TSMC)
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 2013:
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, 2013, 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 2013 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.
7. This Statement has been passed by the Board of Directors in their meeting held on February 18, 2014, with none of the eight attending
directors expressing dissenting opinions, and the remainder all affirming the content of this Statement.
Taiwan Semiconductor Manufacturing Company Limited
Morris Chang,
Chairman
Mark Liu,
President and Co-Chief Executive Officer
C.C. Wei
President and Co-Chief Executive Officer
The Board of Directors approved the appointment of Drs. Mark Liu and C. C. Wei
(in alphabetical order) as President and Co-Chief Executive Officer of TSMC at
its meeting of November 12, 2013. Dr. Morris Chang remains as the Chairman
of TSMC. The Presidents and the Co-Chief Executive Officers shall report to and
perform such duties as designated by the Chairman of the Board. Finance and
Legal organizations will continue to report to the Chairman.
Dr. Chiang departs his position to enjoy retirement life, but will continue to serve
as advisor to the Chairman of TSMC, sit in on Board of Directors’ meetings, and
take on other special assignments from time to time.
Executive Vice President and
Co-Chief Operating Officer
Shang-yi Chiang
11/10/2009
11/01/2013
3.8.2 Certification Details of Employees Whose Jobs are Related to the Release of the Company’s Financial Information
Certification
Certified Public Accountants (CPA)
US Certified Public Accountants (US CPA)
The Chartered Institute of Management Accountants (CIMA)
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)
Certification in Risk Management Assurance (CRMA)
Certified Information Systems Auditor (CISA)
BS7799/ISO 27001 Lead Auditor
Number of Employees
Internal Audit
2
2
-
10
-
-
-
-
4
3
3
1
Finance
28
12
1
5
1
2
1
1
-
-
-
-
3.9 Information Regarding TSMC’s Independent Auditor
3.9.1 Audit Fees
Unit: NT$ thousands
Accounting
Firm
Deloitte &
Touche
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
Yi-Hsin Kao,
Hung-Wen Huang,
and others
69,369
-
235
-
3,354
3,589
V
Note
Note 1
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 IFRS adoption project.
3.9.2 Due to relevant regulatory requirements on rotation, Deloitte & Touche has rotated audit partners for TSMC in
2013.
3.9.3 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
2013.
3.10 Material Information Management Procedure
TSMC has established relevant procedures for managing and disclosing material information. The responsible departments regularly remind
all officers and employees about the need to comply with these procedures and other applicable regulations when they become aware of any
potential material information and the possible need to publicly disclose such information. To ensure that our employees, managers and board
directors are aware of and comply with these relevant regulations, TSMC has also established an “Insider Trading Policy“. To reduce the risk
of insider trading, on-line training programs and live seminars are conducted regularly. In addition, employees can familiarize themselves with
relevant internal policies and training articles by easily accessing TSMC’s intranet website.
042
043
4. Capital and Shares
4.1 Capital and Shares
4.1.1 Capitalization
Unit: Share/NT$
Month/
Year
Issue Price
(Per Share)
Authorized Share Capital
Capital Stock
Shares
Amount
Shares
Amount Sources of Capital
Remark
Capital Increase by
Assets Other than
Cash
03/2013
10 28,050,000,000
280,500,000,000 25,924,435,668
259,244,356,680 Exercise of Employee Stock
None
Options: NT$23,880,900
06/2013
09/2013
11/2013
10 28,050,000,000
280,500,000,000 25,928,232,685
259,282,326,850 Exercise of Employee Stock
None
Options: NT$37,970,170
10 28,050,000,000
280,500,000,000
25,928,305,829
259,283,058,290 Exercise of Employee Stock
None
Options: NT$731,440
10 28,050,000,000
280,500,000,000
25,928,390,990
259,283,909,900 Exercise of Employee Stock
None
Options: NT$851,610
As of 02/28/2014
Date of Approval &
Approval Document No.
03/11/2013 Yuan Shang Tzu
No.1020007200
06/06/2013 Yuan Shang Tzu
No.1020016352
09/03/2013 Yuan Shang Tzu
No.1020026632
11/29/2013 Yuan Shang Tzu
No.1020037052
As of 02/28/2014
Total
Authorized Share Capital
Issued Shares
Listed
Non-listed
Total
Unissued
Shares
25,929,049,937
-
25,929,049,937
2,120,950,063
28,050,000,000
4.1.2 Capital and Shares
Unit: Share
Type of Stock
Common Stock
Shelf Registration: None.
90% of TSMC’s share
capital comes from
self-generated funds.
044
045
4.1.3 Composition of Shareholders
Common Share
Type of Shareholders
Government
Agencies
Financial
Institutions
Other Juridical
Persons
Foreign
Institutions
& Natural Persons
Domestic Natural
Persons
Number of Shareholders
10
234
1,023
3,341
359,899
As of 07/09/2013 (last record date)
Total
364,507
4.1.4 Major Shareholders
Common Share
Shareholders
ADR-Taiwan Semiconductor Manufacturing Company, Ltd.
National Development Fund, Executive Yuan
Shareholding
1,653,712,458
738,531,978
1,127,435,779
20,023,387,265
2,385,238,349
25,928,305,829
JPMorgan Chase Bank N.A. Taipei Branch in custody for Saudi Arabian Monetary Agency
Holding Percentage (%)
6.38%
2.85%
4.35%
77.22%
9.20%
100.00%
Government of Singapore
Distribution Profile of Share Ownership
Common Share
Shareholder Ownership (Unit: Share)
Number of Shareholders
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.
171,105
130,752
28,306
11,294
4,922
5,565
2,644
1,621
3,222
1,702
1,096
430
258
205
1,385
364,507
Ownership
38,623,504
284,996,435
200,375,733
136,512,854
85,892,113
134,811,854
91,015,467
72,830,364
223,963,582
234,597,317
308,623,163
209,759,142
181,133,766
184,443,995
23,540,726,540
25,928,305,829
As of 07/09/2013 (last record date)
Ownership (%)
0.15%
1.10%
0.77%
0.53%
0.33%
0.52%
0.35%
0.28%
0.86%
0.90%
1.19%
0.81%
0.70%
0.71%
90.80%
100.00%
046
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
JPMorgan Chase Bank N.A. Taipei Branch in custody for Norges Bank
iShares MSCI Emerging Markets Index Fund
Vanguard Emerging Markets Stock Index Fund, a Series of Vanguard International Equity Index Funds
JPMorgan Chase Bank, N.A., Taipei Branch in Custody for Stichting Depositary APG Emerging Markets
Equity Pool
Total Shares Owned
5,456,754,818
1,653,709,980
854,162,727
540,394,959
425,265,136
329,478,439
274,910,515
246,339,000
235,633,845
232,312,361
As of 07/09/2013 (last record date)
Ownership (%)
21.05%
6.38%
3.29%
2.08%
1.64%
1.27%
1.06%
0.95%
0.91%
0.90%
4.1.5 Net Change in Shareholding and Shares Pledged by Directors, Management and Shareholders with 10%
Shareholdings or More
Unit: Share
Title
Name
Chairman
Morris Chang
Vice Chairman
F.C. Tseng
Director
National Development Fund, Executive Yuan
Representative: Johnsee Lee
Director
Rick Tsai (Note 2)
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
President and Co-Chief Executive Officer
Mark Liu (Note 3)
President and Co-Chief Executive Officer
C.C. Wei (Note 3)
Executive Vice President and Co-Chief Operating Officer
Shang-yi Chiang (Note 4)
Senior Vice President and Chief Information Officer
Information Technology, Materials Management and Risk
Management
Stephen T. Tso
Senior Vice President and General Counsel
Legal
Richard Thurston
Senior Vice President, Chief Financial Officer and
Spokesperson
Finance
Lora Ho
2013
01/01/2014 ～ 02/28/2014
Net Change in
Shareholding
Net Change in Shares
Pledged (Note 1)
-
(190,000)
-
-
(930,000)
-
-
-
-
-
(125,000)
276,882
(50,000)
(570,000)
(12,290)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net Change in
Shareholding
2,000,000
-
-
-
(50,000)
-
-
-
-
-
(25,000)
-
N/A
(140,000)
-
-
Net Change in Shares
Pledged (Note 1)
-
-
-
-
-
-
-
-
-
-
-
-
N/A
-
-
-
(Continued)
047
01/01/2014 ～ 02/28/2014
4.1.6 Stock Trade with Related Party: None.
Net Change in Shares
Pledged (Note 1)
Net Change in
Shareholding
Net Change in Shares
Pledged (Note 1)
4.1.7 Stock Pledge with Related Party: None.
Title
Name
Senior Vice President
Worldwide Sales and Marketing
Jason C.S. Chen (Note 5)
Senior Vice President
Research and Development
Wei-Jen Lo (Note 6)
Senior Vice President of TSMC and
President of TSMC North America
Rick Cassidy (Note 6)
Vice President
Operations/Affiliate Fabs
M.C. Tzeng
Vice President and 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
Human Resources
L.C. Tu (Note 7)
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
Vice President
Business Development
Been-Jon Woo (Note 8)
2013
Net Change in
Shareholding
(105,000)
(381,000)
-
(26,000)
(34,000)
(175,000)
-
(24,000)
(9,000)
-
(179,000)
(244,000)
-
(100,000)
20,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
N/A
(8,000)
-
-
-
(17,000)
-
N/A
-
-
(70,000)
-
-
-
15,000
N/A
-
-
-
-
-
-
N/A
-
-
-
-
-
-
-
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: Dr. Rick Tsai resigned as a director of TSMC, effective January 27, 2014. His shareholding was not disclosed after that date.
Note 3: Executive Vice Presidents and Co-Chief Operating Officers Drs. Mark Liu and C.C. Wei were appointed as President and Co-Chief Executive Officer, effective November 12, 2013.
Note 4: Executive Vice President and Co-Chief Operating Officer Dr. Shang-yi Chiang voluntarily retired, effective November 1, 2013. His shareholding was not disclosed after that date.
Note 5: Senior Vice President of Worldwide Sales and Marketing Mr. Jason C.S. Chen resigned as the Executive Officer, effective November 23, 2013. His shareholding was not disclosed after that date.
Note 6: Dr. Wei-Jen Lo and Mr. Rick Cassidy were promoted to Senior Vice President, effective February 18, 2014.
Note 7: Vice President of Human Resources Mr. L.C. Tu was appointed as President of TSMC China, effective March 15, 2013. His shareholding was not disclosed after that date.
Note 8: Dr. Been-Jon Woo was promoted to Vice President, effective November 12, 2013. Her shareholding was disclosed starting from that date.
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 07/09/2013 (last record date)
Name and Relationship
between TSMC’s
Shareholders
Shares
%
Shares
ADR-Taiwan Semiconductor Manufacturing Company, Ltd.
5,456,754,818
21.05%
National Development Fund, Executive Yuan
Representative: Johnsee Lee
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
JPMorgan Chase Bank N.A. Taipei Branch in custody for
Norges Bank
iShares MSCI Emerging Markets Index Fund
Vanguard Emerging Markets Stock Index Fund, a Series of
Vanguard International Equity Index Funds
JPMorgan Chase Bank, N.A., Taipei Branch in Custody for
Stichting Depositary APG Emerging Markets Equity Pool
1,653,709,980
6.38%
-
-
854,162,727
3.29%
540,394,959
425,265,136
2.08%
1.64%
329,478,439
1.27%
274,910,515
1.06%
246,339,000
235,633,845
0.95%
0.91%
232,312,361
0.90%
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
None
None
N/A
None
None
None
None
None
None
None
None
None
None
None
None
Ownership by TSMC (1)
Ownership by Directors, Managers and
Directly/Indirectly Owned Subsidiaries (2)
Total Ownership
(1) + (2)
As of 12/31/2013
Shares
%
Shares
4.1.9 Long-term Investment Ownership
Long-term Investment
Equity Method:
TSMC Partners, Ltd.
TSMC Global Ltd.
TSMC North America
TSMC Europe B.V.
TSMC Japan Limited
TSMC Korea Limited
TSMC China Company Limited
TSMC Guang Neng Investment, Ltd.
TSMC Solar Ltd.
TSMC Solid State Lighting Ltd.
Systems on Silicon Manufacturing Co. Pte. Ltd.
Vanguard International Semiconductor Corp.
Xintec Inc.
Global UniChip Corporation
Emerging Alliance Fund, L.P.
Shares
988,268,244
1,284
11,000,000
200
6,000
80,000
Not Applicable (Note 1)
Not Applicable (Note 1)
1,118,000,000
554,674,437
313,603
628,223,493
94,950,005
46,687,859
%
100%
100%
100%
100%
100%
100%
100%
100%
98.58%
92.32%
38.79%
39.36%
40.16%
34.84%
-
-
-
-
-
-
Not Applicable (Note 1)
Not Applicable (Note 1)
-
-
-
-
-
-
-
-
6,749,800
9,181,173
-
0.60%
1.53%
-
278,100,295
17.42% (Note 2)
-
-
988,268,244
1,284
11,000,000
200
6,000
80,000
Not Applicable (Note 1)
Not Applicable (Note 1)
1,124,479,800
563,855,610
313,603
906,323,788
94,950,005
46,687,859
Not Applicable (Note 1)
Not Applicable (Note 1)
-
-
-
-
%
100%
100%
100%
100%
100%
100%
100%
100%
99.18%
93.85%
38.79%
56.78%
40.16%
34.84%
99.50%
98.00%
98.98%
VentureTech Alliance Fund II, L.P.
Not Applicable (Note 1)
98.00%
Not Applicable (Note 1)
Not Applicable (Note 1)
99.50%
Not Applicable (Note 1)
VentureTech Alliance Fund III, L.P.
Not Applicable (Note 1)
50.35%
Not Applicable (Note 1)
48.63%
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 17.17% while other Directors and Management hold 0.25%.
048
049
4.1.10 Share Information
4.1.11 Dividend Policy
TSMC’s earnings per share increased 13.3% in 2013 to NT$7.26 per share. The following table details TSMC’s net worth, earnings, dividends and
TSMC’s profits may be distributed by way of cash dividend and/or stock dividend. The preferred method of distributing profits is by way of an
market price per common share, as well as other data regarding return on investment.
Net Worth, Earnings, Dividends, and Market Price Per Common Share
Unit: NT$, except for weighted average shares and return on investment ratios
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. TSMC has distributed cash dividends every year to its
shareholders since 2004 and maintained dividends per share (DPS) at NT$3.0 every year since 2007. TSMC intends to maintain a stable dividend
policy, and will consider raising DPS when the free cash flow significantly exceeds NT$3.0 per share.
2013
01/01/2014 ~ 02/28/2014
4.1.12 Distribution of Profit
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
2012
99.20
74.30
84.08
27.79
24.79
115.50
94.40
104.09
32.69
(Note 5)
Weighted Average Shares (thousand shares)
25,927,936
25,929,603
Diluted Earnings Per Share
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 for shareholders’ approval
6.41
3.00
-
13.12
28.03
4%
7.26 (Note 5)
3.00 (Note 5)
-
(Note 5)
(Note 5)
(Note 5)
108.50
100.50
105.34
-
-
-
-
-
-
-
-
-
The Board adopted a proposal for 2013 profit distribution at its meeting on February 18, 2013. The proposal will be effected according to the
relevant regulations, upon the approval of shareholders at the Annual Shareholders’ Meeting on June 24, 2014.
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 2014 Annual Shareholders’
Meeting, was recorded as a charge to earnings of approximately 6.7% of net income in year 2013; compensation to directors was expensed
based on the 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 24, 2014. 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 2013 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 2013 which have been expensed under the Company’s income statements are listed below:
－NT$12,634,664,804 distributed employees’ cash bonus
－NT$12,634,664,804 employees’ cash profit sharing to be distributed after 2014 Annual Shareholders’ Meeting
－NT$104,136,580 directors’ compensation
2012 Directors’ Compensation and Employee Profit Sharing
77,785,851,420
Directors’ Compensation (Cash)
Employee’s Cash Profit Sharing
Total
Board Resolution (02/05/2013)
Actual Result (Note)
Amount (NT$)
71,351,700
11,115,239,772
11,186,591,472
Amount (NT$)
71,351,700
10,859,687,110
10,931,038,810
Note: The above Directors’ Compensation and Employee’s Cash Profit Sharing were expensed under the Company’s 2012 income statements and the same amounts were approved by the Board of Directors at its meeting on
February 5, 2013. The Employee’s Cash Profit Sharing was distributed after the approval of the same by shareholders at 2013 Annual Shareholders’ Meeting on June 11, 2013. Due to employee turnover, Employee’s Cash
Profit Sharing in the amount of NT$255,552,662 was undistributed, and related expense was reversed in 2013.
4.1.13 Impact to 2014 Business Performance and EPS Resulting from Stock Dividend Distribution: Not applicable.
4.1.14 Buyback of Common Stock: None.
050
051
4.2 Issuance of Corporate Bonds
4.2.1 Corporate Bonds
NTD Corporate Bonds
As of 02/28/2014
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) Domestic Unsecured Bond (102-2) Domestic Unsecured Bond (102-3) Domestic Unsecured Bond (102-4)
Issuance
Issuing Date
Denomination
Offering Price
Total Amount
Coupon
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.
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.
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.
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.
Tenor and Maturity Date
Tranche A: 5 years
Maturity: 09/28/2016
Tranche B: 7 years
Maturity: 09/28/2018
Tranche A: 5 years
Maturity: 01/11/2017
Tranche B: 7 years
Maturity: 01/11/2019
Tranche A: 5 years
Maturity: 08/02/2017
Tranche B: 7 years
Maturity: 08/02/2019
Tranche A: 5 years
Maturity: 09/26/2017
Tranche B: 7 years
Maturity: 09/26/2019
10/09/2012
NT$10,000,000
Par
01/04/2013
NT$10,000,000
Par
02/06/2013
NT$10,000,000
Par
07/16/2013
NT$10,000,000
Par
08/09/2013
NT$10,000,000
Par
09/25/2013
NT$10,000,000
Par
NT$4,400,000,000
NT$23,600,000,000
NT$21,400,000,000
NT$13,700,000,000
NT$12,500,000,000
NT$15,000,000,000
1.53% p.a.
Tranche A: 1.23% p.a.
Tranche B: 1.35% p.a.
Tranche C: 1.49% p.a.
Tranche A: 1.23% p.a.
Tranche B: 1.38% p.a.
Tranche C: 1.50% p.a.
Tranche A: 1.50% p.a.
Tranche B: 1.70% p.a.
Tranche A: 1.34% p.a.
Tranche B: 1.52% p.a.
Tenor: 10 years
Maturity: 10/09/2022
Tranche A: 5 years
Maturity: 01/04/2018
Tranche B: 7 years
Maturity: 01/04/2020
Tranche C: 10 years
Maturity: 01/04/2023
Tranche A: 5 years
Maturity: 02/06/2018
Tranche B: 7 years
Maturity: 02/06/2020
Tranche C: 10 years
Maturity: 02/06/2023
Tranche A: 7 years
Maturity: 07/16/2020
Tranche B: 10 years
Maturity: 07/16/2023
Tranche A: 4 years
Maturity: 08/09/2017
Tranche B: 6 years
Maturity: 08/09/2019
Tranche A: 1.35% p.a.
Tranche B: 1.45% p.a.
Tranche C: 1.60% p.a.
Tranche D: 1.85% p.a.
Tranche E: 2.05% p.a.
Tranche F: 2.10% p.a.
Tranche A: 3 years
Maturity: 09/25/2016
Tranche B: 4 years
Maturity: 09/25/2017
Tranche C: 5.5 years
Maturity: 03/25/2019
Tranche D: 7.5 years
Maturity: 03/25/2021
Tranche E: 9.5 years
Maturity: 03/25/2023
Tranche F: 10 years
Maturity: 09/25/2023
None
Guarantor
Trustee
Underwriter
Legal Counsel
Auditor
Repayment
Outstanding
Redemption or Early Repayment Clause
Covenants
Credit Rating
None
None
None
None
None
None
None
None
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
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
Not Applicable
Modern Law Office
Deloitte & Touche
Bullet
Not Applicable
Modern Law Office
Deloitte & Touche
Bullet
Not Applicable
Modern Law Office
Deloitte & Touche
Bullet
Not Applicable
Modern Law Office
Deloitte & Touche
Bullet
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
NT$21,700,000,000
NT$4,400,000,000
NT$23,600,000,000
NT$21,400,000,000
NT$13,700,000,000
NT$12,500,000,000
NT$15,000,000,000
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
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)
twAAA
(Taiwan Ratings Corporation,
05/16/2013)
twAAA
(Taiwan Ratings Corporation,
07/15/2013)
twAAA
(Taiwan Ratings Corporation,
08/06/2013)
None
Not Applicable
None
Not Applicable
None
Not Applicable
None
Not Applicable
None
Not Applicable
None
Not Applicable
None
Not Applicable
None
Not Applicable
None
Not Applicable
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
None
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
USD Corporate Bonds
Issuance
Issuing Date
Denomination
Listing
Offering Price
Total Amount
Coupon
Tenor and Maturity Date
Guarantor
Trustee
Underwriter
Senior Unsecured Notes (Note)
04/03/2013
US$200,000 and integral multiples of US$1,000 in excess thereof
Singapore Exchange
2016 Notes: 99.988%
2018 Notes: 99.933%
US$1,500,000,000
2016 Notes: 0.950% p.a.
2018 Notes: 1.625% p.a.
2016 Notes: 3 years
Maturity: 04/03/2016
2018 Notes: 5 years
Maturity: 04/03/2018
TSMC
Citicorp International Limited
Goldman Sachs International
As of 02/28/2014
Legal Advisor
Auditor
Repayment
Outstanding
Jones Day
Maples and Calder
Deloitte & Touche
Bullet
US$1,500,000,000
Redemption or Early Repayment Clause
At issuer’s option
Covenants
Credit Rating
Limitations on (1) liens and (2) sale and leaseback transactions
A1 (Moody’s Investors Service, 03/15/2013)
A+ (Standard & Poor’s Rating Services, 03/15/2013)
Conversion Right
None
Other Rights of
Bondholders
Amount of Converted
or Exchanged Common
Shares, ADRs or Other
Securities
Dilution Effect and Other Adverse Effects on
Existing Shareholders
(Continued)
Custodian
Not Applicable
None
None
Note: Issued by TSMC’s wholly-owned subsidiary, TSMC Global Ltd., and unconditionally and irrevocably guaranteed by TSMC.
052
053
4.2.2 Convertible Bond: None.
4.2.3 Exchangeable Bond: None.
4.2.4 Shelf Registration: None.
4.2.5 Bond with Warrants: None.
4.3 Preferred Shares
4.3.1 Preferred Share: None.
4.3.2 Preferred Share with Warrants: None.
4.4 Issuance of American Depositary Shares
Issuing Date
10/08/1997
11/20/1998
01/12/1999 -
01/14/1999
07/15/1999
08/23/1999 -
09/09/1999
02/22/2000 -
03/08/2000
04/17/2000
06/07/2000 -
06/15/2000
05/14/2001 -
06/11/2001
06/12/2001
11/27/2001
02/07/2002 -
02/08/2002
11/21/2002 -
12/19/2002
07/14/2003 -
07/21/2003
11/14/2003
08/10/2005 -
09/08/2005
05/23/2007
Issuance and Listing
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
Total Amount (US$)
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
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
(Pursuant to ADR
Conversion Sale
Program)
TSMC Common
Shares from Selling
Shareholders
TSMC Common
Shares from Selling
Shareholders
TSMC Common
Shares from Selling
Shareholders
Common Shares
Represented
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
Rights and Obligations
of ADS 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
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
and Maintenance
Terms and Conditions
in the Deposit
Agreement and
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
(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
See Deposit
Agreement
and Custody
Agreement
for Details
See Deposit
Agreement
and Custody
Agreement
for Details
Closing Price Per ADS
(US$)
2013
01/01/2014 -
02/28/2014
High
Low
Average
High
Low
Average
19.66
15.75
17.55
18.15
16.46
17.36
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 dividends 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 were 45%, 23%, 28%, 40%, 10%, 8%, 14.08668%, 4.99971%, 2.99903%, 0.49991%, 0.50417% and 0.49998%, respectively. As of February 28,
2014, total number of outstanding ADSs was 1,077,494,287 after 70,340,918 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
fees and accountant fees were borne by TSMC.
054
055
4.5 Status of Employee Stock Option Plan
4.5.1 Issuance of Employee Stock Options
ESOP Granted
Approval Date by The Securities & Futures Bureau
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
Third Grant
06/25/2002
11/08/2002
1,085,000
0.00583%
10 years
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
Eighth Grant
Ninth Grant
As of 02/28/2014
10/29/2003
05/11/2004
11,167,817
0.05510%
10 years
10/29/2003
08/11/2004
135,300
0.00058%
10 years
01/06/2005
05/17/2005
10,742,350
0.04620%
10 years
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
-
NT$53.0
NT$25.6
0.00000%
1,416,203
45,875,186
-
NT$51.0
NT$24.6
0.00000%
7,584,554
174,820,504
-
NT$41.6
NT$20.2
0.00000%
24,838,979
849,375,434
-
NT$58.5
NT$28.3
0.00000%
583,111
29,807,359
-
NT$66.5
NT$50.1
0.00000%
15,416
744,182
-
NT$63.5
NT$47.8
0.00000%
10,143,247
449,012,664
201,281
NT$57.5
NT$43.2
0.00078%
128,014
4,982,968
-
NT$43.8
NT$38.0
0.00000%
7,087,842
371,734,875
1,129,240
NT$54.3
NT$47.2
0.00436%
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
056
057
4.5.2 Employee Stock Options Granted to Management Team and to Top 10 Employees
Title
Name
Number of Options Granted
(Note 6)
% of Shares Exercisable to
Outstanding Common Shares
Exercised
Unexercised
Shares Exercised
Exercise Price Per
Share
Value of Shares
Exercised (NT$)
% of Shares
Exercised to
Outstanding
Common Shares
Shares
Unexercised
Adjusted Grant
Price Per Share
Value of Shares
Unexercised (NT$)
As of 02/28/2014
% of Shares
Unexercised to
Outstanding
Common Shares
Officers
Chairman
President and Co-Chief Executive Officer
President and Co-Chief Executive Officer
Morris Chang (Note 1 & 2)
Mark Liu (Note 1 & 3)
C.C. Wei (Note 1 & 3)
Senior Vice President and Chief Information Officer
Stephen T. Tso (Note 1)
Senior Vice President and General Counsel
Senior Vice President of TSMC and President of TSMC North
America
Richard Thurston (Note 1)
Rick Cassidy (Note 4)
Vice President and Chief Technology Officer
President of TSMC China
Employees
Vice President
Vice President
Director
Director
Sr. Vice President of TSMC North America
Sr. Vice President of TSMC North America
Sr. Vice President of TSMC North America
Vice President of TSMC North America
President of WaferTech
Director of WaferTech
Director of WaferTech
Deputy Fab Manager of WaferTech
Jack Sun (Note 1)
L.C. Tu (Note 1 & 5)
J.K. Lin (Note 1)
Burn J. Lin (Note 1)
Jessica Chou
Lie-Szu Juang
Pan-Wei Lai
Bradford Paulsen
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%
-
-
-
0.00000%
7,674,288
0.02960%
7,232,603
43.7
316,303,631
0.02789%
441,685
47.2
20,847,555
0.00170%
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: Effective November 12, 2013, Chairman and Chief Executive Officer Dr. Morris Chang retired as Chief Executive Officer. Executive Vice Presidents and Co-Chief Operating Officers Drs. Mark Liu and C.C. Wei assumed the role
as Co-Chief Executive Officers.
Note 3: Executive Vice Presidents and Co-Chief Operating Officers Drs. Mark Liu and C.C. Wei were appointed as President and Co-Chief Executive Officer, effective November 12, 2013.
Note 4: Mr. Rick Cassidy was promoted to Senior Vice President, effective February 18, 2014.
Note 5: Vice President of Human Resources Mr. L.C. Tu was appointed as President of TSMC China, effective March 15, 2013.
Note 6: Number of options granted includes the additional shares due to stock dividends distributed in 2004, 2005, 2006, 2007, 2008 and 2009.
4.6 Status of Employee Restricted Stock
TSMC did not issue employee restricted stock in 2013, 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 neither issued new shares in connection with mergers or acquisitions during 2013, nor as of the date of this Annual Report.
4.8 Financing Plans and Implementation: Not applicable.
058
059
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 specialty wafer production processes and unparalleled manufacturing efficiency. TSMC strives to provide the best overall value
to its customers, and the success of TSMC’s business is manifested in the success of its customers.
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 productivity and product quality.
In May 2009, TSMC established the New Businesses organization to explore non-foundry related business opportunities. In August
2011, the New Businesses organization was formally separated from the main TSMC organization as two subsidiaries, TSMC Solid
State Lighting Ltd. and TSMC Solar Ltd., responsible for solid state lighting and solar business activities, respectively.
5.1.2 Customer Applications
TSMC manufactured more than 8,600 different products for over 440 different customers in 2013. These chips are used across
the entire spectrum of electronic applications, including computers and peripherals, information appliances, wired and wireless
communications systems, automotive and industrial equipment, consumer electronics such as DVDs, digital TVs, game consoles,
digital still cameras (DSCs), and many other applications.
The rapid evolution of end products drives our customers to utilize TSMC’s innovative technologies and services, while at the same
time spurring TSMC’s own development of technology. As always, success depends on leading rather than following industry
trends.
TSMC manufactured over 8,600
products for over 440 customers in
2013. TSMC significantly outgrew
the semiconductor market in 25 of
the last 27 years since its founding.
060
061
5.1.3 Consolidated Shipments and Net Revenue in 2013 and 2012
Unit: Shipments (8-inch equivalent wafers) / Net Revenue (NT$ thousands)
2013
2012
Wafer
Domestic (Note 1)
Export
Others (Note 2)
Domestic (Note 1)
Total
Export
Domestic (Note 1)
Export
Note 1: Domestic means sales to Taiwan.
Note 2: Others majorly include revenue associated with mask making, design, and royalty income.
5.1.4 Production in 2013 and 2012
Unit: Capacity / Output (8-inch equivalent wafers) / Amount (NT$ thousands)
Year
2013
2012
Note: Starting 2013, TSMC no longer includes SSMC's capacity in this capacity tables.
5.2 Technology Leadership
5.2.1 R&D Organization and Investment
Shipments
2,810,456
12,855,511
N/A
N/A
2,810,456
12,855,511
Wafers
Capacity
16,446,779
14,832,671
Net Revenue
79,982,833
480,702,380
5,118,245
31,220,739
85,101,078
511,923,119
Shipments
2,392,978
11,651,318
N/A
N/A
2,392,978
11,651,318
Output
15,197,701
13,643,678
Net Revenue
65,782,349
397,188,087
4,764,100
39,010,698
70,546,449
436,198,785
Amount
301,305,826
267,104,646
In 2013, TSMC continued to invest in R&D with total R&D expenditure
Amount: NT$ thousands
amounting to 8% of revenue, a level that equals or exceeds the R&D
investment of many other high technology leaders. Along with the
increase in budget, R&D staffing increased by 11%.
TSMC recognizes that the technology challenge required to extend
Moore’s Law, the business law behind CMOS scaling, is becoming
increasingly complex. The efforts of the R&D organization are
focused on enabling the Company to continuously offer its customers
first-to-market, leading edge technologies and design solutions that
R&D Expenditures
2012
2013
01/01/2014~
02/28/2014
7,726,273
40,383,195
48,118,165
contribute to their product success in today’s complex and challenging market environment. In 2013 the R&D organization met these challenges
by introducing into manufacture the industry-leading 20nm technology. The 16nm technology, which is the first integrated technology platform
to make use of 3D FinFET transistors, has also met its development goals and is now in risk production. The R&D organization continues
to strengthen the pipeline of technology innovations that are required to maintain technology leadership. The 10nm technology advanced
development was completed, and entered full development, while the 7nm technology is in the early development stage.
In addition to CMOS logic, TSMC conducts research and development on a wide range of other semiconductor technologies that provide the
functionality our customers require for mobile SoC and other applications. Highlights achieved in 2013 include: production ramp of the CoWoSTM
(Chip on Wafer on Substrate) 3D packaging technology; extension of the 28nm technology for RF and embedded flash technologies; the first
industry introduction of the BCD power technology into a 12-inch fab environment and, manufacturing readiness of TSMC’s first wide band gap
Gallium Nitride (GaN) semiconductor technology for high frequency power applications.
TSMC maintains a network of important external R&D partnerships and alliances with world-class research institutions such as IMEC, the
respected European R&D consortium, where TSMC is a core partner. TSMC also provides funding for nanotechnology research at leading
universities worldwide to promote innovation and the advancement of nanoelectronic technology. In 2013, TSMC announced the formation of
collaborative research centers with National Taiwan University and National Chiao Tung University in Taiwan, and anticipates announcing the
establishment of additional research centers in Taiwan in 2014.
5.2.2 R&D Accomplishments in 2013
R&D Highlights
● 28nm Technology
TSMC delivered the world’s first 28nm High-k/Metal Gate triple gate
oxide technology (28HPT). This technology provides 10% faster speed
compared to the 28HPM technology while keeping the same leakage
power. 28HPT is qualified for production in both Fab 12 and Fab 15
with equivalent yield to 28HPM.
Several new techniques were introduced during 2013 to enable
the successful launch of 10nm development. While the immersion
lithography process will be extended to the 10nm node, the double
patterning technique that was developed for the 20nm and 16nm
nodes is insufficient to meet 10nm requirements. Multiple patterning
becomes essential to enable high yield manufacturing. To further
stretch the patterning capability of optical lithography, significant
learning in material processing, image modeling, and defect control
has been achieved to make the 10nm process viable.
● 20nm Technology
TSMC’s 20nm technology was successfully qualified for volume
manufacture.
● 16nm Technology
The 16nm technology features FinFET transistors with a third
generation High-k/Metal Gate process, a fifth generation of transistor
strain process, and advanced 193nm lithography. FinFET transistors
offer substantial power reduction at the same chip performance
compared to transistors built with the traditional planar structure,
which is essential for advanced mobile applications. In 2013, the R&D
organization successfully verified the process development test vehicle
(TV1R), provided customers with version 1.0 design kits (design rules
and SPICE models) and offered two public cyber shuttles. More than
10 customers and IP vendors took the shuttles and verified their IP.
The 16nm technology has completed manufacturing qualification
with good yield.
● 10nm Technology
2013 saw the introduction of 10nm technology into development.
The 10nm technology will offer substantial power reduction for the
same chip performance compared to earlier technology generations.
Development activities in 2014 will focus on manufacturing baseline
process setup, yield learning, transistor performance improvement,
and reliability evaluation. TSMC plans to enter 10nm risk production
in 2015 and volume production in 2016.
● Lithography
2013 was a productive year in 16nm lithography development
with the technology reaching the risk production stage. Several
novel patterning techniques were developed for 48nm pitch Fin
patterning. These techniques overcame the challenge of high
aspect ratio topography of 3D device structures. Besides patterning
challenges, defect reduction on the high aspect ratio topography
also required special engineering efforts. Several key solutions were
developed in 2013, such as improvement in tool and process recipe
co-optimization, and enhanced defect-monitoring methodology. The
development of optimum automation and Advanced Process Control
systems, including enhanced tool control and stability, resulted in
significant reduction of rework rate and cycle time, helping to drive
faster learning in both defect reduction and yield improvement.
In 2013, TSMC took delivery of a NXE3300 extreme ultraviolet (EUV)
scanner, and exposed its first wafers after successful installation.
While we see a clear advantage in process simplification by the use
of EUV as opposed to multiple patterning with optical immersion
lithography, insufficient power of the EUV light source is our major
concern.
Multiple e-beam direct-write lithography (MEB DW) not only
has the potential for economical imaging critical layers, but it
also may offer cost reduction potential for non-critical layers and
450-mm wafers. It is being developed to meet the need of 7nm
node imaging and beyond. A TSMC team from the design, CMOS,
MEMS, and packaging areas is jointly developing and fabricating the
digital pattern generation (DPG) module for the Reflective E-Beam
Lithography (REBL) system of KLA-Tencor. The first DPG test chip,
which was a collaborative effort between TSMC and KLA-Tencor, was
taped out in the third quarter of 2013.
● Mask Technology
Mask technology is an integral part of our advanced lithography. In
2013, we completed the development of mask technology for the
16nm node and made solid progress on development for the 10nm
node. In the meantime, continued progress is being made on the
mask technology for EUV lithography. Working with suppliers, we
continue to drive down counts of native defects on mask blanks. In
addition TSMC continues to work with several industrial consortia in
developing the infrastructure of EUV mask technology.
Integrated Interconnect and Packaging
● 3D IC
TSMC achieved a new industry landmark in 2013 with the ramp up
to volume production of a new turnkey system integration solution
called CoWoSTM. The CoWoSTM solution is integrated with TSMC’s
advanced silicon technologies to provide customers with alternatives
for system level integration compared to the traditional SoC
approach. The technology has passed customer product qualifications
with 28nm FPGA products. At 20nm, development continues and we
expect customer tape outs in the first half of 2014. We successfully
demonstrated 3D IC stacking of an application processor and wide
I/O DRAM in 28HPM technology through transistor stacking (TTS) TSV
technology, and completed 16nm TSV process development.
062
063
● Advanced Package Development
TSMC offers a wide variety of lead-free flip chip packaging
technologies. In 2013, TSMC qualified for manufacture at 20nm
technology.
0.18μm Complementary Bipolar Complementary MOS (CBCMOS)
time-to-market for highly integrated circuits, in 2013 TSMC also
extended its IP quality program (TSMC9000) to allow IP audits to
The 3D IC Reference Flow is an extension of our previously announced
CoWoSTM Reference Flow that addresses true 3D chip stacking. The
3D IC flow provides a complete solution for through-silicon via (TSV)
TSMC developed and transferred to manufacturing a first generation
Given the ever-increasing need for first-time silicon success and early
an innovative Bump-on-Trace (BoT) packaging technology with an
ultra-fine pitch (80μm) copper (Cu) bump that is suitable for mobile/
handheld devices. Additionally, lead-free flip chip packaging was
enhanced for ultra large die size (≥600mm2) for high performance
applications (GPU/CPU/FPGA/Networking Processor).
● Advanced Interconnect
Development of low resistance Cu and low capacitance dielectric
● Power IC/BCD Technology/Panel Drivers
TSMC released the 0.13BCD technology, the first BCD technology
be performed either at TSMC or at TSMC-certified laboratories. The
modeling, power integrity, thermal analysis, chip-package-board
extended IP quality program currently includes standard interface IP
switching noise analysis, and design for test (DFT) for memory
such as MIPI, HDMI and LVDS. Further IP types will be included in the
integration through a Wide IO interface. These tools allow customers
to be implemented in a 12-inch fab. The R&D team also completed
upcoming year. TSMC also donated its IP Tag format to the industry
to fully explore the new system integration opportunities made
development and qualified for manufacture the wide band
gap material GaN in a high electron mobility transistor (HEMT)
to extend IP quality tracking coverage beyond our IP Alliance partners.
possible by 3D IC technology.
To help customers plan new product tape-outs incorporating TSMC
configuration for high power, high frequency applications. The 55HV
certified IP, the OIP ecosystem now features a portal to connect
5.2.5 Intellectual Property
technology was qualified targeting high quality mobile displays, while
customers to an ecosystem of more than 40 solution providers.
continued to be the primary focus in 2013. At the 16nm node,
C015HV was released targeted at the large panel market. TSMC has
a novel dielectric scheme has been developed that reduces the
also developed a 0.18μm HV embedded flash technology for touch
capacitance between copper lines. For the 10nm node and beyond,
panel applications.
we have developed a new spacer-patterning scheme that allows
copper line width and spacing to be reduced and minimizes
signal delay. The effective resistivity of copper lines developed
● Micro-electromechanical Systems (MEMS) Technology
A variety of products were qualified for manufacturing ramp in
with these advanced processes is highly competitive and is lower
2013, including products aimed at: giga-level pixel display density;
than that projected by the International Technology Roadmap for
BioMEMS applications such human genome sequencing; second
Semiconductors (ITRS).
generation motion sensor products; and high-resolution noise
cancellation microphones.
Advanced Transistor Research
The increased performance and lower power requirements of
advanced logic technologies require constant innovation in
transistor architecture and materials. TSMC is at the forefront of
research in these areas, with particular focus on non-silicon channel
materials such as germanium and III-V compounds because of their
desirable performance and power characteristics. As an example of
the progress being made in this area, our research team recently
announced at the 2013 International Electron Devices Meeting world
record-breaking transistor performance for both Germanium (Ge)
channel PMOS FinFET and Indium Arsenide (InAs) (III-V) channel
NMOS. New concepts of transistor structures employing innovative
nanotechnology are also under intensive investigation.
Specialty Technologies
TSMC offers a broad mix of technologies to address the wide
range of applications that customers are engaged in. The Company
enhanced its SoC roadmap to address the needs of specialty
applications in mixed-signal, RF markets, high voltage power
management IC, high voltage IC’s for display, MEMS and embedded
memory.
● Mixed Signal/Radio Frequency (MS/RF) Technology
TSMC has successfully verified customer products in the 28nm
technology for RF CMOS applications (28LP-RF) that are aimed at
next generation RF transceivers (e.g. 4G LTE). Higher performance
analog and RF solutions are also in development at the 20nm node.
● Flash/Embedded Flash Technology
TSMC achieved several important milestones in embedded flash
technologies. At the more mature 65nm/55nm node, NOR based
cell technologies including 1-T cell and Split-Gate cell successfully
completed customer qualification. At the 40nm node, the split-gate
cell technology has been shipped for both automotive and consumer
applications. Embedded flash development for the 28LP and
28HPM platforms is underway for low leakage applications such as
smartcard, MCU and Automobile.
5.2.3 Technology Platform
TSMC provides our customers with advanced technology platforms
that include the comprehensive design infrastructure required to
optimize design productivity and cycle time. These include: design
flows for electronic design automation (EDA); silicon-proven IP
building blocks, such as libraries; and simulation and verification
design kits, i.e., process design kits (PDK) and technology files.
To ensure the OIP ecosystem delivers to our customers the highest
quality design experience with newly introduced technologies,
TSMC has collaborated with our EDA partners to certify EDA tool
readiness. In particular, since 16nm is the first FinFET technology
for our customers, TSMC and ecosystem partners improved the tool
certification process to cover point tool enhancement as well as
integrated, cross-tool certification using an advanced CPU core as the
vehicle (EDA tool certification results can be found on TSMC-Online).
A strong portfolio of intellectual property rights strengthens TSMC’s
technology leadership and protects our advanced and leading edge
technologies. In 2013, TSMC received a record breaking 940 U.S.
5.2.4 Design Enablement
TSMC’s technology platforms provide a solid foundation for design
patents, as well as 500+ issued patents in Taiwan and the PRC, and
enablement. Customers can design directly using the Company’s
other patents issued in various other countries. In 2013, TSMC ranked
internally developed IP and tools, or using those that are available via
#35 in the “Top 50“ U.S. patent grants. TSMC’s patent portfolio now
our OIP partners.
Tech File and PDK
TSMC provides a broad range of process design kits (PDK) for digital
logic, mix-signal, radio frequency (RF), high-voltage driver, CMOS
Image Sensor (CIS) and embedded flash technologies across a
range of technology nodes from 0.5μm to 16nm. In addition, TSMC
provides technology files for: DRC; LVS; RC extraction; automatic
place and route; and a layout editor to ensure process technology
information is accurately represented in EDA tools. There are more
than 100,000 customer downloads of these files every year.
Library and IP
TSMC and its alliance partners offer our customers a rich portfolio
of reusable IP, which are essential building blocks for many circuit
designs. In 2013, over 60% of new tape-outs at TSMC adopted one
or more libraries or IP from TSMC and/or our IP partners. In 2013,
TSMC expanded its library and silicon IP portfolio to contain more
than 6,300 items, a 16% increase over 2012.
Design Methodology and Flow
In 2013 TSMC addressed the critical design challenges associated
with the new 16nm FinFET technology for digital and SoC
applications, as well as 3D IC chip stacking technology by announcing
the readiness of reference flows through our Open Innovation
Platform® (OIP) collaboration.
The 16nm reference flow features FinFET-specific design solutions
and methodologies for performance, power, and area optimization.
The flow covers place-and-route, RC extraction, timing analysis,
electromigration, IR-drop, and physical verification. In addition, it
includes analysis capability for layout-dependent-effects (LDE) and
voltage-dependent rule checking (VDRC) to improve custom design
accuracy and productivity.
exceeds 20,000 patents worldwide (including 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, operations, 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.
We have worked continuously to improve the quality of our
intellectual property portfolio and to reduce the costs of maintaining
it. We plan to continue investing in our intellectual property portfolio
and intellectual property management system to ensure that we
protect our technology leadership and receive maximum business
value from our intellectual property rights.
5.2.6 TSMC University Collaboration Programs
TSMC University Research Centers in Taiwan
TSMC has significantly expanded its interaction with universities
in Taiwan with the establishment of several new research centers
located at the nation’s most prestigious universities. The mission of
these centers is twofold: to increase the number of highly qualified
students who are suitable for employment at TSMC, and to inspire
university professors to initiate research programs that focus on the
frontiers of semiconductor device, process and materials technology;
semiconductor manufacturing and engineering science; and specialty
technologies of relevance to the semiconductor industry. Two of
these research centers were established in 2013 at National Taiwan
University and National Chiao Tung University, and two additional
centers will be established at National Cheng Kung University and
064
065
National Tsing Hua University in 2014. These centers are funded
structures, strained-layer CMOS, high mobility materials and novel 3D
jointly by governmental agencies together with a commitment from
IC devices. These studies of the fundamental physics of nanometer
TSMC of several hundred million Taiwan dollars and in-kind university
CMOS transistors are core aspects of our efforts to improve the
shuttles. In 2013, about three hundred high caliber students across
understanding and guide the design of transistors at advanced
Electronics, Physics, Materials Engineering, Chemistry, Chemical
nodes. The findings of these studies are being applied to ensure our
Engineering and Mechanical Engineering disciplines joined the
continued industry leadership at the 28nm and 20nm nodes and to
research centers.
TSMC University Shuttle Program
The TSMC University Shuttle Program was established to provide
professors at leading research universities worldwide with access to
the advanced silicon process technologies that are needed to research
and develop innovative circuit design concepts. This program links
motivated professors and graduate students with enthusiastic
managers at TSMC with the goals of promoting excellence in
the development of advanced silicon design technologies, and
the nurturing of new generations of engineering talent in the
semiconductor field.
The program provides access to silicon process technologies
including the 65nm and 40nm nodes for digital, analog/mixed-signal
circuits and RF design, and the 0.11μm/0.18μm process nodes for
micro-electromechanical system designs. Select research projects
utilize the 28nm technology node. Participants in the TSMC University
Shuttle Program include major university research groups in the
U.S.: M.I.T.; Stanford University; UC Berkeley; UCLA; University of
Texas at Austin; and University of Michigan. In Taiwan, participants
are: National Taiwan University; National Chiao Tung University;
and National Tsing Hua University. Other participants include: Tsing
Hua University in Beijing; The Hong Kong University of Science and
Technology; and Singapore’s Nanyang Technological University.
extend our leadership to the 10nm and 7nm nodes. One of TSMC’s
goals is to extend Moore’s Law through both innovative in-house
work and by collaborating with industry leaders and academia. We
seek to push the envelope in finding cost-effective technologies and
manufacturing solutions.
TSMC intends to continue working closely with international
consortia and lithography equipment suppliers to ensure the
timely development of 193nm high-NA scanner technology, EUV
lithography, and multiple- e-beam direct-write technologies.
These technologies are increasingly important to TSMC’s process
development efforts at the 10nm, 7nm, and smaller nodes.
Similarly, TSMC continues to work with mask writing, inspection, and
repair equipment suppliers to develop viable mask-making technology
to help ensure that the Company maintains its leadership position in
mask quality and cycle time and continues to meet aggressive R&D,
prototyping, and production requirements.
With a highly competent and dedicated R&D team and its
unwavering commitment to innovation, TSMC is confident of its
ability to deliver the best and most cost-effective SoC technologies
for its customers, thereby supporting the Company’s business growth
and profitability.
TSMC R&D Future Major Project Summary
TSMC’s University Shuttle Program participants recognize the
importance of the program in allowing their graduate students to
Project Name
Description
Risk Production
(Estimated Target
Schedule)
implement exciting designs ranging from: low-power memories;
analog-to-digital converters; and advanced radio-frequency
and mixed-signal bio-medical systems. This is truly a “win-win“
collaboration. In 2013, TSMC received specific letters of appreciation
from professors at M.I.T., Stanford University, UC Berkeley, UCLA,
University of Michigan, National Taiwan University and National
Chiao Tung University.
5.2.7 Future R&D Plans
In light of the significant accomplishments of TSMC’s advanced
technologies in 2013, the Company plans to continue to grow its
R&D investments. The Company plans to reinforce its exploratory
development work on new transistors and technologies, such as 3D
10nm logic platform
technology and applications
3rd generation FinFET technology for
both digital and analog products
2015
7nm logic platform
technology and applications
3D IC
CMOS platform technology for SoC
2017
Cost-effective solution with better
form factor and performance for SIP
2014 ~ 2016
Next-generation lithography
EUV and multiple e-beam to extend
Moore’s Law
2014 ~ 2019
Long-term research
Special SoC technology (including
new NVM, MEMS, RF, analog) and
5nm transistors
2014 ~ 2019
The above plans accounted for roughly 70% of the total R&D budget in 2014. The total R&D
budget is currently estimated to be around 8% of 2014 revenue.
5.3 Manufacturing Excellence
5.3.3 Precision and Lean Operations
5.3.1 GIGAFABTM Facilities
TSMC’s 12-inch fabs are a key part of its manufacturing strategy.
TSMC currently operates three 12-inch GIGAFABTM facilities – Fab
12, Fab 14, and Fab 15 – the combined capacity of which reached
4,619,000 12-inch wafers in 2013. Production within these three
facilities supports 0.13μm, 90nm, 65nm, 40nm, 28nm, and 20nm
process technologies, and their sub-nodes. Part of the capacity is
reserved for research and development work and currently supports
16nm, 10nm and beyond technology development. TSMC has
developed a centralized fab manufacturing management for the
customers’ benefit of consistent quality and reliability performance,
greater flexibility of demand fluctuations, faster yield learning and
time-to-volume, and minimized costly product re-qualification. It
enabled Fab 15 to fast ramp 28nm capacity from 50,000 to around
100,000 wafers output per month in 2013 to satisfy customers’
demand.
5.3.2 Engineering Performance Optimization
Highly sophisticated information technology (IT) solutions, such
as advanced equipment control, fault detection and diagnosis,
engineering big data mining, and centralized operation platforms,
are implemented to optimize TSMC equipment, process and yield
performance. They also improve production efficiency, effectiveness,
and engineering capability via information integration, workflow
optimization and automation.
Advanced analytical methods identify critical equipment and process
parameters that are linked to device performance. Methodologies
such as virtual metrology, yield dissection and management integrate
Advanced Process Control (APC), Fault Detection Classification (FDC),
Statistical Process Control (SPC), and Circuit Probe data in order to
optimize equipment performance to match device performance.
Accurate modeling and control at each process stage drives
intelligent module loop control. The process control hierarchy
dispatched via sophisticated computer-integrated manufacturing
systems enables optimization from equipment to end product,
which achieves precision and lean operation in a high product mix
semiconductor manufacturing environment.
TSMC’s unique manufacturing infrastructure is tailored for a high
product mix foundry environment. Following its commitment to
manufacturing excellence, TSMC has equipped a sophisticated
scheduling and dispatching system, implemented industry-leading
automated materials handling systems, and employed
Lean Manufacturing approaches to provide customers with
on-time-delivery and best-in-class cycle time. Real-time equipment
performance and productivity monitoring, analysis, diagnosis
and control minimize production interruption and maximize cost
effectiveness.
5.3.4 450mm Wafer Manufacturing Transition
TSMC joined the Global 450mm Consortium (G450C) located in
the College of Nanoscale Science and Engineering (CNSE) of New
York University at Albany, New York. The consortium includes five IC
makers and CNSE (which represents New York State and provides the
clean room facility), as well as key 450mm tool suppliers as associate
members.
Currently, TSMC has 16 experienced employees working in the
consortium. TSMC has assumed the Operation General Manager
position in the consortium and commits to lead the industry for a
cost-effective 450mm transition. The clean room of G450C in Albany
has been ready for tool installation since the first quarter of 2013.
Most of the tools will be installed by 2015.
Besides 450mm tool readiness, TSMC is also developing novel
450mm operations to bring the maximum value of semiconductor
wafer fabrication to customers, including advanced quality and the
most competitive cycle time in advanced technology. 450mm will be
a new era of semiconductor manufacturing with new manufacturing
capability advanced from today’s leading edge technology.
5.3.5 Raw Materials and Supply Chain Risk Management
In 2013, TSMC continued Supply Chain Risk Management review
meetings periodically with business teams to proactively identify
and manage risk of supply capacity insufficiency and supply chain
interruption. TSMC also worked with its suppliers to enhance the
performance of quality, delivery, risk management, and to support
green procurement, environmental protection and safety.
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067
Raw Materials Supply
Major Materials
Major Suppliers
Market Status
Procurement Strategy
Raw Wafers
F.S.T.
S.E.H.
Siltronic
SUMCO
SunEdison
These five suppliers together provide over 90% of the
world’s wafer supply.
● TSMC’s suppliers of silicon wafers are required to pass stringent quality
certification procedures.
Each supplier has multiple manufacturing sites in order
to meet customer demand, including plants in North
America, Asia, and Europe.
● 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.
These seven 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.
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.
Chemicals
Litho Materials
Gases
Slurry, Pad, Disk
Air Products
ATMI
BASF
Dow
SAFC
KANTO-PPC
MGC
AZ
Dow
JSR
Nissan
Shin-Etsu Chemical
Sumitomo
T.O.K.
Air Liquide
Air Products
Linde
Taiyo Nippon Sanso
Air Products
Asahi Glass
Cabot Microelectronics
Dow Chemical
Fujifilm Planar Solutions
Fujimi
Hitachi Chemical
Kinik
3M
Suppliers Accounted for at Least 10% of Annual Consolidated Net Procurement
Unit: NT$ thousands
Supplier
VIS
Company A
Company B
Company C
Others
Total Net Procurement
2013
2012
Procurement
Amount
As % of 2013 Total
Net Procurement
Relation to TSMC
Procurement
Amount
As % of 2012 Total
Net Procurement
Relation to TSMC
6,993,964
4,925,966
4,812,417
4,401,215
20,773,685
41,907,247
17%
Investee accounted for using
equity method
12%
None
11%
None
11%
None
49%
100%
4,475,674
6,708,942
5,846,449
3,954,602
20,394,725
41,380,392
11%
Investee accounted for using
equity method
16%
None
14%
None
9%
None
50%
100%
● TSMC conducts periodic audits of the suppliers’ quality assurance systems to
ensure that they meet TSMC’s standards.
2013.
5.3.6 Quality and Reliability
A characteristic of TSMC’s industry reputation is its commitment to
providing customers with the best quality wafers and service for their
products. Quality and Reliability (Q&R) services aim to achieve “quality
on demand“ to fulfill customers’ needs regarding time-to-market,
reliable quality, and market competition over a broad range of
products.
Q&R technical services assist customers in the technology
development and product design stage to design-in their product
reliability requirements. Since 2008, Q&R has worked with
R&D to successfully establish and implement new qualification
methodology for High-k/Metal Gate (HKMG) as well as for FinFET
structures in 2013. Q&R had been collaborating with SEMI, the
Semiconductor Equipment and Material International, to establish
an IC Quality Committee since May 2012 in order to enhance
product quality of the semiconductor supply chain. For backend
technology development, Q&R worked with R&D and the Backend
Technology and Service Division to complete the Cu Bump technology
development and production transfer of both CuBoL (Copper
Bump on Lead) and CuBoT (Copper Bump on Trace) as lead free
bump solutions for fine bump pitch products. To extend product
package reliability validation, Q&R established in-house system-level
temperature cycling, bending, drop and vibration test capabilities in
In 2013, Q&R completed a new audit of incoming material suppliers
for advanced technology. Q&R also implemented innovative statistical
matching methodologies to achieve the goal of enlarging the
manufacturing window with better quality control. The scope of the
methodology includes facility, metrology and process tools, wafer
acceptance test (WAT) data and reliability performance. Since 2011,
Q&R tightened the post-fab outgoing visual inspection criteria for
wafer quality improvement to AQL 0.4% from AQL 0.65%.
To sustain production quality, and to minimize risk to customers
when deviations occur, manufacturing quality monitoring and event
management span all critical stages – from raw material supply,
In compliance with the electronic industry’s lead-free and green
IC package policy, Q&R qualified and released lead-free bumping
to satisfy customer demands, and made lead-free bump package
possible for 0.13μm, 45nm, 40nm, 28nm and 20-SoC technology
products by collaborating with the major outsource assembly and
testing subcontractors. This enabled TSMC customers to introduce
and ramp lead-free products with excellent assembly quality. In
2013, TSMC Q&R ramped wafer-level Chip Scale Package (CSP)
to 21K per month and lead-free to 60K per month without major
quality issues. For mainstream technologies, Q&R qualified ultra,
extreme low leakage and high endurance embedded Flash IP, IPD
(Integrated Passive Device), hybrid of Copper, and Copper-Aluminum
technology with customers. Q&R continues to build reliability testing
and monitoring to ensure excellent manufacturing quality of specialty
technologies on automotive, high-voltage products, CMOS image
sensors and embedded-Flash memory products.
TSMC Q&R is also responsible for leading the Company towards
the ultimate goal of zero-defect production through the use of
continuous improvement programs. Periodic customer feedback
indicates that products shipped from TSMC have consistently met
or exceeded their field quality and reliability requirements. In 2013,
a third-party audit verified the effectiveness of the TSMC quality
management system in compliance with ISO/TS 16949:2009 and
IECQ QC 080000:2012 certificates requirements.
5.4 Customer Trust
5.4.1 Customers
TSMC’s worldwide customers have diverse product specialties
and excellent performance records in various segments of the
semiconductor industry. Fabless customers include: Advanced
Micro Devices, Inc., Broadcom Corporation, Marvell Semiconductor
Inc., MediaTek Inc., NVIDIA Corporation, OmniVision Technologies
and Qualcomm Inc. IDM customers include: Analog Devices Inc.,
STMicroelectronics and Texas Instruments Inc. etc.
Customer Service
mask making, and real-time in-process monitoring, to bumping,
wafer sort and reliability performance. Advanced failure and materials
TSMC believes that providing superior customer service is critical to
enhancing customer satisfaction and loyalty, which is very important
analysis techniques are also developed and effectively deployed in
to retaining existing customers, attracting new customers, and
process development, customer product development and product
strengthening customer relationships. With a dedicated customer
manufacturing. In recent years, due to continuous shrinking of
device features, laboratory tools have been adapted to complement
traditional metrology tools that have run into their physical limits.
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, mask making,
Furthermore, state-of-the-art materials analysis, chemical analysis and
manufacturing, and backend to achieve optimum experience for
fault isolation equipment are continuously being added to support
our customers and, in return, to gain customer’s trust and sustain
development activities of the 20nm, 16nm and 10nm technology
Company profitability.
nodes.
068
069
To facilitate customer interaction and information access on a real-time basis, TSMC-Online services offer a suite of web-based applications that
● The foundry segment’s earliest and most comprehensive EDA
TSMC Workforce Structure
provide a more active role in design, engineering, and logistics collaborations. Customers have 24-hour a day, seven-day-a-week access to critical
certification program delivering timely design tool enhancement
information and are able to subscribe customized reports through TSMC-Online services. Design Collaboration focuses on content availability
required by new process technologies; and
and accessibility, with close attention to complete, accurate, and current information at each level of the wafer design life cycle. Engineering
● The foundry segment’s largest, most comprehensive and robust
Collaboration includes online access to engineering lots, wafer yields, wafer acceptance test (WAT) analysis, and quality reliability data. Logistics
silicon-proven intellectual properties (IPs) and library portfolio; and
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 of our customers’ needs are appropriately understood, TSMC conducts an annual customer
satisfaction survey (ACSS) with most active customers, either by web or interview, through an independent consultancy.
Complementary with the survey, quarterly business reviews (QBRs) are also conducted by the customer service team so that customers can give
feedback to TSMC on a regular basis. Through both surveys and intensive interaction with customers by our account teams, TSMC is able to
maintain close touch with customers for better service and collaboration.
Customer feedback is routinely reviewed and considered by executives and then developed into appropriate improvement plans, all-in-all
becoming an integral part of the customer satisfaction process with a complete closed loop. TSMC has maintained a focus on customer survey
data as one of our key indicators of corporate performance – not just of past performance, but also as a leading indicator of future performance.
TSMC has acted on the belief that customer 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 Revenue
Unit: NT$ thousands
Customer
Customer A
Others
Total Net Revenue
2013
2012
Net Revenue
As % of 2013 Total
Net Revenue
Relation to TSMC
130,563,982
466,460,215
597,024,197
22%
None
78%
100%
Net Revenue
85,880,132
420,865,102
506,745,234
As % of 2012 Total
Net Revenue
Relation to TSMC
17%
None
83%
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. OIP is a key
part of the TSMC Grand Alliance.
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 IP, 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:
● Comprehensive design ecosystem alliance programs covering
market-leading EDA, library, IPs, and design service partners.
TSMC’s OIP Alliance consists of 28 electronic design automation
(EDA) partners, 41 IP partners, and 25 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
the needed design infrastructure with timely enhancement of EDA
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 2013, TSMC hosted an OIP Ecosystem Forum at the
San Jose Convention Center in California, with keynote addresses
Job
Total
Gender
Education
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)
12/31/2012
(Note 1)
12/31/2013
(Note 2)
02/28/2014
(Note 2)
3,865
15,844
3,079
16,479
39,267
55.5%
44.5%
3.6%
34.5%
25.9%
12.9%
4,078
17,205
3,236
15,964
40,483
57.5%
42.5%
4.0%
37.4%
25.8%
11.9%
4,105
17,225
3,277
16,156
40,763
57.5%
42.5%
4.0%
37.2%
26.1%
11.8%
23.1%
20.9%
20.8%
33.2
6.2
33.5
6.6
33.6
6.7
Note 1: On a consolidated basis and includes employees of our non-wholly owned subsidiaries, Xintec Inc. and
Mutual-Pak Technology Co., Ltd., since 2012.
from TSMC executives as well as OIP ecosystem partners. The forum
Note 2: The data shown no longer includes Xintec Inc, as Xintec Inc. was deconsolidated in June 2013.
was well attended by both customers and ecosystem partners and
demonstrated the value of collaboration through OIP to nurture
5.5.2 Recruitment
innovations.
TSMC is an equal employment opportunity employer, and its
practices center on the principles of open-and-fair recruitment. The
TSMC’s OIP Partner Management Portal facilitates communication
Company evaluates all candidates according to their qualification as
with our ecosystem partners for efficient business productivity.
related to the requirement of each position, rather than race, gender,
This portal is designed with an intuitive interface and can be linked
age, religion, nationality, or political affiliation.
directly from TSMC-Online.
5.5 Employees
5.5.1 Human Capital
Although facing a softer global economy, TSMC’s continuous
growth requires constant talent sourcing and recruitment activities to
support its business. The Company recruited over 3,300 managers,
professionals, and administrative staffs, as well as over 1,300
Human capital is one of the most important assets of TSMC.
assistants and technicians in 2013.
The Company is committed to providing quality jobs with good
compensation, challenging work, and comfortable work environment
In addition, the Company, through its University Program Office,
for its employees, and it is dedicated to foster a dynamic and fun
established two university-level research centers in National Taiwan
work environment. In 2013, TSMC was named the “Most Admired
University (NTU) and National Chiao Tung University (NCTU) in 2013.
Company in Taiwan” by CommonWealth Magazine for the 17th
Two other centers with National Cheng Kung University and National
consecutive year.
Tsing Hua University will be established in 2014. The mission of the
centers is two-fold: to develop top graduate students for future
At the end of 2013, TSMC and its subsidiaries had over 40,483
employment and encourage selected academics to consolidate
employees worldwide, including 4,078 managers, 17,205
different research domains under one umbrella for more effective
professionals, 3,236 assistants, and 15,964 technicians. The following
synergy. TSMC provides hundred of millions of NT dollars in seed
table summarized TSMC workforce at the end of February, 2014:
money for leveraging funding from the National Science Council.
In 2013, the two centers in NTU and NCTU sponsored more
than 50 faculty and 250 students across the fields of Electronics,
Material Engineering, Physics, Chemistry, Chemical Engineering and
Mechanical Engineering. These centers also help advance novel or
innovative academic semiconductor research.
070
071
In order to cultivate a young talent pipeline for recruitment both
● Direct Labor (DL) Training: enables employees of the production
locally and around the world, TSMC deploys a number of recruiting
line in acquiring the knowledge, skills and attitudes they need to
activities and university programs, including Joint Development
perform their jobs well and to pass the certification for operating
Programs, University Shuttle Program, Summer Internship, Job Fairs
equipment. Training includes DL Skill Training, Technician
TSMC’s commitment in providing employees with a sustainable
career with its continuous growth, as well as its unceasing efforts
as an advocate for employees’ work-life balance, has earned it the
aforementioned “Most Admired Company in Taiwan“ awarded by
in Taiwan, U.S., Singapore and India, as well as a series of Fresh
“Train-the-Trainer” Training, and Manufacturing Leader Training.
CommonWealth Magazine.
Graduate Career Symposium for soon-to-be graduates.
5.5.3 People Development
subsidized when taking external short-term courses, credit courses
implements programs to enhance their well-being, benefit,
Apart from internal training resources, our employees are also
To enrich employees’ work experience, the Company continuously
● 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 for employees.
In 2013, TSMC employees continued to be recognized through a
host of prestigious external awards, including National Outstanding
Managers Award, Outstanding Young Engineer Award, National
Model Worker Award, and National Industrial Innovation Award.
TSMC is committed to cultivating a continuous and diversified
learning environment. Under this mission, the Company initiated
“TSMC Employee Training and Education Procedure” to ensure the
and degrees.
5.5.4 Compensation
Company’s and individuals’ development objectives can be achieved
TSMC provides a diversified compensation program that is competitive
recognition, rewards and communication. The various initiatives
include the following:
Employee Benefit Programs
Employee Communication
through internal and external training resources.
externally, fair internally, and adapted locally. TSMC upholds the
● Diverse employee welfare programs: including 77 hobby clubs, 52
Based on the nature of the individual’s job, work performance
develop, motivate and reward talented employees. With excellent
and career development path, the Company provides employees a
operating performance, employment at TSMC entitles employees to a
philosophy of sharing wealth with employees in order to attract, retain,
speeches covering diverse topics (in 2013), Sports Day, and Family
Day. In addition, holiday bonuses, marriage bonuses, condolence
allowances and emergency subsidies are also available to cater for
comprehensive network of learning resources, including on-the-job
comprehensive compensation and benefits program above the industry
employees’ needs.
training, classroom training, e-learning, coaching, mentoring, and job
average.
rotation.
● Convenient on-site services: cafeterias, dry-cleaning, convenience
stores, travel, banking, housing, and commuting assistance are
For each employee, a tailor-made Individual Development Plan (IDP)
employee cash bonus based on quarterly business results, and
● Comprehensive health enhancement programs: physical care and
is provided.
employee profit sharing when the Company distributes its profit each
psychological consultation services. Five free counseling sessions
TSMC’s compensation program includes a monthly salary, an
accessible for employees in the fabs.
The Company provides employees with a wide range of on-site
year.
general, professional, and management training programs. In
The purpose of the employee cash bonus and profit sharing programs
addition to engaging external experts as trainers, hundreds of TSMC
is to reward employee contributions appropriately, to encourage
are offered to TSMC employees on an annual basis, with extension
available depending on the individual’s needs. Other programs
include weight control, medical check-up, smoking secession,
exercise promotion campaign, massage service, abdominal and
employees are trained as qualified instructors to deliver their valuable
employees to work consistently toward ensuring the success of TSMC,
neck x-ray, female care, blood donation, liver disease prevention, as
know-how in internal training courses. In 2013, TSMC conducted
and to link employees’ interests with those of TSMC’s shareholders.
well as seminars to raise awareness of personal health.
1,549 internal training sessions, which translated to a company-wide
The Company determines the amount of the cash bonus and profit
● Premium Sports Center: a variety of workout facilities available to all
total of nearly 890,000 training hours with the participation of over
sharing based on operating results and industry practice in the
employees and their families, as well as exercise sessions conducted
530,000 attendees. Employees on average attended over 22 hours of
Republic of China. The amount and form of the employee cash
by professional instructors.
training and the total training expenses reached NT$83 million.
bonus and profit sharing are determined by the Board of Directors
TSMC’s training programs include:
based on the Compensation Committee’s recommendation, and the
employee profit sharing is subject to shareholders’ approval at the
● Flexible Preschool Service: the childcare service, operated to meet
employees’ work schedules, is available in a total of three fabs in
Hsinchu and Tainan.
● New Employee Training: includes basic training and job orientation
Annual Shareholders’ Meeting. Individual awards are based on each
for new employees. Furthermore, newcomers’ managers and the
employee’s job responsibility, contribution and performance.
Employee Recognition
Company’s well-established Buddy System are in place to support
the newcomers in their assimilation process.
In addition to providing employees of TSMC’s overseas subsidiaries
● General Training: refers to training required by government
with a locally competitive base salary, the Company grants annual
regulations and/or Company policies, as well as trainings on general
bonuses as a part of total compensation. The annual bonuses are
subjects for all employees or employees of different job functions.
granted in line with local regulations, market practices, and the
Such training includes subjects of industry-specific safety, workplace
overall operating performance of each subsidiary, to encourage
health and safety, quality, fab emergency response, languages, and
employees’ commitment and development within the Company.
personal effectiveness.
● Professional/Functional Training: provides technical and professional
5.5.5 Employee Satisfaction
TSMC sponsors various internal 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 award programs include:
● TSMC Medal of Honor, presented exclusively by the Chairman,
recognizes those who contribute to the Company’s business
training required by different functions within the Company.
TSMC offers training courses on equipment engineering, process
engineering, accounting, information technology, and so forth.
● Management Training: programs are tailored to the needs of
managers at all levels, including new, experienced, and senior
managers; optional courses are also available.
TSMC is committed to providing quality jobs with good
performance significantly.
compensation, challenging work, and comfortable work environment
● TSMC Academy recognizes outstanding TSMC scientists and
for its employees, and it is dedicated to foster a dynamic and fun
engineers whose individual technical capabilities make significant
work environment. The Company encourages employees to maintain
contributions to the Company.
a healthy and well-balanced life, apart from their time spent working.
● Outstanding Engineer Award for each fab and Total Quality
Excellence Award recognize employees’ continuous efforts in
creating value for the Company.
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.
To ensure that employees’ opinions and voices are heard, and their
issues are addressed effectively, impartial submission mechanisms,
including quarterly labor-management communication meetings,
are in place to provide timely support. 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. In 2013 and as of the date of this Annual Report,
there had been no loss resulting from labor disputes.
A host of two-way communication channels are leveraged to
maintain the unobstructed flow of information between the
managers and the employees, including:
● Regular communication meetings are held for the various levels of
managers and employees.
● Periodic employee satisfaction surveys are conducted, with
follow-up actions based on the survey findings.
● The corporate intranet, myTSMC: the website features Chairman’s
Talk, corporate messages, Executive interviews, and other activities
of interest to employees.
● eSilicon Garden: the website hosting TSMC’s internal electronic
publication is updated on a bi-weekly basis with inspirational
content featuring outstanding teams and individuals, as well as
major activities of the Company.
● Complaints regarding major management, financial, and auditing
issues are handled by the following channels with high level of
confidentiality:
- The independent Audit Committee; and
- Ombudsman system led by an appointed Vice President.
● Employee Opinion Box provides a channel for employees to
express their opinions regarding their work and the overall work
environment.
● Fab Caring Circle in each fab takes care of the issues related to
employees’ work and personal life. In 2013, the system dedicated
mainly to the direct labors (DL) of the Company won the CSR Award
presented by GlobalView Magazine with its quality and effective
services.
072
073
Employees
TSMC Internal Communication Structure
Face-to-Face Meeting
● Functional/Work Unit/Skip-Level
Announcement
Fab/Functional Activity
Employee Portal
Employee Survey
HR Area Service Team
Communication Meeting by Request
eSilicon Garden
Announcement
Company-Wide Activity
Employee Assistance Program
● Wellness Center
● Counseling Service
● EWC Emergency Assistance
Employee Voice Channels
● Ombudsman System
● Internal Audit Committee
● Sexual Harassment Inv estigation
Committee
● Employee Opinion Box
● Fab Caring Circle
● Dadicated Line & SMS
Managers of All
Levels
Human Resources
System /
Committee Chair
Board of Directors and
Management Team
5.5.6 Retention
From the employee’s initial adaptation to professional and career development, TSMC works proactively to retain outstanding employees through
good compensation and through an innovative, challenging and fun work environment. All these efforts contributed to a healthy turnover rate
of 5.3% for 2013.
5.5.7 Retirement Policy
TSMC’s retirement policy is set according to the Labor Standards Act and Labor Pension Act of the Republic of China. With the Company’s sound
financial system, TSMC ensures employees a solid pension contribution and payments, which encourages employees to set long-term career plans
and raises their commitment to TSMC.
5.6 Material Contracts
Shareholders Agreement
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.
Manufacturing, License, and Technology Transfer
Agreement
Term of Agreement:
04/01/2004 - 03/31/2006, automatically renewable for successive
one-year terms until and unless both parties decide otherwise by
mutual consent in writing
Contracting Party:
Vanguard International Semiconductor Corporation (VIS)
Summary:
VIS reserves certain capacity to manufacture TSMC products on
mutually agreed terms. TSMC may also transfer certain technologies
to VIS, for which it will in return receive royalties from VIS.
Investment Agreement and Shareholder Agreement
Term of Investment Agreement:
Effective as of 08/05/2012
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.
Research and Development Funding Agreement
Term of Agreement:
10/31/2012 - 12/31/2017
Contracting Party:
ASML Holding N.V. (ASML)
Summary:
TSMC shall provide EUR276 million to ASML’s research and
development programs from 2013 to 2017.
Note: TSMC is not currently party to any other material contract,
other than contracts entered into in the ordinary course of its
business. The Company’s “Significant Contingent Liabilities and
Unrecognized Commitments“ are disclosed in Annual Report
(II), Financial Information, page 51.
074
075
6. Financial Highlights
6.1 Financial Status and Operating Results
6.1.1 Financial Status
Consolidated
Unit: NT$ thousands
Item
Current Assets
Long-term Investments (Note 1)
Property, Plant and Equipment
Intangible Assets
Other Assets (Note 2)
Total Assets
Current Liabilities
Noncurrent Liabilities
Total Liabilities
Capital Stock
Capital Surplus
Retained Earnings
Equity Attributable to Shareholders of the Parent
Total Equity
2013
358,486,654
89,183,810
792,665,913
11,490,383
11,228,217
1,263,054,977
189,777,934
225,501,958
415,279,892
259,286,171
55,858,626
518,193,152
847,508,255
847,775,085
2012
250,325,436
65,717,240
617,562,188
10,959,569
16,790,075
961,354,508
148,473,947
89,786,655
238,260,602
259,244,357
55,675,340
408,411,468
720,550,680
723,093,906
Difference
108,161,218
23,466,570
175,103,725
530,814
(5,561,858)
301,700,469
41,303,987
135,715,303
177,019,290
41,814
183,286
109,781,684
126,957,575
124,681,179
%
43%
36%
28%
5%
-33%
31%
28%
151%
74%
0%
0%
27%
18%
17%
Note 1: Long-term investments consist of noncurrent available-for-sale financial assets, financial assets carried at cost and investments accounted for using equity method.
Note 2: Other assets consist of deferred income tax assets, refundable deposits, and other noncurrent assets.
● Analysis of Deviation over 20%
The increase in current assets was mainly due to increase in cash and cash equivalents in 2013.
The increase in long-term investments was mainly due to increase in fair value of available-for-sale financial assets in 2013.
The increase in property, plant and equipment was mainly due to acquisition of advanced technology equipment during 2013.
The decrease in other assets was mainly due to decrease in deferred income tax assets.
The increase in total assets was mainly due to increase in cash and cash equivalents and property, plant and equipment.
The increase in current liabilities was mainly due to increase in payables to contractors and equipment suppliers and income tax
payable, partially offset by decrease in short-term loans.
The increase in noncurrent liabilities was mainly due to issuance of corporate bonds of NT$130.8 billion in 2013.
The increase in total liabilities was mainly due to increase in noncurrent liabilities.
The increase in retained earnings was mainly due to net income of 2013, partially offset by distribution of 2012 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.
In 2013, net income
registered a record level of
NT$188.1 billion with EPS
of NT$7.26.
076
077
Unconsolidated
Unit: NT$ thousands
Item
Current Assets
Long-term Investments (Note 1)
Property, Plant and Equipment
Intangible Assets
Other Assets (Note 2)
Total Assets
Current Liabilities
Noncurrent Liabilities
Total Liabilities
Capital Stock
Capital Surplus
Retained Earnings
Total Equity
2013
257,623,763
165,545,159
770,443,494
7,069,456
7,897,131
1,208,579,003
187,195,744
173,875,004
361,070,748
259,286,171
55,858,626
518,193,152
847,508,255
2012
205,819,614
139,634,200
586,636,036
6,449,837
13,597,966
952,137,653
144,528,616
87,058,357
231,586,973
259,244,357
55,675,340
408,411,468
720,550,680
Difference
51,804,149
25,910,959
183,807,458
619,619
(5,700,835)
256,441,350
42,667,128
86,816,647
129,483,775
41,814
183,286
109,781,684
126,957,575
%
25%
19%
31%
10%
-42%
27%
30%
100%
56%
0%
0%
27%
18%
Note 1: Long-term investments consist of financial assets carried at cost and investments accounted for using equity method.
Note 2: Other assets consist of deferred income tax assets, refundable deposits, and other noncurrent assets
● Analysis of Deviation over 20%
The increase in current assets was mainly due to increase in cash and cash equivalents in 2013.
The increase in property, plant and equipment was mainly due to acquisition of advanced technology equipment during 2013.
The decrease in other assets was mainly due to decrease in deferred income tax assets.
The increase in total assets was mainly due to increase in cash and cash equivalents and property, plant and equipment.
The increase in current liabilities was mainly due to increase in payables to contractors and equipment suppliers and income tax payable,
partially offset by decrease in short-term loans.
The increase in noncurrent liabilities was mainly due to issuance of corporate bonds of NT$86.2 billion in 2013.
The increase in total liabilities was mainly due to increase in noncurrent liabilities.
The increase in retained earnings was mainly due to net income of 2013, partially offset by distribution of 2012 earnings.
● Major Impact on Financial Position
The above deviations had no major impact on TSMC’s financial position.
● Future Plan on Financial Position: Not applicable.
6.1.2 Financial Performance
Consolidated
Unit: NT$ thousands
Item
Net Revenue
Cost of Revenue
Gross Profit before Unrealized Gross Profit on Sales to
Associates
Unrealized Gross Profit on Sales to Associates
Gross Profit
Operating Expenses
Other Operating Income and Expenses, Net
Income from Operations
Non-operating Income and Gains
Income before Income Tax
Income Tax Expenses
Net Income
Other Comprehensive Income, Net of Income Tax
Total Comprehensive Income for the Year
Total Net Income Attributable to Shareholders of the Parent
Total Comprehensive Income Attributable to Shareholders
of the Parent
Note: NM stands for non-meaningful.
2013
597,024,197
316,057,820
280,966,377
(20,870)
280,945,507
71,563,234
47,090
209,429,363
6,057,759
215,487,122
27,468,185
188,018,937
16,352,248
204,371,185
188,146,790
204,505,782
2012
506,745,234
262,583,098
244,162,136
(25,029)
244,137,107
62,510,875
(449,364)
181,176,868
499,588
181,676,456
15,552,654
166,123,802
4,252,632
170,376,434
166,318,286
170,521,543
Difference
90,278,963
53,474,722
36,804,241
4,159
36,808,400
9,052,359
496,454
28,252,495
5,558,171
33,810,666
11,915,531
21,895,135
12,099,616
33,994,751
21,828,504
33,984,239
%
18%
20%
15%
-17%
15%
14%
NM (Note)
16%
1113%
19%
77%
13%
285%
20%
13%
20%
● Analysis of Deviation over 20%
Increase in cost of revenue: The increase was mainly due to higher sales.
Increase in other operating income and expenses, net: The increase was mainly due to impairment loss related to property, plant and equipment
recognized in 2012.
Increase in non-operating income and gains: The increase was primarily due to increase in earnings of equity method investees, lower impairment
loss of financial assets recognized in 2013, partially offset by higher interest expenses for corporate bonds in 2013.
Increase in income tax expenses: The increase was mainly due to higher taxable income, the AMT tax rate changed from 10% to 12% and
increase in income tax on unappropriated earnings.
Increase in other comprehensive income, net of income tax: The increase was mainly due to exchange rate differences arising from translation of
foreign operations and the increase in fair value of available-for-sale financial assets in 2013.
Increase in total comprehensive income and total comprehensive income attributable to shareholders of the parent: The increase was mainly due
to higher net income and other comprehensive income in 2013.
● Sales Volume Forecast and Related Information
For additional details, please refer to “1. Letter to Shareholders” on pages 2-5 of this Annual Report.
● Major Impact on Financial Performance
The above deviations had no major impact on TSMC’s financial performance.
● Future Plan on Financial Performance: Not applicable.
Unconsolidated
Unit: NT$ thousands
Item
Net Revenue
Cost of Revenue
Gross Profit before Unrealized Gross Profit on Sales to
Subsidiaries and Associates
Unrealized Gross Profit on Sales to Subsidiaries and Associates
Gross Profit
Operating Expenses
Other Operating Income and Expenses, Net
Income from Operations
Non-operating Income and Gains
Income before Income Tax
Income Tax Expenses
Net Income
Other Comprehensive Income, Net of Income Tax
Total Comprehensive Income for the Year
2013
591,087,600
319,407,163
271,680,437
(35,577)
271,644,860
66,924,354
(66,614)
204,653,892
11,062,658
215,716,550
27,569,760
188,146,790
16,358,992
204,505,782
2012
500,369,525
265,494,185
234,875,340
(25,029)
234,850,311
57,481,083
(549,087)
176,820,141
6,932,246
183,752,387
17,434,101
166,318,286
4,203,257
170,521,543
Difference
90,718,075
53,912,978
36,805,097
(10,548)
36,794,549
9,443,271
482,473
27,833,751
4,130,412
31,964,163
10,135,659
21,828,504
12,155,735
33,984,239
%
18%
20%
16%
42%
16%
16%
-88%
16%
60%
17%
58%
13%
289%
20%
● Analysis of Deviation over 20%
Increase in cost of revenue: The increase was mainly due to higher sales.
Increase in unrealized gross profit on sales to subsidiaries and associates: The increase was mainly due to higher sales to subsidiaries and
associates in the fourth quarter 2013.
Decrease in other operating income and expenses, net: The decrease was mainly due to property, plant and equipment impairment loss during
2012.
Increase in non-operating income and gains: The increase was primarily due to increase in earnings of equity method, less impairment loss of
financial assets recognized in 2013, partially offset by higher interest expenses for corporate bonds in 2013.
Increase in income tax expenses: The increase was mainly due to higher taxable income, the AMT tax rate changed from 10% to 12% and income
tax on unappropriated earnings.
Increase in other comprehensive income, net of income tax: The increase was mainly due to exchange rate differences arising from translation of
foreign operations and the increase in other comprehensive income of subsidiaries and associates in 2013.
Increase in total comprehensive income: The increase was mainly due to higher net income and other comprehensive income in 2013.
078
079
● Sales Volume Forecast and Related Information
For additional details, please refer to “1. Letter to Shareholders” on pages 2-5 of this Annual Report.
● Major Impact on Financial Performance
The above deviations had no major impact on TSMC’s financial performance.
● Future Plan on Financial Performance: Not applicable.
6.1.3 Cash Flow
Consolidated
Unit: NT$ thousands
Cash Balance 12/31/2012
Net Cash Provided by
Operating Activities in 2013
Net Cash Used in Investing
and Financing Activities
in 2013
Cash Balance 12/31/2013
Remedy for Liquidity Shortfall
Investment Plan
Financing Plan
143,410,588
347,383,537
(248,098,678)
242,695,447
None
None
● Analysis of Cash Flow
NT$347.4 billion net cash generated by operating activities: mainly from net income and depreciation/amortization.
NT$281.1 billion net cash used in investing activities: primarily for capital expenditures.
NT$33 billion net cash generated by financing activities: mainly from issuance of corporate bonds, partially offset by payment of cash dividends
and decrease in short-term loans.
● Remedial Actions for Liquidity Shortfall: As a result of positive operating cash flows and cash on-hand, remedial actions are not required.
● Cash Flow Projection for Next Year: Not applicable.
Unconsolidated
Unit: NT$ thousands
Cash Balance 12/31/2012
Net Cash Provided by
Operating Activities in 2013
Net Cash Used in Investing
and Financing Activities
in 2013
Cash Balance 12/31/2013
Remedy for Liquidity Shortfall
Investment Plan
Financing Plan
109,150,810
335,283,326
(297,995,368)
146,438,768
None
None
● Analysis of Cash Flow
NT$335.3 billion net cash generated by operating activities: mainly from net income and depreciation/amortization.
NT$284.4 billion net cash used in investing activities: primarily for capital expenditures.
NT$13.6 billion net cash used in financing activities: mainly from payment of cash dividends and decrease in short-term loans, partially offset by
issuance of corporate bonds.
● Remedial Actions for Liquidity Shortfall: As a result of positive operating cash flows and cash on-hand, remedial actions are not required.
● Cash Flow Projection for Next Year: Not applicable.
6.1.4 Major Capital Expenditures and Impact on Financial and Business
Unit: NT$ thousands
Plan
Actual or Planned Source of Capital
Total Amount as of
12/31/2013
Actual Use of Capital
2013
2012
Production Facilities, R&D and
Production Equipment
Others
Total
Cash flow generated from operations and issuance of corporate bonds
527,715,597
283,822,265
243,893,332
Cash flow generated from operations
6,016,537
533,732,134
3,772,508
287,594,773
2,244,029
246,137,361
Based on capital expenditures listed above and projected for 2014, it is estimated that TSMC’s annual production capacity will increase by
approximately 1.64 million 8-inch equivalent wafers in 2014.
6.1.5 Long-term Investment Policy and Results
6.2.1 Risk Management (RM) Organization Chart
TSMC’s long-term investments, accounted for under the equity
method, were all made for strategic purposes. However, when an
investment is no longer of strategic value, it may be considered
a financial investment. In 2013, the investment gain from these
investments amounted to NT$9,530,933 thousand (NT$3,972,031
thousand on a consolidated basis), increasing significantly compared
to 2012 mainly due to the high growth of mobile computing
products and the recovery of solar market. For future investments,
TSMC 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 operates an 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 the appropriate management
of risks by TSMC on behalf of all stakeholders. A Risk MAP that
considers likelihood and impact severity is applied for identifying and
prioritizing corporate risks. Various risk treatment strategies are also
adopted in response to identified corporate risks.
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
enhance supply chain resilience capability through effectively manage
the risks faced by its suppliers. As a result of those efforts, there was
no interruption in TSMC’s supply lines in 2013.
As TSMC continued to expand production capacity with advanced
technology in 2013, seismic protection engineering design, risk
treatment practices and green factory projects were initiated and
implemented, beginning in the design phase for all new fabs.
Audit Committee
CEO
RM Steering
Committee
Materials Management
and Risk Management
RM Working
Committee
RM Program
● RM Steering Committee
Reports to Audit Committee;
Is composed of functional heads;
Reviews risk control progress; and
Identifies and approves the prioritized risk lists.
● RM Working Committee
Is composed of representatives from each function;
Periodically reviews risk control associated with business or
manufacturing process changes;
Aligns functional ERM activities; and,
Follows up the risk control action plan
● RM Program
Coordinates the RM Working Committee activities;
Facilitates functional risk management activities;
Initiates cross function communication for risk mitigation; and,
Consolidates ERM reports into the RM Steering Committee
6.2.2 Strategic Risks
Risks Associated with Changes in Technology and
Industry
● Industry Developments
The electronics industries and semiconductor market are cyclical
and subject to significant, and often rapid, increases and decreases
in product demand. TSMC’s semiconductor foundry business is
affected by the market conditions of the highly cyclical electronics
and semiconductor industries in which most of its customers operate.
Variations in order levels from customers result in volatility in the
Company’s revenues and earnings.
080
081
From time to time, the electronics and semiconductor industries
products. Any significant decrease in the demand for any one of
have experienced significant, and sometimes prolonged, periods of
these products may decrease the demand for such other products
downturns and overcapacity. Because TSMC is, and will continue to
as well as overall global semiconductor foundry services, including
be, dependent on the requirements of electronics and semiconductor
TSMC’s services, and may adversely affect the Company’s revenues.
companies for its services, periods of downturn and overcapacity
Further, a significant portion of TSMC’s operating costs is fixed
in the general electronics and semiconductor industries could lead
because the Company owns most of its manufacturing capacities.
to reduced demand for overall semiconductor foundry services,
In general, these costs do not decline when customer demand or
including TSMC’s services. If TSMC cannot take appropriate actions
TSMC’s capacity utilization rates drop, and thus declines in customer
such as reducing its costs to sufficiently offset declines in demand,
demand, among other factors, may significantly decrease margins.
the Company’s revenues, margins and earnings will suffer during
Conversely, as product demand rises and factory utilization increases,
periods of downturn and overcapacity. Furthermore, due to the
the fixed costs are spread over increased output, which can improve
increasingly complex technological nature of our foundry services, the
TSMC’s margins. Additionally, the historical and current trend
amount of our accounting provisions may also need to be provided
of declining average selling prices of end-use applications places
and adjusted for potential sales returns and allowances to customers
downward pressure on the prices of the components that go into
that may adversely affect the results of our operations.
such applications. If the average selling prices of end-use applications
● Changes in Technology
The semiconductor industry and its technologies are constantly
changing. TSMC competes by developing process technologies using
continue to decrease, the pricing pressure on components produced
by the Company may lead to a reduction of TSMC’s revenues, margin
and earnings.
increasingly advanced nodes and with manufacturing products
Risks Associated with Competition
with more functions. TSMC also competes by developing new
derivative technologies. If TSMC does not anticipate these changes
in technologies or fails to rapidly develop new and innovative
technologies, or if the Company’s competitors unforeseeably gain
sudden access to additional technologies, TSMC may not be able
to provide foundry services on competitive terms. In addition,
TSMC’s customers have significantly decreased the time in which
their products or services are launched into the market. If TSMC is
unable to meet these shorter product times-to-market, TSMC risks
losing these customers. These factors have also been intensified
by the shift of the global technology market to consumer driven
products such as mobile devices, and increasing concentration of
customers and competition (all further discussed among these risk
factors). These challenges also place greater demands on its research
and development capabilities. If TSMC is unable to innovate new
technologies that meet the demands of its customers or overcome
the above factors, its revenues may decline significantly. Although
TSMC has concentrated on maintaining a competitive edge in
research and development, if TSMC fails to achieve advances
in technologies or processes, or to obtain access to advanced
technologies or processes developed by others, it may become less
competitive.
Regarding the response measures for the above-mentioned risks,
please refer to “2.2.4 TSMC Position, Differentiation and Strategy” on
pages 10-11 of this Annual Report.
Risks Associated with Decrease in Demand and Average
Selling Price
A vast majority of the Company’s revenue is derived from customers
who use TSMC’s services in communication devices, personal
The markets for our foundry services are highly competitive. We
compete with other foundry service providers, as well as 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 competitive activities may decrease TSMC’s
customer base, TSMC’s average selling prices, or both.
For example, over the past few years, TSMC has seen the rise of
certain companies with the capability of providing foundry services.
These companies are committed to trying to attract TSMC’s
customers. If TSMC is unable to compete with any and each of
these new competitors with better technologies and manufacturing
capacity and capabilities, it risks losing customers to these new
contenders.
The Company competes primarily on the basis of process technology,
manufacturing quality and service. The level of competition differs
according to the process technology involved. For example, in
more mature technologies, competitors tend to be more numerous
and specialized. Some companies compete with TSMC in selected
geographic regions or in application end markets. In recent years,
substantial investments have been made by others to establish new
pure-play foundry companies in mainland China and elsewhere,
or to spin off the manufacturing operations of integrated device
manufacturers (IDMs) and transform them into a pure-play foundry
computers, consumer electronics products and industrial/standard
company.
Risks Associated with Changes in the Government
Policies and Regulatory Environment
TSMC management closely monitors all domestic and foreign
governmental policies and regulations that might impact TSMC’s
business and financial operations. As of February 28, 2014, the
following changes or developments in governmental policies and
regulations may influence the Company’s business operations:
The Taiwan Financial Supervisory Commission (FSC) requires
listed companies, starting from January 1, 2013, to prepare their
consolidated financial statements in accordance with Taiwan’s
“Guidelines Governing the Preparation of Financial Reports by
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.
Other than the above laws and regulations, it is not expected that
other governmental policies or regulatory changes would materially
impact TSMC’s operations and financial condition.
6.2.3 Operational Risks
Securities Issuers“ (the “Financial Reporting Guideline“) and the
Risks Associated with Capacity Expansion
following FSC endorsed standards and interpretations: “International
TSMC performs long-term market demand forecasts to estimate
Financial Reporting Standards,“ “International Accounting
Standards,“ and relevant Interpretations (collectively, “Taiwan-IFRSs“).
TSMC has already prepared its 2013 annual and interim consolidated
financial statements in accordance with the Financial Reporting
Guideline and Taiwan-IFRSs.
The Taiwan “National Health Insurance Act“ was amended in January
2011, to create an obligation for employers and employees to pay an
extra 2% “supplementary premium,“ effective from January 1, 2013.
TSMC pays such extra 2% “supplementary premium“ when TSMC
distributes employees’ profit sharing and variable bonus.
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%. TSMC has evaluated the impact of these amendments on its
financial statements and implemented such amendments according
to the relevant laws.
The “Labor Safety and Health Act“ of Taiwan was amended and
renamed as the “Occupational Safety and Health Act“ in July, 2013.
Highlights of the amendment include: expanding the applicability of
the Act to employees of all occupations; building a comprehensive
occupational disease prevention system; strengthening the protection
of the mental and physical health of workers; stipulating maternity
protection and employment equality; and requiring high-risk business
to regularly implement safety assessments. TSMC over the years
has been consistently maintaining a robust safe and healthy work
environment and protective measures in place, and will continue to
maintain the safety and health of its workplace 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“ and “Energy Tax Act“). Though
the “Greenhouse Gas Reduction Act“ has not been passed, TSMC
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. During periods of
continued decline in demand, our operating facilities may not be
able to absorb and complete in a timely manner outstanding orders
re-directed from shuttered facilities.
Recently, TSMC has been adding capacity to its 12-inch wafer fabs in
the Hsinchu Science Park, Southern Taiwan Science Park and Central
Taiwan Science Park, based on our market demand forecasts taking
into account the demand forecasts of our customers. As a result,
the total monthly capacity of the Company’s 12-inch wafer fabs was
increased from 366,800 wafers as of December 31, 2012 to 414,700
wafers as of December 31, 2013. Expansion and modification of the
Company’s production facilities will, among other factors, increase
TSMC’s costs. For example, the Company will need to purchase
additional equipment, train personnel to operate the new equipment,
or hire additional personnel. If TSMC cannot increase its net revenue
accordingly, in order to offset these higher costs, TSMC’s financial
performance may be adversely affected.
TSMC has established systems and processes to evaluate and forecast
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.
082
083
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 60% and 62% of net revenue
in 2012 and 2013, respectively, and the Company’s largest customer
accounted for approximately 17% and 22% of net revenue in 2012
and 2013, respectively.
To reduce the supply chain risk and to manage the cost actively,
TSMC is committing resources toward developing new supply
terms it considers reasonable or at all. The lack of necessary licenses
In June 2010, Keranos, LLC. filed a complaint in the U.S. District
could expose TSMC to claims for damages and/or injunctions from
Court for the Eastern District of Texas alleging that TSMC, TSMC
sources. In addition, the Company encourages its suppliers to reduce
third parties, as well as claims for indemnification by its customers
North America, and several other leading technology companies
their supply chain risk by decentralizing production plants, and to
intensify their cost competitiveness by moving their production site
to Taiwan from high-cost areas. The Company believes this benefits
in instances where it has contractually agreed to indemnify its
infringe three expired U.S. patents. In response, TSMC, TSMC North
customers against damages resulting from infringement claims.
America, and several co-defendants in the Texas case filed a lawsuit
against Keranos in the U.S. District Court for the Northern District
both suppliers and TSMC. Moreover, the Company continually refines
TSMC has received, from time-to-time, communications from third
of California in November 2010, seeking a judgment declaring that
its planning system and monitors its inventory and replenishment on
parties asserting that its technologies, manufacturing processes,
they did not infringe the asserted patents, and that those patents are
a daily basis so as to sustain an optimal level at rational cost.
the design of the integrated circuits made by TSMC or the use by
invalid. These two litigations have been consolidated into a single
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 customers who are
successfully exploiting this new business model paradigm.
● Equipment
The Company’s operations and ongoing expansion plans depend
on its ability to obtain an appropriate amount of equipment and
related services from a limited number of suppliers in a market
its customers of semiconductors made by TSMC may infringe upon
lawsuit in the U.S. District Court for the Eastern District of Texas. In
their patents or other intellectual property rights. Because of the
February 2014, the Court entered a final judgment in favor of TSMC,
nature of the industry, the Company may continue to receive such
dismissing all of Keranos’ claims against TSMC with prejudice.
communications in the future. In some instances, these disputes have
resulted in litigation. Recently, there has been a notable increase in
In December 2010, Ziptronix, Inc. filed a complaint in the U.S. District
Also, in order to respond to the new business model paradigm,
TSMC has seen the nature of its customers’ business models change.
For example, there is a growing trend toward the rise of system
houses that operate in a manner that makes their products and
services more marketable to the changing consumer market. The loss
of, or significant curtailment of, purchases by one or more of the
Company’s top customers, including curtailment due to increased
competitive pressures, industrial consolidation, a change in their
designs, or change in their manufacturing sourcing policies, or
practices of these customers, or the timing of customer or distributor
inventory adjustments, or change in its major customers’ business
models may adversely affect TSMC’s results of operations and
financial condition.
We will keep a close watch on these trends and work closely with our
customers to respond to these changes and to strengthen our market
position.
that is characterized from time to time by limited supply and long
the number of claims or lawsuits initiated by certain patent assertion
Court for the Northern District of California accusing TSMC, TSMC
delivery cycles. During such times, supplier-specific or industry-wide
entities and these entities are also becoming more aggressive in their
North America and one other company of infringing several U.S.
lead times for delivery can be as long as six months or more. To
better manage its supply chain, the Company has implemented
various business models and risk management contingencies
with suppliers to shorten the procurement lead time. TSMC also
provides its projected demand for various items to many of its
equipment suppliers to help them plan their production in advance.
The Company has purchased used tools and continues to seek
opportunities to acquire relevant used tools. Further, the growing
complexities especially in next-generation lithographic technologies
may delay the timely availability of the equipment and parts needed
to exploit time sensitive business opportunities and also increase
the market price for such equipment and parts. If TSMC is unable
to obtain equipment in a timely manner to fulfill its customers’
monetary demands and requests for court-issued injunctions. Such
patents. The outcome cannot be determined at this time.
lawsuits or claims may increase TSMC’s cost of doing business and
may potentially be extremely disruptive if the plaintiffs succeed in
In December 2013, Tela Innovations, Inc. filed complaints in the U.S.
blocking the trade of its products and services. If TSMC fails to obtain
District Court for the District of Delaware and in the United States
or maintain certain government, technologies or intellectual property
International Trade Commission accusing TSMC and TSMC North
licenses and, if litigation related to alleged intellectual property
matters occurs, it could prevent it from manufacturing or selling
particular products or applying particular technologies, which could
America of infringing one U.S. patent. The Delaware case had been
stayed since February 2014. In January 2014, TSMC filed a lawsuit
in the U.S. District Court for the District of North California against
reduce its opportunities to generate revenues.
Tela for trade secret misappropriation and breach of contract. The
outcome cannot be determined at this time.
TSMC has taken other measures to minimize potential loss of
shareholder value arising from intellectual property claims and
Other than the matters described above, TSMC was not involved in
litigation filed against the Company. These measures include:
any other material litigation in 2013 and are not currently involved in
orders, or at a reasonable cost, its financial condition and results of
obtaining licenses from certain semiconductor and other technology
any material litigation.
operations could be negatively impacted.
companies; timely securing of intellectual property rights for
Risks Associated with Intellectual Property Rights
business; aggressively defending against frivolous litigation; and
As of the date of this Annual Report, there were no such risks for
defensive and/or offensive protection of TSMC technology and
Risks Associated with Mergers and Acquisitions
Risks Associated with Purchase Concentration
The Company’s ability to compete successfully and to achieve
● Raw Materials
TSMC’s production operations require that it obtain adequate
supplies of raw materials, such as silicon wafers, gases, chemicals and
photoresist, on a timely basis. In the past, shortages in the supply of
some materials, whether by specific vendors or by the semiconductor
industry generally, have resulted in occasional industry-wide price
adjustments and delivery delays. Also, since TSMC procures some
of its raw materials from sole-source suppliers, there is a risk that
its need for such raw materials may not be met when needed or
that back-up supplies may not be readily available. The Company’s
revenue and earnings could decline if it is unable to obtain adequate
supplies of the necessary raw materials in a timely manner or if there
are significant increases in the costs of raw materials that it cannot
pass on to its customers.
future growth will depend in part on the continued strength of its
intellectual property portfolio. While TSMC actively obtain, preserve,
enforces, defend and protects its intellectual property rights, there
can be no assurance that its efforts will be adequate to prevent the
misappropriation or improper use of its proprietary technologies,
trade secrets, software or know-how. Also, the Company cannot
assure that, as its business or business models expand into new
areas, or otherwise, it will be able to develop independently the
acquiring or licensing strategic intellectual property rights necessary
TSMC.
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
technologies, trade secrets, patents, software or know-how necessary
or other intellectual property rights of others. In some instances,
to conduct its business or that it can do so without unknowingly
infringing the intellectual property rights of others. As a result,
TSMC may have to rely increasingly on licensed technologies and
patent licenses from others. To the extent that the Company relies
on licenses from others, there can be no assurance that it will be
able to obtain any or all of the necessary licenses in the future on
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.
Risks Associated with Recruiting and Retaining Qualified
Personnel
The Company depends on the continued services and contributions
of its executive officers, skilled technical personnel, personnel of other
expertise and direct labors. TSMC’s business could suffer if it loses,
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.
However, no such incident has happened to TSMC as of the date of
this annual report.
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TSMC provides a varied and competitive compensation programs,
TSMC took the first prize in the Occupational Health category for
6.2.4 Financial Risks
and is generous in sharing the Company’s long-term business
the GlobalViews Magazine Corporate Social Responsibility Award,
achievements with its employees. Furthermore, in order to attract
was ranked number one in net profit and profitability in the China
and retain talents, the Company is dedicated to providing a timely
Credit Information Service poll of major corporations in Taiwan,
distribution of employees’ cash bonus from its profits. TSMC believes
and also ranked first in the Business Next Magazine “Infotech 100“
that by rewarding employees’ hard work in a timely fashion, it not
for Taiwan and Asia. TSMC was one of Barron’s Magazine’s “Top
only encourages employees to contribute consistently to ensure the
100 World’s Most Respected Companies“ in 2013, and received the
success of the Company, but also links their interests with those of
“Best-Managed Company in Asia,“ “Best Corporate Governance,
TSMC’s shareholders.
Taiwan,“ and “Best Corporate Social Responsibility, Taiwan“ Awards
Future R&D Plans and Expected R&D Spending
For additional details, please refer to “5.2.7 Future R&D Plans“ on
page 66 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 was honored with awards for its achievements in operations,
corporate governance, innovation, profit growth, investor relations,
and corporate social responsibility and other fields in 2013, further
strengthening the Company’s public reputation. In addition to being
selected as a component of the Dow Jones Sustainability Index (DJSI)
for a 13th consecutive year, TSMC was also recognized by DJSI as
the Semiconductors and Semiconductor Equipment Industry Group
Leader. TSMC is the first Taiwan company, and one of just four Asian
companies, to win the highest score out of its industry peers in the
DJSI’s 24 industry groups.
In addition, in 2013 TSMC received the R.O.C. Executive Yuan
National Sustainable Development Award, National Industrial
Innovation Award, Environmental Protection Administration (EPA)
National Enterprise Environmental Protection Award, the EPA Energy
Conservation and Carbon Reduction Action Mark, the Science Park
Low-Carbon Enterprise Achievement Award, the Science Park Labor
Health and Safety Achievement Award, and the Taiwan Institute for
Sustainable Energy 2013 Taiwan Corporate Sustainability Award.
TSMC was also recognized as the Most Admired Company in Taiwan
by CommonWealth Magazine, won the CommonWealth Corporate
Citizenship Award, and placed number one in the magazine’s
ranking of the most profitable manufacturing companies in Taiwan.
from FinanceAsia.
TSMC has always endeavored to act as a positive force in society,
and maintains 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, TSMC maintains
an Emergency Response Procedure Manual, and health and safety
supervisors for each fab hold meetings of the “Environment, Health,
and Safety Technical Board“ every month. In addition, relevant
departments hold regular drills and continuously improve their
emergency response and notification procedures. At the same
time, TSMC has established communications criteria for all types of
stakeholders, and the Public Relations Department is responsible
for external communications. In the event of emergencies, rapid
deployment of emergency response reduces casualties and minimizes
impact on the surrounding environment, company property, and
manufacturing operations. The Public Relations Department’s
involvement at the first stage of response also ensures smooth
channels of communications to maintain the Company’s image.
Risks Associated with Change in Management
The Board of Directors approved the appointment of Drs. Mark
Liu and C.C. Wei (in alphabetical order) as President and Co-Chief
Executive Officer of TSMC at its meeting of November 12, 2013.
Dr. Morris Chang remains as the Chairman of TSMC. The Presidents
and the Co-Chief Executive Officers shall report to and perform such
duties as designated by the Chairman of the Board. Finance and Legal
organizations will continue to report to the Chairman.
Internal Management of Economic Risks
● 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
More than 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 2013, 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 2013
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.
in the expectation of inflation or deflation. Both high inflation
and deflation adversely affect an economy, at both the macro and
micro levels, by reducing economic efficiency, disrupting saving
and investment decisions and reducing the efficiency of the market
prices as a mechanism to allocate resources. Such fluctuations may
negatively affect the costs of TSMC’s operations and the business
operations of its customers who may be forced to plan their
purchases of TSMC’s goods and services within an uncertain macro
and micro economy. Therefore, the demand for TSMC’s products
and services could unexpectedly fluctuate severely in accordance with
market and consumer expectations of inflation or deflation.
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
continued ability to obtain sufficient external financing is subject to a
variety of uncertainties, including:
● its future financial condition, results of operations and cash flow;
● general market conditions for financing activities;
● market conditions for financing activities of semiconductor
companies; and,
● social, economic, financial, political and other conditions in Taiwan
and elsewhere.
Sufficient external financing may not be available to the Company
on a timely basis, on reasonable market terms, or at all. As a result,
TSMC may be forced to curtail its expansion and modification plans
or delay the deployment of new or expanded services until it obtains
such financing.
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
Risks Associated with High-risk/high-leveraged
Investment; Lending, Endorsements, and Guarantees for
Other Parties; and Financial Derivative Transactions
Shares (ADSs) and of any cash dividends paid in NT dollars on TSMC’s
TSMC did not make high-risk or high-leveraged financial investments
common shares represented by ADSs.
● Inflation and Deflation
The world economy is becoming more vulnerable to sudden
during 2013 and up to the date of this report. TSMC provided a
guarantee to TSMC Global, a wholly-owned subsidiary of TSMC, for
its issuance of US dollar-denominated senior unsecured corporate
bonds of US$1,500 million in April 2013. As of February 28, 2014,
unexpected fluctuations in inflationary and deflationary market
TSMC had an intercompany loan of US$100 million arranged among
expectations and conditions. For example, certain structural changes
the Company’s subsidiaries, which was in compliance with relevant
that resulted from the global financial crisis in 2008~2009 and
rules and regulations.
EU sovereign debt crises, such as highly accommodative monetary
policies by major central banks worldwide, may cause variations
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The financial transactions of a “derivative“ nature that TSMC entered
purchases, assets purchases, licensing of major intellectual property
manufacturing fabs in Taiwan have also been TOSHMS (Taiwan
Company maintains many overlapping risk prevention and protection
into were strictly for hedging purposes and not for any trading or
rights, joint investments or research and development projects,
Occupational Safety and Health Management System) certified. The
systems, as well as comprehensive fire and casualty insurance,
speculative purpose. For more information, please refer to pages
outright mergers and acquisitions, private equity transactions and
new fabs will also acquire the above certificates within 18 months
including insurance for loss of property and loss of profit resulting
27 and 28 of the Annual Report section (II), Financial Information.
other similar transactions. Any such investment will incur risks, which
after volume production.
The fair market value of our trading and available-for-sale financial
may result in losses if not carefully managed. Any such loss resulting
from business interruption, TSMC’s risk management and insurance
coverage may not be sufficient to cover all of the Company’s
securities are subject to prevailing market conditions and may
from such investments may result in significant impairment charges,
The Company pays special attention to preparedness for emergencies
potential losses. If any of TSMC’s fabs or vendor facilities were
fluctuate from TSMC’s carrying value from time to time, which may
lower profit margin and ultimately lower distributable earnings.
or disasters, such as typhoons, floods, droughts caused by climate
to be damaged, or cease operations as a result of an explosion,
impact the returns of those securities.
change, earthquakes, environmental contamination, large-scale
fire or environmental influences, it could reduce the Company’s
Risks Associated with Impairment Charges
product returns, service disruption of IT systems, strikes, pandemics
manufacturing capacity and may cause it to lose important
To control various types of financial transactions, the Company has
established internal policies and procedures based on sound financial
and business practices, all in compliance with the relevant rules and
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 Taiwan-IFRSs, TSMC is required to evaluate its investments,
tangible 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 Taiwan-IFRSs to
evaluate goodwill for impairment at least on an annual basis or more
frequently whenever triggering events or changes in circumstances
indicate that goodwill may be impaired and the carrying value may
not be recoverable. For example, TSMC holds investments in certain
publicly listed and private companies, some of which have incurred
From time to time, TSMC has made or will make a series of strategic
certain impairment charges disclosed in the “Financial Information”
investments that serve two major purposes. First, some of TSMC’s
of Annual Report (II), pages 28-30.
major strategic investments were, or will be, made to help the
Company open new sources of revenues and innovate alternative
The determination of an impairment charge at any given time is
business models that target to generate additional shareholders’
based on the expected results of the Company’s operations over a
value going forward in the future. For example, in order to help
number of years subsequent to that time. As a result, an impairment
the Company grow into next generation business areas, TSMC has
charge is more likely to occur during a period when the Company’s
invested to develop potential businesses in solid state lighting,
operating results are otherwise already depressed.
solar power and other renewable sources of energy. The Company
believes these investments into these areas will generate new sources
TSMC has established the process and system to closely monitor and
of revenues as a gradual transition into consuming cleaner sources
assess the risk of any impairment charge. However, the management
of power is generally expected. For further information on these
is unable to estimate the extent or timing of any impairment charge
investments, please refer to “8. Subsidiary Information and Other
for future years, or whether such impairment charge required may
Special Notes“ on pages 110-115 of this Annual Report. Second,
have a material adverse effect on the Company’s net income.
some of TSMC’s significant strategic investments were, or will be,
made to help the Company grow its existing business by augmenting
6.2.5 Hazardous Risks
key technology development. For example, to accelerate the
development of next-generation lithographic technology, in August
2012, TSMC, along with other major technology firms, 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 (450mm) lithography tools. Under the
agreement with ASML, TSMC invested EUR838 million to acquire 5%
of ASML’s equity and has committed EUR276 million, to be spread
over five years, toward ASML’s research and development program.
As a result, the Company is exposed to share price fluctuations
arising from its investment in ASML. In the future, TSMC may make
more strategic investments in various forms, whether through stock
TSMC maintains a comprehensive risk management system
dedicated to the conservation of natural resources, the safety of
people, and the protection of property. In order to effectively handle
emergencies and natural disasters at each facility, management has
developed comprehensive plans and procedures that focus on risk
prevention, emergency response, crisis management, and business
continuity. TSMC has adopted local and international standards for
Environmental, Safety and Health (ESH) management. All TSMC
manufacturing fabs have been ISO 14001 certified (Environmental
Management System), OHSAS 18001 certified (Occupational
Health and Safety Management System) and QC 080000
certified (Hazardous Substance Process Management System). All
(such as H1N1 influenza), and sudden and unexpected disruptions
customers, thereby having a potentially adverse and material
to the supply of raw materials or water, electricity, and other public
impact on TSMC’s financial performance. In addition to periodic fire
utilities. TSMC has established a company-wide task force dedicated
protection system inspection and firefighting drills, the Company has
to managing the risk of water shortage that might arise due to
also carried out a corporate-wide fire risk mitigation project focused
climate change. This task force keeps watch on the external supply
on management and hardware improvements.
and internal demand for water. Cross-company consolidations and
external collaborations with public agencies are also ongoing in the
Changes may cause unpredictable interruption to production. In
industrial parks to ensure and sustain a stable water supply.
order to reduce such uncertainty, TSMC has adopted a number
TSMC has further strengthened its business continuity plans, which
design, procurement and construction of facilities, to operation and
of standards to maintain operational continuity, ranging from
include periodic risk assessment, risk mitigation, and implementation
decommission.
through the establishment of emergency task forces when necessary,
combined with the preparation of a thorough analysis of the
6.2.6 Risks Associated with Climate Change and Non-
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
2013, 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 emergency response drills, enhancing tool anchorage
or seismic isolation facilities, training and preparedness for tool
salvage, and has improved TSMC business continuity procedures with
reference to ISO 22301 business continuity management.
TSMC and many of its suppliers use highly combustible and toxic
materials in its manufacturing processes and are therefore subject
to the risk of loss arising from explosion, fire, or environmental
influences which cannot be completely eliminated. Although the
compliance with Environmental and Climate
Related Laws and Regulations, and Other
International Laws, Regulations and Accords
The manufacturing, assembling and testing of our products require
the use of metals, chemicals and materials that are subject to
environmental, climate-related, health and safety and humanitarian,
conflict-free sourcing laws, regulations and guidelines issued
worldwide. For example, the U.S. SEC implemented the final rule
mandated by the Dodd-Frank Wall Street Reform and Consumer
Protection Act to require companies to publicly disclose their use
of conflict minerals (i.e. Gold, Cassiterite, Coltan and Wolframite)
that originated in the Democratic Republic of the Congo (DRC)
or an adjoining country. The final applicable legal rule as well as
non-binding guidelines on conflict minerals imposes substantial
supply chain verification requirements in the event that conflict
minerals originates from the Democratic Republic of the Congo,
adjoining countries or any geographic territory that may be specified
by the relevant authorities at a future date. These new rules and
verification requirements, which apply to our activities in 2013 and
beyond, impose additional costs on us and on our suppliers and
may limit the sources or increase the prices of materials used in our
products. Further, if we are unable to certify that our products are
conflict free under applicable law or non-binding guidelines or if we
are unable to comply with any material provisions of such laws or
guidelines, we may face challenges with our customers that place
us at a significant competitive disadvantage, and our goodwill and
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reputation may be irreparably damaged. Often times, our customers
Any of the above contingencies resulting from the actual and
have imposed upon us legally non-binding conditions or guidelines
potential impact of local or international laws and regulations, as well
● Conflict Minerals Risk Control
For additional details, please refer to the section of “Supplier and
● Since 2005, TSMC has been participating in an annual survey held
by the nonprofit Carbon Disclosure Project (CDP), which includes
on sourcing conflict minerals that exceed those imposed under
as international accords on environmental or climate change, could
Contractor Management” of “7.2.3 Safety and Health” on pages
GHG emission and reduction information for all TSMC fabs,
relevant legal requirements. For example, many of our customers
harm the Company’s business and operational results by increasing
102-104 of this Annual Report.
have been asking us to apply the OECD Due Diligence Guidance
expenses or requiring TSMC to alter its manufacturing, assembly and
for Responsible Supply Chains of Minerals in Conflict-Affected and
test processes.
High-Risk Areas. These guidelines while legally non-binding may
● Climate Disaster Risk Control
Abnormal climate caused by the greenhouse effect has increased the
subsidiaries, joint ventures, and overseas offices.
● Since 2006, TSMC follows the ISO 14064-1 standard to conduct a
GHG inventory and acquire verification by an accreditation agency
every year. TSMC also voluntarily reports GHG inventory data to
impose requirements that well exceed those mandated by applicable
Increasing climate change and environmental concerns could affect
frequency and severity of climate disasters – storms, floods, drought,
the Taiwan Environmental Protection Administration (EPA) and the
law. If we agree to apply these guidelines as requested by our
the results of our operations if any of our customers request that we
and water shortages – causing considerable impacts on business
Taiwan Semiconductor Industry Association (TSIA).
customers, there is the risk that the prices we charge for our products
provide products and services that exceed any existing standard(s) of
and services will increase (to reflect the added cost in complying with
environmental compliance. For example, TSMC has been working on
such conditions or guidelines), resulting in the loss of actual and
an on-going basis with our suppliers, customers, and several industry
potential customers. Conversely, any failure on our part to comply
consortia to develop and provide products that are compliant with
with such customer-imposed legally non-binding conditions or
the European Union Restriction of Hazardous Substances Directive
guidelines may result in us suffering significant competitive harms
(RoHS). Even though TSMC is entitled to rely on various exemptions
such as the loss of actual or potential customers that will likely have a
under RoHS, some of our customers may request that we provide
material adverse impact on our financial statements.
products that exceed the legal standard set by RoHS without
using any of the exemptions still permitted under RoHS. If TSMC is
operations and supply chains. TSMC believes that climate change
control should take into account both mitigation and adaption,
6.2.7 Other Risks
and this requires cooperation between industry and government to
reduce risk. To ensure electricity and raw water supplies, therefore,
in addition to water-saving measures at our own facilities and those
of our upstream and downstream partners, TSMC participates in the
Taiwan Science Park Industrial Union Experts Committee platform,
and is actively involved in regular meetings with Taipower Company
and the Taiwan Water Corporation to discuss supply and allocation
Although TSMC may be eligible for various exemptions and/or
unable to offer such products or offer products that are compliant,
for response issues.
extensions of time for compliance, our failure to comply with any of
but are not as reliable due to the lack of reasonably available
these applicable laws or regulations could result in:
alternative technologies or materials, it may lose market share to our
● significant penalties and legal liabilities, such as the denial of import
competitors.
permits;
● the temporary or permanent suspension of production of the
Further, energy costs in general could increase significantly due to
affected products;
climate change and other regulations. Therefore, TSMC’s energy costs
● unfavorable alterations in our manufacturing, fabrication and
may increase significantly if utility or power companies pass on their
assembly and test processes;
costs, either fully or partially, such as those associated with carbon
● loss of actual or potential sales contracts in case we are unable to
taxes, emission caps and carbon credit trading programs.
satisfy the conditions regarding conflict-free minerals sourcing laws
or requirements by our customers; and
● restrictions on our operations or sales
TSMC believes that climate change should be regarded as an
important corporate risk, which must be controlled to improve our
competitiveness. Climate change risks include legal risk, physical risk
Existing and future environmental and climate related laws and
and other risks. TSMC’s control measures are as follows:
regulations as well as applicable international accords to which
TSMC are subject, could also require it, among other things, to do
the following: (a) purchase, use or install expensive pollution control,
● Climate Regulatory Risk Control
The greenhouse gas (GHG) control regulations and agreements of
reduction or remediation equipment; (b) implement climate change
countries around the world are becoming more and more stringent.
● Other Climate Risk Controls
Climate change is a concern to the global supply chain, necessitating
energy conservation, carbon reduction, and disaster prevention. For
example, The Electronic Industry Citizenship Coalition (EICC) has also
required members’ suppliers to disclose GHG emissions information.
TSMC not only discloses its own GHG emissions information each
year, but it also assists and requires its suppliers to establish a GHG
inventory system and conduct reduction programs. TSMC’s suppliers
are required by TSMC to submit GHG emissions and reduction
information as an important index of sustainability scoring in its
procurement strategy.
To mitigate risks resulting from climate change, TSMC continues
to actively carry out energy conservation measures, and voluntary
perfluorinated compounds (PFC) emission reduction projects and
conducting GHG inventory and verification every year. TSMC has
publicly disclosed climate change information every year through the
mitigation programs and “abatement or reduction of greenhouse
Enterprises are legally required to regularly disclose GHG-related
following channels:
gas emissions“ programs, or “carbon credit trading“ programs; (c)
information, and also limit GHG emissions. The cost of production,
modify our product designs and manufacturing processes, or incur
including materials and energy, may also grow along with future
● TSMC has disclosed GHG emissions and reduction-related
information for evaluation by the Dow Jones Sustainability Index
other significant expenses associated with such laws and regulations
legal requirements such as carbon or energy taxes. TSMC continues
every year since 2001.
such as obtaining substitute raw materials or chemicals that may cost
to monitor legislative trends and communicate with various
more or be less available for our operations. It is unclear whether
governments through industrial organizations and associations to set
such necessary actions would affect the reliability or efficiency of our
reasonable and feasible legal requirements.
● TSMC’s GHG-related information has been disclosed in its CSR
report on the Company website annually since 2008. TSMC also
provides information to customers and investors upon request.
products and services.
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 6.38% of
TSMC’s outstanding shares as of February 28, 2014, has from time
to time in the past sold our shares in the form of ADSs in several
transactions.
Currently no shareholder owns 10% or more of TSMC’s total
outstanding shares.
Other Material Risks
During 2013 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.
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7. Corporate Social Responsibility
TSMC was named Semiconductors
and Semiconductor Industry
Group Leader by Dow Jones
Sustainability Index in 2013.
7.1 Overview
CSR Guidelines
TSMC believes a company’s corporate social responsibility is to uplift society. As an important part of the technology industry,
looking to the future, we not only aim to maintain our leadership in worldwide competition and promote Taiwan’s globalization
and economic growth, but we will also 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.
4. We practice good corporate governance, and balance the interests of shareholders, employees, and all stakeholders in the
Company.
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 do our part to control 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 care for our communities over the long term.
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.
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The following table shows TSMC’s view of CSR. TSMC’s social responsibility is to “uplift society“, and on the vertical axis are matters that TSMC
2013 CSR Awards and Recognitions
considers its responsibilities. The horizontal axis lists areas where TSMC believes its values can affect society.
Corporate Social Responsibility: Uplift Society
Category
Overall CSR
TSMC
Society
Morality
Business Ethics
Economy
Rule of Law
Sustainability
Work/Life
Balance
Happiness
Philanthropy
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
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
CSR Management Approach
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
TSMC’s decision-making and operations in corporate social responsibility (CSR) are led by the Company’s Chief Financial Officer, who was
appointed by the Chairman to act as an overall coordinator for the entire Company’s CSR activities. To better carry out and coordinate
sustainability efforts, the Company founded the “Corporate Social Responsibility Committee“ in 2011, which brings together representatives from
all of TSMC’s CSR-related business segments, including Customer Service, Human Resources, Investor Relations, the Legal Department, Material
and Supply Chain Management, Operations, Public Relations, Quality and Reliability, R&D, Risk Management, the Environment, Safety & Hygiene
Department, the independent TSMC Education & Culture Foundation and the TSMC Volunteer Association. Since 2012, CSR has been a topic on
TSMC’s Board meeting agenda. Annual CSR performance is reported to the Board.
The CSR Committee holds quarterly meetings to discuss related topics, led by the CFO and the President of the Volunteer Program. The quarterly
CSR meeting systematically and effectively carries out our corporate social responsibilities by following a “Plan-Do-Check-Act“ cycle to regularly
review interaction with stakeholders and the issues that concern them, discuss progress in CSR activities and set future plans. Through close
cooperation between organizations, CSR is now an integral part of TSMC’s daily operations.
DJSI Industry Group Leader
In 2013, TSMC was recognized by the Dow Jones Sustainability Indexes (DJSI) as the Semiconductors and Semiconductor Equipment Industry
Group Leader, setting a milestone for the Company’s achievements in sustainability and corporate social responsibility. TSMC is the first Taiwan
company, and one of just four Asian companies, to win the highest score out of its industry peers in the DJSI’s 24 industry groups, made up
of 59 industries and the 2,500 largest companies in the world. Moreover, TSMC is one of only two semiconductor companies chosen as index
components for 13 consecutive years.
Organization
Awards and Recognitions
Dow Jones Sustainability Index (DJSI)
Goldman Sachs
CommonWealth Magazine
● First Taiwan company to be recognized as the DJSI Semiconductors and Semiconductor Equipment “Industry
Group Leader“ (i.e. the company with the highest sustainability score out of its industry peers in the DJSI’s 24
industry groups, made up of 59 industries and the 2,500 largest companies in the world)
● RobecoSAM Sustainability Award “Gold Class“
● Membership in the Dow Jones Sustainability World Index for a 13th consecutive year
● Membership on the GS SUSTAIN Focus List, which incorporates 59 global industry leaders
● Most Admired Company Rank No.1 in Taiwan
● Excellence in Corporate Social Responsibility Award
Globalviews Magazine
● Excellence in Corporate Social Responsibility, Occupational Health First Prize
Taiwan Institute for Sustainable Energy
● Award for Corporate Sustainability Reports - Excellent for Manufacturing Industry
● Model Award for Corporate Sustainability Development Performances - Category of Transparency and Integrity
FinanceAsia
● Best Corporate Social Responsibility - Ranked No.2 in Taiwan
R.O.C. Ministry of Culture
“Wenxin Award” for the 10th consecutive year
Economy, Governance
Institutional Investor
IR Magazine
EUROMONEY
FinanceAsia
Global IR Awards
International Law Office
● Best CEO (Technology/Semiconductors) - 1st Place (buy-side)
● Best CEO (Technology/Semiconductors) - 1st Place (sell-side)
● Best CFO (Technology/Semiconductors) - 1st Place (buy-side)
● Best CFO (Technology/Semiconductors) - 2nd Place (sell-side)
● Best IR Team (Technology/Semiconductors) - 1st Place (buy-side)
● Best IR Team (Technology/Semiconductors) - 1st Place (sell-side)
● Best IR Professional (Technology/Semiconductors) - 1st Place (buy-side)
● Best IR Professional (Technology/Semiconductors) - 1st Place (sell-side)
● Best corporate governance and disclosure
● Best overall IR by a Taiwanese company
● Best IRO - Taiwan
● Asia Best Managed Companies 2013 - IT/software/technology
● Asia’s Best Managed Companies: Hong Kong, Korea and Taiwan
● Best Managed Company - Ranked No.1 in Taiwan
● Best Corporate Governance Company - Ranked No.1 in Taiwan
● Best CEO - Ranked No.1 in Taiwan
● Best CFO - Ranked No.2 in Taiwan
● Most Committed to a strong Dividend Policy - Ranked No.1 in Taiwan
● Best Investor Relations - Ranked No.1 in Taiwan
● Global Top 50 Gold: Ranked No.12
● Asia-Pacific Counsel Awards 2013 - General Counsel of the Year
R.O.C. Securities & Futures Institute
● 10th Information Disclosure of Public Companies Ranking - Ranked A+
Environment, Safety and Wellness
U.S. Green Building Council Leadership in
Energy and Environmental Design (LEED)
certification
● “Gold” certification in LEED-Existing Building: Operation and Maintenance (LEED-EB O&M) - Fab 14 Phase 1
Office Building, Fab 14 Phase 1/2 Manufacturing Facility
● “Gold” certification in LEED - NB - Fab 12 Phase 6 Manufacturing Facility, Fab 15 Phase 1/2 Manufacturing
Facility
Note: Up to the end of 2013, TSMC received 11 U.S. LEED certifications (1 “Platinum” class, 10 “Gold” class)
R.O.C. Ministry of the Interior “Ecology,
Energy Saving, Waste Reduction and Health
(EEWH)” certification
● Diamond class “Green Building” certification - Fab 12 Phase 6 Manufacturing Facility, Fab 14 Phase 3 Office
Building
Note: Up to the end of 2013, TSMC received 1 Taiwan EEWH Diamond class “Intelligent Green Building,” 6
R.O.C. Ministry of Economic Affairs
Industrial Development Bureau
ISO 50001 Energy Management System
certification
R.O.C. Environmental Protection
Administration
R.O.C. Ministry of Economic Affairs
Hsinchu Science Park Administration
Southern Taiwan Science Park
Administration
Taiwan EEWH Diamond class “Green Building” certifications.
● “Green Factory Label” - Fab 12 Phase 5
Fab 12 Phase 6, Fab 15
● “Annual Enterprise Environmental Protection Award” - Fab 15
● “Energy Conservation and Carbon Reduction Action Mark” - Fab 6, Fab 8, Fab 12 Phase 6, Advanced Backend
Fab 2
● “Excellence in Toxic Substance Management Award” - Fab 14B
● “Enterprise Green Procurement Award” - Headquarter
● “Excellence in Carbon Reduction Award” - Fab 8, Fab 12 Phase 4/5
● “Water Conservation Award” - Fab 3, Fab 12 Phase 4/5, Fab 15
● “National Sustainable Development Award” - Fab 3
● “Low Carbon Enterprise Award” - Fab 12 Phase 6
● “Excellence in Environmental Protection” - Fab 12 Phase 1/2
● “Excellence in Labor Safety and Hygiene Award” - Fab 3 and Fab 12A (Note)
● “Excellence in Environmental Protection” - Fab 14A
Hsinchu County Environmental Protection
Bureau
● “Enterprise Green Procurement Award” - Fab 2 and 5
● “Mobile Pollution Sources Control” - Fab 2 and 5
Hsinchu City Environmental Protection
Bureau
● “Mobile Pollution Sources Control” - Fab 12 Phase 1/2
● “Environmental Education Award” - Fab 12 Phase 1/2
Employees
Council of Labor Affairs, Executive Yuan
● Large Enterprise Award of National TrainQuali Prize (NTQP)
Health Promotion Administration, Ministry
of Health and Welfare
● Health Management Award
● Healthy Weight Management Award
● Pioneering Weight Management Award
GlobalView Magazine
● First place in CSR Award for Workplace Health
Note: Fab 12A includes Fab 12 Phase 1/2/3.
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7.2 Environmental, Safety and Health (ESH)
Management
2014, TSMC has three fabs – Fab 12 Phase 4/5/6, Fab 14 Phase 3/4
and Fab 15 – that earned the ISO 50001 certifications. Other TSMC
fabs also implement energy management measures consistent with
TSMC believes its environmental, safety and health practices must
ISO 50001.
not only comply with legal requirements, but also measure up to or
exceed recognized international practices. TSMC’s ESH policy aims
to reach the goals of “zero incident“ and “sustainable development,“
and to make TSMC a world-class company in environmental, safety
and health management. The Company’s strategies for reaching
these goals are to comply with regulations, promote safety and
health, strengthen recycling and pollution prevention, manage ESH
risks, instill an ESH culture, establish a green supply chain, and fulfill
its related corporate social responsibilities.
All TSMC manufacturing facilities have received ISO 14001:2004
certification for environmental management systems and OHSAS
18001:2007 certification for occupational safety and health
management systems. All fabs in Taiwan have also been TOSHMS
(Taiwan Occupational Safety and Health Management System)
certified since 2009.
TSMC strives for continuous improvement and actively seeks to
enhance pollution prevention, power and resource conservation,
waste reduction, safety and health management, fire and explosion
prevention and minimize the impact of other risks, such as climate
change, earthquakes, in order to reduce the overall environmental,
safety and health risk.
In 2006, in order to meet regulatory and customer needs for the
management of hazardous materials, TSMC began to adopt the
IECQ QC 080000 Hazardous Substance Process Management (HSPM)
System. All TSMC manufacturing facilities have been QC 080000
certified since 2007. By practicing QC 080000, TSMC ensures that
its products comply with regulatory and customer requirements,
including the European Union’s Restriction of Hazardous Substances
(RoHS) Directive, EU Registration, Evaluation, Authorization
and Restriction of Chemicals (REACH), the Montreal Protocol
on substances that deplete the ozone layer, the halogen free in
TSMC regularly communicates with suppliers and contractors
regarding environmental, safety and health issues and encourages
them to improve their ESH performance. In line with this policy,
TSMC uses priority work management and self-management to
govern work performed by contractors. TSMC requires contractors
performing high-risk operations to complete certification for
technicians, and to establish their own OHSAS 18001 safety and
health management system before bidding on contracts. This
self-management is aimed at increasing the sense of responsibility of
TSMC’s contractors, with the goal of promoting safety awareness and
technical improvement for all contractors in the industry.
TSMC collaborates with suppliers to improve the sustainability of the
Company’s supply chain regarding ESH-related issues such as carbon
and water footprinting, and conflict mineral management. TSMC not
only performs on-site ESH audits at its suppliers manufacturing sites,
but also proactively assists them with improving ESH performance.
Reducing the carbon and water footprints of TSMC’s supply chain
is essential to the Company’s green supply chain ideals. Since
2009, TSMC has required suppliers to set up their carbon inventory
procedures. Since 2010, TSMC collaborated with selected suppliers
to set up product carbon footprints and has received PAS2050
certifications for 6-inch, 8-inch and 12-inch finished wafer.
TSMC also monitors potential water shortages in the supply chain
and investigates the supply chain’s water inventory. TSMC is
also preparing to work with suppliers on water footprinting and
conservation plans. The ESH management programs of TSMC
suppliers are tied to a sustainability index that includes three
components: the Green Index, the Social Index and the Risk Index.
The “Green Index“ includes environmental management systems,
regulatory compliance, hazardous substance management, conflict
electronic products initiative, and Perfluorooctane Sulfonates (PFOS)
mineral investigation, greenhouse gas inventory, carbon footprinting,
restriction standards.
Since 2011, TSMC adopted ISO 50001 Energy Management System
for the continuous improvement of energy conservation. TSMC Fab
12 Phase 4 data center is Taiwan’s first facility to earn the ISO 50001
certification for a high density computing data center. As of early
water footprinting and other green activities. The “Social Index“
includes labor and ethical conduct and participation in social
activities. Both of the “Green“ and “Social“ indexes are consistent
with the Electronic Industry Citizenship Coalition (EICC) code of
conduct. The “Risk Index“ includes safety and health management,
fire prevention, natural disaster mitigation, IT interruption recovery,
transportation reliability, supply chain management, pandemic
response planning and a business continuity plan. This sustainability
index is applied to TSMC’s critical suppliers.
7.2.1 Environmental Protection
Greenhouse Gas (GHG) Emission Reduction
TSMC is an active participant in international environmental
regulatory and protection programs. TSMC achieved its voluntary
PFC emissions reduction goal as per its commitment to the World
Semiconductor Council (WSC) and the Taiwan Environmental
Protection Administration (EPA) in 2010.
In 2005, TSMC was Taiwan’s first semiconductor company to make
a complete inventory of its GHG emissions and to gain ISO 14064
certification for its processes and outputs. The purpose of the
inventory was to serve as a baseline reference for TSMC’s strategy
to reduce GHG emissions, to meet future domestic regulatory
requirements, and to prepare for carbon trading and corporate
carbon asset management. All TSMC facilities conduct an annual
GHG. The inventory result shows that the major direct GHG emissions
are perfluorinated compounds (PFCs), which are used in the
semiconductor manufacturing process. The primary indirect GHG
emission is electricity consumption.
TSMC is taking measures to reduce its emission of GHGs. TSMC
endorsed a memorandum of understanding between the Taiwan
Semiconductor Industry Association, the Taiwan EPA, and the WSC,
whereby TSMC committed to reducing PFC emissions to 10% below
the average of 1997 and 1999 by 2010, a commitment that it
was proud to achieve. This emissions target remains fixed as TSMC
continues to grow and expand its manufacturing facilities.
TSMC is active in WSC’s activities to set up a global voluntary PFC
emissions reduction goal for the next 10 years, and has 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. In 2013, according to the “EPA
Early Actions for Carbon Credit of Greenhouse Gases Reduction“
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.
Air and Water Pollution Control
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
around the clock and tracks system effectiveness to ensure the quality
of emitted air and discharged water.
To make the most effective use of Taiwan’s limited water resources,
all TSMC fabs make an effort to increase water reclamation rates
by adjusting the water usage of manufacturing equipment and
improving wastewater reclamation systems. New fabs are able to
reclaim more than 85% of process water, meeting or exceeding the
standards of the each Science Park Administration and outperforming
most semiconductor fabs around the world. TSMC also strives to
reduce non-manufacturing-related water consumption, including
water used in air conditioning systems, sanitary facilities, cleaning,
landscaping and kitchens. TSMC uses an intranet website to collect
and measure water recycling volumes company wide.
Since water resources are inherently local, TSMC shares its water
saving experiences with other semiconductor companies through
the Association of Science-Based Industrial Park to promote water
conservation. At the same time, TSMC collaborates with the Science
Park Administrations to assist small facilities in each Science Park with
water resource management in order to achieve the Science Park’s
goals and ensure a long-term balance of supply and demand.
Waste Management and Recycling
regulation, TSMC applied for the recognition of greenhouse reduction
that committed to the WSC and EPA, and has received carbon credits
TSMC has established a designated unit responsible for waste
recycling and disposal. To meet the goal of sustainable resource
from 2005 to 2011. Those carbon credits can be used to offset
utilization, TSMC’s first priority is to reduce process waste before
greenhouse gas emissions of new manufacturing facilities regulated
considering recycling or disposal. TSMC carefully selects waste
by Environmental Impact Assessment (EIA) Act. It will mitigate climate
disposal and recycling contractors and performs annual audits of
change risk to support the Company’s sustainable operation.
certification documents, site operations and transportation routes
to ensure the legal and proper disposal of waste. TSMC achieved a
92.41% waste recycling rate in 2013, surpassing its goal of 90%. The
Company’s landfill rate has remained at less than 1% since 2008.
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Environmental Accounting
Other Environmental Protection Programs
Environmental Compliance Record
The purpose of TSMC’s environmental accounting system is to identify and calculate environmental costs for internal management. At the same
TSMC conducts “Product Life Cycle Assessments“ (Product LCA),
As of, 2014, TSMC had not received any environmental penalties or
time, we can also evaluate the cost reduction or economic benefits of environmental protection programs so as to promote economically efficient
collecting and analyzing data from the entire semiconductor
fines during or related to 2013 and early 2014.
programs. With environmental costs expected to continue growing, environmental accounting can help us manage more effectively. TSMC’s
manufacturing chain from raw materials suppliers to finished
environmental accounting measures define the various environmental costs and set up independent environmental account codes, then provide
products, including statistics for such items as energy, raw
7.2.2 Green Products
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 2013, 92 environmental projects were completed and the total benefits including waste recycling are more than
NT$1,451 million.
2013 Environmental Cost of TSMC Fabs in Taiwan
Unit: NT$ thousands
Classification
1. Direct Cost for Reducing Environmental Impact
Description
Investment
Expense
(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)
3. Other Environment-related Costs
Total
(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
4,303,659
1,904,749
-
306,030
3,139,691
106,175
426,887
190,105
-
-
6,514,438
3,862,858
2013 Environmental Efficiency of TSMC Fabs in Taiwan
Unit: NT$ thousands
Category
Description
1. Cost Saving of Environmental Protection
Energy saving: completed 35 projects
Projects
Water saving: completed 11 projects
Waste reduction: completed 5 projects
Material reduction: completed 41 projects
2. Real Income of Industrial Waste Recycling
Recycling of used chemicals, wafers, targets, batteries, lamps, packaging materials, paper cardboard, metals,
plastics, and other wastes
Total
Efficiency
665,300
95,900
10,100
499,000
181,000
1,451,300
material consumption, and pollution. The Product LCA study has
established “Eco-Profiles“ for all TSMC fabs and helps the Company
to meet 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.
TSMC also maintains “green procurement“ procedures, requiring raw
materials suppliers to declare that the materials they supply to TSMC
TSMC collaborates with upstream material suppliers and downstream
assembly and testing service providers to reduce environmental
impact. We reduce the resources and energy consumed for each unit
of production to provide more advanced, efficient and ecologically
sound products. In addition to helping customers design low-power,
high-performance products to reduce resource consumption over the
product’s life cycle, TSMC implements clean manufacturing practices
that provide additional “green value“ to our customers and our other
do not contain any prohibited substances. This ensures that products
manufactured by TSMC comply with customer requirements and the
stakeholders.
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. In 2013, TSMC received the Best Green Procurement
Company Award from Taiwan EPA.
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 continues to upgrade existing office buildings to
comply with the LEED standard each year. From 2008 to 2013, eleven
of TSMC’s fabs and office buildings achieved LEED certifications
(one Platinum, ten Gold class). Six of them also won Taiwan’s EEWH
Diamond class certification.
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 2013, more than 6,297 visitors from 159 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“. TSMC received Taiwan’s first
“Green Factory Label“ from the government and four labels in total
for Fab 12 Phase 4, Fab 14 Phase 3, Fab 14 Phase 4, and Fab 12
Phase 5.
TSMC-manufactured ICs are used in a broad variety of applications
covering various segments of the computer, communications,
consumer, industrial and other electronics markets. Through our
manufacturing technologies, our customers’ designs are realized
and incorporated into peoples’ lives. These chips make significant
contributions to the progress of modern society. TSMC works
hard to achieve profitable growth while providing products that
add environmental and social value. We have listed below several
examples of how TSMC-manufactured products significantly
contribute to society and the environment.
Environmental Contribution by TSMC Foundry Services
1. Providing New Process Technology to Achieve Lower
Power Consumption
● The continuous development of TSMC’s advanced semiconductor
process technologies follows Moore’s law, which holds that process
technology moves forward one generation every 24 months. In
each new generation circuitry line widths shrink, making circuits
smaller and lowering the energy and raw materials consumed per
unit area. At the same time, the smaller IC die size consumes less
power. TSMC’s 28nm technology, for example, can accommodate
approximately four times the number of electronic components as
the 55nm technology. ICs made with 28nm technology in active
or standby mode consume roughly one third the power of 55nm
products, according to our internal test results. The Company
continuously provides process simplification and new design
methodology based upon its manufacturing excellence to help
customers reduce design and process waste.
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● TSMC continues to lead the foundry segment in technology, having
achieved volume production at the 28nm node. TSMC’s 28nm
processes include 28nm High Performance (28HP), 28nm High
Performance Low Power (28HPL), 28nm Low Power (28LP), and
28nm High Performance Mobile Computing (28HPM). Customer
28nm production tape-outs are more than double the number
of 40nm customer tape-outs. The TSMC 28nm process also has
surpassed the previous generation’s production ramp and product
yield at the same point in time due, in part, to closer and earlier
collaboration with customers. TSMC will continue to encourage
customer designs that result in the most advanced, energy-saving,
and environmentally friendly products.
● TSMC quickly ramped its 28nm technology in 2013. The 28nm
contribution to revenue grew significantly from 12% in 2012 to
30% in 2013, representing approximately NT$180 billion, or US$6
billion. This reflects the fact that TSMC’s advanced manufacturing
process technology helps the Company achieve both profitable
growth and energy savings.
28nm Contribution to Total Revenue
Unit: %
2009
-
2010
-
2011
1
2012
12
2013
30
● TSMC continues to deliver performance-per-watt scaling in its 20nm
SoC and 16nm FinFET process technologies. With energy-efficient
transistors and interconnects, the 20nm SoC process can reduce
total power consumption of the 28nm process by one third, and
by migrating from planar to FinFET technology, the 16nm FinFET
process can further reduce total power consumption to about 40%
of 28nm technology. The 20nm SoC process was qualified in 2013
and produced first silicon success on multiple customer production
tape-outs. The 16nm FinFET process entered risk production in
2013.
Die Size Cross-Technology
Comparison
Die size is shrinking as line width shrinks
1
0.53
0.48
0.25
0.13
0.12
55nm
45nm
40nm
28nm
20SoC
16FF
Total Power Consumption Cross-
Technology Comparison
1
0.6
0.3
0.2
0.12
N55LP
(1.2V)
N40LP
(1.1V)
N28HPM
(0.9V)
N20SoC
(0.9 V)
N16FF
(0.8 V)
2. Manufacturing Power Management ICs with the Highest
Social Contribution by TSMC Foundry Services
Efficiency
● TSMC’s leading manufacturing technology helps its customers
design and manufacture green products. Power management
ICs are the most notably green IC products. Power management
ICs are the key components that regulate power consumption in
all electronic devices. TSMC’s analog power technology research
and development team uses 6-inch and 8-inch wafer fabs to
develop Bipolar-CMOS-DMOS and Ultra-High Voltage technology,
producing industry-leading power management chips with more
stable and efficient power supplies and lower energy consumption
for broad-based applications in the consumer, communication, and
computer markets.
● TSMC also provides power-efficient design platforms. Customers
use these platforms to develop energy-saving products.
● Power management ICs generate material revenue to TSMC’s
industrial market segment. In 2013, TSMC’s HV/Power technologies
collectively shipped more than 1.3 million customer wafers. In
total, the Power management ICs manufactured by TSMC for our
customers accounted for more than one-third of global computer,
communication and consumer (3C) systems.
HV/Power Technologies Shipments
Unit: 8-inch equivalent wafer
2009
>400K
2010
>700K
2011
>800K
2012
2013
>1,000K
>1,300K
1. Providing Mobile and Wireless Chips that Enhance
Mobility and Convenience
● The rapid growth of smartphones and tablets in recent years
reflects strong demand for mobile devices. Mobile devices offer
remarkable convenience and TSMC contributes significant value to
these devices. For example: (1) new process technology helps chips
provide faster computing speeds in a smaller die area, leading to
smaller form factors for these electronic devices. In addition, SoC
technology integrates more functions into one chip, reducing the
total number of chips in electronic devices, which also leads to a
smaller system form factor; (2) new process technology helps chips
consume less energy. People can therefore use mobile devices for
a longer period of time, increasing their convenience; and (3) with
more convenient wireless connectivity, such as 3G/4G and WLAN/
Bluetooth, people communicate more efficiently with each other,
can “work anytime and anywhere,“ significantly improving the
mobility of modern society.
● Mobile-related products, such as Baseband, RF Transceiver, AP
(Application Processors), WLAN (Wireless Local Area network), NFC
(Near Field Communication), Bluetooth, GPS (Global Positioning
System) and others, represent more than 36% of TSMC annual
revenue, reaching more than NT$213 billion or US$7.2 billion in
revenue in 2013. TSMC’s growth in recent years was largely driven
by the growing global demand for these mobile IC products.
Contribution of Mobile-related Products to TSMC Total Revenue
3. Green Manufacturing that Lowers Energy Consumption
● TSMC continues to develop manufacturing technologies that
Unit: %
provide more advanced and efficient manufacturing services.
Improvements reduce per-unit energy consumption, resource
consumption and pollutant generation. They also lower energy
consumption and reduce pollution during product use. To
see the total energy savings benefits realized through TSMC’s
green manufacturing, please refer to page 98, “Environmental
Accounting“.
2009
25
2010
27
2011
31
2012
33
2013
36
2. Enhancing Human Health and Safety with MEMS (Micro
Electro Mechanical Systems)
● TSMC-manufactured ICs are widely used in medical treatment
and health care applications. Through the Company’s advanced
manufacturing technology, more and more IC products are
providing major contributions to modern medicine. Customers’
MEMS products are used in a number of advanced medical
treatments. MEMS are also widely used in preventative health care,
such as early warning systems that limit the number of injuries
to the elderly resulting from falls, systems that detect physiology
changes, car safety system and other applications that greatly
enhance human health and safety.
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7.2.3 Safety and Health
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.
TSMC believes that employees’ physical and mental health is not only
fundamental to maintaining normal business operations but also part
of a corporation’s responsibility.
In 2013, TSMC collaborated with government and academia to
hold the third Labor Health Forum. The theme of the 2013 forum
is “industry, government, and university collaboration to improve
occupational health,“ a response to the new Occupational Safety
and Health Act signed in July, 2013. This legislation introduces new
requirements in corporate occupational health risk management and
also strengthens corporate responsibility to protect the physical and
mental health of employees.
The Labor Health Forum was founded in 2011 by TSMC and the
NTU College of Public Health for the business community to discuss
occupational health issues, and has become a major annual event in
this field for enterprises in Taiwan. In 2013, China Steel Corp., CPC
Corp., LCY Chemical Corp., Uni-President Enterprises, and Chimei
Innolux Corp. were invited to join as co-sponsors of the event. We
specially added the form of a “global citizen café,“ a brainstorming
session between business, universities, and government to discuss
how to collaborate and adopt the most up-to-date knowledge
and methods in occupational health, and fulfill the spirit of the
Occupational Health and Safety Act. Through enthusiastic discussion,
the six participating industries each collected points of consensus to
serve as guidelines for future action in occupational health.
TSMC also developed occupational management tools tailored for
TSMC by industry-academic cooperation, including the promotion
of personnel stress management and the measurement of radio
frequency (RF) exposure to wireless network antennas and
mobile phone in the offices. TSMC offers annual employee health
examinations and consultation services as well as on-site clinics and a
performs regular drills designed to minimize harm to employees and
employee leave due to illness and, at the same time, develops a
property, as well as the impact on society and the environment in the
continuous plan to address manpower shortages as well as minimize
event of a disaster.
business impact.
● Working Environment Measurement
TSMC conducts workplace hazard assessment and interventions to
● Emergency Response
The planning and execution of an effective emergency response
dental clinic for a better access to medical assistance.
provide a comfortable and safe workplace to Company employees.
requires big-picture thinking, continuous improvement and practice
TSMC also requires employees to use personal protective equipment
drills. TSMC’s emergency response plans include procedures for rapid
In order to avoid infectious disease epidemics, TSMC has established
(PPE) to prevent hazard exposures.
response to accidents and disaster recovery as well as establishing
company-level prevention committees and procedures for emergency
response procedures for potential disasters.
response to infectious diseases outbreak.
As office work is primarily performed on computers, TSMC launched
Working Environment and Employee Safety Protection
and desks to meet the needs of taller or shorter employees. Whenever
and evacuation drills. TSMC’s Tainan-site fabs initiated quarterly spot
an office ergonomics program to adjust the height of office chairs
All TSMC fabs conduct major annual emergency response exercises
TSMC’s ESH policy is focused on 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
standards, as well as mitigating ESH-related risks when building or
rebuilding facilities, TSMC also maintains procedures governing new
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 New Tools
and New Chemical Substances
TSMC, as a technology leader in the worldwide semiconductor
industry, operates many diversified process tools and new chemicals
in the R&D stage. Before using those new tools and new chemicals,
they are reviewed carefully by the “New tools and new Chemical
Review Committee”. The purpose is to ensure that new tools are
compliant with semiconductor industry’s safety standards (such as
SEMI S2) and that new chemicals’ environmental, safety and health
concerns can be well controlled, including engineering controls,
application 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
new employees of significantly above or below-average height enter
drills, which have been recognized as good practices. TSMC’s on-site
the Company, the assessment and intervention will be initiated
service contractors also participate in emergency response planning
proactively by site ESH professionals.
and exercises to ensure cooperation in handling accidents and to
effectively minimize any damage caused by disasters.
TSMC requires that all new tools meet SEMI-S8 requirements and
that appropriate supplementary control measures be taken to
In addition to the regular emergency response drills held by
reduce ergonomic risk. Moreover, TSMC endeavors to automate
engineering and facilities departments each quarter, the Company’s
300mm front-opening unified pod (FOUP) transportation to prevent
laboratory, canteen, dormitory, and shuttle bus personnel also hold
accumulative damage caused by long-term manual handling
emergency response drills to prepare for events such as earthquakes,
of 300mm FOUPs. TSMC 300mm fabs have achieved 99.9% in
chemical leakage, ammonia release, fires and automobile accidents.
automatic transportation control.
TSMC performs semi-annual workplace environment assessments
of physical and chemical hazards, including CO2 concentration,
illumination, noise, and hazardous chemical substances regulated by
● 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
domestic laws. When abnormal measurements or events happen, site
TSMC Employee Assistance Program (EAP) provides free individual
ESH professionals will conduct onsite observation and interventions
counseling sessions, group sharing, workshops, and mental
to ensure exposure risk acceptable. TSMC also conducts Indoor Air
assessment, as well as lectures on personal and family issues to take
Quality Program to set up indoor air quality standard, measurement,
care of employees’ well-being.
and control measures to continuously provide a safer and more
comfortable workplace.
Health promotion activities for employees include fitness programs,
women’s health care programs, mother’s rooms, body weight control
● Emerging Infectious Disease Response
TSMC has a dedicated corporate ESH organization which monitors
programs, sleep problem management, massage and chiropractic
services, hepatitis and flu vaccinations, and health lectures. TSMC
emerging infectious diseases around the world, assesses any potential
believes employees who are physically and mentally fit can enjoy a
impact on the workplace and provides a strategic response plan. In
better quality of life and be more productive.
previous outbreaks (such as SARS in 2003 and the H1N1 influenza
outbreak in 2009), TSMC convened the Corporate Influenza Response
Supplier and Contractor Management
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
● Supplier Management
As a means of enhancing its supply chain management, TSMC is
committed to communicating with and encouraging its contractors
and suppliers to improve their quality, cost effectiveness, delivery
performance and sustainability on environmental protection, safety
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and health. By means of communication between senior managers,
and require suppliers to improve and expand their disclosure to fulfill
Palace Museum, Taipei Fine Arts Museum, National Taiwan Science
being the most important stage for the youth of Taiwan to inspire
site audits and experience sharing, TSMC collaborates with major
regulatory and customer requirements.
Education Center, National Museum of Natural Science and National
their interest and talents to literacy, in addition to the writing
suppliers and contractors to enhance partnership and ensure
continual improvement for better performance and increased joint
7.3 TSMC Education and Culture Foundation
contributions to society. Contractors performing high-risk activities
must lay out clearly defined safety precautions and preventative
measures. In addition, contractors working on high-risk engineering
projects must establish OHSAS 18001 systems and the workers must
successfully complete work skill training.
● Supply Chain Sustainability
TSMC has been working together with our suppliers in several
fields of sustainable development, such as greening our supply
chain, carbon management for climate change, mitigation of fire
risk, ESH management and business continuity plans for natural
disasters. In 2013, TSMC announced our sustainability standard
for suppliers through benchmarking with EICC Code of Conduct
standard as operating principles and encouraged our suppliers to
create sustainable value in these fields. To enhance the supply chain
sustainability and partnership with our suppliers, TSMC also shared its
experience and practice to assist suppliers in the field of anti-quake
engineering, hazardous chemical management etc.
TSMC is subject to the new U.S. SEC disclosure rule on conflict
minerals released under Rule 13p-1 of the U.S. Securities Exchange
Act of 1934. As a recognized global leader in the hi-tech
supply-chain, we at TSMC acknowledge our corporate social
responsibility to procure our minerals from conflict-free areas.
TSMC is one of the strongest supporters of the Electronic Industry
Citizenship Coalition (EICC) and the Global e-Sustainability Initiative
(GeSI), which will help our suppliers source conflict-free materials.
TSMC in general supports the humanitarian and ethical principles
contained in the OECD’s Model Supply Chain Policy for a Responsible
Global Supply Chain of Minerals from Conflict-Affected and High
Risk Areas issued in 2011. The Company encourages suppliers to
source from facilities or smelters that have received a “conflict-free“
designation by a recognized industry group, such as the EICC, and
also requires suppliers to disclose information on smelters and mines
in 2013. TSMC adopts and follows global semiconductor industry
The TSMC Education and Culture Foundation, established in 1998
to coordinate the Company’s sponsorship as part of its efforts
in corporate social responsibility, devotes its resources towards
education, promotion of art and culture events, community building,
and the employee volunteer program.
In 2013, the TSMC Foundation contributed over NT$73.5 million to
its long-term projects of promoting education, culture, and arts. In
2013, the Foundation infused more resources in science education.
In addition to supporting a long-term science educational project,
The Foundation for the first time in 2013 sponsored the Center
for the Advancement of Science Education at National Taiwan
University (CASE) to hold “TSMC Cup – Competition of Scientific Story
Telling,“ which target young people aged 15 to 18 nationwide in
order to inspire their interest for science, and to train short talks by
incorporating the four major capacities of listening, speaking, reading
and writing into this innovative contest.
In continuing to promote arts and Chinese Culture, the TSMC
Foundation sponsored the National Symphony Orchestra to produce
the stage version of Wagner’s Die Walküre for the very first time in
Taiwan. Following “The Analects of Confucius“ and “The Writings
of Chung-tzu,“ Professor Hsin Yih-yun, invited by the Foundation,
launched the broadcasting program “Mo-tzu in Hsin’s View“ to
lead the audience to understand Mo-tzu’s philosophy. TSMC’s
six-year consecutive support of the broadcasting program shows the
commitment and endeavors toward the Classical Chinese Philosophy.
Aside from financial sponsorships of culture and educational projects,
the TSMC Foundation supports TSMC Volunteer Society, organizing
employees to devote themselves to the caring of the underprivileged
of the communities.
Commitment to Education – Supporting Educational
Programs to Target the Needs at Different Age Levels
conflict minerals procurement practices such as sourcing from the
Talents are essential to the development of the society. As a leader
same suppliers used by other semiconductor companies. To date,
of Taiwan’s knowledge-based industry, TSMC regards cultivating
TSMC is conflict-free for gold, tantalum, tin and tungsten because
according to the results of our reasonable inquiry into the country
talented people for society as a core responsibility. Thus the TSMC
Foundation tailors various programs to target a whole range of
of origin of these minerals as defined under relevant law, TSMC has
education needs at different age levels.
not used any of these conflict minerals from the Democratic Republic
of Congo and/or its surrounding countries. It is TSMC’s goal to strive
At the primary-school level, the TSMC Foundation is concerned about
use tantalum, tin, tungsten and gold in our products that are DRC
the unbalanced development between urban and rural education. To
conflict-free. TSMC will continue to renew its supplier survey annually
bridge the urban-rural gap, the “TSMC Aesthetic Tour“ and “TSMC
Science Tour“ takes children from remote townships to visit National
Science and Technology Museum. Over the last 11years, more than
competition and lectures, the activity also created the special
87,000 students from remote townships have participated in the tour
editorial pages of United Daily for the former winners, who were
to cultivate their appreciation of art and experience the charisma of
invited to create new works, showing their talents and progress. The
science. The Foundation also continued to support CommonWealth
sixth “TSMC Youth Calligraphy Contest“ held three workshops at
Magazine’s highly successful “Hope Reading Project“. Through
three high schools to inspire students to appreciate the beauty and
the project, the Foundation offers 200 primary schools of remote
cultural richness of calligraphy. The Foundation arranged the former
townships 20,000 books every year. By providing 190,000 good
winners and the calligraphy devotees to visit Taiwan Calligraphy
books with children in remote and underprivileged areas of Taiwan
master Professor Chung-Kao Du. Professor Du, who shared his
since 2004, the Foundation hopes to promote literacy and inspire
50-year experience of calligraphic writings with the participants and
interest in reading among these children so that they will have the
encouraged them to keep on pursuing the art of calligraphy.
opportunity to open the window of hope. In addition to sponsoring
these activities, the TSMC Foundation supports the Taipei Fine Arts
At the college and society level, the TSMC Foundation held the 2nd
Museum’s expansion of the “TSMC Children’s Art Education Center,“
TSMC Literature Award to encourage under-40-year-old writers to
due for completion and inauguration in 2014. The center will be an
create Chinese novels between 60,000 words and 80,000 words.
important cradle for cultivating children’s art appreciation.
Winners not only received big cash prizes but also a contract with
the book publisher, INK. This competition offers young writers
At the high school level, to enhance teenagers’ full development
an excellent forum to showcase their talent and opportunity to
to knowledge of science and humanity, the Foundation supported
be published, underscoring TSMC’s commitment to supporting
and organized scientific camps, contests, and humanity activities. In
literature. The TSMC Foundation continued “TSMC Scholarship“ to
2013, the TSMC Foundation for the first time sponsored the Center
support and encourage underprivileged students attending National
for the Advancement of Science Education at National Taiwan
Tsing Hua University and National Central University. Also, the
University to hold “TSMC Cup – Competition of Scientific Story
Foundation continued to endow chair professorships to enhance
Telling“. Racing through the different stages of the Competition,
academic research of Taiwan universities.
students will cultivate the capacity of logical thinking, argumentation
and presentation skills. Together with the dynamics of teamwork, the
Competition provides a complete scientific experience and training,
and gained overwhelmingly responses from teachers and students. In
2013, 188 teams across the nation participated. The Foundation also
continued to support three science talent camps – Wu Chien-Shiung
Science Camp, Wu Ta-Yu Science Camp and Madame Curie Senior
High School Chemistry Camps – to provide talented students with the
opportunity to hold discussions with world-class scientists with the
goal of inspiring students and helping them realize their potential.
“Senior High School Academic Train,“ organized by National Tsing
hua University, invited professors from the University to introduce
senior high school students to the latest knowledge of technology
and common knowledge for daily life and science. The courses will be
held in 12 senior high schools located in northern, central, southern,
eastern and Kinmen areas. The TSMC Foundation also collaborates
with the Wu Chien-Shiung Foundation to work on “Lifting the
Ability of High School Physics Experiments,“ providing professional
development for 282 science teachers.
In the humanities, “the TSMC Youth Literature Award“ has for 10
years encouraged talented young writers to create new works. AS
Promotion of Arts and Culture – Sponsoring Taiwan Arts
Groups and Promoting the Chinese Classics
The TSMC Education and Culture Foundation has, for years, devoted
its efforts to promoting Taiwan Art Groups. In 2013, the TSMC
Foundation supported National Symphony Orchestra to produce
the stage version of Wagner’s Die Walküre for the very first time in
Taiwan. Under the leadership of Maestro Shao-Chia Lü, Die Walküre
gathered together the prestigious director Hans-Peter Lehmann,
who for years has served as assistant director at the Bayreuth Festival
Theatre, along with Taiwan art groups and top vocal singers from
Taiwan and abroad, all of whom showed marvelous creativity and
performance levels. The production indeed set a milestone of Taiwan
Opera Performing Art history.
In addition to support Taiwan Art Groups, the TSMC Foundation
commits to promote Chinese Traditional Classics in the long term.
Through presenting lectures, producing broadcasting programs
and publishing audio books, the Foundation relives the Classics and
enables audiences to easily understand traditional Chinese philosophy
and wisdom. Among these projects, since 2008 the Foundation
and IC broadcasting company collaborated to invite Professor Hsin
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Yih-yun to produce the Chinese Classics broadcasting program,
sees the duo go head-to-head on stage, charming and enchanting
TSMC-affiliated companies, including Vanguard, VisEra, Xintec,
TSMC Energy Saving Volunteer Program
which are extremely popular and gained huge attention from Chinese
the audience with a variety of classical pieces. The foundation, during
and Global Unichip. The docents’ enthusiasm and professionalism
audiences all over the world. Following The Analects by Confucius
the three-month Art Festival, arranged in total over 40 activities, from
were highly praised by visitors; the group has continuously been
and The Writings of Chuang-tzu, in 2013, Professor Hsin introduced
concerts, traditional operas and lectures, to family-oriented activities,
recognized as the “Outstanding Volunteer Team“ by the National
Mo-tzu, whose thought was as important as Confucius’ at Chinese
attracting more than 25,000 people from local communities.
Museum of Science.
Spring and Autumn Period. Through Professor Hsin Yih-yun’s rich
knowledge and vivid examples, Professor Hsin delivered Mo-tzu’s
7.4 TSMC Volunteer Program
philosophy of promoting diligent and thrifty and comprehensive love
to the public.
Noting the importance of preserving historic sites, the 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. The Foundation also donated NT$10,000,000
to the revitalization of Dr. Sun Yun-suan’s residence, in memory
of Dr. Sun Yun-suan, who was former premier and known for his
contribution to the economic development of Taiwan.
Community Building by Arts – Organizing Hsinchu Arts
Festival to Cultivate the Public’s Art Appreciation
The foundation has long played the role of “fine art planter“ and
hopes to spread the seeds of fine art to the community through
continuous art activities. At TSMC’s site communities, Hsinchu,
Taichung and Tainan, the Foundation annually organizes “Hsinchu
Arts Festival“ to present a broad spectrum of performances for the
inhabitants’ interests in art. Presented annually for the past 11 years,
“Hsinchu Arts Festival“ has become a main art event gaining a huge
nationwide attention. International artists presented by the Festival
include Cho-liang Lin, Midori, Ann-Sophie Mutter, Shlomo Mintz,
Yun-di Li, Kun Woo Paik, Garrick Ohlsson, Jean-Yves Thibaudet and
Sir James Galway. The Festival also gathered the Chinese theatre
masters, including Pai Hsien-yung, Wu Hsing-kuo, Wei Hai-ming,
and Li Bao-chun, to present phenomenal performances at the
communities.
During 2013, the Foundation again invited the most prestigious
artists to join the Festival, such as the winner of 2010 International
Chopin Piano Competition, the Russian pianist Yulianna A. Avdeeva,
who fascinated the Hsinchu classical music lovers with her great
technique and depth of music interpretation. The classical new
star, British violinist Charlie Siem, played Sarasate’s Zigeunerweisen
and Hubay’s Carman Fantasy etc. The wonderful concert fascinated
the students of National Cheng Kung University at Tainan. For an
audience of more than 6,000, the Festival arranged an interactive
concert, the Piano Battle, at Taichung Outdoor Arena. The Piano
Battle, organized and performed by Paul Cibiss and Andreas Kern,
Corporate social responsibility is an integral part of TSMC’s culture
since its founding. TSMC Foundation launched the first employee
volunteer program, Volunteer Docent Program, in 2003 as a channel
through which the Company’s most valuable asset, high-tech
professional employees, give to the society.
TSMC Volunteer Program is dedicated to promoting education and
culture, providing aid for the underprivileged, advocating energy
saving, and caring for the community. Now, employees and their
family members can take part in a variety of programs as follows:
● TSMC Volunteer Docent Program
● TSMC Book Reading Volunteer Program
● TSMC Energy-saving Volunteer Program
● TSMC Community Volunteer Program
● TSMC Ecology Volunteer Program
● TSMC Fab/Division Volunteer Program (2013 new initiative)
TSMC Volunteer Docent Program
An important way through which a corporation can serve and return
to the community in which it operates is to share its expertise.
The spread of knowledge furthers people’s understanding of their
environment and may inspire the future generations and bring forth
change in society.
To promote science education and to enhance people’s
understanding of the IC industry, TSMC made a donation to the
National Museum of Natural Science in Taichung in 1997 to set up
an exhibition hall – The World of the Integrated Circuits. In 2003 and
2011, TSMC sponsored the renovation of the hall, adding interactive
displays that explain semiconductor principles, the development of
integrated circuits, and the important role IC industry plays in one’s
daily life. In 2004, TSMC Foundation started to recruit employees and
their family members to serve as volunteer docents at the exhibition
hall on weekends and holiday.
As many as 194 people volunteered in 2004. Youth volunteers
were added in 2006, allowing employees to invite their children
(high school and above) to join the Volunteer Docent Program.
In 2007, the program was expanded to recruit new blood from
When “The World of Semiconductor“ exhibition opened in 2011,
TSMC recruited around 500 volunteers as tour guides for visitors on
weekends and holidays. In 2013, the number grew to 935 volunteers,
translating to a dedication of 10,752 service hours. As of December
2013, the cumulative service hour totaled to more than 58,152
hours.
TSMC Book Reading Volunteer Program
With global warming and the depletion of limited natural resources
and fuel, saving energy has become a critical issue for both
individuals and corporations around the world. In 2008, TSMC
recruited employees with expertise in energy conservation to start the
Energy Saving Volunteer Program, and since, the Company has been
providing schools in the Hsinchu and Tainan areas with professional
consulting service. The team helps to come up with plans for schools
to improve power efficiency and reduce carbon emissions.
Beginning with 25 TSMC employees, the Energy Saving Volunteer
Program initially served only neighborhood schools. Two high schools
in Hsinchu were chosen, and a team was sent to each school to assist
in lowering water, electricity and telecommunication bills, as well as
TSMC believes the future hope and competitiveness of Taiwan lie
improving environmental safety and air-conditioning. After assessing
in children of the next generation, and education is the key to the
the facilities, collecting data, and evaluating power efficiency, the
development of these children. Hoping to help reduce the disparity
teams proposed energy-saving plans and ways to reduce carbon
of educational resources between rural and urban schools, TSMC
emissions to the schools.
Foundation has been sponsoring the “Hope Reading Program“
organized by CommonWealth Magazine since 2004. Besides
The Energy Saving Volunteers not only endeavor to save energy
donating 20,000 books annually to 200 schools in remote and rural
for the Company and Taiwan but also wish to do what they can to
areas, the Foundation recruited employees and their family members
preserve the earth. The program expanded its service to Taichung in
to form volunteer teams and read to underprivileged children of
2011 to fulfill its promise: “Where TSMC is, its volunteers will be“.
remote areas in hope of sparking their interest in reading.
In 2013, these volunteers input 1,000 hours in Hsinchu, Taichung,
In 2004, 49 volunteers joined the Program and started serving two
elementary schools in the remote townships in Hsinchu. Now, more
TSMC Community Volunteer Program
Tainan and Penghu areas.
than 100 people travel to the remote schools to read stories to the
children on a regular basis. With increased numbers of participants,
the program was extended to Tainan in 2006. Currently, volunteers
serve in five schools, encouraging children to read and make use of
the books donated through the Hope Reading Program.
The selfless service of Book Reading Volunteer Program participants
is greatly valued by the schools and the children. This program has
become a great model frequently reported by the mass media, which
helps to spread the spirit of encouraging reading through reading
aloud.
In 2012, TSMC expanded its service scope to eight schools from five.
Today, 465 volunteers read books with children in Hsinchu, Taichung
and Tainan. They have served for nine consecutive years and will
continue to help pave the road leading to a brighter future for the
underprivileged children. In 2013, volunteers dedicated 6,678 hours
to read books for children. As of December 2013, the cumulative
service hour is more than 30,478 hours.
When the TSMC Community Volunteer Program started recruiting
employees, its 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 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, Typhoon Morakot Project Team
became the Community Volunteer Program in 2010, aiming to reach
out to the ones in need.
Both the elderly and children are the joint focus of TSMC Community
Volunteers partly because Taiwan is an aging society with more than
two million people over the age of 65, among whom one fifth need
nursing care. Moreover, with the rapid changes in society, it is critical
for children – the future of the country – to build their characters at
an early age. It is especially important for children of dysfunctional
families to have productive interactions and experience the warmth,
care and company of others.
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and veterans to create art works such as rock-painting. The veterans
volunteered to maintain the Hsinchu venue of The National Lantern
Item
Implementation Status
The TSMC Community Volunteer Program mainly serves the elderly
at Hsinchu Veterans Home and the children at St. Teresa Children
● Environmental Protection
The Company is dedicated to protecting the environment of Taiwan
Center. At Hsinchu Veterans Home, art workshops allow volunteers
in collaboration with charities. For instance, TSMC employees
get to enjoy the beauty of art; volunteers and veterans get to
Festival 2013. In addition, invited by TSMC volunteers, students of
understand each other more through chatting. At St. Teresa Children
Jinshan Elementary School participated in the street cleaning activity
Center, volunteers conduct one-on-one companionship. During the
as one of their graduating events. The activity not only contributed
monthly family day at the Center, volunteers spend a wonderful
to the community, but also helped plant the seed of environmental
weekend going on an outing with the children or reading to them in
protection in the mind of the younger generation.
the Center.
Two Holiday Volunteer activities were held in 2013. In July, TSMC
● Energy Consumption Reduction
With the long-term collaboration between TSMC’s fabs in Tainan and
Community Volunteers invited the elderly and children they served
Zengwum Dam, the Company organized interactive and interesting
to “Window on China“ theme park and spent a wonderful Saturday
field trips for students from the schools near downstream of the
together. In December, the volunteers held the second holiday activity
watershed to promote the idea of water consumption reduction.
for the year at Hsinchu City Zoo. During this event, a roundtable
Through interactive learning activities, the students realized the
banquet was held for the elderly and children to celebrate an early
importance of water saving.
Chinese New Year. In 2013, there were 349 volunteers. The elderly,
the children, and the volunteers are closely linked with one another
Despite high competition in the technology industry, the Company
through regular activities.
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 donated their time to environmental protection
never forgets to cherish the environment. With the summoning of
Volunteer Club’s President, Mrs. Sophie Shu-fen Chang, seminars
concerning energy consumption and power reduction were held
to share the knowledge and technology of the green buildings and
energy saving accomplishments. Through those efforts, the Company
hopes to root the green power deeply into the minds of other
service at ecology parks in Taichung and Tainan. Volunteers were
corporations.
trained as ecology docents to share natural ecology concepts with
school children and the public visiting the two parks.
● Hsinchu Fab 12B ecology park docent: In 2013, a new venue was
added to provide docent service. With 88 employees joining the
group, the Company invited more than 120 students and teachers
from four elementary schools to visit TSMC’s ecology park in
Hsinchu.
● Taichung Fab 15 ecology park docent: In 2013, 92 employees
joined the group, and the Company invited more than 150 students
and teachers from five elementary schools to visit TSMC’s ecology
park in Taichung.
● Caring for the Disadvantaged
Charity bazaars and group-buying were held in fabs from time
to time and, in the belief that even a small donation will make
a difference, the accumulated profits were donated to charities.
Furthermore, when the employees saw people in need, such as
solitary elders, destitute children, and economically disadvantaged
individuals, they called for enthusiastic support from their fellow
employees to repair and maintain the old houses of the ones in
need, provided daily suppliers and necessities, and offered warm
accompany. Employees of the Company are devoted to give a hand
to helpless people for them to move toward a brighter future with
● Tainan Jacana ecology education park docent: TSMC Volunteer
dignity.
Program recruited 134 employees and their family members to
serve as volunteer docents at the Jacana ecology education park on
weekends and holidays.
TSMC Fab/Division Volunteer Program
With the enthusiastic support from Senior Managers, TSMC
employees are dedicated to give to the society in return. Employees
have devoted to various welfare activities on the Fab/Division level
for causes such as environment protection, promotion of energy
consumption reduction, and caring of the disadvantaged.
7.5 Social Responsibility Implementation Status as Required by the Taiwan Financial Supervisory
Commission
Non-implementation
and Its Reason(s)
None
1. Implementation of Corporate Governance
(1) Corporate social responsibility policy and performance evaluation
(1) Please refer to “7. Corporate Social Responsibility“ on pages 92-109 of this
Annual Report.
(2) Dedicated organization for the promotion and execution of corporate social
(2) Please refer to “7. Corporate Social Responsibility” on pages 92-109 of this
responsibility
Annual Report.
(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 “3.5 Code of Ethics and Business Conduct“ on pages 36-39 of
this Annual Report.
2. Sustainable Environment Development
(1) Commitment to improving resources utilization and the use of renewable
Please refer to “7.2.1 Environmental Protection“ on pages 97-99 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 gr eenhouse
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 pages 71-74 of this Annual Report.
None
(2) Safety and health in working environment, and the condition for providing
(2) Please refer to “7.2.3 Safety and Health“ on pages 102-104 of this Annual
periodical safety and health training to employees
Report.
(3) Mechanism of periodical communication with employees, and reasonable
(3) Please refer to “5.5 Employees“ on pages 71-74 of this Annual Report.
notice measures regarding significant operational changes which might cause
significant impacts to employees.
(4) Disclosure of consumer rights policy, and official channel for consumer
(4) Please refer to “5.4 Customer Trust“ on pages 69-71 of this Annual Report.
complaints
(5) Collaboration with suppliers
(5) Please refer to “Supply Chain Sustainability” in “7. Corporate Social
Responsibility” on page 104 of this Annual Report.
(6) Participation in community development and charities through commercial
(6) Please refer to “7. Corporate Social Responsibility“ on pages 92-109 of this
activities, donations, volunteers or other free professional services
Annual Report.
4. Enhancement of Information Disclosure
(1) Disclosure of corporate social responsibility related information with
significance and reliability.
(2) Published corporate responsibility report and disclosure of implementation of
corporate social responsibility
TSMC has published “Corporate 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 follows the ten principles of corporate social responsibility set by the Chairman, Dr. Morris Chang. For our corporate social responsibility operational status, please refer to “7. Corporate Social
Responsibility“ on pages 92-109 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 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 Responsibility Report is compliant with the requirements of Global Reporting Initiative (GRI) G3.1 level A+ and AA1000AS:2008 standard.
108
109
8. Subsidiary Information
and Other Special Notes
TSMC is the world’s largest
dedicated semiconductor foundry
with capacity of 16.45 million
8-inch equivalent wafers in 2013.
8.1 Subsidiaries
8.1.1 TSMC Subsidiaries Chart
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%
Emerging Alliance Fund, L.P.
Shareholding: 99.5%
Taiwan
Semiconductor
Manufacturing
Company Limited
As of 12/31/2013
WaferTech, LLC
Shareholding: 100%
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%
VentureTech Alliance Fund II, L.P.
Shareholding: 98%
Mutual-Pak Technology Co., Ltd.
Shareholding: 58.33%
VentureTech Alliance Fund III, L.P.
Shareholding: 50.35%
Growth Fund Limited
Shareholding: 100%
TSMC Solar Ltd.
Shareholding: 98.58%
VentureTech Alliance Fund III, L.P.
Shareholding: 48.63%
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: 92.32%
TSMC Lighting North America, Inc.
Shareholding: 100%
TSMC Guang Neng Investment, Ltd.
Shareholding: 100%
TSMC Solar Ltd.
Shareholding: 0.46%
TSMC Solid State Lighting Ltd.
Shareholding: 0.90%
110
111
8.1.2 Business Scope of TSMC and Its Subsidiaries
8.1.4 Shareholders in Common of TSMC and Its Subsidiaries with Deemed Control and Subordination: None.
TSMC and its subsidiaries strive to provide the best foundry services in the industry. Subsldlarles in North America, Europe, Japan, China, and
South Korea are dedicated to servicing TSMC customers worldwide. WaferTech in the United States and TSMC China provide additional 8-inch
wafer capacity. Other subsidiaries support the Company’s core foundry business with related services such as design service and invest in start-up
companies involved in design, manufacturing, and other related businesses in the semiconductor industry. Beginning in 2010, certain TSMC’s
subsidiaries also engage in researching, developing, designing, manufacturing and selling of solid state lighting devices and related products and
8.1.5 Rosters of Directors, Supervisors, and Presidents of TSMC’s Subsidiaries
Unit: NT$(USD/EUR), except shareholding
Company
Title
Name
systems, and solar-related technologies and products.
8.1.3 TSMC Subsidiaries
Unit: NT(USD, EUR, JPY, KRW, RMB, CAD)$ thousands
TSMC North America
As of 12/31/2013
TSMC Europe B.V.
Company
Date of
Incorporation
Place of Registration
Capital Stock
Business Activities
TSMC North America
Jan. 18, 1988
San Jose, California, U.S.
US$
11,000
Selling and marketing of integrated circuits and
semiconductor devices
TSMC Europe B.V.
TSMC Japan Limited
TSMC Korea Limited
TSMC China Company Limited
Mar. 04, 1994
Sep. 10, 1997
May 02, 2006
Aug. 04, 2003
TSMC Technology, Inc.
Feb. 20, 1996
InveStar Semiconductor Development Fund, Inc.
Sep. 10, 1996
InveStar Semiconductor Development Fund,
Inc. (II) LDC.
TSMC Development, Inc.
WaferTech, LLC
Aug. 25, 2000
Feb. 16, 1996
Jun. 03, 1996
Amsterdam, The Netherlands
Yokohama, Japan
Seoul, Korea
Shanghai, China
Delaware, U.S.
Cayman Islands
Cayman Islands
Delaware, U.S.
Washington, U.S.
EUR
JPY
KRW
RMB
US$
US$
US$
US$
US$
100
Marketing and engineering supporting activities
300,000
Marketing activities
400,000
Customer service and technical supporting activities
4,502,080
Manufacturing and selling of integrated circuits at the
order of and pursuant to product design specifications
provided by customers
0.001
Engineering support activities
811
Investing in new start-up technology companies
14,578
Investing in new start-up technology companies
0.001
Investment activities
80,000
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.
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
May 28, 2007
Jul. 13, 2006
Mar. 22, 2006
Jan. 10, 2001
Feb. 27, 2004
Mar. 25, 2006
May 30, 2007
Apr. 25, 2007
Aug. 16, 2011
Sep. 03, 2010
Sep. 29, 2010
Dec. 17, 2010
Ontario, Canada
Tortola, British Virgin Islands
Taipei, Taiwan
Cayman Islands
Cayman Islands
Cayman Islands
Cayman Islands
Delaware, U.S.
CAD
US$
NT$
US$
US$
US$
US$
2,434
Engineering support activities
1,284,000
Investment activities
268,184
Manufacturing and selling of electronic parts and
researching, developing and testing of RFID
24,155
Investing in new start-up technology companies
14,511
Investing in new start-up technology companies
115,679
Investing in new start-up technology companies
2,130
Investing in new start-up technology companies
N/A
Investing in new start-up technology companies
Taichung, Taiwan
NT$
11,341,000
Researching, developing, designing, manufacturing
and selling renewable energy and energy saving related
technologies and products
TSMC Solid State Lighting Ltd.
Aug. 16, 2011
Hsinchu, Taiwan
NT$
6,008,000
Delaware, U.S.
Amsterdam, the Netherlands
Hamburg, Germany
US$
EUR
EUR
1
Selling and marketing of solar related products
TSMC Partners, Ltd.
100
100
Investing in solar related business
Selling of solar related products and providing customer
service
Researching, developing, designing, manufacturing
and selling solid state lighting devices and related
applications products and systems
TSMC Design Technology Canada Inc.
TSMC Lighting North America, Inc.
Sep. 03, 2010
Delaware, U.S.
TSMC Guang Neng Investment, Ltd.
Jan. 19, 2012
Taipei, Taiwan
US$
NT$
1
Selling and marketing of solid state lighting related
products
150,000
Investment activities
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
Director
Director
President
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
Dick Thurston
Rick Cassidy
Rick Cassidy
Wendell Huang
Maria Marced
Maria Marced
Chih-Chun Tsai
Makoto Onodera
Lora Ho
Makoto Onodera
Shing-Wha Lin
Chih-Chun Tsai
Wendell Huang
F.C. Tseng
M.C. Tzeng
L.C. Tu
Lora Ho
L.C. Tu
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
Cormac Michael O’Connell
Richard Thurston
Cliff Hou
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
As of 12/31/2013
% (Investment
Holding%)
-
-
-
100%
-
-
-
100%
-
-
-
-
100%
-
-
-
100%
-
-
-
-
-
(100%)
-
-
-
-
100%
-
97.09%
-
97.09%
-
-
-
100%
-
-
-
100%
-
-
-
100%
-
-
-
-
100%
(Continued)
112
113
Company
TSMC Global, Ltd.
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
Director
Director
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
Name
Lora Ho
Richard Thurston
Hsu-Tung Chen
Lewis Hwang
Representative of VentureTech Alliance Fund III,
L.P.: Juine-Kai Tseng
Wei-Pong Lin
Lewis Hwang
None
None
None
None
None
Rick Tsai (Note 1)
F.C. Tseng
Richard Thurston
Lora Ho
Ying-Chen Chao
Lora Ho
Richard Thurston
Rick Tsai (Note 2)
Lora Ho
Richard Thurston
Rick Tsai (Note 3)
Lora Ho
Richard Thurston
Stephen McKenery
Ying-Chen Chao
Rick Tsai (Note 1)
F.C. Tseng
Richard Thurston
Lora Ho
Jacob Tarn (Note 4)
Lora Ho
Richard Thurston
Rick Tsai (Note 5)
Lora Ho
Richard Thurston
Shareholding
Shares (Investment Amount)
% (Investment
Holding%)
-
-
TSMC holds 1,284 shares
1,107,010 shares
2,508,000 shares
15,643,347 shares
30,000 shares
2,508,000 shares
(TSMC’s investment US$24,034,590)
(TSMC’s investment US$14,221,019)
(TSMC’s investment US$58,240,732)
(TSMC Solar Ltd.’s investment US$56,250,001)
(VentureTech Alliance Fund III, L.P.’s
investment US$2,130,000)
None
-
-
-
-
TSMC holds 1,118,000,000 shares
TSMC Guang Neng Investment, Ltd. holds
5,249,800 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
-
-
-
-
TSMC holds 554,674,437 shares
TSMC Guang Neng Investment, Ltd. holds
5,435,878 shares
2,457,415 shares
-
-
-
TSMC Solid State Lighting Ltd. holds
1,000 shares
-
-
(TSMC’s investment NT$150,000,000)
-
-
100%
4.13%
9.35%
58.33%
0.11%
9.35%
(99.50%)
(98.00%)
(50.35%)
(48.63%)
(100%)
(100%)
-
-
-
-
98.58%
0.46%
0.11%
-
-
-
100%
-
-
100%
-
-
-
-
-
100%
-
-
-
-
92.32%
0.90%
0.41%
-
-
-
100%
-
-
100%
Note 1: Dr. Rick Tsai resigned as a director on January 27, 2014, succeeded by Dr. Stephen T. Tso.
Note 2: Dr. Rick Tsai resigned as President on January 27, 2014, succeeded by Mr. Ying-Chen Chao.
Note 3: Dr. Rick Tsai resigned as a director on January 27, 2014.
Note 4: Dr. Jacob Tarn resigned as President on February 20, 2014, succeeded by Mr. C.H. Chen.
Note 5: Dr. Rick Tsai resigned as President on January 27, 2014, succeeded by Mr. C.H. Chen.
TSMC Technology, Inc.
InveStar Semiconductor Development Fund,
Inc.
InveStar Semiconductor Development Fund,
Inc. (II) LDC
TSMC Development, Inc.
WaferTech, LLC
TSMC Partners, Ltd.
8.1.6 Operational Highlights of TSMC Subsidiaries (Note)
Unit: NT$ thousands, except EPS ($)
Company
Capital Stock
Assets
Liabilities
Net Worth
Net Revenue
TSMC North America
TSMC Europe B.V.
TSMC Japan Limited
TSMC Korea Limited
327,800
59,095,156
55,331,962
3,763,194
418,065,923
4,100
85,020
11,320
389,587
171,807
31,714
98,749
47,045
2,239
290,838
124,762
29,475
446,714
237,267
20,993
Income
(Loss) from
Operation
97,185
47,317
10,791
1,925
TSMC China Company Limited
22,015,171
26,389,517
2,362,958
24,026,559
17,047,495
4,917,422
5,192,936
As of 12/31/2013
Net Income
(Loss)
Basic Earnings
(Loss) Per Share
468,309
37,659
4,717
1,296
42.57
188,294.17
786.16
16.20
N/A
0.03
24,153
528,148
297,024
141,177
41,168
386,971
255,857
852,391
226,292
40,590
191,163
37,518
3,751,830.90
190,339
234.84
434,412
333,283
1,098
332,185
97,291
73,178
73,175
5.02
0.03
20,614,259
-
20,614,259
2,384,000
8,515,086
808,506
7,706,580
29,450,394
42,862,161
-
42,862,161
TSMC Design Technology Canada Inc.
68,197
169,884
27,116
142,768
TSMC Global Ltd.
38,263,200
115,161,390
50,207,901
64,953,489
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 North America, Inc.
TSMC Lighting North America, Inc.
TSMC Solar Europe B.V.
TSMC Solar Europe GmbH
TSMC Solar Ltd.
TSMC Solid State Lighting Ltd.
TSMC Guang Neng Investment, Ltd.
268,184
719,830
432,435
3,447,244
63,474
-
30
30
4,100
4,100
11,341,000
6,008,000
150,000
98,622
145,652
450,222
888,020
18,075
-
22,608
2,980
89,407
124,034
7,213,235
3,008,574
86,412
59,017
-
5,817
298
-
-
14,303
107
211
38,171
2,635,931
674,396
1,250
39,605
145,652
444,405
887,722
18,075
-
8,305
2,873
89,196
85,863
4,577,304
2,334,178
85,162
2,612,431
8,495,239
3,516,600
217,842
928,232
60,934
13,413
84,352
37,833
-
-
2,611,740
2,512,407
3,516,560
19,804
(107,256)
(18,454)
4,025
32,391
2,593,196
259,319,585.23
2,558,757
3,516,560
15,493
8.71
3.56
6.74
(172,392)
(134,261.45)
(19,129)
(10,806)
(3,662)
(0.71)
N/A
N/A
N/A
N/A
N/A
(1,510,174)
(1,510,174)
(3,286)
-
(1,839)
-
439
(37,126)
(36,733)
(36,732.98)
-
-
151,344
259,158
178,335
-
(65)
(282)
(51,325)
(65)
(93,795)
(93,917)
(65.19)
(468,973.40)
(469,587.03)
(962,460)
(1,530,526)
(1,671,706)
(1,659,745)
(106)
(22,899)
(1.35)
(2.76)
N/A
Note: Foreign exchange rates for balance sheet amounts are as follows: $1 USD = $29.800 NT, $1 EUR = $41.00.NT, $1 JPY = $0.2834 NT, $1 RMB = $4.89 NT, $1 KRW = $0.0283NT, $1 CAD = $28.02 NT
Foreign exchange rates for income statement amounts are as follows: $1 USD = $29.675 NT, $1 EUR = $39.54 NT, $1 JPY = $0.3068 NT, $1 RMB = $4.83 NT, $1 KRW = $0.0272 NT, $1 CAD = $28.89 NT
8.2 Status of TSMC Common Shares and ADRs Acquired, Disposed of, and Held by Subsidiaries: None.
8.3 Special Notes
8.3.1 Private Placement Securities in 2013 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 2013 and as of the Date of this Annual Report
The competent authorities fined a minor fine totaling NT$27,433 for very few isolated incidents of administrative errors. TSMC has been
implementing relevant remedial measures.
8.3.3 Any Events in 2013 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.
114
115
CONTACT INFORMATION
Corporate Headquarters & Fab 12A
8, Li-Hsin Rd. 6, Hsinchu Science Park, Hsinchu 300-78, Taiwan, R.O.C.
Tel: 886-3-5636688 Fax: 886-3-5637000
R&D Center & Fab 12B
168, Park Ave. II, Hsinchu Science Park, Hsinchu 300-75, Taiwan, R.O.C.
Tel: 886-3-5636688 FAX: 886-3-6687827
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
Fab 3
9, Creation Rd. 1, Hsinchu Science Park, Hsinchu 300-77, Taiwan, R.O.C.
Tel: 886-3-5636688 Fax: 886-3-5781548
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
Fab 8
25, Li-Hsin Rd., Hsinchu Science Park, Hsinchu 300-78, Taiwan, R.O.C.
Tel: 886-3-5636688 Fax: 886-3-5662051
Fab 14A
1-1, Nan-Ke North Rd., Tainan Science Park, Tainan 741-44, Taiwan
R.O.C.
Tel: 886-6-5056688 Fax: 886-6-5051262
Fab 14B
17, Nan-Ke 9th Rd., Tainan Science Park, Tainan 741-44, Taiwan, R.O.C.
Tel: 886-6-5056688 Fax: 886-6-5055217
Fab 15
1, Keya Rd. 6., Cental Taiwan Science Park, 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 Europe B.V.
World Trade Center, Zuidplein 60, 1077 XV Amsterdam
The Netherlands
Tel: 31-20-3059900 Fax: 31-20-3059911
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
TSMC China Company Limited
4000, Wen Xiang Road, Songjiang, Shanghai, China
Postcode: 201616
Tel: 86-21-57768000 Fax: 86-21-57762525
Copyright © 2014 by Taiwan Semiconductor Manufacturing Company, Ltd. All rights reserved.
TSMC Korea Limited
15F, AnnJay Tower, 718-2, Yeoksam-dong, Gangnam-gu
Seoul 135-080, Korea
Tel: 82-2-20511688 Fax: 82-2-20511669
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
TSMC Design Technology Canada Inc.
535 Legget Dr., Suite 600, Kanata, ON K2K 3B8, Canada
Tel: 613-576-1990
Fax: 613-576-1999
TSMC Spokesperson
Name: Lora Ho
Title: Senior Vice President & CFO
Tel: 886-3-5054602 Fax: 886-3-5637000
Email: cyhsu@tsmc.com
Deputy Spokesperson/Corporate Communications
Name: Elizabeth Sun
Title: Director, TSMC Corporate Communication Division
Tel: 886-3-5682085 Fax: 886-3-5637000
Email: elizabeth_sun@tsmc.com
Auditors
Company: Deloitte & Touche
Auditors: Yi-Hsin Kao, Hung-Wen 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
CONTACT INFORMATION
Corporate Headquarters & Fab 12A
8, Li-Hsin Rd. 6, Hsinchu Science Park, Hsinchu 300-78, Taiwan, R.O.C.
Tel: 886-3-5636688 Fax: 886-3-5637000
TSMC North America
2585 Junction Avenue, San Jose, CA 95134, U.S.A.
Tel: 1-408-3828000 Fax: 1-408-3828008
R&D Center & Fab 12B
168, Park Ave. II, Hsinchu Science Park, Hsinchu 300-75, Taiwan, R.O.C.
Tel: 886-3-5636688 FAX: 886-3-6687827
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
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
Fab 8
25, Li-Hsin Rd., Hsinchu Science Park, Hsinchu 300-78, Taiwan, R.O.C.
Tel: 886-3-5636688 Fax: 886-3-5662051
Fab 14A
1-1, Nan-Ke North Rd., Tainan Science Park, Tainan 741-44, Taiwan
R.O.C.
Tel: 886-6-5056688 Fax: 886-6-5051262
Fab 14B
17, Nan-Ke 9th Rd., Tainan Science Park, Tainan 741-44, Taiwan, R.O.C.
Tel: 886-6-5056688 Fax: 886-6-5055217
Fab 15
1, Keya Rd. 6., Cental Taiwan Science Park, Taichung 428-82, Taiwan
R.O.C.
Tel: 886-4-27026688 Fax: 886-4-25607548
TSMC China Company Limited
4000, Wen Xiang Road, Songjiang, Shanghai, China
Postcode: 201616
Tel: 86-21-57768000 Fax: 86-21-57762525
TSMC Korea Limited
15F, AnnJay Tower, 718-2, Yeoksam-dong, Gangnam-gu
Seoul 135-080, Korea
Tel: 82-2-20511688 Fax: 82-2-20511669
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
TSMC Design Technology Canada Inc.
535 Legget Dr., Suite 600, Kanata, ON K2K 3B8, Canada
Tel: 613-576-1990
Fax: 613-576-1999
TSMC Spokesperson
Name: Lora Ho
Title: Senior Vice President & CFO
Tel: 886-3-5054602 Fax: 886-3-5637000
Email: cyhsu@tsmc.com
Copyright © 2014 by Taiwan Semiconductor Manufacturing Company, Ltd. All rights reserved.
Deputy Spokesperson/Corporate Communications
Name: Elizabeth Sun
Title: Director, TSMC Corporate Communication Division
Tel: 886-3-5682085 Fax: 886-3-5637000
Email: elizabeth_sun@tsmc.com
Auditors
Company: Deloitte & Touche
Auditors: Yi-Hsin Kao, Hung-Wen 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
TABLE OF CONTENTS
1. Condensed Balance Sheet
2. Condensed Statement of Comprehensive Income /
Condensed Statement of Income
3. Financial Analysis
4. Auditors’ Opinions from 2009 to 2013
5. Audit Committee’s Review Report
6. Financial Difficulties
7. Consolidated Financial Statements
for the
Years Ended December 31, 2013 and
2012 and
Independent Auditors’ Report
8. Parent Company Only Financial Statements for the
Years Ended December 31, 2013 and 2012 and
Independent Auditors’ Report
2
3
6
10
10
10
10
72
1. Condensed Balance Sheet
1.1 Condensed Balance Sheet from 2012 to 2013 (Consolidated)
1.2 Condensed Balance Sheet from 2009 to 2011 (Consolidated) -
Unit: NT$ thousands
ROC GAAP
Item
Current Assets
Long-term Investments (Note 1)
Property, Plant and Equipment
Intangible Assets
Other Assets (Note 2)
Total Assets
Current Liabilities
Before Distribution
After Distribution
Noncurrent Liabilities
Total Liabilities
Before Distribution
After Distribution
Equity Attributable to Shareholders of the Parent
Capital Stock
Capital Surplus
Retained Earnings
Before Distribution
After Distribution
Others
Equity Attributable to Shareholders of the Parent
Before Distribution
After Distribution
Noncontrolling Interests
Total Equity
Before Distribution
After Distribution
2012
250,325,436
65,717,240
617,562,188
10,959,569
16,790,075
961,354,508
148,473,947
226,247,254
89,786,655
238,260,602
316,033,909
259,244,357
55,675,340
408,411,468
330,638,161
(2,780,485)
720,550,680
642,777,373
2,543,226
723,093,906
645,320,599
2013
358,486,654
89,183,810
792,665,913
11,490,383
11,228,217
1,263,054,977
189,777,934
(Note 3)
225,501,958
415,279,892
(Note 3)
259,286,171
55,858,626
518,193,152
(Note 3)
14,170,306
847,508,255
(Note 3)
266,830
847,775,085
(Note 3)
Note 1: Long-term investments consists of noncurrent available-for-sale financial assets, financial assets carried at cost and investments accounted for using equity
method.
Note 2: Other assets consists of deferred income tax assets, refundable deposits, and other noncurrent assets.
Note 3: Pending for shareholders’ approval.
Item
Current Assets
Long-term Investments
Fixed Assets
Other Assets
Total Assets
Current Liabilities
Before Distribution
After Distribution
Long-term Liabilities
Other Liabilities
Total Liabilities
Before Distribution
After Distribution
Capital Stock
Capital Surplus
Retained Earnings
Before Distribution
After Distribution
Cumulative Transaction Adjustments
Unrealized Gain/Loss on Financial Instruments
Equity Attributable to Shareholders of the Parent
Before Distribution
After Distribution
Minority Interests
Total Equity
Before Distribution
After Distribution
2009
259,803,748
37,845,503
273,674,787
23,372,182
594,696,220
79,133,288
156,841,408
11,388,479
5,125,905
95,647,672
173,355,792
259,027,066
55,486,010
181,882,682
104,174,562
(1,766,667)
453,621
495,082,712
417,374,592
3,965,836
499,048,548
421,340,428
2010
261,519,317
39,775,528
388,444,023
29,190,036
718,928,904
123,191,113
200,921,349
12,050,755
4,982,631
140,224,499
217,954,735
259,100,787
55,698,434
265,779,571
188,049,335
(6,543,163)
109,289
574,144,918
496,414,682
4,559,487
578,704,405
500,974,169
Unit: NT$ thousands
2011
225,260,396
34,458,504
490,374,916
24,171,126
774,264,942
117,006,687
194,755,355
20,458,493
4,756,211
142,221,391
219,970,059
259,162,226
55,846,357
322,191,155
244,442,487
(6,433,369)
(1,172,855)
629,593,514
551,844,846
2,450,037
632,043,551
554,294,883
2
1.3 Condensed Balance Sheet from 2012 to 2013 (Unconsolidated)
1.4 Condensed Balance Sheet from 2009 to 2011 (Unconsolidated) -
Unit: NT$ thousands
ROC GAAP
Item
Current Assets
Long-term Investments (Note 1)
Property, Plant and Equipment
Intangible Assets
Other Assets (Note 2)
Total Assets
Current Liabilities
Before Distribution
After Distribution
Noncurrent Liabilities
Total Liabilities
Before Distribution
After Distribution
Equity
Capital Stock
Capital Surplus
Retained Earnings
Before Distribution
After Distribution
Others
Total Equity
Before Distribution
After Distribution
2012
205,819,614
139,634,200
586,636,036
6,449,837
13,597,966
952,137,653
144,528,616
222,301,923
87,058,357
231,586,973
309,360,280
259,244,357
55,675,340
408,411,468
330,638,161
(2,780,485)
720,550,680
642,777,373
Note 1: Long-term investments consists of financial assets carried at cost and investments accounted for using equity method.
Note 2: Other assets consists of intangible assets, deferred income tax assets, refundable deposits, and other noncurrent assets.
Note 3: Pending for shareholders’ approval.
2013
257,623,763
165,545,159
770,443,494
7,069,456
7,897,131
1,208,579,003
187,195,744
(Note 3)
173,875,004
361,070,748
(Note 3)
259,286,171
55,858,626
518,193,152
(Note 3)
14,170,306
847,508,255
(Note 3)
Item
Current Assets
Long-term Investments
Fixed Assets
Other Assets
Total Assets
Current Liabilities
Before Distribution
After Distribution
Long-term Liabilities
Other Liabilities
Total Liabilities
Before Distribution
After Distribution
Capital Stock
Capital Surplus
Retained Earnings
Before Distribution
After Distribution
Cumulative Transaction Adjustments
Unrealized Gain/Loss on Financial Instruments
Total Equity
Before Distribution
After Distribution
2009
185,831,537
118,427,813
254,751,526
18,415,746
577,426,622
72,571,095
150,279,215
4,916,390
4,856,425
82,343,910
160,052,030
259,027,066
55,486,010
181,882,682
104,174,562
(1,766,667)
453,621
495,082,712
417,374,592
2010
192,234,282
117,913,756
366,854,299
24,237,329
701,239,666
118,022,260
195,752,496
4,500,000
4,572,488
127,094,748
204,824,984
259,100,787
55,698,434
265,779,571
188,049,335
(6,543,163)
109,289
574,144,918
496,414,682
Unit: NT$ thousands
2011
158,563,352
129,400,844
454,373,533
19,070,145
761,407,874
109,514,430
187,263,098
18,000,000
4,299,930
131,814,360
209,563,028
259,162,226
55,846,357
322,191,155
244,442,487
(6,433,369)
(1,172,855)
629,593,514
551,844,846
3
2. Condensed Statement of Comprehensive Income / Condensed
Statement of Income
2.1 Condensed Statement of Comprehensive Income from 2012 to 2013
2.2 Condensed Statement of Income from 2009 to 2011 (Consolidated) -
(Consolidated)
Item
Net Revenue
Gross Profit
Income from Operations
Non-operating Income and Expenses
Income before Income Tax
Net Income
Other Comprehensive Income for the Year, Net of Income Tax
Total Comprehensive Income for the Year
Net Income (Loss) Attributable to:
Shareholders of the Parent
Noncontrolling Interests
Total Comprehensive Income (Loss) Attributable to:
Shareholders of the Parent
Noncontrolling Interests
Basic Earnings Per Share
* Based on weighted average shares outstanding in each year
Unit: NT$ thousands (Except EPS:NT$)
Unit: NT$ thousands (Except EPS: NT$)
ROC GAAP
2012
506,745,234
244,137,107
181,176,868
499,588
181,676,456
166,123,802
4,252,632
170,376,434
166,318,286
(194,484)
170,521,543
(145,109)
6.42*
2013
597,024,197
280,945,507
209,429,363
6,057,759
215,487,122
188,018,937
16,352,248
204,371,185
188,146,790
(127,853)
204,505,782
(134,597)
7.26*
Item
Net Sales
Gross Profit
Income from Operations
Non-operating Income and Gains
Non-operating Expenses and Losses
Interest Revenue
Interest Expense
Income before Income Tax
Net Income
Net Income Attributable to Shareholders of the Parent
Basic Earnings Per Share
* Based on weighted average shares outstanding in each year
2009
295,742,239
129,328,611
91,961,886
5,653,548
2,152,787
2,600,925
391,479
95,462,647
89,466,223
89,217,836
3.45*
2010
419,537,911
207,053,591
159,175,335
13,136,072
2,041,012
1,665,193
425,356
170,270,395
162,281,930
161,605,009
6.24*
2011
427,080,645
194,069,228
141,557,418
5,358,527
1,768,268
1,479,514
626,725
145,147,677
134,453,260
134,201,279
5.18*
4
2.3 Condensed Statement of Comprehensive Income from 2012 to 2013
2.4 Condensed Statement of Income from 2009 to 2011 (Unconsolidated)
(Unconsolidated)
Item
Net Revenue
Gross Profit
Income from Operations
Non-operating Income and Expenses
Income before Income Tax
Net Income
Other Comprehensive Income for the Year, Net of Income Tax
Total Comprehensive Income for the Year
Basic Earnings Per Share
* Based on weighted average shares outstanding in each year
Unit: NT$ thousands (Except EPS: NT$)
Unit: NT$ thousands (Except EPS: NT$)
- ROC GAAP
2012
500,369,525
234,850,311
176,820,141
6,932,246
183,752,387
166,318,286
4,203,257
170,521,543
6.42*
2013
591,087,600
271,644,860
204,653,892
11,062,658
215,716,550
188,146,790
16,358,992
204,505,782
Item
Net Sales
Gross Profit
Income from Operations
Non-operating Income and Gains
Non-operating Expenses and Losses
Interest Revenue
Interest Expense
Income before Income Tax
7.26*
Net Income
Basic Earnings Per Share
* Based on weighted average shares outstanding in each year
2009
285,742,868
126,475,970
94,522,353
4,121,509
3,662,840
1,117,374
142,026
94,981,022
89,217,836
3.45*
2010
406,963,312
196,989,302
154,846,508
15,907,968
1,464,272
764,027
214,641
169,290,204
161,605,009
6.24*
2011
418,245,493
185,560,865
138,905,763
7,287,046
1,484,965
697,196
445,887
144,707,844
134,201,279
5.18*
5
3. Financial Analysis
3.1 Financial Analysis from 2012 to 2013 (Consolidated)
Capital Structure Analysis
Debts Ratio (%)
Long-term Fund to Property, Plant and Equipment (%)
Liquidity Analysis
Current Ratio (%)
Quick Ratio (%)
Times Interest Earned (Times)
Operating Performance Analysis
Average Collection Turnover (Times)
Days Sales Outstanding
Average Inventory Turnover (Times)
Average Inventory Turnover Days
Average Payment Turnover (Times)
Property, Plant and Equipment Turnover (Times)
Total Assets Turnover (Times)
Profitability Analysis
Return on Total Assets (%)
Return on Equity Attributable to Shareholders of the Parent (%)
Operating Income to Paid-in Capital Ratio (%)
Pre-tax Income to Paid-in Capital Ratio (%)
Net Margin (%)
Basic Earnings Per Share (NT$)
Diluted Earnings Per Share (NT$)
2012
24.78
131.63
168.60
142.39
177.92
9.64
37.86
8.38
43.56
19.38
0.91
0.58
19.19
24.68
69.89
70.08
32.78
6.42
6.41
2013
32.88
135.40
188.90
168.57
82.41
9.11
40.06
8.39
43.49
20.01
0.85
0.54
17.11
24.00
80.77
83.11
31.49
7.26
7.26
*Glossary
1. Capital Structure Analysis
(1) Debt Ratio = Total Liabilities / Total Assets
(2) Long-term Fund to Property, Plant and Equipment Ratio = (Shareholders’ Equity + Noncurrent Liabilities) / Net Property, Plant and Equipment
2. Liquidity Analysis
(1) Current Ratio = Current Assets / Current Liabilities
(2) Quick Ratio = (Current Assets - Inventories - Prepaid Expenses) / Current Liabilities
(3) Times Interest Earned = Earnings before Interest and Taxes / Interest Expenses
3. Operating Performance Analysis
(1) Average Collection Turnover = Net Sales / Average Trade Receivables
(2) Days Sales Outstanding = 365 / Average Collection Turnover
(3) Average Inventory Turnover = Cost of Sales / Average Inventory
(4) Average Inventory Turnover Days = 365 / Average Inventory Turnover
(5) Average Payment Turnover = Cost of Sales / Average Trade Payables
(6) Property, Plant and Equipment Turnover = Net Sales / Average Net Property, Plant and Equipment
(7) Total Assets Turnover = Net Sales / Average Total Assets
4. Profitability Analysis
(1) Return on Total Assets = (Net Income + Interest Expenses * (1 - Effective Tax Rate)) / Average Total Assets
(2) Return on Equity attributable to Shareholders of the Parent = Net Income Attributable to Shareholders of the Parent / Average Equity Attributable to
Shareholders of the Parent
(3) Operating Income to Paid-in Capital Ratio= Operating Income / Paid-in Capital
(4) Pre-tax Income to Paid-in Capital Ratio = Income before Tax / Paid-in Capital
(5) Net Margin = Net Income / Net Sales
(6) Earnings Per Share = (Net income attributable to Shareholders of the Parent - Preferred Stock Dividend) / Weighted Average Number of Shares Outstanding
5. Cash Flow
(1) Cash Flow Ratio = Net Cash Provided by Operating Activities / Current Liabilities
(2) Cash Flow Adequacy Ratio = Five-year Sum of Cash from Operations / Five-year Sum of Capital Expenditures, Inventory Additions, and Cash Dividend
(3) Cash Flow Reinvestment Ratio = (Cash Provided by Operating Activities - Cash Dividends) / (Gross Property, Plant and Equipment + Long-term Investments +
Other Noncurrent Assets + Working Capital)
6. Leverage
(1) Operating Leverage = (Net Sales - Variable Cost) / Income from Operations
(2) Financial Leverage = Income from Operations / (Income from Operations - Interest Expenses)
Cash Flow
Cash Flow Ratio (%)
191.93
183.05
Leverage
Industry Specific Key
Performance Indicator
Cash Flow Adequacy Ratio (%) (Note 1)
Cash Flow Reinvestment Ratio (%)
Operating Leverage
Financial Leverage
Billing Utilization Rate (%) (Note 2)
Advanced Technologies (40/45-nanometer and below)
Percentage of Wafer Sales (%)
Sales Growth (%)
Net Income Growth (%)
94.71
11.46
2.32
1.01
91
39
18.7 (Note 3)
23.9 (Note 3)
88.35
12.16
2.40
1.01
91
50
17.82
13.12
Analysis of deviation of 2013 vs. 2012 over 20%:
1. The debt ratio increased by 33% as a result of increase in bonds payable.
2. The times interest earned decreased by 54%, primarily due to increase in interest expense.
Note 1: 2008-2011 operating cash flow are based on ROC GAAP.
Note 2: Capacity includes wafers committed by Vanguard and SSMC.
Note 3: 2011 net sales and net income are based on ROC GAAP.
6
3.2 Financial Analysis from 2009 to 2011 (Consolidated) - ROC GAAP
Capital Structure Analysis
Debts Ratio (%)
Long-term Fund to Fixed Assets (%)
Liquidity Analysis
Current Ratio (%)
Operating Performance
Analysis
Quick Ratio (%)
Times Interest Earned (Times)
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)
Profitability Analysis
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$)
Diluted Earnings Per Share (NT$)
Cash Flow
Cash Flow Ratio (%)
Leverage
Industry Specific Key
Performance Indicator
Cash Flow Adequacy Ratio (%)
Cash Flow Reinvestment Ratio (%)
Operating Leverage
Financial Leverage
Billing Utilization Rate (%) (Note)
Advanced Technologies (40/45-nanometer and
below) Percentage of Wafer Sales (%)
Sales Growth (%)
Net Income Growth (%)
Note: Capacity includes wafers committed by VIS and SSMC.
2009
16.08
186.51
328.31
300.15
244.85
10.78
33.86
9.30
39.25
18.77
1.14
0.51
15.57
18.37
35.50
36.85
30.25
3.45
3.44
202.15
126.39
6.90
2.53
1.00
75
4
-11.2
-10.7
2010
19.50
152.08
212.29
187.57
401.30
10.57
34.54
8.62
42.36
17.23
1.27
0.64
24.77
30.23
61.43
65.72
38.68
6.24
6.23
186.28
113.91
11.13
2.12
1.00
101
17
41.9
81.1
2011
18.37
133.06
192.52
170.06
229.27
10.06
36.29
8.75
41.70
18.77
0.97
0.57
18.08
22.30
54.62
56.01
31.48
5.18
5.18
211.60
101.93
11.12
2.50
1.00
91
26
1.8
-17.0
*Glossary
1. Capital Structure Analysis
(1) Debt Ratio = Total Liabilities / Total Assets
(2) Long-term Fund to Fixed Assets Ratio = (Shareholders’ Equity + Long-term Liabilities) / Net Fixed Assets
2. Liquidity Analysis
(1) Current Ratio = Current Assets / Current Liabilities
(2) Quick Ratio = (Current Assets - Inventories - Prepaid Expenses) / Current Liabilities
(3) Times Interest Earned = Earnings before Interest and Taxes / Interest Expenses
3. Operating Performance Analysis
(1) Average Collection Turnover = Net Sales / Average Trade Receivables
(2) Days Sales Outstanding = 365 / Average Collection Turnover
(3) Average Inventory Turnover = Cost of Sales / Average Inventory
(4) Average Inventory Turnover Days = 365 / Average Inventory Turnover
(5) Average Payment Turnover = Cost of Sales / Average Trade Payables
(6) Fixed Assets Turnover = Net Sales / Average Net Fixed Assets
(7) Total Assets Turnover = Net Sales / Average Total Assets
4. Profitability Analysis
(1) Return on Total Assets = (Net Income + Interest Expenses * (1 - Effective Tax Rate)) / Average Total Assets
(2) Return on Equity = Net Income / Average Shareholders’ Equity
(3) Operating Income to Paid-in Capital Ratio = Operating Income / Paid-in Capital
(4) Pre-tax Income to Paid-in Capital Ratio = Income before Tax / Paid-in Capital
(5) Net Margin = Net Income / Net Sales
(6) Earnings Per Share = (Net Income - Preferred Stock Dividend) / Weighted Average Number of Shares Outstanding
5. Cash Flow
(1) Cash Flow Ratio = Net Cash Provided by Operating Activities / Current Liabilities
(2) Cash Flow Adequacy Ratio = Five-year Sum of Cash from Operations / Five-year Sum of Capital Expenditures, Inventory Additions, and Cash Dividend
(3) Cash Flow Reinvestment Ratio = (Cash Provided by Operating Activities - Cash Dividends) / (Gross Fixed Assets + Long-term Investments + Other Assets +
6. Leverage
Working Capital)
(1) Operating Leverage = (Net Sales - Variable Cost) / Income from Operations
(2) Financial Leverage = Income from Operations / (Income from Operations - Interest Expenses)
7
3.3 Financial Analysis from 2012 to 2013 (Unconsolidated)
Capital Structure Analysis
Debt Ratio (%)
Long-term fund to Property, Plant and Equipment Ratio (%)
Liquidity Analysis
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)
Property, Plant and Equipment Turnover (Times)
Total Assets Turnover (Times)
Profitability Analysis
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$)
Diluted Earnings Per Share (NT$)
Cash Flow
Cash Flow Ratio (%)
Leverage
Cash Flow Adequacy Ratio (%) (Note)
Cash Flow Reinvestment Ratio (%)
Operating Leverage
Financial Leverage
Analysis of deviation of 2013 vs. 2012 over 20%:
1. The debt ratio increased by 23% as a result of increase in bonds payable.
2. The times interest earned decreased by 47%, primarily due to increase in interest expense.
Note: 2008-2011 operating cash flow are based on ROC GAAP.
2012
24.32
137.67
142.41
117.49
195.42
9.87
36.98
9.13
39.97
18.22
0.96
0.58
19.45
24.68
68.21
70.88
33.24
6.42
6.41
189.88
93.23
11.36
2.37
1.01
2013
29.88
132.57
137.62
118.35
104.10
9.26
39.40
9.06
40.30
18.55
0.87
0.55
17.58
24.00
78.93
83.20
31.83
7.26
7.26
179.11
86.78
12.32
2.46
1.01
*Glossary
1. Capital Structure Analysis
(1) Debt Ratio = Total Liabilities / Total Assets
(2) Long-term Fund to Property, Plant and Equipment Ratio = (Shareholders’ Equity + Noncurrent Liabilities) / Net Property, Plant and Equipment
2. Liquidity Analysis
(1) Current Ratio = Current Assets / Current Liabilities
(2) Quick Ratio = (Current Assets - Inventories - Prepaid Expenses) / Current Liabilities
(3) Times Interest Earned = Earnings before Interest and Taxes / Interest Expenses
3. Operating Performance Analysis
(1) Average Collection Turnover = Net Sales / Average Trade Receivables
(2) Days Sales Outstanding = 365 / Average Collection Turnover
(3) Average Inventory Turnover = Cost of Sales / Average Inventory
(4) Average Inventory Turnover Days = 365 / Average Inventory Turnover
(5) Average Payment Turnover = Cost of Sales / Average Trade Payables
(6) Property, Plant and Equipment Turnover = Net Sales / Average Net Property, Plant and Equipment
(7) Total Assets Turnover = Net Sales / Average Total Assets
4. Profitability Analysis
(1) Return on Total Assets = (Net Income + Interest Expenses * (1 - Effective Tax Rate)) / Average Total Assets
(2) Return on Equity = Net Income / Average Shareholders’ Equity
(3) Operating Income to Paid-in Capital Ratio= Operating Income / Paid-in Capital
(4) Pre-tax Income to Paid-in Capital Ratio = Income before Tax / Paid-in Capital
(5) Net Margin = Net Income / Net Sales
(6) Earnings Per Share = (Net Income - Preferred Stock Dividend) /Weighted Average Number of Shares Outstanding
5. Cash Flow
(1) Cash Flow Ratio = Net Cash Provided by Operating Activities / Current Liabilities
(2) Cash Flow Adequacy Ratio = Five-year Sum of Cash from Operations / Five-year Sum of Capital Expenditures, Inventory Additions, and Cash Dividend
(3) Cash Flow Reinvestment Ratio = (Cash Provided by Operating Activities - Cash Dividends) / (Gross Property, Plant and Equipment + Long-term Investments +
Other Noncurrent Assets + Working Capital)
6. Leverage
(1) Operating Leverage = (Net Sales - Variable Cost) / Income from Operations
(2) Financial Leverage = Income from Operations / (Income from Operations - Interest Expenses)
8
3.4 Financial Analysis from 2009 to 2011 (Unconsolidated) - ROC GAAP
Capital Structure Analysis
Debt Ratio (%)
Long-term Fund to Fixed Assets Ratio (%)
Liquidity Analysis
Current Ratio (%)
Operating Performance
Analysis
Quick Ratio (%)
Times Interest Earned (Times)
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)
Profitability Analysis
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$)
Diluted Earnings Per Share (NT$)
Cash Flow
Cash Flow Ratio (%)
Leverage
Cash Flow Adequacy Ratio (%)
Cash Flow Reinvestment Ratio (%)
Operating Leverage
Financial Leverage
2009
14.26
196.27
256.07
228.94
669.76
11.17
32.66
10.06
36.29
18.46
1.21
0.51
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
1.31
0.64
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
1.02
0.57
18.40
22.30
53.60
55.84
32.09
5.18
5.18
217.99
99.13
11.07
2.54
1.00
*Glossary
1. Capital Structure Analysis
(1) Debt Ratio = Total Liabilities / Total Assets
(2) Long-term Fund to Fixed Assets Ratio = (Shareholders’ Equity + Long-term Liabilities) / Net Fixed Assets
2. Liquidity Analysis
(1) Current Ratio = Current Assets / Current Liabilities
(2) Quick Ratio = (Current Assets - Inventories - Prepaid Expenses) / Current Liabilities
(3) Times Interest Earned = Earnings before Interest and Taxes / Interest Expenses
3. Operating Performance Analysis
(1) Average Collection Turnover = Net Sales / Average Trade Receivables
(2) Days Sales Outstanding = 365 / Average Collection Turnover
(3) Average Inventory Turnover = Cost of Sales / Average Inventory
(4) Average Inventory Turnover Days = 365 / Average Inventory Turnover
(5) Average Payment Turnover = Cost of Sales / Average Trade Payables
(6) Fixed Assets Turnover = Net Sales / Average Net Fixed Assets
(7) Total Assets Turnover = Net Sales / Average Total Assets
4. Profitability Analysis
(1) Return on Total Assets = (Net Income + Interest Expenses * (1 - Effective Tax Rate)) / Average Total Assets
(2) Return on Equity = Net Income / Average Shareholders’ Equity
(3) Operating Income to Paid-in Capital Ratio = Operating Income / Paid-in Capital
(4) Pre-tax Income to Paid-in Capital Ratio = Income before Tax / Paid-in Capital
(5) Net Margin = Net Income / Net Sales
(6) Earnings Per Share = (Net Income - Preferred Stock Dividend) / Weighted Average Number of Shares Outstanding
5. Cash Flow
(1) Cash Flow Ratio = Net Cash Provided by Operating Activities / Current Liabilities
(2) Cash Flow Adequacy Ratio = Five-year Sum of Cash from Operations / Five-year Sum of Capital Expenditures, Inventory Additions, and Cash Dividend
(3) Cash Flow Reinvestment Ratio = (Cash Provided by Operating Activities - Cash Dividends) / (Gross Fixed Assets + Long-term Investments + Other Assets +
6. Leverage
Working Capital)
(1) Operating Leverage = (Net Sales - Variable Cost) / Income from Operations
(2) Financial Leverage = Income from Operations / (Income from Operations - Interest Expenses)
9
4. Auditors' Opinions from 2009 to 2013
7. Consolidated Financial Statements for the Years Ended
December 31, 2013 and 2012 and Independent Auditors’ Report
CPA
Audit Opinion
Year
2009
2010
2011
2012
2013
Hung-Peng Lin, Shu-Chieh Huang
Hung-Peng Lin, Shu-Chieh Huang
Hung-Peng Lin, Shu-Chieh Huang
Hung-Peng Lin, Shu-Chieh Huang
Yi-Hsin Kao, Hung-Wen 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 Review Report
An Unqualified Opinion with explanatory paragraph
referring to adoption of new accounting standards
REPRESENTATION LETTER
An Unqualified Opinion
An Unqualified Opinion
An Unqualified Opinion
An Unqualified Opinion
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, 2013, 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 International Accounting Standard 27, “Consolidated and Separate
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.
The Board of Directors has prepared the Company’s 2013 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.
Very truly yours,
Taiwan Semiconductor Manufacturing Company Limited
By
Taiwan Semiconductor Manufacturing Company Limited
Chairman of the Audit Committee: Sir Peter Leahy Bonfield
Morris Chang
Chairman
February 18, 2014
February 18, 2014
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 2013 and as of the date of this Annual
Report: None
10
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, 2013 and 2012 and January 1, 2012 and the
related consolidated statements of comprehensive income, changes in equity and cash flows for the years
ended December 31, 2013 and 2012. 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, 2013 and 2012 and January 1, 2012, 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, the International Financial Reporting
Standards, International Accounting Standards, interpretation as well as related guidance translated by
Accounting Research and Development Foundation endorsed by the Financial Supervisory Commission of
the Republic of China with the effective dates.
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 parent company
only financial statements of Taiwan Semiconductor Manufacturing Company Limited as of and for the years
ended December 31, 2013 and 2012 on which we have issued an unqualified opinion.
February 18, 2014
11
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands of New Taiwan Dollars)
ASSETS
CURRENT ASSETS
December 31, 2013
December 31, 2012
January 1, 2012
Amount
%
Amount
%
Amount
Cash and cash equivalents (Note 6)
Financial assets at fair value through profit or loss (Note 7)
Available-for-sale financial assets (Note 8)
Held-to-maturity financial assets (Note 9)
Notes and accounts receivable, net (Note 11)
Receivables from related parties (Note 37)
Other receivables from related parties (Note 37)
Inventories (Notes 5 and 12)
Other financial assets (Note 38)
Other current assets (Note 17)
$ 242,695,447
90,353
760,793
1,795,949
71,649,926
291,708
221,576
37,494,893
501,785
2,984,224
19 $ 143,410,588
39,554
2,410,635
5,056,973
57,777,586
353,811
185,550
37,830,498
473,833
2,786,408
-
-
-
6
-
-
3
-
-
15 $ 143,472,277
15,360
3,308,770
3,825,680
45,830,288
185,764
122,292
24,840,582
617,142
2,174,014
-
-
1
6
-
-
4
-
-
Total current assets
358,486,654
28
250,325,436
26
224,392,169
NONCURRENT ASSETS
Available-for-sale financial assets (Note 8)
Held-to-maturity financial assets (Note 9)
Financial assets carried at cost (Note 13)
Investments accounted for using equity method
(Notes 5 and 14)
Property, plant and equipment (Notes 5 and 15)
Intangible assets (Notes 5 and 16)
Deferred income tax assets (Notes 5 and 31)
Refundable deposits (Note 37)
Other noncurrent assets (Note 17)
Total noncurrent assets
58,721,959
-
2,145,591
28,316,260
792,665,913
11,490,383
7,239,609
2,519,031
1,469,577
904,568,323
5
-
-
2
63
1
1
-
-
72
38,751,245
-
3,605,077
23,360,918
617,562,188
10,959,569
13,128,219
2,426,712
1,235,144
711,029,072
4
-
-
3
64
1
2
-
-
74
-
5,243,167
4,315,005
24,886,931
490,422,153
10,861,563
13,604,218
4,518,863
1,306,746
555,158,646
%
18
-
-
1
6
-
-
3
-
-
28
-
1
1
3
63
1
2
1
-
72
LIABILITIES AND EQUITY
CURRENT LIABILITIES
December 31, 2013
December 31, 2012
January 1, 2012
Amount
%
Amount
%
Amount
%
Short-term loans (Note 18)
Financial liabilities at fair value through profit or loss (Note 7)
Hedging derivative financial liabilities (Note 10)
Accounts payable
Payables to related parties (Note 37)
Salary and bonus payable
Accrued profit sharing to employees and bonus to directors and
$ 15,645,000
33,750
-
14,670,260
1,688,456
8,330,956
1 $ 34,714,929
15,625
-
-
-
14,490,429
1
748,613
-
7,535,296
1
4 $ 25,926,528
13,742
-
232
-
10,530,487
2
1,328,521
-
6,148,499
1
supervisors (Note 24)
Payables to contractors and equipment suppliers
Income tax payable (Note 31)
Provisions (Notes 5 and 19)
Accrued expenses and other current liabilities (Notes 15 and 22)
Current portion of bonds payable and long-term bank loans
(Notes 20 and 21)
12,738,801
89,810,160
22,563,286
7,603,781
16,693,484
-
1
7
2
1
1
-
11,186,591
44,831,798
15,635,594
6,038,003
13,148,944
128,125
1
5
2
-
1
-
9,081,293
35,540,526
10,656,124
5,068,263
13,218,235
4,562,500
3
-
-
1
-
1
1
5
1
1
2
1
Total current liabilities
189,777,934
15
148,473,947
16
122,074,950
16
NONCURRENT LIABILITIES
Hedging derivative financial liabilities (Note 10)
Bonds payable (Note 20)
Long-term bank loans (Note 21)
Provisions (Note 19)
Other long-term payables (Note 22)
Obligations under finance leases (Note 15)
Accrued pension cost (Notes 5 and 23)
Guarantee deposits
Others
Total noncurrent liabilities
Total liabilities
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock (Note 24)
Capital surplus (Note 24)
Retained earnings (Note 24)
Appropriated as legal capital reserve
Appropriated as special capital reserve
Unappropriated earnings
Others (Note 24)
5,481,616
210,767,625
40,000
10,452
36,000
776,230
7,589,926
151,660
648,449
225,501,958
415,279,892
259,286,171
55,858,626
132,436,003
2,785,741
382,971,408
518,193,152
14,170,306
Equity attributable to shareholders of the parent
847,508,255
NONCONTROLLING INTERESTS (Note 24)
Total equity
266,830
847,775,085
-
17
-
-
-
-
1
-
-
18
33
21
4
11
-
30
41
1
67
-
67
-
80,000,000
1,359,375
4,891
54,000
748,115
6,921,234
203,890
495,150
89,786,655
-
8
-
-
-
-
1
-
-
9
-
18,000,000
1,587,500
2,889
-
870,993
6,241,024
443,983
400,831
27,547,220
-
3
-
-
-
-
1
-
-
4
238,260,602
25
149,622,170
20
259,244,357
55,675,340
115,820,123
7,606,224
284,985,121
408,411,468
(2,780,485)
720,550,680
2,543,226
723,093,906
27
6
12
1
29
42
-
75
-
75
259,162,226
55,471,662
102,399,995
6,433,874
211,630,458
320,464,327
(7,606,219)
627,491,996
2,436,649
629,928,645
33
7
13
1
27
41
(1)
80
-
80
TOTAL
$ 1,263,054,977
100 $ 961,354,508
100 $ 779,550,815
100
TOTAL
$ 1,263,054,977
100 $ 961,354,508
100 $ 779,550,815
100
The accompanying notes are an integral part of the consolidated financial statements.
12
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
NET REVENUE (Notes 5, 26, 37 and 42)
$ 597,024,197
100
$ 506,745,234
2013
Amount
%
2012
Amount
COST OF REVENUE (Notes 12, 33 and 37)
GROSS PROFIT BEFORE UNREALIZED GROSS PROFIT ON SALES TO
ASSOCIATES
UNREALIZED GROSS PROFIT ON SALES TO ASSOCIATES
GROSS PROFIT
OPERATING EXPENSES (Notes 5, 33 and 37)
Research and development
General and administrative
Marketing
Total operating expenses
OTHER OPERATING INCOME AND EXPENSES, NET (Notes 27 and 33)
INCOME FROM OPERATIONS (Note 42)
NON-OPERATING INCOME AND EXPENSES
Share of profits of associates and joint venture
(Notes 14 and 42)
Other income (Note 28)
Foreign exchange gain, net
Finance costs (Notes 10 and 29)
Other gains and losses (Notes 30 and 37)
Total non-operating income and expenses
INCOME BEFORE INCOME TAX
INCOME TAX EXPENSE (Notes 31 and 42)
NET INCOME
316,057,820
280,966,377
(20,870)
280,945,507
48,118,165
18,928,544
4,516,525
71,563,234
47,090
209,429,363
3,972,031
2,342,123
285,460
(2,646,776)
2,104,921
6,057,759
215,487,122
27,468,185
188,018,937
53
47
-
47
8
3
1
12
-
35
1
-
-
-
-
1
36
5
31
262,583,098
244,162,136
(25,029)
244,137,107
40,383,195
17,631,694
4,495,986
62,510,875
(449,364)
181,176,868
2,073,729
1,716,093
582,498
(1,020,422)
(2,852,310)
499,588
181,676,456
15,552,654
166,123,802
%
100
52
48
-
48
8
3
1
12
-
36
-
-
-
-
-
-
36
3
33
(Continued)
2013
Amount
%
2012
Amount
OTHER COMPREHENSIVE INCOME (LOSS) (Notes 10, 14, 23, 24 and 31)
Exchange differences arising on translation of foreign operations
Changes in fair value of available-for-sale financial assets
Cash flow hedges
Share of other comprehensive income (loss) of associates and joint
venture
Actuarial loss from defined benefit plans
Income tax benefit (expense) related to components of other
comprehensive income
$ 3,668,509
13,290,385
-
(59,740)
(662,074)
115,168
Other comprehensive income for the year, net of income tax
16,352,248
1
2
-
-
-
-
3
$ (4,322,697)
9,534,269
232
53,748
(685,978)
(326,942)
4,252,632
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
$ 204,371,185
34
$ 170,376,434
NET INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent
Noncontrolling interests
TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent
Noncontrolling interests
$ 188,146,790
(127,853)
$ 188,018,937
$ 204,505,782
(134,597)
$ 204,371,185
31
-
31
34
-
34
$ 166,318,286
(194,484)
$ 166,123,802
$ 170,521,543
(145,109)
$ 170,376,434
%
(1)
2
-
-
-
-
1
34
33
-
33
34
-
34
EARNINGS PER SHARE (NT$, Note 32)
Basic earnings per share
Diluted earnings per share
2013
2012
Income Attributable to
Shareholders of the Parent
Income Attributable to
Shareholders of the Parent
$ 7.26
$ 7.26
$ 6.42
$ 6.41
The accompanying notes are an integral part of the consolidated financial statements
(Concluded)
13
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In Thousands of New Taiwan Dollars, Except Dividends Per Share)
Equity Attributable to Shareholders of the Parent
Capital Stock - Common Stock
Retained Earnings
Shares
(In Thousands)
Capital Surplus
Amount
Legal Capital
Reserve
Special Capital
Reserve
Unappropriated
Earnings
Total
Foreign
Currency
Translation
Reserve
Others
Unrealized
Gain/Loss
from
Available-
for-sale
Financial
Assets
Cash Flow
Hedges
Reserve
Total
Noncontrolling
Interests
Total
Total
Equity
BALANCE, JANUARY 1, 2012
25,916,222 $ 259,162,226 $ 55,471,662 $ 102,399,995 $ 6,433,874 $ 211,630,458 $ 320,464,327 $ (6,433,364) $ (1,172,762) $ (93) $ (7,606,219) $ 627,491,996 $ 2,436,649 $ 629,928,645
Appropriations of prior year’s earnings
Legal capital reserve
Special capital reserve
Cash dividends to shareholders - NT$3.00 per share
Total
Net income in 2012
Other comprehensive income in 2012, net of income
tax
Total comprehensive income in 2012
Issuance of stock from exercise of employee stock
options
Stock option compensation cost of subsidiary
Adjustments to share of changes in equity of
associates and joint venture
Adjustments arising from changes in percentage of
ownership in subsidiaries
Increase in noncontrolling interests
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,213
82,131
160,357
-
-
-
-
-
-
-
-
-
2,588
40,733
-
13,420,128
-
-
13,420,128
-
1,172,350
-
1,172,350
(13,420,128)
(1,172,350)
(77,748,668)
(92,341,146)
-
-
(77,748,668)
(77,748,668)
166,318,286
166,318,286
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(622,477)
(622,477)
(4,320,442)
9,146,083
165,695,809
165,695,809
(4,320,442)
9,146,083
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
BALANCE, DECEMBER 31, 2012
25,924,435
259,244,357
55,675,340
115,820,123
7,606,224
284,985,121
408,411,468
(10,753,806)
7,973,321
Appropriations of prior year’s earnings
Legal capital reserve
Reversal of special capital reserve
Cash dividends to shareholders - NT$3.00 per share
Total
Net income in 2013
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,615,880
-
-
16,615,880
-
(4,820,483)
-
(4,820,483)
(16,615,880)
4,820,483
(77,773,307)
(89,568,704)
-
-
(77,773,307)
(77,773,307)
-
-
188,146,790
188,146,790
-
-
-
-
-
-
-
-
-
-
14
-
-
-
-
-
93
93
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(77,748,668)
(77,748,668)
-
-
-
-
-
-
(77,748,668)
(77,748,668)
166,318,286
(194,484)
166,123,802
4,825,734
4,203,257
49,375
4,252,632
4,825,734
170,521,543
(145,109)
170,376,434
-
-
-
-
-
242,488
-
242,488
-
6,219
6,219
2,588
-
2,588
40,733
(40,733)
-
-
286,200
286,200
(2,780,485)
720,550,680
2,543,226
723,093,906
-
-
-
-
-
-
-
(77,773,307)
(77,773,307)
-
-
-
-
-
-
(77,773,307)
(77,773,307)
188,146,790
(127,853)
188,018,937
(Continued)
Equity Attributable to Shareholders of the Parent
Capital Stock - Common Stock
Retained Earnings
Shares
(In Thousands)
Capital Surplus
Amount
Legal Capital
Reserve
Special Capital
Reserve
Unappropriated
Earnings
Total
Foreign
Currency
Translation
Reserve
Others
Unrealized
Gain/Loss
from
Available-
for-sale
Financial
Assets
Cash Flow
Hedges
Reserve
Total
Noncontrolling
Interests
Total
Total
Equity
Other comprehensive income in 2013, net of income
tax
- $ - $ - $ - $ - $ (591,799) $ (591,799) $ 3,613,444 $ 13,337,460 $ (113) $ 16,950,791 $ 16,358,992 $ (6,744) $ 16,352,248
Total comprehensive income in 2013
-
-
-
Issuance of stock from exercise of employee stock
options
4,182
41,814
82,756
Stock option compensation cost of subsidiary
Adjustments to share of changes in equity of
associates and joint venture
Adjustments arising from changes in percentage of
ownership in subsidiaries
Increase in noncontrolling interests
Effect of deconsolidation of subsidiary
-
-
-
-
-
-
-
-
-
-
-
38,084
62,446
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
187,554,991
187,554,991
3,613,444
13,337,460
(113)
16,950,791
204,505,782
(134,597)
204,371,185
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
124,570
-
124,570
-
5,312
5,312
38,084
-
38,084
62,446
(62,446)
-
-
-
188,488
188,488
(2,273,153)
(2,273,153)
BALANCE, DECEMBER 31, 2013
25,928,617 $ 259,286,171 $ 55,858,626 $ 132,436,003 $ 2,785,741 $ 382,971,408 $ 518,193,152 $ (7,140,362) $ 21,310,781 $ (113) $ 14,170,306 $ 847,508,255 $ 266,830 $ 847,775,085
The accompanying notes are an integral part of the consolidated financial statements.
(Concluded)
15
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
2013
2012
2013
2012
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax
Adjustments for:
$ 215,487,122
$ 181,676,456
Depreciation expense
Amortization expense
Stock option compensation cost of subsidiary
Finance costs
Share of profits of associates and joint venture
Interest income
Gain on disposal of property, plant and equipment and intangible assets, net
Impairment loss on property, plant and equipment
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
Loss (gain) on disposal of investments in associates
Gain on deconsolidation of subsidiary
Unrealized gross profit on sales to associates
Loss (gain) on foreign exchange, net
Dividend income
Income from receipt of equity securities in settlement of trade receivables
Loss on hedging instruments
Gain on arising from changes in fair value of available-for-sale financial assets in
hedge effective portion
Changes in operating assets and liabilities:
Derivative financial instruments
Notes and accounts receivable, net
Receivables from related parties
Other receivables from related parties
Inventories
Other financial assets
Other current assets
Accounts payable
Payables to related parties
Salary and bonus payable
Accrued profit sharing to employees and bonus to directors and supervisors
Accrued expenses and other current liabilities
Provisions
Accrued pension cost
Cash generated from operations
Income taxes paid
153,979,847
2,202,022
5,312
2,646,776
(3,972,031)
(1,835,980)
(48,848)
-
352,214
(1,267,086)
(44,721)
733
(293,578)
20,870
317,547
(506,143)
(9,977)
5,602,779
(5,071,118)
(32,189)
(14,131,066)
(204,278)
50,589
122,472
18,578
(312,251)
346,401
850,094
883,925
1,552,210
3,531,017
1,595,810
9,554
361,846,606
(14,463,069)
129,168,514
2,180,775
6,219
1,020,422
(2,073,729)
(1,645,036)
(103)
444,505
4,231,602
(399,598)
(141,491)
(4,977)
-
25,029
(3,219,144)
(71,057)
(886)
-
-
(22,311)
(11,947,191)
(168,047)
(63,258)
(12,989,916)
53,182
648,051
3,656,358
(605,182)
1,386,797
2,105,298
2,051,785
977,901
(5,769)
296,275,199
(11,312,039)
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
Other assets
Costs from entering into hedging transactions
Interest received
Other dividends received
Dividends received from associates
Refundable deposits paid
Refundable deposits refunded
Net cash outflow from deconsolidation of subsidiary (Note 34)
$ 2,418,578
5,145,850
67,986
173,554
-
(143,982)
1,790,725
506,143
2,141,881
(98,888)
113,399
(979,910)
$ 964,367
2,711,440
353,656
157,484
26,688
-
1,719,026
71,057
2,088,472
(517,162)
2,609,313
-
Net cash used in investing activities
(281,054,215)
(269,317,707)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of bonds
Repayment of bonds
Increase (decrease) in short-term loans
Increase in long-term bank loans
Repayment of long-term bank loans
Repayment of other long-term payables
Interest paid
Guarantee deposits received
Guarantee deposits refunded
Decrease in obligations under finance leases
Proceeds from exercise of employee stock options
Cash dividends
Increase in noncontrolling interests
130,844,821
-
(19,636,240)
690,000
(62,500)
(853,788)
(1,330,886)
41,519
(113,087)
(27,796)
124,570
(77,773,307)
202,619
62,000,000
(4,500,000)
9,747,094
50,000
(212,500)
(2,367,866)
(736,607)
15,671
(255,764)
(108,863)
242,488
(77,748,668)
286,200
Net cash generated by (used in) financing activities
32,105,925
(13,588,815)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
849,612
(2,118,327)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
99,284,859
(61,689)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
143,410,588
143,472,277
Net cash generated by operating activities
347,383,537
284,963,160
CASH AND CASH EQUIVALENTS, END OF YEAR
$ 242,695,447
$ 143,410,588
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Available-for-sale financial assets
Held-to-maturity financial assets
Financial assets carried at cost
Property, plant and equipment
Intangible assets
16
The accompanying notes are an integral part of the consolidated financial statements.
(Concluded)
(21,303)
(1,795,949)
(27,165)
(287,594,773)
(2,750,361)
(31,525,876)
-
(56,512)
(246,137,361)
(1,782,299)
(Continued)
Taiwan Semiconductor Manufacturing Company Limited and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(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.
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).
The address of its registered office and principal place of business is No. 8, Li-Hsin Rd. 6, Hsinchu Science
Park, Taiwan. The principal operating activities and operating segments information of TSMC and its
subsidiaries (collectively as the “Company”) are described in Notes 4 and 42.
2. THE AUTHORIZATION OF FINANCIAL STATEMENTS
The accompanying consolidated financial statements were approved and authorized for issue by the Board
of Directors on February 18, 2014.
3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRSs)
On May 14, 2009, the Financial Supervisory Commission (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) endorsed by the FSC with the
effective dates (collectively, “Taiwan-IFRSs”.)
a. New and revised standards, amendments and interpretations in issue but not yet effective
As of the date that the accompanying consolidated financial statements were authorized for issue, the
new, revised or amended IFRSs, IASs, interpretations and related guidance in issue but not yet adopted
by the Company as well as the effective dates issued by the International Accounting Standards Board
(IASB), are stated as follows; however, the initial adoption to the following standards and interpretations
is still subject to the effective date to be published by the FSC except that the standards and interpretation
included in the 2013 Taiwan-IFRSs version should be adopted by the Company starting 2015.
New, Revised or Amended Standards and Interpretations
Effective Date Issued by IASB (Note)
Included in the 2013 Taiwan-IFRSs version
Amendments to IFRSs Improvements to IFRSs 2009 - Amendment to IAS 39
Amendment to IAS 39 Embedded Derivatives
January 1, 2009 or January 1, 2010
Effective in fiscal year ended on or after June
Improvements to IFRSs 2010
Annual Improvements to IFRSs 2009 - 2011 Cycle
Amendments to IFRS 1 Limited Exemption from Comparative IFRS 7 Disclosures for First -
time Adopters
Amendments to IFRS 1 Severe Hyperinflation and Removal of Fixed Dates for First - time Adopters
Amendments to IFRS 1 Government Loans
Amendment to IFRS 7 Disclosures - offsetting Financial Assets and Financial Liabilities
Amendment to IFRS 7 Disclosures - Transfers of Financial Assets
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
Amendments to IFRS 10, IFRS 11 and IFRS 12 Consolidated financial Statements, Joint
Arrangements, and Disclosure of Interests in Other Entities: Transition Guidance
Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities
IFRS 13 Fair Value Measurement
Amendment to IAS 1 Presentation of Items of Other Comprehensive Income
Amendment to IAS 12 Deferred Tax: Recovery of Underlying Assets
Amendment to IAS 19 Employee Benefits
Amendment to IAS 27 Separate Financial Statements
Amendment to IAS 28 Investments in Associates and Joint Ventures
Amendment to IAS 32 Offsetting of Financial Assets and Financial Liabilities
IFRIC 20 Stripping Costs in the Production Phase of A Surface Mine
Not included in the 2013 Taiwan-IFRSs version
30, 2009
July 1, 2010 or January 1, 2011
January 1, 2013
July 1, 2010
July 1, 2011
January 1, 2013
January 1, 2013
July 1, 2011
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2014
January 1, 2013
July 1, 2012
January 1, 2012
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2014
January 1, 2013
Annual Improvements to IFRSs 2010 - 2012 Cycle
July 1, 2014 or transactions on or after July 1,
Annual Improvements to IFRSs 2011 - 2013 Cycle
IFRS 9 Financial Instruments
Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date and Transition Disclosure
IFRS 14 Regulatory Deferral Accounts
Amendment to IAS 19 Defined Benefit Plans: Employee Contributions
Amendment to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets
Amendment to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting
IFRIC 21 Levies
2014
July 1, 2014
Not yet determined
Not yet determined
January 1, 2016
July 1, 2014
January 1, 2014
January 1, 2014
January 1, 2014
Note: The aforementioned new, revised or amended standards or interpretations are effective after fiscal year beginning on or after the effective dates, unless
specified otherwise.
17
b. Significant changes in accounting policy resulted from new and revised standards, amendments and
3) IFRS 13, “Fair Value Measurement”
interpretations in issue but not yet effective
Except for the following items, the Company believes that the adoption of aforementioned standards or
interpretations will not have a significant effect on the Company’s accounting policies.
1) IFRS 9, “Financial Instruments”
Under IFRS 9, all recognized financial assets currently in the scope of IAS 39, “Financial Instruments:
Recognition and Measurement,” will be subsequently measured at either the amortized cost or the
fair value. If the objective of the Company’s business model is to hold the financial asset to collect
the contractual cash flows which are solely for payments of principal and interest on the principal
amount outstanding, such assets are measured at the amortized cost. All other financial assets must be
measured at the fair value through profit or loss as of the end of the reporting period.
The main change in IFRS 9 is the increase of the eligibility of hedge accounting. It allows reporters
to reflect risk management activities in the financial statements more closely as it provides more
opportunities to apply hedge accounting. A fundamental difference to IAS 39 is that IFRS 9 (a)
increases the scope of hedged items eligible for hedge accounting. For example, the risk components
of non-financial items may be designated as hedging accounting; (b) revises a new way to account
for the gain or loss recognition arising from hedging derivative financial instruments, which results in
a less volatility in profit or loss; and (c) is necessary for there to be an economic relationship between
the hedged item and hedging instrument instead of performing the retrospective hedge effectiveness
testing.
The amendment to IFRS 9 issued by IASB introduces the new hedge accounting model and removed
the original mandatory effective date of January 1, 2015 (on and after). IASB will reconsider the
appropriate effective date once the standard is complete with a new impairment model and the
finalization of any limited amendments to classification and measurement.
IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about
fair value measurements. It defines fair value, establishes a framework for measuring fair value, and
requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more
extensive than those required in the current standards. For example, quantitative and qualitative
disclosures based on the three-level fair value hierarchy currently required for financial instruments only
will be extended by IFRS 13 to cover all assets and liabilities within its scope.
4) Amendments to IAS 1, “Presentation of Items of Other Comprehensive Income”
The amendments to IAS 1 introduce a new disclosure terminology for other comprehensive income,
which require additional disclosures in other comprehensive income. The items of other comprehensive
income will be grouped into two categories: (a) items that will not be reclassified subsequently
to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific
conditions are met. In addition, income tax on items of other comprehensive income is also required
to be allocated on the same basis. The Company expects the aforementioned amendments will change
the Company’s presentation on the statement of comprehensive income.
5) Amendments to IAS 19, “Employee Benefits”
The amendments to IAS 19 change the accounting for defined benefit plans, which require the
Company to recognize changes in defined benefit obligations or assets, to disclose the components
of the defined benefit costs, to eliminate the corridor approach and to accelerate the recognition
of past service cost. According to the amendments, all actuarial gains and losses will be recognized
immediately through other comprehensive income; the past service cost, on the other hand, will be
expensed immediately when it incurs and no longer be amortized over the average period before
vested on a straight-line basis. In addition, the amendment also requires a broader disclosure in
defined benefit plans.
2) IFRS 12, “Disclosure of Interests in Other Entities”
6) Amendments to IAS 36, “Recoverable Amount Disclosures for Non-Financial Assets”
IFRS 12 is a standard that requires a broader disclosure in an entity’s interests in subsidiaries, joint
arrangements, associates and unconsolidated entities. The objective of IFRS 12 is to specify the
disclosure information provided by the entity that enables the users of financial statements in
evaluating the nature of, and risks associated with, its interests in other entities and the effects of
those interests on the entity’s financial assets and liabilities, as well as the involvement of the owners of
noncontrolling interests towards the entity. The Company expects the application of IFRS 12 will result
in more extensive disclosures of interests in other entities in the financial statements.
The amendments to IAS 36 clarify that the Company is only required to disclose the recoverable
amount in the year of impairment accrual or reversal. Moreover, if the recoverable amount of impaired
assets is based on fair value less costs of disposal, the Company should also disclose the discount rate
used. The Company expects the aforementioned amendments will result in a broader disclosure of
recoverable amount for non-financial assets.
c. Impact of the application of the new and revised standards, amendments and interpretations in issue but
not yet effective on the consolidated financial statements of the Company
18
As of the date that the accompanying consolidated financial statements were approved and authorized
for issue, the Company continues in evaluating the impact on its financial position and financial
performance as a result of the initial adoption of the above standards or interpretations. The related
impact will be disclosed when the Company completes the evaluation.
Income and expenses of subsidiaries acquired or disposed of are included in the consolidated statement of
comprehensive income from the effective date of acquisition and up to the effective date of disposal, as
appropriate. Total comprehensive income of subsidiaries is attributed to the shareholders of the parent and
to the noncontrolling interests even if this results in the noncontrolling interests having a deficit balance.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements are the first Taiwan-IFRSs annual consolidated
financial statements prepared for the year ended December 31, 2013. The Company’s date of transition to
Taiwan-IFRSs is January 1, 2012, and the effect of the transition to Taiwan-IFRSs is disclosed in Note 43.
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:
Statement of Compliance
The accompanying consolidated financial statements have been prepared in conformity with the Guidelines
Governing the Preparation of Financial Reports by Securities Issuers, the IFRSs, IASs, interpretations as well as
related guidance translated by the ARDF endorsed by the FSC with the effective dates.
Basis of Preparation
The accompanying consolidated financial statements have been prepared on the historical cost basis except
for financial instruments that are measured at fair values, as explained in the accounting policies below.
Historical cost is generally based on the fair value of the consideration given in exchange for the assets.
The opening balance sheet at the date of transition is prepared in accordance with the recognition and
measurement required by IFRS 1. According to IFRS 1, the Company is required to apply each effective IFRS
retrospectively in its opening balance sheet at the date of transition to Taiwan-IFRSs; except for optional
exemptions and mandatory exceptions to such retrospective application provided under IFRS 1. The main
optional exemptions the Company adopted are described in Note 43.
Basis of Consolidation
The basis for the consolidated financial statements
The consolidated financial statements incorporate the financial statements of TSMC and entities controlled
by TSMC (its subsidiaries). Control is achieved where the Company has the power to govern the financial
and operating policies of an entity so as to obtain benefits from its activities.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies into line with those used by the Company.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing
control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the
Company’s interests and the noncontrolling interests are adjusted to reflect the changes in their relative
interests in the subsidiaries. Any difference between the amount by which the noncontrolling interests
are adjusted and the fair value of the consideration paid or received is recognized directly in equity and
attributed to shareholders of the parent.
When the Company loses control of a subsidiary, a gain or loss is recognized in profit or loss and is
calculated as the difference between:
a. the aggregate of the fair value of consideration received and the fair value of any retained interest at the
date when control is lost; and
b. the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any
noncontrolling interest.
The Company shall account for all amounts recognized in other comprehensive income in relation to the
subsidiary on the same basis as would be required if the Company had directly disposed of the related assets
and liabilities.
The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded
as the cost on initial recognition of an investment in an associate.
19
The subsidiaries in the consolidated financial statements
The detail information of the subsidiaries at the end of reporting period was as follows:
Name of Investor
Name of Investee
Main Businesses and Products
TSMC
TSMC North America
TSMC Japan Limited (TSMC Japan)
TSMC Partners, Ltd. (TSMC Partners)
Selling and marketing of integrated circuits and semiconductor devices
Marketing activities
Investing in companies involved in the design, manufacture, and other related business in the
semiconductor industry
TSMC Korea Limited (TSMC Korea)
TSMC Europe B.V. (TSMC Europe)
TSMC Global, Ltd. (TSMC Global)
TSMC China Company Limited (TSMC China)
Customer service and technical supporting activities
Marketing and engineering supporting activities
Investment activities
Manufacturing and selling of integrated circuits at the order of and pursuant to product design
VentureTech Alliance Fund III, L.P. (VTAF III)
VentureTech Alliance Fund II, L.P. (VTAF II)
Emerging Alliance Fund, L.P. (Emerging
Alliance)
specifications provided by customers
Investing in new start-up technology companies
Investing in new start-up technology companies
Investing in new start-up technology companies
Establishment
and Operating Location
San Jose, California, U.S.A.
Yokohama, Japan
Tortola, British Virgin Islands
Seoul, Korea
Amsterdam, the Netherlands
Tortola, British Virgin Islands
Shanghai, China
Cayman Islands
Cayman Islands
Cayman Islands
Xintec Inc. (Xintec)
TSMC Solid State Lighting Ltd. (TSMC SSL)
Wafer level chip size packaging service
Engaged in researching, developing, designing, manufacturing and selling solid state lighting devices and
Taoyuan, Taiwan
Hsin-Chu, Taiwan
related applications products and systems
TSMC Solar Ltd. (TSMC Solar)
Engaged in researching, developing, designing, manufacturing and selling renewable energy and saving
Tai-Chung, Taiwan
related technologies and products
Percentage of Ownership
December 31,
2013
December 31,
2012
January 1,
2012
Note
100%
100%
100%
100%
100%
100%
100%
50%
98%
99.5%
b)
92%
99%
100%
100%
100%
100%
100%
100%
100%
50%
98%
99.5%
40%
95%
99%
100%
100%
100%
100%
100%
100%
100%
53%
98%
99.5%
40%
100%
100%
-
a)
-
a)
a)
-
-
-
-
a)
-
TSMC and TSMC GN aggregately
have a controlling interest of
93% in TSMC SSL.
TSMC and TSMC GN aggregately
have a controlling interest of
99% in TSMC Solar.
TSMC Guang Neng Investment, Ltd.
Investment activities
(TSMC GN)
TSMC Partners
TSMC Design Technology Canada Inc.
Engineering support activities
(TSMC Canada)
TSMC Technology, Inc. (TSMC Technology)
TSMC Development, Inc. (TSMC Development)
InveStar Semiconductor Development Fund,
Engineering support activities
Investment activities
Investing in new start-up technology companies
Inc. (ISDF)
InveStar Semiconductor Development Fund,
Investing in new start-up technology companies
Inc. (II) LDC. (ISDF II)
Taipei, Taiwan
100%
100%
-
-
Ontario, Canada
Delaware, U.S.A.
Delaware, U.S.A.
Cayman Islands
Cayman Islands
100%
100%
100%
97%
97%
100%
100%
100%
97%
97%
100%
100%
100%
97%
97%
a)
a)
-
a)
a)
TSMC Development
WaferTech, LLC (WaferTech)
Manufacturing, selling, testing and computer-aided designing of integrated circuits and other
Washington, U.S.A.
100%
100%
100%
-
semiconductor devices
VTAF III
VTAF III, VTAF II and
Emerging Alliance
Mutual-Pak Technology Co., Ltd. (Mutual-Pak)
Growth Fund Limited (Growth Fund)
VentureTech Alliance Holdings, LLC (VTA
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
Taipei, Taiwan
Cayman Islands
Delaware, U.S.A.
58%
100%
100%
58%
100%
100%
57%
100%
100%
a)
a)
a)
Holdings)
TSMC SSL
TSMC Lighting North America, Inc. (TSMC
Selling and marketing of solid state lighting related products
Delaware, U.S.A.
100%
100%
100%
a)
Lighting NA)
TSMC Solar
TSMC Solar North America, Inc.
Selling and marketing of solar related products
(TSMC Solar NA)
TSMC Solar Europe B.V. (TSMC Solar Europe)
VentureTech Alliance Fund III, L.P. (VTAF III)
Investing in solar related business
Investing in new start-up technology companies
Delaware, U.S.A.
Amsterdam, the Netherlands
Cayman Islands
TSMC Solar Europe
TSMC Solar Europe GmbH
Selling of solar related products and providing customer service
Hamburg, Germany
100%
100%
49%
100%
100%
100%
49%
100%
100%
100%
46%
100%
a)
a)
-
a)
Note a: This is an immaterial subsidiary for which the consolidated financial statements are not audited by the Company’s independent accountants.
Note b: TSMC has no power to govern the financial and operating policies of Xintec starting June 2013 due to the loss of power to cast the majority of votes at meetings of the Board of Directors. As a result, Xintec is no longer consolidated and is accounted for using the equity method. Please refer to Note 34.
20
Foreign Currencies
The financial statements of each individual consolidated entity were expressed in the currency which
reflected its primary economic environment (functional currency). The functional currency of TSMC and
presentation currency of the consolidated financial statements are both New Taiwan Dollars (NT$). In
preparing the consolidated financial statement, the operating results and financial positions of each
consolidated entity are translated into NT$.
In preparing the financial statements of each individual consolidated entity, transactions in currencies other
than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing
at the dates of the transactions. At the end of each reporting period, monetary items denominated in
foreign currencies are retranslated at the rates prevailing at that date. Such exchange differences are
recognized in profit or loss in the year in which they arise. Non-monetary items measured at fair value that
are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value
was determined. Exchange differences arising on the retranslation of non-monetary items are included in
profit or loss for the year except for exchange differences arising on the retranslation of non-monetary items
in respect of which gains and losses are recognized directly in other comprehensive income, in which case,
the exchange differences are also recognized directly in other comprehensive income. Non-monetary items
that are measured in terms of historical cost in foreign currencies are not retranslated.
For the purposes of presenting consolidated financial statements, the assets and liabilities of the Company’s
foreign operations are translated into NT$ using exchange rates prevailing at the end of each reporting
period. Income and expense items are translated at the average exchange rates for the period. Exchange
differences arising, if any, are recognized in other comprehensive income and accumulated in equity
(attributed to noncontrolling interests as appropriate).
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 end of the reporting period. Current liabilities are obligations
incurred for trading purposes and obligations expected to be settled within one year from the end of the
reporting period. Assets and liabilities that are not classified as current are noncurrent assets and liabilities,
respectively.
Cash Equivalents
Cash equivalents, for the purpose of meeting short-term cash commitments, consist of highly liquid time
deposits and investments that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are
recognized immediately in profit or loss. Fair value is determined in the manner described in Note 36.
Financial Assets
Financial assets are classified into the following specified categories: Financial assets “at fair value through
profit or loss” (FVTPL), “held-to-maturity” financial assets, “available-for-sale” financial assets and “loans and
receivables”. The classification depends on the nature and purpose of the financial assets and is determined
at the time of initial recognition. All regular way purchases or sales of financial assets are recognized and
derecognized on a settlement date basis. Regular way purchases or sales are purchases or sales of financial
assets that require delivery of assets within the time frame established by regulation or convention in the
marketplace.
Financial assets at fair value through profit or loss
Derivative financial instruments that do not meet the criteria for hedge accounting are stated at fair value,
with any gains or losses arising on remeasurement recognized in profit or loss.
Held-to-maturity financial assets
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and
fixed maturity dates that the Company has the positive intent and ability to hold to maturity. Subsequent
to initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective
interest method less any impairment.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either designated as
available-for-sale or are not classified as (a) loans and receivables, (b) held-to-maturity financial assets or (c)
financial assets at fair value through profit or loss.
Stocks and money market funds held by the Company that are traded in an active market are classified as
available-for-sale financial assets and are stated at fair value at the end of each reporting period.
Interest income from available-for-sale monetary financial assets and dividends on available-for-sale equity
investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale
financial assets are recognized in other comprehensive income. When the investment is disposed of or
is determined to be impaired, the cumulative gain or loss previously recognized in other comprehensive
income is reclassified to profit or loss.
Financial Instruments
Financial assets and liabilities shall be recognized when the Company becomes a party to the contractual
provisions of the instruments.
Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company’s right
to receive the dividends is established.
Financial assets and liabilities are initially recognized at fair values. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets
and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of
Available-for-sale equity instruments that do not have a quoted market price in an active market and whose
fair value cannot be reliably measured are measured at cost less any identified impairment losses at the end
of each reporting period. Such equity instruments are subsequently remeasured at fair value when their fair
value can be reliably measured, and the difference between the carrying amount and fair value is recognized
in profit or loss or other comprehensive income.
21
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. Loans and receivables including cash and cash equivalents, notes and accounts
receivable and other receivables are measured at amortized cost using the effective interest method, less any
impairment, except for those loans and receivables with immaterial discounted effect.
Derecognition of financial assets
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the
financial asset expire, or when it transfers the financial asset and substantially all the risks and rewards of
ownership of the financial asset to another entity.
Impairment of financial assets
Financial assets, other than those carried at FVTPL, are assessed for indicators of impairment at the end of
each reporting period. Those financial assets are considered to be impaired when there is objective evidence
that, as a result of one or more events that occurred after the initial recognition of the financial assets, their
estimated future cash flows have been affected.
For financial assets carried at amortized cost, such as trade receivables, assets that are assessed not to be
impaired individually are, in addition, assessed for impairment on a collective basis. The Company assesses
the collectability of receivables by performing the account aging analysis and examining current trends in
the credit quality of its customers.
For financial assets carried at amortized cost, the amount of the impairment loss is the difference between
the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial
asset’s original effective interest rate.
For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively to an event occurring after the impairment loss
was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent
that the carrying amount of the financial assets at the date the impairment loss is reversed does not exceed
what the amortized cost would have been had the impairment loss not been recognized.
When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously
recognized in other comprehensive income are reclassified to profit or loss in the year.
In respect of available-for-sale equity instruments, impairment losses previously recognized in profit or
loss are not reversed through profit or loss. Any increase in fair value subsequent to the recognition of
an impairment loss is recognized in other comprehensive income and accumulated under the heading of
unrealized gains or losses from available-for-sale financial assets.
For financial assets carried at cost, the amount of the impairment loss is measured as the difference between
the asset’s carrying amount and the present value of the estimated future cash flows discounted at the
current market rate of return for a similar financial asset. Such impairment loss will not be reversed in
subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial
assets with the exception of trade receivables, where the carrying amount is reduced through the use of
an allowance account. When a trade receivable is considered uncollectible, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are credited against the
allowance account.
On derecognition of a financial asset in its entirety, the difference between the financial asset’s carrying
amount and the sum of the consideration received and receivable and the cumulative gain or loss that had
been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.
Financial Liabilities and Equity Instruments
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity
in accordance with the substance of the contractual arrangements and the definitions of a financial liability
and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds
received, net of direct issue costs.
Financial liabilities
Financial liabilities are subsequently measured either at amortized cost using effective interest method or at
FVTPL.
Financial liabilities measured at FVTPL are derivative financial instruments that do not meet the criteria for
hedge accounting, and they are stated at fair value, with any gains or losses arising on remeasurement
recognized in profit or loss.
Financial liabilities other than those held for trading purposes and designated as at FVTPL are subsequently
measured at amortized cost at the end of each reporting period.
Derecognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, the Company’s obligations are
discharged, cancelled or they expire. The difference between the carrying amount of the financial liability
derecognized and the consideration paid and payable is recognized in profit or loss.
Derivative Financial Instruments
The Company enters into a variety of derivative financial instruments to manage its market risk exposure to
foreign exchange rate, interest rate and equity price fluctuation, including forward exchange contracts, cross
currency swap contracts, interest rate swaps and forward stock contracts.
Derivative financial instruments are initially recognized at fair value at the date the derivative contracts are
entered into and are subsequently remeasured to their fair value at the end of each reporting period. The
resulting gain or loss is recognized in profit or loss immediately unless the derivative financial instrument is
22
designated and effective as a hedging instrument, in which event the timing of the recognition in profit or
loss depends on the nature of the hedge relationship.
Any excess of the Company’s share of the net fair value of the identifiable assets, liabilities and contingent
liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.
Changes in the fair value of derivative financial instruments that are designated and qualify as fair value
hedges are recognized in profit or loss immediately, together with any changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk.
The effective portion of changes in the fair value of derivative financial instruments that are designated
and qualify as cash flow hedges is recognized in other comprehensive income and accumulated under the
heading of cash flow hedges reserve. Amounts previously recognized in other comprehensive income and
accumulated in equity are reclassified to profit or loss in the period when the hedged item is recognized in
profit or loss.
Inventories
Inventories are stated at the lower of cost or net realizable value. Inventories are recorded at standard cost
and adjusted to approximate weighted-average cost at the end of the reporting period. Net realizable
value represents the estimated selling price of inventories less all estimated costs of completion and costs
necessary to make the sale.
Investments Accounted for Using Equity Method
Investments accounted for using the equity method include investments in associates and interests in joint
ventures.
An associate is an entity over which the Company has significant influence and that is neither a subsidiary
nor a joint venture. Significant influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control over those policies.
A joint venture is a contractual arrangement whereby the Company and other parties undertake an
economic activity that is subject to joint control (i.e. when the strategic financial and operating policy
decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing
control). Joint venture arrangements that involve the establishment of a separate entity in which each
venturer has an interest are referred to as jointly controlled entities.
The operating results and assets and liabilities of associates and jointly controlled entities are incorporated
in these consolidated financial statements using the equity method of accounting. Under the equity
method, an investment in an associate or a jointly controlled entity is initially recognized in the consolidated
statement of financial position at cost and adjusted thereafter to recognize the Company’s share of profit or
loss and other comprehensive income of the associate and jointly controlled entity as well as the distribution
received. The Company also recognized its share in the changes in the associates and jointly controlled
entity.
Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable
assets, liabilities and contingent liabilities of an associate or a jointly controlled entity recognized at the date
of acquisition is recognized as goodwill, which is included within the carrying amount of the investment.
When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment
as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to
sell) with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the
investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of
the investment subsequently increases.
The Company discontinues the use of the equity method from the date when the Company ceases to have
significant influence over an associate. When the Company retains an interest in the former associate, the
Group measures the retained interest at fair value at that date. The difference between the carrying amount
of the associate at the date the equity method was discontinued, and the fair value of any retained interest
and any proceeds from disposing of a part interest in the associate is included in the determination of the
gain or loss on disposal of the associate. In addition, the Company shall account for all amounts recognized
in other comprehensive income in relation to that associate on the same basis as would be required if the
associate had directly disposed of the related assets or liabilities.
When the Company subscribes to additional shares in an associate or jointly controlled entity at a
percentage different from its existing ownership percentage, the resulting carrying amount of the
investment differs from the amount of the Company’s proportionate interest in the net assets of the
associate or jointly controlled entity. The Company records such a difference as an adjustment to
investments with the corresponding amount charged or credited to capital surplus. If the Company’s
ownership interest is reduced due to the additional subscription to the shares of associate or joint controlled
entity by other investors, the proportionate amount of the gains or losses previously recognized in other
comprehensive income in relation to that associate or jointly controlled entity shall be reclassified to profit or
loss on the same basis as would be required if the associate or jointly controlled entity had directly disposed
of the related assets or liabilities.
When a consolidated entity transacts with an associate or a joint controlled entity, profits and losses
resulting from the transactions with the associate or jointly controlled entity are recognized in the Company’
consolidated financial statements only to the extent of interests in the associate or jointly controlled entity
that are not owned by the Company.
Property, Plant and Equipment
Property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment. Costs include any incremental costs that are directly attributable to the construction or
acquisition of the item of property, plant and equipment.
Properties in the course of construction for production, supply or administrative purposes are carried at cost,
less any recognized impairment loss. Such properties are classified to the appropriate categories of property,
plant and equipment when completed and ready for intended use. Depreciation of these assets, on the
same basis as other property assets, commences when the assets are ready for their intended use.
23
Depreciation is recognized so as to write off the cost of the assets less their residual values over their
useful lives, and it is computed using the straight-line method over the following estimated useful 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. The estimated useful lives, residual values and
depreciation method are reviewed at the end of each reporting period, with the effect of any changes in
estimates accounted for on a prospective basis. Land is not depreciated.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned
assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the
lease term, assets are depreciated over the shorter of the lease term and their useful lives.
An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected to arise from the continued use of the assets. Any gain or loss arising on the disposal
or retirement of an item of property, plant and equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognized in profit or loss.
Leases
Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
The Company as lessor
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant
lease.
The Company as lessee
Assets held under finance lease are initially recognized as assets of the Company at the fair value at the
inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding
liability to the lessor is included in the consolidated balance sheet as an obligation under finance lease.
Lease payments are apportioned between finance expense and reduction of the lease obligation so as to
achieve a constant rate of interest on the remaining balance of the liability.
Operating lease payments are recognized as an expense on a straight-line basis over the lease term.
Intangible Assets
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of
the business less accumulated impairment losses, if any.
Other intangible assets
Other separately acquired intangible assets with finite useful lives are carried at cost less accumulated
amortization and accumulated impairment losses. Amortization is recognized using the straight-line method
over the following estimated useful lives: 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. The estimated useful life and amortization method are
reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted
for on a prospective basis.
Impairment of Tangible and Intangible Assets
Goodwill
Goodwill is not amortized and instead is tested for impairment annually, or more frequently when there
is an indication that the cash generating unit may be impaired. For the purpose of impairment testing,
goodwill is allocated to each of the Company’s cash-generating units or groups of cash-generating
units that are expected to benefit from the synergies of the combination. If the recoverable amount of a
cash-generating unit is less than its carrying amount, the difference is allocated first to reduce the carrying
amount of any goodwill allocated to such cash generating unit and then to the other assets of the cash
generating unit pro rata based on the carrying amount of each asset in the cash generating unit. Any
impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for
goodwill is not reversed in subsequent periods.
Other tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an
individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the
asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are
also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying
amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An
impairment loss is recognized immediately in profit or loss.
24
When an impairment loss subsequently reverses, the carrying amount of the asset or a cash-generating unit
is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been determined had no impairment loss been
recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized
immediately in profit or loss.
Provision
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a
past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate
can be made of the amount of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding
the obligation. When a provision is measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash flows.
Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for
estimated customer returns, rebates and other similar allowances.
Sale of goods
Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which
time all the following conditions are satisfied:
● The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
● The Company retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
● The amount of revenue can be measured reliably;
● It is probable that the economic benefits associated with the transaction will flow to the Company; and
● The costs incurred or to be incurred in respect of the transaction can be measured reliably.
In principle, payment term granted to customers is due 30 days from the invoice date or 30 days from the
end of the month of when the invoice is issued. Due to the short term nature of the receivables from sale of
goods with the immaterial discounted effect, the Company measures them at the original invoice amounts
without discounting.
Royalties, dividend and interest income
Revenue from royalties is recognized on an accrual basis in accordance with the substance of the relevant
agreement (provided that it is probable that the economic benefits will flow to the Company and the
amount of revenue can be measured reliably).
Dividend income from investments is recognized when the shareholder’s right to receive payment has been
established, provided that it is probable that the economic benefits will flow to the Group and the amount
of income can be measured reliably.
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow
to the Company and the amount of income can be measured reliably. Interest income is accrued on a time
basis, by reference to the principal outstanding and at the effective interest rate applicable.
Retirement Benefits
For defined contribution retirement benefit plans, payments to the benefit plan are recognized as an
expense when the employees have rendered service entitling them to the contribution. For defined benefit
retirement benefit plans, the cost of providing benefit is recognized based on actuarial calculations.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected
Unit Credit Method, with actuarial calculations being carried out at year end. Actuarial gains and losses are
reported in retained earnings in the period that they are recognized as other comprehensive income.
Share-based Payment Arrangements
The Company elected to take the optional exemption under IFRS 1 for the share-based payment transactions
granted and vested before the date of transition to Taiwan-IFRSs. There were no stock options granted prior
to but unvested at the date of transition. Please refer to the description in Note 43 b.
The compensation costs of employee stock options that were granted after January 1, 2012 are measured at
the fair value of the stock options at the grant date. The fair value of the stock option granted determined at
the grant date of the stock options is expensed on a straight-line basis over the vesting period, based on the
Company’s estimate of the number of stock options that will eventually vest, with a corresponding increase
in capital surplus - employee stock option. The estimate is revised if subsequent information indicates that
the number of stock options expected to vest differs from original estimates.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
Income tax on unappropriated earnings (excluding earnings from foreign consolidated subsidiaries) at a rate
of 10% is expensed in the year the shareholders approved the appropriation of earnings which is the year
subsequent to the year the earnings are generated.
Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
25
Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in
the consolidated financial statements and the corresponding tax bases used in the computation of taxable
profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax
assets are generally recognized for all deductible temporary differences, net operating loss carryforwards
and unused tax credits to the extent that it is probable that taxable profits will be available against which
those deductible temporary differences can be utilized.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in
subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the
reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such
investments are only recognized to the extent that it is probable that there will be sufficient taxable profits
against which to utilize the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part
of the deferred tax asset to be recovered. The deferred tax assets which originally not recognized is also
reviewed at the end of each reporting period and recognized to the extent that it is probable that sufficient
taxable profits will be available to allow all or part of the deferred tax asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the year in
which the liability is settled or the asset is realized, based on tax rates (and tax laws) that have been enacted
or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and
assets reflects the tax consequences that would follow from the manner in which the Company expects, at
the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Current and deferred tax for the year
Current and deferred tax are recognized in profit or loss, except when they relate to items that are
recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax
are also recognized in other comprehensive income or directly in equity, respectively.
5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND
UNCERTAINTY
In the application of the Company’s accounting policies, which are described in Note 4, the directors are
required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the year in which the estimate is revised if the revision affects only that year, or
in the year of the revision and future years if the revision affects both current and future years.
The following are the critical judgments, apart from those involving estimations, that the directors have
made in the process of applying the Company’s accounting policies and that have the most significant effect
on the amounts recognized in the consolidated financial statements.
Revenue Recognition
The Company recognizes revenue when the conditions described in Note 4 are satisfied. The Company also
records a provision for estimated future returns and other allowances in the same period the related revenue
is recorded. Provision for estimated sales returns and other allowances is generally made and adjusted at a
specific percentage based on historical experience and any known factors that would significantly affect the
allowance, and our management periodically reviews the adequacy of the percentage used.
Impairment of Tangible and Intangible Assets Other than Goodwill
In the process of evaluating the potential impairment of tangible and intangible assets other than goodwill,
the Company is required to make subjective judgments in determining the independent cash flows, useful
lives, expected future revenue and expenses related to the specific asset groups with the consideration of the
nature of semiconductor industry. Any changes in these estimates based on changed economic conditions
or business strategies could result in significant impairment charges or reversal in future years.
Impairment of Goodwill
The assessment of impairment of goodwill requires the Company to make subjective judgment to determine
the identified cash-generating units, allocate the goodwill to relevant cash-generating units and estimate the
recoverable amount of relevant cash-generating units.
Impairment Assessment on Investment Using Equity Method
The Company assesses the impairment of investments accounted for using the equity method whenever
triggering events or changes in circumstances indicate that an investment may be impaired and carrying
value may not be recoverable. The Company measures the impairment based on a projected future cash
flow of the investees, including the underlying assumptions of sales growth rate and capacity utilization
rate formulated by such investees’ internal management team. The Company also takes into account market
conditions and the relevant industry trends to ensure the reasonableness of such assumptions.
Realization of Deferred Income Tax Assets
Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available
against which those deferred tax assets can be utilized. Assessment of the realization of the deferred tax
assets requires the Company’s subjective judgment and estimate, including the future revenue growth and
profitability, tax holidays, the amount of tax credits can be utilized and feasible tax planning strategies. Any
changes in the global economic environment, the industry trends and relevant laws and regulations could
result in significant adjustments to the deferred tax assets.
26
Valuation of Inventory
Inventories are stated at the lower of cost or net realizable value, and the Company use judgment and
estimate to determine the net realizable value of inventory at the end of each reporting period.
The Company entered into derivative contracts 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.
Due to the rapid technological changes, the Company estimates the net realizable value of inventory for
obsolescence and unmarketable items at the end of reporting period and then writes down the cost of
inventories to net realizable value. The net realizable value of the inventory is mainly determined based on
assumptions of future demand within a specific time horizon.
Recognition and Measurement of Defined Benefit Plans
Accrued pension liabilities and the resulting pension expenses under defined benefit pension plans are
calculated using the Projected Unit Credit Method. Actuarial assumptions comprise the discount rate, rate
of employee turnover, and long-term average future salary increase. Changes in economic circumstances
and market conditions will affect these assumptions and may have a material impact on the amount of the
expense and the liability.
6. CASH AND CASH EQUIVALENTS
Cash and deposits in banks
Repurchase agreements collateralized by short-term
commercial paper
Repurchase agreements collateralized by corporate bonds
Repurchase agreements collateralized by government bonds
December 31, 2013
December 31, 2012
January 1, 2012
$ 238,014,580
$ 140,072,294
$ 139,637,363
2,395,644
1,809,344
475,879
349,341
2,691,042
297,911
-
-
3,834,914
$ 242,695,447
$ 143,410,588
$ 143,472,277
7. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Outstanding forward exchange contracts consisted of the following:
December 31, 2013
Sell NT$/Buy EUR
Sell NT$/Buy US$
Sell US$/Buy EUR
Sell US$/Buy JPY
Sell US$/Buy RMB
December 31, 2012
Sell NT$/Buy EUR
Sell NT$/Buy US$
Sell NT$/Buy JPY
Sell US$/Buy NT$
Sell US$/Buy RMB
January 1, 2012
Sell EUR/Buy NT$
Sell NT$/Buy US$
Sell RMB/Buy US$
Sell US$/Buy EUR
Sell US$/Buy JPY
Sell US$/Buy NT$
Maturity Date
Contract Amount
(In Thousands)
January 2014
January 2014
January 2014
January 2014
January 2014 to February 2014
NT$4,514,314/EUR110,000
NT$683,749/US$22,800
US$340,134/EUR248,000
US$341,023/JPY35,754,801
US$138,000/RMB841,492
January 2013
January 2013
January 2013
January 2013 to March 2013
January 2013
NT$9,417,062/EUR246,000
NT$590,403/US$20,400
NT$44,110/JPY130,000
US$13,700/NT$398,239
US$20,000/RMB124,735
January 2012
January 2012 to February 2012
January 2012
January 2012
January 2012
January 2012 to February 2012
EUR38,600/NT$1,528,206
NT$163,491/US$5,400
RMB1,118,705/US$177,000
US$2,082/EUR1,591
US$3,335/JPY259,830
US$16,900/NT$510,122
Derivative financial assets
Forward exchange contracts
Cross currency swap contracts
Derivative financial liabilities
Forward exchange contracts
Cross currency swap contracts
December 31, 2013
December 31, 2012
January 1, 2012
Outstanding cross currency swap contracts consisted of the following:
$ 90,353
-
$ 38,607
947
$ 15,360
-
$ 90,353
$ 39,554
$ 15,360
$ 29,573
4,177
$ 12,174
3,451
$ 13,623
119
$ 33,750
$ 15,625
$ 13,742
Maturity Date
December 31, 2013
Contract Amount
(In Thousands)
Range of Interest Rates Paid
Range of
Interest Rates Received
January 2014
NT$1,639,215/US$55,080
-
1.03%-2.00%
December 31, 2012
January 2013
January 2013
January 1, 2012
January 2012
NT$1,083,139/US$37,280
US$275,000/NT$7,986,190
-
0.14%-0.17%
NT$420,431/US$13,880
-
0.06%
-
0.48%
27
8. AVAILABLE-FOR-SALE FINANCIAL ASSETS
Publicly traded stocks
Money market funds
December 31, 2013
December 31, 2012
January 1, 2012
$ 59,481,569
1,183
$ 41,160,437
1,443
$ 3,306,248
2,522
The Company’s investments in publicly traded stocks are exposed to the risk of market price fluctuations.
Accordingly, the Company entered into stock forward contracts to sell shares at a contracted price in a
specific future period in order to hedge the fair value risk caused by changes in equity prices.
The outstanding stock forward contracts consisted of the following:
$ 59,482,752
$ 41,161,880
$ 3,308,770
Contract Amount (In Thousands)
Contract Price
Current portion
Noncurrent portion
$ 760,793
58,721,959
$ 2,410,635
38,751,245
$ 3,308,770
-
$ 59,482,752
$ 41,161,880
$ 3,308,770
December 31, 2013
NT$37,431,626
(US$1,256,095)
Determined by the specific percentage of spot price on the trade date
In October 2012, the Company acquired 5% of the outstanding equity of ASML Holding N.V. (ASML) for
EUR837,816 thousand with a lock-up period of 2.5 years starting from the acquisition date. (Note 40e)
In the second quarter of 2012, the Company recognized an impairment loss on some of the foreign publicly
traded stocks in the amount of NT$2,677,529 thousand due to the significant decline in fair value.
In addition, 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. The contract information was as follows:
Contract Amount (In Thousands)
Maturity Date
Range of Interest Rates Paid
Range of Interest Rates
Received
9. HELD-TO-MATURITY FINANCIAL ASSETS
January 1, 2012
Commercial paper
Corporate bonds
Government bonds
Current portion
Noncurrent portion
December 31, 2013
December 31, 2012
January 1, 2012
$ 1,795,949
-
-
$ -
5,056,973
-
$ -
8,614,527
454,320
$ 1,795,949
$ 5,056,973
$ 9,068,847
$ 1,795,949
-
$ 5,056,973
-
$ 3,825,680
5,243,167
$ 1,795,949
$ 5,056,973
$ 9,068,847
10. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS
NT$80,000
August 31, 2012
1.38%
0.63%-0.86%
For the year ended December 31, 2012, the amount recognized in other comprehensive income and
accumulated under the heading of cash flow hedges reserve from the above interest rate swap contract
amounted to a net gain of NT$5 thousand; the amount reclassified from equity and recognized as a
loss from the above interest rate swap contract amounted to a net loss of NT$227 thousand, which was
included under finance costs in the consolidated statements of comprehensive income.
11. NOTES AND ACCOUNTS RECEIVABLE, NET
Notes and accounts receivable
Allowance for doubtful receivables
$ 72,136,514
(486,588)
$ 58,257,798
(480,212)
$ 46,321,240
(490,952)
December 31, 2013
December 31, 2012
January 1, 2012
December 31, 2013
December 31, 2012
January 1, 2012
Notes and accounts receivable, net
$ 71,649,926
$ 57,777,586
$ 45,830,288
Financial liabilities
Current
Cash flow hedges
Interest rate swap contracts
$ -
$ -
$ 232
Financial liabilities
Noncurrent
Fair value hedges
Stock forward contracts
$ 5,481,616
$ -
$ -
In principle, the payment term granted to customers is due 30 days from the invoice date or 30 days from
the end of the month of when the invoice is issued. The allowance for doubtful receivables is assessed by
reference to the collectability of receivables by performing the account aging analysis, historical experience
and current financial condition of customers.
28
Except for those impaired, for the rest of the notes and accounts receivable, the account aging analysis at
the end of the reporting period is summarized in the following table. Notes and accounts receivable include
amounts that are past due but for which the Company has not recognized a specific allowance for doubtful
receivables after the assessment since there has not been a significant change in the credit quality of its
customers and the amounts are still considered recoverable.
Aging analysis of notes and accounts receivable, net
Neither past due nor impaired
Past due but not impaired
Past due within 30 days
December 31, 2013
December 31, 2012
January 1, 2012
$ 64,112,564
$ 47,528,952
$ 39,362,390
7,537,362
10,248,634
6,467,898
$ 71,649,926
$ 57,777,586
$ 45,830,288
12. INVENTORIES
Finished goods
Work in process
Raw materials
Supplies and spare parts
December 31, 2013
December 31, 2012
January 1, 2012
$ 7,245,209
26,033,625
2,435,269
1,780,790
$ 6,244,824
25,713,217
3,864,105
2,008,352
$ 3,347,849
17,940,960
1,808,615
1,743,158
$ 37,494,893
$ 37,830,498
$ 24,840,582
Write-down of inventories to net realizable value in the amount of NT$664,662 thousand and
NT$1,558,915 thousand, respectively, were included in the cost of revenue for the years ended December
31, 2013 and 2012.
Movements of the allowance for doubtful receivables
13. FINANCIAL ASSETS CARRIED AT COST
Balance, beginning of year
Provision
Write-off
Effect of deconsolidation of subsidiary
Effect of exchange rate changes
Years Ended December 31
2013
2012
$ 480,212
9,436
-
(3,157)
97
$ 490,952
450
(11,083)
-
(107)
Balance, end of year
$ 486,588
$ 480,212
Aging analysis of accounts receivable that is individually determined to be impaired
Not past due
Past due 1-30 days
Past due 31-60 days
Past due 61-120 days
Past due over 121 days
December 31, 2013
December 31, 2012
January 1, 2012
$ 38
276
80
158
7,824
$ 160,354
2,863
-
-
3,157
$ 81,017
24,351
4,684
-
9,769
$ 8,376
$ 166,374
$ 119,821
The Company held bank guarantees and other credit enhancements as collateral for certain impaired
accounts receivables. As of December 31, 2013 and 2012 and January 1, 2012, the amount of the bank
guarantee and other credit enhancements were US$11 thousand, US$1,000 thousand and US$2,962
thousand, respectively.
Non-publicly traded stocks
Mutual funds
$ 1,865,078
280,513
$ 3,314,713
290,364
$ 4,004,314
310,691
December 31, 2013
December 31, 2012
January 1, 2012
$ 2,145,591
$ 3,605,077
$ 4,315,005
Since there is a wide range of estimated fair values of the Company’s investments in non-publicly traded
stocks, the Company concludes that the fair value cannot be reliably measured and therefore should be
measured at the cost less any impairment.
The Company recognized impairment loss on financial assets carried at cost in the amount of NT$1,538,888
thousand and NT$367,399 thousand for the years ended December 31, 2013 and 2012, respectively.
14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
Investments accounted for using the equity method consisted of the following:
Associates
Jointly controlled entities
$ 24,823,807
3,492,453
$ 20,325,277
3,035,641
$ 22,033,567
2,853,364
December 31, 2013
December 31, 2012
January 1, 2012
$ 28,316,260
$ 23,360,918
$ 24,886,931
29
a. Investments in associates
Associates consisted of the following:
Name of Associate
Principal Activities
Place of
Incorporation and Operation
Carrying Amount
% of Ownership and Voting Rights Held by the Company
December 31, 2013
December 31, 2012
January 1, 2012
December 31, 2013
December 31, 2012
January 1, 2012
Research, design, development, manufacture, packaging, testing
and sale of memory integrated circuits, LSI, VLSI and related
parts
Hsinchu, Taiwan
$ 10,556,348
$ 9,406,597
$ 8,985,340
Vanguard International
Semiconductor Corporation (VIS)
Systems on Silicon Manufacturing
Company Pte Ltd. (SSMC)
Motech Industries, Inc. (Motech)
Xintec
Global Unichip Corporation (GUC)
Fabrication and supply of integrated circuits
Singapore
Manufacturing and sales of solar cells, crystalline silicon solar
Taipei, Taiwan
cell, and test and measurement instruments and design and
construction of solar power systems
Wafer level chip size packaging service
Researching, developing, manufacturing, testing and marketing
of integrated circuits
Taoyuan, Taiwan
Hsinchu, Taiwan
Mcube Inc. (Mcube)
Research, development, and sale of micro-semiconductor device
Delaware, U.S.A.
7,457,733
3,887,462
1,866,123
1,056,141
-
6,710,956
2,992,899
-
1,214,825
-
6,289,429
5,609,002
-
1,149,796
-
$ 24,823,807
$ 20,325,277
$ 22,033,567
39%
39%
20%
40%
35%
-
40%
39%
20%
-
35%
25%
39%
39%
20%
-
35%
25%
In the fourth quarter of 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. Subsequently, as the recoverable
amount of the aforementioned investments was higher than its carrying amount, the impairment loss of
NT$1,186,674 thousand recognized in prior year was reversed in the fourth quarter of 2013.
Total assets
Total liabilities
Net assets
December 31, 2013
December 31, 2012
January 1, 2012
$ 96,689,523
(28,141,625)
$ 82,348,735
(21,683,504)
$ 87,282,437
(20,948,855)
$ 68,547,898
$ 60,665,231
$ 66,333,582
Since TSMC did not participate in Mcube’s issuance of new shares in the third quarter of 2013, the
Company’s percentage of ownership in Mcube decreased to 18%. As a result, the Company evaluated and
concluded that the Company did not exercise significant influence over Mcube. Therefore Mcube is no
longer accounted for using the equity method. Further, such investment was reclassified to financial assets
carried at cost. The Company also measured the fair value of retained interest in Mcube when the significant
influence was lost, which has no difference with the carrying amount; accordingly, the Company did not
recognize any gain or loss.
TSMC has no power to govern the financial and operating policies of Xintec starting June 2013 due to the
loss of power to cast the majority of votes at meetings of the Board of Directors. As a result, Xintec is no
longer consolidated and is accounted for using the equity method. Please refer to Note 34.
The summarized financial information in respect of the Company’s associates is set out below. The
summarized financial information below represents amounts shown in the associates’ financial statements
prepared in accordance with IFRSs, IASs, interpretations as well as related guidance translated by the ARDF
endorsed by the FSC with the effective dates, which is also adjusted by the Company using the equity
method of accounting.
The Company’s share of net assets of associates
$ 24,823,807
$ 20,325,277
$ 22,033,567
Net revenue
Net income
Other comprehensive income (loss)
The Company’s share of profits of associates
The Company’s share of other comprehensive income (loss) of
Years Ended December 31
2013
2012
$ 67,752,079
$ 8,325,722
$ 168,081
$ 3,518,495
$ 55,746,115
$ 175,900
$ (24,553)
$ 1,456,645
associates
$ 18,554
$ (39,238)
The market prices of the investments accounted for using the equity method in publicly traded stocks
calculated by the closing price at the end of the reporting period are summarized as follows:
Name of Associate
December 31, 2013
December 31, 2012
January 1, 2012
VIS
Motech
GUC
$ 22,239,112
$ 5,345,015
$ 3,454,902
$ 12,658,703
$ 2,383,824
$ 4,692,130
$ 6,627,758
$ 4,645,176
$ 4,645,442
30
b. Investments in jointly controlled entities
Jointly controlled entities consisted of the following:
Name of Jointly Controlled Entity
Principal Activities
Place of
Incorporation and Operation
Carrying Amount
% of Ownership and Voting Rights Held by the Company
December 31, 2013
December 31, 2012
January 1, 2012
December 31, 2013
December 31, 2012
January 1, 2012
VisEra Holding Company (VisEra
Holding)
Investing in companies involved in the design, manufacturing
and other related businesses in the semiconductor industry
Cayman Islands
$ 3,492,453
$ 3,035,641
$ 2,853,364
49%
49%
49%
The summarized financial information in respect of the Company’s jointly controlled entity is set out below.
The summarized financial information below represents amounts shown in the jointly controlled entity’s
financial statements prepared in accordance with IFRSs, IASs, interpretations as well as related guidance
translated by the ARDF endorsed by the FSC with the effective dates, which is also adjusted by the Company
using the equity method of accounting.
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
December 31, 2013
December 31, 2012
January 1, 2012
$ 2,335,612
$ 1,564,485
$ 407,184
$ 460
$ 1,887,122
$ 1,780,903
$ 631,803
$ 581
$ 1,616,916
$ 1,732,247
$ 495,066
$ 733
Years Ended December 31
2013
2012
Net revenue
Income from operations
Net income
Other comprehensive income (loss)
Total comprehensive income
Income tax expense
The Company’s share of profits of joint venture
The Company’s share of other comprehensive income (loss) of joint venture
$ 1,801,619
$ 474,787
$ 453,536
$ (78,294)
$ 375,242
$ 64,311
$ 453,536
$ (78,294)
$ 1,869,049
$ 522,486
$ 617,084
$ 92,986
$ 710,070
$ 135,247
$ 617,084
$ 92,986
15. PROPERTY, PLANT AND EQUIPMENT
Land and land improvements
Buildings
Machinery and equipment
Office equipment
Assets under finance leases
Equipment under installation and construction in progress
December 31, 2013
December 31, 2012
January 1, 2012
$ 3,582,717
103,948,570
404,706,105
7,836,261
418,467
272,173,793
$ 1,159,755
85,610,120
404,382,298
6,907,376
438,663
119,063,976
$ 1,185,573
71,915,740
294,814,381
5,148,538
493,945
116,863,976
$ 792,665,913
$ 617,562,188
$ 490,422,153
31
Cost
Land and land improvements
Buildings
Machinery and equipment
Office equipment
Assets under finance leases
Accumulated depreciation and impairment
Land improvements
Buildings
Machinery and equipment
Office equipment
Assets under finance leases
Equipment under installation and construction in progress
Cost
Land and land improvements
Buildings
Machinery and equipment
Office equipment
Assets under finance leases
Accumulated depreciation and impairment
Land improvements
Buildings
Machinery and equipment
Office equipment
Assets under finance leases
Equipment under installation and construction in progress
Balance, Beginning of Year
Additions
Disposals
Reclassification
Effect of Deconsolidation of
Subsidiary
Effect of Exchange Rate
Changes
Balance, End of Year
Year Ended December 31, 2013
$ 1,527,124
197,411,851
1,279,893,177
20,067,943
766,732
1,499,666,827
$ 3,212,000
31,869,046
140,223,121
3,791,109
-
$ 179,095,276
$ -
-
(2,925,145)
(788,080)
-
$ (3,713,225)
$ -
3,797
360
-
-
$ 4,157
$ (772,029)
(986,205)
(5,630,854)
(1,055,809)
-
$ (8,444,897)
$ 19,814
884,247
2,359,135
46,869
37,698
$ 3,347,763
$ 3,986,909
229,182,736
1,413,919,794
22,062,032
804,430
1,669,955,901
367,369
111,801,731
875,510,879
13,160,567
328,069
1,001,168,615
119,063,976
$ 27,069
13,183,558
138,314,235
2,413,652
41,333
$ 153,979,847
$ 154,706,858
$ -
-
(2,809,185)
(786,464)
-
$ (3,595,649)
$ -
$ -
-
-
-
-
$ -
$ -
$ -
(226,908)
(3,656,326)
(599,483)
-
$ (4,482,717)
$ (1,632,860)
$9,754
475,785
1,854,086
37,499
16,561
$ 2,393,685
$ 35,819
404,192
125,234,166
1,009,213,689
14,225,771
385,963
1,149,463,781
272,173,793
$ 617,562,188
$ 792,665,913
Balance, Beginning of Year
Additions
Disposals
Impairment
Reclassification
Effect of Exchange Rate
Changes
Balance, End of Year
Year Ended December 31, 2012
$ 1,541,128
172,997,391
1,057,926,529
17,041,306
791,480
1,250,297,834
$ 18,500
25,183,927
226,497,664
3,680,707
-
$ 255,380,798
$ -
(54,456)
(2,104,900)
(563,454)
-
$ (2,722,810)
$ -
-
-
-
-
$ -
$ -
(11,074)
11,040
34
-
$ -
$ (32,504)
(703,937)
(2,437,156)
(90,650)
(24,748)
$ (3,288,995)
$ 1,527,124
197,411,851
1,279,893,177
20,067,943
766,732
1,499,666,827
355,555
101,081,651
763,112,148
11,892,768
297,535
876,739,657
116,863,976
$ 26,983
11,154,790
116,070,821
1,875,785
40,135
$ 129,168,514
$ 2,308,355
$ -
(44,354)
(1,966,751)
(555,485)
-
$ (2,566,590)
$ -
$ -
-
422,323
22,182
-
$444,505
$ -
$ -
(164)
158
6
-
$ -
$ (8,525)
$ (15,169)
(390,192)
(2,127,820)
(74,689)
(9,601)
$ (2,617,471)
$ (99,830)
367,369
111,801,731
875,510,879
13,160,567
328,069
1,001,168,615
119,063,976
$ 490,422,153
$ 617,562,188
32
The significant part of the Company’s buildings includes main plants, mechanical and electrical power
equipment and clean rooms, and the related depreciation is calculated using the estimated useful lives of 20
years, 10 years and 10 years, respectively.
For the year ended December 31, 2012, the Company recognized impairment loss of NT$444,505 thousand
related to property, plant and equipment of the foundry reportable segment since the carrying amount of
some of property, plant and equipment is expected to be unrecoverable.
The Company entered into agreements to lease buildings from December 2003 to November 2018 that
qualify as finance leases.
Future minimum lease gross payments were as follows:
16. INTANGIBLE ASSETS
December 31, 2013
December 31, 2012
January 1, 2012
Goodwill
Technology license fees
Software and system design costs
Patent and others
$ 5,627,517
1,103,161
3,647,670
1,112,035
$ 5,523,707
1,461,893
2,968,942
1,005,027
$ 5,693,999
1,682,892
2,366,483
1,118,189
$ 11,490,383
$ 10,959,569
$ 10,861,563
Year Ended December 31, 2013
Balance,
Beginning of
Year
Additions
Disposals Reclassification
Effect of
Deconsolidation
of Subsidiary
Effect of
Exchange Rate
Changes
Balance,
End of Year
December 31, 2013
December 31, 2012
January 1, 2012
Cost
Minimum lease payments
Not later than 1 year
Later than 1 year and not later than 5 years
Later than five years
Less: Future finance expenses
$ 28,376
850,703
-
879,079
94,040
$ 27,042
108,168
729,566
864,776
108,471
$ -
223,296
780,962
1,004,258
133,265
Present value of minimum lease payments
$ 785,039
$ 756,305
$ 870,993
Present value of minimum lease payments
Not later than 1 year
Later than 1 year and not later than 5 years
Later than five years
$ 27,684
757,355
-
$ 26,382
100,821
629,102
$ -
213,411
657,582
$ 785,039
$ 756,305
$ 870,993
Current portion
Noncurrent portion
$ 8,809
776,230
$ 8,190
748,115
$ -
870,993
$ 785,039
$ 756,305
$ 870,993
There was no capitalization of borrowing costs for the year ended December 31, 2013. During the year
ended December 31, 2012, the Company capitalized the borrowing costs directly attributable to the
acquisition or construction of property, plant and equipment. For the year ended December 31, 2012,
the amount of capitalized borrowing costs was NT$6,442 thousand and the capitalized interest rate was
1.08%-1.20%.
Goodwill
Technology license fees
Software and system
design costs
Patent and others
Accumulated amortization
Technology license fees
Software and system
design costs
Patent and others
$ 5,523,707 $ - $ - $ - $ -
(113,340)
4,590,548
(29,564)
-
-
15,095,421
3,094,664
28,304,340
2,140,675
578,901
(25,335)
(42,089)
$ 2,719,576 $ (41,795) $ (39,662) $ (180,764)
(111,105)
101,007
(18,246)
(23,549)
$ 103,810
(2,816)
$ 5,627,517
4,444,828
5,395
20,462
$ 126,851
17,086,805
3,729,396
30,888,546
$ 3,128,655
$ 282,414 $ - $ - $ (66,587) $ (2,815)
$ 3,341,667
1,344,339
575,269
(12,661)
(25,195)
$ 2,202,022 $ (41,523) $ (5,941) $ (104,443)
(17,974)
(23,549)
(5,941)
-
12,126,479
2,089,637
17,344,771
$ 10,959,569
4,893
1,199
$ 3,277
13,439,135
2,617,361
19,398,163
$ 11,490,383
Year Ended December 31, 2012
Additions
Disposals
Reclassification
Balance,
Beginning of
Year
Effect of
Exchange Rate
Changes
Balance,
End of Year
Cost
Goodwill
Technology license fees
Software and system design costs
Patent and others
Accumulated amortization
Technology license fees
Software and system design costs
Patent and others
$ 5,693,999 $ - $ - $ - $ (170,292)
(2,227)
(4,861)
(3,663)
$ 2,253,722 $ (141,227) $ 200,106 $ (181,043)
4,370,173
13,438,579
2,670,031
26,172,782
31,022
1,795,360
427,340
-
(48,193)
(93,034)
191,580
(85,464)
93,990
$ 442,467 $ - $ - $ (1,093)
(4,365)
(538)
$ 2,180,775 $ (141,227) $ - $ (5,996)
1,143,493
594,815
(48,193)
(93,034)
(36,552)
36,552
2,687,281
11,072,096
1,551,842
15,311,219
$ 10,861,563
$ 5,523,707
4,590,548
15,095,421
3,094,664
28,304,340
3,128,655
12,126,479
2,089,637
17,344,771
$ 10,959,569
33
The Company’s goodwill has been tested for impairment at the end of the annual reporting period and the
recoverable amount is determined based on the value in use. The value in use was calculated based on the
cash flow forecast from the financial budgets covering the future five-year period, and the Company used
annual discount rate of 8.50% and 9.00% in its test of impairment as of December 31, 2013 and 2012,
respectively, to reflect the relevant specific risk in the cash-generating unit.
For the years ended December 31, 2013 and 2012, the Company did not recognize any impairment loss on
goodwill.
Year ended December 31, 2013
Balance, beginning of year
Provision made
Payment
Effect of deconsolidation of subsidiary
Effect of exchange rate changes
Sales Returns and
Allowances
Warranties
Total
$ 6,038,003
6,633,290
(5,042,752)
(37,748)
12,988
$ 4,891
6,162
(890)
-
289
$ 6,042,894
6,639,452
(5,043,642)
(37,748)
13,277
17. OTHER ASSETS
Tax receivable
Prepaid expenses
Long-term receivable
Others
Current portion
Noncurrent portion
18. SHORT-TERM LOANS
Unsecured loans
Amount
Original loan content
US$ (in thousands)
Annual interest rate
Maturity date
19. PROVISIONS
December 31, 2013
December 31, 2012
January 1, 2012
$ 1,781,376
1,081,957
820,000
770,468
$ 1,565,104
1,080,236
767,800
608,412
$ 708,891
1,436,416
785,400
550,053
$ 4,453,801
$ 4,021,552
$ 3,480,760
$ 2,984,224
1,469,577
$ 2,786,408
1,235,144
$ 2,174,014
1,306,746
$ 4,453,801
$ 4,021,552
$ 3,480,760
December 31, 2013
December 31, 2012
January 1, 2012
Balance, end of year
$ 7,603,781
$ 10,452
$ 7,614,233
Year ended December 31, 2012
Balance, beginning of year
Provision made
Payment
Effect of exchange rate changes
$ 5,068,263
7,187,023
(6,211,170)
(6,113)
$ 2,889
2,048
-
(46)
$ 5,071,152
7,189,071
(6,211,170)
(6,159)
Balance, end of year
$ 6,038,003
$ 4,891
$ 6,042,894
Provisions for sales returns and allowances are estimated based on historical experience, management
judgment, and any known factors that would significantly affect the returns and allowances, and are
recognized as a reduction of revenue in the same year of the related product sales.
The provision for warranties represents the present value of the Company’s best estimate of the future
outflow of the economic benefits that will be required under the Company’s obligations for warranties. The
estimate has been made on the basis of historical warranty trends of business and may vary as a result of
new materials, altered manufacturing processes or other events affecting product quality.
$ 15,645,000
$ 34,714,929
$ 25,926,528
20. BONDS PAYABLE
$ 525,000
0.38%-0.42%
Due in January 2014
$ 1,195,500
0.39%-0.58%
Due in January 2013
$ 856,000
0.45%-1.00%
Due by February 2012
Domestic unsecured bonds
Overseas unsecured bonds
Less: Discounts on bonds payable
Total
Current portion
Noncurrent portion
December 31, 2013
December 31, 2012
January 1, 2012
$ 166,200,000
44,700,000
210,900,000
132,375
$ 80,000,000
-
80,000,000
-
$ 22,500,000
-
22,500,000
-
$ 210,767,625
$ 80,000,000
$ 22,500,000
$ -
210,767,625
$ -
80,000,000
$ 4,500,000
18,000,000
$ 210,767,625
$ 80,000,000
$ 22,500,000
Sales returns and allowances
Warranties
$ 7,603,781
10,452
$ 6,038,003
4,891
$ 5,068,263
2,889
December 31, 2013
December 31, 2012
January 1, 2012
$ 7,614,233
$ 6,042,894
$ 5,071,152
Current portion
Noncurrent portion
$ 7,603,781
10,452
$ 6,038,003
4,891
$ 5,068,263
2,889
$ 7,614,233
$ 6,042,894
$ 5,071,152
34
The major terms of domestic unsecured bonds are as follows:
21. LONG-TERM BANK LOANS
Issuance
Tranche
Issuance Period
Total Amount
Coupon Rate
Repayment and Interest Payment
100-1
100-2
101-1
101-2
101-3
101-4
102-1
102-2
102-3
102-4
Domestic 5th
A
B
A
B
A
B
A
B
-
A
B
C
A
B
C
A
B
A
B
A
B
C
D
E
F
C
September 2011 to September 2016
$ 10,500,000
1.40%
Bullet repayment; interest payable
September 2011 to September 2018
January 2012 to January 2017
January 2012 to January 2019
August 2012 to August 2017
August 2012 to August 2019
September 2012 to September 2017
September 2012 to September 2019
October 2012 to October 2022
January 2013 to January 2018
January 2013 to January 2020
January 2013 to January 2023
February 2013 to February 2018
February 2013 to February 2020
February 2013 to February 2023
July 2013 to July 2020
July 2013 to July 2023
August 2013 to August 2017
August 2013 to August 2019
September 2013 to September 2016
September 2013 to September 2017
September 2013 to March 2019
7,500,000
10,000,000
7,000,000
9,900,000
9,000,000
12,700,000
9,000,000
4,400,000
10,600,000
10,000,000
3,000,000
6,200,000
11,600,000
3,600,000
10,200,000
3,500,000
4,000,000
8,500,000
1,500,000
1,500,000
1,400,000
September 2013 to March 2021
September 2013 to March 2023
September 2013 to September 2023
2,600,000
5,400,000
2,600,000
1.63%
1.29%
1.46%
1.28%
1.40%
1.28%
1.39%
1.53%
1.23%
1.35%
1.49%
1.23%
1.38%
1.50%
1.50%
1.70%
1.34%
1.52%
1.35%
1.45%
1.60%
1.85%
2.05%
2.10%
annually
〃
〃
〃
〃
〃
〃
〃
〃
〃
〃
〃
〃
〃
〃
〃
〃
〃
〃
〃
〃
Bullet repayment; interest payable
annually (interest for the six
months prior to maturity will
accrue on the basis of actual days
and be repayable at maturity)
〃
〃
Bullet repayment; interest payable
annually
Bank loans for working capital:
Repayable from April 2016 in 16 quarterly installments, annual
interest rate at 3.63% in 2013
$ 40,000
$ -
$ -
December 31, 2013
December 31, 2012
January 1, 2012
Repayable in full in one lump sum payment in June 2016,
however, reflective of a prepayment of NT$100,000 thousand in
September 2012, annual interest rate at 1.08%-1.21% in 2012
Repayable in full in one lump sum payment in March 2015,
however, reflective of a prepayment of NT$50,000 thousand in
August 2012, annual interest rate at 1.16%-1.18% in 2012
Repayable from July 2012 in 16 quarterly installments, annual
interest rate at 1.21%-1.24% in 2012
Repayable from September 2012 in 16 quarterly installments,
annual interest rate at 1.21%-1.24% in 2012
Repayable from October 2013 in 16 quarterly installments,
annual interest rate at 1.23%-1.24% in 2012
Current portion
Noncurrent portion
-
-
-
-
-
550,000
650,000
450,000
262,500
175,000
50,000
500,000
300,000
200,000
-
$ 40,000
$ 1,487,500
$ 1,650,000
$ -
40,000
$ 128,125
1,359,375
$ 62,500
1,587,500
$ 40,000
$ 1,487,500
$ 1,650,000
As of December 31, 2013, in relation to the deconsolidation of Xintec in June 2013 (refer to Note 34),
long-term bank loans of Xintec have been derecognized.
22. OTHER LONG-TERM PAYABLES
January 2002 to January 2012
4,500,000
3.00%
〃
December 31, 2013
December 31, 2012
January 1, 2012
The major terms of foreign unsecured bonds are as follows:
Issuance Period
Total Amount (US$ in Thousands)
Coupon Rate
Repayment and Interest Payment
April 2013 to April 2016
April 2013 to April 2018
$ 350,000
1,150,000
0.95%
1.625%
Bullet repayment; interest payable semi-annually
〃
Payables for software and system design costs
Payables for acquisition of property, plant and equipment
Payables for technology transfer
$ 54,000
-
-
$ 113,000
825,447
29,038
$ -
3,399,855
-
Current portion (classified under accrued expenses and other current
liabilities)
Noncurrent portion
$ 54,000
$ 967,485
$ 3,399,855
$ 18,000
36,000
$ 913,485
54,000
$ 3,399,855
-
$ 54,000
$ 967,485
$ 3,399,855
TSMC entered into an agreement with a counterparty in 2003 whereby TSMC China purchased in 2004
certain property, plant and equipment. The obligations under the aforementioned agreement were fully paid
in July 2013.
35
23. RETIREMENT BENEFIT PLANS
a. Defined contribution plans
The plan under the Labor Pension Act (the “Act”) is deemed a defined contribution plan. Pursuant to the
Act, TSMC, 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 Technology, TSMC Solar NA and TSMC Solar Europe
GmbH also make monthly contributions at certain percentages of the basic salary of their employees.
Accordingly, the Company recognized expenses of NT$1,590,414 thousand and NT$1,403,507 thousand
in the consolidated statements of comprehensive income for the years ended December 31, 2013 and
2012, respectively.
b. Defined benefit plans
TSMC, 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. TSMC revised its defined benefit plan in the fourth quarter of 2013 to set the employee’s
mandatory retirement age. Such plan changes have reflected in the actuarial results as of December 31,
2013.
The actuarial valuations of plan assets and the present value of the defined benefit obligation were carried
out by qualified actuaries. The principal assumptions of the actuarial valuation were as follows:
Discount rate
Future salary rate increase
Expected rate of return on plan assets
Measurement Date
December 31, 2013
December 31, 2012
January 1, 2012
2.15%
3.00%
1.25%
1.50%-1.75%
2.00%-3.00%
1.75%-2.00%
1.75%
2.50%-3.00%
2.00%
The pension costs of the defined benefit plans recognized in profit or loss were as follows:
Current service cost
Interest cost
Expected return on plan assets
Past service cost
Years Ended December 31
2013
2012
$ 134,762
175,563
(67,324)
(7,240)
$ 235,761
$ 129,217
160,018
(63,279)
(7,239)
$ 218,717
The pension costs of the aforementioned defined benefit plans were recognized in profit or loss by the
following categories:
Cost of revenue
Research and development expenses
General and administrative expenses
Marketing expenses
Years Ended December 31
2013
2012
$ 152,512
60,864
18,080
4,305
$ 137,857
57,536
18,923
4,401
$ 235,761
$ 218,717
For the years ended December 31, 2013 and 2012, the pre-tax actuarial loss recognized in other
comprehensive income were NT$662,074 thousand and NT$685,978 thousand, respectively. As of
December 31, 2013 and 2012, the pre-tax accumulated actuarial loss recognized in other comprehensive
income were NT$1,348,052 thousand and NT$685,978 thousand, respectively.
The amounts arising from the defined benefit obligation of the Company in the consolidated balance
sheets were as follows:
Present value of defined benefit obligation
Fair value of plan assets
Funded status
Unrecognized prior service cost
December 31, 2013
December 31, 2012
January 1, 2012
$ 10,329,510
(3,527,847)
6,801,663
788,263
$ 10,133,361
(3,352,567)
6,780,794
140,440
$ 9,214,125
(3,120,665)
6,093,460
147,564
Accrued pension cost
$ 7,589,926
$ 6,921,234
$ 6,241,024
Movements in the present value of the defined benefit obligation were as follows:
Balance, beginning of year
Current service cost
Interest cost
Effect of plan changes
Benefits paid from plan assets
Benefits paid directly by the Company
Actuarial loss
Effect of deconsolidation of subsidiary
Years Ended December 31
2013
2012
$ 10,133,361
134,762
175,563
(655,179)
(50,508)
(7,011)
638,071
(39,549)
$ 9,214,125
129,217
160,018
-
(26,119)
-
656,120
-
Balance, end of year
$ 10,329,510
$ 10,133,361
36
Movements in the fair value of the plan assets were as follows:
Balance, beginning of year
Expected return on plan assets
Actuarial loss
Contributions from employer
Benefits paid
Effect of deconsolidation of subsidiary
Years Ended December 31
2013
2012
$ 3,352,567
67,324
(24,003)
219,062
(50,508)
(36,595)
$ 3,120,665
63,279
(29,858)
224,600
(26,119)
-
24. EQUITY
a. Capital stock
Authorized shares (in thousands)
Authorized capital
Issued and paid shares (in thousands)
Issued capital
December 31, 2013
December 31, 2012
January 1, 2012
28,050,000
$ 280,500,000
25,928,617
$ 259,286,171
28,050,000
$ 280,500,000
25,924,435
$ 259,244,357
28,050,000
$ 280,500,000
25,916,222
$ 259,162,226
Balance, end of year
$ 3,527,847
$ 3,352,567
A holder of issued common shares with par value of NT$10 per share is entitled to vote and to receive
dividends.
The percentage of the fair value of the plan assets by major categories at the end of reporting period was
as follows:
Cash
Equity instruments
Debt instruments
Fair Value of Plan Assets (%)
December 31, 2013
December 31, 2012
January 1, 2012
23
45
32
100
25
38
37
100
24
41
35
100
The overall expected rate of return on plan assets was based on the historical return trends, analysts’
predictions of the market over the life of related obligation, reference to the performance of the Funds
operated by the Committee and the consideration of the effect that the minimum return should not be
less than the average interest rate on a two-year time deposit published by the local banks. For the years
ended December 31, 2013 and 2012, the actual return on plan assets were NT$43,321 thousand and
NT$33,421 thousand, respectively.
The Company elects to disclose the historical information of experience adjustments from the adoption of
Taiwan-IFRSs, which is as follows:
Experience adjustments on plan liabilities
Experience adjustments on plan assets
$ 1,294,538
$ (24,003)
$ 396,616
$ (29,858)
$ -
$ -
December 31, 2013
December 31, 2012
January 1, 2012
The Company expects to make contributions of NT$223,524 thousand to the defined benefit plans in the
next year starting from December 31, 2013.
The authorized shares include 500,000 thousand shares allocated for the exercise of employee stock
options.
As of December 31, 2013, 1,082,959 thousand ADSs of TSMC were traded on the NYSE. The number
of common shares represented by the ADSs was 5,414,794 thousand shares (one ADS represents five
common shares).
b. Capital surplus
Additional paid-in capital
From merger
From convertible bonds
From differences between equity purchase price and
carrying amount arising from acquisition or disposal
of subsidiaries
From share of changes in equities of associates and
joint venture
Donations
December 31, 2013
December 31, 2012
January 1, 2012
$ 24,017,363
22,804,510
8,892,847
$ 23,934,607
22,804,510
8,892,847
$ 23,774,250
22,804,510
8,892,847
100,827
43,024
55
40,733
2,588
55
-
-
55
$ 55,858,626
$ 55,675,340
$ 55,471,662
Under the Company Law, 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, the surplus from treasury stock transactions and the differences between equity purchase price
and carrying amount arising from acquisition or disposal of subsidiaries) may be used to offset a deficit;
in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends
or stock dividends up to a certain percentage of TSMC’s paid-in capital.
37
c. Retained earnings and dividend policy
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:
1) Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve equals
TSMC’s paid-in capital;
2) Special capital reserve in accordance with relevant laws or regulations or as requested by the
authorities in charge;
3) 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;
4) Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.
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 period,
which amounted to NT$12,634,665 thousand and NT$11,115,240 thousand for the years ended
December 31, 2013 and 2012, respectively. Bonuses to members of the Board of Directors were expensed
based on estimated amount payable. If the actual amounts subsequently approved by the shareholders
differ from the amounts estimated, the differences are recorded in the year such bonuses are approved
by the shareholders as a change in accounting estimate. If profit sharing approved for distribution to
employees is in the form of common shares, the number of shares is determined by dividing the amount
of profit sharing by the closing price (after considering the effect of dividends) of the shares on the day
preceding the shareholders’ meeting.
The appropriation for legal capital reserve shall be made until the reserve equals the Company’s paid-in
capital. The reserve may be used to offset a deficit, or be distributed as dividends in cash or stocks for the
portion in excess of 25% of the paid-in capital if the Company incurs no loss.
Pursuant to existing regulations, the Company is required to set aside additional special capital
reserve equivalent to the net debit balance of the other components of stockholders’ equity, such as
the accumulated balance of foreign currency translation reserve, unrealized valuation gain/loss on
available-for-sale financial assets, gain/loss from changes in fair value of hedging instruments in cash flow
hedges, etc. For the subsequent decrease in the deduction amount to stockholders’ equity, any special
reserve appropriated may be reversed to the extent that the net debit balance reverses.
38
The appropriations of 2012 and 2011 earnings have been approved by TSMC’s shareholders in its
meetings held on June 11, 2013 and on June 12, 2012, respectively. The appropriations and dividends
per share were as follows:
Appropriation of Earnings
Dividends Per Share (NT$)
For Fiscal Year 2012
For Fiscal Year 2011
For Fiscal Year 2012
For Fiscal Year 2011
Legal capital reserve
Special capital reserve
Cash dividends to shareholders
$ 16,615,880
(4,820,483)
77,773,307
$ 13,420,128
1,172,350
77,748,668
$ 89,568,704
$ 92,341,146
$ 3.00
$ 3.00
TSMC’s profit sharing to employees and bonus to members of the Board of Directors in the amounts of
NT$11,115,240 thousand and NT$71,351 thousand in cash for 2012, respectively, and profit sharing to
employees and bonus to members of the Board of Directors in the amounts of NT$8,990,026 thousand
and NT$62,324 thousand in cash for 2011, respectively, had been approved by the shareholders in its
meetings held on June 11, 2013 and June 12, 2012, respectively. The aforementioned approved amount
is the same as the one approved by the Board of Directors in its meetings held on February 5, 2013 and
February 14, 2012, respectively, and the same amount had been charged against earnings for the years
ended December 31, 2012 and 2011, respectively.
The appropriations of earnings, payment of profit sharing to employees and bonus to members of the
Board of Directors for the year ended December 31, 2012 approved by the Board of Directors of TSMC
were based on the financial statements for the year ended December 31, 2012 prepared under the R.O.C.
GAAP and in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities
Issuers issued by the FSC before amendment.
TSMC’s appropriations of earnings for 2013 had been approved in the meeting of the Board of Directors
held on February 18, 2014. The appropriations and dividends per share were as follows:
Legal capital reserve
Special capital reserve
Cash dividends to shareholders
Appropriation of Earnings
Dividends Per Share (NT$)
For Fiscal Year 2013
For Fiscal Year 2013
$ 18,814,679
(2,785,741)
77,785,851
$ 93,814,789
$ 3.00
The Board of Directors of TSMC also approved the profit sharing to employees and bonus to members
of the Board of Directors in the amounts of NT$12,634,665 thousand and NT$104,136 thousand in
cash for payment in 2013, respectively. There is no significant difference between the aforementioned
approved amounts and the amounts charged against earnings of 2013.
The appropriations of earnings, profit sharing to employees and bonus to members of the Board of
Directors for 2013 are to be presented for approval in the TSMC’s shareholders’ meeting to be held on
June 24, 2014 (expected).
The information about the appropriations of TSMC’s profit sharing to employees and bonus to members
of the Board of Directors is available at the Market Observation Post System website.
The exchange differences arising on translation of foreign operation’s net assets from its functional
currency to TSMC’s presentation currency are recognized directly in other comprehensive income and also
accumulated in the foreign currency translation reserve.
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.
d. Others
Changes in others were as follows:
Year Ended December 31, 2013
Foreign Currency
Translation
Reserve
Unrealized
Gain/Loss from
Available-for-sale
Financial Assets
Cash Flow Hedges
Reserve
Total
Balance, beginning of year
$ (10,753,806)
$ 7,973,321
$ -
$ (2,780,485)
Unrealized gain/loss on available-for-sale financial assets represents the cumulative gains or losses arising
from the fair value measurement on available-for-sale financial assets that are recognized in other
comprehensive income, excluding the amounts recognized in profit or loss for the effective portion from
changes in fair value of the hedging instruments. When those available-for-sale financial assets have been
disposed of or are determined to be impaired subsequently, the related cumulative gains or losses in
other comprehensive income are reclassified to profit or loss.
The cash flow hedges reserve represents the cumulative effective portion of gains or losses arising on
changes in fair value of the hedging instruments entered into as cash flow hedges. The cumulative gain
or loss arising on changes in fair value of the hedging instruments that are recognized and accumulated
in cash flow hedges reserve will be reclassified to profit or loss only when the hedge transaction affects
profit or loss.
Exchange differences arising on translation of
foreign operations
Changes in fair value of available-for-sale financial
assets
Cumulative (gain)/loss reclassified to profit or loss
upon disposal of available-for-sale financial assets
Share of other comprehensive income of associates
and joint venture
The proportionate share of other comprehensive
income/losses reclassified to profit or loss upon
partial disposal of associates
Income tax effect
Balance, end of year
3,667,657
-
-
-
14,554,695
(1,256,281)
-
-
-
3,667,657
14,554,695
(1,256,281)
e. Noncontrolling interests
Years Ended December 31
2013
2012
(54,989)
2,551
(113)
(52,551)
Balance, beginning of year
$ 2,543,226
$ 2,436,649
776
-
(44)
36,539
-
-
732
36,539
$ (7,140,362)
$ 21,310,781
$ (113)
$ 14,170,306
Year Ended December 31, 2012
Foreign Currency
Translation
Reserve
Unrealized
Gain/Loss from
Available-for-sale
Financial Assets
Cash Flow Hedges
Reserve
Total
Share of noncontrolling interests
Net loss
Exchange differences arising on translation of foreign operations
Changes in fair value of available-for-sale financial assets
Cumulative (gain)/loss reclassified to profit or loss upon disposal of
available-for-sale financial assets
Changes in fair value of hedging instruments for cash flow hedges
Changes in fair value of hedging instruments for cash flow hedges
reclassified to profit or loss
Stock option compensation cost of subsidiary
Share of other comprehensive income of associates and joint venture
The proportionate share of other comprehensive income/losses
reclassified to profit or loss upon partial disposal of associates
Actuarial gain/loss from defined benefit plans
Income tax expense related to actuarial gain/loss from defined benefit
(4,375,597)
plans
Adjustments arising from changes in percentage of ownership in
subsidiaries
Increase in noncontrolling interests
Effect of deconsolidation of subsidiary
(127,853)
852
2,776
(10,805)
-
-
5,312
177
1
299
(44)
(62,446)
188,488
(2,273,153)
(194,484)
52,900
1,077
(4,741)
3
136
6,219
-
-
-
-
(40,733)
286,200
-
Balance, beginning of year
$ (6,433,364)
$ (1,172,762)
$ (93)
$ (7,606,219)
Exchange differences arising on translation of
foreign operations
Changes in fair value of hedging instruments for
cash flow hedges
Changes in fair value of hedging instruments for
cash flow hedges reclassified to profit or loss
Changes in fair value of available-for-sale financial
assets
Cumulative loss reclassified to profit or loss upon
impairment of available-for-sale financial assets
Cumulative (gain)/loss reclassified to profit or loss
upon disposal of available-for-sale financial assets
Share of other comprehensive income of associates
and joint venture
Income tax effect
(4,375,597)
-
-
-
-
-
55,155
-
-
-
-
7,255,261
2,677,529
(394,857)
17,450
(409,300)
-
2
91
-
-
-
-
-
2
91
7,255,261
2,677,529
(394,857)
72,605
(409,300)
Balance, end of year
$ (10,753,806)
$ 7,973,321
$ -
$ (2,780,485)
Balance, end of year
$ 266,830
$ 2,543,226
25. SHARE-BASED PAYMENT
a. Optional exemption from applying IFRS 2 “Share-based Payment” (IFRS 2)
The Company elected to take the optional exemption from applying IFRS 2 retrospectively for
shared-based payment transactions granted and vested before January 1, 2012. The plans are described
as follows:
39
TSMC’s Employee Stock Option Plans, consisting of the TSMC 2004 Plan, TSMC 2003 Plan and TSMC
2002 Plan, were approved by the Securities and Futures Bureau (SFB) on January 6, 2005, October 29,
2003 and June 25, 2002, respectively. The maximum number of stock 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 stock option eligible to subscribe for one
common share of TSMC when exercised. The stock 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 stock 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 stock options are granted at an exercise price equal to the closing price
of TSMC’s common shares quoted on the TWSE on the grant date.
Stock options of the plans that had never been granted or had been granted but subsequently canceled
had expired as of December 31, 2013.
Information about TSMC’s outstanding stock options for the years ended December 31, 2013 and 2012
was as follows:
Number of Stock Options
(In Thousands)
Weighted-average
Exercise Price (NT$)
Year ended December 31, 2013
Balance, beginning of year
Stock options exercised
Balance, end of year
Year ended December 31, 2012
Balance, beginning of year
Stock options exercised
Stock options canceled
Balance, end of year
5,945
(4,182)
1,763
14,293
(8,213)
(135)
5,945
$ 34.6
29.8
45.9
$ 31.4
29.5
34.6
34.6
The numbers of outstanding stock options and exercise prices have been adjusted to reflect the
distribution of earnings by TSMC in accordance with the plans.
Information about TSMC’s outstanding stock options was as follows:
December 31, 2013
December 31, 2012
January 1, 2012
Range of Exercise
Price (NT$)
Weighted-average
Remaining Contractual
Life (Years)
Range of Exercise
Price (NT$)
Weighted-average
Remaining Contractual
Life (Years)
Range of Exercise
Price (NT$)
Weighted-average
Remaining Contractual
Life (Years)
$43.2-$47.2
1.0
$20.2-$28.3
$38.0-$50.1
0.4
2.0
$20.9-$29.3
$38.0-$50.1
1.2
2.9
As of December 31, 2013, all of the above outstanding stock options were exercisable.
b. Application of IFRS 2
The Company applied IFRS 2 for the following plans as the shared-based payment transactions were
granted and vested on or after January 1, 2012. The plans are described as follows:
The Board of Directors of TSMC SSL approved on December 18, 2012 and November 21, 2011 the
issuance of new shares and allocated 17,000 thousand shares and 17,175 thousand shares for 2013 and
2012 stock option plan, respectively, for their employees to subscribe to, according to the Company Law.
The aforementioned stock options were fully vested on the grant date.
Information about TSMC SSL’s employee stock options related to the aforementioned new shares issued
was as follows:
Number of Stock Options
(In Thousands)
Weighted-average
Exercise Price (NT$)
Year ended December 31, 2013
Balance, beginning of year
Stock options granted
Stock options exercised
Balance, end of year
Year ended December 31, 2012
Balance, beginning of year
Stock options granted
Stock options exercised
Balance, end of year
-
17,000
(17,000)
-
-
17,175
(17,175)
-
$ -
10.0
10.0
-
$ -
10.0
10.0
-
The grant dates of aforementioned stock options were April 10, 2013 and January 9, 2012, respectively.
TSMC SSL used the Black-Scholes model to determine the fair value of the stock options. The valuation
assumptions were as follows:
Valuation assumptions:
Stock price on grant date (NT$/share)
Exercise price (NT$/share)
Expected volatility
Expected life
Risk free interest rate
2013 Stock Option Plan
2012 Stock Option Plan
$ 4.6
$ 10.0
51.68%
31 days
0.60%
$ 8.9
$ 10.0
40.32%
40 days
0.76%
The stock price of TSMC SSL 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 fair value of the aforementioned stock options was close to nil, and accordingly, no compensation
cost was recognized.
40
The Board of Directors of TSMC Solar approved on November 21, 2011 the issuance of new shares and
allocated 12,341 thousand shares for stock option plan for their employees to subscribe to, according to
the Company Law. The aforementioned stock options were fully vested on the grant date.
27. OTHER OPERATING INCOME AND EXPENSES, NET
Information about TSMC Solar’s employee stock options related to the aforementioned new shares issued
was as follows:
Income (expenses) of rental assets
Rental income
Depreciation of rental assets
Number of Stock Options
(In Thousands)
Weighted-average
Exercise Price (NT$)
Year ended December 31, 2012
Balance, beginning of year
Stock options granted
Stock options exercised
Balance, end of year
-
12,341
(12,341)
-
$ -
10.0
10.0
Gain on disposal of property, plant and equipment and intangible assets,
net
Impairment loss on property, plant and equipment
Income from receipt of equity securities in settlement of trade receivables
-
28. OTHER INCOME
The grant date of aforementioned stock options was January 9, 2012. TSMC Solar used the Black-Scholes
model to determine the fair value of the stock options. The valuation assumptions were as follows:
Valuation assumptions:
Stock price on grant date (NT$/share)
Exercise price (NT$/share)
Expected volatility
Expected life
Risk free interest rate
$ 9.0
$ 10.0
40.32%
40 days
0.76%
Interest income
Bank deposits
Available-for-sale financial assets
Held-to-maturity financial assets
Dividend income
The stock price of TSMC Solar 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.
29. FINANCE COSTS
The fair value of the aforementioned stock optionswas close to nil, and accordingly, no compensation
cost was recognized.
26. NET REVENUE
The analysis of the Company’s net revenue was as follows:
Net revenue from sale of goods
Net revenue from royalties
Years Ended December 31
2013
2012
$ 596,516,949
507,248
$ 506,248,580
496,654
$ 597,024,197
$ 506,745,234
Interest expense
Corporate bonds
Bank loans
Finance leases
Others
Loss reclassified to profit or loss arising from effective portion for cash
flow hedges
Capitalized interest
Years Ended December 31
2013
2012
$ 13,385
(25,120)
(11,735)
$ 808
(6,656)
(5,848)
48,848
-
9,977
103
(444,505)
886
$ 47,090
$ (449,364)
Years Ended December 31
2013
2012
$ 1,808,239
5,328
22,413
1,835,980
506,143
$ 1,513,025
5,964
126,047
1,645,036
71,057
$ 2,342,123
$ 1,716,093
Years Ended December 31
2013
2012
$ 2,501,820
110,716
19,539
14,701
2,646,776
$ 758,204
200,907
20,773
46,753
1,026,637
-
-
227
(6,442)
$ 2,646,776
$ 1,020,422
41
30. OTHER GAINS AND LOSSES
A reconciliation of income before income tax and income tax expense recognized in profit or loss was as
follows:
Gain on disposal of financial assets, net
Available-for-sale financial assets
Financial assets carried at cost
Gain on deconsolidation of subsidiary
Settlement income
Other gains
Net gain (loss) on financial instruments at FVTPL
Held for trading
Impairment loss reversal (accrual) of financial assets
Available-for-sale financial assets
Financial assets carried at cost
Investment accounted for using equity method
Fair value hedges
Loss from hedging instruments
Gain arising from changes in fair value of available-for-sale financial
assets in hedge effective portion
Other losses
31. INCOME TAX
a. Income tax expense recognized in profit or loss
Years Ended December 31
2013
2012
$ 1,267,086
44,721
293,578
899,745
394,330
$ 399,598
141,491
-
883,845
504,880
196,711
-
(1,538,888)
1,186,674
(5,602,779)
5,071,118
(107,375)
(252,530)
(2,677,529)
(367,399)
(1,186,674)
-
-
(297,992)
Years Ended December 31
2013
2012
Income before tax
$ 215,487,122
$ 181,676,456
Income tax expense at the statutory rate
Tax effect of adjusting items:
Nondeductible (deductible) items in determining taxable income
Tax-exempt income
Additional income tax on unappropriated earnings
Effect of tax rate changes on deferred income tax
The origination and reversal of temporary differences
Income tax credits
Remeasurement of investment tax credits
Remeasurement of operating loss carryforward
Current income tax expense
Income tax adjustments on prior years
Other income tax adjustments
$ 38,458,611
$ 34,085,426
(1,417,976)
(8,612,025)
7,659,010
-
674,231
(3,136,942)
(3,460,886)
(1,663,527)
28,500,496
(1,021,688)
(10,623)
(3,011,224)
(9,830,280)
4,193,497
(543,611)
(865,386)
(2,828,300)
(4,215,165)
(1,688,735)
15,296,222
55,313
201,119
$ 2,104,921
$ (2,852,310)
Income tax expense recognized in profit or loss
$ 27,468,185
$ 15,552,654
For the years ended December 31, 2013 and 2012, the Company applied a tax rate of 17% for entities
subject to the Income Tax Law of the Republic of China; for other jurisdictions, the Company measures
taxes by using the applicable tax rate for each individual jurisdiction.
Income tax expense consisted of the following:
b. Income tax expense recognized in other comprehensive income
Current income tax expense (benefit)
Current tax expense recognized in the current year
Income tax adjustments on prior years
Other income tax adjustments
Deferred income tax expense (benefit)
Effect of tax rate changes
The origination and reversal of temporary differences
Investment tax credits and operating loss carryforward
Years Ended December 31
2013
2012
$ 22,501,143
(1,021,688)
(10,623)
21,468,832
$ 15,201,438
55,313
201,119
15,457,870
-
674,231
5,325,122
5,999,353
(543,611)
(865,386)
1,503,781
94,784
Income tax expense recognized in profit or loss
$ 27,468,185
$ 15,552,654
Deferred income tax expense (benefit)
Related to unrealized gain/loss on available-for-sale financial assets
Related to actuarial gain/loss from defined benefit plans
$ (36,539)
(78,629)
$ 409,300
(82,358)
$ (115,168)
$ 326,942
Years Ended December 31
2013
2012
c. Deferred income tax balance
The analysis of deferred income tax in the consolidated balance sheets was as follows:
Investment tax credits
Temporary differences
Depreciation
Provision for sales returns and allowance
Accrued pension cost
Available-for-sale financial assets
Unrealized loss on inventories
Goodwill from business combination
Deferred compensation cost
Others
Operating loss carryforward
December 31, 2013
December 31, 2012
January 1, 2012
$ 1,955,980
$ 7,324,263
$ 9,869,024
644,824
900,354
908,022
6,154
438,423
373,682
267,416
684,585
1,060,169
1,502,736
717,889
824,052
224,618
404,656
329,766
132,286
624,609
1,043,344
2,056,421
494,914
618,336
308,929
2,757
-
101,639
131,424
20,774
$ 7,239,609
$ 13,128,219
$ 13,604,218
42
Year Ended December 31, 2013
Investment tax credits
Temporary differences
Depreciation
Provision for sales returns and allowance
Accrued pension cost
Available-for-sale financial assets
Unrealized loss on inventory
Goodwill from business combination
Deferred compensation cost
Others
Operating loss carryforward
Deferred income tax assets
Year Ended December 31, 2012
Investment tax credits
Temporary differences
Depreciation
Provision for sales returns and allowance
Accrued pension cost
Available-for-sale financial assets
Unrealized loss on inventory
Goodwill from business combination
Deferred compensation cost
Others
Operating loss carryforward
Deferred income tax assets
Balance, Beginning of Year
Recognized in
Profit or Loss
Other Comprehensive Income
Effect of Deconsolidation of
Subsidiary
Effect of Exchange Rate
Changes
Balance, End of Year
$ 7,324,263
$ (5,348,982)
$ -
$ (19,301)
$ -
$ 1,955,980
1,502,736
717,889
824,052
224,618
404,656
329,766
132,286
624,609
1,043,344
(865,021)
188,198
5,813
(255,003)
32,665
35,115
131,107
52,895
23,860
-
-
78,629
36,539
-
-
-
-
-
(15,387)
(6,417)
(472)
-
-
-
-
(3,987)
(32,910)
22,496
684
-
-
1,102
8,801
4,023
11,068
25,875
644,824
900,354
908,022
6,154
438,423
373,682
267,416
684,585
1,060,169
$ 13,128,219
$ (5,999,353)
$ 115,168
$ (78,474)
$ 74,049
$ 7,239,609
$ 9,869,024
$ (2,544,761)
$ -
$ -
$ -
$ 7,324,263
2,056,421
494,914
618,336
308,929
2,757
-
101,639
131,424
20,774
(545,820)
223,435
123,358
324,989
402,707
335,921
35,492
508,915
1,040,980
-
-
82,358
(409,300)
-
-
-
-
-
-
-
-
-
-
-
-
(7,865)
(460)
-
-
(808)
(6,155)
(4,845)
(15,730)
(18,410)
1,502,736
717,889
824,052
224,618
404,656
329,766
132,286
624,609
1,043,344
$ 13,604,218
$ (94,784)
$ (326,942)
$ -
$ (54,273)
$ 13,128,219
d. The investment tax credits, operating loss carryforward and deductible temporary differences for which
no deferred income tax assets have been recognized in the consolidated financial statements
The information of the operating loss carryforward for which no deferred tax assets have been recognized
was as follows:
The information of the investment tax credits for which no deferred income tax assets have been
recognized was as follows:
Expiry year
2012
2013
2014
2015
December 31, 2013
December 31, 2012
January 1, 2012
$ -
-
3,019,880
-
$ -
33,089
5,830,285
22,864
$ 11,254
5,493,620
4,915,861
23,590
$ 3,019,880
$ 5,886,238
$ 10,444,325
Expiry year
2014 - 2018
2019 - 2023
December 31, 2013
December 31, 2012
January 1, 2012
$ 41,894
5,773,037
$ 41,894
5,402,683
$ 41,894
7,558,917
$ 5,814,931
$ 5,444,577
$ 7,600,811
As of December 31, 2013 and 2012 and January 1, 2012, the aggregate deductible temporary
differences for which no deferred income tax assets have been recognized amounted to NT$8,673,160
thousand, NT$13,589,292 thousand and NT$14,893,317 thousand, respectively.
43
e. Unused investment tax credits, operating loss carryforward and tax-exemption information
All of TSMC’s earnings generated prior to December 31, 1997 have been appropriated.
As of December 31, 2013, investment tax credits of TSMC and TSMC SSL consisted of the following:
h. Income tax examination
Law/Statute
Item
Remaining Creditable Amount
Expiry Year
Statute for Upgrading
Industries
Purchase of machinery and
equipment
$ 4,493,509
482,351
2014
2015
The tax authorities have examined income tax returns of TSMC through 2010. All investment tax credit
adjustments assessed by the tax authorities have been recognized accordingly.
$ 4,975,860
32. EARNINGS PER SHARE
As of December 31, 2013, operating loss carryforward of TSMC Solar, TSMC SSL, Mutual-Pak and
WaferTech consisted of the following:
Years Ended December 31
2013
2012
Remaining Creditable Amount
Basic EPS
Diluted EPS
$ 7.26
$ 7.26
$ 6.42
$ 6.41
Remaining Creditable Amount
Expiry Year
2014 - 2018
2019 - 2023
$ 41,894
9,052,631
$ 9,094,525
EPS is computed as follows:
As of December 31, 2013, the profits generated from the following projects of TSMC are exempt from
income tax for a five-year period:
Construction and expansion of 2005 by TSMC
Construction and expansion of 2006 by TSMC
Construction and expansion of 2007 by TSMC
Tax-exemption Period
2010 to 2014
2011 to 2015
2014 to 2018
f. The information of unrecognized deferred income tax liabilities associated with investments
As of December 31, 2013 and 2012 and January 1, 2012, the aggregate taxable temporary differences
associated with investments in subsidiaries not unrecognized as deferred income tax liabilities amounted
to NT$28,035,340 thousand, NT$20,516,999 thousand and NT$15,074,593 thousand, respectively.
g. Integrated income tax information
Balance of the Imputation
Credit Account - TSMC
$ 15,242,724
$ 8,130,060
$ 4,003,228
December 31, 2013
December 31, 2012
January 1, 2012
Year ended December 31, 2013
Basic EPS
Net income available to common shareholders of
the parent
Effect of dilutive potential common shares
Diluted EPS
Net income available to common shareholders of
the parent (including effect of dilutive potential
common shares)
Year ended December 31, 2012
Basic EPS
Net income available to common shareholders of
the parent
Effect of dilutive potential common shares
Diluted EPS
Net income available to common shareholders of
the parent (including effect of dilutive potential
common shares)
Amounts (Numerator)
Number of Shares
(Denominator)
(In Thousands)
EPS (NT$)
$ 188,146,790
-
25,927,778
1,825
$ 7.26
$ 188,146,790
25,929,603
$ 7.26
$ 166,318,286
-
25,920,735
7,201
$ 6.42
$ 166,318,286
25,927,936
$ 6.41
The estimated and actual creditable ratio for distribution of TSMC’s earnings of 2013 and 2012 were
9.80% and 7.75 %, respectively.
Under the Rule No.10204562810 issued by the Ministry of Finance, when calculating the creditable ratio
in the year of first-time adoption of Taiwan-IFRSs, the Company has included the adjustments to retained
earnings from the effect of transition to Taiwan-IFRSs in the accumulated unappropriated earnings.
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.
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 end of the reporting
period. Such dilutive effect of the potential shares needs to be included in the calculation of diluted EPS until
profit sharing to employees to be settled in the form of common stocks are approved by the shareholders in
the following year.
44
June 30, 2013
$ 979,910
564,364
213,133
110,766
5,595,040
164,311
(1,571,289)
(291,715)
(1,940,625)
(27,472)
$ 3,796,423
Six Months Ended June 30, 2013
$ 1,816,848
3,796,423
(2,273,153)
1,523,270
$ 293,578
33. ADDITIONAL INFORMATION OF EXPENSES BY NATURE
b. Analysis of assets and liabilities over which the Company lost control
Net income included the following items:
a. Depreciation of property, plant and equipment
Recognized in cost of revenue
Recognized in operating expenses
Recognized in other operating income and expenses
b. Amortization of intangible assets
Recognized in cost of revenue
Recognized in operating expenses
Years Ended December 31
2013
2012
$ 141,002,263
12,952,464
25,120
$ 118,313,581
10,848,277
6,656
$ 153,979,847
$ 129,168,514
$ 1,154,698
1,047,324
$ 1,344,819
835,956
$ 2,202,022
$ 2,180,775
Current assets
Cash and cash equivalents
Accounts receivable
Inventories
Others
Noncurrent assets
Property, plant and equipment
Others
Current liabilities
Accounts payable
Others
Noncurrent liabilities
Loans
Others
Net assets deconsolidated
c. Research and development costs expensed as incurred
$ 48,118,165
$ 40,383,195
c. Gain on deconsolidation of subsidiary
d. Employee benefits expenses
Post-employment benefits (Note 23)
Defined contribution plans
Defined benefit plans
Equity-settled share-based payments
Other employee benefits
Employee benefits expense summarized by function
Recognized in cost of revenue
Recognized in operating expenses
$ 1,590,414
235,761
1,826,175
5,312
65,514,082
$ 1,403,507
218,717
1,622,224
6,219
59,668,232
$ 67,345,569
$ 61,296,675
$ 40,245,628
27,099,941
$ 35,561,523
25,735,152
$ 67,345,569
$ 61,296,675
34. DECONSOLIDATION OF SUBSIDIARY
Starting June 2013, the Company has no power to govern the financial and operating policies of Xintec due
to the loss of power to cast the majority of votes at meetings of the Board of Directors; accordingly, the
Company derecognized related assets, liabilities and noncontrolling interests of Xintec.
a. Consideration received
The Company did not receive any consideration in the deconsolidation of Xintec.
Fair value of interest retained
Less: Carrying amount of interest retained
Net assets deconsolidated
Noncontrolling interests
Gain on deconsolidation of subsidiary
Gain on deconsolidation of subsidiary was included in other gains and losses for the year ended
December 31, 2013.
d. Net cash outflow arising from deconsolidation of the subsidiary
The balance of cash and cash equivalents deconsolidated
35. CAPITAL MANAGEMENT
Six Months Ended June 30, 2013
$ 979,910
The Company requires significant amounts of capital to build and expand its production facilities and
acquire additional equipment. In consideration of the industry dynamics, the Company manages its capital
in a manner to ensure that it has sufficient and necessary financial resources to fund its working capital
needs, capital asset purchases, research and development activities, dividend payments, debt service
requirements and other business requirements associated with its existing operations over the next 12
months.
45
36. FINANCIAL INSTRUMENTS
a. Categories of financial instruments
Financial assets
FVTPL
Held for trading derivatives
Available-for-sale financial assets (Note)
Held-to-maturity financial assets
Loans and receivables
Cash and cash equivalents
Notes and accounts receivables (including related
parties)
Other receivables
Refundable deposits
Financial liabilities
FVTPL
December 31, 2013
December 31, 2012
January 1, 2012
$ 90,353
61,628,343
1,795,949
$ 39,554
44,766,957
5,056,973
$ 15,360
7,623,775
9,068,847
242,695,447
143,410,588
143,472,277
71,941,634
1,422,795
2,519,031
58,131,397
1,307,473
2,426,712
46,016,052
1,403,694
4,518,863
$ 382,093,552
$ 255,139,654
$ 212,118,868
Held for trading derivatives
$ 33,750
$ 15,625
$ 13,742
Derivative financial instruments in designated hedge
accounting relationships
Amortized cost
Short-term loans
Accounts payable (including related parties)
Payables to contractors and equipment suppliers
Accrued expenses and other current liabilities
Bonds payable
Long-term bank loans
Other long-term payables
Guarantee deposits
Note: Including financial assets carried at cost.
b. Financial risk management objectives
5,481,616
15,645,000
16,358,716
89,810,160
13,649,615
210,767,625
40,000
54,000
151,660
-
34,714,929
15,239,042
44,831,798
9,316,232
80,000,000
1,487,500
967,485
203,890
232
25,926,528
11,859,008
35,540,526
7,796,538
22,500,000
1,650,000
3,399,855
443,983
$ 351,992,142
$ 186,776,501
$ 109,130,412
The Company seeks to ensure sufficient cost-efficient funding readily available when needed. The
Company manages its exposure to foreign currency risk, interest rate risk, equity price risk, credit risk and
liquidity risk with the objective to reduce the potentially adverse effects the market uncertainties may have
on its financial performance.
The plans for material treasury activities are reviewed by Audit Committees and/or Board of Directors
in accordance with procedures required by relevant regulations or internal controls. During the
implementation of such plans, Corporate Treasury function must comply with certain treasury procedures
that provide guiding principles for overall financial risk management and segregation of duties.
Foreign currency risk
Most of the Company’s operating activities are denominated in foreign currencies. Consequently, the
Company is exposed to foreign currency risk. To protect against reductions in value and the volatility of
future cash flows caused by changes in foreign exchange rates, the Company utilizes derivative financial
instruments, including currency forward contracts and cross currency swaps, to hedge its currency
exposure. These instruments help to reduce, but do not eliminate, the impact of foreign currency
exchange rate movements.
The Company also holds short-term borrowings in foreign currencies in proportion to its expected future
cash flows. This allows foreign-currency-denominated borrowings to be serviced with expected future
cash flows and provides a partial hedge against transaction translation exposure.
The Company’s sensitivity analysis to foreign currency risk mainly focuses on the foreign currency
monetary items at the end of the reporting period. Assuming an unfavorable 10% movement in the levels
of foreign exchanges against the New Taiwan dollar, the net income for the years ended December 31,
2013 and 2012 would have decreased by NT$171,961 thousand and NT$719,882 thousand, respectively,
after taking into consideration of the hedging contracts and the hedged items.
Interest rate risk
The Company is exposed to interest rate risk arising from borrowing at both fixed and floating interest
rates. All of the Company’s long-term bonds have fixed interest rates and are measured at amortized cost.
As such, changes in interest rates would not affect the future cash flows. On the other hand, because
interest rates of the Company’s long-term bank loans are floating, changes in interest rates would affect
the future cash flows but not the fair value. To reduce the cash flow risk caused by floating interest rates,
the Company utilized an interest rate swap contract to partially hedge its exposure.
Assuming the amount of floating interest rate bank loans at the end of the reporting period had been
outstanding for the entire period and all other variables were held constant, a hypothetical increase in
interest rates of 100 basis point (1%) would have resulted in an increase in the interest expense, net of
tax, by approximately NT$332 thousand and NT$12,346 thousand for the years ended December 31,
2013 and 2012, respectively.
Other price risk
The Company is exposed to equity price risk arising from available-for-sale equity investments. To reduce
the equity price risk, the Company utilized some stock forward contracts to partially hedge its exposure.
Assuming a hypothetical decrease of 5% in equity prices of the equity investments at the end of the
reporting period, the net income for the years ended December 31, 2013 and 2012 would have been
unaffected as they were classified as available-for-sale; however, the other comprehensive income for
the years ended December 31, 2013 and 2012 would have decreased by NT$931,881 thousand and
NT$2,217,457 thousand, respectively.
c. Market risk
d. Credit risk management
The Company is exposed to the market risks arising from changes in foreign exchange rates, interest rates
and the prices in equity investments, and utilizes some derivative financial instruments to reduce the
related risks.
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the Company. The Company is exposed to credit risk from operating activities, primarily
trade receivables, and from financing activities, primarily deposits, fixed-income investments and other
46
financial instruments with banks. Credit risk is managed separately for business related and financial
related exposures. As of the end of the reporting period, the Company’s maximum credit risk exposure is
mainly from the carrying amount of financial assets recognized in the consolidated balance sheet.
Business related credit risk
The Company has considerable trade receivables outstanding with its customers worldwide. A substantial
majority of the Company’s outstanding trade receivables are not covered by collateral or credit insurance.
While the Company has procedures to monitor and limit exposure to credit risk on trade receivables,
there can be no assurance such procedures will effectively limit its credit risk and avoid losses. This risk is
heightened during periods when economic conditions worsen.
As of December 31, 2013 and 2012 and January 1, 2012, the Company’s ten largest customers
accounted for 68%, 68% and 64% of accounts receivable, respectively. The Company believes the
concentration of credit risk is insignificant for the remaining accounts receivable.
Financial credit risk
The Company regularly monitors and reviews the transaction limit applied to counterparties and adjusts
the concentration limit according to market conditions and the credit standing of the counterparties. The
Company mitigates its exposure by selecting counterparties with investment-grade credit ratings.
e. Liquidity risk management
The objective of liquidity risk management is to ensure the Company has sufficient liquidity to fund
its business requirements associated with existing operations over the next 12 months. The Company
manages its liquidity risk by maintaining adequate cash and banking facilities.
As of December 31, 2013 and 2012 and January 1, 2012, the unused of financing facilities of the
Company amounted to NT$76,689,543 thousand, NT$53,422,331 thousand and NT$63,708,014
thousand, respectively.
The table below summarizes the maturity profile of the Company’s financial liabilities based on
contractual undiscounted payments, including principles and interests.
Derivative financial instruments
Forward exchange contracts
Outflows
Inflows
Cross currency swap contracts
Outflows
Inflows
Stock forward contracts
Outflows
Inflows
December 31, 2012
Non-derivative financial liabilities
Short-term loans
Accounts payable (including related
parties)
Payables to contractors and equipment
suppliers
Accrued expenses and other current
liabilities
Bonds payable
Long-term bank loans
Other long-term payables
Obligations under finance leases
Guarantee deposits
Derivative financial instruments
Forward exchange contracts
Outflows
Inflows
Less Than 1 Year
2-3 Years
4-5 Years
5+ Years
Total
Cross currency swap contracts
Outflows
Inflows
Less Than 1 Year
2-3 Years
4-5 Years
5+ Years
Total
$ 29,608,952
(29,605,246)
3,706
$ -
-
-
$ -
-
-
$ -
-
-
$ 29,608,952
(29,605,246)
3,706
1,639,215
(1,641,384)
(2,169)
-
-
-
-
-
-
37,431,626
(37,431,626)
-
-
-
-
-
-
-
-
-
-
-
-
-
1,639,215
(1,641,384)
(2,169)
37,431,626
(37,431,626)
-
$ 138,550,767
$ 28,643,574
$ 101,645,863
$ 94,372,849
$ 363,213,053
$ 34,721,003
$ -
$ -
$ -
$ 34,721,003
15,239,042
44,831,798
9,316,232
1,108,150
146,571
913,485
27,042
-
106,303,323
11,030,154
(11,059,396)
(29,242)
9,068,589
(9,068,727)
(138)
-
-
-
2,216,300
745,174
36,000
54,084
203,890
3,255,448
-
-
-
44,911,191
637,580
18,000
54,084
-
45,620,855
-
-
-
37,834,474
-
-
729,566
-
38,564,040
15,239,042
44,831,798
9,316,232
86,070,115
1,529,325
967,485
864,776
203,890
193,743,666
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,030,154
(11,059,396)
(29,242)
9,068,589
(9,068,727)
(138)
December 31, 2013
Non-derivative financial liabilities
Short-term loans
Accounts payable (including related
parties)
Payables to contractors and equipment
suppliers
Accrued expenses and other current
liabilities
Bonds payable
Long-term bank loans
Other long-term payables
Obligations under finance leases
Guarantee deposits
$ 15,646,783
$ -
$ -
$ -
$ 15,646,783
$ 106,273,943
$ 3,255,448
$ 45,620,855
$ 38,564,040
$ 193,714,286
16,358,716
89,810,160
13,649,615
3,036,130
1,450
18,000
28,376
-
138,549,230
-
-
-
28,388,887
10,275
36,000
56,752
151,660
28,643,574
-
-
-
100,830,341
21,571
-
793,951
-
101,645,863
-
-
-
94,360,103
12,746
-
-
-
94,372,849
16,358,716
89,810,160
13,649,615
226,615,461
46,042
54,000
879,079
151,660
363,211,516
(Continued)
January 1, 2012
Non-derivative financial liabilities
Short-term loans
Accounts payable (including related
parties)
Payables to contractors and equipment
suppliers
Accrued expenses and other current
liabilities
Bonds payable
$ 25,933,177
$ -
$ -
$ -
$ 25,933,177
11,859,008
35,540,526
7,796,538
4,775,081
-
-
-
-
-
-
-
538,500
-
11,000,933
-
7,713,258
11,859,008
35,540,526
7,796,538
24,027,772
(Continued)
47
Long-term bank loans
Other long-term payables
Obligations under finance leases
Guarantee deposits
Derivative financial instruments
Forward exchange contracts
Outflows
Inflows
Cross currency swap contracts
Outflows
Inflows
Interest rate swap contracts
Outflows
Inflows
Less Than 1 Year
2-3 Years
4-5 Years
5+ Years
Total
$ 79,558
3,399,855
-
-
89,383,743
$ 778,190
-
167,472
443,983
1,928,145
$ 849,021
-
55,824
-
11,905,778
$ -
-
780,962
-
8,494,220
$ 1,706,769
3,399,855
1,004,258
443,983
111,711,886
7,736,197
(7,726,584)
9,613
420,431
(420,397)
34
706
(442)
264
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,736,197
(7,726,584)
9,613
420,431
(420,397)
34
706
(442)
264
2) Fair value measurements recognized in the consolidated balance sheets
The following table provides an analysis of financial instruments that are measured subsequent to
initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value
is observable:
● Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets
for identical assets or liabilities;
● Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices); and
● Level 3 fair value measurements are those derived from valuation techniques that include inputs for
the asset or liability that are not based on observable market data (unobservable inputs).
December 31, 2013
Level 1
Level 2
Level 3
Total
Financial assets at FVTPL
$ 89,393,654
$ 1,928,145
$ 11,905,778
$ 8,494,220
$ 111,721,797
Derivative financial instruments
$ -
$ 90,353
$ -
$ 90,353
(Concluded)
Available-for-sale financial assets
f. Fair value of financial instruments
1) Fair value of financial instruments carried at amortized cost
Publicly traded stocks
Money market funds
$ 59,481,569
1,183
$ -
-
$ -
-
$ 59,481,569
1,183
$ 59,482,752
$ -
$ -
$ 59,482,752
Except as detailed in the following table, the Company considers that the carrying amounts of financial
assets and financial liabilities recognized in the consolidated financial statements approximate their fair
values.
Financial liabilities at FVTPL
Derivative financial instruments
$ -
$ 33,750
$ -
$ 33,750
December 31, 2013
December 31, 2012
January 1, 2012
Hedging derivative financial liabilities
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Stock forward contract
$ -
$ 5,481,616
$ -
$ 5,481,616
Financial assets
Held-to-maturity financial assets
Commercial paper
Corporate bonds
Government bonds
Financial liabilities
Measured at amortized cost
Bonds payable
$ 1,795,949
-
-
$ 1,795,612
-
-
$ -
5,056,973
-
$ -
5,066,363
-
$ -
8,614,527
454,320
$ -
8,674,016
454,047
December 31, 2012
Level 1
Level 2
Level 3
Total
Financial assets at FVTPL
Derivative financial instruments
$ -
$ 39,554
$ -
$ 39,554
Available-for-sale financial assets
210,767,625
208,649,668
80,000,000
80,343,413
22,500,000
22,597,115
Publicly traded stocks
Money market funds
$ 41,160,437
1,443
$ -
-
$ -
-
$ 41,160,437
1,443
$ 41,161,880
$ -
$ -
$ 41,161,880
Financial liabilities at FVTPL
Derivative financial instruments
$ -
$ 15,625
$ -
$ 15,625
48
Financial assets at FVTPL
Level 1
Level 2
Level 3
Total
Derivative financial instruments
$ -
$ 15,360
$ -
$ 15,360
Intercompany balances and transactions between TSMC and its subsidiaries, which are related parties of
TSMC, have been eliminated upon consolidation; therefore those items are not disclosed in this note. The
following is a summary of transactions between the Company and other related parties:
January 1, 2012
37. RELATED PARTY TRANSACTIONS
Available-for-sale financial assets
Publicly traded stocks
Money market funds
$ 3,306,248
2,522
$ -
-
$ -
-
$ 3,306,248
2,522
$ 3,308,770
$ -
$ -
$ 3,308,770
Financial liabilities at FVTPL
Derivative financial instruments
$ -
$ 13,742
$ -
$ 13,742
Hedging derivative financial liabilities
Interest rate swap contract
$ -
$ 232
$ -
$ 232
There were no transfers between Level 1 and 2 for the years ended December 31, 2013 and 2012,
respectively.
There were no purchases and disposals for assets on Level 3 for the years ended December 31, 2013
and 2012, respectively.
a. Net Revenue
Related Party Categories
Associates
Joint venture
b. Purchases
Related Party Categories
Associates
Net Revenue from Sale of Goods
Net Revenue from Royalties
Years Ended December 31
Years Ended December 31
2013
2012
2013
2012
$ 4,093,031
1,677
$ 5,307,621
3,410
$ 497,020
-
$ 479,239
-
$ 4,094,708
$ 5,311,031
$ 497,020
$ 479,239
Years Ended December 31
2013
2012
$ 10,052,359
$ 8,114,307
3) Valuation techniques and assumptions used in fair value measurement
c. Receivables from related parties
The fair values of financial assets and financial liabilities are determined as follows:
December 31, 2013
December 31, 2012
January 1, 2012
● The fair values of financial assets and financial liabilities with standard terms and conditions and
traded on active liquid markets are determined with reference to quoted market prices (includes
publicly traded stocks and money market funds).
● Forward exchange contracts and cross currency swap contracts are measured using quoted forward
exchange rates and yield curves derived from quoted interest rates matching maturities of the
contracts; interest rate swaps are measured at the present value of future cash flows estimated
and discounted based on the applicable yield curves derived from quoted interest rates; and stock
forward contracts are measured at the difference between the present value of stock forward price
discounted based on the applicable yield curve derived from quoted interest rates and the stock spot
price.
● The fair values of other financial assets and financial liabilities are determined in accordance with
generally accepted pricing models based on discounted cash flow analysis.
Related Party Categories
Associates
Joint venture
d. Payables to related parties
Related Party Categories
Associates
Joint venture
$ 291,376
332
$ 353,652
159
$ 185,552
212
$ 291,708
$ 353,811
$ 185,764
December 31, 2013
December 31, 2012
January 1, 2012
$ 1,687,239
1,217
$ 746,532
2,081
$ 1,325,791
2,730
$ 1,688,456
$ 748,613
$ 1,328,521
49
e. Acquisition of property, plant and equipment and intangible assets
Related Party Categories
Associates
Joint venture
Purchase Price
Years Ended December 31
2013
2012
$ 21,135
-
$ 47,051
1,224
$ 21,135
$ 48,275
f. Disposal of property, plant and equipment
Years Ended December 31, 2013
Years Ended December 31, 2012
Proceeds
Gains (Losses)
Proceeds
Gains (Losses)
Related Party Categories
Associates
Joint venture
Related Party Categories
Associates
Joint venture
Other Receivables from Related Parties
December 31, 2013
December 31, 2012
January 1, 2012
$ 221,576
-
$ 185,550
-
$ 121,767
525
$ 221,576
$ 185,550
$ 122,292
Refundable Deposits
December 31, 2013
December 31, 2012
January 1, 2012
$ 5,813
-
$ 5,813
4
$ -
-
$ 5,813
$ 5,817
$ -
Related Party Categories
Associates
Joint venture
Related Party Categories
Associates
Joint venture
g. Others
Related Party Categories
Associates
Joint venture
Related Party Categories
Associates
50
$ 69,683
-
$ 6,146
948
$ 20,380
9,000
$ (132)
213
$ 69,683
$ 7,094
$ 29,380
$ 81
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, price and terms were determined in accordance with
mutual agreements.
Deferred Gains (Losses) from Disposal of Property,Plant and Equipment
December 31, 2013
December 31, 2012
January 1, 2012
The Company leased machinery and equipment from Xintec. The lease terms and prices were determined
in accordance with mutual agreements. The rental expense was paid quarterly and the related expense
was classified under manufacturing expenses.
$ -
-
$ (7,806)
948
$ -
-
$ -
$ (6,858)
$ -
The Company deferred the disposal gain/loss derived from sales of property, plant and equipment to
related parties (transactions with associates and joint venture), and then recognized such gain/loss over
the depreciable lives of the disposed assets.
Manufacturing Expenses
Research and Development Expenses
The compensation to directors and other key management personnel were as follows:
h. Compensation of key management personnel
Years Ended December 31
Years Ended December 31
2013
2012
2013
2012
$ 934,480
6,582
$ 8,347
15,544
$ 903
6,340
$ 4,644
8,911
$ 941,062
$ 23,891
$ 7,243
$ 13,555
Short-term employee benefits
Post-employment benefits
$ 1,356,119
9,064
$ 1,417,358
3,896
$ 1,365,183
$ 1,421,254
Years Ended December 31
2013
2012
The compensation to directors and other key management personnel were determined by the
Compensation Committee of TSMC in accordance with the individual performance and the market trends.
Non-operating Income
Years Ended December 31
2013
2012
38. PLEDGED ASSETS
$ -
$ 6,046
The Company provided certificate of deposits recorded in other financial assets as collateral mainly for
building lease agreements. As of December 31, 2013 and 2012 and January 1, 2012, the aforementioned
other financial assets amounted to NT$120,566 thousand, NT$119,710 thousand and NT$121,140
thousand, respectively.
39. SIGNIFICANT OPERATING LEASE ARRANGEMENTS
c. In June 2010, Keranos, LLC. filed a complaint in the U.S. District Court for the Eastern District of Texas
The Company leases several parcels of land, factory and office premises from the Science Park
Administration and entered into lease agreements for its office premises and certain office equipment
located in the United States, Europe, Japan, Shanghai and Taiwan. These operating leases expire between
January 2014 and December 2032 and can be renewed upon expiration.
The Company expensed the lease payments as follows:
Minimum lease payments
$ 902,439
$ 689,198
Years Ended December 31
2013
2012
Future minimum lease payments under the above non-cancellable operating leases are as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
$ 859,070
3,053,029
5,534,848
$ 693,758
2,478,443
4,221,524
$ 627,882
2,258,302
3,870,728
December 31, 2013
December 31, 2012
January 1, 2012
$ 9,446,947
$ 7,393,725
$ 6,756,912
40. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS
Significant contingent liabilities and unrecognized commitments of the Company as of the end of the
reporting period, 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 TSMC can use up to 35% of TSMC’s capacity provided 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. In 2013 and 2012, the R.O.C.
Government did not involve such right.
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, in September 2006, Philips spun-off
its semiconductor subsidiary which was renamed as NXP B.V. Further, 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 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 falls below a
specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related
unavoidable costs. There was no default from the aforementioned commitment as of December 31,
2013.
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 lawsuit in the U.S.
District Court for the Eastern District of Texas. The outcome cannot be determined and the Company
cannot make a reliable estimate of the contingent liability at this time.
d. 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 and the Company cannot make a reliable estimate of the
contingent liability at this time.
e. 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 on October 31, 2012. Both parties also signed the research and development
funding agreement whereby TSMC shall provide EUR276,000 thousand to ASML’s research and
development programs from 2013 to 2017. For the year ended December 31, 2013, TSMC paid
EUR55,078 thousand to ASML under the research and development funding agreement.
f. In December 2013, Tela Innovations, Inc. filed complaints in the U.S. District Court for the District of
Delaware and in the United States International Trade Commission accusing TSMC and TSMC North
America of infringing one U.S. patent. In January 2014, TSMC filed a lawsuit against Tela for trade secret
misappropriation and breach of contract. The outcome cannot be determined and the Company cannot
make a reliable estimate of the contingent liability at this time.
g. Amounts available under unused letters of credit as of December 31, 2013 and 2012 and January 1,
2012 were NT$89,400 thousand, NT$99,671 thousand and NT$263,880 thousand, respectively.
41. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS
AND LIABILITIES
The significant financial assets and liabilities denominated in foreign currencies were as follows:
Foreign Currencies
(In Thousands)
Exchange Rate (Note)
Carrying Amount
December 31, 2013
Financial assets
Monetary items
USD
EUR
JPY
Non-monetary items
HKD
$ 2,756,090
451,162
41,386,551
168,334
29.800
41.00
0.2834
3.84
$ 82,131,493
18,497,657
11,728,949
646,402
(Continued)
51
Financial liabilities
Monetary items
USD
EUR
JPY
December 31, 2012
Financial assets
Monetary items
USD
EUR
JPY
Non-monetary items
HKD
Financial liabilities
Monetary items
USD
EUR
JPY
January 1, 2012
Financial assets
Monetary items
USD
EUR
JPY
Non-monetary items
HKD
Financial liabilities
Monetary items
USD
EUR
JPY
Foreign Currencies
(In Thousands)
Exchange Rate (Note)
Carrying Amount
The Company uses the income from operations as the measurement for segment profit and the basis
of performance assessment. There was no material differences between the accounting policies of the
operating segment and the accounting policies described in Note 4.
$ 2,026,958
811,202
71,931,749
29.800
41.00
0.2834
$ 60,403,358
33,259,299
20,385,458
b. Segment revenue and operating results
Year ended December 31, 2013
Foundry
Others
Elimination
Total
2,442,184
117,535
35,381,976
492,014
29.038
38.39-38.49
0.3352-0.3364
3.75
2,388,832
245,481
43,292,238
29.038
38.39-38.49
0.3352-0.3364
1,566,212
125,490
33,242,609
671,060
30.288
39.18-39.27
0.3897-0.3906
3.90
1,772,583
109,782
35,364,089
30.288
39.18-39.27
0.3897-0.3906
70,916,125
4,512,154
11,860,041
1,845,053
69,366,903
9,424,022
14,511,562
47,437,429
4,927,977
12,954,665
2,617,134
53,688,005
4,311,133
13,781,403
(Concluded)
Net revenue from external customers
Net revenue from sales among intersegments
Income (loss) from operations
Share of profits of associates and joint venture
Income tax expense
$ 596,615,439
-
212,156,627
4,280,780
27,468,185
$ 408,758
33,215
(2,727,264)
(308,749)
-
$ -
(33,215)
-
-
-
$ 597,024,197
-
209,429,363
3,972,031
27,468,185
Year ended December 31, 2012
Net revenue from external customers
Net revenue from sales among intersegments
Income (loss) from operations
Share of profits of associates and joint venture
Income tax expense
c. Geographic information
Taiwan
United States
Asia
Europe
Others
506,594,586
-
183,794,638
3,470,406
15,553,242
150,648
14,678
(2,617,770)
(1,396,677)
(588)
-
(14,678)
-
-
-
506,745,234
-
181,176,868
2,073,729
15,552,654
Years Ended December 31
Net Revenue from External Customers
Non-current Assets
2013
2012
2013
2012
$ 74,150,318
423,265,839
56,533,399
41,229,682
1,844,959
$ 68,150,152
343,707,672
46,687,358
46,429,835
1,770,217
$ 783,173,768
7,691,023
14,743,733
17,349
-
$ 603,844,829
7,699,344
18,196,790
15,938
-
$ 597,024,197
$ 506,745,234
$ 805,625,873
$ 629,756,901
The Company categorized the net revenue based on the country in which the customer is headquartered.
Non-current assets include property, plant and equipment, intangible assets and other noncurrent assets.
d. Production information
Production
Wafer
Others
Years Ended December 31
2013
2012
$ 560,685,213
36,338,984
$ 462,970,436
43,774,798
$ 597,024,197
$ 506,745,234
Note: Exchange rate represents the number of N.T. dollars for which one foreign currency could be exchanged.
42. OPERATING SEGMENTS INFORMATION
a. Operating segments
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, designing, manufacturing and selling of solid state lighting
devices and renewable energy and efficiency related technologies and products.
52
e. Major customers representing at least 10% of net revenue
1) Reconciliation of consolidated balance sheet as of December 31, 2012
Customer A
Years Ended December 31
2013
Amount
$ 130,563,982
2012
Amount
$ 85,880,132
%
22
%
17
43. FIRST-TIME ADOPTION OF TAIWAN-IFRSs
a. Basis of preparation for financial information under Taiwan-IFRSs
The Company prepares consolidated financial statements for the year ended December 31, 2013 under
Taiwan-IFRSs. As the basis of the preparation, the Company not only follows the significant accounting
policies stated in Note 4 but also applies IFRS 1.
b. Exemptions from IFRS 1
IFRS 1 establishes the procedures for the Company’s first consolidated financial statements prepared in
accordance with Taiwan-IFRSs. According to IFRS 1, the Company is required to determine the accounting
policies under Taiwan-IFRSs and retrospectively apply those accounting policies in its opening balance
sheet at the date of transition to Taiwan-IFRSs; 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 that occurred before January 1, 2012. Therefore, in the
opening balance sheet, the amount of goodwill generated from past business combinations was the
same as the carrying amount of goodwill under R.O.C. GAAP as of January 1, 2012.
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.
R.O.C. GAAP
Effect of Transition to
Taiwan-IFRSs
Taiwan-IFRSs
Amount
Recognition and
Measurement
Difference
Presentation
Difference
Amount
Item
$ 143,410,588 $ - $ - $ 143,410,588 Cash and cash equivalents
Item
Current assets
Cash and cash equivalents
Financial assets at fair value
through profit or loss
Available-for-sale financial
assets
39,554
2,410,635
Held-to-maturity financial assets
5,056,973
Notes and accounts receivable
58,257,798
Receivables from related parties
353,811
Allowance for doubtful
(480,212)
receivables
Allowance for sales returns and
(6,038,003)
others
Other receivables from related
185,550
parties
Other financial assets
Inventories
Deferred income tax assets
Prepaid expenses and other
current assets
Total current assets
Long-term investments
473,833
37,830,498
8,001,202
2,786,408
252,288,635
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
39,554 Financial assets at fair value
through profit or loss
2,410,635 Available-for-sale financial
assets
5,056,973 Held-to-maturity financial
assets
(480,212)
57,777,586 Notes and accounts
receivable, net
-
353,811 Receivables from related
parties
480,212
6,038,003
-
-
-
-
-
185,550 Other receivables from
-
-
(8,001,202)
-
related parties
473,833 Other financial assets
37,830,498 Inventories
-
-
2,786,408 Other current assets
(1,963,199)
250,325,436 Total current assets
Investments accounted for using
23,430,020
(69,102)
equity method
Available-for-sale financial
38,751,245
-
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
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)
-
-
351,002
-
-
351,002
-
-
-
-
32,742
-
23,360,918 Investments accounted
e)
for using equity method
38,751,245 Available-for-sale financial
assets
3,605,077 Financial assets carried at cost
65,717,240
617,562,188 Property, plant and equipment
10,959,569 Intangible assets
8,001,202
-
(32,742)
7,968,460
13,128,219 Deferred income tax assets
2,426,712 Refundable deposits
1,235,144 Other noncurrent assets
16,790,075
Note
a)
b)
c)
b), d)
c)
3) Share-based payment. The Company elected to take the optional exemption from applying IFRS 2
retrospectively for the shared-based payment transactions granted and vested before January 1, 2012.
Total
$ 955,034,605 $ 281,900 $ 6,038,003 $ 961,354,508 Total
c. Effect of transition to Taiwan-IFRSs
After transition to Taiwan-IFRSs, the effect on the Company’s consolidated balance sheets as of
December 31, 2012 and January 1, 2012 (the transition date) as well as the consolidated statements of
comprehensive income for the year ended December 31, 2012, is stated as follows:
Current liabilities
Short-term loans
Financial liabilities at fair value
through profit or loss
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
$ 34,714,929 $ - $ - $ 34,714,929 Short-term loans
15,625
14,490,429
748,613
15,635,594
7,535,296
11,186,591
44,831,798
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,625 Financial liabilities at fair value
through profit or loss
14,490,429 Accounts payable
748,613 Payables to related parties
15,635,594 Income tax payable
7,535,296 Salary and bonus payable
11,186,591 Accrued profit sharing to
employees and bonus to
directors and supervisors
44,831,798 Payables to contractors and
equipment suppliers
(Continued)
53
R.O.C. GAAP
Effect of Transition to
Taiwan-IFRSs
Taiwan-IFRSs
Item
Amount
Recognition and
Measurement
Difference
Presentation
Difference
Amount
Item
Accrued expenses and other
$ 13,148,944 $ - $ - $ 13,148,944 Accrued expenses and other
current liabilities
Current portion of bonds payable
and long-term bank loans
128,125
-
Total current liabilities
-
142,435,944
Long-term liabilities
Bonds payable
Long-term bank loans
Other long-term payables
Obligations under capital leases
80,000,000
1,359,375
54,000
748,115
Total long-term liabilities
82,161,490
-
-
-
-
-
-
-
-
-
current liabilities
128,125 Current portion of bonds
payable and long-term
bank loans
6,038,003
6,038,003
6,038,003 Provisions
a)
148,473,947 Total current liabilities
-
-
-
-
-
80,000,000 Bonds payable
1,359,375 Long-term bank loans
54,000 Other long-term payables
748,115 Obligations under finance
leases
82,161,490
3,979,541
203,890
-
500,041
4,683,472
229,280,906
2,941,693
-
-
-
2,941,693
2,941,693
-
-
4,891
(4,891)
-
6,038,003
6,921,234 Accrued pension cost
203,890 Guarantee deposits
4,891 Provisions
495,150 Others
7,625,165
238,260,602 Total 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
259,244,357
56,137,809
-
(462,469)
Appropriated as legal capital
115,820,123
reserve
Appropriated as special
7,606,224
-
-
capital reserve
Unappropriated earnings
287,174,942
410,601,289
(2,189,821)
(2,189,821)
Others
Cumulative translation
(10,753,763)
adjustments
Net loss not recognized as
(5,299)
pension cost
Unrealized gain/loss on
financial instruments
7,973,321
(43)
5,299
-
Equity attributable to
shareholders of the parent
Minority interests
Total shareholders’ equity
(2,785,741)
723,197,714
5,256
(2,647,034)
2,555,985
725,753,699
(12,759)
(2,659,793)
d)
e)
-
-
-
-
-
-
-
-
-
-
-
-
-
259,244,357 Capital stock
55,675,340 Capital surplus
Retained earnings
115,820,123 Appropriated as legal capital
reserve
7,606,224 Appropriated as special
capital Reserve
284,985,121 Unappropriated earnings
408,411,468
d), e)
(10,753,806)
Foreign currency translation
e)
reserve
-
-
d), e)
7,973,321 Unrealized gain/loss from
available-for- sale financial
assets
(2,780,485)
720,550,680 Equity attributable to
shareholders of the parent
2,543,226 Noncontrolling interests
d)
723,093,906 Total equity
Total
$ 955,034,605 $ 281,900 $ 6,038,003 $ 961,354,508 Total
(Concluded)
54
2) Reconciliation of consolidated balance sheet as of January 1, 2012
Note
R.O.C. GAAP
Effect of Transition to
Taiwan-IFRSs
Taiwan-IFRSs
Amount
Recognition and
Measurement
Difference
Presentation
Difference
Amount
Item
$ 143,472,277 $ - $ - $ 143,472,277 Cash and cash equivalents
Item
Current assets
Cash and cash equivalents
Financial assets at fair value
through profit or loss
Available-for-sale financial
assets
15,360
3,308,770
Held-to-maturity financial
3,825,680
assets
Notes and accounts receivable
46,321,240
Receivables from related parties
185,764
Allowance for doubtful
(490,952)
receivables
Allowance for sales returns and
(5,068,263)
others
Other receivables from related
122,292
-
-
-
-
-
-
-
-
-
-
-
15,360 Financial assets at fair value
through profit or loss
3,308,770 Available-for-sale financial
assets
3,825,680 Held-to-maturity financial
assets
(490,952)
45,830,288 Notes and accounts
-
490,952
5,068,263
receivable, net
185,764 Receivables from related
Parties
-
-
-
-
-
122,292 Other receivables from
parties
Other financial assets
Inventories
Deferred income tax assets
Prepaid expenses and other
current assets
Total current assets
Long-term investments
617,142
24,840,582
5,936,490
2,174,014
-
-
-
-
-
-
(5,936,490)
-
related parties
617,142 Other financial assets
24,840,582 Inventories
-
-
2,174,014 Other current asset
225,260,396
-
(868,227)
224,392,169 Total current assets
Investments accounted for using
24,900,332
(13,401)
equity method
Held-to-maturity financial assets
5,243,167
-
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
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)
-
-
231,011
-
-
231,011
-
-
-
-
47,237
-
24,886,931 Investments accounted for
e)
using equity method
5,243,167 Held-to-maturity financial
assets
4,315,005 Financial assets carried at cost
34,445,103
490,422,153 Property, plant and equipment
10,861,563 Intangible assets
5,936,490
-
(47,237)
5,889,253
13,604,218 Deferred income tax assets
4,518,863 Refundable deposits
1,306,746 Other noncurrent assets
19,429,827
Total
$ 774,264,942 $ 217,610 $ 5,068,263 $ 779,550,815 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
$ 25,926,528 $ - $ - $ 25,926,528 Short-term loans
13,742
232
10,530,487
1,328,521
10,656,124
6,148,499
9,081,293
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,742 Financial liabilities at fair
value through profit or loss
232 Hedging derivative financial
liabilities
10,530,487 Accounts payable
1,328,521 Payables to related parties
10,656,124 Income tax payable
6,148,499 Salary and bonus payable
9,081,293 Accrued profit sharing to
employees and bonus to
directors and supervisors
(Continued)
Note
a)
b)
c)
b), d)
c)
R.O.C. GAAP
Effect of Transition to
Taiwan-IFRSs
Taiwan-IFRSs
Amount
Recognition and
Measurement
Difference
Presentation
Difference
Amount
Item
$ 35,540,526 $ - $ - $ 35,540,526 Payables to contractors
3) Reconciliation of consolidated statement of comprehensive income for the year ended December 31,
Note
2012
R.O.C. GAAP
Effect of Transition to Taiwan-
IFRSs
Taiwan-IFRSs
a)
d)
e)
Item
Payables to contractors and
equipment suppliers
Accrued expenses and other
current liabilities
13,218,235
Current portion of bonds
4,562,500
payable and long-term bank
loans
-
Total current liabilities
Long-term liabilities
Bonds payable
Long-term bank loans
Obligations under capital leases
-
117,006,687
18,000,000
1,587,500
870,993
Total long-term liabilities
20,458,493
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
-
-
and equipment suppliers
13,218,235 Accrued expenses and other
current liabilities
4,562,500 Current portion of bonds
payable and long-term
bank loans
5,068,263
5,068,263
5,068,263 Provisions
122,074,950 Total current liabilities
-
-
-
-
18,000,000 Bonds payable
1,587,500 Long-term bank loans
870,993 Obligations under finance
leases
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
-
-
2,889
(2,889)
-
5,068,263
6,241,024 Accrued pension cost
443,983 Guarantee deposits
2,889 Provisions
400,831 Others
7,088,727
149,622,170 Total liabilities
259,162,226
55,846,357
-
(374,695)
Appropriated as legal capital
102,399,995
reserve
Appropriated as special
6,433,874
-
-
capital reserve
Unappropriated earnings
213,357,286
322,191,155
(1,726,828)
(1,726,828)
Others
Cumulative translation
(6,433,369)
adjustments
Unrealized gain/loss on
financial instruments
-
Equity attributable to
shareholders of the parent
Minority interests
Total shareholders’ equity
(1,172,855)
5
-
-
(7,606,224)
629,593,514
-
5
(2,101,518)
2,450,037
632,043,551
(13,388)
(2,114,906)
-
-
-
-
-
-
-
93
(93)
-
-
-
-
259,162,226 Capital stock
55,471,662 Capital surplus
Retained earnings
102,399,995 Appropriated as legal
capital reserve
6,433,874 Appropriated as special
capital reserve
211,630,458 Unappropriated earnings
320,464,327
(6,433,364)
Foreign currency translation
e)
reserve
(1,172,762) Unrealized gain/loss from
available-for-sale financial
assets
(93) Cash flow hedges reserve
(7,606,219)
627,491,996 Equity attributable to
shareholders of the parent
2,436,649 Noncontrolling interests
d)
629,928,645 Total equity
Total
$ 774,264,942 $ 217,610 $ 5,068,263 $ 779,550,815 Total
(Concluded)
Unrealized gross profit from
(25,029)
-
-
Item
Net sales
Cost of sales
Gross profit before affiliates
elimination
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
Settlement income
Foreign exchange gain, net
Gain on settlement and disposal
of financial assets, net
Technical service income
Others
-
-
gains
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
Total non-operating expenses and
losses
Income before income tax
Income tax expense
Amount
Recognition and
Measurement
Difference
Presentation
Difference
Amount
Item
$ 506,248,580 $ - $ 496,654 $ 506,745,234 Net revenue
262,628,681
243,619,899
(45,583)
45,583
-
496,654
262,583,098 Cost of revenue
244,162,136 Gross profit before unrealized
gross profit on sales to
associates
(25,029) Unrealized gross profit on
sales to associates
243,594,870
45,583
496,654
244,137,107 Gross profit
40,402,138
17,638,088
4,497,451
62,537,677
-
(18,943)
(6,394)
(1,465)
(26,802)
-
-
-
-
-
(449,364)
40,383,195 Research and development
17,631,694 General and administrative
4,495,986 Marketing
62,510,875
(449,364) Other operating income and
expenses, net
181,057,193
72,385
47,290
181,176,868 Income from operations
2,028,611
45,118
-
2,073,729 Share of profits of associates
1,645,036
883,845
582,498
541,089
496,654
604,304
-
-
6,782,037
4,231,602
1,020,422
444,505
31,816
556,909
6,285,254
-
-
-
-
-
-
-
4,977
50,095
-
-
-
-
-
-
(1,645,036)
(883,845)
-
(541,089)
(496,654)
(604,304)
1,716,093
(2,857,287)
(5,312,122)
(4,231,602)
-
(444,505)
(31,816)
(556,909)
(5,264,832)
and joint venture
-
-
-
-
582,498 Foreign exchange gain, net
-
-
-
-
-
-
1,716,093 Other income
(2,852,310) Other gains and losses
1,520,010
-
-
1,020,422 Finance costs
-
-
-
-
-
1,020,422
-
181,553,976
15,590,287
122,480
(37,633)
-
-
181,676,456 Income before income tax
15,552,654 Income tax expense
Note
f)
d)
d)
d)
d)
f)
e)
f)
f)
f)
f)
f)
f)
e), f)
f)
f)
f)
f)
d)
d), e)
Total non-operating income and
(Continued)
55
R.O.C. GAAP
Effect of Transition to Taiwan-
IFRSs
Taiwan-IFRSs
Item
Amount
Recognition and
Measurement
Difference
Presentation
Difference
Amount
Item
Net income
$ 165,963,689 $ 160,113 $ - $ 166,123,802 Net income
(4,322,697)
Exchange differences arising
on translation of foreign
operations
9,534,269 Changes in fair value of
available-for-sale financial
assets
232 Cash flow hedges
53,748 Share of other comprehensive
e)
income of associates and
joint venture
(685,978) Actuarial loss from defined
(326,942)
benefit plans
Income tax expense related to
components of other
comprehensive income
4,252,632 Other comprehensive income
for the year, net of income
tax
d)
d)
$ 170,376,434 Total comprehensive income
for the year
(Concluded)
4) Significant reconciliation differences in consolidated statements of cash flows for the year ended
December 31, 2012
The Company prepared the statement of cash flows using the indirect method under R.O.C. GAAP, in
which the interest received is not required to be disclosed separately; instead, the interest received and
the interest paid are included within the operating activities in the statement of cash flows. However,
according to IAS No. 7, “Statement of Cash Flows,” for the year ended December 31, 2012, the
interest received of NT$1,719,026 thousand should be disclosed separately in the investing activities;
and the interest paid of NT$736,607 thousand should be disclosed in the financing activities based on
their nature, respectively.
Except for the above differences, there are no other significant differences between R.O.C. GAAP and
Taiwan-IFRSs in the consolidated statement of cash flows.
56
d. Notes to the reconciliation of the significant differences:
Note
1) 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 year the related revenue is recognized based on historical experience. The corresponding
allowance for sales returns and others is presented as a reduction in accounts receivable. Under
Taiwan-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 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.
2) Classifications of deferred income tax asset/liability and valuation allowance
Under R.O.C. GAAP, a deferred tax asset and liability is classified as current or noncurrent 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 noncurrent based on the expected length of time before it is realized or settled. Under
Taiwan-IFRSs, a deferred tax asset and liability is classified as noncurrent 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 noncurrent assets were NT$8,001,202 thousand and NT$5,936,490 thousand, respectively.
3) The classification of assets leased to others and idle assets
Under R.O.C. GAAP, assets leased to others and idle assets are classified under other assets. Under
Taiwan-IFRSs, the aforementioned items are classified as property, plant and equipment according
to their nature. In accordance with IAS No. 40, “Investment Property,” investment properties are
defined as properties held to earn rentals or for capital appreciation; however, the Company’s assets
leased to others are mainly housing facilities leased to employees and manufacturing facilities leased
to suppliers. The housing facilities leased to employees are not classified as investment properties;
and manufacturing facilities leased to suppliers are not considered as investment properties since they
cannot be sold separately and comprise only an insignificant portion of the entire facility.
As of December 31, 2012 and January 1, 2012, the amounts reclassified from assets leased to
others and idle assets to property, plant and equipment were NT$32,742 thousand and NT$47,237
thousand, respectively.
4) Employee benefits
The Company had recognized the pension cost and retirement benefit obligation under its defined
benefit plans based on actuarial valuations performed in conformity with R.O.C. GAAP. Under
Taiwan-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 such actuarial gains and losses. When using
the corridor approach, actuarial gains and losses is 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. For the year ended December 31, 2012, total actuarial gains and losses were also recognized
to other comprehensive income in accordance with actuarial valuation carried out in 2012.
In addition, under R.O.C. GAAP, a minimum pension liability should be recognized in the balance
sheet. If the accrued pension cost is less than the minimum pension liability, the difference should be
recognized as an additional liability. Under Taiwan-IFRSs, there is no aforementioned requirement to
recognize minimum pension liability.
As of December 31, 2012 and January 1, 2012, accrued pension cost of the Company was adjusted 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;
noncontrolling interests were adjusted for a decrease of NT$12,759 thousand and NT$13,388
thousand, respectively. As of December 31, 2012, net loss not recognized as pension cost was
adjusted for a decrease of NT$4,416 thousand. For the year ended December 31, 2012, pension cost
and income tax expense of the Company were adjusted for a decrease of NT$72,385 thousand and
NT$37,633 thousand, respectively; actuarial loss from defined benefit plans and income tax benefit
related to components of other comprehensive income were recognized in the amount of NT$685,978
thousand and NT$82,358 thousand, respectively.
5) Investments accounted for using the equity method
The Company has evaluated significant differences between current accounting policies and
Taiwan-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 investor subscribes to additional shares of associates and joint ventures that is
disproportionate to its existing ownership percentage and results in a decrease in the investor’s
ownership percentage in the associate and joint venture, the resulting carrying amount of the
investment differs from the amount of the investor’s share in the equity of the associates and joint
venture. Under R.O.C. GAAP, the investor records such a difference as an adjustment to the carrying
amount of the investment with the corresponding amount charged or credited to capital surplus.
Under Taiwan-IFRSs, such a difference is still adjusted to carrying amount of the investment and
capital surplus. If the investor’s ownership interest in an associate and joint venture decreases, the
proportionate amount of the gains or losses previously recognized in other comprehensive income
in relation to that associate and joint venture shall be reclassified to profit or loss on the same basis
as would be required if the associate and joint venture had directly disposed of the related assets or
liabilities.
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; foreign currency translation reserve 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 a
decrease of NT$18,905 thousand for the year ended December 31, 2012, respectively; other gains and
losses was adjusted for a gain of NT$4,977 thousand for the year ended December 31, 2012.
6) The reclassification of line items in the consolidated statement of comprehensive income
In accordance with the Guidelines Governing the Preparation of Financial Reports by Securities
Issuers before its amendment due to the adoption of Taiwan-IFRSs, income from operations in the
consolidated income statement only includes net revenue, cost of revenue and operating expenses.
Under Taiwan-IFRSs, based on the nature of operating transactions, technical service income is
reclassified under net revenue; 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 income and expenses, which are included in income from operations.
57
Under Taiwan-IFRSs, based on the nature of operating transactions, for the year ended December 31,
2012, the Company reclassified technical service income of NT$496,654 thousand to net revenue,
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
income and expenses. In addition, interest income of NT$1,645,036 thousand and dividend income
of NT$71,057 thousand were also reclassified to other income; settlement income of NT$883,845
thousand, net gain on 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 loss of financial assets of NT$4,231,602 thousand as well as others
of NT$297,992 thousand (under non-operating expenses and losses) were reclassified to other gains
and losses for the year ended December 31, 2012.
k. Names, locations, and related information of investees over which TSMC exercises significant influence:
Please see Table 9 attached;
l. 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, income
(losses) of the investee, share of profits/losses of investee, ending balance, amount received as
dividends from the investee, and the limitation on investee: Please see Table 10 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 8 attached.
44. ADDITIONAL DISCLOSURES
Following are the additional disclosures required by the SFB for TSMC:
a. Financings provided: Please see Table 1 attached;
b. Endorsement/guarantee provided: Please see Table 2 attached;
c. Marketable securities held (excluding investments in subsidiaries, associates and jointly controlled entities):
Please see Table 3 attached;
d. Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the
paid-in capital: Please see Table 4 attached;
e. Acquisition of individual real estate properties at costs of at least NT$300 million or 20% of the paid-in
capital: Please see Table 5 attached;
f. Disposal of individual real estate properties at prices of at least NT$300 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 6 attached;
h. Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital:
Please see Table 7 attached;
i. Information about the derivative financial instruments transaction: Please see Notes 7 and 10;
j. Others: The business relationship between the parent and the subsidiaries and between each subsidiary,
and significant transactions between them: Please see Table 8 attached;
58
TABLE 1
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
FINANCINGS PROVIDED
FOR THE YEAR ENDED DECEMBER 31, 2013
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
No.
Financing
Company
Counter-
party
Financial Statement
Account
Related
Party
1
TSMC Partners
TSMC China
TSMC Solar
TSMC SSL
TSMC Solar
TSMC SSL
2
TSMC
Development
Other receivables
from related parties
Other receivables
from related parties
Other receivables
from related parties
Other receivables
from related parties
Other receivables
from related parties
Yes
Yes
Yes
Yes
Yes
Maximum
Balance for the
Period (US$ in
Thousands)
(Note 3)
$ 3,874,000
(US$ 130,000)
2,682,000
(US$ 90,000)
1,788,000
(US$ 60,000)
2,384,000
(US$ 80,000)
2,682,000
(US$ 90,000)
Ending Balance
(US$ in
Thousands)
(Note 3)
Amount Actually
Drawn (US$ in
Thousands)
Interest Rate
Nature for Financing
Transaction
Amounts
Reason for Financing
Allowance
for Bad
Debt
Collateral
Item
Value
$ -
$ -
2,682,000
(US$ 90,000)
1,788,000
(US$ 60,000)
2,100,900
(US$ 70,500)
298,000
(US$ 10,000)
-
The need for short-
term financing
0.37%- 0.3805% The need for short-
term financing
0.37% The need for short-
term financing
-
-
-
-
-
-
The need for short-
term financing
The need for short-
term financing
$ -
Purchase equipment
$ -
-
-
-
-
Operating capital
Operating capital
Operating capital
Operating capital
-
-
-
-
-
-
-
-
-
$ -
-
-
-
-
Financing Limits
for Each Borrowing
Company
$ 42,862,161
(Note 1)
17,144,864
(Note 1)
17,144,864
(Note 1)
6,503,905
(Notes 1 and 4)
6,503,905
(Notes 1 and 4)
Financing
Company’s Total
Financing Amount
Limits
(Note 2)
$ 42,862,161
42,862,161
42,862,161
16,259,762
(Note 4)
16,259,762
(Note 4)
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. The above
restriction does not apply to the offshore subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC (offshore 100% owned subsidiaries) or the subsidiaries whose voting shares are 90% and up owned, directly or indirectly, by TSMC (90% and up owned subsidiaries). However, the respective lending limit for
offshore 100% owned subsidiaries shall not exceed the net worth of TSMC Partners and TSMC Development, respectively, and the aggregate amounts lendable to 90% and up owned subsidiaries and the total amount lendable to one such borrower in 90% and up owned subsidiaries shall not exceed forty percent (40%) of the net
worth of TSMC Partners and TSMC Development, respectively.
Note 2: The total amount available for lending purpose shall not exceed the net worth of TSMC Partners and TSMC Development, respectively.
Note 3: The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.
Note 4: The amount was determined based on the audited financial statements in accordance with local accounting principles.
59
TABLE 2
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
ENDORSEMENTS/GUARANTEES PROVIDED
FOR THE YEAR ENDED DECEMBER 31, 2013
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
No.
Endorsement/
Guarantee Provider
Name
Guaranteed Party
Nature of
Relationship
Limits on
Endorsement/
Guarantee Amount
Provided to Each
Guaranteed Party
(Notes 1 and 2)
Maximum Balance for
the Period
(US$ in Thousands)
(Note 3)
Ending Balance
(US$ in Thousands)
(Note 3)
Amount Actually
Drawn
(US$ in Thousands)
Amount of
Endorsement/
Guarantee
Collateralized by
Properties
Ratio of Accumulated
Endorsement/
Guarantee to Net
Equity per Latest
Financial Statements
Maximum
Endorsement/
Guarantee Amount
Allowable
(Note 2)
Guarantee
Provided by
Parent Company
Guarantee
Provided by
A Subsidiary
Guarantee
Provided to
Subsidiaries in
Mainland China
0
TSMC
TSMC Global
Subsidiary
$ 211,877,064
$ 44,700,000
(US$ 1,500,000)
$ 44,700,000
(US$ 1,500,000)
$ 44,700,000
(US$ 1,500,000)
$ -
5.3% $ 211,877,064 Yes
No
No
Note 1: The total amount of the guarantee provided by TSMC to any individual entity shall not exceed ten percent (10%) of TSMC’s net worth, or the net worth of such entity. However, subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC are not subject to the above restrictions after the approval of the Board of
Directors.
Note 2: The total amount of guarantee shall not exceed twenty-five percent (25%) of TSMC’s net worth.
Note 3: The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.
60
TABLE 3
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
MARKETABLE SECURITIES HELD
DECEMBER 31, 2013
(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, 2013
Shares/Units
(In Thousands)
Carrying Value
(Foreign Currencies
in Thousands)
Percentage of
Ownership (%)
Fair Value
(Foreign Currencies
in Thousands)
Note
TSMC
Commercial paper
CPC Corporation, Taiwan
Taiwan Power Company
Stock
Semiconductor Manufacturing International Corporation
United Industrial Gases Co., Ltd.
Shin-Etsu Handotai Taiwan Co., Ltd.
W.K. Technology Fund IV
Fund
Horizon Ventures Fund
Crimson Asia Capital
TSMC Global
Stock
ASML
Money market fund
Ssga Cash Mgmt Global Offshore
TSMC North America
TSMC Partners
Stock
Spansion Inc.
Stock
Mcube
Emerging Alliance
ISDF
ISDF II
Fund
Shanghai Walden Venture Capital Enterprise
Common stock
Global Investment Holding Inc.
RichWave Technology Corp.
Preferred stock
Next IO, Inc.
QST Holdings, LLC
Preferred stock
Sonics, Inc.
Common stock
Alchip Technologies Limited
Sonics, Inc.
Goyatek Technology, Corp.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Held-to-maturity financial assets
〃
100
80
$ 998,018
797,931
N/A
N/A
$ 997,608
798,004
Available-for-sale financial assets
Financial assets carried at cost
〃
〃
Financial assets carried at cost
〃
275,957
21,230
10,500
4,000
-
-
646,402
193,584
105,000
39,280
78,303
53,211
1
10
7
2
12
1
Note 1
646,402
437,105
340,108
34,919
78,303
53,211
Available-for-sale financial assets
20,993
US$ 1,970,536
5
US$ 1,970,536
Note 2
Available-for-sale financial assets
40
US$ 40
N/A
US$ 40
Available-for-sale financial assets
274
US$ 3,799
-
US$ 3,799
Financial assets carried at cost
6,333
-
17
-
Financial assets carried at cost
-
US$ 5,000
6
US$ 5,000
Financial assets carried at cost
〃
11,124
4,074
US$ 3,065
US$ 1,545
6
10
US$ 3,065
US$ 1,545
Financial assets carried at cost
〃
8
-
-
US$ 141
Financial assets carried at cost
230
US$ 497
Financial assets carried at cost
〃
〃
7,520
278
745
US$ 3,664
US$ 10
US$ 163
-
4
2
14
3
6
-
US$ 141
Note 3
US$ 497
US$ 3,664
US$ 10
US$ 163
(Continued)
61
Held Company Name
Marketable Securities Type and Name
Relationship with the Company
Financial Statement Account
December 31, 2013
Shares/Units
(In Thousands)
Carrying Value
(Foreign Currencies
in Thousands)
Percentage of
Ownership (%)
Fair Value
(Foreign Currencies
in Thousands)
Note
VTAF II
Preferred stock
Sonics, Inc.
Common stock
Sentelic
Aether Systems, Inc.
RichWave Technology Corp.
Preferred stock
5V Technologies, Inc.
Aquantia
Cresta Technology Corporation
Impinj, Inc.
Next IO, Inc.
QST Holdings, LLC
VTAF III
Common stock
Accton Wireless Broadband Corp.
Preferred stock
BridgeLux, Inc.
GTBF, Inc.
LiquidLeds Lighting Corp.
Neoconix, Inc.
Powervation, Ltd.
Stion Corp.
Tilera, Inc.
Validity Sensors, Inc.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Note 1: The carrying value represents carrying amount less accumulated impairment of NT$412,901 thousand.
Note 2: In October 2012, TSMC Global acquired 5% of the outstanding equity of ASML with a lock-up period of 2.5 years starting from the acquisition date.
Note 3: The carrying value represents carrying amount less accumulated impairment of US$500 thousand.
Note 4: The carrying value represents carrying amount less accumulated impairment of US$1,219 thousand.
Note 5: The carrying value represents carrying amount less accumulated impairment of US$4,672 thousand.
Note 6: The carrying value represents carrying amount less accumulated impairment of US$55,474 thousand.
Financial assets carried at cost
264
US$ 456
3
US$ 456
Financial assets carried at cost
〃
〃
Financial assets carried at cost
〃
〃
〃
〃
〃
1,806
2,600
1,267
963
4,556
92
711
179
-
US$ 2,607
US$ 2,243
US$ 1,036
US$ 2,168
US$ 4,316
US$ 28
US$ 1,100
-
US$ 588
8
28
3
3
2
-
-
1
13
US$ 2,607
US$ 2,243
US$ 1,036
US$ 2,168
US$ 4,316
US$ 28
US$ 1,100
-
US$ 588
Financial assets carried at cost
2,249
US$ 315
6
US$ 315
Financial assets carried at cost
〃
〃
〃
〃
〃
〃
〃
7,522
1,154
1,600
4,147
527
8,152
3,890
11,192
US$ 9,379
US$ 1,500
US$ 800
US$ 170
US$ 8,238
-
US$ 3,025
US$ 4,197
3
N/A
11
-
15
15
2
4
US$ 9,379
US$ 1,500
US$ 800
US$ 170
US$ 8,238
-
US$ 3,025
US$ 4,197
Note 4
Note 5
Note 6
(Concluded)
62
TABLE 4
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2013
(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 1)
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)
Available-for-sale financial
-
-
1,277,958 $ 1,845,052
- $ -
1,002,001 $ 1,830,424
$ 983,715
$ 846,709
275,957
$ 646,402
TSMC
Stock
Semiconductor Manufacturing
International Corporation
TSMC SSL
Commercial Paper
CPC Corporation, Taiwan
Taiwan Power Company
TSMC Global
Corporate bond
Aust + Nz Banking Group
assets
Investments accounted for
using equity method
Held-to-maturity financial
assets
〃
Held-to-maturity financial
assets
Commonwealth Bank of Australia 〃
Commonwealth Bank of Australia 〃
〃
Deutsche Bank AG London
〃
JP Morgan Chase + Co.
〃
Westpac Banking Corp.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Note 2
Subsidiary
430,400
2,389,541
124,274
1,242,744
-
-
-
-
100
80
998,018
797,931
-
-
-
-
-
-
-
-
-
20,000 US$ 19,999
25,000 US$ 25,000
25,000 US$ 25,000
20,000 US$ 19,999
35,000 US$ 35,006
25,000 US$ 25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,000 US$ 20,000 US$ 20,000
25,000 US$ 25,000 US$ 25,000
25,000 US$ 25,000 US$ 25,000
20,000 US$ 20,000 US$ 20,000
35,000 US$ 35,000 US$ 35,000
25,000 US$ 25,000 US$ 25,000
-
- US$ 100,000
TSMC
Stock
Development WaferTech
Investments accounted for
using equity method
Note 3
Subsidiary
293,637 US$ 262,053
Note 1: The ending balance includes the amortization of premium/discount on bonds investments, unrealized gains/losses on financial assets, share of profits/losses of investees and other related adjustment to equity.
Note 2: The acquisition is primarily consisted of cash injection.
Note 3: The disposal is primarily consisted of capital return.
-
-
-
-
-
-
-
-
-
-
554,674
2,154,913
100
80
-
-
-
-
-
-
998,018
797,931
-
-
-
-
-
-
293,637 US$ 248,252
63
TABLE 5
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2013
(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
-
-
-
-
-
-
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
TSMC
Land
January 3, 2013
$ 2,248,400
By the contract
Miaoli County
Government
January 22, 2013 to
August 29, 2013
January 27, 2013 to
June 21, 2013
March 3, 2013 to
October 25, 2013
April 3, 2013 to May
15, 2013
3,561,600
By the construction progress
Fu Tsu Construction
Co., Ltd.
4,373,205
By the construction progress
Da Cin Construction
Co., Ltd.
338,948
By the construction progress
I Domain Industrial
Co., Ltd.
2,615,744
By the construction progress
China Steel Structure
May 27, 2013 to June
615,038
By the construction progress
19, 2013
Co., Ltd.
Tasa Construction
Corporation
Fab
Fab
Fab
Fab
Fab
64
TABLE 6
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, 2013
(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
% to Total
Payment Terms
Unit Price (Note)
Payment Terms
(Note)
Associate of the Company’s subsidiary (Note 2)
Subsidiary
Sales
Purchases
TSMC
TSMC North America
GUC
VIS
Mcube
TSMC China
WaferTech
VIS
SSMC
Subsidiary
Associate
Associate
Indirect subsidiary
Associate
Associate
TSMC Solar
TSMC Solar Europe GmbH
Subsidiary
TSMC North
America
GUC
Associate of TSMC
Amount
(Foreign Currencies
in Thousands)
$ 414,087,565
1,970,934
Purchases/ Sales
Sales
Sales
Sales
69
1
Net 30 days from invoice date
Net 30 days from the end of the
month of when invoice is issued
195,101
-
Net 30 days from the end of the
119,067
16,902,114
8,520,337
6,993,964
3,056,372
-
27
14
11
month of when invoice is issued
Net 30 days from invoice date
Net 30 days from the end of the
month of when invoice is issued
Net 30 days from the end of the
month of when invoice is issued
Net 30 days from the end of the
month of when invoice is issued
5
Net 30 days from the end of the
month of when invoice is issued
146,866
57
Net 30 days from the end of the
month of when invoice is issued
1,714,625
(US$ 57,780)
-
Net 30 days from invoice date
Purchases
Purchases
Purchases
Sales
Sales
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Note 1: 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.
Note 2: TSMC Partners, the subsidiary of TSMC, did not exercise significant influence over Mcube starting the third quarter of 2013, and therefore, Mcube is no longer a related party to the Company.
Ending Balance
(Foreign Currencies
in Thousands)
$ 52,750,047
219,424
-
-
(1,509,508)
(685,906)
(731,587)
(382,007)
16,287
71,952
(US$ 2,414)
Note
% to Total
74
-
-
-
8
4
4
2
43
-
65
TABLE 7
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, 2013
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Company Name
Related Party
Nature of Relationships
TSMC
TSMC North America
GUC
VIS
Subsidiary
Associate
Associate
TSMC Partners
TSMC Solar
The same parent company
TSMC SSL
The same parent company
TSMC China
TSMC
Parent company
TSMC Technology
TSMC
Parent company
WaferTech
TSMC
Parent company
Ending Balance
(Foreign Currencies in
Thousands)
$ 53,078,207
219,424
105,881
2,102,953
(US$ 70,569)
298,025
(US$ 10,001)
1,509,508
(RMB 308,836)
170,332
(US$ 5,716)
685,906
(US$ 23,017)
Turnover Days (Note 1)
Overdue
Amount
Action Taken
41
42
(Note 2)
(Note 2)
(Note 2)
31
(Note 2)
27
$ 16,627,236
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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.
Amounts Received in
Subsequent Period
Allowance for
Bad Debts
$ 18,782,230
-
-
$ -
-
-
-
-
-
-
-
-
-
-
-
-
66
TABLE 8
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 2013
(Amounts in Thousands of New Taiwan Dollars)
No.
0
Company Name
Counter Party
TSMC
TSMC North America
TSMC China
TSMC Japan
TSMC Europe
TSMC Korea
TSMC Technology
WaferTech
TSMC Canada
Xintec
Nature of
Relationship
(Note 1)
1
1
1
1
1
1
1
1
1
Financial Statements Item
Net revenue from sale of goods
Receivables from related parties
Other receivables from related parties
Payables to related parties
Net revenue from sale of goods
Net revenue from royalty
Purchases
Marketing expenses - commission
Disposal of property, plant and equipment
Gain on disposal of property, plant and equipment
Purchases of property, plant and equipment
Other receivables from related parties
Payables to related parties
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
Research and development expenses
Payables to related parties
Net revenue from sale of goods
Purchases
Other receivables from related parties
Payables to related parties
Research and development expenses
Payables to related parties
Manufacturing expenses
Research and development expenses
Disposal of property, plant and equipment
Intercompany Transactions
Amount
Terms (Note 2)
Percentage of Consolidated Net
Revenue or Total Assets
$ 414,087,565
52,750,047
328,160
7,675
7,798
15,624
16,902,114
89,129
67,174
2,682
100,298
15,409
1,509,508
240,268
37,906
385,931
62,070
55,482
21,609
2,327
826,291
170,332
12,525
8,520,337
3,009
685,906
217,031
17,096
106,290
1,418
26,978
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
69%
4%
-
-
-
-
3%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1%
-
-
-
-
-
-
-
(Continued)
67
No.
0
1
2
3
4
5
Company Name
Counter Party
TSMC
TSMC SSL
TSMC Solar
TSMC Solar
TSMC Development
WaferTech
TSMC North America
TSMC Technology
TSMC Solar
TSMC Solar Europe GmbH
TSMC SSL
TSMC China
TSMC Development
TSMC Partners
TSMC Partners
Xintec
TSMC Partners
Nature of
Relationship
(Note 1)
1
1
1
1
3
1
3
3
3
3
3
Financial Statements Item
Manufacturing expenses
Other gains and losses
Other receivables from related parties
Payables to related parties
Manufacturing expenses
General and administrative expenses
Other gains and losses
Purchases of property, plant and equipment
Other receivables from related parties
Payables to related parties
Other receivables from related parties
Other receivables from related parties
Net revenue from sale of goods
Receivables from related parties
Finance costs
Finance costs
Other payables to related parties
Other receivables from related parties
Disposal of property, plant and equipment
Finance costs
Intercompany Transactions
Amount
Terms (Note 2)
Percentage of Consolidated Net
Revenue or Total Assets
$ 12,956
8,550
2,160
3,292
2,822
2,257
10,086
20,201
2,431
14,054
40,485
8,307
146,866
16,287
2,613
2,043
2,102,953
298,025
48,193
2,788
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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.
(Concluded)
68
TABLE 9
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
FOR THE YEAR ENDED DECEMBER 31, 2013
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Investor Company
Investee Company
Location
Main Businesses and Products
Original Investment Amount
Balance as of December 31, 2013
December 31,
2013 (Foreign
Currencies in
Thousands)
December 31,
2012 (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)
Share of Profits/
Losses of Investee
(Note 1) (Foreign
Currencies in
Thousands)
Note
TSMC
TSMC Global
TSMC Partners
Tortola, British Virgin Islands
Tortola, British Virgin Islands
Investment activities
Investing in companies involved in the design,
$ 42,327,245 $ 42,327,245
31,456,130
31,456,130
1
988,268
VIS
Hsin-Chu, Taiwan
Research, design, development, manufacture,
13,232,288
13,232,288
628,223
manufacture, and other related business in the
semiconductor industry
SSMC
TSMC Solar
Singapore
Tai-Chung, Taiwan
TSMC North America
San Jose, California, U.S.A.
packaging, testing and sale of memory integrated
circuits, LSI, VLSI and related parts
Fabrication and supply of integrated circuits
Engaged in researching, developing, designing,
manufacturing and selling renewable energy and
saving related technologies and products
Selling and marketing of integrated circuits and
semiconductor devices
5,120,028
11,180,000
5,120,028
11,180,000
314
1,118,000
100 $ 64,953,489 $ (172,392) $ (172,392)
100
Subsidiary
3,516,667 Subsidiary
42,861,788
3,516,560
39
39
99
10,556,348
4,370,988
1,724,819 Associate
7,457,733
4,551,318
5,039,563
(1,554,038)
1,954,847 Associate
Subsidiary
(1,516,235)
333,718
333,718
11,000
100
3,763,194
468,309
468,309 Subsidiary
TSMC SSL
Hsin-Chu, Taiwan
Engaged in researching, developing, designing,
5,546,744
4,304,000
554,674
Xintec
GUC
VTAF III
VTAF II
TSMC Europe
Emerging Alliance
TSMC Japan
TSMC GN
TSMC Korea
Taoyuan, Taiwan
Hsin-Chu, Taiwan
Cayman Islands
Cayman Islands
Amsterdam, the Netherlands
Cayman Islands
Yokohama, Japan
Taipei, Taiwan
Seoul, Korea
TSMC Solar
Motech
Taipei, Taiwan
manufacturing and selling solid state lighting devices
and related applications products and systems
Wafer level chip size packaging service
Researching, developing, manufacturing, testing and
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
Manufacturing and sales of solar cells, crystalline silicon
solar cell, and test and measurement instruments and
design and construction of solar power systems
1,357,890
386,568
1,908,912
596,514
15,749
841,757
83,760
150,000
13,656
1,357,890
386,568
1,896,914
704,447
15,749
852,258
83,760
100,000
13,656
94,950
46,688
-
-
-
-
6
-
80
6,228,661
6,228,661
87,480
VTAF III
TSMC Solar Europe
TSMC Solar NA
Cayman Islands
Amsterdam, the Netherlands
Delaware, U.S.A.
Investing in new start-up technology companies
Investing in solar related business
Selling and marketing of solar related products
1,806,693
504,107
205,772
1,801,918
504,107
205,772
TSMC SSL
TSMC Lighting NA
Delaware, U.S.A.
Selling and marketing of solid state lighting related
3,133
3,133
products
TSMC Partners
TSMC Development
Delaware, U.S.A.
Investment activities
VisEra Holding Company
Cayman Islands
Investing in companies involved in the design,
TSMC Technology
Delaware, U.S.A.
manufacturing, and other related businesses in the
semiconductor industry
Engineering support activities
ISDF II
Cayman Islands
Investing in new start-up technology companies
$ 0.03
(US$ 0.001)
1,281,400
(US$ 43,000)
$ 0.03
(US$ 0.001)
1,281,400
(US$ 43,000)
0.03
(US$ 0.001)
421,759
(US$ 14,153)
0.03
(US$ 0.001)
421,759
(US$ 14,153)
-
-
1
1
-
43,000
-
14,153
92
40
35
50
98
100
99.5
100
100
100
20
49
100
100
100
2,154,913
(1,663,137)
(1,550,850)
Subsidiary
1,866,123
1,056,141
892,439
441,763
290,838
144,924
124,762
85,162
29,475
288,881
289,204
(1,509,593)
(3,662)
37,659
(10,806)
4,717
(22,899)
1,296
37,942 Associate
100,746 Associate
Subsidiary
(151,326)
(3,589)
Subsidiary
37,659 Subsidiary
Subsidiary
(10,753)
4,717 Subsidiary
Subsidiary
1,296 Subsidiary
(22,899)
3,887,462
251,864
Note 2 Associate
597
89,196
8,305
2,873
(1,509,593)
(93,795)
(36,733)
Note 2 Associate
Note 2 Subsidiary
Note 2 Subsidiary
(65)
Note 2 Subsidiary
100 $ 20,614,259
(US$ 691,754)
3,492,453
(US$ 117,196)
49
$ 2,593,196
(US$ 87,387)
922,947
(US$ 31,102)
100
97
386,971
(US$ 12,986)
322,518
(US$ 10,823)
37,518
(US$ 1,264)
73,175
(US$ 2,466)
Note 2 Subsidiary
Note 2 Jointly controlled entity
Note 2 Subsidiary
Note 2 Subsidiary
(Continued)
69
Original Investment Amount
Balance as of December 31, 2013
Shares
(In Thousands)
Percentage of
Ownership
Carrying Value
(Foreign
Currencies in
Thousands)
Net Income
(Losses) of the
Investee (Foreign
Currencies in
Thousands)
Share of Profits/
Losses of Investee
(Note 1) (Foreign
Currencies in
Thousands)
Note
97 $ 248,411
(US$ 8,336)
142,773
(US$ 4,791)
100
$ 190,339
(US$ 6,414)
15,493
(US$ 522)
Note 2 Subsidiary
Note 2 Subsidiary
100
7,397,902
(US$ 248,252)
2,558,757
(US$ 86,226)
Note 2 Subsidiary
58
100
62
31
7
36,404
(US$ 1,222)
18,075
(US$ 607)
-
(19,129)
(US$ 645)
(1,839)
(US$ 62)
-
-
-
-
-
100
85,863
(EUR 2,094)
(93,917)
(EUR 2,375)
Note 2 Subsidiary
Note 2 Subsidiary
Note 2 Subsidiary
Note 2 Subsidiary
Note 2 Subsidiary
Note 2 Subsidiary
-
1
21,056
(1,554,038)
Note 2 Associate
21,011
(1,663,137)
Note 2 Associate
(Concluded)
Investor Company
Investee Company
Location
Main Businesses and Products
ISDF
Cayman Islands
Investing in new start-up technology companies
TSMC Canada
Ontario, Canada
Engineering support activities
TSMC Development WaferTech
Washington, U.S.A.
Manufacturing, selling, testing and computer-aided
designing of integrated circuits and other
semiconductor devices
VTAF III
Mutual-Pak Technology Co.,
Ltd.
Growth Fund
Taipei, Taiwan
Cayman Islands
Manufacturing and selling of electronic parts and
researching, developing, and testing of RFID
Investing in new start-up technology companies
VTA Holdings
Delaware, U.S.A.
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
TSMC Solar Europe
TSMC Solar Europe GmbH
Hamburg, Germany
Selling of solar related products and providing customer
service
December 31,
2013 (Foreign
Currencies in
Thousands)
December 31,
2012 (Foreign
Currencies in
Thousands)
$ 23,453
(US$ 787)
68,540
(US$ 2,300)
$ 23,453
(US$ 787)
68,540
(US$ 2,300)
2,384,000
(US$ 80,000)
8,344,000
(US$ 280,000)
155,318
(US$ 5,212)
63,474
(US$ 2,130)
-
155,318
(US$ 5,212)
54,534
(US$ 1,830)
-
-
-
-
-
508,400
(EUR 12,400)
508,400
(EUR 12,400)
787
2,300
293,637
15,643
-
-
-
-
-
TSMC GN
TSMC Solar
Tai-Chung, Taiwan
Engaged in researching, developing, designing,
52,498
42,945
5,250
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
54,359
34,266
5,436
Note 1: The share of profits/losses of investee includes the effect of unrealized gross profit on intercompany transactions.
Note 2: The share of profits/losses of the investee company is not reflected herein as such amount is already included in the share of profits/losses of the investor company.
Note 3: Please refer to Table 10 for information on investment in Mainland China.
70
TABLE 10
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
INFORMATION ON INVESTMENT IN MAINLAND CHINA
FOR THE YEAR ENDED DECEMBER 31, 2013
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Investee Company
Main Businesses and Products
TSMC China
Manufacturing 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, 2013
(US$ in Thousands)
$ 18,939,667
(US$ 596,000)
Investment Flows
Outflow
Inflow
$ -
$ -
Accumulated Outflow of
Investment from Taiwan as of
December 31, 2013
(US$ in Thousands)
$ 18,939,667
(US$ 596,000)
Investee Company
Percentage of Ownership
Share of Profits/Losses
TSMC China
100%
$ 5,111,975
(Note 2)
Carrying Amount as of
December 31, 2013
Accumulated Inward Remittance of Earnings as of
December 31, 2013
$ 23,845,371
$ -
Accumulated Investment in Mainland China as of
December 31, 2013 (US$ in Thousands)
Investment Amounts Authorized by Investment Commission, MOEA
(US$ in Thousands)
Upper Limit on Investment (US$ in Thousands)
$ 18,939,667
(US$ 596,000)
$ 18,939,667
(US$ 596,000)
$ 18,939,667
(US$ 596,000)
Note 1: TSMC directly invested US$596,000 thousand in TSMC China.
Note 2: Amount was recognized based on the audited financial statements.
71
8. Parent Company Only Financial Statements for the Years Ended December 31, 2013 and 2012 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 parent company only balance sheets of Taiwan Semiconductor
Manufacturing Company Limited as of December 31, 2013 and 2012 and January 1, 2012 and the related
parent company only statements of comprehensive income for the years ended December 31, 2013 and
2012, as well as the parent company only statements of changes in equity and cash flows for the years
ended December 31, 2013 and 2012. These parent company only 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 parent company only financial statements referred to above present fairly, in all material
respects, the parent company only financial position of Taiwan Semiconductor Manufacturing Company
Limited as of December 31, 2013 and 2012 and January 1, 2012, 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.
The statements of major accounting items listed in the parent company only financial statements of Taiwan
Semiconductor Manufacturing Company Limited as of and for the year ended December 31, 2013 are
presented for the purpose of additional analysis. Such statements have been subjected to the auditing
procedures applied in our audits of the financial statements mentioned above. In our opinion, such
statements are fairly stated in all material respects in relation to the financial statements as a whole.
February 18, 2014
72
Taiwan Semiconductor Manufacturing Company Limited
PARENT COMPANY ONLY BALANCE SHEETS
(In Thousands of New Taiwan Dollars)
ASSETS
CURRENT ASSETS
December 31, 2013
December 31, 2012
January 1, 2012
Amount
%
Amount
%
Amount
Cash and cash equivalents (Note 6)
Financial assets at fair value through profit or loss (Note 7)
Available-for-sale financial assets (Note 8)
Held-to-maturity financial assets (Note 9)
Notes and accounts receivable, net (Note 10)
Receivables from related parties (Note 34)
Other receivables from related parties (Note 34)
Inventories (Notes 5 and 11)
Other financial assets
Other current assets (Note 16)
$ 146,438,768
64,030
646,402
1,795,949
17,445,877
52,969,803
572,000
35,243,061
61,842
2,386,031
12 $ 109,150,810
38,824
1,845,052
701,146
15,252,394
40,987,444
274,963
35,296,391
175,261
2,097,329
-
-
-
2
4
-
3
-
-
12 $ 85,262,521
14,925
2,617,134
701,136
19,409,266
24,777,534
188,028
22,853,397
122,010
1,725,736
-
-
-
2
4
-
4
-
-
Total current assets
257,623,763
21
205,819,614
22
157,671,687
%
11
-
1
-
3
3
-
3
-
-
21
LIABILITIES AND EQUITY
CURRENT LIABILITIES
December 31, 2013
December 31, 2012
January 1, 2012
Amount
%
Amount
%
Amount
%
Short-term loans (Note 17)
Financial liabilities at fair value through profit or loss (Note 7)
Accounts payable
Payables to related parties (Note 34)
Accrued profit sharing to employees and bonus to directors
(Note 21)
Payables to contractors and equipment suppliers
Income tax payable (Note 28)
Provisions (Notes 5 and 18)
Accrued expenses and other current liabilities
Current portion of bonds payable (Note 19)
$ 15,645,000
25,404
13,628,675
4,183,979
1 $ 34,714,929
6,274
-
13,392,221
1
3,230,342
-
4 $ 25,926,528
-
-
9,522,688
1
2,992,582
-
12,738,801
89,555,814
22,567,331
7,217,331
21,633,409
-
1
8
2
1
2
-
11,186,591
44,371,108
15,196,399
5,732,738
16,698,014
-
1
5
1
1
2
-
9,055,704
33,811,970
10,647,797
4,887,879
13,057,161
4,500,000
3
-
1
-
1
5
1
1
2
1
Total current liabilities
187,195,744
16
144,528,616
15
114,402,309
15
NONCURRENT ASSETS
Held-to-maturity financial assets (Note 9)
Financial assets carried at cost (Note 12)
Investments accounted for using equity method
(Notes 5 and 13)
Property, plant and equipment (Notes 5 and 14)
Intangible assets (Notes 5 and 15)
Deferred income tax assets (Notes 5 and 28)
Refundable deposits
Other noncurrent assets (Note 16)
Total noncurrent assets
-
469,378
165,075,781
770,443,494
7,069,456
4,580,468
2,496,663
820,000
950,955,240
-
-
14
64
1
-
-
-
79
-
483,759
139,150,441
586,636,036
6,449,837
10,318,863
2,394,826
884,277
746,318,039
-
-
15
61
1
1
-
-
78
702,291
497,835
128,143,256
454,420,770
6,287,000
13,228,485
4,491,735
1,022,349
17
59
1
2
-
-
- NONCURRENT LIABILITIES
-
Bonds payable (Note 19)
Other long-term payables
Accrued pension cost (Notes 5 and 20)
Guarantee deposits
Total noncurrent liabilities
Total liabilities
608,793,721
79
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock (Note 21)
Capital surplus (Note 21)
Retained earnings (Note 21)
Appropriated as legal capital reserve
Appropriated as special capital reserve
Unappropriated earnings
Others (Note 21)
Total equity
166,200,000
36,000
7,491,040
147,964
173,875,004
361,070,748
259,286,171
55,858,626
132,436,003
2,785,741
382,971,408
518,193,152
14,170,306
847,508,255
14
-
-
-
14
30
21
5
11
-
32
43
1
70
80,000,000
54,000
6,805,042
199,315
87,058,357
8
-
1
-
9
18,000,000
-
6,132,071
439,032
24,571,103
2
-
1
-
3
231,586,973
24
138,973,412
18
259,244,357
55,675,340
115,820,123
7,606,224
284,985,121
408,411,468
(2,780,485)
720,550,680
27
6
12
1
30
43
-
76
259,162,226
55,471,662
102,399,995
6,433,874
211,630,458
320,464,327
(7,606,219)
627,491,996
34
7
13
1
28
42
(1)
82
TOTAL
$ 1,208,579,003
100 $ 952,137,653
100 $ 766,465,408
100
TOTAL
$ 1,208,579,003
100 $ 952,137,653
100 $ 766,465,408
100
The accompanying notes are an integral part of the parent company only financial statements.
73
2013
Amount
%
2012
Amount
OTHER COMPREHENSIVE INCOME (LOSS) (Notes 13, 20, 21 and 28)
Exchange differences arising on translation of foreign operations
Changes in fair value of available-for-sale financial assets
Share of other comprehensive income of subsidiaries and associates
Actuarial loss from defined benefit plans
Income tax benefit (expense) related to components of other
comprehensive income
$ 3,655,675
(214,935)
13,472,874
(671,774)
117,152
Other comprehensive income for the year, net of income tax
16,358,992
1
-
2
-
-
3
$ (4,317,386)
2,407,647
7,118,419
(677,413)
(328,010)
4,203,257
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
$ 204,505,782
35
$ 170,521,543
EARNINGS PER SHARE (NT$, Note 29)
Basic earnings per share
Diluted earnings per share
$ 7.26
$ 7.26
$ 6.42
$ 6.41
%
(1)
1
1
-
-
1
34
The accompanying notes are an integral part of the parent company only financial statements.
(Concluded)
Taiwan Semiconductor Manufacturing Company Limited
PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
NET REVENUE (Notes 5, 23 and 34)
$ 591,087,600
100
$ 500,369,525
2013
Amount
%
2012
Amount
COST OF REVENUE (Notes 11, 30 and 34)
GROSS PROFIT BEFORE UNREALIZED GROSS PROFIT ON SALES TO
SUBSIDIARIES AND ASSOCIATES
319,407,163
271,680,437
UNREALIZED GROSS PROFIT ON SALES TO SUBSIDIARIES AND ASSOCIATES
(35,577)
GROSS PROFIT
OPERATING EXPENSES (Notes 5, 30 and 34)
Research and development
General and administrative
Marketing
Total operating expenses
OTHER OPERATING INCOME AND EXPENSES, NET (Notes 24 and 30)
INCOME FROM OPERATIONS
NON-OPERATING INCOME AND EXPENSES
Share of profits of subsidiaries and associates (Note 13)
Other income (Note 25)
Foreign exchange gain, net
Finance costs (Note 26)
Other gains and losses (Notes 27 and 34)
Total non-operating income and expenses
INCOME BEFORE INCOME TAX
INCOME TAX EXPENSE (Note 28)
NET INCOME
271,644,860
46,922,471
17,697,411
2,304,472
66,924,354
(66,614)
204,653,892
9,530,933
1,082,426
279,488
(2,092,236)
2,262,047
11,062,658
215,716,550
27,569,760
188,146,790
54
46
-
46
8
3
-
11
-
35
2
-
-
-
-
2
37
5
32
265,494,185
234,875,340
(25,029)
234,850,311
38,769,956
16,324,238
2,386,889
57,481,083
(549,087)
176,820,141
8,175,390
936,903
327,744
(945,114)
(1,562,677)
6,932,246
183,752,387
17,434,101
166,318,286
%
100
53
47
-
47
8
3
1
12
-
35
2
-
-
-
-
2
37
4
33
(Continued)
74
Taiwan Semiconductor Manufacturing Company Limited
PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY
(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
Foreign Currency
Translation
Reserve
Others
Unrealized
Gain/Loss
from Available-
for-sale
Financial Assets
Cash Flow
Hedges Reserve
Total Equity
Total
BALANCE, JANUARY 1, 2012
25,916,222 $ 259,162,226 $ 55,471,662 $ 102,399,995 $ 6,433,874 $ 211,630,458 $ 320,464,327 $ (6,433,364) $ (1,172,762) $ (93) $ (7,606,219) $ 627,491,996
BALANCE, DECEMBER 31, 2012
25,924,435
259,244,357
55,675,340
115,820,123
7,606,224
284,985,121
408,411,468
(10,753,806)
7,973,321
Appropriations of prior year’s earnings
Legal capital reserve
Special capital reserve
Cash dividends to shareholders - NT$3.00 per share
Total
Net income in 2012
Other comprehensive income in 2012, net of income tax
Total comprehensive income in 2012
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Issuance of stock from exercise of employee stock options
8,213
82,131
160,357
Adjustments to share of changes in equity of subsidiaries and
associates
Adjustments arising from changes in percentage of ownership
in subsidiaries
-
-
-
-
2,588
40,733
Appropriations of prior year’s earnings
Legal capital reserve
Reversal of special capital reserve
Cash dividends to shareholders - NT$3.00 per share
Total
Net income in 2013
Other comprehensive income in 2013, net of income tax
Total comprehensive income in 2013
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Issuance of stock from exercise of employee stock options
4,182
41,814
82,756
Adjustments to share of changes in equity of subsidiaries and
associates
Adjustments arising from changes in percentage of ownership
in subsidiaries
-
-
-
-
38,084
62,446
13,420,128
-
-
13,420,128
-
1,172,350
-
1,172,350
(13,420,128)
(1,172,350)
(77,748,668)
(92,341,146)
-
-
(77,748,668)
(77,748,668)
166,318,286
166,318,286
-
-
-
-
-
-
-
-
-
-
(622,477)
(622,477)
(4,320,442)
9,146,083
165,695,809
165,695,809
(4,320,442)
9,146,083
-
-
-
-
-
-
-
-
-
-
-
-
16,615,880
-
-
16,615,880
-
(4,820,483)
-
(4,820,483)
(16,615,880)
4,820,483
(77,773,307)
(89,568,704)
-
-
(77,773,307)
(77,773,307)
188,146,790
188,146,790
-
-
-
-
-
-
-
-
-
-
(591,799)
(591,799)
3,613,444
13,337,460
187,554,991
187,554,991
3,613,444
13,337,460
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
93
93
-
-
-
-
-
-
-
-
-
(113)
(113)
-
-
-
-
-
-
-
-
-
-
(77,748,668)
(77,748,668)
166,318,286
4,825,734
4,203,257
4,825,734
170,521,543
-
-
-
242,488
2,588
40,733
(2,780,485)
720,550,680
-
-
-
-
-
-
-
(77,773,307)
(77,773,307)
188,146,790
16,950,791
16,358,992
16,950,791
204,505,782
-
-
-
124,570
38,084
62,446
BALANCE, DECEMBER 31, 2013
25,928,617 $ 259,286,171 $ 55,858,626 $ 132,436,003 $ 2,785,741 $ 382,971,408 $ 518,193,152 $ (7,140,362) $ 21,310,781 $ (113) $ 14,170,306 $ 847,508,255
The accompanying notes are an integral part of the parent company only financial statements.
75
Taiwan Semiconductor Manufacturing Company Limited
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
2013
2012
2013
2012
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax
Adjustments for:
Depreciation expense
Amortization expense
Finance costs
Share of profits of subsidiaries and associates
Interest income
Loss on disposal of property, plant and equipment and intangible assets, net
Impairment loss on property, plant and equipment
Impairment loss of financial assets
Gain on disposal of available-for-sale financial assets, net
Loss (gain) on disposal of financial assets carried at cost, net
Loss (gain) on disposal of investments in associates
Gain on deconsolidation of subsidiary
Unrealized gross profit on sales to associates
Loss (gain) on foreign exchange, net
Dividend income
Changes in operating assets and liabilities:
Derivative financial instruments
Notes and accounts receivable, net
Receivables from related parties
Other receivables from related parties
Inventories
Other current assets
Other financial assets
Accounts payable
Payables to related parties
Accrued profit sharing to employees and bonus to directors
Accrued expenses and other current liabilities
Provisions
Accrued pension cost
Cash generated from operations
Income taxes paid
$ 215,716,550
$ 183,752,387
147,266,825
2,072,926
2,092,236
(9,530,933)
(1,011,301)
64,753
-
-
(846,709)
(42,664)
656
(293,578)
35,577
315,098
(71,125)
(6,076)
(2,193,483)
(11,982,359)
(257,810)
53,330
(266,929)
68,313
182,965
961,579
1,552,210
4,269,512
1,484,593
14,224
349,648,380
(14,365,054)
122,377,815
2,022,064
945,114
(8,175,390)
(867,227)
125,488
418,330
2,677,529
(110,634)
269
(4,977)
-
25,029
(3,143,506)
(69,676)
(17,625)
4,156,872
(16,209,910)
(89,347)
(12,442,994)
(363,366)
(18,057)
3,565,949
(67,770)
2,130,887
3,281,875
844,859
(4,442)
284,739,546
(10,312,114)
Net cash generated by operating activities
335,283,326
274,427,432
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Held to maturity financial assets
Financial assets carried at cost
Property, plant and equipment
Intangible assets
(1,795,949)
(2,177)
(285,889,575)
(2,727,399)
-
(1,093)
(242,063,668)
(1,743,043)
(Continued)
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
Interest received
Other dividends received
Dividends received from subsidiaries and associates
Refundable deposits paid
Refundable deposits refunded
$ 1,830,424
700,000
59,222
162,068
1,057,553
71,125
2,151,373
(96,072)
112,204
$ 612,834
700,000
14,900
93,984
834,314
69,676
1,688,878
(508,158)
2,599,560
Net cash used in investing activities
(284,367,203)
(237,701,816)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of bonds
Repayment of bonds
Increase (decrease) in short-term loans
Interest paid
Guarantee deposits received
Guarantee deposits refunded
Proceeds from exercise of employee stock options
Payment of partial acquisition of interests in subsidiaries
Proceeds from partial disposal of interests in subsidiaries
Cash dividends
86,200,000
-
(19,636,240)
(1,286,296)
40,729
(111,313)
124,570
(1,357,222)
170,914
(77,773,307)
62,000,000
(4,500,000)
9,747,093
(670,165)
13,038
(249,771)
242,488
(2,259,244)
587,902
(77,748,668)
Net cash used in financing activities
(13,628,165)
(12,837,327)
NET INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
37,287,958
109,150,810
23,888,289
85,262,521
CASH AND CASH EQUIVALENTS, END OF YEAR
$ 146,438,768
$ 109,150,810
The accompanying notes are an integral part of the parent company only financial statements
(Concluded)
76
Taiwan Semiconductor Manufacturing Company Limited
New, Revised or Amended Standards and Interpretations
Effective Date Issued by IASB (Note )
NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
(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. On September 5, 1994, the Company’s shares were listed on the Taiwan Stock Exchange (TWSE). On
October 8, 1997, the Company listed some of its shares of stock on the New York Stock Exchange (NYSE)
in the form of American Depositary Shares (ADSs). The address of its registered office and principal place of
business is No. 8, Li-Hsin Rd. 6, Hsinchu Science Park, Taiwan.
2. THE AUTHORIZATION OF FINANCIAL STATEMENTS
The accompanying parent company only financial statements were approved and authorized for issue by the
Board of Directors on February 18, 2014.
3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS
Amendments to IFRS 1 Government Loans
Amendment to IFRS 7 Disclosures-offsetting Financial Assets and Financial Liabilities
Amendment to IFRS 7 Disclosures - Transfers of Financial Assets
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
Amendments to IFRS 10,
IFRS 11 and IFRS 12 Consolidated financial Statements, Joint Arrangements, and Disclosure of
Interests in Other Entities: Transition Guidance
IFRS 13 Fair Value Measurement
Amendment to IAS 1 Presentation of Items of Other Comprehensive Income
Amendment to IAS 12 Deferred Tax: Recovery of Underlying Assets
Amendment to IAS 19 Employee Benefits
Amendment to IAS 27 Separate Financial Statements
Amendment to IAS 28 Investments in Associates and Joint Ventures
Amendment to IAS 32 Offsetting of Financial Assets and Financial Liabilities
IFRIC 20 Stripping Costs in the Production Phase of A Surface Mine
Not included in the 2013 Taiwan-IFRSs version
January 1, 2013
January 1, 2013
July 1, 2011
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013
July 1, 2012
January 1, 2012
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2014
January 1, 2013
Annual Improvements to IFRSs 2010 - 2012 Cycle
July 1, 2014 or transactions on or after July 1,
Annual Improvements to IFRSs 2011 - 2013 Cycle
IFRS 9 Financial Instruments
Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date and Transition Disclosure
IFRS 14 Regulatory Deferral Accounts
Amendment to IAS 19 Defined Benefit Plans: Employee Contributions
Amendment to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets
Amendment to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting
IFRIC 21 Levies
2014
July 1, 2014
Not yet determined
Not yet determined
January 1, 2016
July 1, 2014
January 1, 2014
January 1, 2014
January 1, 2014
Note: The aforementioned new, revised or amended standards or interpretations are effective after fiscal year beginning on or after the effective
(Concluded)
a. New and revised standards, amendments and interpretations in issue but not yet effective
dates, unless specified otherwise.
As of the date that the accompanying parent company only financial statements were authorized for
issue, the new, revised or amended International Financial Reporting Standards, International Accounting
Standards, interpretations and related guidance in issue but not yet adopted by the Company as well as
the effective dates issued by the International Accounting Standards Board (IASB), are stated as follows;
however, the initial adoption to the following standards and interpretations is still subject to the effective
date to be published by the Financial Supervisory Commission (FSC) except that the standards and
interpretation included in the 2013 Taiwan-IFRSs version should be adopted by the Company starting
2015.
New, Revised or Amended Standards and Interpretations
Effective Date Issued by IASB (Note )
Included in the 2013 Taiwan-IFRSs version
Amendments to IFRSs Improvements to IFRSs 2009 - Amendment to IAS 39
Amendment to IAS 39 Embedded Derivatives
January 1, 2009 or January 1, 2010
Effective in fiscal year ended on or after June
Improvements to IFRSs 2010
Annual Improvements to IFRSs 2009 - 2011 Cycle
Amendments to IFRS 1 Limited Exemption from Comparative IFRS 7 Disclosures for First-time
Adopters
30, 2009
July 1, 2010 or January 1, 2011
January 1, 2013
July 1, 2010
Amendments to IFRS 1 Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters
July 1, 2011
b. Significant changes in accounting policy resulted from new and revised standards, amendments and
interpretations in issue but not yet effective
Except for the following items, the Company believes that the adoption of aforementioned standards or
interpretations will not have a significant effect on the Company’s accounting policies.
1) IFRS 9, “Financial Instruments”
Under IFRS 9, all recognized financial assets currently in the scope of IAS 39, “Financial Instruments:
Recognition and Measurement,” will be subsequently measured at either the amortized cost or the
fair value. If the objective of the Company’s business model is to hold the financial asset to collect
the contractual cash flows which are solely for payments of principal and interest on the principal
amount outstanding, such assets are measured at the amortized cost. All other financial assets must be
measured at the fair value through profit or loss as of the end of the reporting period.
2) IFRS 12, “Disclosure of Interests in Other Entities”
(Continued)
IFRS 12 is a standard that requires a broader disclosure in an entity’s interests in subsidiaries and
associates.
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3) IFRS 13, “Fair Value Measurement”
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about
fair value measurements. It defines fair value, establishes a framework for measuring fair value, and
requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more
extensive than those required in the current standards. For example, quantitative and qualitative
disclosures based on the three-level fair value hierarchy currently required for financial instruments only
will be extended by IFRS 13 to cover all assets and liabilities within its scope.
4) Amendments to IAS 1, “Presentation of Items of Other Comprehensive Income”
The amendments to IAS 1 introduce a new disclosure terminology for other comprehensive income,
which require additional disclosures in other comprehensive income. The items of other comprehensive
income will be grouped into two categories: (a) items that will not be reclassified subsequently
to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific
conditions are met. In addition, income tax on items of other comprehensive income is also required
to be allocated on the same basis. The Company expects the aforementioned amendments will change
the Company’s presentation on the statement of comprehensive income.
5) Amendments to IAS 19, “Employee Benefits”
The amendments to IAS 19 change the accounting for defined benefit plans, which require the
Company to recognize changes in defined benefit obligations or assets, to disclose the components
of the defined benefit costs, to eliminate the corridor approach and to accelerate the recognition
of past service cost. According to the amendments, all actuarial gains and losses will be recognized
immediately through other comprehensive income; the past service cost, on the other hand, will be
expensed immediately when it incurs and no longer be amortized over the average period before
vested on a straight-line basis. In addition, the amendment also requires a broader disclosure in
defined benefit plans.
6) Amendments to IAS 36, “Recoverable Amount Disclosures for Non-Financial Assets”
The amendments to IAS 36 clarify that the Company is only required to disclose the recoverable
amount in the year of impairment accrual or reversal. Moreover, if the recoverable amount of impaired
assets is based on fair value less costs of disposal, the Company should also disclose the discount rate
used. The Company expects the aforementioned amendments will result in a broader disclosure of
recoverable amount for non-financial assets.
c. Impact of the application of the new and revised standards, amendments and interpretations in issue but
not yet effective on the consolidated financial statements of the Company
As of the date that the accompanying parent company only financial statements were approved and
authorized for issue, the Company continues in evaluating the impact on its financial position and
financial performance as a result of the initial adoption of the above standards or interpretations. The
related impact will be disclosed when the Company completes the evaluation.
The accompanying parent company only financial statements are the first annual parent company only
financial statements prepared in accordance with the Guidelines Governing the Preparation of Financial
Reports by Securities Issuers amended on December 22, 2011.
For the convenience of readers, the accompanying parent company only 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 parent company only financial statements shall prevail.
Statement of Compliance
The accompanying parent company only financial statements have been prepared in conformity with the
Guidelines Governing the Preparation of Financial Reports by Securities Issuers (the “Accounting Standards
Used in Preparation of the Parent Company Only Financial Statements”).
Basis of Preparation
The accompanying parent company only financial statements have been prepared on the historical cost basis
except for financial instruments that are measured at fair values, as explained in the accounting policies
below. Historical cost is generally based on the fair value of the consideration given in exchange for the
assets.
When preparing the parent company only financial statements, the Company account for subsidiaries
and associates by using the equity method. In order to agree with the amount of net income, other
comprehensive income and equity attributable to shareholders of the parent in the consolidated financial
statements, the differences of the accounting treatment between the parent company only basis and the
consolidated basis are adjusted under the heading of investments accounted for using equity method,
share of profits of subsidiaries and associates and share of other comprehensive income of subsidiaries and
associates in the parent company only financial statements.
Foreign Currencies
In preparing the parent company only financial statements, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of
the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at that date. Such exchange differences are recognized in profit or loss
in the year in which they arise. Non-monetary items measured at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange
differences arising on the retranslation of non-monetary items are included in profit or loss for the year
except for exchange differences arising on the retranslation of non-monetary items in respect of which gains
and losses are recognized directly in other comprehensive income, in which case, the exchange differences
are also recognized directly in other comprehensive income. Non-monetary items that are measured in terms
of historical cost in foreign currencies are not retranslated.
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For the purposes of presenting parent company only financial statements, the assets and liabilities of the
Company’s foreign operations are translated into NT$ using exchange rates prevailing at the end of each
reporting period. Income and expense items are translated at the average exchange rates for the period.
Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in
equity.
Held-to-maturity financial assets
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and
fixed maturity dates that the Company has the positive intent and ability to hold to maturity. Subsequent
to initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective
interest method less any impairment.
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 end of the reporting period. Current liabilities are obligations
incurred for trading purposes and obligations expected to be settled within one year from the end of the
reporting period. Assets and liabilities that are not classified as current are noncurrent assets and liabilities,
respectively.
Cash Equivalents
Cash equivalents, for the purpose of meeting short-term cash commitments, consist of highly liquid time
deposits and investments that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either designated as
available-for-sale or are not classified as (a) loans and receivables, (b) held-to-maturity financial assets or (c)
financial assets at fair value through profit or loss.
Stocks held by the Company that are traded in an active market are classified as available-for-sale financial
assets and are stated at fair value at the end of each reporting period.
Dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the
carrying amount of available-for-sale financial assets are recognized in other comprehensive income.
When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously
recognized in other comprehensive income is reclassified to profit or loss.
Financial Instruments
Financial assets and liabilities shall be recognized when the Company becomes a party to the contractual
provisions of the instruments.
Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company’s right
to receive the dividends is established.
Financial assets and liabilities are initially recognized at fair values. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets
and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of
the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are
recognized immediately in profit or loss. Fair value is determined in the manner described in Note 33.
Financial Assets
Financial assets are classified into the following specified categories: Financial assets “at fair value through
profit or loss” (FVTPL), “held-to-maturity” financial assets, “available-for-sale” financial assets and “loans and
receivables”. The classification depends on the nature and purpose of the financial assets and is determined
at the time of initial recognition. All regular way purchases or sales of financial assets are recognized and
derecognized on a settlement date basis. Regular way purchases or sales are purchases or sales of financial
assets that require delivery of assets within the time frame established by regulation or convention in the
marketplace.
Financial assets at fair value through profit or loss
Derivative financial instruments that do not meet the criteria for hedge accounting are stated at fair value,
with any gains or losses arising on remeasurement recognized in profit or loss.
Available-for-sale equity instruments that do not have a quoted market price in an active market and whose
fair value cannot be reliably measured are measured at cost less any identified impairment losses at the end
of each reporting period. Such equity instruments are subsequently remeasured at fair value when their fair
value can be reliably measured, and the difference between the carrying amount and fair value is recognized
in profit or loss or other comprehensive income.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. Loans and receivables including cash and cash equivalents, notes and accounts
receivable and other receivables are measured at amortized cost using the effective interest method, less any
impairment, except for those loans and receivables with immaterial discounted effect.
Impairment of financial assets
Financial assets, other than those carried at FVTPL, are assessed for indicators of impairment at the end of
each reporting period. Those financial assets are considered to be impaired when there is objective evidence
that, as a result of one or more events that occurred after the initial recognition of the financial assets, their
estimated future cash flows have been affected.
For financial assets carried at amortized cost, such as trade receivables, assets that are assessed not to be
impaired individually are, in addition, assessed for impairment on a collective basis. The Company assesses
the collectability of receivables by performing the account aging analysis and examining current trends in
the credit quality of its customers.
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For financial assets carried at amortized cost, the amount of the impairment loss is the difference between
the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial
asset’s original effective interest rate.
Financial liabilities
Financial liabilities are subsequently measured either at amortized cost using effective interest method or at
FVTPL.
For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively to an event occurring after the impairment was
loss recognized, the previously recognized impairment loss is reversed through profit or loss to the extent
that the carrying amount of the financial assets at the date the impairment loss is reversed does not exceed
what the amortized cost would have been had the impairment loss not been recognized.
When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously
recognized in other comprehensive income are reclassified to profit or loss in the year.
In respect of available-for-sale equity instruments, impairment losses previously recognized in profit or
loss are not reversed through profit or loss. Any increase in fair value subsequent to the recognition of
an impairment loss is recognized in other comprehensive income and accumulated under the heading of
unrealized gains or losses from available-for-sale financial assets.
For financial assets carried at cost, the amount of the impairment loss is measured as the difference between
the asset’s carrying amount and the present value of the estimated future cash flows discounted at the
current market rate of return for a similar financial asset. Such impairment loss will not be reversed in
subsequent periods.
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial
assets with the exception of trade receivables, where the carrying amount is reduced through the use of
an allowance account. When a trade receivable is considered uncollectible, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are credited against the
allowance account.
Derecognition of financial assets
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the
financial asset expire, or when it transfers the financial asset and substantially all the risks and rewards of
ownership of the financial asset to another entity.
On derecognition of a financial asset in its entirety, the difference between the financial asset’s carrying
amount and the sum of the consideration received and receivable and the cumulative gain or loss that had
been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.
Financial Liabilities and Equity Instruments
Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity
in accordance with the substance of the contractual arrangements and the definitions of a financial liability
and an equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds
received, net of direct issue costs.
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Financial liabilities measured at FVTPL are derivative financial instruments that do not meet the criteria for
hedge accounting, and they are stated at fair value, with any gains or losses arising on remeasurement
recognized in profit or loss.
Financial liabilities other than those held for trading purposes and designated as at FVTPL are subsequently
measured at amortized cost at the end of each reporting period.
Derecognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, the Company’s obligations are
discharged, cancelled or they expire. The difference between the carrying amount of the financial liability
derecognized and the consideration paid and payable is recognized in profit or loss.
Derivative Financial Instruments
The Company enters into a variety of derivative financial instruments to manage its market risk exposure to
foreign exchange rate and interest rate, including forward exchange contracts and currency swap contracts.
Derivative financial instruments are initially recognized at fair value at the date the derivative contracts are
entered into and are subsequently remeasured to their fair value at the end of each reporting period. The
resulting gain or loss is recognized in profit or loss immediately.
Inventories
Inventories are stated at the lower of cost or net realizable value. Inventories are recorded at standard cost
and adjusted to approximate weighted-average cost at the end of the reporting period. Net realizable
value represents the estimated selling price of inventories less all estimated costs of completion and costs
necessary to make the sale.
Investments Accounted for Using Equity Method
Investments accounted for using the equity method include investments in subsidiaries and associates.
Investment in subsidiaries
A subsidiary is an entity that is controlled by the Company.
Under the equity method, an investment in a subsidiary is initially recognized at cost and adjusted thereafter
to recognize the Company’s share of profit or loss and other comprehensive income of the subsidiary as
well as the distribution received. The Company also recognized its share in the changes in the equity of
subsidiaries.
Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing
control over the subsidiaries are accounted for as equity transactions. Any difference between the carrying
amount of the subsidiary and the fair value of the consideration paid or received is recognized directly in
equity.
When the Company loses control of a subsidiary, any retained investment of the former subsidiary is
measured at the fair value at that date. A gain or loss is recognized in profit or loss and calculated as the
difference between (a) the aggregate of the fair value of consideration received and the fair value of any
retained interest at the date when control is lost; and (b) the previous carrying amount of the investments
in such subsidiary. In addition, the Company shall account for all amounts previously recognized in other
comprehensive income in relation to the subsidiary on the same basis as would be required if the Company
had directly disposed of the related assets and liabilities.
The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded
as the cost on initial recognition of an investment in an associate.
When the Company transacts with its subsidiaries, profits and losses resulting from the transactions with the
subsidiaries are recognized in the Company’s parent company only financial statements only to the extent of
interests in the subsidiaries that are not owned by the Company.
Investment in associates
An associate is an entity over which the Company has significant influence and that is neither a subsidiary
nor a joint venture. Significant influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control over those policies.
The operating results and assets and liabilities of associates are incorporated in these parent company only
financial statements using the equity method of accounting. Under the equity method, an investment in
an associate is initially recognized in the statement of financial position at cost and adjusted thereafter to
recognize the Company’s share of profit or loss and other comprehensive income of the associate as well as
the distribution received. The Company also recognized its share in the changes in the equity of associates.
Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets,
liabilities and contingent liabilities of an associate recognized at the date of acquisition is recognized as
goodwill, which is included within the carrying amount of the investment. Any excess of the Company’s
share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of
acquisition, after reassessment, is recognized immediately in profit or loss.
When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment
as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to
sell) with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the
investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of
the investment subsequently increases.
When the Company subscribes to additional shares in an associate at a percentage different from its existing
ownership percentage, the resulting carrying amount of the investment differs from the amount of the
Company’s proportionate interest in the net assets of the associate. The Company records such a difference
as an adjustment to investments with the corresponding amount charged or credited to capital surplus. If
the Company’s ownership interest is reduced due to the additional subscription to the shares of associate,
the proportionate amount of the gains or losses previously recognized in other comprehensive income in
relation to that associate shall be reclassified to profit or loss on the same basis as would be required if the
associate or jointly controlled entity had directly disposed of the related assets or liabilities.
When the Company transacts with an associate, profits and losses resulting from the transactions with the
associate are recognized in the Company’ parent company only financial statements only to the extent of
interests in the associate that are not owned by the Company.
Property, Plant and Equipment
Property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment. Costs include any incremental costs that are directly attributable to the construction or
acquisition of the item of property, plant and equipment.
Properties in the course of construction for production, supply or administrative purposes are carried at cost,
less any recognized impairment loss. Such properties are classified to the appropriate categories of property,
plant and equipment when completed and ready for intended use. Depreciation of these assets, on the
same basis as other property assets, commences when the assets are ready for their intended use.
Depreciation is recognized so as to write off the cost of the assets less their residual values over their useful
lives, and it is computed using the straight-line method over the following estimated useful lives: buildings
- 10 to 20 years; machinery and equipment - 5 years; and office equipment - 3 to 5 years. The estimated
useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with
the effect of any changes in estimates accounted for on a prospective basis. Land is not depreciated.
An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected to arise from the continued use of the assets. Any gain or loss arising on the disposal
or retirement of an item of property, plant and equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognized in profit or loss.
Leases
Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.
The Company as lessor
Rental income from operating leases is recognized on a straight-line basis over the term of the relevant
lease.
The Company as lessee
Operating lease payments are recognized as an expense on a straight-line basis over the lease term.
Intangible Assets
Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of
the business less accumulated impairment losses, if any.
Other intangible assets
Other separately acquired intangible assets with finite useful lives are carried at cost less accumulated
amortization and accumulated impairment losses. Amortization is recognized using the straight-line method
over the following estimated useful lives: 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
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- the economic life or contract period. The estimated useful life and amortization method are reviewed
at the end of each reporting period, with the effect of any changes in estimate being accounted for on a
prospective basis.
The amount recognized as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding
the obligation. When a provision is measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those cash flows.
Impairment of Tangible and Intangible Assets
Goodwill
Goodwill is not amortized and instead is tested for impairment annually, or more frequently when there
is an indication that the cash-generating unit may be impaired. For the purpose of impairment testing,
goodwill is allocated to each of the Company’s cash-generating units or groups of cash-generating units
that are expected to benefit. If the recoverable amount of a cash-generating unit is less than its carrying
amount, the difference is allocated first to reduce the carrying amount of any goodwill allocated to such
cash-generating unit and then to the other assets of the cash-generating unit pro rata based on the carrying
amount of each asset in the cash-generating unit. Any impairment loss for goodwill is recognized directly in
profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.
Other tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an
individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the
asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are
also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent allocation basis can be identified.
Revenue Recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for
estimated customer returns, rebates and other similar allowances.
Sale of goods
Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which
time all the following conditions are satisfied:
● The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
● The Company retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
● The amount of revenue can be measured reliably;
● It is probable that the economic benefits associated with the transaction will flow to the Company; and
● The costs incurred or to be incurred in respect of the transaction can be measured reliably.
In principle, the payment term granted to customers is due 30 days from the invoice date or 30 days from
the end of when the month of the invoice is issued. Due to the short term nature of the receivables from
sale of goods with the immaterial discounted effect, the Company measures them at the original invoice
amounts without discounting.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
Royalties, dividend and interest income
Revenue from royalties is recognized on an accrual basis in accordance with the substance of the relevant
agreement (provided that it is probable that the economic benefits will flow to the Company and the
amount of revenue can be measured reliably).
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying
amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An
impairment loss is recognized immediately in profit or loss.
Dividend income from investments is recognized when the shareholder’s right to receive payment has been
established, provided that it is probable that the economic benefits will flow to the Group and the amount
of income can be measured reliably.
When an impairment loss subsequently reverses, the carrying amount of the asset or a cash-generating unit
is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been determined had no impairment loss been
recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized
immediately in profit or loss.
Provision
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a
past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate
can be made of the amount of the obligation.
Interest income from a financial asset is recognized when it is probable that the economic benefits will flow
to the Company and the amount of income can be measured reliably. Interest income is accrued on a time
basis, by reference to the principal outstanding and at the effective interest rate applicable.
Retirement Benefits
For defined contribution retirement benefit plans, payments to the benefit plan are recognized as an
expense when the employees have rendered service entitling them to the contribution. For defined benefit
retirement benefit plans, the cost of providing benefit is recognized based on actuarial calculations.
For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected
Unit Credit Method, with actuarial calculations being carried out at year end. Actuarial gains and losses are
reported in retained earnings in the period that they are recognized as other comprehensive income.
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Share-based Payment Arrangements
The Company elected to take the optional exemption according to related guidance for the share-based
payment transactions granted and vested before the date of transition to Accounting Standards Used in
Preparation of the Parent Company Only Financial Statements. There were no stock options granted prior to
but unvested at the date of transition. Please refer to the description in Note 38a.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND
UNCERTAINTY
In the application of the Company’s accounting policies, which are described in Note 4, the directors are
required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be relevant. Actual results may differ from
these estimates.
Current tax
Income tax on unappropriated earnings at a rate of 10% is expensed in the year the shareholders approved
the appropriation of earnings which is the year subsequent to the year the earnings are generated.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized in the year in which the estimate is revised if the revision affects only that year, or
in the year of the revision and future years if the revision affects both current and future years.
Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
Deferred tax
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in
the parent company only financial statements and the corresponding tax bases used in the computation of
taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred
tax assets are generally recognized for all deductible temporary differences and unused tax credits to the
extent that it is probable that taxable profits will be available against which those deductible temporary
differences can be utilized.
Deferred tax liabilities are recognized for taxable temporary differences associated with investments in
subsidiaries and associates, except where the Company is able to control the reversal of the temporary
difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets arising from deductible temporary differences associated with such investments are
only recognized to the extent that it is probable that there will be sufficient taxable profits against which to
utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part
of the deferred tax asset to be recovered. The deferred tax assets which originally not recognized is also
reviewed at the end of each reporting period and recognized to the extent that it is probable that sufficient
taxable profits will be available to allow all or part of the deferred tax asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the year in
which the liability is settled or the asset is realized, based on tax rates (and tax laws) that have been enacted
or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and
assets reflects the tax consequences that would follow from the manner in which the Company expects, at
the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Current and deferred tax for the year
Current and deferred tax are recognized in profit or loss, except when they relate to items that are
recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax
are also recognized in other comprehensive income or directly in equity, respectively.
The following are the critical judgments, apart from those involving estimations, that the directors have
made in the process of applying the Company’s accounting policies and that have the most significant effect
on the amounts recognized in the parent company only financial statements.
Revenue Recognition
The Company recognizes revenue when the conditions described in Note 4 are satisfied. The Company also
records a provision for estimated future returns and other allowances in the same period the related revenue
is recorded. Provision for estimated sales returns and other allowances is generally made and adjusted at a
specific percentage based on historical experience and any known factors that would significantly affect the
allowance, and our management periodically reviews the adequacy of the percentage used.
Impairment of Tangible and Intangible Assets Other than Goodwill
In the process of evaluating the potential impairment of tangible and intangible assets other than goodwill,
the Company is required to make subjective judgments in determining the independent cash flows, useful
lives, expected future revenue and expenses related to the specific asset groups with the consideration of the
nature of semiconductor industry. Any changes in these estimates based on changed economic conditions
or business strategies could result in significant impairment charges or reversal in future years.
Impairment of Goodwill
The assessment of impairment of goodwill requires the Company to make subjective judgment to determine
the identified cash-generating units, allocate the goodwill to relevant cash-generating units and estimate the
recoverable amount of relevant cash-generating units.
Impairment Assessment on Investment Using Equity Method
The Company assesses the impairment of investments accounted for using the equity method whenever
triggering events or changes in circumstances indicate that an investment may be impaired and carrying
value may not be recoverable. The Company measures the impairment based on a projected future cash
flow of the investees, including the underlying assumptions of sales growth rate and capacity utilization
rate formulated by such investees’ internal management team. The Company also takes into account market
conditions and the relevant industry trends to ensure the reasonableness of such assumptions.
Realization of Deferred Income Tax Assets
Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available
against which those deferred tax assets can be utilized. Assessment of the realization of the deferred tax
83
assets requires the Company’s subjective judgment and estimate, including the future revenue growth and
profitability, tax holidays, the amount of tax credits can be utilized and feasible tax planning strategies. Any
changes in the global economic environment, the industry trends and relevant laws and regulations could
result in significant adjustments to the deferred tax assets.
The Company entered into derivative contracts 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:
Valuation of Inventory
Inventories are stated at the lower of cost or net realizable value, and the Company use judgment and
estimate to determine the net realizable value of inventory at the end of each reporting period.
Due to the rapid technological changes, the Company estimates the net realizable value of inventory for
obsolescence and unmarketable items at the end of reporting period and then writes down the cost of
inventories to net realizable value. The net realizable value of the inventory is mainly determined based on
assumptions of future demand within a specific time horizon.
Recognition and Measurement of Defined Benefit Plans
Accrued pension liabilities and the resulting pension expenses under defined benefit pension plans are
calculated using the Projected Unit Credit Method. Actuarial assumptions comprise the discount rate, rate
of employee turnover, and long-term average future salary increase. Changes in economic circumstances
and market conditions will affect these assumptions and may have a material impact on the amount of the
expense and the liability.
6. CASH AND CASH EQUIVALENTS
Cash and deposits in banks
Repurchase agreements collateralized by short-term
commercial paper
Repurchase agreements collateralized by corporate bonds
Repurchase agreements collateralized by government bonds
December 31, 2013
December 31, 2012
January 1, 2012
$ 142,049,643
$ 105,873,048
$ 81,467,607
2,395,644
1,708,603
284,878
349,341
2,660,042
268,379
-
-
3,794,914
$ 146,438,768
$ 109,150,810
$ 85,262,521
7. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
December 31, 2013
Sell NT$/Buy EUR
Sell US$/Buy EUR
Sell US$/Buy JPY
December 31, 2012
Sell NT$/Buy EUR
January 1, 2012
Sell EUR/Buy NT$
Maturity Date
January 2014
January 2014
January 2014
Contract Amount
(In Thousands)
NT$4,514,314/EUR110,000
US$340,134/EUR248,000
US$341,023/JPY35,754,801
January 2013
NT$9,417,062/EUR246,000
January 2012
EUR38,600/NT$1,528,206
Outstanding cross currency swap contracts consisted of the following:
Maturity Date
December 31, 2012
January 2013
Contract Amount
(In Thousands)
Range of
Interest Rates Paid
Range of
Interest Rates Received
US$275,000/
NT$7,986,190
0.14%-0.17%
-
8. AVAILABLE-FOR-SALE FINANCIAL ASSETS
Available-for-sale financial assets consisted of investments in foreign publicly traded stocks. In the second
quarter of 2012, the Company recognized an impairment loss on such investments in the amount of
NT$2,677,529 thousand due to the significant decline in fair value.
December 31, 2013
December 31, 2012
January 1, 2012
9. HELD-TO-MATURITY FINANCIAL ASSETS
$ 64,030
-
$ 37,877
947
$ 14,925
-
Commercial paper
Corporate bonds
December 31, 2013
December 31, 2012
January 1, 2012
$ 1,795,949
-
$ -
701,146
$ -
1,403,427
$ 64,030
$ 38,824
$ 14,925
$ 1,795,949
$ 701,146
$ 1,403,427
$ 25,404
-
$ 3,572
2,702
$ -
-
$ 25,404
$ 6,274
$ -
Current portion
Noncurrent portion
$ 1,795,949
-
$ 701,146
-
$ 701,136
702,291
$ 1,795,949
$ 701,146
$ 1,403,427
Derivative financial assets
Forward exchange contracts
Cross currency swap contracts
Derivative financial liabilities
Forward exchange contracts
Cross currency swap contracts
84
10. NOTES AND ACCOUNTS RECEIVABLE, NET
Notes and accounts receivable
Allowance for doubtful receivables
$ 17,929,379
(483,502)
$ 15,726,431
(474,037)
$ 19,894,386
(485,120)
December 31, 2013
December 31, 2012
January 1, 2012
The Company held bank guarantees and other credit enhancements as collateral for certain impaired
accounts receivables. As of December 31, 2013 and 2012 and January 1, 2012, the amount of the bank
guarantee and other credit enhancements were US$11 thousand, US$1,000 thousand and US$2,962
thousand, respectively.
Notes and accounts receivable, net
$ 17,445,877
$ 15,252,394
$ 19,409,266
11. INVENTORIES
In principle, the payment term granted to customers is due 30 days from the invoice date or 30 days from
the end of the month of when the invoice is issued. The allowance for doubtful receivables is assessed by
reference to the collectability of receivables by performing the account aging analysis, historical experience
and current financial condition of customers.
Finished goods
Work in process
Raw materials
Supplies and spare parts
December 31, 2013
December 31, 2012
January 1, 2012
$ 7,049,813
24,857,927
2,208,291
1,127,030
$ 5,936,018
24,442,123
3,666,048
1,252,202
$ 3,250,637
16,971,209
1,593,393
1,038,158
$ 35,243,061
$ 35,296,391
$ 22,853,397
Except for those impaired, for the rest of the notes and accounts receivable, the account aging analysis at
the end of the reporting period is summarized in the following table. Notes and accounts receivable include
amounts that are past due but for which the Company has not recognized a specific allowance for doubtful
receivables after the assessment since there has not been a significant change in the credit quality of its
customers and the amounts are still considered recoverable.
Write-down of inventories to net realizable value in the amount of NT$526,182 thousand and
NT$1,341,041 thousand, respectively, were included in the cost of revenue for the years ended December
31, 2013 and 2012.
Aging analysis of notes and accounts receivable, net
12. FINANCIAL ASSETS CARRIED AT COST
Neither past due nor impaired
Past due but not impaired
Past due within 30 days
December 31, 2013
December 31, 2012
January 1, 2012
$ 17,119,920
$ 13,984,100
$ 16,975,425
325,957
1,268,294
2,433,841
$ 17,445,877
$ 15,252,394
$ 19,409,266
Non-publicly traded stocks
Mutual funds
$ 337,864
131,514
$ 338,584
145,175
$ 338,584
159,251
December 31, 2013
December 31, 2012
January 1, 2012
$ 469,378
$ 483,759
$ 497,835
Movements of the allowance for doubtful receivables
Balance, beginning of year
Provision
Write-off
Balance, end of year
Years Ended December 31
2013
2012
$ 474,037
9,465
-
$ 485,120
-
(11,083)
$ 483,502
$ 474,037
Aging analysis of accounts receivable that is individually determined to be impaired
Subsidiaries
Associates
Not past due
Past due 1-30 days
Past due 31-60 days
Past due 61-120 days
Past due over 121 days
December 31, 2013
December 31, 2012
January 1, 2012
$ 38
276
80
158
7,824
$ 160,354
2,863
-
-
-
$ 81,017
24,351
4,684
-
6,611
$ 8,376
$ 163,217
$ 116,663
Since there is a wide range of estimated fair values of the Company’s investments in non-publicly traded
stocks, the Company concludes that the fair value cannot be reliably measured and therefore should be
measured at the cost less any impairment.
13. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
Investments accounted for using the equity method consisted of the following:
December 31, 2013
December 31, 2012
January 1, 2012
$ 144,139,436
20,936,345
$ 121,818,063
17,332,378
$ 111,718,691
16,424,565
$ 165,075,781
$ 139,150,441
$ 128,143,256
85
a. Investments in subsidiaries
Subsidiaries consisted of the following:
Subsidiaries
Principal Activities
Place of
Incorporation and Operation
Carrying Amount
% of Ownership and Voting Rights Held by the Company
December 31, 2013
December 31, 2012
January 1, 2012
December 31, 2013
December 31, 2012
January 1, 2012
TSMC Global Ltd. (TSMC Global)
TSMC Partners, Ltd. (TSMC Partners)
Investment activities
Investing in companies involved in the design, manufacture, and
Tortola, British Virgin Islands
Tortola, British Virgin Islands
$ 64,953,489
42,861,788
$ 49,954,386
38,635,129
$ 44,071,845
34,986,964
TSMC China Company Limited
(TSMC China)
other related business in the semiconductor industry
Manufacturing and selling of integrated circuits at the order
of and pursuant to product design specifications provided by
customers
Shanghai, China
23,845,371
17,828,683
13,542,181
TSMC Solar Ltd. (TSMC Solar)
Engaged in researching, developing, designing, manufacturing
Tai-Chung, Taiwan
4,551,318
6,011,397
10,136,237
and selling renewable energy and saving related technologies
and products
TSMC North America
Selling and marketing of integrated circuits and semiconductor
San Jose, California, U.S.A.
devices
TSMC Solid State Lighting Ltd.
Engaged in researching, developing, designing, manufacturing
Hsin-Chu, Taiwan
(TSMC SSL)
and selling solid state lighting devices and related
applications products and systems
VentureTech Alliance Fund III, L.P.
Investing in new start-up technology companies
Cayman Islands
(VTAF III)
VentureTech Alliance Fund II, L.P.
Investing in new start-up technology companies
Cayman Islands
(VTAF II)
TSMC Europe B.V. (TSMC Europe)
Emerging Alliance Fund, L.P.
Marketing and engineering supporting activities
Investing in new start-up technology companies
Amsterdam, the Netherlands
Cayman Islands
(Emerging Alliance)
TSMC Japan Limited (TSMC Japan)
TSMC Guang Neng Investment, Ltd.
Marketing activities
Investment activities
(TSMC GN)
TSMC Korea Limited (TSMC Korea)
Xintec Inc. (Xintec)
Customer service and technical supporting activities
Wafer level chip size packaging service
Yokohama, Japan
Taipei, Taiwan
Seoul, Korea
Taoyuan, Taiwan
3,763,194
2,154,913
892,439
441,763
290,838
144,924
124,762
85,162
29,475
-
3,209,288
2,389,541
2,981,639
1,725,514
1,047,285
1,311,044
563,056
235,761
167,359
142,412
65,007
26,935
1,541,824
762,135
205,171
213,235
161,601
-
23,448
1,597,677
$ 144,139,436
$ 121,818,063
$ 111,718,691
100%
100%
100%
99%
100%
92%
50%
98%
100%
99.5%
100%
100%
100%
-
100%
100%
100%
99%
100%
95%
50%
98%
100%
99.5%
100%
100%
100%
40%
100%
100%
100%
100%
100%
100%
53%
98%
100%
99.5%
100%
-
100%
40%
Starting June 2013, the Company has no power to govern the financial and operating policies of Xintec due
to the loss of power to cast the majority of votes at meetings of the Board of Directors, but over which the
Company still retains significant influence. Accordingly, Xintec is reclassified as an associate. Please refer to
Note 31.
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 May 2013 and 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, 2013, the Company’s percentages of ownership in TSMC SSL and TSMC Solar
were 92% and 99%, respectively.
86
b. Investments in associates
Associates consisted of the following:
Name of Associate
Principal Activities
Place of
Incorporation and Operation
Carrying Amount
% of Ownership and Voting Rights Held by the Company
December 31, 2013
December 31, 2012
January 1, 2012
December 31, 2013
December 31, 2012
January 1, 2012
Vanguard International
Semiconductor Corporation (VIS)
Research, design, development, manufacture, packaging, testing
and sale of memory integrated circuits, LSI, VLSI and related
parts
Hsinchu, Taiwan
$ 10,556,348
$ 9,406,597
$ 8,985,340
Systems on Silicon Manufacturing
Company Pte Ltd. (SSMC)
Xintec
Global Unichip Corporation (GUC)
Fabrication and supply of integrated circuits
Singapore
Wafer level chip size packaging service
Researching, developing, manufacturing, testing and marketing
Taoyuan, Taiwan
Hsinchu, Taiwan
of integrated circuits
7,457,733
1,866,123
1,056,141
6,710,956
-
1,214,825
6,289,429
-
1,149,796
$ 20,936,345
$ 17,332,378
$ 16,424,565
39%
39%
40%
35%
40%
39%
-
35%
39%
39%
-
35%
The summarized financial information in respect of the Company’s associates is set out below. The
summarized financial information below represents amounts shown in the associates’ financial statements
prepared in accordance with the Accounting Standards Used in Preparation of the Parent Company Only
Financial Statements, which is also adjusted by the Company using the equity method of accounting.
Total assets
Total liabilities
Net assets
December 31, 2013
December 31, 2012
January 1, 2012
$ 62,946,717
(12,103,610)
$ 49,240,451
(7,755,433)
$ 46,033,229
(6,117,893)
$ 50,843,107
$ 41,485,018
$ 39,915,336
The Company’s share of net assets of associates
$ 20,936,345
$ 17,332,378
$ 16,424,565
Net revenue
Net income
Other comprehensive loss
The Company’s share of profits of associates
The Company’s share of other comprehensive loss of associates
Years Ended December 31
2013
2012
$ 46,268,485
$ 9,946,540
$ (4,148)
$ 3,827,244
$ (2,190)
$ 40,583,794
$ 7,255,006
$ (12,969)
$ 2,853,322
$ (8,624)
The market prices of the investments accounted for using the equity method in publicly traded stocks
calculated by the closing price at the end of the reporting period are summarized as follows:
Name of Associate
December 31, 2013
December 31, 2012
January 1, 2012
VIS
GUC
$ 22,239,112
$ 3,454,902
$ 12,658,703
$ 4,692,130
$ 6,627,758
$ 4,645,442
14. PROPERTY, PLANT AND EQUIPMENT
December 31, 2013
December 31, 2012
January 1, 2012
Land
Buildings
Machinery and equipment
Office equipment
Equipment under installation and construction in progress
$ 3,212,000
94,121,508
393,907,564
7,423,200
271,779,222
$ -
73,699,762
388,186,195
5,974,732
118,775,347
$ -
59,268,448
280,093,649
4,242,921
110,815,752
$ 770,443,494
$ 586,636,036
$ 454,420,770
87
Cost
Land
Buildings
Machinery and equipment
Office equipment
Accumulated depreciation and impairment
Buildings
Machinery and equipment
Office equipment
Equipment under installation and construction in progress
Cost
Buildings
Machinery and equipment
Office equipment
Accumulated depreciation and impairment
Buildings
Machinery and equipment
Office equipment
Equipment under installation and construction in progress
Balance, Beginning of Year
Additions
Disposals
Reclassification
Balance, End of Year
Year Ended December 31, 2013
$ -
173,442,106
1,203,400,605
16,683,484
1,393,526,195
$ 3,212,000
31,812,949
139,527,643
3,631,477
$ 178,184,069
$ -
-
(2,400,908)
(508,592)
$ (2,909,500)
$ -
3,797
-
-
$ 3,797
$ 3,212,000
205,258,852
1,340,527,340
19,806,369
1,568,804,561
99,742,344
815,214,410
10,708,752
925,665,506
118,775,347
$ 11,395,000
133,688,815
2,183,010
$ 147,266,825
$ 153,007,821
$ -
(2,283,449)
(508,593)
$ (2,792,042)
$ (3,946)
$ -
-
-
$ -
$ -
111,137,344
946,619,776
12,383,169
1,070,140,289
271,779,222
$ 586,636,036
$ 770,443,494
Balance, Beginning of Year
Additions
Disposals
Impairment
Reclassification
Balance, End of Year
Year Ended December 31, 2012
$ 149,620,319
985,232,851
13,824,434
1,148,677,604
$ 23,886,199
219,868,105
3,348,864
$ 247,103,168
$ (53,338)
(1,711,425)
(489,814)
$ (2,254,577)
$ -
-
-
$ -
$ (11,074)
11,074
-
$ -
$ 173,442,106
1,203,400,605
16,683,484
1,393,526,195
90,351,871
705,139,202
9,581,513
805,072,586
110,815,752
9,434,868
111,325,894
1,617,053
$ 122,377,815
$ 8,004,900
(44,231)
(1,669,180)
(489,814)
$ (2,203,225)
$ (45,305)
-
418,330
-
$ 418,330
$ -
(164)
164
-
$ -
$ -
99,742,344
815,214,410
10,708,752
925,665,506
118,775,347
$ 454,420,770
$ 586,636,036
The significant part of the Company’s buildings includes main plants, mechanical and electrical power
equipment and clean rooms, and the related depreciation is calculated using the estimated useful lives of 20
years, 10 years and 10 years, respectively.
For the year ended December 31, 2012, the Company recognized impairment loss of NT$418,330 thousand
related to property, plant and equipment of the foundry reportable segment since the carrying amount of
some of property, plant and equipment is expected to be unrecoverable.
15. INTANGIBLE ASSETS
Goodwill
Technology license fees
Software and system design costs
Patent and others
December 31, 2013
December 31, 2012
January 1, 2012
$ 1,567,756
980,685
3,620,028
900,987
$ 1,567,756
1,226,587
2,914,613
740,881
$ 1,567,756
1,617,310
2,316,571
785,363
$ 7,069,456
$ 6,449,837
$ 6,287,000
Cost
Goodwill
Technology license fees
Software and system design costs
Patent and others
Accumulated amortization
Technology license fees
Software and system design costs
Patent and others
Year Ended December 31, 2013
Balance,
Beginning of Year
Additions
Disposals
Reclassification
Balance,
End of Year
$ 1,567,756
4,186,558
14,880,058
2,646,738
23,281,110
$ -
-
2,130,713
565,901
$ 2,696,614
$ -
-
(2,373)
-
$ (2,373)
$ -
-
(110,745)
101,007
$ (9,738)
$ 1,567,756
4,186,558
16,897,653
3,313,646
25,965,613
2,959,971
11,965,445
1,905,857
16,831,273
$ 245,902
1,320,222
506,802
$ 2,072,926
$ -
(2,101)
-
$ (2,101)
$ -
(5,941)
-
$ (5,941)
3,205,873
13,277,625
2,412,659
18,896,157
$ 6,449,837
$ 7,069,456
88
Cost
Goodwill
Technology license fees
Software and system design costs
Patent and others
Accumulated amortization
Technology license fees
Software and system design costs
Patent and others
Year Ended December 31, 2012
18. PROVISIONS
Balance,
Beginning of Year
Additions
Disposals
Reclassification
Balance,
End of Year
$ 1,567,756
4,186,558
13,227,136
2,140,805
21,122,255
$ -
-
1,772,958
411,943
$ 2,184,901
$ -
-
(26,046)
-
$ (26,046)
$ -
-
(93,990)
93,990
$ -
$ 1,567,756
4,186,558
14,880,058
2,646,738
23,281,110
Balance, beginning of year
Provision made
Payment
Balance, end of year
December 31, 2013
December 31, 2012
$ 5,732,738
6,187,344
(4,702,751)
$ 4,887,879
6,825,851
(5,980,992)
$ 7,217,331
$ 5,732,738
2,569,248
10,910,565
1,355,442
14,835,255
$ 390,723
1,117,478
513,863
$ 2,022,064
$ -
(26,046)
-
$ (26,046)
$ -
(36,552)
36,552
$ -
2,959,971
11,965,445
1,905,857
16,831,273
Provisions for sales returns and allowances are estimated based on historical experience, management
judgment, and any known factors that would significantly affect the returns and allowances, and are
recognized as a reduction of revenue in the same year of the related product sales.
$ 6,287,000
$ 6,449,837
19. BONDS PAYABLE
The Company’s goodwill has been tested for impairment at the end of the annual reporting period and the
recoverable amount is determined based on the value in use. The value in use was calculated based on the
cash flow forecast from the financial budgets covering the future five-year period, and the Company used
annual discount rate of 8.50% and 9.00% in its test of impairment as of December 31, 2013 and 2012,
respectively, to reflect the relevant specific risk in the cash-generating unit.
Domestic unsecured bonds
$ 166,200,000
$ 80,000,000
$ 22,500,000
December 31, 2013
December 31, 2012
January 1, 2012
Current portion
Noncurrent portion
$ -
166,200,000
$ -
80,000,000
$ 4,500,000
18,000,000
$ 166,200,000
$ 80,000,000
$ 22,500,000
For the years ended December 31, 2013 and 2012, the Company did not recognize any impairment loss on
goodwill.
The major terms of domestic unsecured bonds are as follows:
16. OTHER ASSETS
Tax receivable
Prepaid expenses
Long-term receivable
Others
Current portion
Noncurrent portion
17. SHORT-TERM LOANS
Unsecured loans
Amount
Original loan content
US$ (in thousands)
Annual interest rate
Maturity date
December 31, 2013
December 31, 2012
January 1, 2012
$ 1,547,706
837,425
820,000
900
$ 1,382,392
714,937
767,800
116,477
$ 569,223
1,156,502
785,400
236,960
$ 3,206,031
$ 2,981,606
$ 2,748,085
$ 2,386,031
820,000
$ 2,097,329
884,277
$ 1,725,736
1,022,349
$ 3,206,031
$ 2,981,606
$ 2,748,085
December 31, 2013
December 31, 2012
January 1, 2012
$ 15,645,000
$ 34,714,929
$ 25,926,528
$ 525,000
0.38%-0.42%
Due in January 2014
$ 1,195,500
0.39%-0.58%
Due in January 2013
$ 856,000
0.45%-1.00%
Due by February 2012
Issuance
Tranche
Issuance Period
Total Amount
Coupon Rate
Repayment and Interest Payment
100-1
100-2
101-1
101-2
101-3
101-4
102-1
102-2
102-3
102-4
A
B
A
B
A
B
A
B
-
A
B
C
A
B
C
A
B
A
B
A
B
C
September 2011 to September 2016
$ 10,500,000
1.40% Bullet repayment; interest payable
September 2011 to September 2018
January 2012 to January 2017
January 2012 to January 2019
August 2012 to August 2017
August 2012 to August 2019
September 2012 to September 2017
September 2012 to September 2019
October 2012 to October 2022
January 2013 to January 2018
January 2013 to January 2020
January 2013 to January 2023
February 2013 to February 2018
February 2013 to February 2020
February 2013 to February 2023
July 2013 to July 2020
July 2013 to July 2023
August 2013 to August 2017
August 2013 to August 2019
September 2013 to September 2016
September 2013 to September 2017
September 2013 to March 2019
7,500,000
10,000,000
7,000,000
9,900,000
9,000,000
12,700,000
9,000,000
4,400,000
10,600,000
10,000,000
3,000,000
6,200,000
11,600,000
3,600,000
10,200,000
3,500,000
4,000,000
8,500,000
1,500,000
1,500,000
1,400,000
annually
1.63% 〃
1.29% 〃
1.46% 〃
1.28% 〃
1.40% 〃
1.28% 〃
1.39% 〃
1.53% 〃
1.23% 〃
1.35% 〃
1.49% 〃
1.23% 〃
1.38% 〃
1.50% 〃
1.50% 〃
1.70% 〃
1.34% 〃
1.52% 〃
1.35% 〃
1.45% 〃
1.60% Bullet repayment; interest payable
annually (interest for the six months
prior to maturity will accrue on the
basis of actual days and be repayable
at maturity)
(Continued)
89
Issuance
Tranche
Issuance Period
Total Amount
Coupon Rate
Repayment and Interest Payment
D
September 2013 to March 2021
2,600,000
1.85% Bullet repayment; interest payable
The pension costs of the aforementioned defined benefit plans were recognized in profit or loss by the
following categories:
E
F
C
Domestic 5th
September 2013 to March 2023
September 2013 to September 2023
5,400,000
2,600,000
2.05% 〃
2.10% Bullet repayment; interest payable
January 2002 to January 2012
4,500,000
3.00% 〃
annually
(Concluded)
annually (interest for the six months
prior to maturity will accrue on the
basis of actual days and be repayable
at maturity)
Cost of revenue
Research and development expenses
General and administrative expenses
Marketing expenses
Years Ended December 31
2013
2012
$ 148,787
59,518
16,766
4,037
$ 135,841
56,014
17,877
4,146
$ 229,108
$ 213,878
20. RETIREMENT BENEFIT PLANS
a. Defined contribution plans
The plan 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. Accordingly, the Company recognized expenses of NT$1,355,947
thousand and NT$1,205,642 thousand in the parent company only statements of comprehensive income
for the years ended December 31, 2013 and 2012, respectively.
b. Defined benefit plans
The Company has 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 Company contributes 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. The Company revised its
defined benefit plan in the fourth quarter of 2013 to set the employee’s mandatory retirement age. Such
plan changes have reflected in the actuarial results as of December 31, 2013.
For the years ended December 31, 2013 and 2012, the pre-tax actuarial loss recognized in other
comprehensive income were NT$671,774 thousand and NT$677,413 thousand, respectively. As of
December 31, 2013 and 2012, the pre-tax accumulated actuarial loss recognized in other comprehensive
income were NT$1,349,187 thousand and NT$677,413 thousand, respectively.
The amounts arising from the defined benefit obligation of the Company in the parent company only
balance sheets were as follows:
Present value of defined benefit obligation
Fair value of plan assets
Funded status
Unrecognized prior service cost
December 31, 2013
December 31, 2012
January 1, 2012
$ 10,176,332
(3,471,478)
6,704,854
786,186
$ 9,931,695
(3,264,786)
6,666,909
138,133
$ 9,026,683
(3,039,871)
5,986,812
145,259
Accrued pension cost
$ 7,491,040
$ 6,805,042
$ 6,132,071
Movements in the present value of the defined benefit obligation were as follows:
The actuarial valuations of plan assets and the present value of the defined benefit obligation were carried
out by qualified actuaries. The principal assumptions of the actuarial valuation were as follow:
Discount rate
Future salary rate increase
Expected rate of return on plan assets
Measurement Date
December 31, 2013
December 31, 2012
January 1, 2012
2.15%
3.00%
1.25%
1.75%
3.00%
2.00%
1.75%
3.00%
2.00%
Balance, beginning of year
Current service cost
Interest cost
Benefits paid from plan assets
Effect of plan changes
Actuarial loss
Balance, end of year
The pension costs of the defined benefit plans recognized in profit or loss were as follows:
Movements in the fair value of the plan assets were as follows:
Years Ended December 31
2013
2012
$ 129,749
172,486
(66,001)
(7,126)
$ 125,895
156,773
(61,664)
(7,126)
Balance, beginning of year
Expected return on plan assets
Actuarial loss
Contributions from employer
Benefits paid from plan assets
$ 229,108
$ 213,878
Balance, end of year
$ 3,471,478
$ 3,264,786
Years Ended December 31
2013
2012
$ 9,931,695
129,749
172,486
(50,508)
(655,179)
648,089
$ 9,026,683
125,895
156,773
(26,119)
-
648,463
$ 10,176,332
$ 9,931,695
Years Ended December 31
2013
2012
$ 3,264,786
66,001
(23,685)
214,884
(50,508)
$ 3,039,871
61,664
(28,950)
218,320
(26,119)
Current service cost
Interest cost
Expected return on plan assets
Past service cost
90
The percentage of the fair value of the plan assets by major categories at the end of reporting period was
as follows:
b. Capital surplus
Cash
Equity instruments
Debt instruments
Fair Value of Plan Assets (%)
December 31, 2013
December 31, 2012
January 1, 2012
23
45
32
100
25
38
37
100
24
41
35
100
Additional paid-in capital
From merger
From convertible bonds
From differences between equity purchase price and
carrying amount arising from acquisition or disposal
of subsidiaries
From share of changes in equities of subsidiaries and
associates
Donations
December 31, 2013
December 31, 2012
January 1, 2012
$ 24,017,363
22,804,510
8,892,847
$ 23,934,607
22,804,510
8,892,847
$ 23,774,250
22,804,510
8,892,847
100,827
43,024
55
40,733
2,588
55
-
-
55
$ 55,858,626
$ 55,675,340
$ 55,471,662
The overall expected rate of return on plan assets was based on the historical return trends, analysts’
predictions of the market over the life of related obligation, reference to the performance of the Funds
operated by the Committee and the consideration of the effect that the minimum return should not be
less than the average interest rate on a two-year time deposit published by the local banks. For the years
ended December 31, 2013 and 2012, the actual return on plan assets were NT$42,316 thousand and
NT$32,714 thousand, respectively.
The Company elects to disclose the historical information of experience adjustments from the adoption
of Accounting Standards Used in Preparation of Parent Company Only Financial Statements, which is as
follows:
Experience adjustments on plan liabilities
Experience adjustments on plan assets
$ 1,298,932
$ (23,685)
$ 391,826
$ (28,950)
$ -
$ -
December 31, 2013
December 31, 2012
January 1, 2012
The Company expects to make contributions of NT$221,330 thousand to the defined benefit plans in the
next year starting from December 31, 2013.
21. EQUITY
a. Capital stock
Authorized shares (in thousands)
Authorized capital
Issued and paid shares (in thousands)
Issued capital
December 31, 2013
December 31, 2012
January 1, 2012
28,050,000
$ 280,500,000
25,928,617
$ 259,286,171
28,050,000
$ 280,500,000
25,924,435
$ 259,244,357
28,050,000
$ 280,500,000
25,916,222
$ 259,162,226
Under the Company Law, 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, the surplus from treasury stock transactions and the differences between equity purchase price
and carrying amount arising from acquisition or disposal of subsidiaries) may be used to offset a deficit;
in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends
or stock dividends up to a certain percentage of the Company’s paid-in capital.
c. Retained earnings and dividend policy
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:
1) Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve equals
the Company’s paid-in capital;
2) Special capital reserve in accordance with relevant laws or regulations or as requested by the
authorities in charge;
3) 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;
A holder of issued common shares with par value of $10 per share is entitled to vote and to receive
dividends.
4) Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.
The authorized shares include 500,000 thousand shares allocated for the exercise of employee stock
options.
As of December 31, 2013, 1,082,959 thousand ADSs of the Company were traded on the NYSE. The 5
number of common shares represented by the ADSs was 5,414,794 thousand shares (one ADS represents
five common shares).
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.
The Company accrued profit sharing to employees based on certain percentage of net income during the
91
period, which amounted to NT$12,634,665 thousand and NT$11,115,240 thousand for the years ended
December 31, 2013 and 2012, respectively. Bonuses to members of the Board of Directors were expensed
based on estimated amount payable. If the actual amounts subsequently approved by the shareholders
differ from the amounts estimated, the differences are recorded in the year such bonuses are approved
by the shareholders as a change in accounting estimate. If profit sharing approved for distribution to
employees is in the form of common shares, the number of shares is determined by dividing the amount
of profit sharing by the closing price (after considering the effect of dividends) of the shares on the day
preceding the shareholders’ meeting.
The appropriation for legal capital reserve shall be made until the reserve equals the Company’s paid-in
capital. The reserve may be used to offset a deficit, or be distributed as dividends in cash or stocks for the
portion in excess of 25% of the paid-in capital if the Company incurs no loss.
Pursuant to existing regulations, the Company is required to set aside additional special capital
reserve equivalent to the net debit balance of the other components of stockholders’ equity, such as
the accumulated balance of foreign currency translation reserve, unrealized valuation gain/loss on
available-for-sale financial assets, gain/loss from changes in fair value of hedging instruments in cash flow
hedges, etc. For the subsequent decrease in the deduction amount to stockholders’ equity, any special
reserve appropriated may be reversed to the extent that the net debit balance reverses.
The appropriations of 2012 and 2011 earnings have been approved by the Company’s shareholders in its
meetings held on June 11, 2013 and on June 12, 2012, respectively. The appropriations and dividends
per share were as follows:
Appropriation of Earnings
Dividends Per Share (NT$)
For Fiscal Year 2012
For Fiscal Year 2011
For Fiscal Year 2012
For Fiscal Year 2011
The Company’s appropriations of earnings for 2013 had been approved in the meeting of the Board of
Directors held on February 18, 2014. The appropriations and dividends per share were as follows:
Legal capital reserve
Special capital reserve
Cash dividends to shareholders
Appropriation of Earnings
Dividends Per Share (NT$)
For Fiscal Year 2013
For Fiscal Year 2013
$ 18,814,679
(2,785,741)
77,785,851
$ 93,814,789
$ 3.00
The Board of Directors of the Company also approved the profit sharing to employees and bonus to
members of the Board of Directors in the amounts of NT$12,634,665 thousand and NT$104,136
thousand in cash for payment in 2013, respectively. There is no significant difference between the
aforementioned approved amounts and the amounts charged against earnings of 2013.
The appropriations of earnings, profit sharing to employees and bonus to members of the Board of
Directors for 2013 are to be presented for approval in the TSMC’s shareholders’ meeting to be held on
June 24, 2014 (expected).
The information about the appropriations of the Company’s profit sharing to employees and bonus to
members of the Board of Directors is available at the Market Observation Post System website.
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 the Company
on earnings generated since January 1, 1998.
Legal capital reserve
Special capital reserve
Cash dividends to shareholders
$ 16,615,880
(4,820,483)
77,773,307
$ 13,420,128
1,172,350
77,748,668
$ 89,568,704
$ 92,341,146
$ 3.00
$ 3.00
d. Others
Changes in others were as follows:
The Company’s profit sharing to employees and bonus to members of the Board of Directors in the
amounts of NT$11,115,240 thousand and NT$71,351 thousand in cash for 2012, respectively, and profit
sharing to employees and bonus to members of the Board of Directors in the amounts of NT$8,990,026
thousand and NT$62,324 thousand in cash for 2011, respectively, had been approved by the
shareholders in its meeting held on June 11, 2013 and June 12, 2012, respectively. The aforementioned
approved amount is the same as the one approved by the Board of Directors in its meetings held on
February 5, 2013 and February 14, 2012, respectively, and the same amount had been charged against
earnings for the years ended December 31, 2012 and 2011, respectively.
The appropriations of earnings, payment of profit sharing to employees and bonus to members of the
Board of Directors for the year ended December 31, 2012 approved by the Board of Directors of the
Company were based on the financial statements for the year ended December 31, 2012 prepared under
the R.O.C. GAAP and in accordance with the Guidelines Governing the Preparation of Financial Reports by
Securities Issuers issued by the FSC before amendment.
Year Ended December 31, 2013
Foreign Currency
Translation
Reserve
Unrealized
Gain/Loss from
Available-for- sale
Financial Assets
Cash Flow Hedges
Reserve
Total
$ (10,753,806)
$ 7,973,321
$ -
$ (2,780,485)
3,655,675
-
-
-
(1,061,644)
846,709
-
-
-
3,655,675
(1,061,644)
846,709
(42,930)
13,515,899
(113)
13,472,856
699
-
(43)
36,539
-
-
656
36,539
$ (7,140,362)
$ 21,310,781
$ (113)
$ 14,170,306
Balance, beginning of year
Exchange differences arising on translation of foreign
operations
Changes in fair value of available-for-sale financial
assets
Cumulative (gain)/loss reclassified to profit or loss
upon disposal of available-for-sale financial assets
Share of other comprehensive income of subsidiaries
and associates
The proportionate share of other comprehensive
income/losses reclassified to profit or loss upon
partial disposal of associates
Income tax effect
Balance, end of year
92
$ (10,753,806)
$ 7,973,321
$ -
$ (2,780,485)
Balance, end of year
Year Ended December 31, 2012
Foreign Currency
Translation
Reserve
Unrealized
Gain/Loss from
Available-for- sale
Financial Assets
Cash Flow Hedges
Reserve
Total
Balance, beginning of year
Exchange differences arising on translation of foreign
$ (6,433,364)
$ (1,172,762)
$ (93)
$ (7,606,219)
operations
(4,317,386)
-
Changes in fair value of available-for-sale financial
assets
Cumulative loss reclassified to profit or loss upon
impairment of available-for-sale financial assets
Cumulative (gain)/loss reclassified to profit or loss
upon disposal of available-for-sale financial assets
Share of other comprehensive income of subsidiaries
and associates
Income tax effect
Balance, end of year
-
-
-
(3,056)
-
(159,248)
2,677,529
(110,634)
7,147,736
(409,300)
-
-
-
-
93
-
(4,317,386)
(159,248)
2,677,529
(110,634)
7,144,773
(409,300)
The exchange differences arising on translation of foreign operation’s net assets from its functional
currency to TSMC’s presentation currency are recognized directly in other comprehensive income and also
accumulated in the foreign currency translation reserve.
Unrealized gain/loss on available-for-sale financial assets represents the cumulative gains or losses arising
from the fair value measurement on available-for-sale financial assets that are recognized in other
comprehensive income. When those available-for-sale financial assets have been disposed of or are
determined to be impaired subsequently, the related cumulative gains or losses in other comprehensive
income are reclassified to profit or loss.
The cash flow hedges reserve represents the cumulative effective portion of gains or losses arising on
changes in fair value of the hedging instruments entered into as cash flow hedges. The cumulative gain
or loss arising on changes in fair value of the hedging instruments that are recognized and accumulated
in cash flow hedges reserve will be reclassified to profit or loss only when the hedge transaction affects
profit or loss.
22. SHARE-BASED PAYMENT
The Company elected to take the optional exemption from applying related guidance retrospectively for
shared-based payment transactions granted and vested before January 1, 2012. The plans are described as
follows:
The Company’s Employee Stock Option Plans, consisting of the 2004 Plan, 2003 Plan and 2002 Plan, were
approved by the Securities and Futures Bureau (SFB) on January 6, 2005, October 29, 2003 and June 25,
2002, respectively. The maximum number of stock 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 stock option eligible to subscribe for one common share when exercised. The stock 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
stock 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 stock options are granted at an
exercise price equal to the closing price of the Company’s common shares quoted on the TWSE on the grant
date.
Stock options of the plans that had never been granted or had been granted but subsequently canceled had
expired as of December 31, 2013.
Information about the Company’s outstanding stock options for the years ended December 31, 2013 and
2012 was as follows:
Number of Stock Options
(In Thousands)
Weighted-average
Exercise Price (NT$)
Year ended December 31, 2013
Balance, beginning of year
Stock options exercised
Year ended December 31, 2012
Balance, beginning of year
Stock options exercised
Stock options canceled
Balance, end of year
5,945
(4,182)
1,763
14,293
(8,213)
(135)
5,945
$ 34.6
29.8
45.9
$ 31.4
29.5
34.6
34.6
The numbers of outstanding stock options and exercise prices have been adjusted to reflect the distribution
of earnings by the Company in accordance with the plans.
Information about the Company’s outstanding stock options was as follows:
December 31, 2013
December 31, 2012
January 1, 2012
Range of Exercise
Price (NT$)
Weighted-average
Remaining Contractual
Life (Years)
Range of Exercise
Price (NT$)
Weighted-average
Remaining Contractual
Life (Years)
Range of Exercise
Price (NT$)
Weighted-average
Remaining Contractual
Life (Years)
$43.2-$47.2
1.0
$20.2-$28.3
$38.0-$50.1
0.4
2.0
$20.9-$29.3
$38.0-$50.1
1.2
2.9
As of December 31, 2013, all of the above outstanding stock options were exercisable.
23. NET REVENUE
The analysis of the Company’s net revenue was as follows:
Net revenue from sale of goods
Net revenue from royalties
Years Ended December 31
2013
2012
$ 590,564,728
522,872
$ 499,871,887
497,638
$ 591,087,600
$ 500,369,525
93
24. OTHER OPERATING INCOME AND EXPENSES, NET
27. OTHER GAINS AND LOSSES
Income (expenses) of rental assets
Rental income
Depreciation of rental assets
Loss on disposal of property, plant and equipment and intangible assets, net
Impairment loss on property, plant and equipment
Others
Years Ended December 31
2013
2012
$ 13,385
(25,120)
(11,735)
(64,753)
-
9,874
$ 469
(6,656)
(6,187)
(125,488)
(418,330)
918
$ (66,614)
$ (549,087)
Gain (loss) on disposal of financial assets, net
Available-for-sale financial assets
Financial assets carried at cost
Gain on deconsolidation of subsidiary
Settlement income
Other gains
Net gain (loss) on financial instruments at FVTPL
Held for trading
Impairment loss of financial assets
Available-for-sale financial assets
Other losses
Years Ended December 31
2013
2012
$ 846,709
42,664
293,578
899,745
138,612
$ 110,634
(269)
-
883,845
286,266
54,766
-
(14,027)
(152,814)
(2,677,529)
(12,810)
$ 2,262,047
$ (1,562,677)
Years Ended December 31
2013
2012
$ 22,297,945
(603,321)
19,589
21,714,213
$ 14,609,220
48,609
194,660
14,852,489
-
506,563
5,348,984
5,855,547
(543,611)
588,318
2,536,905
2,581,612
Years Ended December 31
2013
2012
28. INCOME TAX
$ 996,995
14,306
1,011,301
71,125
$ 836,580
30,647
867,227
69,676
$ 1,082,426
$ 936,903
a. Income tax expense recognized in profit or loss
Income tax expense consisted of the following:
Years Ended December 31
2013
2012
$ 1,991,519
99,722
995
$ 758,204
182,040
4,870
Current income tax expense (benefit)
Current tax expense recognized in the current year
Income tax adjustments on prior years
Other income tax adjustments
Deferred income tax expense (benefit)
Effect of tax rate changes
The origination and reversal of temporary differences
Investment tax credits
$ 2,092,236
$ 945,114
Income tax expense recognized in profit or loss
$ 27,569,760
$ 17,434,101
25. OTHER INCOME
Interest income
Bank deposits
Held-to-maturity financial assets
Dividend income
26. FINANCE COSTS
Interest expense
Corporate bonds
Bank loans
Others
94
A reconciliation of income before income tax and income tax expense recognized in profit or loss was as
follows:
Years Ended December 31
2013
2012
Year Ended December 31, 2013
Recognized in
Balance,
Beginning of Year
Profit or Loss
Other
Comprehensive
Income
Balance,
End of Year
Income before tax
$ 215,716,550
$ 183,752,387
Income tax expense at the statutory rate (17%)
Tax effect of adjusting items:
Nondeductible (deductible) items in determining taxable income
Tax-exempt income
Additional income tax on unappropriated earnings
Effect of tax rate changes on deferred income tax
Income tax credits
The origination and reversal of temporary differences
Remeasurement of investment tax credits
Income tax adjustments on prior years
Other income tax adjustments
$ 36,671,813
$ 31,237,906
(2,369,323)
(7,716,747)
7,659,010
-
(3,136,942)
506,563
(3,460,882)
28,153,492
(603,321)
19,589
(2,873,123)
(8,360,834)
4,186,013
(543,611)
(2,828,300)
588,318
(4,215,537)
17,190,832
48,609
194,660
Income tax expense recognized in profit or loss
$ 27,569,760
$ 17,434,101
b. Income tax expense recognized in other comprehensive income
Years Ended December 31
2013
2012
Investment tax credits
Temporary differences
Depreciation
Provision for sales returns and allowance
Accrued pension cost
Available-for-sale financial assets
Unrealized loss on inventories
Others
$ 7,304,964
$ (5,348,984)
$ -
$ 1,955,980
819,231
687,929
818,502
224,694
359,823
103,720
(452,319)
178,151
1,680
(254,872)
27,404
(6,607)
-
-
80,613
36,539
-
-
366,912
866,080
900,795
6,361
387,227
97,113
Deferred income tax assets
$ 10,318,863
$ (5,855,547)
$ 117,152
$ 4,580,468
Year Ended December 31, 2012
Investment tax credits
Temporary differences
Depreciation
Provision for sales returns and allowance
Accrued pension cost
Available-for-sale financial assets
Unrealized loss on inventories
Others
$ 9,841,869
$ (2,536,905)
$ -
$ 7,304,964
2,044,680
488,788
457,667
308,929
-
86,552
(1,225,449)
199,141
279,545
325,065
359,823
17,168
-
-
81,290
(409,300)
-
-
819,231
687,929
818,502
224,694
359,823
103,720
Deferred income tax expense (benefit)
Deferred income tax assets
$ 13,228,485
$ (2,581,612)
$ (328,010)
$ 10,318,863
Related to unrealized gain/loss on available-for-sale financial assets
Related to actuarial gain/loss from defined benefit plans
$ (36,539)
(80,613)
$ 409,300
(81,290)
$ (117,152)
$ 328,010
have been recognized in the parent company only financial statements
d. The investment tax credits and deductible temporary differences for which no deferred income tax assets
c. Deferred income tax balance
The analysis of deferred income tax in the parent company only balance sheets was as follows:
The information of the investment tax credits for which no deferred income tax assets have been
recognized was as follows:
Investment tax credits
Temporary differences
Depreciation
Provision for sales returns and allowance
Accrued pension cost
Available-for-sale financial assets
Unrealized loss on inventories
Others
December 31, 2013
December 31, 2012
January 1, 2012
$ 1,955,980
$ 7,304,964
$ 9,841,869
Expiry year
2013
2014
366,912
866,080
900,795
6,361
387,227
97,113
819,231
687,929
818,502
224,694
359,823
103,720
2,044,680
488,788
457,667
308,929
-
86,552
$ 4,580,468
$ 10,318,863
$ 13,228,485
December 31, 2013
December 31, 2012
January 1, 2012
$ -
3,015,705
$ -
5,807,110
$ 5,456,991
4,881,100
$ 3,015,705
$ 5,807,110
$ 10,338,091
As of December 31, 2013 and 2012 and January 1, 2012, the aggregate deductible temporary
differences for which no deferred income tax assets have been recognized amounted to NT$8,673,160
thousand, NT$13,589,292 thousand and NT$14,893,317 thousand, respectively.
95
e. Unused investment tax credits and tax-exemption information
h. Income tax examination
As of December 31, 2013, the investment tax credits of the Company consisted of the following:
Law/Statute
Item
Remaining Creditable Amount
Expiry Year
Statute for Upgrading
Industries
Purchase of machinery and
equipment
$ 4,489,334
482,351
2014
2015
$ 4,971,685
The tax authorities have examined income tax returns of the Company through 2010. All investment tax
credit adjustments assessed by the tax authorities have been recognized accordingly.
29. EARNINGS PER SHARE
As of December 31, 2013, the profits generated from the following projects of the Company are exempt
from income tax for a five-year period:
Basic EPS
Diluted EPS
Years Ended December 31
2013
2012
$ 7.26
$ 7.26
$ 6.42
$ 6.41
Amounts (Numerator)
Number of Shares
(Denominator)
(In Thousands)
EPS (NT$)
EPS is computed as follows:
Year ended December 31, 2013
Basic EPS
Net income available to common shareholders
Effect of dilutive potential common shares
$ 188,146,790
-
25,927,778
1,825
$ 7.26
Diluted EPS
Net income available to common shareholders
(including effect of dilutive potential common
shares)
Year ended December 31, 2012
Basic EPS
$ 188,146,790
25,929,603
$ 7.26
Net income available to common shareholders
Effect of dilutive potential common shares
$ 166,318,286
-
25,920,735
7,201
$ 6.42
Diluted EPS
Net income available to common shareholders
(including effect of dilutive potential common
shares)
$ 166,318,286
25,927,936
$ 6.41
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 end of the reporting
period. Such dilutive effect of the potential shares needs to be included in the calculation of diluted EPS until
profit sharing to employees to be settled in the form of common stocks are approved by the shareholders in
the following year.
Construction and expansion of 2005
Construction and expansion of 2006
Construction and expansion of 2007
Tax-exemption Period
2010 to 2014
2011 to 2015
2014 to 2018
f. The information of unrecognized deferred income tax liabilities associated with investments
As of December 31, 2013 and 2012 and January 1, 2012, the aggregate taxable temporary differences
associated with investments in subsidiaries not unrecognized as deferred income tax liabilities amounted
to NT$28,035,340 thousand, NT$20,516,999 thousand and NT$15,074,593 thousand, respectively.
g. Integrated income tax information
Balance of the Imputation
Credit Account
$ 15,242,724
$ 8,130,060
$ 4,003,228
December 31, 2013
December 31, 2012
January 1, 2012
The estimated and actual creditable ratio for distribution of the Company’s earnings of 2013 and 2012
were 9.80% and 7.75%, respectively.
Under the Rule No.10204562810 issued by the Ministry of Finance, when calculating the creditable ratio
in the year of first-time adoption of Accounting Standards Used in Preparation of Parent Company Only
Financial Statements, the Company has included the adjustments to retained earnings from the effect
of transition to Parent Company Only Financial Statements Accounting Standards in the accumulated
unappropriated earnings.
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.
All earnings generated prior to December 31, 1997 have been appropriated.
96
30. ADDITIONAL INFORMATION OF EXPENSES BY NATURE
33. FINANCIAL INSTRUMENTS
Net income included the following items:
a. Categories of financial instruments
a. Depreciation of property, plant and equipment
Recognized in cost of revenue
Recognized in operating expenses
Recognized in other operating income and expenses
b. Amortization of intangible assets
Recognized in cost of revenue
Recognized in operating expenses
Years Ended December 31
2013
2012
$ 134,545,283
12,696,422
25,120
$ 111,929,312
10,441,847
6,656
$ 147,266,825
$ 122,377,815
$ 1,099,542
973,384
$ 1,273,689
748,375
$ 2,072,926
$ 2,022,064
c. Research and development costs expensed as incurred
$ 46,922,471
$ 38,769,956
d. Employee benefits expenses
Post-employment benefits (Note 20)
Defined contribution plans
Defined benefit plans
Other employee benefits
Employee benefits expense summarized by function
Recognized in cost of revenue
Recognized in operating expenses
$ 58,207,270
$ 52,208,200
Note: Including financial assets carried at cost.
$ 1,355,947
229,108
1,585,055
56,622,215
$ 1,205,642
213,878
1,419,520
50,788,680
$ 35,791,556
22,415,714
$ 31,066,533
21,141,667
$ 58,207,270
$ 52,208,200
31. LOSS OF CONTROL IN SUBSIDIARY
Starting June 2013, the Company has no power to govern the financial and operating policies of Xintec
due to the loss of power to cast the majority of votes at meetings of the Board of Directors, but over
which the Company still retains significant influence. Accordingly, Xintec is reclassified as an associate. For
more information on deconsolidation of subsidiary, please refer to Note 34 to the consolidated financial
statements for the year ended December 31, 2013.
Financial assets
FVTPL
Held for trading derivatives
Available-for-sale financial assets (Note)
Held-to-maturity financial assets
Loans and receivables
December 31, 2013
December 31, 2012
January 1, 2012
$ 64,030
1,115,780
1,795,949
$ 38,824
2,328,811
701,146
$ 14,925
3,114,969
1,403,427
Cash and cash equivalents
Notes and accounts receivables (including related parties)
Other receivables
Refundable deposits
146,438,768
70,415,680
1,453,842
2,496,663
109,150,810
56,239,838
1,218,024
2,394,826
85,262,521
44,186,800
1,095,438
4,491,735
$ 223,780,712
$ 172,072,279
$ 139,569,815
Financial liabilities
FVTPL
Held for trading derivatives
Amortized cost
Short-term loans
Accounts payable (including related parties)
Payables to contractors and equipment suppliers
Accrued expenses and other current liabilities
Bonds payable
Other long-term payables
Guarantee deposits
$ 25,404
$ 6,274
$ -
15,645,000
17,812,654
89,555,814
13,035,795
166,200,000
54,000
147,964
34,714,929
16,622,563
44,371,108
8,689,543
80,000,000
113,000
199,315
25,926,528
12,515,270
33,811,970
7,112,898
22,500,000
-
439,032
$ 302,476,631
$ 184,716,732
$ 102,305,698
b. Financial risk management objectives
The Company seeks to ensure sufficient cost-efficient funding readily available when needed. The
Company manages its exposure to foreign currency risk, interest rate risk, equity price risk, credit risk and
liquidity risk with the objective to reduce the potentially adverse effects the market uncertainties may have
on its financial performance.
The plans for material treasury activities are reviewed by Audit Committees and/or Board of Directors
in accordance with procedures required by relevant regulations or internal controls. During the
implementation of such plans, Corporate Treasury function must comply with certain treasury procedures
that provide guiding principles for overall financial risk management and segregation of duties.
32. CAPITAL MANAGEMENT
c. Market risk
The Company requires significant amounts of capital to build and expand its production facilities and
acquire additional equipment. In consideration of the industry dynamics, the Company manages its capital
in a manner to ensure that it has sufficient and necessary financial resources to fund its working capital
needs, capital asset purchases, research and development activities, dividend payments, debt service
requirements and other business requirements associated with its existing operations over the next 12
months.
The Company is exposed to the market risks arising from changes in foreign exchange rates, interest rates
and the prices in equity investments, and utilizes some derivative financial instruments to reduce the
related risks.
97
Foreign currency risk
Most of the Company’s operating activities are denominated in foreign currencies. Consequently, the
Company is exposed to foreign currency risk. To protect against reductions in value and the volatility of
future cash flows caused by changes in foreign exchange rates, the Company utilizes derivative financial
instruments, including currency forward contracts and cross currency swaps, to hedge its currency
exposure. These instruments help to reduce, but do not eliminate, the impact of foreign currency
exchange rate movements.
As of December 31, 2013 and 2012 and January 1, 2012, the Company’s ten largest customers
accounted for 56%, 55% and 59% of accounts receivable, respectively. The Company believes the
concentration of credit risk is insignificant for the remaining accounts receivable.
Financial credit risk
The Company regularly monitors and reviews the transaction limit applied to counterparties and adjusts
the concentration limit according to market conditions and the credit standing of the counterparties. The
Company mitigates its exposure by selecting counterparties with investment-grade credit ratings.
The Company also holds short-term borrowings in foreign currencies in proportion to its expected future
cash flows. This allows foreign-currency-denominated borrowings to be serviced with expected future
cash flows and provides a partial hedge against transaction translation exposure.
e. Liquidity risk management
The Company’s sensitivity analysis to foreign currency risk mainly focuses on the foreign currency
monetary items at the end of the reporting period. Assuming an unfavorable 10% movement in the levels
of foreign exchanges against the New Taiwan dollar, the net income for the years ended December 31,
2013 and 2012 would have decreased by NT$156,590 thousand and NT$707,926 thousand, respectively,
after taking into consideration of the hedging contracts and the hedged items.
Interest rate risk
The Company is exposed to interest rate risk arising from borrowing at fixed interest rates. All of the
Company’s long-term bonds have fixed interest rates and are measured at amortized cost. As such,
changes in interest rates would not affect the future cash flows.
Other price risk
The Company is exposed to equity price risk arising from available-for-sale equity investments.
Assuming a hypothetical decrease of 5% in equity prices of the equity investments at the end of the
reporting period, the net income for the years ended December 31, 2013 and 2012 would have been
unaffected as they were classified as available-for-sale; however, the other comprehensive income for
the years ended December 31, 2013 and 2012 would have decreased by NT$47,150 thousand and
NT$97,492 thousand, respectively.
d. Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in
financial loss to the Company. The Company is exposed to credit risk from operating activities, primarily
trade receivables, and from financing activities, primarily deposits, fixed-income investments and other
financial instruments with banks. Credit risk is managed separately for business related and financial
related exposures. As of the end of the reporting period, the Company’s maximum credit risk exposure
is mainly from the carrying amount of financial assets recognized in the parent company only balance
sheet.
Business related credit risk
The Company has considerable trade receivables outstanding with its customers worldwide. A substantial
majority of the Company’s outstanding trade receivables are not covered by collateral or credit insurance.
While the Company has procedures to monitor and limit exposure to credit risk on trade receivables,
there can be no assurance such procedures will effectively limit its credit risk and avoid losses. This risk is
heightened during periods when economic conditions worsen.
98
The objective of liquidity risk management is to ensure the Company has sufficient liquidity to fund
its business requirements associated with existing operations over the next 12 months. The Company
manages its liquidity risk by maintaining adequate cash and banking facilities.
As of December 31, 2013 and 2012 and January 1, 2012, the unused of financing facilities of the
Company amounted to NT$67,437,805 thousand, NT$46,273,762 thousand and NT$55,424,367
thousand, respectively.
The table below summarizes the maturity profile of the Company’s financial liabilities based on
contractual undiscounted payments, including principles and interests.
Less Than 1 Year
2-3 Years
4-5 Years
5+ Years
Total
December 31, 2013
Non-derivative financial liabilities
Short-term loans
Accounts payable (including related parties)
Payables to contractors and equipment
suppliers
Accrued expenses and other current
liabilities
Bonds payable
Other long-term payables
Guarantee deposits
Derivative financial instruments
Forward exchange contracts
Outflows
Inflows
December 31, 2012
Non-derivative financial liabilities
$ 15,646,783
17,812,654
$ -
-
$ -
-
$ -
-
$ 15,646,783
17,812,654
89,555,814
-
-
-
89,555,814
13,035,795
2,380,157
18,000
-
138,449,203
-
16,720,430
36,000
147,964
16,904,394
-
65,859,591
-
-
65,859,591
-
94,360,103
-
-
94,360,103
13,035,795
179,320,281
54,000
147,964
315,573,291
24,812,803
(24,810,910)
1,893
-
-
-
-
-
-
-
-
-
24,812,803
(24,810,910)
1,893
$ 138,451,096
$ 16,904,394
$ 65,859,591
$ 94,360,103
$ 315,575,184
Short-term loans
Accounts payable (including related parties)
$ 34,721,003
16,622,563
$ -
-
$ -
-
$ -
-
$ 34,721,003
16,622,563
(Continued)
Payables to contractors and equipment
suppliers
$ 44,371,108
$ -
$ -
$ -
$ 44,371,108
1) Fair value of financial instruments carried at amortized cost
Less Than 1 Year
2-3 Years
4-5 Years
5+ Years
Total
f. Fair value of financial instruments
Accrued expenses and other current
liabilities
Bonds payable
Other long-term payables
Guarantee deposits
Derivative financial instruments
Forward exchange contracts
Outflows
Inflows
Cross currency swap contracts
Outflows
Inflows
January 1, 2012
Non-derivative financial liabilities
Short-term loans
Accounts payable (including related parties)
Payables to contractors and equipment
suppliers
Accrued expenses and other current
liabilities
Bonds payable
Guarantee deposits
Derivative financial instruments
Forward exchange contracts
Outflows
Inflows
8,689,543
1,108,150
59,000
-
105,571,367
-
2,216,300
36,000
199,315
2,451,615
-
44,911,191
18,000
-
44,929,191
-
37,834,474
-
-
37,834,474
8,689,543
86,070,115
113,000
199,315
190,786,647
Except as detailed in the following table, the Company considers that the carrying amounts of financial
assets and financial liabilities recognized in the parent company only financial statements approximate
their fair values.
December 31, 2013
December 31, 2012
January 1, 2012
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
9,417,062
(9,443,940)
(26,878)
7,985,450
(7,986,190)
(740)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,417,062
(9,443,940)
(26,878)
7,985,450
(7,986,190)
(740)
Financial assets
Held-to-maturity financial assets
Commercial paper
Corporate bonds
Financial liabilities
$ 105,543,749
$ 2,451,615
$ 44,929,191
$ 37,834,474
$ 190,759,029
Measured at amortized cost
$ 1,795,949 $ 1,795,612 $ - $ - $ - $ -
1,426,474
1,403,427
701,146
708,973
-
-
$ 25,933,177
12,515,270
$ -
-
$ -
-
$ -
-
$ 25,933,177
12,515,270
33,811,970
7,112,898
4,775,081
-
84,148,396
1,515,822
(1,528,206)
(12,384)
-
-
538,500
439,032
977,532
-
-
33,811,970
-
11,000,933
-
11,000,933
-
7,713,258
-
7,713,258
7,112,898
24,027,772
439,032
103,840,119
-
-
-
-
-
-
-
-
-
1,515,822
(1,528,206)
(12,384)
Bonds payable
166,200,000
165,476,545
80,000,000
80,343,413
22,500,000
22,597,115
2) Fair value measurements recognized in the parent company only balance sheets
The following table provides an analysis of financial instruments that are measured subsequent to
initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value
is observable:
● Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets
for identical assets or liabilities;
● Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices); and
● Level 3 fair value measurements are those derived from valuation techniques that include inputs for
the asset or liability that are not based on observable market data (unobservable inputs).
December 31, 2013
$ 84,136,012
$ 977,532
$ 11,000,933
$ 7,713,258
$ 103,827,735
Level 1
Level 2
Level 3
Total
(Concluded)
Financial assets at FVTPL
Derivative financial instruments
$ -
$ 64,030
$ -
$ 64,030
Available-for-sale financial assets
Publicly traded stocks
$ 646,402
$ -
$ -
$ 646,402
Financial liabilities at FVTPL
Derivative financial instruments
$ -
$ 25,404
$ -
$ 25,404
99
Financial assets at FVTPL
Level 1
Level 2
Level 3
Total
Derivative financial instruments
$ -
$ 38,824
$ -
$ 38,824
The transactions between the Company and its related parties, other than those disclosed in other notes, are
summarized as follows:
December 31, 2012
34. RELATED PARTY TRANSACTIONS
Available-for-sale financial assets
a. Net revenue
Publicly traded stocks
$ 1,845,052
$ -
$ -
$ 1,845,052
Financial liabilities at FVTPL
Derivative financial instruments
$ -
$ 6,274
$ -
$ 6,274
January 1, 2012
Level 1
Level 2
Level 3
Total
Financial assets at FVTPL
Derivative financial instruments
$ -
$ 14,925
$ -
$ 14,925
Available-for-sale financial assets
Publicly traded stocks
$ 2,617,134
$ -
$ -
$ 2,617,134
There were no transfers between Level 1 and 2 for the years ended December 31, 2013 and 2012,
respectively.
There were no purchases and disposals for assets on Level 3 for the years ended December 31, 2013
and 2012, respectively.
Related Party Categories
Subsidiaries
Associates
Associates of the Company’s subsidiaries
Joint venture of the Company’s subsidiaries
b. Purchases
Related Party Categories
Subsidiaries
Associates
Net Revenue from Sale of Goods
Net Revenue from Royalties
Years Ended December 31
Years Ended December 31
2013
2012
2013
2012
$ 414,108,019
2,167,467
119,067
1,677
$ 416,396,230
$ 326,784,542
4,548,173
-
3,410
$ 331,336,125
$ 15,624
497,020
-
-
$ 512,644
$ 984
479,239
-
-
$ 480,223
Years Ended December 31
2013
2012
$ 25,422,634
10,052,170
$ 23,734,561
8,114,307
$ 35,474,804
$ 31,848,868
3) Valuation techniques and assumptions used in fair value measurement
c. Receivables from related parties
The fair values of financial assets and financial liabilities are determined as follows:
Related Party Categories
December 31, 2013
December 31, 2012
January 1, 2012
● The fair values of financial assets and financial liabilities with standard terms and conditions and
traded on active liquid markets are determined with reference to quoted market prices (includes
publicly traded stocks).
● Forward exchange contracts and cross currency swap contracts are measured using quoted forward
exchange rates and yield curves derived from quoted interest rates matching maturities of the
contracts.
● The fair values of other financial assets and financial liabilities are determined in accordance with
generally accepted pricing models based on discounted cash flow analysis.
Subsidiaries
Associates
Joint venture of the Company’s subsidiaries
$ 52,750,047
219,424
332
$ 40,748,905
238,380
159
$ 24,661,104
116,218
212
$ 52,969,803
$ 40,987,444
$ 24,777,534
d. Payables to related parties
Related Party Categories
December 31, 2013
December 31, 2012
January 1, 2012
Subsidiaries
Associates
Joint venture of the Company’s subsidiaries
$ 2,503,578
1,679,184
1,217
$ 2,485,560
742,705
2,077
$ 1,664,623
1,325,791
2,168
$ 4,183,979
$ 3,230,342
$ 2,992,582
100
e. Acquisition of property, plant and equipment and intangible assets
Purchase Price
Years Ended December 31
2013
2012
Related Party Categories
Marketing Expenses - Commission
Non-operating Income
Years Ended December 31
Years Ended December 31
2013
2012
2013
2012
Related Party Categories
Subsidiaries
Associates
Joint venture of the Company’s subsidiaries
$ 120,499
21,135
-
$ 230,532
47,051
1,224
$ 141,634
$ 278,807
Subsidiaries
Associates
$ 736,937
-
$ 716,296
-
$ 18,636
-
$ 12,292
5,990
$ 736,937
$ 716,296
$ 18,636
$ 18,282
Other Receivables from Related Parties
December 31, 2013
December 31, 2012
January 1, 2012
f. Disposal of property, plant and equipment
Related Party Categories
Related Party Categories
Years Ended December 31
2013
2012
Proceeds
Gains (Losses)
Proceeds
Gains (Losses)
Subsidiaries
Associates
Joint venture of the Company’s subsidiaries
$ 351,169
220,831
-
$ 95,271
179,692
-
$ 65,736
121,767
525
$ 572,000
$ 274,963
$ 188,028
Subsidiaries
Associates
Joint venture of the Company’s subsidiaries
$ 94,152
58,265
-
$ 2,570
2,787
948
$ 46,951
14,531
9,000
$ (18,697)
(132)
213
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, price and terms were determined in accordance with
mutual agreements.
$ 152,417
$ 6,305
$ 70,482
$ (18,616)
Deferred Gains (Losses) from Disposal of Property,Plant and Equipment
December 31, 2013
December 31, 2012
January 1, 2012
The Company leased machinery and equipment from Xintec. The lease terms and prices were determined
in accordance with mutual agreements. The rental expense was paid quarterly and the related expense
was classified under manufacturing expenses.
Related Party Categories
Subsidiaries
Associates
Joint venture of the Company’s subsidiaries
$ 46,235
-
-
$ 17,279
(7,806)
948
$ (1,493)
-
-
The Company deferred the disposal gain/loss derived from sales of property, plant and equipment to
related parties using equity method, and then recognized such gain/loss over the depreciable lives of the
disposed assets.
$ 46,235
$ 10,421
$ (1,493)
h. Compensation of key management personnel
g. Others
Related Party Categories
Manufacturing Expenses
Research and Development Expenses
Years Ended December 31
Years Ended December 31
2013
2012
2013
2012
Subsidiaries
Associates
Joint venture of the Company’s subsidiaries
$ 122,068
908,977
5,187
$ 180,998
-
14,586
$ 1,107,059
903
6,340
$ 975,455
4,644
8,254
$ 1,036,232
$ 195,584
$ 1,114,302
$ 988,353
The compensation to directors and other key management personnel were as follows:
Short-term employee benefits
Post-employment benefits
$ 1,242,451
7,998
$ 1,293,052
3,009
$ 1,250,449
$ 1,296,061
Years Ended December 31
2013
2012
The compensation to directors and other key management personnel were determined by the
Compensation Committee of the Company in accordance with the individual performance and the market
trends.
101
35. SIGNIFICANT OPERATING LEASE ARRANGEMENTS
The Company leases several parcels of land from the Science Park Administration. These operating leases
expire between February 2014 and December 2032 and can be renewed upon expiration.
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 lawsuit in the U.S.
District Court for the Eastern District of Texas. The outcome cannot be determined and the Company
cannot make a reliable estimate of the contingent liability at this time.
The Company expensed the lease payments as follows:
Years Ended December 31
2013
2012
d. 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 and the Company cannot make a reliable estimate of the
contingent liability at this time.
Minimum lease payments
$ 671,371
$ 484,603
Future minimum lease payments under the above non-cancellable operating leases are as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
$ 666,791
2,426,891
5,110,098
$ 485,963
1,783,197
3,655,825
$ 453,868
1,642,683
3,255,047
December 31, 2013
December 31, 2012
January 1, 2012
$ 8,203,780
$ 5,924,985
$ 5,351,598
36. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS
Significant contingent liabilities and unrecognized commitments of the Company as of the end of the
reporting period, 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
provided 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. In 2013 and
2012, the R.O.C. Government did not involve such right.
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, in September 2006,
Philips spun-off its semiconductor subsidiary which was renamed as NXP B.V. Further, 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 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 falls below a specific percentage of its capacity, the defaulting
party is required to compensate SSMC for all related unavoidable costs. There was no default from the
aforementioned commitment as of December 31, 2013.
c. In June 2010, Keranos, LLC. filed a complaint 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
102
e. The Company 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 on October 31, 2012. Both parties also signed the research and development
funding agreement whereby the Company shall provide EUR276,000 thousand to ASML’s research and
development programs from 2013 to 2017. For the year ended December 31, 2013, the Company paid
EUR55,078 thousand to ASML under the research and development funding agreement.
f. In December 2013, Tela Innovations, Inc. filed complaints in the U.S. District Court for the District of
Delaware and in the United States International Trade Commission accusing the Company and TSMC
North America of infringing one U.S. patent. In January 2014, the Company filed a lawsuit against Tela
for trade secret misappropriation and breach of contract. The outcome cannot be determined and the
Company cannot make a reliable estimate of the contingent liability at this time.
g. As of December 31, 2013, the Company provided financial guarantees of NT$44,700,000 thousand to its
subsidiary, TSMC Global, in respect of the issuance of unsecured corporate bonds.
37. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS
AND LIABILITIES
The significant financial assets and liabilities denominated in foreign currencies were as follows:
Foreign Currencies
(In Thousands)
Exchange Rate (Note)
Carrying Amount
December 31, 2013
Financial assets
Monetary items
USD
EUR
JPY
Non-monetary items
HKD
Financial liabilities
Monetary items
USD
EUR
JPY
$ 2,601,226
450,273
41,327,283
168,334
1,926,813
810,174
71,828,809
29.800
41.00
0.2834
3.84
29.800
41.00
0.2834
$ 77,516,527
18,461,200
11,712,152
646,402
57,419,016
33,217,114
20,356,284
(Continued)
Foreign Currencies
(In Thousands)
Exchange Rate (Note)
Carrying Amount
1) Business combinations. The Company elected not to apply related guidance retrospectively to business
combinations that occurred before January 1, 2012. Therefore, in the opening balance sheet, the
amount of goodwill generated from past business combinations was the same as the carrying amount
of goodwill under R.O.C. GAAP as of January 1, 2012.
$ 65,492,054
4,496,863
11,829,489
1,845,052
2) Employee benefits. The Company elected to recognize all cumulative actuarial gains and losses in
retained earnings as of the transition date. In addition, the Company elected to apply the exemption
disclosure requirement provided by related guidance, 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.
December 31, 2012
Financial assets
Monetary items
USD
EUR
JPY
Non-monetary items
HKD
Financial liabilities
Monetary items
USD
EUR
JPY
January 1, 2012
Financial assets
Monetary items
USD
EUR
JPY
Non-monetary items
HKD
Financial liabilities
Monetary items
USD
EUR
JPY
$ 2,255,391
117,136
35,290,837
492,014
2,171,316
245,237
43,052,403
$ 1,566,212
124,425
33,073,336
671,060
1,626,129
106,931
34,942,421
29.038
38.39
0.3352
3.75
29.038
38.39
0.3352
30.288
39.27
0.3897
3.90
30.288
39.27
0.3897
63,050,668
9,414,653
14,431,165
$ 47,437,444
4,886,187
12,888,679
2,617,134
49,252,192
4,199,185
13,617,061
(Concluded)
Note: Exchange rate represents the number of N.T. dollars for which one foreign currency could be exchanged.
38. FIRST-TIME ADOPTION OF PARENT COMPANY ONLY FINANCIAL STATEMENTS
ACCOUNTING STANDARDS
The transition to Accounting Standards Used in Preparation of the Parent Company Only Financial
Statements was on January 1, 2012 (the transition date). The effects on the Company’s parent company
only balance sheets as of December 31, 2012 and January 1, 2012 as well as the parent company only
statements of comprehensive income for the year ended December 31, 2012, were as follows:
a. Exemptions
Except for optional exemptions and mandatory exceptions, the Company retrospectively applied
Accounting Standards Used in Preparation of the Parent Company Only Financial Statements in its
opening balance sheet at the date of transition, January 1, 2012.
3) Share-based payment. The Company elected to take the optional exemption from applying related
guidance retrospectively for the shared-based payment transactions granted and vested before the
transition date.
b. Reconciliation of parent company only balance sheet as of December 31, 2012
R.O.C. GAAP
Effect of Transition to
Accounting Standards Used in
Preparation of the Parent Company
Only Financial Statements
Accounting Standards Used in Preparation
of the Parent Company Only Financial
Statements
Note
Amount
Recognition and
Measurement
Difference
Presentation
Difference
Amount
Item
$ 109,150,810 $ - $ - $ 109,150,810 Cash and cash equivalents
Item
Current assets
Cash and cash equivalents
Financial assets at fair value
through profit or loss
38,824
Available-for-sale financial assets
1,845,052
Held-to-maturity financial assets
701,146
Notes and accounts receivable
15,726,431
Receivables from related parties
Allowance for doubtful
40,987,444
(474,037)
receivables
Allowance for sales returns and
(5,732,738)
274,963
175,261
35,296,391
7,728,464
2,097,329
207,815,340
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
Financial assets carried at cost
Total long-term investments
Net property, plant and equipment
Intangible assets
Other assets
Deferred income tax assets
Refundable deposits
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
38,824 Financial assets at fair value
through profit or loss
1,845,052 Available-for-sale financial
assets
701,146 Held-to-maturity financial
assets
(474,037)
15,252,394 Notes and accounts
-
474,037
5,732,738
receivable, net
40,987,444 Receivables from related parties
-
-
-
-
-
274,963 Other receivables from related
-
-
(7,728,464)
-
parties
175,261 Other financial assets
35,296,391 Inventories
-
-
2,097,329 Other current assets
(1,995,726)
205,819,614 Total current assets
a)
b)
139,264,161
(113,720)
-
139,150,441 Investments accounted for
e)
483,759
139,747,920
586,603,294
6,449,837
2,244,947
2,394,826
-
(113,720)
-
-
345,452
-
using equity method
-
-
32,742
-
483,759 Financial assets carried at cost
139,634,200
586,636,036 Property, plant and equipment
c)
6,449,837 Intangible assets
7,728,464
-
10,318,863 Deferred income tax assets
2,394,826 Refundable deposits
b), d)
(Continued)
103
R.O.C. GAAP
Effect of Transition to
Accounting Standards Used in
Preparation of the Parent Company
Only Financial Statements
Accounting Standards Used in Preparation
of the Parent Company Only Financial
Statements
Amount
Recognition and
Measurement
Difference
Presentation
Difference
Amount
Item
$ 917,019 $ - $ (32,742) $ 884,277 Other noncurrent assets
7,695,722
13,597,966
5,556,792
345,452
Note
c)
Item
Others
Total other assets
Total
$ 946,173,183 $ 231,732 $ 5,732,738 $ 952,137,653 Total
c. Reconciliation of parent company only balance sheet as of January 1, 2012
R.O.C. GAAP
Effect of Transition to Accounting
Standards Used in Preparation
of the Parent Company Only
Financial Statements
Accounting Standards Used in Preparation
of the Parent Company Only Financial
Statements
Note
Amount
Recognition and
Measurement
Difference
Presentation
Difference
Amount
Item
$ 85,262,521 $ - $ - $ 85,262,521 Cash and cash equivalents
$ 34,714,929 $ - $ - $ 34,714,929 Short-term loans
Current liabilities
Short-term loans
Financial liabilities at fair value
through profit or loss
Accounts payable
Payables to related parties
Income tax payable
Accrued profit sharing to
employees and bonus to
directors
Payables to contractors and
equipment suppliers
Accrued expenses and other
current liabilities
-
Total current liabilities
Long-term liabilities
Bonds payable
Other long-term payables
Total long-term liabilities
Other liabilities
Accrued pension cost
Guarantee deposits
Total other liabilities
Total liabilities
Capital stock
Capital surplus
Retained earnings
6,274
13,392,221
3,230,342
15,196,399
11,186,591
44,371,108
16,698,014
-
138,795,878
80,000,000
54,000
80,054,000
3,926,276
199,315
4,125,591
222,975,469
259,244,357
56,137,809
-
-
-
-
-
-
-
-
-
-
-
-
2,878,766
-
2,878,766
2,878,766
-
(462,469)
-
-
Appropriated as legal capital
115,820,123
reserve
Appropriated as special capital
7,606,224
reserve
Unappropriated earnings
Others
287,174,942
410,601,289
(2,189,821)
(2,189,821)
Cumulative translation
(10,753,763)
adjustments
Net loss not recognized as
(5,299)
pension cost
Unrealized gain/loss on financial
7,973,321
instruments
(43)
5,299
-
Total shareholders’ equity
(2,785,741)
723,197,714
5,256
(2,647,034)
-
-
-
-
-
-
-
6,274 Financial liabilities at fair
value through profit or loss
13,392,221 Accounts payable
3,230,342 Payables to related parties
15,196,399 Income tax payable
11,186,591 Accrued profit sharing to
employees and bonus to
directors
44,371,108 Payables to contractors and
equipment suppliers
16,698,014 Accrued expenses and other
current liabilities
5,732,738
5,732,738
5,732,738 Provisions
144,528,616 Total current liabilities
-
-
-
80,000,000 Bonds payable
54,000 Other long-term payables
80,054,000
-
-
-
5,732,738
-
-
6,805,042 Accrued pension cost
199,315 Guarantee deposits
7,004,357
231,586,973 Total liabilities
259,244,357 Capital stock
55,675,340 Capital surplus
a)
d)
e)
Retained earnings
115,820,123 Appropriated as legal capital
reserve
7,606,224 Appropriated as special
capital Reserve
284,985,121 Unappropriated earnings
408,411,468
d), e)
(10,753,806)
Foreign currency translation
reserve
-
-
e)
e)
7,973,321 Unrealized gain/loss from
available-for-sale financial
assets
(2,780,485)
720,550,680 Total equity
-
-
-
-
-
-
-
-
-
Total
$ 946,173,183 $ 231,732 $ 5,732,738 $ 952,137,653 Total
(Concluded)
104
Item
Current assets
Cash and cash equivalents
Financial assets at fair value
through profit or loss
Available-for-sale financial
assets
14,925
2,617,134
Held-to-maturity financial
701,136
assets
Notes and accounts receivable
19,894,386
Receivables from related parties
24,777,534
Allowance for doubtful
(485,120)
receivables
Allowance for sales returns and
(4,887,879)
others
Other receivables from related
188,028
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
122,010
22,853,397
5,779,544
1,725,736
158,563,352
128,200,718
(57,462)
Held-to-maturity financial assets
702,291
-
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
497,835
129,400,844
454,373,533
6,287,000
7,221,824
4,491,735
1,069,586
12,783,145
-
(57,462)
-
-
227,117
-
-
227,117
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,925 Financial assets at fair value
through profit or loss
2,617,134 Available-for-sale financial
assets
701,136 Held-to-maturity financial
assets
(485,120)
19,409,266 Notes and accounts
receivable, net
-
24,777,534 Receivables from related
Parties
485,120
4,887,879
-
-
-
-
-
188,028 Other receivables from related
-
-
(5,779,544)
-
parties
122,010 Other financial assets
22,853,397 Inventories
-
-
1,725,736 Other current asset
(891,665)
157,671,687 Total current assets
a)
b)
-
-
-
-
47,237
-
128,143,256 Investments accounted for
e)
using equity method
702,291 Held-to-maturity financial
assets
497,835 Financial assets carried at cost
129,343,382
454,420,770 Property, plant and equipment
c)
6,287,000 Intangible assets
5,779,544
-
(47,237)
5,732,307
13,228,485 Deferred income tax assets
4,491,735 Refundable deposits
1,022,349 Other noncurrent assets
18,742,569
b), d)
c)
Total
$ 761,407,874 $ 169,655 $ 4,887,879 $ 766,465,408 Total
Current liabilities
Short-term loans
Accounts payable
Payables to related parties
Income tax payable
Accrued profit sharing to
employees and bonus to
directors
Payables to contractors and
equipment suppliers
$ 25,926,528 $ - $ - $ 25,926,528 Short-term loans
9,522,688 Accounts payable
2,992,582 Payables to related parties
10,647,797 Income tax payable
9,055,704 Accrued profit sharing to
9,522,688
2,992,582
10,647,797
9,055,704
-
-
-
-
-
-
-
-
33,811,970
-
-
employees and bonus to
directors
33,811,970 Payables to contractors and
equipment suppliers
(Continued)
R.O.C. GAAP
Effect of Transition to Accounting
Standards Used in Preparation
of the Parent Company Only
Financial Statements
Accounting Standards Used in Preparation
of the Parent Company Only Financial
Statements
Note
Item
Amount
Recognition and
Measurement
Difference
Presentation
Difference
Amount
Item
Accrued expenses and other
$ 13,057,161 $ - $ - $ 13,057,161 Accrued expenses and other
current liabilities
Current portion of bonds
4,500,000
payable
-
Total current liabilities
Long-term liabilities
Bonds payable
Other liabilities
Accrued pension cost
Guarantee deposits
Total other liabilities
Total liabilities
Capital stock
Capital surplus
Retained earnings
-
109,514,430
18,000,000
3,860,898
439,032
4,299,930
131,814,360
259,162,226
55,846,357
-
4,500,000 Current portion of bonds
current liabilities
4,887,879
4,887,879
payable
4,887,879 Provisions
114,402,309 Total current liabilities
-
18,000,000 Bonds payable
-
-
-
-
2,271,173
-
2,271,173
2,271,173
-
(374,695)
-
-
-
4,887,879
-
-
6,132,071 Accrued pension cost
439,032 Guarantee deposits
6,571,103
138,973,412 Total liabilities
259,162,226 Capital stock
55,471,662 Capital surplus
Retained earnings
a)
d)
e)
Appropriated as legal capital
$ 102,399,995 $ - $ - $ 102,399,995 Appropriated as legal capital
reserve
Appropriated as special capital
6,433,874
-
reserve
Unappropriated earnings
Others
Cumulative translation
adjustments
213,357,286
322,191,155
(1,726,828)
(1,726,828)
(6,433,369)
5
-
Unrealized gain/loss on financial
(1,172,855)
instruments
-
Total shareholders’ equity
-
(7,606,224)
629,593,514
-
5
(2,101,518)
reserve
6,433,874 Appropriated as special
capital reserve
211,630,458 Unappropriated earnings
320,464,327
d), e)
(6,433,364)
Foreign currency translation
e)
reserve
(1,172,762) Unrealized gain/loss from
available-for-sale financial
assets
(93) Cash flow hedges reserve
(7,606,219)
627,491,996 Total equity
-
-
-
-
93
(93)
-
-
Total
$ 761,407,874 $ 169,655 $ 4,887,879 $ 766,465,408 Total
(Concluded)
d. Reconciliation of parent company only statement of comprehensive income for the year ended December
Unrealized gross profit from
(25,029)
-
-
31, 2012
R.O.C. GAAP
Item
Net sales
Cost of sales
Gross profit before affiliates
elimination
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
Settlement income
-
Technical service income
Others
-
-
Total non-operating income and
gains
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
Total non-operating expenses and
losses
Income before income tax
Income tax expense
Effect of Transition to Accounting
Standards Used in Preparation
of the Parent Company Only
Financial Statements
Accounting Standards Used in Preparation
of the Parent Company Only Financial
Statements
Note
Amount
Recognition and
Measurement
Difference
Presentation
Difference
Amount
Item
$ 499,871,887 $ - $ 497,638 $ 500,369,525 Net revenue
265,538,540
234,333,347
(44,355)
44,355
-
497,638
265,494,185 Cost of revenue
234,875,340 Gross profit before unrealized
gross profit on sales to
associates
(25,029) Unrealized gross profit on
sales to associates
234,308,318
44,355
497,638
234,850,311 Gross profit
38,788,245
16,330,060
2,388,243
57,506,548
-
(18,289)
(5,822)
(1,354)
(25,465)
-
-
-
-
-
(549,087)
38,769,956 Research and development
16,324,238 General and administrative
2,386,889 Marketing
57,481,083
(549,087) Other operating income and
expenses, net
176,801,770
69,820
(51,449)
176,820,141 Income from operations
f)
d)
d)
d)
d)
f)
-
8,175,390 Share of profits of subsidiaries
e)
8,127,748
867,227
883,845
-
497,638
811,619
-
-
11,188,077
2,677,529
945,114
418,330
146,647
172,279
4,359,899
47,642
-
-
-
-
-
-
4,977
52,619
-
-
-
-
-
-
(867,227)
(883,845)
327,744
(497,638)
(811,619)
936,903
(1,567,654)
(3,363,336)
(2,677,529)
-
(418,330)
(146,647)
(172,279)
(3,414,785)
and associates
-
-
-
-
327,744 Foreign exchange gain, net
-
-
-
-
936,903 Other income
(1,562,677) Other gains and losses
7,877,360
-
-
945,114 Finance costs
-
-
-
-
-
-
945,114
183,629,948
17,471,146
122,439
(37,045)
-
-
183,752,387 Income before income tax
17,434,101 Income tax expense
f)
f)
f)
f)
f)
f)
e), f)
f)
f)
f)
f)
d)
(Continued)
105
R.O.C. GAAP
Effect of Transition to Accounting
Standards Used in Preparation
of the Parent Company Only
Financial Statements
Accounting Standards Used in Preparation
of the Parent Company Only Financial
Statements
Note
f. Notes to the reconciliation of the significant differences:
1) Allowance for sales returns and others
Item
Amount
Recognition and
Measurement
Difference
Presentation
Difference
Amount
Item
Net income
$ 166,158,802 $ 159,484 $ - $ 166,318,286 Net income
(4,317,386)
Exchange differences arising
on translation of foreign
operations
2,407,647 Changes in fair value of
available-for-sale financial
assets
7,118,419 Share of other comprehensive
income of subsidiaries and
associates
(677,413) Actuarial loss from defined
(328,010)
benefit plans
Income tax expense related to
components of other
comprehensive income
e)
d)
d)
4,203,257 Other comprehensive income
for the year, net of income
tax
$ 170,521,543 Total comprehensive income
for the year
(Concluded)
e. Significant reconciliation differences in statement of cash flows for the year ended December 31, 2012
For the year ended December 31, 2012, the Company partially disposed and acquired its interests in
subsidiaries without the loss of control with the cash inflows and cash outflows of NT$587,902 thousand
and NT$2,259,244 thousand, respectively. Under R.O.C. GAAP, such cash flows were classified as
investing activities. However, under Accounting Standards Used in Preparation of the Parent Company
Only Financial Statements, such cash flows were classified as financing activities.
The Company prepared the statement of cash flows using the indirect method under R.O.C. GAAP, in
which the interest received is not required to be disclosed separately; instead, the interest received and
the interest paid are included within the operating activities in the statement of cash flows. However,
according to Accounting Standards Used in Preparation of the Parent Company Only Financial Statements
for the year ended December 31, 2012, the interest received of NT$834,314 thousand should be
disclosed separately in the investing activities; and the interest paid of NT$670,165 thousand should be
disclosed in the financing activities based on their nature, respectively.
Except for the above differences, there are no other significant differences between R.O.C. GAAP and
Accounting Standards Used in Preparation of the Parent Company Only Financial Statements in the parent
company only statement of cash flows.
Under R.O.C. GAAP, provisions for estimated sales returns and others are recognized as a reduction in
revenue in the year the related revenue is recognized based on historical experience. The corresponding
allowance for sales returns and others is presented as a reduction in accounts receivable. Under
Accounting Standards Used in Preparation of the Parent Company Only Financial Statements, 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 in accordance with the related
guidance.
As of December 31, 2012 and January 1, 2012, the amounts reclassified from allowance for sales
returns and others to provisions were NT$5,732,738 thousand and NT$4,887,879 thousand,
respectively.
2) Classifications of deferred income tax asset/liability and valuation allowance
Under R.O.C. GAAP, a deferred tax asset and liability is classified as current or noncurrent 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 parent company only financial statements, it
is classified as either current or noncurrent based on the expected length of time before it is realized
or settled. Under Accounting Standards Used in Preparation of the Parent Company Only Financial
Statements, a deferred tax asset and liability is classified as noncurrent 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 the related
guidance, 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 noncurrent assets were NT$7,728,464 thousand and NT$5,779,544 thousand, respectively.
3) The classification of assets leased to others and idle assets
Under R.O.C. GAAP, assets leased to others and idle assets are classified under other assets. Under
Accounting Standards Used in Preparation of the Parent Company Only Financial Statements, the
aforementioned items are classified as property, plant and equipment according to their nature. In
accordance with the related guidance, investment properties are defined as properties held to earn
rentals or for capital appreciation; however, the Company’s assets leased to others are mainly housing
facilities leased to employees and manufacturing facilities leased to suppliers. The housing facilities
leased to employees are not classified as investment properties; and manufacturing facilities leased
to suppliers are not considered as investment properties since they cannot be sold separately and
comprise only an insignificant portion of the entire facility.
106
As of December 31, 2012 and January 1, 2012, the amounts reclassified from assets leased to
others and idle assets to property, plant and equipment were NT$32,742 thousand and NT$47,237
thousand, respectively.
4) Employee benefits
The Company had recognized the pension cost and retirement benefit obligation under its defined
benefit plans based on actuarial valuations performed in conformity with R.O.C. GAAP. Under
Accounting Standards Used in Preparation of the Parent Company Only Financial Statements, the
Company should carry out actuarial valuation on defined benefit obligation in accordance with the
related guidance.
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 such actuarial gains and losses. When using
the corridor approach, actuarial gains and losses is amortized over the expected average remaining
working lives of the participating employees.
Under the related guidance, 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 the related guidance
and recognized the valuation difference directly to retained earnings. For the year ended December
31, 2012, total actuarial gains and losses were also recognized to other comprehensive income in
accordance with actuarial valuation carried out in 2012.
In addition, under R.O.C. GAAP, a minimum pension liability should be recognized in the balance
sheet. If the accrued pension cost is less than the minimum pension liability, the difference should be
recognized as an additional liability. Under Accounting Standards Used in Preparation of the Parent
Company Only Financial Statements, there is no aforementioned requirement to recognize minimum
pension liability.
As of December 31, 2012 and January 1, 2012, accrued pension cost of the Company was adjusted for
an increase of NT$2,878,766 thousand and NT$2,271,173 thousand, respectively; deferred income tax
assets were adjusted for an increase of NT$345,452 thousand and NT$227,117 thousand, respectively.
For the year ended December 31, 2012, pension cost and income tax expense of the Company were
adjusted for a decrease of NT$69,820 thousand and NT$37,045 thousand, respectively; actuarial loss
from defined benefit plans and income tax benefit related to components of other comprehensive
income were recognized in the amount of NT$677,413 thousand and NT$81,290 thousand,
respectively.
5) Investments accounted for using the equity method
The Company has evaluated significant differences between current accounting policies and
Accounting Standards Used in Preparation of the Parent Company Only Financial Statements for
the Company’s subsidiaries and associates accounted for using the equity method. The significant
difference is mainly due to the adjustment to employee benefits.
In addition, if the investor subscribes to additional shares of associates and joint ventures that is
disproportionate to its existing ownership percentage and results in a decrease in the investor’s
ownership percentage in the associate and joint venture, the resulting carrying amount of the
investment differs from the amount of the investor’s share in the equity of the associates and joint
venture. Under R.O.C. GAAP, the investor records such a difference as an adjustment to the carrying
amount of the investment with the corresponding amount charged or credited to capital surplus.
Under Accounting Standards Used in Preparation of the Parent Company Only Financial Statements,
such a difference is still adjusted to carrying amount of the investment and capital surplus. If the
investor’s ownership interest in an associate and joint venture decreases, the proportionate amount of
the gains or losses previously recognized in other comprehensive income in relation to that associate
and joint venture shall be reclassified to profit or loss on the same basis as would be required if the
associate and joint venture had directly disposed of the related assets or liabilities.
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$113,720
thousand and NT$57,462 thousand, respectively; foreign currency translation reserve 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$5,299
thousand. In addition, equity in earnings of equity method investees and share of other comprehensive
income of subsidiaries and associates were adjusted for an increase of NT$47,642 thousand and
decrease of NT$26,402 thousand respectively for the year ended December 31, 2012; other gains and
losses was adjusted for a gain of NT$4,977 thousand for the year ended December 31, 2012.
6) The reclassification of line items in the parent company only statement of comprehensive income
In accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers
before its amendment due to the adoption of Accounting Standards Used in Preparation of the Parent
Company Only Financial Statements, income from operations in the income statement only includes
net revenue, cost of revenue and operating expenses. Under Accounting Standards Used in Preparation
of the Parent Company Only Financial Statements, based on the nature of operating transactions,
technical service income is reclassified under net revenue; 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 income and expenses, which are included in income
from operations.
107
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. Information about the derivative financial instruments transaction: Please see Note 7;
j. Names, locations, and related information of investees over which the Company exercises significant
influence: Please see Table 7 attached;
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, income
(losses) of the investee, share of profits/losses of investee, 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 34.
Under Accounting Standards Used in Preparation of the Parent Company Only Financial Statements,
based on the nature of operating transactions, for the year ended December 31, 2012, the Company
also reclassified technical service income of NT$497,638 thousand to net revenue, rental revenue
of NT$469 thousand, net loss on disposal of property, plant and equipment and other assets of
NT$125,488 thousand, other income of NT$918 thousand, depreciation of rental assets of NT$6,656
thousand and impairment loss on idle assets of NT$418,330 thousand to other operating income and
expenses; other income of NT$327,744 thousand was reclassified to net foreign exchange gain. In
addition, interest income of NT$867,227 thousand and dividend income of NT$69,676 thousand were
also reclassified to other income; settlement income of NT$883,845 thousand, net gain on disposal
of financial assets of NT$110,365 thousand, others of NT$286,266 thousand (under non-operating
income and gains), net valuation loss on financial instruments of NT$152,814 thousand, impairment
loss of financial assets of NT$2,677,529 thousand as well as others of NT$17,787 thousand (under
non-operating expenses and losses) were reclassified to other gains and losses for the year ended
December 31, 2012.
39. ADDITIONAL DISCLOSURES
a. Financings provided: None;
b. Endorsement/guarantee provided: Please see Table 1 attached;
c. Marketable securities held (excluding investments in subsidiaries, associates and jointly controlled entities):
Please see Table 2 attached;
d. Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the
paid-in capital: Please see Table 3 attached;
e. Acquisition of individual real estate properties at costs of at least NT$300 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$300 million or 20% of the paid-in
capital: None;
g. Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital:
Please see Table 5 attached;
108
TABLE 1
Taiwan Semiconductor Manufacturing Company Limited
ENDORSEMENTS/GUARANTEES PROVIDED
FOR THE YEAR ENDED DECEMBER 31, 2013
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
No.
Endorsement/
Guarantee Provider
Name
Guaranteed Party
Nature of
Relationship
Limits on
Endorsement/
Guarantee Amount
Provided to Each
Guaranteed Party
(Notes 1 and 2)
Maximum Balance
for the Period (US$ in
Thousands) (Note 3)
Ending Balance (US$
in Thousands)
(Note 3)
Amount Actually
Drawn
(US$ in Thousands)
Amount of
Endorsement/
Guarantee
Collateralized by
Properties
Ratio of Accumulated
Endorsement/
Guarantee to Net
Equity per Latest
Financial Statements
Maximum
Endorsement/
Guarantee Amount
Allowable (Note 2)
Guarantee
Provided by
Parent Company
Guarantee
Provided by
A Subsidiary
Guarantee
Provided to
Subsidiaries in
Mainland China
0
The Company
TSMC Global
Subsidiary
$ 211,877,064
$ 44,700,000
(US$ 1,500,000)
$ 44,700,000
(US$ 1,500,000)
$ 44,700,000
(US$ 1,500,000)
$ -
5.3% $ 211,877,064 Yes
No
No
Note 1: The total amount of the guarantee provided by the Company to any individual entity shall not exceed ten percent (10%) of the Company’s net worth, or the net worth of such entity. However, subsidiaries whose voting shares are 100% owned, directly or indirectly, by the Company are not subject to the above restrictions after the
approval of the Board of Directors.
Note 2: The total amount of guarantee shall not exceed twenty-five percent (25%) of the Company’s net worth.
Note 3: The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.
109
TABLE 2
Taiwan Semiconductor Manufacturing Company Limited
MARKETABLE SECURITIES HELD
DECEMBER 31, 2013
(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, 2013
Shares/Units
(In Thousands)
Carrying Value
(Foreign Currencies
in Thousands)
Percentage of
Ownership (%)
Fair Value
(Foreign Currencies
in Thousands)
Note
The Company
Commercial paper
CPC Corporation, Taiwan
Taiwan Power Company
Stock
Semiconductor Manufacturing International Corporation
United Industrial Gases Co., Ltd.
Shin-Etsu Handotai Taiwan Co., Ltd.
W.K. Technology Fund IV
Fund
Horizon Ventures Fund
Crimson Asia Capital
Note: The carrying value represents carrying amount less accumulated impairment of NT$412,901 thousand.
-
-
-
-
-
-
-
-
Held-to-maturity financial assets
〃
100
80
$ 998,018
797,931
N/A
N/A
$ 997,608
798,004
Available-for-sale financial assets
Financial assets carried at cost
〃
〃
Financial assets carried at cost
〃
275,957
21,230
10,500
4,000
-
-
646,402
193,584
105,000
39,280
78,303
53,211
1
10
7
2
12
1
Note
646,402
437,105
340,108
34,919
78,303
53,211
110
TABLE 3
Taiwan Semiconductor Manufacturing Company Limited
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2013
(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 1)
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)
The Company
Stock
Semiconductor Manufacturing
International Corporation
TSMC SSL
Commercial Paper
CPC Corporation, Taiwan
Taiwan Power Company
Available-for-sale financial
-
-
1,277,958 $ 1,845,052
- $ -
1,002,001 $ 1,830,424 $ 983,715 $ 846,709
275,957 $ 646,402
assets
Investments accounted for
using equity method
Note 2
Subsidiary
430,400
2,389,541
124,274
1,242,744
Held-to-maturity financial
assets
〃
-
-
-
-
-
-
-
-
100
80
998,018
797,931
-
-
-
-
-
-
-
-
-
-
-
-
554,674
2,154,913
100
80
998,018
797,931
Note 1:The ending balance includes unrealized gains/losses on financial assets, share of profits/losses of investees and other related adjustment to equity.
Note 2: The acquisition is primarily consisted of cash injection.
111
TABLE 4
Taiwan Semiconductor Manufacturing Company Limited
ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2013
(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
The Company
Land
January 3, 2013
$ 2,248,400
By the contract
Miaoli County
Government
Fu Tsu Construction
Co., Ltd.
3,561,600
By the construction progress
4,373,205
By the construction progress
Da Cin Construction
Co., Ltd.
338,948
By the construction progress
I Domain Industrial
Co., Ltd.
2,615,744
By the construction progress
China Steel Structure
615,038
By the construction progress
Co., Ltd.
Tasa Construction
Corporation
-
-
-
-
-
-
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
Fab
Fab
Fab
Fab
Fab
January 22, 2013 to
August 29, 2013
January 27, 2013 to
June 21, 2013
March 3, 2013 to
October 25, 2013
April 3, 2013 to
May 15, 2013
May 27, 2013 to
June 19, 2013
112
TABLE 5
Taiwan Semiconductor Manufacturing Company Limited
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, 2013
(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
TSMC
TSMC North America
GUC
VIS
Subsidiary
Associate
Associate
Purchases/ Sales
Sales
Sales
Sales
Amount
(Foreign Currencies
in Thousands)
$ 414,087,565
1,970,934
69
1
Net 30 days from invoice date
Net 30 days from the end of the
month of when invoice is issued
195,101
-
Net 30 days from the end of the
% to Total
Payment Terms
Unit Price
(Note 1)
Payment Terms
(Note 1)
Mcube Inc. (Mcube)
TSMC China
Associate of the Company’s subsidiary (Note 2)
Subsidiary
Sales
Purchases
WaferTech
Indirect subsidiary
VIS
SSMC
Associate
Associate
Purchases
Purchases
Purchases
119,067
16,902,114
8,520,337
6,993,964
3,056,372
-
27
14
11
month of when invoice is issued
Net 30 days from invoice date
Net 30 days from the end of the
month of when invoice is issued
Net 30 days from the end of the
month of when invoice is issued
Net 30 days from the end of the
month of when invoice is issued
5
Net 30 days from the end of the
month of when invoice is issued
Note 1: 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.
Note 2: TSMC Partners, the subsidiary of the Company, did not exercise significant influence over Mcube starting the third quarter of 2013, and therefore, Mcube is no longer a related party to the Company.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Ending Balance
(Foreign Currencies
in Thousands)
$ 52,750,047
219,424
-
-
(1,509,508)
(685,906)
(731,587)
(382,007)
Note
% to Total
74
-
-
-
8
4
4
2
113
TABLE 6
Taiwan Semiconductor Manufacturing Company Limited
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
DECEMBER 31, 2013
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Company Name
Related Party
Nature of Relationships
TSMC
TSMC North America
GUC
VIS
Subsidiary
Associate
Associate
Ending Balance
(Foreign Currencies in
Thousands)
$ 53,078,207
219,424
105,881
Turnover Days (Note 1)
Overdue
Amount
Action Taken
41
42
(Note 2)
$ 16,627,236
-
-
-
-
-
Amounts Received in
Subsequent Period
Allowance for
Bad Debts
$ 18,782,230
-
-
$ -
-
-
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.
114
TABLE 7
Taiwan Semiconductor Manufacturing Company Limited
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
FOR THE YEAR ENDED DECEMBER 31, 2013
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Investor Company
Investee Company
Location
Main Businesses and Products
Original Investment Amount
Balance as of December 31, 2013
December 31,
2013 (Foreign
Currencies in
Thousands)
December 31,
2012 (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)
Share of Profits/
Losses of Investee
(Note 1) (Foreign
Currencies in
Thousands)
Note
TSMC
TSMC Global
TSMC Partners
Tortola, British Virgin Islands
Tortola, British Virgin Islands
Investment activities
Investing in companies involved in the design,
$ 42,327,245 $ 42,327,245
31,456,130
31,456,130
1
988,268
VIS
Hsin-Chu, Taiwan
Research, design, development, manufacture,
13,232,288
13,232,288
628,223
manufacture, and other related business in the
semiconductor industry
SSMC
TSMC Solar
Singapore
Tai-Chung, Taiwan
TSMC North America
San Jose, California, U.S.A.
packaging, testing and sale of memory integrated
circuits, LSI, VLSI and related parts
Fabrication and supply of integrated circuits
Engaged in researching, developing, designing,
manufacturing and selling renewable energy and
saving related technologies and products
Selling and marketing of integrated circuits and
semiconductor devices
5,120,028
11,180,000
5,120,028
11,180,000
314
1,118,000
100 $ 64,953,489 $ (172,392) $ (172,392)
100
Subsidiary
3,516,667 Subsidiary
42,861,788
3,516,560
39
39
99
10,556,348
4,370,988
1,724,819 Associate
7,457,733
4,551,318
5,039,563
(1,554,038)
1,954,847 Associate
Subsidiary
(1,516,235)
333,718
333,718
11,000
100
3,763,194
468,309
468,309 Subsidiary
TSMC SSL
Hsin-Chu, Taiwan
Engaged in researching, developing, designing,
5,546,744
4,304,000
554,674
Xintec
GUC
VTAF III
VTAF II
TSMC Europe
Emerging Alliance
TSMC Japan
TSMC GN
TSMC Korea
Taoyuan, Taiwan
Hsin-Chu, Taiwan
Cayman Islands
Cayman Islands
Amsterdam, the Netherlands
Cayman Islands
Yokohama, Japan
Taipei, Taiwan
Seoul, Korea
manufacturing and selling solid state lighting devices
and related applications products and systems
Wafer level chip size packaging service
Researching, developing, manufacturing, testing and
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
1,357,890
386,568
1,908,912
596,514
15,749
841,757
83,760
150,000
13,656
1,357,890
386,568
1,896,914
704,447
15,749
852,258
83,760
100,000
13,656
94,950
46,688
-
-
-
-
6
-
80
92
40
35
50
98
100
99.5
100
100
100
2,154,913
(1,663,137)
(1,550,850)
Subsidiary
1,866,123
1,056,141
892,439
441,763
290,838
144,924
124,762
85,162
29,475
288,881
289,204
(1,509,593)
(3,662)
37,659
(10,806)
4,717
(22,899)
1,296
37,942 Associate
100,746 Associate
Subsidiary
(151,326)
(3,589)
Subsidiary
37,659 Subsidiary
Subsidiary
(10,753)
4,717 Subsidiary
Subsidiary
1,296 Subsidiary
(22,899)
Note 1: The share of profits/losses of investee includes the effect of unrealized gross profit on intercompany transactions.
Note 2: Please refer to Table 10 for information on investment in Mainland China.
115
TABLE 8
Taiwan Semiconductor Manufacturing Company Limited
INFORMATION ON INVESTMENT IN MAINLAND CHINA
FOR THE YEAR ENDED DECEMBER 31, 2013
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Investee Company
Main Businesses and Products
TSMC China
Manufacturing 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, 2013
(US$ in Thousands)
$ 18,939,667
(US$ 596,000)
Investment Flows
Outflow
Inflow
$ -
$ -
Accumulated Outflow of
Investment from Taiwan as of
December 31, 2013
(US$ in Thousands)
$ 18,939,667
(US$ 596,000)
Investee Company
Percentage of Ownership
Share of Profits/Losses
TSMC China
100%
$ 5,111,975
(Note 2)
Carrying Amount as of
December 31, 2013
Accumulated Inward Remittance of Earnings as of
December 31, 2013
$ 23,845,371
$ -
Accumulated Investment in Mainland China as of
December 31, 2013 (US$ in Thousands)
Investment Amounts Authorized by Investment Commission, MOEA
(US$ in Thousands)
Upper Limit on Investment (US$ in Thousands)
$ 18,939,667
(US$ 596,000)
$ 18,939,667
(US$ 596,000)
$ 18,939,667
(US$ 596,000)
Note 1: TSMC directly invested US$596,000 thousand in TSMC China.
Note 2: Amount was recognized based on the audited financial statements.
116
THE CONTENTS OF STATEMENTS OF MAJOR ACCOUNTING ITEMS
ITEM
Major Accounting Items in Assets, Liabilities and Equity
Statement of Cash and Cash Equivalents
Statement of Notes and Accounts Receivable, Net
Statement of Receivables from Related Parties
Statement of Inventories
Statement of Other Current Assets
Statement of Changes in Investments Accounted for Using Equity Method
Statement of Changes in Property, Plant and Equipment
Statement of Changes in Accumulated Depreciation and Accumulated Impairment of
Property, Plant and Equipment
Statement of Changes in Intangible Assets
Statement of Deferred Income Tax Assets
Statement of Short-term Loans
Statement of Payables to Related Parties
Statement of Payables to Contractors and Equipment Suppliers
Statement of Provisions
Statement of Accrued Expenses and Other Current Liabilities
Statement of Bonds Payable
Major Accounting Items in Profit or Loss
Statement of Net Revenue
Statement of Cost of Revenue
Statement of Operating Expenses
Statement of Other Operating Income and Expenses, Net
Statement of Finance Costs
Statement of Labor, Depreciation and Amortization by Function
STATEMENT INDEX
1
2
3
4
Note 16
5
Note 14
Note 14
Note 15
Note 28
6
7
8
Note 18
9
10
11
12
13
Note 24
Note 26
14
STATEMENT 1
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF CASH AND CASH EQUIVALENTS
DECEMBER 31, 2013
(In thousands of New Taiwan Dollars)
Item
Cash
Petty cash
Cash in banks
Checking accounts and demand deposits
Foreign currency deposits
Time deposits
Cash equivalents
Description
Including US$206,545 thousand @29.800, JPY94 thousand
@0.2834, EUR54 thousand @41.00
From 2013.09.25 to 2014.04.30, interest rates at 0.35%-1.10%,
including NT$ 105,214,460 thousand, US$5,400 thousand
@29.800, JPY40,981,458 thousand @0.2834 and EUR378,338
thousand @41.00
Repurchase agreements collateralized by
Expired by 2014.01.23, interest rates at 0.65%-0.70%
corporate bonds
Repurchase agreements collateralized by
Expired by 2014.02.26, interest rates at 0.64%-0.66%
short-term commercial paper
Repurchase agreements collateralized by
Expired by 2014.01.23, interest rates at 0.65%-0.66%
government bonds
Total
Amount
$ 530
3,390,420
6,157,302
132,501,391
1,708,603
2,395,644
284,878
$ 146,438,768
117
STATEMENT 2
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT 3
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF NOTES AND ACCOUNTS RECEIVABLE, NET
DECEMBER 31, 2013
(In thousands of New Taiwan Dollars)
STATEMENT OF RECEIVABLES FROM RELATED PARTIES
DECEMBER 31, 2013
(In thousands of New Taiwan Dollars)
Amount
Client Name
$ 2,066,935
TSMC North America
1,380,840
1,185,287
928,011
12,368,306
17,929,379
483,502
$ 17,445,877
Others (Note)
Total
Note: The amount of individual client included in others does not exceed 5% of the account balance.
STATEMENT 4
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF INVENTORIES
DECEMBER 31, 2013
(In thousands of New Taiwan Dollars)
Amount
$ 52,750,047
219,756
$ 52,969,803
Item
Finished goods
Work in process
Raw materials
Supplies and spare parts
Total
Amount
Cost
Net Realizable Value
$ 7,049,813
$ 14,607,068
24,857,927
2,208,291
1,127,030
68,937,287
2,195,941
1,315,950
$ 35,243,061
$ 87,056,246
Client Name
MediaTek Inc.
Spreadtrum Communications, Inc.
NXP Semiconductors N.V.
STMicroelectronics Pte Ltd.
Others (Note 1)
Less: Allowance for doubtful accounts
Total
Note 1: The amount of individual client included in others does not exceed 5% of the account balance.
Note 2: The accounts receivable past due over one year amounted to NT$20 thousand for which the Company has recognized appropriate allowance for doubtful
accounts.
118
STATEMENT 5
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF CHANGES IN INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
FOR THE YEAR ENDED DECEMBER 31, 2013
(In thousands of New Taiwan Dollars)
Balance, January 1, 2013
Additions
Decrease
Investees
Shares
(In Thousands)
Amount
Shares
(In Thousands)
Amount
Shares
(In Thousands)
Amount
Increase
(Decrease)
in Using the
Equity Method
Adjustments to
Share of Changes
in Equity of
Subsidiaries
and Associates
Adjustments
Arising from
Changes in
Percentage of
Ownership in
Subsidiaries
Adjustments
Resulting
from the
Transactions with
Subsidiaries and
Associates
Amount
(Note 3)
Amount
Amount
Amount
Balance, December 31, 2013
Market Value or Net Assets Value
Shares
(in Thousands)
%
Amount
Unit Price
(NT$)
Total Amount
Collateral
Stocks
TSMC Global
TSMC Partners
VIS
SSMC
TSMC Solar
TSMC North America
TSMC SSL
Xintec
GUC
TSMC Europe
TSMC Japan
TSMC Korea
Subtotal
Capital
TSMC China
VTAF III
VTAF II
Emerging Alliance
TSMC GN
Subtotal
1 $ 49,954,386
38,635,129
9,406,597
6,710,956
6,011,397
3,209,288
2,389,541
1,541,824
988,268
628,223
314
1,118,000
11,000
430,400
94,950
46,688
-
6
80
1,214,825
235,761
142,412
26,935
119,479,051
- $ -
-
-
-
-
-
-
-
-
-
-
1,242,744
124,274
293,578
-
(Note 4)
-
-
-
-
1,536,322
-
-
-
-
-
-
-
-
-
17,828,683
1,047,285
563,056
167,359
65,007
19,671,390
-
-
-
-
-
-
46,945
14,578
2,955
50,000
114,478
- $ - $ 14,999,103 $ - $ - $ -
-
-
-
-
-
-
(6)
-
-
-
-
-
-
-
4,226,405
1,110,938
746,777
(1,454,686)
553,906
(1,547,898)
28,926
254
-
-
(2,647)
-
70,526
(172)
-
38,813
-
(2,740)
-
-
1,967
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(38,801)
55,077
(17,650)
2,540
18,664,637
-
(34,947)
(122,511)
(13,456)
-
(170,914)
6,059,284
(168,451)
(13,360)
(11,934)
(22,723)
5,842,816
44
-
-
-
38,084
-
-
-
-
-
-
-
-
-
-
67,961
-
1,607
-
-
(7,122)
(5,515)
(119,927)
-
-
-
(119,933)
(42,596)
-
-
-
-
(42,596)
1
988,268
628,223
314
1,118,000
11,000
554,674
94,950
100 $ 64,953,489
42,861,788
100
10,556,348
39
7,457,733
39
4,551,318
99
3,763,194
100
2,154,913
92
1,866,123
40
46,688
-
6
80
35
100
100
100
1,056,141
290,838
124,762
29,475
139,666,122
35.40 (Note 1)
74.00 (Note 2)
-
-
-
-
-
100
50
98
99.5
100
23,845,371
892,439
441,763
144,924
85,162
25,409,659
$ 64,953,489
42,862,161
22,239,112
7,243,749
4,512,306
3,763,194
2,154,913
1,669,922
3,454,902
290,838
124,762
29,475
153,298,823
24,026,559
869,955
435,517
144,924
85,162
25,562,117
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Total
$ 139,150,441
$ 1,650,800
$ (170,914) $ 24,507,453 $ 38,084 $ 62,446 $ (162,529)
$ 165,075,781
$ 178,860,940
Note 1: The unit price is calculated by closing price of Gre Tai Securities Market as of December 31, 2013.
Note 2: The unit price is calculated by closing price of the Taiwan Stock Exchange as of December 31, 2013.
Note 3: Including share of profit or loss of subsidiaries and associates, share of other comprehensive income of subsidiaries and associates and cash dividends received from subsidiaries and associates.
Note 4: Please refer to Note 31 for gain on deconsolidation of subsidiary.
119
STATEMENT 6
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF SHORT-TERM LOANS
DECEMBER 31, 2013
(In thousands of New Taiwan Dollars)
Type
Unsecured loans
JPMorgan Chase Bank N.A.
The Bank Of Nova Scotia
Credit Agricole Corporate & Investment Bank
BNP Paribas
Citibank Taiwan, Limited
Citibank
Balance, End of Year
Contract Period
Range of Interest Rates (%)
Loan Commitments
Collateral
Remark
$ 4,321,000
3,337,600
2,384,000
2,235,000
1,788,000
1,579,400
2013.12.26-2014.01.07
2013.12.16-2014.01.24
2013.12.16-2014.01.15
2013.12.16-2014.01.06
2013.12.06-2014.01.03
2013.12.06-2014.01.03
$ 15,645,000
0.38
0.38
0.38
0.42
0.40
0.40
US$ 200,000
$ 3,500,000
US$ 100,000
US$ 75,000
US$ 110,000
US$ 395,000
Nil
Nil
Nil
Nil
Nil
Nil
-
-
-
-
-
-
120
STATEMENT 7
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT 9
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF PAYABLES TO RELATED PARTIES
DECEMBER 31, 2013
(In thousands of New Taiwan Dollars)
STATEMENT OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
DECEMBER 31, 2013
(In thousands of New Taiwan Dollars)
Vendor Name
TSMC China
VIS
WaferTech, LLC
Xintec
SSMC
Others (Note)
Total
Amount
Item
$ 1,509,508
Salary and bonus payable
731,587
685,906
565,590
382,007
309,381
Utilities
Receipts in advance
Interest expense
Joint development project expenses
Others (Note)
Amount
$ 6,834,181
2,043,803
1,653,999
1,300,609
1,153,472
8,647,345
$ 4,183,979
Total
$ 21,633,409
Note: The amount of individual vendor in others does not exceed 5% of the account balance.
Note: The amount of each item in others does not exceed 5% of the account balance.
STATEMENT 8
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF PAYABLES TO CONTRACTORS AND EQUIPMENT SUPPLIERS
DECEMBER 31, 2013
(In thousands of New Taiwan Dollars)
Vendor Name
ASML Hong Kong Ltd.
Applied Materials South East Asia Pte Ltd.
TOKYO Electron Ltd.
Others (Note)
Total
Note: The amount of individual vendor included in others does not exceed 5% of the account balance.
Amount
$ 31,688,679
15,960,433
7,240,498
34,666,204
$ 89,555,814
121
STATEMENT 10
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF BONDS PAYABLE
DECEMBER 31, 2013
(In thousands of New Taiwan Dollars)
Bonds Name
Trustee
Issuance Date
Interest
Payment Date
Coupon
Rate (%)
Amount
Total Amount
Repayment
paid
Balance,
End of Year
Unamortized
Premiums
(Discounts)
Carrying Value
Repayment
Collateral
Domestic unsecured bonds-100-1
- A
- B
Domestic unsecured bonds-100-2
- A
- B
Domestic unsecured bonds-101-1
- A
- B
Domestic unsecured bonds-101-2
- A
- B
Domestic unsecured bonds-101-3
Domestic unsecured bonds-101-4
- A
- B
- C
Domestic unsecured bonds-102-1
- A
- B
- C
Domestic unsecured bonds-102-2
- A
- B
Domestic unsecured bonds-102-3
- A
- B
Domestic unsecured bonds-102-4
- A
- B
- C
- D
- E
- F
TOTAL
Mega International Commercial Bank Co., Ltd.
Mega International Commercial Bank Co., Ltd.
2011.09.28
2011.09.28
Mega International Commercial Bank Co., Ltd.
Mega International Commercial Bank Co., Ltd.
2012.01.11
2012.01.11
Mega International Commercial Bank Co., Ltd.
Mega International Commercial Bank Co., Ltd.
2012.08.02
2012.08.02
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
Taipei Fubon Commercial Bank Co., Ltd.
2012.09.26
2012.09.26
2012.10.09
2013.01.04
2013.01.04
2013.01.04
2013.02.06
2013.02.06
2013.02.06
2013.07.16
2013.07.16
2013.08.09
2013.08.09
2013.09.25
2013.09.25
2013.09.25
2013.09.25
2013.09.25
2013.09.25
on 09.28 annually
on 09.28 annually
on 01.11 annually
on 01.11 annually
on 08.02 annually
on 08.02 annually
on 09.26 annually
on 09.26 annually
on 10.09 annually
on 01.04 annually
on 01.04 annually
on 01.04 annually
on 02.06 annually
on 02.06 annually
on 02.06 annually
on 07.16 annually
on 07.16 annually
on 08.09 annually
on 08.09 annually
on 09.25 annually
on 09.25 annually
on 09.25 annually
on 09.25 annually
on 09.25 annually
on 09.25 annually
1.40
1.63
1.29
1.46
1.28
1.40
1.28
1.39
1.53
1.23
1.35
1.49
1.23
1.38
1.50
1.50
1.70
1.34
1.52
1.35
1.45
1.60
1.85
2.05
2.10
$ 10,500,000
7,500,000
$ -
-
$ 10,500,000
7,500,000
$ -
-
$ 10,500,000
7,500,000
Bullet repayment
Bullet repayment
10,000,000
7,000,000
9,900,000
9,000,000
12,700,000
9,000,000
4,400,000
10,600,000
10,000,000
3,000,000
6,200,000
11,600,000
3,600,000
10,200,000
3,500,000
4,000,000
8,500,000
1,500,000
1,500,000
1,400,000
2,600,000
5,400,000
2,600,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,000,000
7,000,000
9,900,000
9,000,000
12,700,000
9,000,000
4,400,000
10,600,000
10,000,000
3,000,000
6,200,000
11,600,000
3,600,000
10,200,000
3,500,000
4,000,000
8,500,000
1,500,000
1,500,000
1,400,000
2,600,000
5,400,000
2,600,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,000,000
7,000,000
Bullet repayment
Bullet repayment
9,900,000
9,000,000
Bullet repayment
Bullet repayment
12,700,000
9,000,000
4,400,000
Bullet repayment
Bullet repayment
Bullet repayment
10,600,000
10,000,000
3,000,000
Bullet repayment
Bullet repayment
Bullet repayment
6,200,000
11,600,000
3,600,000
Bullet repayment
Bullet repayment
Bullet repayment
10,200,000
3,500,000
Bullet repayment
Bullet repayment
4,000,000
8,500,000
Bullet repayment
Bullet repayment
1,500,000
1,500,000
1,400,000
2,600,000
5,400,000
2,600,000
Bullet repayment
Bullet repayment
Bullet repayment
Bullet repayment
Bullet repayment
Bullet repayment
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
$ 166,200,000
$ -
$ 166,200,000
$ -
$ 166,200,000
122
STATEMENT 11
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT 13
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF NET REVENUE
FOR THE YEAR ENDED DECEMBER 31, 2013
(In thousands of New Taiwan Dollars)
STATEMENT OF OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2013
(In thousands of New Taiwan Dollars)
Item
Sales of goods
Wafer
Other
Royalty
Net revenue
Note: 8-inch equivalent wafers.
Shipments (Piece) (Note)
Amount
Item
Research and
Development Expenses
General and
Administrative Expenses
Selling Expenses
Payroll and related expense
$ 15,998,678
$ 5,021,640
$ 1,395,396
15,664,497
$ 557,314,791
33,249,937
590,564,728
522,872
$ 591,087,600
STATEMENT 12
Taiwan Semiconductor Manufacturing Company Limited
Management fees of the Science Park Administration
STATEMENT OF COST OF REVENUE
FOR THE YEAR ENDED DECEMBER 31, 2013
(In thousands of New Taiwan Dollars)
Item
Raw materials used
Balance, beginning of year
Raw material purchased
Raw materials, end of year
Transferred to manufacturing or operating expenses
Others
Subtotal
Direct labor
Manufacturing expenses
Manufacturing cost
Work in process, beginning of year
Work in process, end of year
Transferred to manufacturing or operating expenses
Cost of finished goods
Finished goods, beginning of year
Finished goods purchased
Finished goods, end of year
Transferred to manufacturing or operating expenses
Scrapped
Subtotal
Others
Total
Amount
$ 3,666,048
26,515,240
(2,208,291)
(7,359,525)
(70,385)
20,543,087
10,581,290
261,349,482
292,473,859
24,442,123
(24,857,927)
(5,653,705)
286,404,350
5,936,018
35,468,500
(7,049,813)
(3,449,307)
(216,998)
317,092,750
2,314,413
$ 319,407,163
Depreciation expense
Consumables
Repair and maintenance expense
Joint development project expenses
Utilities
Patents
Commission
Others (Note)
Total
11,925,017
6,706,174
2,672,805
2,562,711
819,391
-
-
-
769,735
61,371
1,863,742
-
1,971,997
1,139,662
893,054
-
6,237,695
5,976,210
1,670
1,718
1,108
-
-
-
-
736,889
167,691
$ 46,922,471
$ 17,697,411
$ 2,304,472
Note: The amount of each item in others does not exceed 5% of the account balance.
123
STATEMENT 14
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF LABOR, DEPRECIATION AND AMORTIZATION BY FUNCTION
FOR THE YEAR ENDED DECEMBER 31, 2013 AND 2012
(In thousands of New Taiwan Dollars)
Labor cost
Salary and bonus
Labor and health insurance
Pension
Others
Year Ended December 31, 2013
Year Ended December 31, 2012
Classified as
Cost of Revenue
Classified as
Operating Expenses
Classified as
Other Operating
Income and Expenses
Total
Classified as
Cost of Revenue
Classified as
Operating Expenses
Classified as
Other Operating
Income and Expenses
Total
$ 31,781,705
1,829,180
1,029,341
1,151,330
$ 20,201,521
1,070,653
555,714
587,826
$ -
-
-
-
$ 51,983,226
2,899,833
1,585,055
1,739,156
$ 27,681,298
1,509,487
901,762
973,986
$ 19,198,385
920,024
517,758
505,500
$ -
-
-
-
$ 46,879,683
2,429,511
1,419,520
1,479,486
$ 35,791,556
$ 22,415,714
$ -
$ 58,207,270
$ 31,066,533
$ 21,141,667
$ -
$ 52,208,200
Depreciation
Amortization
$ 134,545,283
$ 1,099,542
$ 12,696,422
$ 973,384
$ 25,120
$ -
$ 147,266,825
$ 2,072,926
$ 111,929,312
$ 1,273,689
$ 10,441,847
$ 748,375
$ 6,656
$ -
$ 122,377,815
$ 2,022,064
124