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
3.9 Information Regarding TSMC’s Independent Auditor
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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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 Highlights
6.2 Financial Status and Operating Results
6.3 Risk Management
7. Corporate Social Responsibility
7.1 Overview
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7.2 Environmental, Safety and Health (ESH) Management 106
7.3 TSMC Education and Culture Foundation
7.4 TSMC Volunteer Program
7.5 TSMC i-Charity
7.6 Kaohsiung Gas Explosion Project
7.7 Social Responsibility Implementation Status
as Required by the Taiwan Financial
Supervisory Commission
8. Subsidiary Information and
Other Special Notes
8.1 Subsidiaries
8.2 Status of TSMC Common Shares and ADRs
Acquired, Disposed of, and Held by Subsidiaries
8.3 Special Notes
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1. Letter to Shareholders
A diamond requires meticulous cutting and
polishing before it can dazzle radiantly in the
light. Though competition grows more
intense, TSMC works unceasingly to deliver
brilliant results.
Dear Shareholders,
In 2014, we continued to reap the benefits of correct strategic choices made over the last several years. Our record
high revenue and profitability led to significant growth in both net income and earnings per share. Our revenue growth
was propelled largely by strong demand for our industry-leading 28-nanometer technologies and the rapid customer
acceptance and ramp-up of our first-in-foundry-industry 20-nanometer System-on-Chip (SoC) production, which was the
application processor of the world’s best-selling smartphone models in 2014. We anticipate continued growth in 2015
and beyond as strong demand for leading-edge technologies continues with better performance, more efficient power
consumption, and smaller device form factors.
We envision the race ahead as a relay in which our new technology development programs hand off the benefit of each
node to the next, leveraging our knowledge and capacity to deliver optimal performance for our customers and the best
returns to our shareholders. Our success in 20-nanometer has also laid the groundwork for our industry-leading FinFET
solution at the 16-nanometer node. Our 16 FinFET Plus has completed technology qualification on schedule in December
2014 and begun risk production for customers. Our 10-nanometer technology development is progressing, and we
remain on track to begin customer product tape-outs by the end of 2015.
We continue to increase our investments in R&D and capacity, as we firmly believe these will sow the seeds for further
harvests to come. Our other achievements in 2014 include:
● Total wafer shipments grew 19 percent from 2013 to reach 8.26 million 12-inch equivalent wafers.
● Advanced technologies (28-nanometer and beyond) accounted for 42 percent of total wafer revenue.
● We deployed 210 process technologies, and manufactured 8,876 products for 453 customers.
● TSMC’s market share in the total semiconductor foundry segment rose successively during the last five years and reached
54 percent in 2014.
2014 Financial Performance
Consolidated revenue totaled NT$762.81 billion, an increase of 27.8 percent over NT$597.02 billion in 2013. Net income
was NT$263.90 billion and diluted earnings per share were NT$10.18. Both increased 40.3 percent from the 2013 level of
NT$188.15 billion net income and NT$7.26 diluted EPS.
In US dollars, TSMC generated net income of US$8.71 billion on consolidated revenue of US$25.17 billion, compared
with net income of US$6.34 billion on consolidated revenue of US$20.11 billion for 2013.
Gross profit margin was 49.5 percent compared with 47.1 percent in 2013, and operating profit margin was 38.8 percent
compared with 35.1 percent a year earlier. Net profit margin was 34.6 percent, an increase of 3.1 percentage points from
the previous year’s 31.5 percent.
Technological Developments
TSMC’s industry-leading 28-nanometer saw several significant process improvements in 2014. Enhancements and
extensions of the 28-nanometer node help ensure continued strong market share, and the Company is building additional
capacity to accommodate and support customers’ increasing demand. A new offering, 28ULP for ultra-low power
applications helps customers to expand into the Internet of Things (IoT) and wearable device area. Combined with the
Company’s 55- and 40-nanometer ULP, TSMC builds the foundry industry’s most comprehensive ultra-low power platform
that can serve a wide range of speed-power combinations.
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In 20-nanometer, high volume production started in the middle of 2014 and quickly ramped up to account for 21
percent of fourth quarter revenue, registering a record as the fastest production ramp of any node in Company history. By
introducing the double patterning technique, 20SoC provides better density and power value for both performance-driven
products and mobile computing applications migration. In addition, 16-nanometer FinFET Plus (16FF+) has a
comprehensive design ecosystem that supports a wide variety of design tools and more than 100 silicon-validated IPs.
Nearly 60 customer designs are currently scheduled for tape out by the end of 2015. Volume ramp is expected to begin in
the middle of 2015.
2013
2014
2015
Capacity Plan
11%
12%
13%
7.31 million
8.18 million
9.24 million
2013
2014
2015
Sales Plan
30%
70%
58%
42%
50%
50%
Meanwhile, we are at work providing the design ecosystem for our 10-nanometer technology. Not only have we started
the IP validation process early, we have also completed certification of over 35 design tools.
Annual Growth Rate
Capacity: 12-inch equivalent wafers
> 28nm
2015 wafer shipment is expected to be approximately 9.5 million 12-inch
≤ 28nm
equivalent wafers.
In 2014, 7-nanometer technology entered advanced development stage. Development activities in 2015 will focus on
selection of transistor architecture, baseline manufacturing process setup for both transistors and interconnects, and initial
reliability evaluations.
In addition to silicon device scaling, we are working on system scaling through advanced packaging to increase system
bandwidth and to decrease power consumption and device form factors. TSMC’s Chip-on-Wafer-on-Substrate (CoWoS®)
technology continues to expand its applications from FPGA to network and to high performance computing using
20SoC or 16FF+ for the top dies. In parallel, TSMC’s Integrated Fan-Out (InFO) technology has been developed for such
applications as mobile and consumer products. We are qualifying InFO 16-nanometer products for volume ramp-up in
2016. Meanwhile we are working on our second generation InFO to supplement the silicon scaling of the 10-nanometer
generation.
Corporate Developments
In January 2015, TSMC’s board of directors approved the sale of TSMC Solid State Lighting (TSMC SSL) to Epistar, which
is the world’s largest manufacturer of LED epitaxial wafers and dies, through an equity ownership transfer. The share
transfer is valued at NT$1.46 per share with a total of NT$825 million proceeds to TSMC. An important part of the
ownership change is that no employee of TSMC SSL will lose employment. After the transfer, TSMC will exit the LED
industry.
Honors and Awards
TSMC received recognitions for achievements in corporate governance and citizenship, economic contribution, financial
reporting, innovation, investor relations, management, and sustainability in 2014 from organizations including
FinanceAsia, Fortune Magazine, Institutional Investor, IR Magazine, GlobalViews Magazine, CommonWealth Magazine,
RobecoSAM, and the Financial Times and Standard Chartered Bank.
In particular, TSMC was named the Leader of the Dow Jones Sustainability Index for the Semiconductors and
Semiconductor Equipment Industry Group for the second year in a row. The honor affirms the Company’s commitment to
sustainability and corporate social responsibility.
Outlook
TSMC positioned itself with the right technology to capture maximum benefit from the growth in demand for mobile
devices in the past five years. We continue to believe that these products will propel our growth for the next few years
as consumers in emerging economies demand smartphones and tablets with both powerful functionality and accessible
prices.
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We are now utilizing the same strategy to ride the next wave of new evolutionary mobile devices–the Internet of Things.
The Internet of Things not only drive a multitude of consumer devices connected to the network, it will also drive
continuously increasing data processing power on various processors, in data centers, and in many mobile devices. For
example, exciting applications such as wearables, smart cars, smart homes, and smart cities are the major IoT applications
which promise to make semiconductors ubiquitous in our lives.
Innovators are already hard at work designing a myriad of ways to create a better life by linking objects all around us into
an intelligent network. To turn their visions into reality, they need semiconductors with processing power, connectivity,
ultra-low power, various types of sensors, and system-level integration, including advanced packaging. We have made
much progress in developing all of those necessary technologies to make TSMC a critical part of the IoT ecosystem. At the
same time, we are also investing in the capacity in both advanced and specialty technologies to supply the demand from
this highly promising and still evolving market.
With our unwavering dedication to technology leadership, manufacturing excellence, and customer trust, we believe we
can serve as a vital supplier of the fundamental building blocks of the semiconductor industry’s “next big things”. More
importantly, we are preparing for many more years of profitable growth and good shareholder returns.
Morris Chang
Chairman
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2. Company Profile
To carve elaborate images on eggshells is an art that
requires excellence in craftsmanship. With its competitive
advantages of technology leadership, manufacturing
excellence, and customer trust, TSMC pays precise attention
to every detail, and moves forward with full commitment.
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 8,876 different
products using 210 different technologies for 453 different customers in 2014.
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 8.18 million 12-inch equivalent
wafers in 2014. 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 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 43,000 people worldwide at the end of 2014.
By leveraging the successful mass production of 28nm, including 28HP, 28HPM, 28HPL and 28LP, TSMC continuously delivered a
highly competitive performance/cost solution 28HPC (High Performance Compact) in 2014. This process is seamlessly applicable
to the 28nm ecosystem, accelerating time-to-market for customers. Furthermore, 20nm System-on-Chip technology (20SoC)
entered the production stage with smooth ramping and stable yield performance. By introducing the advanced patterning
technique, this process provides better density and power value for both performance-driven products and mobile computing
applications migration. In addition, 16nm FinFET Plus (16FF+) process passed full reliability qualification on schedule in the
fourth quarter of 2014, and nearly 60 customer designs are currently scheduled for tape-out by the end of 2015. Due to rapid
progress in yield and performance, 16FF+ volume ramp is expected to begin around July in 2015. TSMC’s comprehensive 16FF+
design ecosystem supports a wide variety of EDA tools and hundreds of process design kits with more than 100 IPs, and all have
been silicon validated. Also, 10nm technology is under development and on track to start risk production in the fourth quarter of
2015. The Company anticipates customer tape-out in the fourth quarter of 2015 and volume production in 2016. In addition to
general-purpose logic process technology, TSMC supports the wide-ranging needs of its customers with embedded non-volatile
memory, embedded DRAM, Mixed Signal/RF, high voltage, CMOS image sensor, MEMS, silicon germanium technologies and
automotive service packages.
TSMC’s subsidiaries TSMC Solid State Lighting Ltd. and TSMC Solar Ltd. engage in researching, developing, designing,
manufacturing and selling solid state lighting devices and related products and systems, and solar-related technologies and
products, respectively. In January 2015, TSMC announced a sale of all TSMC SSL shares held by TSMC and TSMC’s subsidiary to
Epistar Corp. After this transaction, TSMC completely exited TSMC SSL.
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”.
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2.2 Market/Business Summary
2.2.1 TSMC Achievements
In 2014, TSMC maintained its leading position in the total
foundry segment of the global semiconductor industry, with
an estimated market segment share of 54%. 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 2014, 42% of TSMC’s
wafer revenue came from manufacturing processes with
geometries of 28nm and below.
With TSMC’s focus on customer trust, the Company
strengthened its Open Innovation Platform® (OIP) initiative
in 2014 with additional services. During the 2014 Open
Innovation Platform® Ecosystem Forum, the Company
revealed 16nm FinFET Plus Reference Flow (both full-chip and
IP Design), to highlight the success of design enablement
through OIP. The OIP Ecosystem Forum, which was held
October 2014 in San Jose, California, was well attended by
both customers and ecosystem partners to demonstrate the
value of collaboration through OIP to foster innovations.
● 16nm FinFET Plus technology (16FF+) passed full reliability
qualification on-schedule in the fourth quarter of 2014.
This enhanced version of TSMC’s 16FF technology operates
40% faster than planar 20nm System-on-Chip technology
(20SoC) or consumes 50% less power at the same speed.
It offers customers a new level of performance and power
optimization targeted at the next generation of high-end
mobile computing, networking, and consumer applications.
● 20nm System-on-Chip technology entered production with
smooth ramping and stable yield performance. It provides
better density and power value than 28nm by introducing
advanced patterning technique for both performance-driven
products and mobile computing applications migration.
● 28nm High Performance (28HP) technology for
performance-driven markets like CPU, GPU, APU, FPGA and
high-speed networking applications.
● 28nm High Performance Mobile Computing (28HPM)
technology for tablets, smartphones, SoC applications with
outstanding performance.
● 28nm High Performance Compact Mobile Computing
(28HPC) technology for mainstream smartphones, DTV,
Storage and SoC applications. 28HPC enables circuit design
to use smaller die size, less over-design and extraordinary
power reduction with excellent process control and
optimized design rules.
TSMC offers the foundry segment’s widest technology
portfolio and continues to invest in advanced technologies
and specialty technologies, which is a key differentiator from
our competitors and provides customers more added value.
● 28nm Low Power (28LP and 28HPL) and RF (28HPL-RF and
28LP-RF) technology for entry-level smartphones, application
processors, tablets, home entertainment and digital
consumer applications.
Technologies that the Company either developed or rolled out
in 2014 include:
Advanced Technology
● 10nm FinFET technology is under development to keep
TSMC’s technology leadership position in the industry. It
is expected to be ready for risk production in the fourth
quarter of 2015. 10nm FinFET can provide the best density/
cost benefit with the desired speed/power performance
to meet 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), GPU (Graphics Processing
Unit), Networking and mobile computing applications,
including smartphones, tablets and high-end SoC devices.
● 40nm general purpose (40G) technology for
performance-driven markets like CPU, GPU, FPGA, HDD,
Game Console, Network Processor and Gigabit Ethernet
applications.
● 40nm Low Power (40LP and 40LP+) and RF technology for
smartphones, DTV (Digital Television), STB (Set-Top-Box),
game and wireless connectivity applications.
● 40nm ultra-low power technology is under development.
It is expected to be ready for production in 2015. It can
serve customers from Internet of Things (IoT) and wearable
devices related applications, such as wireless connectivity,
wearable AP, and sensor hub applications.
● Compared to 55nm Low Power (55LP) process, TSMC’s
55nm Ultra-Low Power (55ULP) process can further reduce
operating voltages by 20% to 30% to lower both active
power and standby power consumption and to enable
significant increases in battery life by 2 to 10 times. In
addition, 55ULP integrates RF and EmbFlash to enable
customers’ SoC designs.
2015. GaN-on-Silicon technology offers the values of less
conduction and switching loss for energy efficient power
delivery.
● 28HPC with 5V LDMOS is available for high precision analog
Specialty Technology
products with amplifiers integrated.
● 28HPM passed automotive grade qualification and entered
risk production for automotive applications.
● 40nm eFlash is under development for general offerings.
Solution will be ready in the second half of 2015 for
applications such as high endurance security MCU, wireless
MCU, high performance MCU, etc.
● 55nm eFlash technology is in production for such
applications as FPGA, general purpose MCU, etc.
● 55nm Ultra-Low Power (ULP) eFlash is under development
and will be available in early 2015 for battery-powered
applications like wireless MCUs, IoT, wearable devices, and
general-purpose MCUs.
● 55/65/90nm customized eFlash technologies were
all qualified and entered production for automotive
applications.
● 55nm high voltage process entered production with the
industry’s smallest SRAM bit cell offering to support narrow
border design of Super Retina display driver IC for high-end
mobile phones.
● 65nm TSI CIS (TSMC Stacked Illumination CMOS Image
Sensor) technology was fully qualified, and is ready for
customer tape-outs in the first quarter of 2015.
● 0.13-micron BCD process is ready for production on both
8” and 12” wafers. This process is expected to extend
qualification for automotive AEC-Q100 Grade-0 in the first
half of 2015.
● 0.18μm BCD second generation entered into production
with multiple products from multiple customers. The
technology also passed automotive process qualification
criteria. It offers worldwide competitive power LDMOS
Rds(on) performance with wide voltage spectrum from
6V to 70V for multiple applications in Computing,
Communication, Consumer, wearable devices and
automotive markets.
● 0.18μm eFlash technology is ready for 18V device
integration for analog-intensive applications such as touch
screen controllers.
● 0.5μm GaN on Silicon 100V Enhancement Mode HEMT
process was qualified for power discrete applications. 650V
GaN on Silicon processes are expected to be qualified in
● Successfully produced the world’s smallest CMOS-MEMS
monolithic accelerometer for customers.
2.2.2 Market Overview
TSMC estimates that the worldwide semiconductor market
in 2014 reached US$354 billion in revenue, a 10% growth
compared to 2013. Total foundry, a manufacturing
sub-segment of the semiconductor industry, generated total
revenues of US$42 billion in 2014, or 14% YoY growth.
2.2.3 Industry Outlook, Opportunities and Threats
Industry Demand and Supply Outlook
Following 11% growth in 2013, the foundry segment again
posted double-digit growth, to 14% in 2014, mainly driven
by fabless market share gains over IDM and by process
technology advancement.
TSMC forecasts total semiconductor market to grow
mid single digit in 2015. Over the longer term, due to
increasing semiconductor content in electronics devices,
fabless companies’ continuing market share gains, and
increasing in-house Application-Specific Integrated Circuits
(ASIC) from system companies, foundry segment revenue
growth is expected to be much stronger than the projected
4% compound annual growth rate (CAGR) for the total
semiconductor industry from 2014 through 2019.
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 2014.
Smartphones, which have much stronger 25% growth and
higher semiconductor content, have been leading the growth
of the sector.
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The continuing transition to 4G/LTE and LTE-Advanced
handsets will bring double digits growth to the market.
Smartphones with increasing performance, lower power and
more intelligent features continue to propel buying interest
for new handsets in 2015. The growing popularity of mid- to
low-end smartphones in 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.
● Computer
The computer sector’s unit shipments dropped 1% YoY in
2014, after a 10% decline in 2013. Slowing decline was
driven by replacement cycles, Windows XP expiration, and the
slowdown in tablet sales.
The personal computer (PC) market is expected to decline
low to mid single digit in 2015, with increasing variety (e.g.
Convertible, Ultrabook and Chromebook), the introduction of
new operating systems, and consumer replacement 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’s unit shipments declined 3% in 2014,
as growth from TV game console and set-top-boxes was
offset by the decline on digital cameras, MP3 players, and
handheld game consoles, as well as the result of smartphone
cannibalization.
Consumer electronics will be flat to slightly decline in 2015.
The 4K UHD TVs will also continue the high growth within
the otherwise flattening TV market in 2015. TSMC will be
able to capitalize on these trends with advanced technologies
for 4K UHD TV market.
Supply Chain
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 54% market share in 2014. In terms of
TSMC’s net revenue geographic distribution, 69% came from
North America; 13% from the Asia Pacific region, excluding
China and Japan; 7% from China; 6% from Europe; and 5%
from Japan. By end product application, 10% of TSMC’s
net revenue came from the computer sector, 59% from
communications, 10% from consumer products, and 21%
from industrial and standard products.
Differentiation
TSMC’s leadership position is based on three defining
strengths and a business strategy rooted in the Company’s
heritage. TSMC distinguishes itself from the competition
through its technology leadership, manufacturing excellence
and customer trust.
As a technology leader, TSMC is consistently first among
dedicated foundries to develop next-generation leading-edge
technologies. The Company has also established its
technology leadership on more mature technology nodes
by applying the lessons learned on leading-edge technology
development to enrich 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 management, and is extending that
leadership through its Open Innovation Platform® and
Grand Alliance initiatives. The TSMC Open Innovation
Platform® initiative hastens the pace of innovation among
the semiconductor design community, its ecosystem partners
and TSMC’s IP, design implementation and design for
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 empower innovation throughout
the supply chain and that drive the creation and sharing
of newly created revenue and profits. The TSMC Grand
Alliance is one of the most powerful forces for innovation in
the semiconductor industry, bringing together customers,
electronic design automation (EDA) partners, IP partners,
and key equipment and materials suppliers at a new, higher
level of collaboration. Its objectives are to help customers,
the alliance members and TSMC win business and stay
competitive.
The foundation for customer trust is a commitment TSMC
made when it first opened for business over a quarter century
ago: to never compete with our customers. As a result,
TSMC has never owned nor marketed a single semiconductor
product design, but rather has focused all of its resources on
becoming the trusted foundry for our customers.
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 System-on-Chip technology (20SoC) and 16nm FinFET
Plus (16FF+) technologies. 20SoC technology entered the
production stage with smooth ramping and stable yield
performance. 16FF+ technology passed full reliability
qualification on schedule in the fourth quarter of 2014, and
is expected to begin volume ramp around July 2015. Also, the
even more leading 10nm technology is under development
and on track to start risk production in the fourth quarter of
2015. TSMC maintains technology leadership by collaborating
in the development process through early engagement and
technology definition that provides a smooth transition
for TSMC’s advanced technology customers. At the same
time, the Company maintains its leadership in specialty
technologies by broadening its offerings and expanding their
integration into more advanced process nodes.
Numerous other efforts to ensure manufacturing excellence
through product grade enhancements and manufacturing
technology innovation are underway.
To address challenges inherent in the electronic product life
cycle 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 objectives.
● Short Term Semiconductor Business Development Plan
1. Substantially ramp the business and sustain advanced
technology market share through increased capacity
investment.
2. Maintain mainstream technology market share by
expanding business into new customers and market
segments with off-the-shelf technologies.
3. Further expand TSMC’s business and service infrastructure
into emerging and developing markets.
● Long Term Semiconductor Business Development Plan
1. Continue developing leading-edge technologies consistent
with Moore’s Law.
2. Broaden specialty business contributions by further
developing derivative technologies.
3. Provide more integrated services, covering system-level
integration design, design technology definition, design
tool preparation, wafer processing, and backend services,
that deliver more value to customers through optimization
solutions.
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2.3 Organization
2.3.1 Organization Chart
Audit Committee
Compensation
Committee
Shareholders’ Meeting
Board of Directors,
Chairman,
Vice Chairman
As of 02/28/2015
Internal Audit
Co-CEO Office
Finance and
Spokesperson
Legal
Research and Development-Specialty,
Operations,
Human Resources
Research and Development, Asia, Europe, North America,
Business Development, Corporate Planning Organization,
Quality and Reliability, Information Technology,
Materials Management and Risk Management, Customer Service
2.3.2 Major Corporate Functions
Quality and Reliability
Operations
● In charge of operations of 150mm, 200mm and 300mm
Fabs, as well as affiliate fabs; product development,
manufacturing technology, as well as back-end technology,
and service are part of the organization’s responsibility
Human Resources
● Includes human resources management and organizational
development, as well as proprietary information protection
(PIP) and physical security management
Research and Development
● Includes advanced and specialty technology development,
exploratory research and advanced development, as well as
design and technology platform development
● In charge of ensuring and managing the quality and
reliability of the Company’s products
Information Technology
● Responsible for the integration of the Company’s technology
& business IT systems; developing IT infrastructure, providing
communication services, ensuring IT security and service
quality are also part of the organization’s responsibility
Materials Management and Risk Management
● Includes procurement, warehousing, import and export,
and logistics support; the organization is also responsible
for environmental protection, industrial safety, occupational
health, and risk management
Customer Service
Asia
● Provides support and service for customers in North
● In charge of the sales operations, market development, field
America, Europe, and Asia
technical support and service for Asia customers
Europe
● In charge of technical marketing, field technical support and
service for European customers
North America
Internal Audit
● Inspect and review whether TSMC’s internal control
system is adequate in design and effective in operation
with independent risk assessment to ensure compliance
with TSMC’s policies and procedures as well as external
regulations
● In charge of sales operations, market development, field
technical support and service for North America customers
Finance and Spokesperson
● In charge of corporate finance, accounting and corporate
communication; Chief Financial Officer, the head of the
organization, also serves as company spokesperson
Legal
● Responsible for corporate legal affairs, including litigation,
commercial transactions, patents and management of
other intellectual properties; and compliance with relevant
domestic and international laws and regulations
Business Development
● Includes business development for electronic products,
identification of new applications, as well as development of
markets for specialty technology; exploring and developing
new markets, strengthening the relationship with
customers, as well as managing the Company’s brand are
handled by the organization
Corporate Planning Organization
● In charge of the planning for operational resources, as well
as for production and demand; the integration of business
process, corporate pricing and market analysis and forecast
are also part of the organization’s responsibility
012
013
2.4 Board Members
2.4.1 Information Regarding Board Members
Title/Name
Chairman
Morris Chang
Vice Chairman
F.C. Tseng
Nationality
or Place of
Registration
Date Elected
Term Expires
Date First
Elected
Shares
%
Shares
%
Shareholding When Elected
Current Shareholding
Spouse & Minor Shareholding
U.S.A.
06/12/2012
06/11/2015
12 /10/1986
123,137,914
0.48%
125,137,914
0.48%
Shares
%
135,217
0.00%
R.O.C.
06/12/2012
06/11/2015
05/13/1997
34,662,675
0.13%
34,472,675
0.13%
132,855
0.00%
Director
National Development Fund, Executive Yuan
(Note 1)
Representative:
Johnsee Lee
R.O.C.
08/06/2010
(Note 2)
06/12/2012
06/11/2015
12/10/1986
1,653,709,980
6.38%
1,653,709,980
6.38%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Independent Director
Sir Peter Leahy Bonfield
UK
06/12/2012
06/11/2015
05/07/2002
Independent Director
Stan Shih
R.O.C.
06/12/2012
06/11/2015
04/14/2000
1,480,286
0.01%
1,480,286
0.01%
16,116
0.00%
Selected Education, Past Positions & Current Positions at Non-profit Organizations
Bachelor Degree in Mechanical Engineering, MIT
Master Degree in Mechanical Engineering, MIT
Ph.D. in Electrical Engineering, Stanford University
Former Group Vice-President, Texas Instruments Inc.
Former President & COO, General Instrument Corporation
Former Chairman, Industrial Technology Research Institute
Former CEO, TSMC
Member of National Academy of Engineering, U.S.A.
Life Member Emeritus of MIT Corporation
Fellow of the Computer History Museum, U.S.A.
Bachelor Degree in Electrical Engineering, National Chengkung University
Master Degree in Electrical Engineering, National Chiao Tung University
Ph.D. in Electrical Engineering, National Chengkung University
Honorary Ph.D., National Chiao Tung University
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.
Ph.D. in Chemical Engineering, Illinois Institute of Technology
MBA, University of Chicago
Graduate of Harvard Business School’s Advanced Management Program
Former Principal Investigator, Argonne National Laboratory
Former Senior Manager, Johnson Matthey Inc.
Former President, Industrial Technology Research Institute
Former Chairman, Development Center for Biotechnology
Managing Director, Development Center for Biotechnology
Honorary Chairman, Taiwan Bio Industry Organization
Bachelor Degree in Engineering, Loughborough University
Honours Degree in Engineering, Loughborough University
Former CEO and Chairman of the Executive Committee, British Telecommunications Plc
Former Chairman and CEO, ICL Plc
Former Vice President, the British Quality Foundation
Fellow of the Royal Academy of Engineering
Chair of Council and Senior Pro-Chancellor, Loughborough University, UK
BSEE, National Chiao Tung University
MSEE, National Chiao Tung University
Honorary EE Ph.D., National Chiao Tung University
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.A.
Co-Founder, Chairman Emeritus, Acer Group
Former Chairman & CEO, Acer Group
Independent Director
Thomas J. Engibous
U.S.A.
06/12/2012
06/11/2015
06/10/2009
-
-
-
-
014
Chairman, National Culture and Arts Foundation, R.O.C.
Director, Public Television Service Foundation, R.O.C.
Council member of Asian Corporate Governance Associate (ACGA)
-
-
Bachelor Degree in Electrical Engineering, Purdue University
Master Degree in Electrical Engineering, Purdue University
Honorary Doctorate in Engineering, Purdue University
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
Member of National Academy of Engineering
Member of Texas Business Hall of Fame
Woodrow Wilson Award
Honorary Director of Catalyst
Honorary Trustee, Southwestern Medical Foundation
As of 02/28/2015
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, Chairman of Audit Committee &
Compensation Committee member, Acer Inc.
CEO, Personal Genomics, Inc.
Independent Director of:
- Far Eastern New Century Corp.
- Zhen Ding Technology Holding Ltd.
Chairman, NXP Semiconductors N.V., the
Netherlands
Director of:
- L.M. Ericsson, Sweden
- Mentor Graphics Corporation Inc., Oregon, U.S.A.
- Global Logic Inc., U.S.A.
Member of:
- The Longreach Group Advisory Board
- New Venture Partners LLP Advisory Board
Board Mentor, CMi
Senior Advisor to Rothschild, London
Group Chairman, iD SoftCapital
Director & Honorary Chairman, Acer Inc.
Director of:
- Qisda Corp.
- Wistron Corp.
- Nan Shan Life Insurance Co., Ltd.
- Egis Technology Inc.
- Digitimes Inc.
Chairman, J. C. Penney Company Inc.
(Continued)
015
Title/Name
Independent Director
Gregory C. Chow
Nationality
or Place of
Registration
Date Elected
Term Expires
Date First
Elected
U.S.A.
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
R.O.C.
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
Top 10 Shareholders
Not Applicable
Major institutional shareholders of National Development Fund: Not applicable.
Note 2: Mr. Johnsee Lee was appointed as the representative of National Development Fund on August 6, 2010.
Selected Current Positions at TSMC and
Other Companies
None
None
Selected Education, Past Positions & Current Positions at Non-profit Organizations
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 University of Hong Kong 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
Inns of Court School of Law, England
Barrister-at-law, England
Advocate & Solicitor, Singapore
Attorney-at-law, California, U.S.A.
Former Senior Vice-President & General Counsel, TSMC
Former President, National Culture & Arts Foundation, R.O.C.
Former Vice-President, Echo Publishing, Taiwan
Partner, Chen & Associates Law Offices, Taiwan
Partner, Ding & Ding Law Offices, Taiwan
Lawyer, Heller, Erhman, White & McAuliffe, San Francisco, California, U.S.A.
Lawyer, Sullivan & Cromwell, New York, U.S.A.
Lawyer, Tan, Rajah & Cheah, Singapore
Professor, Soochow University
Professor, National Chengchi University
Chair Professor, National Tsing Hua University
Associate Professor, Soochow University
Lecturer, Nanyang University, Singapore
Chairman, National Performing Arts Center
Advisor, Executive Yuan, R.O.C.
Sponsor and Founder, Taipei Story House
Director, National Culture and Arts Foundation, R.O.C.
Director, Republic of China Female Cancer Foundation
016
017
2.4.2 Remuneration Paid to Directors (Note 1)
Unit: NT$ thousands
Base Compensation (A)
Severance Pay and
Pensions (B) (Note 3)
Compensation to
Directors (C)
Allowances (D)
(Note 5)
Director’s Remuneration
Total Remuneration
(A+B+C+D) as a % of 2014
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)
Severance Pay and
Pensions (F) (Note 3)
Employee Profit Sharing (G)
Exercisable Employee
Stock Options (H)
(Note 6)
Granted Employee
Restricted Stock (I)
(Note 7)
Total Compensation
(A+B+C+D+E+F+G) as
a % of 2014 Net Income
(Note 8)
From TSMC
From All
Consolidated
Entities
From TSMC
From All
Consolidated
Entities
From TSMC
(Note 4)
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)
32,586
32,586
864
864
406,854
406,854
3,806
3,806
0.17%
0.17%
-
1,942
-
32,011
-
-
-
-
-
-
-
-
0.17%
0.18%
2,842
Title/Name
Chairman
Morris Chang
Vice Chairman
F.C. Tseng
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
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: Dr. Rick Tsai resigned as a director of TSMC effective January 27, 2014 and thereafter as directors and executives of TSMC’s subsidiaries.
Note 3: Pensions funded/paid according to applicable law.
Note 4: TSMC Board adopted a proposal that includes 2014 compensation to TSMC’s directors in the amount of NT$ 406,854 thousand at its meeting on February 10, 2015. The amount is preliminary.
Note 5: The above-mentioned figures include expenses for Company cars and gasoline reimbursement, but do not include compensation paid to Company drivers (totaled NT$ 4,441 thousand).
Note 6: Represents the number of cumulative employee stock options exercisable as of the date of this Annual Report.
Note 7: TSMC did not issue employee restricted stock in 2014, and as of the date of this Annual Report.
Note 8: Total remuneration and compensation paid to TSMC’s directors in 2013 was NT$339,617 thousand, accounting for 0.18% of 2013 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
2014
NT$0 ~ 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
NT$50,000,000 ~ NT$99,999,999
Over NT$100,000,000
Total
None
None
Morris Chang
9
F.C. Tseng
None
None
Morris Chang
9
Rick Tsai
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
President and Co-Chief Executive Officer
C.C. Wei
Senior Vice President and Chief Information Officer
Information Technology, Materials Management and
Risk Management
Stephen T. Tso
Senior Vice President,
Chief Financial Officer and Spokesperson
Finance
Lora Ho
Senior Vice President
Research and Development
Wei-Jen Lo (Note 3)
Senior Vice President of TSMC and
President of TSMC North America
Rick Cassidy (Note 3)
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
Vice President
Operations/300mm Fabs
J.K. Wang
Vice President
Corporate Planning Organization
Irene Sun
Nationality
On-board Date
(Note 2)
Shareholding
Spouse & Minor
Shareholding
%
Shareholding
R.O.C.
11/15/1993
12,977,114
0.05%
-
%
-
R.O.C.
02/01/1998
7,179,207
0.03%
261
0.00%
R.O.C.
12/16/1996
13,237,064
0.05%
-
-
R.O.C.
06/01/1999
6,381,080
0.02%
110,268
0.00%
R.O.C.
07/01/2004
1,468,127
0.01%
U.S.A.
11/14/1997
-
-
R.O.C.
01/01/1987
7,592,595
0.03%
R.O.C.
06/02/1997
4,290,831
0.02%
-
-
-
-
-
-
-
-
R.O.C.
01/01/1987
7,273,122
0.03%
2,194,107
0.01%
R.O.C.
03/01/2000
2,051,180
0.01%
1,103,253
0.00%
R.O.C.
01/01/1987
12,498,018
0.05%
1,321,036
0.01%
R.O.C.
02/11/1987
2,553,947
0.01%
160,844
0.00%
R.O.C.
10/01/2003
800,709420,709
0.00%
--
--
-
-
-
-
-
-
-
-
-
-
-
-
-
TSMC Shareholding by
Nominee Arrangement
(Shares)
Education & Selected Past Positions
Selected Current Positions at Other
Companies
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
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
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
Master, Business Administration, National Taiwan University, Taiwan
Senior Director, Accounting, TSMC
Vice President & CFO, TI-Acer Semiconductor Manufacturing Corp.
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
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
None
None
As of 02/28/2015
Managers Who are Spouses or within Second-degree
Relative of Consanguinity to Each Other
Title
None
Name
None
Relation
None
None
None
None
None
None
Director, TSMC subsidiaries
None
None
None
Director and/or Supervisor, TSMC subsidiaries
Director, TSMC affiliates
President, TSMC subsidiaries
None
None
None
None
None
None
None
Director, TSMC North America
None
None
None
Director, TSMC subsidiaries
Director, TSMC affiliate
Deputy Director
M.J. Tzeng
Siblings
None
None
None
Director, TSMC affiliates
None
None
None
None
None
None
None
None
None
None
None
None
Manager
J.J. Wang
Siblings
None
None
None
(Continued)
020
021
Title
Name
(Note 1)
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
Vice President and General Counsel
Legal
Sylvia Fang (Note 4)
Vice President
Human Resources
Connie Ma (Note 4)
Nationality
On-board Date
(Note 2)
Shareholding
Spouse & Minor
Shareholding
%
Shareholding
%
TSMC Shareholding by
Nominee Arrangement
(Shares)
R.O.C.
04/26/2000
2,654,746
0.01%
1,024,933
0.00%
R.O.C.
11/14/1994
1,000,419
0.00%
-
-
R.O.C.
12/15/1997
652,532
0.00%
60,802
0.00%
R.O.C.
04/30/2009
220,000
0.00%
45,000
0.00%
-
-
-
-
R.O.C.
03/20/1995
700,285
0.00%
419,112
0.00%
34,000
R.O.C.
06/01/2014
40,000
0.00%
-
-
-
Note 1: Senior Vice President and General Counsel Dr. Richard Thurston voluntarily retired, effective July 16, 2014.
Note 2: On-board date means the official date joining TSMC.
Note 3: Dr. Wei-Jen Lo and Mr. Rick Cassidy were promoted to Senior Vice President, effective February 18, 2014.
Note 4: Ms. Sylvia Fang and Ms. Connie Ma were promoted to Vice President, effective August 12, 2014.
Education & Selected Past Positions
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.
Master of Comparative Law, School of Law, University of Iowa
Associate General Counsel, TSMC
Taiwan International Patent and Law Office (TIPLO)
EMBA, International Business Management, National Taiwan University
Director of Human Resources, TSMC
Senior Vice President of Global Human Resources, Trend Micro Inc.
Selected Current Positions at Other
Companies
Managers Who are Spouses or within Second-degree
Relative of Consanguinity to Each Other
None
None
Director, TSMC subsidiaries
Director, TSMC affiliate
President, TSMC subsidiaries
None
Director, TSMC subsidiaries
Director, TSMC affiliate
None
Title
None
None
None
None
None
None
Name
None
None
None
None
None
None
Relation
None
None
None
None
None
None
022
023
2.5.2 Compensation Paid to CEO, President and Vice Presidents (Note 1)
Unit: NT$ thousands
Salary (A)
Severance Pay and Pensions (B)
(Note 5)
Bonuses and Allowances (C)
(Note 6)
From TSMC
From All
Consolidated
Entities
From TSMC
From All
Consolidated
Entities
From TSMC
From All
Consolidated
Entities
Employee Profit Sharing (D)
(Note 7)
Total Compensation as a % of
2014 Net Income (A+B+C+D)
(Note 8)
Exercisable Employee Stock
Options (K shares)
(Note 9)
Exercisable Employee Restricted
Stock (K shares)
(Note 10)
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
79,813
95,215
13,537
13,883
609,582
659,230
580,533
-
580,533
-
0.49%
0.51%
-
-
-
-
250
Title
Name
President and Co-Chief Executive Officer
President and Co-Chief Executive 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
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
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
Vice President and General Counsel
Legal
Vice President
Human Resources
Mark Liu
C.C. Wei
Stephen T. Tso
Richard Thurston
(Note 2)
Lora Ho
Wei-Jen Lo (Note 3)
Rick Cassidy (Note 3)
M.C. Tzeng
Jack Sun
Y.P. Chin
N.S. Tsai
J.K. Lin
J.K. Wang
Irene Sun
Burn J. Lin
Y.J. Mii
Cliff Hou
Been-Jon Woo
Sylvia Fang (Note 4)
Connie Ma (Note 4)
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 the Company will face before the compensation and profit sharing proposals are submitted to the Board of Directors for approval.
Note 2: Senior Vice President and General Counsel Dr. Richard Thurston voluntarily retired, effective July 16, 2014.
Note 3: Dr. Wei-Jen Lo and Mr. Rick Cassidy were promoted to Senior Vice President, effective February 18, 2014.
Note 4: Ms. Sylvia Fang and Ms. Connie Ma were promoted to Vice President, effective August 12, 2014.
Note 5: Pensions funded/paid according to applicable law.
Note 6: The above-mentioned figures include the expense for the employees’ cash bonuses distributed in May, August, November 2014 and February 2015, Company cars and gasoline reimbursement,
but does not include compensation paid to Company drivers (totaled NT$3,206 thousand).
Note 7: 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 9, 2015.
Note 8: Total compensation paid to TSMC’s Chief Executive Officer and Executive Officers in 2013 was NT$1,203,742 thousand, accounting for 0.64% of 2013 net income.
Note 9: Represents cumulative employee stock options exercisable as of the date of this Annual Report.
Note 10: TSMC did not issue employee restricted stock in 2014, and as of the date of this Annual Report.
Compensation Paid to CEO, President and Vice Presidents
NT$0 ~ 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
None
None
None
2014
From All Consolidated Entities and Non-consolidated Affiliates
None
None
None
None
NT$15,000,000 ~ NT$29,999,999
Sylvia Fang, Connie Ma
Sylvia Fang, Connie Ma
NT$30,000,000 ~ NT$49,999,999
NT$50,000,000 ~ NT$99,999,999
Richard Thurston, Burn J. LIN, N.S. Tsai, J.K. Lin, Cliff Hou,
Been-Jon Woo, J.K. Wang, Irene Sun
Wei-Jen Lo, Lora Ho, Jack Sun, M.C. Tzeng, Y.P. Chin, Y.J. Mii
Richard Thurston, Burn J. LIN, N.S. Tsai, J.K. Lin, Cliff Hou,
Been-Jon Woo, J.K. Wang, Irene Sun
Wei-Jen Lo, Lora Ho, Rick Cassidy, Jack Sun, M.C. Tzeng, Y.P. Chin,
Y.J. Mii
Over NT$100,000,000
Mark Liu, C.C. Wei, Stephen T. Tso
Mark Liu, C.C. Wei, Stephen T. Tso
Total
20
20
024
025
2.5.3 Employee Profit Sharing Granted to Management Team (Note 1)
Unit: NT$ thousands
Title
President and Co-Chief Executive Officer
President and Co-Chief Executive 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
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
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
Vice President and General Counsel
Legal
Vice President
Human Resources
Name
Mark Liu
C.C. Wei
Stephen T. Tso
Richard Thurston (Note 2)
Lora Ho
Wei-Jen Lo (Note 3)
Rick Cassidy (Note 3)
M.C. Tzeng
Jack Sun
Y.P. Chin
N.S. Tsai
J.K. Lin
J.K. Wang
Irene Sun
Burn J. Lin
Y.J. Mii
Cliff Hou
Been-Jon Woo
Sylvia Fang (Note 4)
Connie Ma (Note 4)
Note 1: The above-mentioned figures are preliminary and the proposed employee profit sharing distribution will be processed after the approval of the same by shareholders at the Annual Shareholders’
Meeting on June 9, 2015.
Note 2: Senior Vice President and General Counsel Dr. Richard Thurston voluntarily retired, effective July 16, 2014.
Note 3: Dr. Wei-Jen Lo and Mr. Rick Cassidy were promoted to Senior Vice President, effective February 18, 2014.
Note 4: Ms. Sylvia Fang and Ms. Connie Ma were promoted to Vice President, effective August 12, 2014.
Stock
(Fair Market Value)
Cash
Total Employee Profit Sharing
Total Employee Profit Sharing Paid to
Management Team as a % of 2014
Net Income
-
580,533
580,533
0.22%
026
027
3. Corporate Governance
In Chinese culture, a seal represents
a person’s credibility and
commitment. At TSMC, we are
committed to integrity and
succeeding together with customers.
3.1 Overview
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, 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.
2014 Corporate Governance Awards
Organization
Dow Jones Sustainability Index
FinanceAsia
IR Magazine (Greater China Awards)
Fortune Magazine
RobecoSAM
CommonWealth Magazine
Awards
DJSI World Semiconductors & Semiconductor Equipment Industry Group Leader
Asia’s Best Company in Technology
Best Corporate Governance
Best Sustainability Practice
Best IR by a Taiwanese Company
Best Financial Reporting
World’s Most Admired Companies
Sustainability Award－Industry Leader & Gold Class
Excellence in Corporate Social Responsibility－Top 10 Large Enterprises – Ranked No.1
Annual Theme Award－Corporate Governance
Taiwan Most Admired Company – Ranked No.1
The Taiwan Institute for Sustainable Energy－Taiwan Corporate Sustainability Awards
Taiwan 10 Most Sustainable Company Awards – First Prize
Taiwan Top 50 Corporate Social Responsibility Report Awards－Large Enterprises, Electronics Industry I – Gold Class
Ministry of Economics
Top 20 Taiwan Innovative Companies – Ranked No.1
National Council for Sustainable Development, Executive Yuan
National Sustainable Development Award－Enterprise Section – First Prize
R.O.C. Securities & Futures Institute
11th Information Disclosure of Public Companies Ranking – Ranked A++
3.2 Board of Directors
Board Structure
TSMC’s Board of Directors consists of eight distinguished members with a great breadth of experience as world-class business
leaders or scholars. We rely on them for their diverse knowledge, personal perspectives, and solid business judgment. Five of
the eight members are independent directors: former British Telecommunications Chief Executive Officer, Sir Peter Bonfield;
Co-Founder, Chairman Emeritus of the Acer Group, Mr. Stan Shih; former Texas Instruments Inc. Chairman of the Board, Mr.
Thomas J. Engibous; Professor of Princeton University, Gregory C. Chow; and Chairman of National Performing Arts Center and
advisor to the Taiwan Executive Yuan, Ms. Kok-Choo Chen. One of the members of the Board Directors is female. The number of
Independent Directors is more than 50% of the total number of Directors.
028
029
Board Responsibilities
Election of Directors
Directors’ Professional Qualifications and Independent Analysis
Under the leadership of Chairman Morris Chang, TSMC’s
Board of Directors takes a serious and forthright approach
to its duties and is a dedicated, competent and independent
Board.
In the spirit of Chairman Chang’s approach to corporate
governance, 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.
The second duty of the Board of Directors is to provide
guidance to the management team of the Company.
Quarterly, TSMC’s management reports to the Board on
a variety of subjects. The management also reviews the
Company’s business strategies with the Board and updates
TSMC’s Board on the progress of those strategies, obtaining
Board guidance as appropriate.
The third duty of the Board of Directors is to evaluate the
management’s performance and to dismiss officers of
the Company when necessary. TSMC’s management has
maintained a healthy and functional communication with
the Board of Directors, has been devoted in executing
guidance of the Board, and is dedicated in running the
business operations, all to achieve the best interests for TSMC
shareholders.
The tenure of office for Directors shall be three years. Our
Board members are nominated through a highly selective
process that considers not only their respective professional
technical competence but also their respective reputation
for ethical behavior and leadership. The independence of
each independent director candidate is also considered and
assessed under relevant law such as the Taiwan “Regulations
Governing Appointment of Independent Directors and
Compliance Matters for Public Companies”. The final slate
of candidates is put to the shareholders for voting at the
relevant annual shareholders’ meeting. Under R.O.C. law, in
which TSMC was incorporated, any shareholders holding one
percent or more of our total outstanding common shares
may nominate their own candidate to stand for election
as a Board member. This democratic mechanism allows
our shareholders to become involved in the selection and
nomination process of Board candidates.
Directors’ Compensation
TSMC’s Articles of Incorporation restricts the amount of
compensation payable to its directors that the Company
may make from its distributable earnings (defined as net
income after required regulatory provisions). Over the
years, TSMC directors’ compensation declined from 1% of
TSMC’s distributable earnings to 0.3%, before being capped
to no more than 0.3% of its distributable compensation.
In addition, directors who also serve as executive officers
of the Company are not entitled to receive any director
compensation.
According to the relevant requirements set by Taiwan’s Securities and Futures Bureau, the professional qualifications and
independence status of the Company’s Board members are listed in the table below.
Meet the Following Professional Qualification Requirements,
Together with at Least Five Years Work Experience
Criteria (Note)
An Instructor or
Higher Position in
a Department of
Commerce, Law,
Finance, Accounting,
or Other Academic
Department Related
to the Business Needs
of the Company in
a Public or Private
Junior College,
College or University
A Judge, Public
Prosecutor, Attorney,
Certified Public
Accountant, or
Other Professional or
Technical Specialists
Who Has Passed a
National Examination
and Been Awarded
a Certificate in a
Profession Necessary
for the Business of
the Company
Have Work
Experience in the
Area of Commerce,
Law, Finance, or
Accounting, or
Otherwise Necessary
for the Business of
the Company
1
2
3
4
5
6
7
8
9
10
Number of Other
Taiwanese Public
Companies
Concurrently Serving
as an Independent
Director
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
-
1
2
-
-
-
-
-
Name/Criteria
Morris Chang
Chairman
F.C. Tseng
Vice Chairman
Johnsee Lee
Director
Sir Peter Leahy Bonfield
Independent Director
Stan Shih
Independent Director
Thomas J. Engibous
Independent Director
Gregory C. Chow
Independent Director
Kok-Choo Chen
Independent Director
Note: Directors, during the two years before being elected and during the term of office, meet any of the following situations, please tick the appropriate corresponding boxes:
1. Not an employee of the company or any of its affiliates;
2. Not a director or supervisor of the company or any of its affiliates. The same does not apply, however, in cases where the person is an independent director of the company, its parent company,
or any subsidiary in which the company holds, directly or indirectly, more than 50 percent of the voting shares;
3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one
percent or more of the total number of issued shares of the company or ranks as one of its top ten shareholders;
4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the above persons in the preceding three subparagraphs;
5. Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the company or ranks as of its top
five shareholders;
6. Not a director, supervisor, officer, or shareholder holding five percent or more of the shares of a specified company or institution that has a financial or business relationship with the company;
7. Not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial,
accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof, provided that this restriction does not apply to any member of the compensation
committee who exercises powers pursuant to Article 7 of the “Regulations Governing the Establishment and Exercise of Powers of Compensation Committees of Companies whose Stock is Listed
on the TWSE or Traded on the GTSM”;
8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the company;
9. Not been a person of any conditions defined in Article 30 of the Company Law; and
10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.
3.2.1 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 following major matters:
● 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;
● Potential fraud investigation reports;
● Corporate risk management;
030
031
● Hiring or dismissal of an attesting CPA, or the compensation given thereto; and
● Appointment or discharge of financial, accounting, or internal auditing officers, etc.
Under R.O.C. law, the membership of Audit Committee shall consist of all independent Directors. TSMC’s Audit Committee
satisfies this statutory requirement. The Committee also engaged a financial expert consultant in accordance with the rules of
the U.S. Securities and Exchange Commission. The Audit Committee annually conducts self-evaluation to assess the Committee’s
performance and identify areas for further attention.
TSMC’s Audit Committee is empowered by its Charter to conduct any study or investigation it deems appropriate to fulfill its
responsibilities. It has direct access to TSMC’s internal auditors, the Company’s independent auditors, and all employees of
the Company. The Committee is authorized to retain and oversee special legal, accounting, or other consultants as it deems
appropriate to fulfill its mandate. The Audit Committee Charter is available on TSMC’s corporate website.
3.2.2 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.
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 2014,
the average Board Meeting attendance rate was 90% and the attendance rate for the Audit Committee and Compensation
Committee’s Meetings were 80% and 95% respectively.
Board of Directors Meeting Status
Dr. Morris Chang, the Chairman of the Board of Directors, convened four regular meetings and one special meeting in 2014. The
directors’ attendance status is as follows.
Title
Chairman
Vice Chairman
Director
Name
Morris Chang
F.C. Tseng
Na tional Development Fund, Executive Yuan
Representative: Johnsee Lee
Independent Director
Sir Peter Leahy Bonfield
Independent Director
Independent Director
Independent Director
Independent Director
Stan Shih
Thomas J. Engibous
Gregory C. Chow
Kok-Choo Chen
Attendance
in Person
By Proxy
Attendance Rate
in Person (%)
5
5
5
4
5
3
4
5
-
-
-
1
-
2
1
-
100%
100%
100%
80%
100%
60%
80%
100%
Notes
None
None
None
Sir Peter Bonfield participated in the
discussion through telephone at 04/11
Special Meeting, represented by proxy.
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 2014.
2. Recusals of Directors due to conflicts of interests in 2014: Directors recused themselves from the discussion and voting of their compensation resolution.
3. Measures taken to strengthen the functionality of the Board:
－Five of the eight Directors are Independent Directors. The number of Independent Directors is more than 50% of the total number of Directors.
－The Chairman and Vice Chairman of the Board of Directors are not executive officers of the Company.
－TSMC Board delegates various responsibilities and authority to two Board Committees, Audit Committee and Compensation Committee. Both the two Committees consist solely of the five Independent
Directors. Each Committee’s chairperson regularly reports to the Board on the activities and actions of the relevant committee.
Audit Committee Meeting Status
Compensation Committee Members’ Professional Qualifications and Independent Analysis
TSMC’s Audit Committee consists of five members. The tenure is from June 12, 2012 to June 11, 2015.
According to the relevant requirements set by Taiwan’s Securities and Futures Bureau, the professional qualifications and
independence status of the Company’s Compensation Committee members are listed in the table below.
Meet the Following Professional Qualification Requirements, Together with at Least
Five Years Work Experience
Criteria (Note)
An Instructor or Higher
Position in a Department
of Commerce, Law,
Finance, Accounting,
or Other Academic
Department Related to
the Business Needs of
the Company in a Public
or Private Junior College,
College or University
A Judge, Public Prosecutor,
Attorney, Certified Public
Accountant, or Other
Professional or Technical
Specialists Who Has Passed
a National Examination
and Been Awarded a
Certificate in a Profession
Necessary for the Business
of the Company
Have Work Experience in
the Area of Commerce,
Law, Finance, or
Accounting, or Otherwise
Necessary for the Business
of the Company
1
2
3
4
5
6
7
8
Number of Other
Taiwanese Public
Companies
Concurrently Serving
as a Compensation
Committee Member in
Taiwan
ˇ
ˇ
ˇ
ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ
-
-
-
-
-
ˇ
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 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.
Sir Peter Bonfield, Chairman of the Audit Committee, convened four regular meetings and one special meeting in 2014. The
Committee members and consultant’s attendance status is shown in the following table. In addition to these meetings, the
Committee members and consultant participated in five telephone conferences to discuss the Company’s Annual Report to be
filed with the Taiwan and U.S. authorities and investor conference materials with management.
Title
Chair
Member
Member
Member
Member
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
5
4
1
1
2
-
-
-
80%
80%
60%
80%
100%
100%
Sir Peter Bonfield participated in the
discussion through telephone at 04/11
Special Meeting, represented by proxy.
None
None
None
None
Mr. Lobbezoo did not have to attend
04/11 Special Meeting.
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 2014.
2. There were no recusals of independent directors due to conflicts of interests in 2014.
3. Descriptions of the communications between the independent directors, the internal auditors, and the independent auditors in 2014 (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 2014, 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 2014, the Company’s independent auditors did not report any irregularity. The
communication channel between the Audit Committee and the independent auditors functioned well.
032
033
Compensation Committee Meeting Status
● approving appointed General Counsel Ms. Sylvia Fang and Director of Human Resources Ms. Connie Ma as Vice President of
TSMC’s Compensation Committee consists of five members. The tenure is from June 12, 2012 to June 11, 2015.
Mr. Stan Shih, Chairman of the Compensation Committee, convened four regular meetings in 2014. 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 2014.
2. There were no written or otherwise recorded resolutions on which a member of the Compensation Committee had a dissenting opinion or qualified opinion.
3.3 Major Resolutions of Shareholders’ Meeting and Board Meetings
3.3.1 Major Resolutions of Shareholders’ Meeting and Implementation Status
TSMC’s 2014 Annual Shareholders’ Meeting was held in Hsinchu, Taiwan on June 24, 2014. At the meeting, shareholders
present in person or by proxy approved the following resolutions:
(1) The 2013 Business Report and Financial Statements;
(2) The distribution of 2013 profits;
(3) The revisions to the following internal rules:
● Procedures for Acquisition or Disposal of Assets
● Procedures for Financial Derivatives Transactions
Implementation Status
3.3.2 Major Resolutions of Board Meetings
During the 2014 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 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;
● approving the promotion of Mr. Rick Cassidy and Dr. Wei-Jen Lo as Senior Vice President; and
● convening the 2014 Annual Shareholders’ Meeting.
(2) Special Board Meeting of April 11, 2014:
● approving the sale of 82 million common shares of Vanguard International Semiconductor Corporation (VIS), approximately
5% of VIS’ paid-in-capital, at a price of about NT$42.55 per share and a total price of approximately NT$3.49 billion.
(3) Regular Board Meeting of May 12 & 13, 2014:
● approving capital appropriations of US$568.23 million (to establish, convert, and upgrade advanced technology capacity); and
● approving the R&D capital appropriations and sustaining capital appropriation of US$107.00 million.
(4) Regular Board Meeting of August 11& 12, 2014:
● approving capital appropriations of US$3,054.7 billion (including expansion of advanced capacity, conversion of certain
logic capacity to specialty technologies, building and facility installation, and for fourth quarter 2014 R&D capital
appropriations and sustaining capital appropriations);
● approving the capital injection of not more than US$2 billion to TSMC Global Ltd., a wholly-owned BVI subsidiary, for the
purpose of reducing foreign exchange hedging costs; and
034
TSMC, effective August 12, 2014.
(5) Regular Board Meeting of November 10 & 11, 2014:
● approving capital appropriations of US$5,574.77 million (including Installation and expansion of advanced technology
capacity; Conversion of certain logic capacity to specialty technologies; Construction of fab and office buildings and
installation of facilities systems; Expansion of mainstream technology capacity; and First quarter 2015 R&D capital
appropriations and sustaining capital appropriations).
(6) Special Board Meeting of January 9, 2015:
● approving the sale of 565.5 million common shares of TSMC Solid State Lighting Ltd. at a price of NT$825 million
(equivalent to NT$1.46 per share) to Epistar Corporation.
(7) Regular Board Meeting of February 9 & 10, 2015:
● approving 2014 business report and financial statements;
● approving distribution of 2014 profits, and cash dividends, employee cash bonus and employee profit sharing;
● approving capital appropriations of approximately US$2,003.70 million (including: 1. installation of advanced and
mainstream technology capacity; 2. installation of specialty technology capacity; 3. conversion of certain logic capacity to
specialty technologies; 4. capacity installation and conversion for advanced packaging and assembly; 5. second quarter
2015 R&D capital investments and sustaining capital expenditures); and
● convening the 2015 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 2014 Calendar Year and as of the Date of this Annual Report: None.
3.4 Taiwan Corporate Governance Implementation as Required by the Taiwan Financial Supervisory
Commission
Assessment Item
Yes
No
Explanation
Implementation Status
ˇ TSMC has always followed excellent corporate governance practices, provided
the utmost in operational transparency and safeguarded shareholders’ equity.
Although the Company does not have a formal code of practice for corporate
governance, however TSMC has always been highly regarded as the industry
leader in implementing comprehensive corporate governance practices. In
addition, the Company also has a world-class Board of Directors. The Company
believes that corporate governance is based on integrity. TSMC has been proving
its excellent corporate governance in its operating performance and continued
winning of domestic and international awards on best corporate governance
company.
2. Shareholding Structure & Shareholders’ Rights
(1) Does Company have Internal Operation Procedures for handling
shareholders’ suggestions, concerns, disputes and litigation matters. If
yes, has these procedures been implemented accordingly?
(2) Does Company possess a list of major shareholders and beneficial owners
of these major shareholders?
(3) Has the Company built and executed a risk management system and
“firewall” between the Company and its affiliates?
(4) Has the Company established internal rules prohibiting insider trading on
undisclosed information?
ˇ
ˇ
ˇ
ˇ
(1) TSMC has designated appropriate departments, such as Corporate
Communication Division, the SEC Compliance Department, Legal Department,
etc., to handle shareholder suggestions, concerns, disputes or litigation
matters.
(2) TSMC tracks the shareholdings of directors, officers, and shareholders holding
more than 10% of the outstanding shares of TSMC.
(3) TSMC has set up internal rules in the Company’s Internal Control System and
Affiliated Corporations Management.
(4) TSMC has established its “Insider Trading policy” that applies to all employees,
officers and members of the Board of Directors of the Company and to any
other person having a duty of trust or confidence, with respect to transactions
in the Company’s securities. This policy prohibits any insider trading and the
Company regularly provides internal training on this issue.
Non-
implementation
and Its Reason(s)
Same as explanation
None
(Continued)
035
All the resolutions of the Shareholders’ Meeting have been fully implemented in accordance with the resolutions.
1. Does Company follow “Taiwan Corporate Governance Implementation” to
establish and disclose its corporate governance practices?
Yes
No
Explanation
Implementation Status
Non-
implementation
and Its Reason(s)
None
(1) The members of TSMC Board of Directors are nominated via a rigorous
selection process. It not only considers professional competence, but also
attaches great importance to his/her personal reputation on ethics and
leadership. Presently, the Company’s Board of Directors consists of eight
members who possesses world-class managerial and/or academic experiences.
We rely on each directors’ knowledge, personal insight and business
judgment. One female director currently sits on the Board of Director, and a
majority of our Board consists of independent directors.
(2) All important resolutions are decided by the Board of Directors of the
Company. TSMC founded its audit committee and compensation committee
in 2002 and 2003 respectively, and the members of these committees are
all independent directors. In addition, the Company has a Corporate Social
Responsibility Committee which is formed by the Company’s management
team and it reports to the Board of Directors.
(3) As TSMC’s corporate governance concept, the Board of Director’s primary
responsibility is to supervise, provide guidance and evaluate the management’s
performance and to dismiss officers of the Company when necessary. TSMC’s
Board of Directors consists of distinguished members with a great breadth of
experience as world-class business leaders or scholars and adhere high ethical
standards and commitment to the Company. Each quarter’s Board Meeting
is last for two days. Company’s resolutions are determined in board meeting,
also business strategy and future orientation are discussed in the meeting,
in order to create best interest for shareholders. Based on TSMC’s operating
performance and local/international awards of best corporate governance, it
certainly proves the Company’s excellent performance of Board of Directors.
Also, TSMC’s audit committee performs self evaluation and discusses future
issues of concern by questionnaire on annual basis.
(4) The Audit Committee annually evaluates the independence of external auditors
and reports the same to the Board of Directors.
Depending on the situation, the Company’s Corporate Communication Division
and SEC Compliance department will communicate with stakeholders. We also
have publicly disclosed the contact information of our corporate spokesperson
and relevant departments. Also, we have a stakeholder section on our corporate
website to address our corporate social responsibilities and any other issues.
None
We have appointed China Trust as our registrar for our Shareholders’ Meetings.
None
None
(1) TSMC discloses its financials, business and corporate governance status on its
website at http://www.tsmc.com (in Chinese and English).
TSMC’s American Depositary Receipt (ADR) is listed on the New York Stock
Exchange (NYSE). As a foreign issuer, TSMC must comply with NYSE’s rules.
We have been operating in accordance with NYSE listing standards, and have
been disclosing the major differences between our corporate governance
practices and U.S. corporate governance practices. Please see http://www.
tsmc.com/download/english/e03_governance/NYSE_Section_303A.pdf
(2) TSMC has designated appropriate departments (e.g. the 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.
Assessment Item
3.Composition and Responsibilities of the Board of Directors
(1) Has the Company established a diversification policy for the composition
of its Board of Directors and has it been implemented accordingly?
(2) Other than the Compensation Committee and the Audit Committee
which are required by law, does the Company plan to set up other Board
committees?
(3) Has the Company established methodology for evaluating the
performance of its Board of Directors, on an annual basis?
(4) Does the Company regularly evaluate its external auditors’ independence?
4. Has the Company established a means of communicating with its
Stakeholders or created a Stakeholders Section on its Company website?
Does the Company respond to stakeholders’ questions on corporate
responsibilities?
5. Has the Company appointed a professional registrar for its Shareholders’
Meetings?
6. Information Disclosure
(1) Has the Company established a corporate website to disclose information
regarding its financials, business and corporate governance status?
(2) Does the Company use other information disclosure channels (e.g.
maintaining an English-language website, designating staff to handle
information collection and disclosure, appointing spokespersons,
webcasting investors conference etc.)?
7. Has the Company disclosed other information to facilitate a better
understanding of its corporate governance practices (e.g. including but
not limited to 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)?
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
ˇ
Assessment Item
8. Does the Company perform any self evaluations on its corporate governance
practices or appointed any third party to do so? (If yes, please disclose the
Board of Director’s view on the results of such evaluation).
Yes
ˇ
Non-
implementation
and Its Reason(s)
None
Implementation Status
No
Explanation
From January 2015, we have conducted the self-evaluation through the corporate
governance evaluation system which is developed by the TWSE Corporate
Governance Center. We will study the results of such evaluation and implement
remedial actions accordingly.
In 2014, TSMC has won numerous international recognitions for its outstanding
corporate governance practices such as the following: IR Magazine honored TSMC
with its “Best Corporate Governance Company”, “Best Sustainability Practice”,
“Best Investor Relation by Taiwanese Company” and “Best Financial Reporting”;
RobecoSAM honored TSMC with the “Industry Leader & Gold Class” Sustainability
Award; CommonWealth Magazine honored TSMC with “Taiwan’s Most Admired
Companies – Ranked No.1”, “Excellence in Corporate Social Responsibility－Top
10 Large Enterprises – Ranked No.1” and “Annual Theme Award－Corporate
Governance”; The Taiwan Institute for Sustainable Energy－Taiwan Corporate
Sustainability Awards honored TSMC with “Taiwan 10 Most Sustainable Company
Awards – First Prize”; National Council for Sustainable Development, Executive
Yuan honored TSMC with the “National Sustainable Development Award－
Enterprise Section – First Prize”; and “11th Information Disclosure of Public
Companies Ranking – Ranked A++” by R.O.C. Securities & Futures Institute.
Continuing Education/Training of Directors in 2014
Host by
Training/Speech Title
CommonWealth Magazine
Speech: Lack of Qualified Human Resources in Taiwan’s Economy
Taiwan Semiconductor Industry Association
Speech: The Next Big Thing
College of Law, National Taiwan University
Speech: Challenges and Breakthroughs
Securities & Future Institute
Trade Secret Protection
Taiwan Corporate Governance Association
The Effectiveness of Taiwan Corporate Boards is Assessed from the Viewpoint in the
Book “The Effective Board”
Middle and Senior Managers Innovation Academy,
Industrial Technology Research Institute
Speech: Wangdao Corporate Management
Taiwan Corporate Governance Association
Legal Liability of the Directors of Public Companies
Hong Kong Heritage Discovery Centre
Legal Structure and Management of Private Museums
Duration
1 hour
1 hour
1 hour
3 hours
3 hours
2 hours
3 hours
3.5 hours
Securities and Futures Institute
Public Companies Integrity Management and Corporate Social Responsibility Forum
3 hours
Monte Jode Science & Technology Association
Global Patent Litigation Trends and Development
TSMC
Speech: “Recent Political & Economic Developments in Taiwan”
by Dr. Chi SU, Chairman of Taipei Forum
3 hours
45 minutes
Date
01/22
03/27
05/02
05/09
12/02
07/11
11/06
11/09
08/21
12/05
05/13
Name
Morris Chang (Note)
F.C. Tseng
Stan Shih (Note)
Kok-Choo Chen
Johnsee Lee
Morris Chang
F.C. Tseng
Sir Peter Leahy Bonfield
Stan Shih
Thomas J. Engibous
Gregory C. Chow
Kok-Choo Chen
Johnsee Lee
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:
- Conflict-free Minerals
- U.S. SEC Rules update
Note: Selected speeches on corporate governance and related topics.
(1) For employee rights and employee wellness, please refer to “5.5 Employees”
None
on page 70-74 of this Annual Report.
Continuing Education/Training of Management in 2014
(2) For investor relations, supplier relations and rights of stakeholders, please refer
to “7. Corporate Social Responsibility” on page 102-119 of this Annual Report.
(3) For Directors’ training records, please refer to page 37 of this Annual Report.
(4) For Risk Management Policies and Risk Evaluation, please refer to “6.3 Risk
Management” on page 91-101 of this Annual Report.
(5) For Customer Relations Policies, please refer to “5.4 Customer Trust” on page
69-70 of this Annual Report.
(6) TSMC maintains D&O Insurance for its directors and officers.
(Continued)
Name/Title
Lora Ho
Senior Vice President,
Chief Financial Officer
and Spokesperson
Sylvia Fang
Vice President and
General Counsel
Jessica Chou
Director, Accounting
Division
John Liang
Director, Internal Audit
Division
Date
05/09
11/14
12/07-
12/09
05/23
05/23
08/06
11/26
12/12
12/24
Host by
Training
Securities & Future Institute
Trade Secret Protection
- College of Law, National Taiwan University (NTU)
- NTU Law Foundation
International Conference on Trade Secrets Protection and Litigation
Intellectual Property Business Congress (IPBC)
IPBC Asia 2014 (in Shanghai)
Accounting Research and Development Foundation
The Proposed Amendments to R.O.C. Tax Regulations Corresponding to the
Adoption of Taiwan-IFRSs
The R.O.C. Corporate Tax Administrative Relief and Case Studies
How to Build a Competitive Capital Structure
The Comparisons of Legal Responsibilities for “Economic Crime” in China and
Taiwan and Case Studies
The Institute of Internal Auditors, R.O.C.
Regulation Compliance Risk Management for Entities
Accounting Research and Development Foundation
Update of Amendment of Regulations Governing Establishment of Internal Control
Systems by Public Companies
Duration
3 hours
7 hours
16 hours
3 hours
3 hours
3 hours
3 hours
6 hours
6 hours
036
037
In addition, various training programs and speech
presentations were also provided by TSMC’s Legal
Organization for Management and the relevant divisions,
such as:
● Anti-bribery/corruption
● Antitrust (unfair competition)
● Environmental Protection
● Insider Trading
● Intellectual Property Protection
● Privacy Protection
● 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.
At the heart of our corporate governance culture is TSMC’s
Code of Ethics and Business Conduct (the “Code”) that
applies to TSMC and its subsidiaries, and this Code requires
that each employee bears a heavy personal responsibility to
preserve and to protect TSMC’s ethical values and reputation
and to comply with various applicable laws and regulations.
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, and
waste or abuse of corporate assets;
● must not undertake any practices detrimental to TSMC, the
environment and to society;
● must procure all of our raw materials from socially
responsible sources;
property rights, proprietary information and trade secrets of
TSMC, our customers, and others.
With respect to information disclosure, 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.
Our core value in ethics is implemented in four ways by all
of our employees, officers and Board members who must
wholeheartedly embrace and practice the Code. First, TSMC’s
management sets the “tone from the top” by acting in
accordance with the Code so that they may be an example
to all stakeholders. Second, working-level managers are
responsible for ensuring their staff’s understanding of and
compliance with applicable rules and regulations. Thirdly,
we encourage an environment of open communications
in discussing any questions related to the Code. Any
stakeholder may consult his or her direct supervisors, Human
Resources or Legal to obtain timely advice. Lastly, TSMC
requires all employees to stay vigilant and whistle-blow any
noncompliance by anyone to their supervisors, the function
head of Human Resources, the responsible corporate Vice
President that oversees the Ombudsmen system, or to the
Chairman of the Company’s Audit Committee directly. In
particular, the Ombudsmen system allows for anonymous
reporting and is open to external parties such as our vendors
and subcontractors. TSMC treats any complaint and the
investigation thereof in a confidential and sensitive manner,
and strictly prohibits any form of retaliation against any
individual who in good faith reports or helps with the
investigation of any complaint.
● 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 addition, we expect and assist our customers, suppliers,
business partners, and any other entities with whom we deal
(such as consultant or third party agents who act for or on
behalf of TSMC) to recognize and understand TSMC’s ethics
standards to fulfill our responsibilities as a corporate citizen.
In order to build and sustain 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
Any modification to the Code requires the approval of our
Audit Committee composed of independent directors to
ensure our ethics compliance program is independently
judged in light of the highest ethical standards.
Code Administration and Disciplinary Action
To educate and remind our employees of their responsibilities under the Code, we publish our Code and relevant policies on our
intranet and promote its awareness through training courses, posters, and internal news articles. We also have an introductory
training course on the Code which is available to all employees online, as well as advanced courses delving into more specific
individual topics such as anti-corruption and insider trading (available online or in person).
As part of our ethics compliance program, all employees must disclose any matters that cause, or may cause, actual or potential
conflict of interest. In addition to such proactive disclosure requirement employees with certain job responsibilities and senior
officers must periodically declare the existence of any conflict of interest situation. All departments and subsidiaries of TSMC are
also required to conduct Control Self-Assessment (CSA) tests annually to review employees’ awareness of the Code. The results of
such CSA are reviewed to gauge the results of our compliance program.
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
As for our suppliers, vendors and contractors, we require all of them 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 communicate our ethical culture to our
business partners through regular live seminars to prevent any unethical conduct and detect any sign of Code violations.
The Internal Auditor of TSMC plays a critical role in ensuring the Company’s compliance with the Code and relevant rules and
regulations. To ensure that our financial, managerial, and operating information is accurate, reliable, and timely and that our
employee’s actions are in compliance with applicable policies, standards, procedures, laws and regulations, our Internal Auditor
conducts audits of various control points within the company in accordance with its annual audit plan approved by the Board of
Directors and subsequently reports its audit findings and remedial issues to the Board and management on a regular basis.
We do not tolerate any violation of the Code and treat every possible violation incident seriously. Any violator of the Code (or
relevant regulations) will be severely punished to the full extent of our policies and the law, including immediate dismissal,
termination of business relationship, and judicial prosecution as appropriate.
038
039
3.5.1 Taiwan Corporate Conduct and Ethics Implementation as Required by the Taiwan Financial Supervisory
Commission
Assessment Item
1. Establishment of Corporate Conduct and Ethics Policy and Implementation
Measures
(1) Does the company have bylaws and publicly available documents
addressing its corporate conduct and ethics policy and measures, and the
commitment regarding implementation of such policy from the Board of
Directors and the management team?
(2) Does the company establish relevant policies which are duly enforced
to prevent unethical conduct and provide implementation procedures,
guidelines, consequence of violation and complaint procedures in such
policies?
(3) Does the company establish appropriate compliance measures for the
business activities prescribed in paragraph 2, article 7 of the Ethical
Corporate Management Best Practice Principles for TWSE/GTSM Listed
Companies and any other such activities associated with high risk of
unethical conduct?
Yes
No
Summary
Implementation Status
Non-implementation
and Its Reason(s)
None
V
V
(1) Integrity is the most important core value of TSMC’s culture. TSMC is
committed to acting ethically in all aspects of our business. We have
established TSMC Code of Ethics and Business Conduct (the “Code”) to
require that each employee bears a heavy personal responsibility to uphold
TSMC’s ethics value. For more details on the Code and the measures that
TSMC Board of Directors (the “Board”) and the management team take to
ensure compliance of the Code please refer to TSMC’s Annual Report and the
Corporate Social Responsibility Report.
(2) At the heart of our corporate governance culture is the Code that applies to
TSMC and its subsidiaries, and this Code requires that each employee bears a
heavy personal responsibility to preserve and to protect TSMC’s ethical values
and reputation and to comply with various applicable laws and regulations.
Specific requirements under the Code could be found in our Annual Report.
In addition, to educate and remind our employees of their responsibilities
under the Code, we publish our Code and relevant policies on our intranet
and promote its awareness through training courses, posters, and internal
news articles. Furthermore, to ensure that our conduct meets the highest
legal and ethical standards, TSMC provides multiple channels for reporting
business conduct concerns. Please refer to Assessment Item 3 for details.
We do not tolerate any violation of the Code and treat every possible
violation incident seriously. Any violator of the Code (or relevant regulations)
will be severely punished to the full extent of our policies and the law,
including immediate dismissal in accordance with TSMC Employee
Recognition, Disciplinary and Ombudsman Procedure, termination of business
relationship, and judicial prosecution as appropriate.
V
(3) Under the framework of the Code, TSMC has established policies,
2. Ethic Management Practice
(1) Does the company assess the ethics records of whom it has business
V
relationship with and include business conduct and ethics related clauses
in the business contracts?
(2) Does the company set up a unit which is dedicated to or tasked with
promoting the company’s ethical standards and reports directly to the
Board of Directors with periodical updates on relevant matters?
V
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“). The above-
mentioned policies are crucial in strengthening overall compliance with the
Code. TSMC, its employees and its subsidiaries and affiliates are expected
to fully understand and comply with all laws and regulations that govern
our businesses. The Internal Auditor of TSMC also plays a critical role in
ensuring the Company’s compliance with the Code and relevant rules
and regulations. To ensure that our financial, managerial, and operating
information is accurate, reliable, and timely and that our employee’s actions
are in compliance with applicable policies, standards, procedures, laws and
regulations, our Internal Auditor conducts audits of various control points
within the Company in accordance with its annual audit plan approved
by the Board of Directors and subsequently reports its audit findings and
remedial issues to the Board and Management on a regular basis.
(1) We expect and assist our customers, suppliers, business partners, and any
other entities with whom we deal (such as consultant or third party agents
who act for or on behalf of TSMC) to understand and act in accordance with
TSMC’s ethics standards. As for our suppliers, vendors and contractors, we
further require all of them 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 communicate our ethical culture to our business partners
through regular live seminars to prevent any unethical conduct.
(2) TSMC’s Board of Directors strives to perform the responsibilities of supervising
the corporate conduct and ethics compliance practice 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. In addition, General Counsel, the responsible corporate Vice
President who oversees the Ombudsmen system and Internal Auditors update
the Board ethical standards compliance issues on a regular basis. Moreover,
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.
(3) Does the company establish policies to prevent conflict of interests, provide
appropriate communication and complaint channels and implement such
policies properly?
V
(3) TSMC requires newly hired employees to declare any conflict of interest
situation as appropriate. In addition, 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). Furthermore, key employees and
senior officers must periodically declare their compliance status with the Code
according to relevant procedures.
Assessment Item
(4) To implement relevant policies on ethical conducts, does the company
establish effective accounting and internal control systems that are audited
by internal auditors or CPA periodically?
Yes
V
Implementation Status
No
Summary
Non-implementation
and Its Reason(s)
(4) TSMC continues maintaining the integrity of its financial reporting processes
and controls and establishes appropriate internal control systems for
preventing higher potential unethical conduct, and the Internal Auditors
formulate annual audit plans based on the results of the risk assessment and
subsequently reports its audit findings and remedial issues to the Board and
Management on a regular basis. In addition, all departments and subsidiaries
of TSMC are also required to conduct Control Self-Assessment (CSA) tests
annually to review the effectiveness of the internal control system.
(5) Does the company provide internal and external ethical conduct training
V
(5) Training is a major component of our compliance program, conducted
programs on a regular basis?
3. Implementation of Complaint Procedures
(1) Does the company establish specific complaint and reward procedures, set
up conveniently accessible complaint channels, and designate responsible
individuals to handle the complaint received?
(2) Does the company establish standard operation procedures for
investigating the complaints received and ensuring such complaints are
handled in a confidential manner?
(3) Does the company adopt proper measures to prevent a complainant from
retaliation for his/her filing a complaint?
4. Information Disclosure
Does the company disclose its guidelines on business ethics as well as
information about implementation of such guidelines on its website and
Market Observation Post System (“MOPS”)?
throughout the year to refresh TSMC’s employees’ commitment to ethical
conduct, and to get updated information on laws and regulations related
to their daily operations. As for our suppliers, vendors and contractors, we
communicate our ethical culture to our business partners through regular
live seminars to ensure their fully understanding of our commit to ethical
conduct.
(1) TSMC has implemented the “Complaint Policy and Procedures for Certain
Accounting and Legal Matters“ and “Procedures for Ombudsman System“
that allow employees or any whistleblowers with relevant evidence to
report any financial, legal, or ethical irregularities. TSMC also requires all
employees to stay vigilant and whistle-blow any noncompliance by anyone
to their supervisors, the function head of Human Resources, the responsible
corporate Vice President that oversees the Ombudsmen system, or to the
Chairman of the Company’s Audit Committee directly. In particular, the
Ombudsmen system allows for anonymous reporting and is open to external
parties such as our vendors and subcontractors.
(2) TSMC treats any complaint and the investigation thereof in a confidential and
sensitive manner, and such manner is clearly stated in our bylaws.
None
(3) TSMC strictly prohibits any form of retaliation against any individual who in
good faith reports or helps with the investigation of any complaint, and such
requirement is clearly stated in our bylaws.
Our internal website provides guidelines and informative articles on ethics and
honorable business conduct (in both Chinese and English) for employees’ easy
access. In addition, TSMC discloses relevant information in its Annual Report
(which is also available at the MOPS) and CSR Report (available at: http://www.
tsmc.com)
None
V
V
V
V
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 to require that all employees, officers and board members comply with the Code and the other policies and procedures. For details on the implementation of TSMC’s Corporate
Conduct and Ethics, please refer to “3.5 Code of Ethics and Business Conduct” on page 38-41 of this Annual Report.
6. Other important information to facilitate better understanding of the company’s corporate conduct and ethics compliance practices (e.g., 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 38-41 of this Annual Report.
None
3.6 Regulatory Compliance
TSMC’s commitment to integrity has been the cornerstone of TSMC’s robust compliance efforts, which are 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. TSMC’s Legal Organization
periodically updates our internal departments, management and the Audit Committee of applicable regulatory changes so that
internal teams may comply with new regulatory requirements in a timely manner. We are also a proactive advocate for local
legislative and regulatory reform. For example, we have achieved remarkable results in strengthening trade secret protection in
Taiwan, and our major comments on legal reforms to the government have been accepted constructively. 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.
(Continued)
Under the framework of the Code, TSMC has established policies, guidelines and procedures in different compliance 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”). It is
040
041
our belief that the above-mentioned policies are crucial in strengthening overall compliance with the Code. TSMC, its employees
and its subsidiaries and affiliates are expected to fully understand and comply with all laws and regulations that govern our
businesses and make ethical decisions under any circumstances.
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 laws and regulations related to their daily operations.
Highlights of our compliance training program include the following:
● Publicizing our compliance policies via posters, news articles, and compliance guidelines which our employees can access
through our intranet;
● Live seminars focusing on such specific topics as Anti-bribery/corruption, PIP, Contract Management, Intellectual Property,
Privacy Protection, Conflict Minerals, Insider Trading, and Export Control (latter two being primary topics in 2014) which are
mandatory for employee affected by these topics to ensure adequate awareness;
● A wide range of on-line learning programs updated frequently to provide most up-to-date and accurate information and timely
and flexible access for employees to understand the law and key compliance issues, covering Antitrust, Anti-harassment, Insider
Trading, Export Control Management, PIP, Privacy Protection, to name just a few;
● External training of TSMC’s internal teams in Taiwan and abroad to receive on current developments of new laws and
regulations. External experts are also invited to give in-house lectures on key issues, while our internal lawyers comply with
applicable continuing legal education requirements.
To ensure that our conduct meets the highest legal and ethical standards, TSMC provides multiple channels for reporting
business conduct concerns. First of all, we have implemented the “Complaint Policy and Procedures for Certain Accounting and
Legal Matters” and “Procedures for Ombudsman System” that allow employees or any whistleblowers with relevant evidence
to report any financial, legal, or ethical irregularities. To foster an open culture of ethics compliance, we encourage employees
to report suspected wrongdoing within the organization or any parties with whom we do business via the above-mentioned
reporting system. We also established an Ombudsman system open to external reporting. Below is a summary of the Number of
Reported Incidents:
FY 2013
FY 2014
Incidents submitted to the Ombudsman System (Note)
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
Note: There is no case for ethics, finance and accounting matters.
35
-
19
1
7
5
45
-
42
-
4
4
3.6.1 Major Accomplishments
● 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. Because
of its successful implementation, TSMC has also frequently
earned recognition as “best in class” and was asked to share
our experience on EMS implementation to third parties that
included a variety of domestic and foreign organizations
and industrial peers.
● TSMC adopted its Personal Data and Privacy Protection
Policy to comply with the Personal Information Protection
Act of Taiwan that became effective in 2012. This Policy
aims to provide 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, including a variety
of training programs such as seminars and both in-person
and online courses. All staff within our Human Resources
department were provided with proper training to ensure
their compliance with relevant policies and guidelines when
handling personal data of TSMC employees. Compliance
posters in our facilities also increase employees’ awareness
of privacy protection in the workplace. Through these action
steps, we are dedicated to promoting awareness of data
protection and privacy and to creating a culture whereby
an individual’s personal data and privacy are protected and
handled in line with global standards.
In 2014, TSMC achieved several major accomplishments in
regulatory compliance, including the following:
● 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 worked closely
with the authorities concerned to carry out the amendment
of relevant laws including the Communication Security and
Surveillance Act, the Intellectual Property Case Adjudication
Act, and the Witness Protection Act. To protect R&D work
and fair competition, we will continue to be an advocate of
trade secret protection.
● Throughout 2014, TSMC offered a wide range of training
courses on various compliance topics, including 12 topics
via on-line education and 36 topics via live seminars. These
courses were developed and conducted by compliance and
legal professionals. In 2014, we primarily focused training
on insider trading and export control, having achieved a
high completion rate for both courses (over five thousand
employees for insider trading and over fifteen thousand
employees for export control). TSMC will regularly review
and update our training programs and identify new areas of
training as necessary.
● TSMC is subject to the U.S. Securities & Exchange
Commission (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 acknowledge our corporate social
responsibility to strive to procure conflict free minerals
in an effort to recognize humanitarian and ethical social
principles that protect the dignity of all persons. We
have implemented a series of compliance safeguards and
maintained frequent communications with our suppliers
and subsidiaries. We make it an annual requirement for
our suppliers and subsidiaries to sign and submit the
conflict-free representation letter as well as Conflict Minerals
Reporting Template. In 2014, we also provided our suppliers
and subsidiaries with in-person training lectures to promote
awareness.
042
043
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 2014 Calendar Year and as of the Date of this Annual Report: None.
3.8.2 Certification of Employees Whose Jobs are Related to the Release of the Company’s Financial Information
Date: February 10, 2015
Certification
Number of Employees
Internal Audit
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 2014:
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, 2014, it has 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 2014 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 10, 2015, 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
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)
Certificate 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
2
2
-
11
-
-
-
-
4
3
3
1
Finance
27
14
1
6
2
2
1
1
-
-
-
-
3.9 Information Regarding TSMC’s Independent Auditor
3.9.1 Audit Fees
The Audit Committee approves all fees payable to TSMC’s independent auditor and recommends the same to the Board of
Directors for further approval. The Board of Directors has authorized the Audit Committee to approve any subsequent changes
not exceeding 10% of the approved 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
Subtotal
Yes
No
Audit
Period
Yi-Hsin Kao,
Hung-Wen Huang,
and others
65,065
-
180
-
-
180
V
Note
Note
Note: Article 10-5-1 of Regulation Governing Information to be published in Annual Report of Public Companies was not applicable to TSMC.
3.9.2 Due to relevant regulatory requirements on rotation, Deloitte & Touche changed audit partners for TSMC in 2013.
3.9.3 TSMC’s Chairman, Directors, 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 in the
most recent two years.
3.9.4 Evaluation of the External Auditor’s Independence
The Audit Committee regularly monitors the independence of TSMC’s external auditor by conducting the below evaluations and
reports the same to the Board of Directors:
1. The auditor’s independence declaration
2. The Audit Committee pre-approves all audit and non-audit services conducted by the auditor to ensure that the non-audit
services do not influence the results of the audit
3. Ensure the audit partner rotates every five years
4. Annually evaluate the independence of the external auditor based on the results of the auditor survey
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 our “Insider Trading Policy”. To reduce the risk of insider trading, on-line training programs and live seminars are
conducted annually. In addition, employees can familiarize themselves with relevant internal policies and training articles by easily
accessing TSMC’s Legal Organization intranet website.
044
045
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
03/2014
06/2014
09/2014
10
28,050,000,000
280,500,000,000
25,928,617,140
259,286,171,400 Exercise of Employee Stock
None
Options: NT$2,261,500
10
28,050,000,000
280,500,000,000
25,929,123,937
259,291,239,370 Exercise of Employee Stock
None
Options: NT$5,067,970
10
28,050,000,000
280,500,000,000
25,929,374,956
259,293,749,560 Exercise of Employee Stock
None
Options: NT$2,510,190
As of 02/28/2015
Date of Approval &
Approval Document No.
03/12/2014 Zhu Shang Tzu
No.1030007123
06/12/2014 Zhu Shang Tzu
No.1030017459
09/03/2014 Zhu Shang Tzu
No.1030025856
As of 02/28/2015
Total
Authorized Share Capital
Issued Shares
Listed
Non-listed
Total
Unissued
Shares
25,930,043,279
-
25,930,043,279
2,119,956,721
28,050,000,000
Cloth is woven from thousands of threads that only
create a beautiful pattern when each thread is in
precisely the right place. TSMC carefully deploys its
capital, and pays painstaking attention to
operational and investment efficiency to weave a
beautiful future for the company.
4.1.2 Capital and Shares
Unit: Share
Type of Stock
Common Stock
Shelf Registration: None.
4.1.3 Composition of Shareholders
Common Share
Type of Shareholders
Government
Agencies
Financial
Institutions
Other Juridical
Persons
Foreign
Institutions
and Natural
Persons
Domestic Natural
Persons
Number of Shareholders
8
217
1,042
3,485
332,872
As of 07/20/2014 (last record date)
Total
337,624
Shareholding
1,653,710,196
867,976,053
1,240,452,818
19,970,458,571
2,196,777,318
25,929,374,956
Holding Percentage (%)
6.38%
3.35%
4.78%
77.02%
8.47%
100.00%
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.
158,910
121,170
25,742
10,211
4,558
5,145
2,420
1,554
2,980
1,607
1,064
427
258
188
1,390
337,624
Ownership
36,077,042
262,376,274
182,408,354
123,643,027
79,670,322
124,557,156
83,517,241
69,903,420
207,042,950
222,806,904
297,773,577
206,384,906
179,672,944
169,216,764
23,684,324,075
25,929,374,956
As of 07/20/2014 (last record date)
Ownership (%)
0.14%
1.01%
0.70%
0.48%
0.31%
0.48%
0.32%
0.27%
0.80%
0.86%
1.15%
0.80%
0.69%
0.65%
91.34%
100.00%
047
046
4.1.4 Major Shareholders
Common Share
Shareholders
ADR-Taiwan Semiconductor Manufacturing Company, Ltd.
National Development Fund, Executive Yuan
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 ABU DHABI Investment Authority
JPMorgan Chase Bank N.A. Taipei Branch in custody for EuroPacific Growth Fund
Cathay Life Insurance Co., Ltd.
JPMorgan Chase Bank, N.A., Taipei Branch in custody for Stichting Depositary APG Emerging Markets Equity Pool
Vanguard Emerging Markets Stock Index Fund, a Series of Vanguard International Equity Index Funds
iShares MSCI Emerging Markets Index Fund
Total Shares Owned
5,386,967,368
1,653,709,980
804,188,035
594,775,575
361,417,833
302,957,649
301,358,235
277,953,361
246,465,845
243,118,000
As of 07/20/2014 (last record date)
Ownership (%)
20.78%
6.38%
3.10%
2.29%
1.39%
1.17%
1.16%
1.07%
0.95%
0.94%
4.1.5 Net Change in Shareholding by Directors, Management and Shareholders with 10% Shareholdings or More
Net Change in Shares
Pledged (Note 1)
Net Change in
Shareholding
Net Change in Shares
Pledged (Note 1)
01/01/2015 ～ 02/28/2015
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
President and Co-Chief Executive Officer
C.C. Wei
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 (Note 3)
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
2014
Net Change in
Shareholding
2,000,000
-
-
-
(50,000)
-
-
-
-
-
(60,000)
(1,281,000)
(708,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
(250,000)
(650,000)
-
1,500,000
(140,000)
-
-
(78,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(40,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(Continued)
Title
Name
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
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
Vice President and General Counsel
Legal
Sylvia Fang (Note 5)
Vice President
Human Resources
Connie Ma (Note 5)
Net Change in Shares
Pledged (Note 1)
Net Change in Shareholding
Net Change in Shares
Pledged (Note 1)
01/01/2015 ～ 02/28/2015
2014
Net Change in
Shareholding
(120,000)
-
-
-
-
-
-
-
(450,000)
(220,000)
(123,000)
-
-
100,000
-
10,000
-
-
-
-
-
-
(52,000)
-
-
-
-
-
-
-
20,000
-
-
-
-
-
-
-
-
-
-
-
-
-
Note 1: This refers to the creation of security interest over TSMC shares in favor of creditors, usually in connection with a shareholder’s own financing activities.
Note 2: Dr. Rick Tsai resigned as a director of TSMC, effective January 27, 2014. His shareholding was not disclosed after that date.
Note 3: Senior Vice President and General Counsel Dr. Richard Thurston voluntarily retired, effective July 16, 2014. His shareholding was not disclosed after that date.
Note 4: Dr. Wei-Jen Lo and Mr. Rick Cassidy were promoted to Senior Vice President, effective February 18, 2014.
Note 5: Ms. Sylvia Fang and Ms. Connie Ma were promoted to Vice President, effective August 12, 2014. Their shareholdings were disclosed starting from that date.
4.1.6 Stock Trade with Related Party: None.
4.1.7 Stock Pledge with Related Party: None.
4.1.8 Related Party Relationship among Our 10 Largest Shareholders
Common Share
Name
Current Shareholding
Spouse & Minor
Shareholding
TSMC Shareholding by
Nominee Arrangement
As of 07/20/2014 (last record date)
Name and Relationship
between TSMC’s
Shareholders
ADR-Taiwan Semiconductor Manufacturing Company, Ltd.
5,386,967,368
Shares
%
Shares
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 ABU
DHABI Investment Authority
JPMorgan Chase Bank N.A. Taipei Branch in custody for
EuroPacific Growth Fund
Cathay Life Insurance Co., Ltd.
Chairman: Hong-Tu Tsai
JPMorgan Chase Bank, N.A., Taipei Branch in custody for
Stichting Depositary APG Emerging Markets Equity Pool
Vanguard Emerging Markets Stock Index Fund, a Series of
Vanguard International Equity Index Funds
1,653,709,980
-
804,188,035
594,775,575
361,417,833
20.78%
6.38%
-
3.10%
2.29%
1.39%
302,957,649
1.17%
301,358,235
1.16%
277,953,361
1.07%
246,465,845
0.95%
iShares MSCI Emerging Markets Index Fund
243,118,000
0.94%
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
None
N/A
None
N/A
None
None
None
None
None
None
None
None
None
None
None
None
048
049
4.1.9 Long-term Investment Ownership
As of 12/31/2014
4.1.11 Dividend Policy
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. (Note 2)
Systems on Silicon Manufacturing Co. Pte. Ltd.
Vanguard International Semiconductor Corp.
Xintec Inc.
Global UniChip Corporation
Emerging Alliance Fund, L.P.
VentureTech Alliance Fund II, L.P.
VentureTech Alliance Fund III, L.P.
Ownership by TSMC (1)
Ownership by Directors, Managers and
Directly/Indirectly Owned Subsidiaries (2)
Total Ownership
(1) + (2)
Shares
988,268,244
3,284
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
546,223,493
94,950,005
46,687,859
Not Applicable (Note 1)
Not Applicable (Note 1)
Not Applicable (Note 1)
%
100%
100%
100%
100%
100%
100%
100%
100%
98.58%
92.32%
38.79%
33.34%
39.87%
34.84%
99.50%
98.00%
98.00%
Shares
%
Shares
-
-
-
-
-
-
Not Applicable (Note 1)
Not Applicable (Note 1)
5,309,152
10,806,037
-
-
-
-
-
-
-
-
-
0.47%
1.80%
-
277,382,647
16.93% (Note 3)
-
-
Not Applicable (Note 1)
Not Applicable (Note 1)
Not Applicable (Note 1)
-
-
-
-
-
988,268,244
3,284
11,000,000
200
6,000
80,000
Not Applicable (Note 1)
Not Applicable (Note 1)
1,123,309,152
565,480,474
313,603
823,606,140
94,950,005
46,687,859
Not Applicable (Note 1)
Not Applicable (Note 1)
Not Applicable (Note 1)
%
100%
100%
100%
100%
100%
100%
100%
100%
99.05%
94.12%
38.79%
50.27%
39.87%
34.84%
99.50%
98.00%
98.00%
Note 1: Not applicable. These firms do not issue shares. TSMC’s investment is measured as a percentage of ownership.
Note 2: On December 31, 2014, we reclassified TSMC SSL as a disposal group held for sale. On February 17, 2015, TSMC SSL ceased to be TSMC’s subsidiary because TSMC’s and TSMC subsidiary’ shares
in TSMC SSL were sold to Epistar Corporation.
Note 3: TSMC’s Director, National Development Fund of Executive Yuan, holds 16.73% while other Directors and Management hold 0.20%.
4.1.10 Share Information
TSMC’s earnings per share increased 40.3% in 2014 to NT$10.18 per share. The following table details TSMC’s market price, net
worth, earnings, and dividends per common share, as well as other data regarding return on investment.
Market Price, Net Worth, Earnings, and Dividends Per Common Share
Unit: NT$, except for weighted average shares and return on investment ratios
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 from 2007 to 2014. TSMC intends
to maintain a stable and sustainable dividend policy, and will consider raising DPS when the free cash flow is sufficient to cover
the previous level of dividend payment and any debt repayment. On February 10, 2015, TSMC’s Board of Directors adopted a
proposal recommending distribution of a cash dividend of NT$4.5 per share. This proposal will be discussed and decided at the
Annual Shareholders’ Meeting on June 9, 2015.
4.1.12 Distribution of Profit
The Board adopted a proposal for 2014 profit distribution at its meeting on February 10, 2015. The proposal will be effected
according to the relevant regulations, upon the approval of shareholders at the Annual Shareholders’ Meeting on June 9, 2015.
In addition, according to the Company’s Articles of Incorporation, TSMC shall allocate no more than 0.3% of earnings available
for distribution (net income after a regulatory required deduction for prior years’ losses and contributions to legal and special
reserves) as compensation to directors, and not less than 1% as a bonus to employees. Profit sharing to employees, to be
distributed after the 2015 Annual Shareholders’ Meeting, was recorded as a charge to earnings of approximately 6.7% of net
income in year 2014; compensation to directors was expensed based on the estimated amount of payment. The proposal will
be effected according to the relevant regulations, upon the approval of shareholders at the Annual Shareholders’ Meeting on
June 9, 2015. If the actual amounts subsequently resolved by the shareholders differ from the above estimated amounts, the
differences will be recorded in the year of shareholders’ resolution as a change in accounting estimate.
Proposal to Distribute 2014 Profits
Unit: NT$
Cash Dividends to Common Shareholders (NT$4.5 per share)
116,683,480,962
Note: Employees’ cash bonus and profit sharing and compensation to directors for the year 2014 which have been expensed under the Company’s income statements are listed below:
－NT$17,645,966,064 distributed employees’ cash bonus
－NT$17,645,966,064 employees’ cash profit sharing to be distributed after 2015 Annual Shareholders’ Meeting
－NT$406,853,980 directors’ compensation
2013 Directors’ Compensation and Employee Profit Sharing
Item
Market Price Per Share (Note 1)
Highest Market Price
Lowest Market Price
Average Market Price
Net Worth Per Share
Before Distribution
After Distribution
Earnings Per Share
2013
115.50
94.40
104.09
32.69
29.69
Weighted Average Shares (thousand shares)
25,929,603
Diluted Earnings Per Share
Dividends Per Share
Cash Dividends
Accumulated Undistributed Dividend
Return on Investment
Price/Earnings Ratio (Note 2)
Price/Dividend Ratio (Note 3)
Cash Dividend Yield (Note 4)
Note 1: Referred to TWSE website
Note 2: Price/Earnings Ratio = Average Market Price/ Diluted Earnings Per Share
Note 3: Price/Dividend Ratio = Average Market Price/Cash Dividends Per Share
Note 4: Cash Dividend Yield = Cash Dividends Per Share/Average Market Price
Note 5: Pending for shareholders’ approval
7.26
3.00
-
14.34
34.70
2.9%
2014
01/01/2015 ~ 02/28/2015
Board Resolution (02/18/2014)
Actual Result (Note)
141.50
100.50
122.53
40.32
(Note 5)
25,930,104
10.18 (Note 5)
4.50 (Note 5)
-
(Note 5)
(Note 5)
(Note 5)
154.50
130.00
141.67
-
-
-
-
-
-
-
-
-
Directors’ Compensation (Cash)
Employee’s Cash Profit Sharing
Total
Amount (NT$)
104,136,580
12,634,664,804
12,738,801,384
Amount (NT$)
104,136,580
12,598,235,278
12,702,371,858
Note: The above Directors’ Compensation and Employee’s Cash Profit Sharing were expensed under the Company’s 2013 income statements and the same amounts were approved by the Board of
Directors at its meeting on February 18, 2014. The Employee’s Cash Profit Sharing was distributed after the approval of the same by shareholders at 2014 Annual Shareholders’ Meeting on June 24,
2014. Due to employee turnover, Employee’s Cash Profit Sharing in the amount of NT$36,429,526 was undistributed, and related expense was reversed in 2014.
4.1.13 Impact to 2015 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 02/28/2015
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 02/28/2015
(Continued)
Legal Advisor
Auditor
Repayment
Outstanding
Redemption or Early Repayment Clause
Covenants
Credit Rating
Jones Day
Maples and Calder
Deloitte & Touche
Bullet
US$1,500,000,000
At issuer’s option
Limitations on (1) liens and (2) sale and leaseback transactions
A1 (Moody’s Investors Service, 03/15/2013)
A+ (Standard & Poor’s Rating Services, 03/15/2013)
Conversion Right
None
Other Rights of
Bondholders
Amount of Converted
or Exchanged Common
Shares, ADRs or Other
Securities
Dilution Effect and Other Adverse Effects on
Existing Shareholders
Custodian
Not Applicable
None
None
Note: Issued by TSMC’s wholly-owned subsidiary, TSMC Global Ltd., and unconditionally and irrevocably guaranteed by TSMC.
052
053
4.2.2 Convertible Bond: None.
4.2.3 Exchangeable Bond: None.
4.2.4 Shelf Registration: None.
4.2.5 Bond with Warrants: None.
4.3 Preferred Shares
4.3.1 Preferred Share: None.
4.3.2 Preferred Share with Warrants: None.
4.4 Issuance of American Depositary Shares
Issuing Date
10/08/1997
11/20/1998
01/12/1999 -
01/14/1999
07/15/1999
08/23/1999 -
09/09/1999
02/22/2000 -
03/08/2000
04/17/2000
06/07/2000 -
06/15/2000
Issuance and Listing
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
NYSE
05/14/2001 -
06/11/2001
NYSE
06/12/2001
11/27/2001
NYSE
NYSE
02/07/2002 -
02/08/2002
NYSE
11/21/2002 -
12/19/2002
NYSE
07/14/2003 -
07/21/2003
NYSE
11/14/2003
NYSE
08/10/2005 -
09/08/2005
NYSE
05/23/2007
NYSE
Total Amount (US$)
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
Rights and Obligations
of ADS Holders
120,000,000
60,470,000
10,000,000
60,470,000
27,430,000
32,800,000
20,000,000
163,339,000
58,410,000
72,140,000
100,000,000
299,000,000
91,740,000
436,786,000
500,000,000
815,137,500
1,200,000,000
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Same as those of
Common Share
Holders
Trustee
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Not Applicable
Depositary Bank
Custodian Bank
(Note 1)
ADSs Outstanding
(Note 2)
Apportionment of
Expenses for Issuance
and Maintenance
Terms and Conditions in
the Deposit Agreement
and Custody Agreement
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
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
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$)
2014
01/01/2015 -
02/28/2015
High
Low
Average
High
Low
Average
23.47
16.10
20.08
25.04
20.79
23.31
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, 2015, total number of outstanding ADSs was 1,073,353,387 after 74,481,818 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 02/28/2015
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%
10,344,528
457,708,004
-
NT$57.5
NT$43.2
0.00000%
128,014
4,982,968
-
NT$43.8
NT$38.0
0.00000%
8,599,903
409,120,157
337,179
NT$54.3
NT$47.2
0.00130%
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
Dilution to Shareholders’
Equity is limited
056
057
4.5.2 Employee Stock Options Granted to Management Team and to Top 10 Employees (Note 1)
Title
Name
Number of Options Granted
(Note 2)
% of Shares Exercisable to
Outstanding Common Shares
Exercised
Unexercised
Shares Exercised
Exercise Price Per
Share
Value of Shares
Exercised (NT$)
% of Shares
Exercised to
Outstanding
Common Shares
Shares Unexercised
Adjusted Grant
Price Per Share
Value of Shares
Unexercised (NT$)
As of 02/28/2015
% of Shares
Unexercised to
Outstanding
Common Shares
Employees
President of WaferTech
Vice President of TSMC North America
Deputy Fab Manager of WaferTech
Director of WaferTech
Director of WaferTech
Director of WaferTech
Director of WaferTech
Director of WaferTech
Deputy Director of WaferTech
Sr. Manager of WaferTech
Kuo Chin Hsu
Edward Wan
Tsung Kuo
Wayne Yeh
Charlton Ku
Men-Chee Chen
Felix Tai
Kingbird Lin
Chang-Ching Kin
Richard Thoits
3,182,761
0.01227%
3,082,586
44.9
138,538,157
0.01189%
100,175
47.2
4,728,260
0.00039%
Note 1: Officers were not granted TSMC employee stock options which expire after 2014.
Note 2: 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 2014, 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 2014, nor as of the date of this Annual
Report.
4.8 Financing Plans and Implementation: Not applicable.
058
059
5. Operational Highlights
A watch needs every single cog to function
together to be accurate. TSMC is dedicated to its
core foundry business, and emphasizes innovation
in all fields and seamless cooperation to adapt to
the industry’s ceaseless changes.
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 wholly owned
subsidiaries, TSMC Solid State Lighting Ltd. (TSMC SSL) and TSMC Solar Ltd., responsible for solid state lighting and solar
business activities, respectively. In January 2015, TSMC announced a sale of all TSMC SSL shares held by TSMC and TSMC’s
subsidiary to Epistar Corp. After this transaction, TSMC completely exits TSMC SSL.
5.1.2 Customer Applications
TSMC manufactured more than 8,800 different products for over 450 different customers in 2014. 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.
5.1.3 Consolidated Shipments and Net Revenue in 2014 and 2013
Unit: Shipments (12-inch equivalent wafers) / Net Revenue (NT$ thousands)
Wafer
Others (Note 2)
Total
Domestic (Note 1)
Export
Domestic (Note 1)
Export
Domestic (Note 1)
Export
2014
2013
Shipments
1,737,743
6,524,853
N/A
N/A
1,737,743
6,524,853
Net Revenue
112,726,728
611,020,808
5,766,553
33,292,376
118,493,281
644,313,184
Shipments
1,249,092
5,713,560
N/A
N/A
1,249,092
5,713,560
Net Revenue
79,982,833
480,702,380
5,118,245
31,220,739
85,101,078
511,923,119
Note 1: Domestic means sales to Taiwan.
Note 2: Others majorly include revenue associated with mask making, design services, and royalties.
060
061
5.1.4 Production in 2014 and 2013
Unit: Capacity / Output (12-inch equivalent wafers) / Amount (NT$ thousands)
Year
2014
2013
Wafers
Capacity
8,175,183
7,309,680
Output
8,206,469
6,754,534
Amount
426,706,846
301,305,826
5.2 Technology Leadership
5.2.1 R&D Organization and Investment
In 2014 TSMC continued to invest in R&D with Total R&D
expenditure amounting to 8% of revenue, a level that equals
or exceeds the RD investment of many other high technology
leaders.
Amount: NT$ thousands
R&D Expenditures
2013
2014
48,118,165
56,823,732
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 contribute to their product success in today’s complex and challenging market environment. In 2014 the R&D
organization met these challenges by introducing into manufacture the industry leading 16FF+ technology, the first integrated
technology platform to make use of 3D FinFET transistors. The R&D organization continues to strengthen the pipeline of technology
innovations that are required to maintain technology leadership. The 10nm technology advanced development continues with the
goal of entering risk production in 2015, while the 7nm technology has now moved into the advanced development stage.
01/01/2015~
02/28/2015
11,369,848
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 2014 include:
introduction of our TSV platform, and expansion of the range of CoWoS® 3D packaging technology to the most advanced Si
technologies; development of ultra-low power RF technologies in 28nm, 40nm and 55nm nodes aimed at meeting the demand
for IoT (Internet-of-Things) applications; the introduction into manufacturing of MEMs process technologies for accelerator and
microphone applications, and a 100V GaN power transistor technology.
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 nano-electronic technology. In 2014
TSMC announced the formation of joint research centers at National Tsing Hua University and National Cheng Kung University,
with the aim of developing greater understanding into the devices and materials used in the manufacture of advanced Si
technologies.
5.2.2 R&D Accomplishments in 2014
R&D Highlights
● 20nm Technology
TSMC’s 20nm technology was successfully qualified for volume manufacture and currently in mass production.
● 16nm Technology
16FF+ technology passed full reliability qualification in the fourth quarter of 2014. This technology features FinFET transistors
with a third generation High-k/Metal Gate process, a fifth generation of transistor strain process, and advanced 193nm
lithography. This enhanced version of TSMC’s 16FF technology operates 40% faster than planar 20nm System-on-Chip
technology (20SoC) or consumes 50% less power at the same speed. More than 15 customers and IP vendors have verified their
IP with the 16FF+ technology.
● 10nm Technology
10nm technology will offer substantial power reduction
for the same chip performance compared to earlier
technology generations. Development activities in 2014
focused 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.
● 7nm Technology
2014 saw the introduction of 7nm technology into advanced
development. The 7nm technology will offer substantial
density improvement and power reduction for the same chip
performance compared to 10nm technology. Development
activities in 2015 will focus on selection of transistor
architecture, baseline manufacturing process setup for both
transistors and interconnects, and initial reliability evaluations.
TSMC plans to enter 7nm full development in 2016 for risk
production in 2018.
● Lithography
The focus of TSMC’s R&D efforts in lithography is 10nm
development. This technology requires special resolution
enhancement techniques to enable immersion tools to image
geometries beyond 16nm. Coupling these enhancements
with advanced patterning that was developed for the 20nm
and 16nm nodes allows the immersion technique to meet
10nm requirements.
In 2014, TSMC received delivery of a second NXE3300
extreme ultraviolet (EUV) scanner. The associated process
and equipment R&D is on-going. TSMC has been working
with ASML to raise its capabilities to meet the requirements
of the 7nm technology node. Looking beyond 7nm,
multiple e-beam direct-write lithography (MEB DW) is being
investigated as a lithography solution.
● Mask Technology
Mask technology is an integral part of our advanced
lithography. Having completed the transfer of mask
technology for the 16nm node to the mask production
organization in 2014, R&D made substantial progress on
developing mask technology for the 10nm node. The R&D
team also made solid progress in the mask technology for
EUV lithography, continuing to work with suppliers and
consortia in developing the required infrastructure.
Integrated Interconnect and Packaging
● 3D IC
TSMC qualified for manufacture a new TSV-based platform
in 2014. This is an important industrial milestone to integrate
TSV with active devices. The CoWoS® technology continues
to expand its application from FPGA to network and to high
performance computing. The choice of top dies on CoWoS®
technology is also expanding quickly from 65/40nm to the
most advanced 20nm and 16nm FinFET technology. In
parallel with TSV-based platforms above, InFO, or integrated
fan out, is being developed as a non-TSV technology for
cost-sensitive applications such as mobile and consumer
products. It is expected to become the most important
backend technology for TSMC in the next few years. An
ultra-thin, fine pitch InFO_PoP packaging technology
has been successfully demonstrated with outstanding
characteristics and qualified for manufacture.
● Advanced Package Development
TSMC offers a wide variety of lead-free packaging
technologies for mobile/handheld devices and applications.
In 2014, TSMC qualified 16nm FinFET Si with ultra-fine
pitch copper (Cu) bump BoT (Bump-on-Trace) packaging
technology, and the innovative Fan-in WLP technology
(UBM-Free Fan-in WLP) with excellent reliability performance.
● Advanced Interconnect
Development of low resistance Cu and low capacitance
dielectric continued to be the primary focus in 2014. At the
10nm node, a new patterning process and a novel dielectric
scheme have been developed to shrink line width/space and
reduce the capacitance between copper lines. For the 7nm
node and beyond, TSMC has developed a new advanced
patterning scheme that allows copper line width and spacing
to be further reduced. A low resistivity metal scheme was
developed. The circuit delay of copper lines developed with
these advanced processes is highly competitive and is lower
than that projected by the International Technology Roadmap
for Semiconductors (ITRS).
Advanced Transistor Research
Enhancing the speed and lowering the power requirements
of advanced logic technologies requires innovation in
transistor architectures and materials. TSMC is at the forefront
of research in these areas with a focus on high mobility
channel materials, such as germanium and III-V compound
semiconductors. Record-breaking germanium transistor
performance was recently achieved and reported at the 2014
IEDM.
062
063
Specialty Technologies
TSMC offers a broad mix of technologies to address the wide
range of applications.
● Mixed Signal/Radio Frequency (MS/RF) Technology
TSMC has started to develop ultra-low power RF technologies
in 28nm, 40nm and 55nm nodes aimed at the expected
strong demand in low power and low cost IoT (Internet-
of-Things) applications, and began development of a
0.18μm SOI process to replace traditional compound
semiconductor-based solutions in cellar/wi-fi RF switch
applications.
● Power IC/BCD Technology/Panel Drivers
The second generation of 0.18μm BCD technology has been
extended to offer lower cost and higher performance devices,
enabling more integration in mobile power ICs.
● Micro-electromechanical Systems (MEMS) Technology
In 2014, TSMC’s modular MEMS technology was qualified
for manufacture of accelerometers and high-resolution noise
cancellation microphones. Future plans include development
of next generation products, and BioMEMS applications.
● GaN Technology
TSMC is the first foundry to implement GaN technology in
a 6-inch fab. The R&D team completed development and
qualified for manufacture a high electron mobility transistor
(100V E-HEMT) configuration for high power, high frequency
applications with low Ron resistance and high breakdown
voltage.
● 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 was shipped for
both automotive and consumer applications. Embedded flash
development for the 28LP and 28HPM platforms is underway
for such low leakage applications as smartcard, MCU and
Automobile.
5.2.3 Technology Platform
TSMC provides 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.
The availability of 16FF+ saw improvements in design
infrastructure using an advanced CPU core as the vehicle to
support customers’ adoption of 16nm FinFET Plus (EDA tool
certification results can be found on TSMC-Online). TSMC
also extended its IP quality program (TSMC9000) to allow IP
audits to be performed either at TSMC or at TSMC-certified
laboratories. To help customers plan new product tape-outs
incorporating IP/Library from TSMC Open Innovation
Platform® (OIP) ecosystem, the OIP ecosystem now features a
portal to connect customers to an ecosystem of 39 solution
providers.
5.2.4 Design Enablement
TSMC’s technology platforms provide a solid foundation for
design enablement. Customers can design directly using the
Company’s internally developed IP and tools, or using those
that are available via our OIP partners.
Tech File and PDK
TSMC provides a broad range of process design kits (PDK) for
digital logic, mixed-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. By 2014, TSMC has
provided more than 7,000 technology files and more than
150 PDKs in TSMC-Online. 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 2014, over 60% of new tape-outs
at TSMC adopted one or more libraries or IP from TSMC and/
or our IP partners. In 2014, TSMC expanded its library and
silicon IP portfolio to contain more than 8,500 items, a 28%
increase over 2013.
Design Methodology and Flow
In 2014 TSMC addressed the critical design challenges
associated with the new 16nm FinFET Plus technology for
digital and SoC applications by announcing the readiness
of reference flows through OIP collaboration that feature
FinFET-specific design solutions and methodologies for
performance, power and area optimization.
5.2.5 Intellectual Property
A strong portfolio of intellectual property rights strengthens
TSMC’s technology leadership and protects our advanced and
leading edge technologies. In 2014, TSMC received a record
breaking 1460 U.S. patents, as well as 450+ issued patents in
Taiwan and the PRC, and other patents issued in various other
countries. In 2014, TSMC ranked #23 in the “Top 50” U.S.
patent grants. TSMC’s patent portfolio now reaches almost
30,000 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 four 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 in semiconductor industry, 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 for electronic
applications. Following the establishment of two research
centers at National Taiwan University and National Chiao
Tung University in 2013, two additional centers were set
up at National Cheng Kung University and National Tsing
Hua University in 2014. These centers are funded jointly by
governmental agencies together with a commitment from
TSMC of several hundred million Taiwan dollars and in-kind
university shuttles. In 2014, several hundred high caliber
students across Electronics, Physics, Materials Engineering,
Chemistry, Chemical Engineering and Mechanical Engineering
disciplines joined the 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
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 such silicon process
technologies as 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.
TSMC’s University Shuttle Program participants recognize
the importance of the program in allowing their graduate
students to implement exciting designs such as 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 2014, 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 2014, 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 structures, strained-layer CMOS,
high mobility materials and novel 3D IC devices. These studies
064
065
of the fundamental physics of nanometer CMOS transistors
are core aspects of our efforts to improve the understanding
and guide the design of transistors at advanced nodes. The
findings of these studies are being applied to ensure our
continued industry leadership at the 20nm and 16nm nodes
and to 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.
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
Project Name
Description
Risk Production
(Estimated Target
Schedule)
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
Next-generation lithography
Long-term research
CMOS platform technology for SoC
2018
Cost-effective solution with better form
factor and performance for SiP
2015 ~ 2016
EUV and multiple e-beam to extend
Moore’s Law
Special SoC technology (including new
NVM, MEMS, RF, analog) and 5nm
transistors
2015 ~ 2019
2015 ~ 2019
The above plans accounted for roughly 70% of the total R&D budget in 2015. The total R&D budget
is currently estimated to be around 8% of 2015 revenue.
5.3 Manufacturing Excellence
5.3.1 GIGAFABTM Facilities
TSMC’s 12-inch fabs are a key part of its manufacturing
strategy. The Company currently operates three 12-inch
GIGAFABTM facilities－Fab 12, Fab 14, and Fab 15－the
combined capacity of which reached 5,283,000 12-inch
wafers in 2014. Production within these three facilities
supports 0.13μm, 90nm, 65nm, 40nm, 28nm, 20nm process
technologies, and their sub-nodes. To provide leading
edge manufacturing technologies, part of the capacity is
reserved for research and development work and currently
supports 10nm and beyond technology development.
TSMC has developed a centralized fab manufacturing
management system to pursue higher customer benefits
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 14 to accelerate 20nm
capacity ramping to 60,000 wafers output per month in one
quarter to satisfy customers’ demand.
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.
5.3.2 Engineering Performance Optimization
TSMC has implemented statistical process control, advanced
equipment control, advanced process control, circuit probe
data and integrated big data analysis systems to optimize
equipment performance to match device performance.
TSMC engages in engineering big data analytics, and
applies the technology in the management and control
of equipment, processes and yields. The Company has
developed various systems such as intelligent tool tuning,
engineering big data mining, and equipment chamber
matching. The intelligent automation systems, driven by the
decisions based on big engineering data, assure the high
efficiency and stability of TSMC’s equipment. It also analyzes
the correlations between electrical, physical measurements
and production-related parameters to identify critical
variables that influence product quality and yields, so as to
fulfill customers’ special process requirements and diversified
product demand simultaneously.
Accurate modeling and control at each process stage
drives intelligent module loop control. The process
control dispatching via sophisticated computer-integrated
manufacturing systems enables optimization from equipment
to end products to achieve precision and lean operations in a
sophisticated semiconductor manufacturing environment.
5.3.3 Precision and Lean Operations
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,
full automated manufacturing, industry-leading automated
materials handling systems and intelligent mobile devices,
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.
5.3.5 Raw Materials and Supply Chain Risk Management
In 2014, TSMC continued Supply Chain Risk Management review meetings periodically with operation, quality and business
teams to proactively identify and manage risk of supply capacity insufficiency, quality issue and supply chain interruption. TSMC
also worked with its suppliers to enhance the performance of quality, delivery, sustainability, and to support green procurement,
environmental protection and safety.
Raw Materials Supply
Major Materials
Major Suppliers
Market Status
Procurement Strategy
Raw Wafers
F.S.T.
S.E.H.
Siltronic
SUMCO
SunEdison
Chemicals
Litho Materials
Gases
Slurry, Pad, Disk
Air Products
ATMI
Avantor
BASF
Hong-Kuang
MGC
SAFC
Wah Lee
AZ
Dow
JSR
Nissan
Shin-Etsu Chemical
Sumitomo
T.O.K.
Air Liquide
Air Products
ATMI
Linde
Taiyo Nippon Sanso
3M
Air Products
Asahi Glass
Cabot Microelectronics
Dow Chemical
Fujifilm Planar Solutions
Fujimi
Kinik
Sumitomo
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, sustainability 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 eight 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 conduct improvement programs of their quality,
delivery, sustainability and green policy, to ensure continuous progress of TSMC’s
supply chain.
● Some major suppliers have relocated or plan to duplicate their manufacturing site
closer to TSMC’s major manufacturing facilities, thereby significantly improving
procurement logistics and reducing supply risks.
These five companies are the major suppliers of specialty
gases.
● The majority of the five 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 conducts periodic audits of the suppliers’ quality assurance systems to ensure
that they meet TSMC’s standards.
● TSMC and suppliers periodically conduct improvement programs of their quality,
delivery, sustainability and green policy, to ensure continuous progress of TSMC’s
supply chain.
● Most suppliers have relocated or duplicated their manufacturing sites closer to TSMC’s
major manufacturing facilities, thereby significantly improving procurement logistics
and reducing supply risks.
Suppliers Accounted for at Least 10% of Annual Consolidated Net Procurement
Unit: NT$ thousands
Supplier
Company A
VIS
Company B
Company C
Others
Total Net Procurement
2014
2013
Procurement
Amount
As % of 2014 Total
Net Procurement
Relation to TSMC
Procurement
Amount
As % of 2013 Total
Net Procurement
Relation to TSMC
8,496,410
7,424,566
6,147,991
5,471,062
23,487,560
51,027,589
None
Investee accounted for using
equity method
None
None
17%
14%
12%
11%
46%
100%
4,925,966
6,993,964
4,812,417
4,401,215
20,773,685
41,907,247
None
Investee accounted for using
equity method
None
None
12%
17%
11%
11%
49%
100%
066
067
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
has collaborated with SEMI, 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
Package-on-Package (PoP) technology development and
started production at major outsource assembly and testing
houses in 2014 for mobile product application. Over 100
million PoP have been shipped to customers without major
quality issues.
In 2014, Q&R conducted a deep-dive audit on the new
material suppliers for 20nm/16nm advanced technology and
announced the incoming material quality requests to enhance
supplier’s delivery quality. 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 raw material,
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, mask making, and real-time
in-process monitoring, to bumping, wafer sort and reliability
performance. Failure, materials and chemical analysis
play important roles in TSMC quality; these capabilities
are used from the early stages of process development
through assembly and packaging, including analysis of
incoming materials, airborne molecular contaminants,
and failure analysis of customer returns. In 2014, TSMC
aggressively invested in state-of-the-art electron and ion
microscopes and surface analysis capabilities. In view of the
importance of ensuring the quality of incoming chemicals
and materials, this year TSMC implemented detection of
metal impurities in certain chemicals to the parts-per-trillion
level. In collaboration with customers and suppliers,
significant progress has been made in dynamic fault isolation,
traditionally a domain of integrated device manufacturers
and fabless companies. This effort will continue into 2015
with the addition of new capabilities to satisfy the needs of a
broader range of customers and improve the quality of TSMC
products.
In compliance with the electronic industry’s lead-free and
green IC package policy, Q&R qualified and released lead-free
bumping and Cu bumping to satisfy customer demands,
and made lead-free bump packages possible for 0.13μm,
45nm, 40nm, 28nm and 20SoC technology products as
well as Cu bump package possible for 28nm and 20SoC 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 2014, TSMC Q&R ramped wafer-level Chip Scale
Package (CSP) to 20K per month, lead-free to 120K per
month and Cu bumping to 12K 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,
embedded-Flash memory and Micro-Electro-Mechanical
System 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 2014, 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. Customers include fabless semiconductor companies, system companies and integrated device
manufacturers, such as Advanced Micro Devices, Inc., Broadcom Corporation, Freescale Semiconductor, Inc., Huawei Tech,
Marvell Technology Group Ltd., MediaTek Inc., NVIDIA Corporation, NXP Semiconductors, OmniVision Technologies, Qualcomm
Inc., Texas Instruments Inc., etc.
Customer Service
TSMC believes that providing superior customer service is critical to enhancing customer satisfaction and loyalty, which is very
important to retaining existing customers, attracting new customers, and strengthening customer relationships. With a dedicated
customer service team as the main contact window for coordination and facilitation, TSMC strives to provide world-class,
high-quality, efficient and professional services in design support, mask making, wafer manufacturing, and backend to achieve
optimum experience for our customers and, in return, to gain customer’s trust and sustain company profitability.
To facilitate customer interaction and information access on a real-time basis, TSMC-Online services offer a suite of web-based
applications that provide a more active role in design, engineering, and logistics collaborations. Customers have 24-hour a day,
seven-day-a-week access to critical information and are able to subscribe customized reports through TSMC-Online services.
Design Collaboration focuses on content availability and accessibility, with close attention to complete, accurate, and current
information at each level of the design life cycle. Engineering Collaboration includes online access to engineering lots, wafer
yields, wafer acceptance test (WAT) analysis, and quality reliability data. Logistics Collaboration provides access to data 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 the
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
customer facing 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 that Accounted for at Least 10% of Annual Consolidated Net Revenue
Unit: NT$ thousands
Customer
Customer A
Others
Total Net Revenue
2014
As % of 2014 Total
Net Revenue
Relation to TSMC
None
21%
79%
100%
Net Revenue
157,631,427
605,175,038
762,806,465
2013
As % of 2013 Total
Net Revenue
Relation to TSMC
None
22%
78%
100%
Net Revenue
130,563,982
466,460,215
597,024,197
068
069
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. The
model features:
● The foundry segment’s earliest and most comprehensive
EDA certification program delivering timely design tool
enhancement required by new process technologies; and
● The foundry segment’s largest, most comprehensive and
robust silicon-proven intellectual properties (IPs) and library
portfolio; and
● Comprehensive design ecosystem alliance programs
covering market-leading EDA, library, IPs, and design service
partners.
TSMC’s OIP Alliance consists of 27 electronic design
automation (EDA) partners, 39 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 in order for
customers to take full advantage of the process technologies
once they reach production-ready maturity.
In October 2014, TSMC hosted an OIP Ecosystem Forum at
the San Jose Convention Center in California, with keynote
addresses from TSMC executives as well as OIP ecosystem
partners. The forum was well attended by both customers
and ecosystem partners and demonstrated the value of
collaboration through OIP to nurture innovations.
TSMC’s OIP Partner Management Portal facilitates
communication with our ecosystem partners for efficient
business productivity. This portal is designed with an intuitive
interface and can be linked directly from TSMC-Online.
5.5 Employees
5.5.1 Human Capital
Human capital is one of the most important assets of TSMC.
The Company is committed to providing quality jobs with good
compensation, meaningful work, and a safe work environment
for its employees; moreover, it is dedicated to foster a dynamic
and fun work environment. The Company’s efforts in fostering
a “Great Place to Work” are highly recognized, and TSMC has
received many awards, including the major prize in Ministry of
Labor’s first “Work-Life Balance Award” in 2014.
TSMC believes that all employees should be treated with
dignity and respect. The Company is committed to upholding
workers’ rights and respects internationally proclaimed human
rights, as outlined by the United Nations Universal Declaration
on Human Rights and the International Labor Organization’s
fundamental conventions on core labor standards.
At the end of 2014, TSMC and its subsidiaries had over
43,591 employees worldwide, including 4,385 managers,
18,552 professionals, 3,530 assistants, and 17,124
technicians. The following table summarized TSMC workforce
at the end of February, 2015:
Workforce Structure for TSMC and Its Subsidiaries
12/31/2013
(Note 1)
12/31/2014
(Note 1)
02/28/2015
(Note 2)
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)
4,078
17,205
3,236
15,964
40,483
57.5%
42.5%
4.0%
37.4%
25.8%
11.9%
20.9%
33.5
6.6
4,385
18,552
3,530
17,124
43,591
58.0%
42.0%
4.2%
37.9%
26.7%
11.4%
19.8%
34.1
6.9
4,368
18,691
3,561
16,957
43,577
58.3%
41.7%
4.3%
38.2%
26.6%
11.4%
19.6%
34.1
7.0
Note 1: The data shown no longer includes Xintec Inc. as it was deconsolidated in June 2013.
Note 2: The data shown no longer includes TSMC Solid State Lighting as all of its shares held
by TSMC and TSMC’s subsidiary were sold to Epistar Corporation. The transaction was
completed on February 17, 2015.
5.5.2 Recruitment
The growth of TSMC relies on the continued services and
contributions of its devoted employees; in order to strengthen
the momentum of its growth, the Company is dedicated to
recruiting professionals for all positions available. TSMC is an
equal employment opportunity employer, and its practices
center on the principles of open-and-fair recruitment.
The Company evaluates all candidates according to their
qualification as related to the requirement of each position,
rather than race, gender, age, religion, nationality, or political
affiliation.
Taiwan’s Labor Standards Act states that companies may
not employ workers under the age of 15, and that children
between the age of 15 and 16 are not permitted to perform
heavy or hazardous work. In addition, child labor is also
strictly forbidden under International Labour Organization’s
(ILO) standards. The Company fully complies with the
above-mentioned laws and standards. Management has
never hired employees under 16 years of age since the
Company’s establishment and will not do so in the future.
for future employment, and to encourage selected academics
to consolidate different research domains under one umbrella
for more effective synergy. Under this mission, TSMC
provides hundreds of millions of NT dollars in seed money for
leveraging funding from the National Science Council.
In 2014, the above-mentioned four centers sponsored more
than 100 faculty and hundreds of students across the fields
of Electronics, Material Engineering, Physics, Chemistry,
Chemical Engineering and Mechanical Engineering.
In order to cultivate a young talent pipeline for recruitment
both locally and around the world, TSMC deploys a number
of recruiting activities and university programs, including Joint
Development Programs, University Shuttle Program, Summer
Internship, Job Fairs in Taiwan, U.S., Singapore and India,
as well as a series of Fresh Graduate Career Symposiums for
soon-to-be graduates. These multiple channels effectively
enable TSMC to recruit from targeted pools in support of the
Company’s constant growth.
TSMC’s continuous growth requires constant talent sourcing
and recruitment activities to support its business. The
Company recruited over 3,200 managers, professionals, and
administrative staffs, as well as over 2,300 assistants and
technicians in 2014.
5.5.3 People Development
The development of employees is an integral and critical
factor for the growth of a company; employees’ learning and
development should incorporate the essence of “systematic,
disciplined and planned”. TSMC is committed to cultivating
a continuous and diverse learning environment, and it has
initiated “TSMC Employee Training and Education Procedure”
to ensure the Company’s and individuals’ development
objectives can be achieved through the integration of internal
and external training resources.
Based on the nature of the individual’s job, work performance
and career development path, the Company provides
employees a comprehensive network of learning resources,
including on-the-job training, classroom training, e-learning,
coaching, mentoring, and job rotation. For each employee, a
tailor-made Individual Development Plan (IDP) is provided.
Students with technological expertise are highly valued in
talent sourcing. As such, TSMC established a total of four
university-level research centers in National Taiwan University,
National Chiao Tung University, National Tsing Hua University,
and National Cheng Kung University since 2013. The mission
of the centers is two-fold: to develop top graduate students
The Company provides employees with a wide range of
on-site general, professional, and management training
programs. In addition to engaging external experts as
trainers, hundreds of TSMC employees are trained to be
qualified instructors to deliver their valuable know-how in
internal training courses.
070
071
TSMC’s training programs include:
● New Employee Training: includes basic training and job
orientation for new employees. Furthermore, newcomers’
managers and the Company’s well-established Buddy
System are in place to support the newcomers in their
assimilation process in both corporate culture and work
requirements.
● General Training: refers to training required by government
regulations and/or Company policies, as well as training on
general subjects for all employees or employees of different job
functions. Such training includes subjects of industry-specific
safety, workplace health and safety, quality, fab emergency
response, languages, and personal effectiveness.
● Professional/Functional Training: provides technical and
professional 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.
● Direct Labor (DL) Training: enables employees of the
production line in acquiring the knowledge, skills and
attitudes they need to perform their jobs well and to pass
the certification for operating equipment. Training includes
DL Skill Training, Technician “Train-the-Trainer” Training,
and Manufacturing Leader Training.
TSMC’s compensation program includes a monthly salary, an
employee cash bonus based on quarterly business results, and
employee profit sharing when the Company distributes its
profit each year.
The purpose of the employee cash bonus and profit sharing
programs is to reward employee contributions appropriately,
to encourage employees to work consistently toward ensuring
the success of TSMC, and to link employees’ interests with
those of TSMC’s shareholders. The Company determines
the amount of the cash bonus and profit sharing based on
operating results and industry practice in the Republic of
China. The amount and form of the employee cash bonus
and profit sharing are determined by the Board of Directors
based on the Compensation Committee’s recommendation,
and the employee profit sharing is subject to shareholders’
approval at the Annual Shareholders’ Meeting. Individual
awards are based on each employee’s job responsibility,
contribution and performance.
In addition to providing employees of TSMC’s overseas
subsidiaries with a locally competitive base salary, the
Company grants annual bonuses as a part of total
compensation. The annual bonuses are granted in line with
local regulations, market practices, and the overall operating
performance of each subsidiary, to encourage employees’
commitment and development within the Company.
In 2014, TSMC conducted 1,453 internal training sessions,
which translated to a company-wide total of 844,174 training
hours with the participation of 536,493 attendees. Employees
on average attended over 19 hours of training with the
training expenses reaching NT$83 million.
5.5.5 Employee Engagement
Taiwan’s Labor Standards Act and the fundamental
convention of ILO prohibit all forms of forced or compulsory
labor. TSMC stands firmly with the protocols and never forced
labor from involuntary persons with menace of any penalty.
Apart from internal training resources, our employees are also
subsidized when taking external short-term courses, credit
courses and degrees.
5.5.4 Compensation
TSMC provides a diversified compensation program that is
competitive externally, fair internally, and adapted locally.
TSMC upholds the philosophy of sharing wealth with
employees in order to attract, retain, develop, motivate
and reward talented employees. With excellent operating
performance, employment at TSMC entitles employees to a
comprehensive compensation and benefits program above
the industry average.
The Company encourages employees to maintain a healthy
and well-balanced life while making use of their time spent
at work with high efficiency and better effectiveness. To
enrich employees’ work experience, TSMC continuously
implements programs to enhance their communication,
well-being, benefit, recognition and rewards. The various
initiatives include the following communication, benefit and
recognition programs:
Employee Communication
TSMC values two-way communication and is committed
to keeping the communication channels between the
management level, subordinates and 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 employees.
A host of two-way communication channels are constructed to maintain the unobstructed flow of information between
managers and 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 suggestions or 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; the system is dedicated
mainly to direct labors (DL) of the Company.
TSMC Internal Communication Structure
Employees
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
The establishment of the above effective communication channels is one of the key factors contributing to TSMC’s cooperative
employee relationship over the years. Under R.O.C. law, employees are granted the right to organize labor unions, and TSMC
respects this important right and complies with applicable laws prohibiting activities that hinder our employees’ freedom of
association. As of this writing, we have not seen any recent union activity from our employees.
In 2014 and as of the date of this Annual Report, there had been no loss resulting from labor disputes.
072
073
Employee Benefit Programs
● Convenient on-site services: cafeterias, laundry services,
convenience stores, travel, banking, housing, and
commuting assistance－are accessible for employees in the
fabs.
● Comprehensive health enhancement programs: physical care
and psychological consultation services. Five free counseling
sessions are offered to TSMC employees on an annual basis,
with extension available depending on the individual’s
needs. Other programs include annual health check, weight
control, outpatient services, smoking secession, exercise
promotion campaign, massage service, sleep therapy,
abdominal and neck x-ray, female care, blood donation, liver
disease prevention, as well as seminars to raise awareness of
personal health.
● Diverse employee welfare programs: including 72 hobby
clubs, 33 speeches covering various topics (in 2014), Sports
Day, and Family Day. In addition, holiday bonuses, marriage
bonuses, condolence allowances and emergency subsidies
are also available to cater to employees’ needs.
● Premium Sports Center: a variety of workout facilities
available to all employees and their families, as well as
exercise sessions conducted by professional instructors.
● Flexible Preschool Service: the childcare service, operated to
meet employees’ work schedules, is available in a total of
three fabs in Hsinchu and Tainan.
Employee Recognition
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 performance significantly.
● TSMC Academy recognizes outstanding TSMC scientists
and engineers whose individual technical capabilities make
significant contributions to the Company.
● Outstanding Engineer Award for each fab and Total Quality
Excellence Award recognize employees’ continuous efforts
in creating value for the Company.
● Service Award represents TSMC’s appreciation toward senior
employees’ dedication and commitment to the Company.
● Excellent Instructor Award praises the outstanding
performance and contribution of the Company’s internal
instructors in training courses for employees.
● Function-wise awards dedicated to innovation, including
Idea Forum, and TQE Awards, etc.
Apart from corporate-wide awards, in 2014, TSMC employees
continued to be recognized through a host of prestigious
external awards, including Outstanding Engineer Award,
Outstanding Young Engineer Award, National Model Worker
Award, and National Industrial Innovation Award.
5.5.6 Retention
Continuous growth underlies the commitment of TSMC
towards its stockholders and employees, and the retention of
outstanding employees is crucial in fulfilling this commitment.
From employee’s initial adaptation to professional and career
development, TSMC works proactively to provide employees
with good compensation, innovative, meaningful and fun
work, as well as a safe work environment.
Employees’ overall satisfaction with the Company’s efforts are
reflected in the 2014 TSMC Core Values Survey, of which 97%
of participants agreed that they are willing to commit fully in
their work to make TSMC an even more successful company;
while 95% of them concurred with the statement that they
are willing to contribute their talents to TSMC and grow
together with the Company for the next five years.
In 2014, the Company recorded a healthy and manageable
turnover rate of 6%.
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 our business. The Company’s “Significant
Contingent Liabilities and Unrecognized Commitments” are
disclosed in Annual Report section (II), Financial Statements,
page 71-72.
074
075
6. Financial Highlights
6.1 Financial Highlights
6.1.1 Condensed Balance Sheet
Condensed Balance Sheet from 2012 to 2014 (Consolidated)
An embroiderer patiently creates an exquisite picture
one step at a time, just as TSMC’s prudent financial
planning and fastidious risk management are the best
foundation for the Company’s growth.
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
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
2014
626,566,787
30,051,544
818,198,801
13,531,510
6,785,203
1,263,054,977
1,495,133,845
189,777,934
267,563,785
225,501,958
415,279,892
493,065,743
259,286,171
55,858,626
518,193,152
440,407,301
14,170,306
847,508,255
769,722,404
266,830
847,775,085
769,989,234
201,014,777
(Note 3)
248,443,321
449,458,098
(Note 3)
259,296,624
55,989,922
704,512,664
(Note 3)
25,749,291
1,045,548,501
(Note 3)
127,246
1,045,675,747
(Note 3)
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.
Note 3: Pending for shareholders’ approval.
076
077
Condensed Balance Sheet from 2010 to 2011 (Consolidated)－R.O.C. GAAP
Unit: NT$ thousands
Condensed Balance Sheet from 2010 to 2011 (Unconsolidated)－R.O.C. GAAP
Unit: NT$ thousands
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
Condensed Balance Sheet from 2012 to 2014 (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
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
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
2013
257,623,763
165,545,159
770,443,494
7,069,456
7,897,131
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
2014
370,949,497
242,390,122
796,684,361
8,996,810
4,023,634
1,208,579,003
1,423,044,424
187,195,744
264,981,595
173,875,004
361,070,748
438,856,599
259,286,171
55,858,626
518,193,152
440,407,301
14,170,306
847,508,255
769,722,404
178,261,092
(Note 3)
199,234,831
377,495,923
(Note 3)
259,296,624
55,989,922
704,512,664
(Note 3)
25,749,291
1,045,548,501
(Note 3)
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 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.
Note 3: Pending for shareholders’ approval.
078
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
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
6.1.2 Condensed Statement of Comprehensive Income/Condensed Statement of Income
Condensed Statement of Comprehensive Income from 2012 to 2014 (Consolidated)
Unit: NT$ thousands (Except EPS: NT$)
Item
Net Revenue
Gross Profit
Income from Operations
Non-operating Income and Expenses
Income before Income Tax
Net Income
Other Comprehensive Income for the Year, Net of Income Tax
Total Comprehensive Income for the Year
Net Income (Loss) Attributable to:
Shareholders of the Parent
Noncontrolling Interests
Total Comprehensive Income (Loss) Attributable to:
Shareholders of the Parent
Noncontrolling Interests
Basic Earnings Per Share
*Based on weighted average shares outstanding in each year
2012
506,745,234
244,137,107
181,176,868
499,588
181,676,456
166,123,802
4,252,632
170,376,434
166,318,286
(194,484)
170,521,543
(145,109)
6.42*
2013
597,024,197
280,945,507
209,429,363
6,057,759
215,487,122
188,018,937
16,352,248
204,371,185
188,146,790
(127,853)
204,505,782
(134,597)
7.26*
2011
158,563,352
129,400,844
454,373,533
19,070,145
761,407,874
109,514,430
187,263,098
18,000,000
4,299,930
131,814,360
209,563,028
259,162,226
55,846,357
322,191,155
244,442,487
(6,433,369)
(1,172,855)
629,593,514
551,844,846
2014
762,806,465
377,734,375
295,890,293
6,207,253
302,097,546
263,780,869
11,834,164
275,615,033
263,898,794
(117,925)
275,717,141
(102,108)
10.18*
079
Condensed Statement of Income from 2010 to 2011 (Consolidated)－R.O.C. GAAP
Unit: NT$ thousands (Except EPS: NT$)
Item
Net Sales
Gross Profit
Income from Operations
Non-operating Income and Gains
Non-operating Expenses and Losses
Interest Revenue
Interest Expense
Income before Income Tax
Net Income
Net Income Attributable to Shareholders of the Parent
Basic Earnings Per Share
*Based on weighted average shares outstanding in each year
2010
419,537,911
207,053,591
159,175,335
13,136,072
2,041,012
1,665,193
425,356
170,270,395
162,281,930
161,605,009
6.24*
Condensed Statement of Comprehensive Income from 2012 to 2014 (Unconsolidated)
Unit: NT$ thousands (Except EPS: NT$)
Item
Net revenue
Gross Profit
Income from Operations
Non-operating Income and Expenses
Income before Income Tax
Net Income
Other Comprehensive Income for the Year, Net of Income Tax
Total Comprehensive Income for the Year
Basic Earnings Per Share
*Based on weighted average shares outstanding in each year
2012
500,369,525
234,850,311
176,820,141
6,932,246
183,752,387
166,318,286
4,203,257
170,521,543
6.42*
2013
591,087,600
271,644,860
204,653,892
11,062,658
215,716,550
188,146,790
16,358,992
204,505,782
7.26*
Condensed Statement of Income from 2010 to 2011 (Unconsolidated)－R.O.C. GAAP
Unit: NT$ thousands (Except EPS: NT$)
Item
Net Sales
Gross Profit
Income from Operations
Non-operating Income and Gains
Non-operating Expenses and Losses
Interest Revenue
Interest Expense
Income before Income Tax
Net Income
Basic Earnings Per Share
*Based on weighted average shares outstanding in each year
2010
406,963,312
196,989,302
154,846,508
15,907,968
1,464,272
764,027
214,641
169,290,204
161,605,009
6.24*
2011
427,080,645
194,069,228
141,557,418
5,358,527
1,768,268
1,479,514
626,725
145,147,677
134,453,260
134,201,279
5.18*
2014
757,152,389
366,911,703
290,659,658
10,363,505
301,023,163
263,898,794
11,818,347
275,717,141
10.18*
2011
418,245,493
185,560,865
138,905,763
7,287,046
1,484,965
697,196
445,887
144,707,844
134,201,279
5.18*
6.1.3 Financial Analysis
Financial Analysis from 2012 to 2014 (Consolidated)
Capital Structure Analysis
Debts Ratio (%)
Long-term Fund to Property, Plant and Equipment (%)
Liquidity Analysis
Current Ratio (%)
Quick Ratio (%)
Times Interest Earned (Times)
Operating Performance Analysis
Average Collection Turnover (Times)
Days Sales Outstanding
Average Inventory Turnover (Times)
Average Inventory Turnover Days
Average Payment Turnover (Times)
Property, Plant and Equipment Turnover (Times)
Total Assets Turnover (Times)
Profitability Analysis
Return on Total Assets (%)
Return on Equity attributable to Shareholders of the Parent (%)
Operating Income to Paid-in Capital Ratio (%)
Pre-tax Income to Paid-in Capital Ratio (%)
Net Margin (%)
Basic Earnings Per Share (NT$)
Diluted Earnings Per Share (NT$)
Cash Flow
Cash Flow Ratio (%)
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 (28-nanometer and below) Percentage of Wafer Sales (%)
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
191.93
94.71
11.46
2.32
1.01
91
12
Sales Growth (%)
Net Income Growth (%)
18.7 (Note 3)
23.9 (Note 3)
Analysis of deviation of 2014 vs. 2013 over 20%:
1. Current ratio and quick ratio increased by 65%, mainly due to increase in cash and cash equivalents, available-for-sale financial assets and notes and accounts receivable.
2. Operating income to paid-in capital ratio increased by 41% as a result of increase in operating income.
3. Pre-tax income to paid-in capital ratio increased by 40% as a result of increase in pre-tax income.
4. Basic earnings per share and diluted earnings per share increased by 40% as a result of increase in net income.
Note 1: 2008-2011 operating cash flow are based on R.O.C. GAAP.
Note 2: Capacity includes wafers committed by Vanguard and SSMC.
Note 3: 2011 net sales and net income are based on R.O.C. GAAP
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
183.05
88.35
12.16
2.40
1.01
91
30
17.82
13.12
2014
30.06
158.17
311.70
278.03
94.35
8.12
44.95
7.42
49.19
19.39
0.95
0.55
19.33
27.88
114.11
116.51
34.58
10.18
10.18
209.70
92.15
13.04
2.15
1.01
97
42
27.77
40.26
*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
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
3. Operating Performance Analysis
5. Cash Flow
(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
(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)
(7) Total Assets Turnover = Net Sales / Average Total Assets
6. Leverage
(1) Operating Leverage = (Net Sales - Variable Cost) / Income from Operations
(2) Financial Leverage = Income from Operations / (Income from Operations - Interest
Expenses)
080
081
Financial Analysis from 2010 to 2011 (Consolidated)－R.O.C. GAAP
Financial Analysis from 2012 to 2014 (Unconsolidated)
Capital Structure Analysis
Debts Ratio (%)
Liquidity Analysis
Long-term Fund to Fixed Assets (%)
Current Ratio (%)
Quick Ratio (%)
Times Interest Earned (Times)
Operating Performance Analysis
Average Collection Turnover (Times)
Days Sales Outstanding
Average Inventory Turnover (Times)
Average Inventory Turnover Days
Average Payment Turnover (Times)
Fixed Assets Turnover (Times)
Total Assets Turnover (Times)
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 (28-nanometer and below) Percentage of Wafer Sales (%)
Sales Growth (%)
Net Income Growth (%)
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
-
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
1
1.8
-17.0
Note: Capacity includes wafers committed by Vanguard and SSMC.
*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 + 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)
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
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
2014
26.53
156.25
208.09
171.82
120.82
8.29
44.02
7.90
46.19
18.64
0.97
0.58
20.22
27.88
112.10
116.09
34.85
10.18
10.18
230.29
90.72
13.29
2.19
1.01
Analysis of deviation of 2014 vs. 2013 over 20%:
1. Current ratio increased by 51%, mainly due to increase in cash and cash equivalents, receivables from related parties and inventories.
2. Quick ratio increased by 45%, mainly due to increase in cash and cash equivalents, receivables from related parties and inventories.
3. Operating income to paid-in capital ratio increased by 42% as a result of increase in operating income.
4. Pre-tax income to paid-in capital ratio increased by 40% as a result of increase in pre-tax income.
5. Basic earnings per share and diluted earnings per share increased by 40% as a result of increase in net income.
6. Cash flow ratio increased by 29% as a result of increase in cash provided by operating activities.
Note: 2008-2011 operating cash flow are based on R.O.C. GAAP.
*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)
082
083
Financial Analysis from 2010 to 2011 (Unconsolidated)－R.O.C. GAAP
6.1.4 Auditors’ Opinions from 2010 to 2014
Capital Structure Analysis
Debt Ratio (%)
Liquidity Analysis
Long-term Fund to Fixed Assets Ratio (%)
Current Ratio (%)
Quick Ratio (%)
Times Interest Earned (Times)
Operating Performance Analysis
Average Collection Turnover (Times)
Days Sales Outstanding
Average Inventory Turnover (Times)
Average Inventory Turnover Days
Average Payment Turnover (Times)
Fixed Assets Turnover (Times)
Total Assets Turnover (Times)
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 (%)
Cash Flow Adequacy Ratio (%)
Cash Flow Reinvestment Ratio (%)
Operating Leverage
Financial Leverage
Leverage
*Glossary
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
Year
2010
2011
2012
2013
2014
CPA
Hung-Peng Lin, Shu-Chieh Huang
Hung-Peng Lin, Shu-Chieh Huang
Hung-Peng Lin, Shu-Chieh Huang
Yi-Hsin Kao, Hung-Wen Huang
Yi-Hsin Kao, Hung-Wen Huang
Audit Opinion
An Unqualified Opinion
An Unqualified Opinion
An Unqualified Opinion
An Unqualified Opinion
An Unqualified Opinion
Deloitte & Touche
12F, No. 156, Sec. 3, Min-Sheng E. Rd., Taipei, Taiwan, R.O.C.
Tel: 886-2-2545-9988
6.1.5 Audit Committee’s Review Report
The Board of Directors has prepared the Company’s 2014 Business Report, Financial Statements, and proposal for allocation of
profits. The CPA firm of Deloitte & Touche was retained to audit TSMC’s Financial Statements and has issued an audit report
relating to the Financial Statements. The Business Report, Financial Statements, and profit allocation proposal have been
reviewed and determined to be correct and accurate by the Audit Committee members of Taiwan Semiconductor Manufacturing
Company Limited. According to Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Law, we hereby
submit this report.
Taiwan Semiconductor Manufacturing Company Limited
Chairman of the Audit Committee: Sir Peter Leahy Bonfield
1. Capital Structure Analysis
4. Profitability 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
(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 + 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)
February 10, 2015
6.1.6 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 2014 and as of the date of this Annual Report: None
6.1.7 Consolidated Financial Statements and Independent Auditors’ Report along with Parent Company Only Financial
Statements and Independent Auditors’ Report
Please refer to Annual Report section (II), Financial Statements.
084
085
6.2 Financial Status and Operating Results
6.2.1 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
Others
Equity Attributable to Shareholders of the Parent
Total Equity
2014
626,566,787
30,051,544
818,198,801
13,531,510
6,785,203
2013
358,486,654
89,183,810
792,665,913
11,490,383
11,228,217
1,495,133,845
1,263,054,977
201,014,777
248,443,321
449,458,098
259,296,624
55,989,922
704,512,664
25,749,291
1,045,548,501
1,045,675,747
189,777,934
225,501,958
415,279,892
259,286,171
55,858,626
518,193,152
14,170,306
847,508,255
847,775,085
Difference
268,080,133
(59,132,266)
25,532,888
2,041,127
(4,443,014)
232,078,868
11,236,843
22,941,363
34,178,206
10,453
131,296
186,319,512
11,578,985
198,040,246
197,900,662
%
75%
-66%
3%
18%
-40%
18%
6%
10%
8%
0%
0%
36%
82%
23%
23%
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, available-for-sale financial assets and
notes and accounts receivable in 2014.
The decrease in long-term investments was mainly due to reclassification of available-for-sale financial assets to current assets in
2014.
The decrease in other assets was mainly due to decrease in refundable deposits and deferred income tax assets.
The increase in retained earnings, equity attributable to shareholders of the parent and total equity was mainly due to net
income of 2014, partially offset by distribution of 2013 earnings.
The increase in others was mainly due to increase in currency exchange differences arising from translation of foreign operations
in 2014.
● Major Impact on Financial Position
The above deviations had no major impact on TSMC’s financial position.
● Future Plan on Financial Position: Not applicable.
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
Others
Total Equity
2014
370,949,497
242,390,122
796,684,361
8,996,810
4,023,634
2013
257,623,763
165,545,159
770,443,494
7,069,456
7,897,131
1,423,044,424
1,208,579,003
178,261,092
199,234,831
377,495,923
259,296,624
55,989,922
704,512,664
25,749,291
1,045,548,501
187,195,744
173,875,004
361,070,748
259,286,171
55,858,626
518,193,152
14,170,306
847,508,255
Difference
113,325,734
76,844,963
26,240,867
1,927,354
(3,873,497)
214,465,421
(8,934,652)
25,359,827
16,425,175
10,453
131,296
186,319,512
11,578,985
198,040,246
%
44%
46%
3%
27%
-49%
18%
-5%
15%
5%
0%
0%
36%
82%
23%
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 asset, 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, receivables from related parties and
inventories in 2014.
The increase in long-term investment was mainly due to increase in investments accounted for using equity method in 2014.
The increase in intangible assets was mainly due to increase in technology license fees in 2014.
The decrease in other assets was mainly due to decrease in refundable deposits and deferred income tax assets.
The increase in retained earnings and total equity was mainly due to net income of 2014, partially offset by distribution of 2013
earnings.
The increase in others was mainly due to increase in currency exchange differences arising from translation of foreign operations
in 2014.
● Major Impact on Financial Position
The above deviations had no major impact on TSMC’s financial position.
● Future Plan on Financial Position: Not applicable.
086
087
6.2.2 Financial Performance
Consolidated
Unit: NT$ thousands
Item
Net Revenue
Cost of Revenue
Gross Profit before Realized (Unrealized) Gross Profit on Sales
to Associates
Realized (Unrealized) Gross Profit on Sales to Associates
Gross Profit
Operating Expenses
Other Operating Income and Expenses, Net
Income from Operations
Non-operating Income and Expenses
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.
2014
762,806,465
385,100,646
377,705,819
28,556
377,734,375
80,842,944
(1,001,138)
295,890,293
6,207,253
302,097,546
38,316,677
263,780,869
11,834,164
275,615,033
263,898,794
275,717,141
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
Difference
165,782,268
69,042,826
96,739,442
49,426
96,788,868
9,279,710
(1,048,228)
86,460,930
149,494
86,610,424
10,848,492
75,761,932
(4,518,084)
71,243,848
75,752,004
71,211,359
%
28%
22%
34%
NM (Note)
34%
13%
-2,226%
41%
2%
40%
39%
40%
-28%
35%
40%
35%
● Analysis of Deviation over 20%
Increase in net revenue: The increase was mainly due to higher wafer shipments in 2014. Furthermore, the introduction of
20-nanometer and higher share of 28-nanometer sales contributed to a higher average selling price.
Increase in cost of revenue: The increase was mainly due to higher sales.
Increase in gross profit before realized (unrealized) gross profit on sales to associates and gross profit: The increase was mainly
due to higher capacity utilization in 2014.
Increase in realized (unrealized) gross profit on sales to associates: The increase was mainly due to lower sales to associates in the
fourth quarter 2014.
Decrease in other operating income and expenses, net: The decrease was mainly due to impairment loss on noncurrent assets
held for sale and property, plant and equipment recognized in 2014.
Increase in income from operations: The increase was mainly due to gross profit increased at a higher rate than the increase in
operating expenses.
Increase in income before income tax: The increase was mainly due to higher income from operations.
Increase in income tax expenses: The increase was mainly due to higher taxable income and increase in income tax on
unappropriated earnings in 2014.
Increase in net income and total net income attributable to shareholders of the parent: The increase was mainly due to higher
income before income tax.
Decrease in other comprehensive income, net of income tax: The decrease was mainly due to changes in fair value of
available-for-sale financial assets, partially offset by currency exchange differences arising from translation of foreign operations
in 2014.
Increase in total comprehensive income for the year and total comprehensive income attributable to shareholders of the parent:
The increase was mainly due to higher net income in 2014.
● 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 Realized (Unrealized) Gross Profit on Sales
to Subsidiaries and Associates
Realized (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 Expenses
Income before Income Tax
Income Tax Expenses
Net Income
Other Comprehensive Income, Net of Income Tax
Total Comprehensive Income for the Year
Note: NM stands for non-meaningful.
2014
757,152,389
390,272,233
366,880,156
2013
591,087,600
319,407,163
271,680,437
Difference
166,064,789
70,865,070
95,199,719
%
28%
22%
35%
31,547
(35,577)
67,124
NM (Note)
366,911,703
76,261,094
9,049
290,659,658
10,363,505
301,023,163
37,124,369
263,898,794
11,818,347
275,717,141
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
95,266,843
9,336,740
75,663
86,005,766
(699,153)
85,306,613
9,554,609
75,752,004
(4,540,645)
71,211,359
35%
14%
NM (Note)
42%
-6%
40%
35%
40%
-28%
35%
● Analysis of Deviation over 20%
Increase in net revenue: The increase was mainly due to higher wafer shipments in 2014. Furthermore, the introduction of
20-nanometer and higher share of 28-nanometer sales contributed to a higher average selling price.
Increase in cost of revenue: The increase was mainly due to higher sales.
Increase in gross profit before realized (unrealized) gross profit on sales to associates and gross profit: The increase was mainly
due to higher capacity utilization in 2014.
Increase in realized (unrealized) gross profit on sales to subsidiaries and associates: The increase was mainly due to lower sales to
subsidiaries and associates in the fourth quarter 2014.
Increase in other operating income and expenses, net: The increase was mainly due to higher net gain on disposal of property,
plant and equipment in 2014.
Increase in income from operations: The increase was mainly due to gross profit increased at a higher rate than the increase in
operating expenses.
Increase in income before income tax: The increase was mainly due to higher income from operations.
Increase in income tax expenses: The increase was mainly due to higher taxable income and increase in income tax on
unappropriated earnings in 2014.
Increase in net income: The increase was mainly due to higher income before income tax.
Decrease in other comprehensive income, net of income tax: The decrease was mainly due to higher share of other
comprehensive loss of subsidiaries and associates, partially offset by currency exchange differences arising from translation of
foreign operations in 2014.
Increase in total comprehensive income: The increase was mainly due to higher net income in 2014.
● 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.
088
089
6.2.3 Cash Flow
Consolidated
Unit: NT$ thousands
Cash Balance 12/31/2013
Net Cash Provided by
Operating Activities in 2014
Net Cash Used in Investing and
Financing Activities in 2014
Cash Balance 12/31/2014
Remedy for Liquidity Shortfall
Investment Plan
Financing Plan
242,695,447
421,523,731
(305,770.149)
358.449,029
None
None
● Analysis of Cash Flow
NT$421.5 billion net cash generated by operating activities: mainly from net income and depreciation and amortization
expenses.
NT$282.4 billion net cash used in investing activities: primarily for capital expenditures.
NT$23.4 billion net cash used in financing activities: primarily for payment of cash dividends, partially offset by receipt of
guarantee deposits and increase in short-term loans.
● Remedial Actions for Liquidity Shortfall: As a result of positive operating cash flows and cash on-hand, remedial actions are not
required.
● Cash Flow Projection for Next Year: Not applicable.
Unconsolidated
Unit: NT$ thousands
Cash Balance 12/31/2013
Net Cash Provided by
Operating Activities in 2014
Net Cash Used in Investing and
Financing Activities in 2014
Cash Balance 12/31/2014
Remedy for Liquidity Shortfall
Investment Plan
Financing Plan
146,438,768
410,511,003
(372,090,539)
184,859,232
None
None
● Analysis of Cash Flow
NT$410.5 billion net cash generated by operating activities: mainly from net income and depreciation and amortization
expenses.
NT$279.8 billion net cash used in investing activities: primarily for capital expenditures.
NT$92.3 billion net cash used in financing activities: primarily for payment of cash dividends and acquisition of interests in
subsidiaries, partially offset by receipt of guarantee deposits and increase in short-term loans.
● Remedial Actions for Liquidity Shortfall: As a result of positive operating cash flows and cash on-hand, remedial actions are not
required.
● Cash Flow Projection for Next Year: Not applicable.
6.2.4 Major Capital Expenditures and Impact on Financial and Business
Unit: NT$ thousands
Plan
Actual or Planned Source of Capital
Total Amount as of 12/31/2014
Actual Use of Capital
2014
2013
Production Facilities, R&D and
Production Equipment
Others
Total
Cash flow generated from operations and issuance of corporate bonds
569,407,844
285,585,579
283,822,265
Cash flow generated from operations
6,726,957
2,954,449
3,772,508
576,134,801
288,540,028
287,594,773
Based on capital expenditures listed above and projected for 2015, it is estimated that TSMC’s annual production capacity will
increase by approximately 1.06 million 12-inch equivalent wafers in 2015.
6.2.5 Long-term Investment Policy and Results
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 2014, the investment gain from
these investments amounted to NT$9,292,150 thousand (NT$3,949,674 thousand on a consolidated basis), mainly from the
contribution of mobile computing products. For future investments, TSMC will continue to focus on strategic purposes through
prudent assessments.
6.3 Risk Management
6.3.1 Risk Management (RM) Organization Chart
Our Board of Directors plays a key role in helping the Company
identify and manage economic risks. Our Risk Management
organization periodically briefs our Audit Committee on the
ever-changing risk environment facing TSMC, the focus of
our enterprise risk management, and risk assessment and
mitigation efforts. Our Audit Committee’s Chairperson also
briefs the Board on such discussion and actions.
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.
The Company’s risk management includes the management
of “Strategic Risks”, “Operational Risks”, “Financial Risks”,
“Hazardous Risks”, “Risks Associated with Climate Change
and Non-compliance with Environmental and Climate
Related Laws and Regulations, and Other International Laws,
Regulations and Accords”, etc.
To reduce TSMC’s supply chain risks, a cross-function
task force comprised of members from fab operations,
material management, risk management and quality system
management worked with TSMC’s suppliers to develop
business continuity plans, and enhance supply chain
resilience capability to effectively manage the risks faced
by its suppliers. As a result of those efforts, there was no
interruption in TSMC’s supply lines in 2014.
As TSMC continued to expand production capacity with
advanced technology in 2014, seismic protection engineering
design, risk treatment practices and green factory projects
were initiated and implemented, beginning in the design
phase for all new fabs.
Board of Directors/
Audit Committee
CEO
RM Steering Committee
Materials Management
and Risk Management
RM Executive Council
RM Program
● RM Steering Committee
Consists of functional heads (with Internal Audit head sitting
as an observer);
Reports to Audit Committee;
Reviews risk control progress; and
Identifies and approves the prioritized risk lists.
● RM Executive Council
Consists of representatives from each function;
Identifies and assesses risks;
Implements risk control program & ensures effectiveness;
Improves transparency & how risks are managed.
● RM Program
Coordinates the RM RM Executive Council activities;
Facilitates functional risk management activities;
Initiates cross function communication for risk mitigation; and
Consolidates ERM reports into the RM Steering Committee.
6.3.2 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 market conditions in such
highly cyclical electronics and semiconductor industries.
Variations in order levels from customers may result in
volatility in the Company’s revenues and earnings.
From time to time, the electronics and semiconductor
industries have experienced significant, and sometimes
prolonged, periods of downturns and overcapacity. Because
TSMC is, and will continue to be, dependent on the
090
091
requirements of electronics and semiconductor companies
for its services, periods of downturn and overcapacity in
the general electronics and semiconductor industries could
lead to reduced demand for overall semiconductor foundry
services, including TSMC’s services. If TSMC cannot take
appropriate actions such as reducing its costs to sufficiently
offset declines in demand, the Company’s revenues, margins
and earnings will suffer during periods of downturn and
overcapacity.
● Changes in Technology
The semiconductor industry and its technologies are
constantly changing. TSMC competes by developing process
technologies using increasingly advanced nodes and on
manufacturing products with more functions. TSMC also
competes by developing new derivative technologies. If TSMC
does not anticipate these changes in technologies and 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 time-to-market, TSMC risks losing
these customers. Consumer driven products such as mobile
devices have shifted the direction of the global technology
market. In addition, customers demand more variety of
technology offerings and faster delivery of these technologies.
Also, we have seen an increasing concentration of customers
and competition (all further discussed among these risk
factors). 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, 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 page 10-11 of this Annual Report.
services, and may adversely affect the Company’s revenues.
Further, a significant portion of TSMC’s operating costs is
fixed because the Company owns most of its manufacturing
capacities. In general, these costs do not decline when
customer demand or TSMC’s capacity utilization rates drop,
and thus declines in customer demand, among other factors,
may significantly decrease margins. Conversely, as product
demand rises and factory utilization increases, the fixed costs
are spread over increased output, which can improve TSMC’s
margins. Additionally, the historical and current trend of
declining average selling prices of end-use applications places
downward pressure on the prices of the components that go
into such applications. If the average selling prices of end-use
applications continue to decrease, the pricing pressure
on components produced by the Company may lead to a
reduction of TSMC’s revenues, margin and earnings.
Risks Associated with Competition
The markets for TSMC’s foundry services are highly
competitive. The Company competes 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.
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 computers, consumer electronics products
and industrial/standard products. Any significant decrease
in the demand for any one of these products may decrease
the demand for such other products as well as overall
global semiconductor foundry services, including TSMC’s
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 company.
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.
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, 2015, 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, 2015, to prepare
their consolidated financial statements in accordance with
the 2013 version of following FSC endorsed standards and
interpretations: “International Financial Reporting Standards,”
“International Accounting Standards,” and relevant
Interpretations (collectively, “2013 Taiwan-IFRSs version”).
TSMC has disclosed the effects arising from the significant
differences between 2013 Taiwan-IFRSs version and the
current accounting policy in TSMC’s 2014 consolidated
financial statements.
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. Ancillary regulations
such as Occupational Safety and Health Measures Rule and
its enforcement Guidelines, Maternity Protection Rule, and
the regulations governing use of chemicals have been issued.
TSMC over the years has been consistently maintaining a
robust safe and healthy work environment and protective
measures in place, and has taken proper measures to
maintain the safety and health of its workplace in compliance
with the aforesaid laws and regulations. In addition, the
Taiwan legislature 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 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
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.
6.3.3 Operational Risks
Risks Associated with Capacity Expansion
TSMC performs long-term market demand forecasts to
estimate market and general economic conditions for
its products and services. Based upon these estimates,
TSMC manages its overall capacity in accordance with
market demand. Because market conditions may vary
significantly and unexpectedly, TSMC’s 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, operating facilities may not
be able to absorb and complete in a timely manner any
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 market
demand forecasts taking into account the demand forecasts
of TSMC’s customers. As a result, the total monthly capacity
of the Company’s 12-inch wafer fabs was increased from
414,680 wafers as of December 31, 2013 to 494,696 wafers
as of December 31, 2014. 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.
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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
62% and 63% of net revenue in 2013 and 2014, respectively,
and the Company’s largest customer accounted for
approximately 22% and 21% of net revenue in 2013 and
2014, respectively.
This customer concentration results in part from the changing
dynamics of the electronics industry with the structural
shift to mobile devices and applications and software that
provide the content for such devices. There are only a limited
number of customers who are successfully exploiting this new
business model paradigm.
Also, in order to respond to the new business model
paradigm, TSMC has seen the change of nature in its
customers’ business models. 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.
TSMC maintains a close watch on these trends and works
closely with its customers to respond to these changes and to
strengthen the Company’s market position.
Risks Associated with Purchase Concentration
● Raw Materials
TSMC’s production operations require that it obtains
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. In addition, major natural disasters,
political or economic turmoil occurring within the country of
origin of such raw materials may also significantly disrupt the
availability of such raw materials or increase their prices. Also,
since we procure some of our raw materials from sole-source
suppliers, there is a risk that our need for such raw materials
may not be met or that back-up supplies may not be readily
available. Our revenue and earnings could decline if we
are 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 we cannot pass
on to our customers. To reduce the supply chain risk and
to manage the cost actively, TSMC is committing resources
toward developing new supply sources. In addition, TSMC
continually encourages its suppliers to reduce 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.
In the meantime, being aware of the risk of fewer back-up
suppliers, TSMC is engaging early and deeply with suppliers
on managing quality, and capacity issues because ramping
at unprecedented speed leaves TSMC with very little time
to re-tune its process. At leading technology nodes, TSMC
requires world-class material quality, manufactured at
world-class facilities, with world-class processes. In regard
to streamlining the supply chain risk management, TSMC
intensifies supplier site audits and extends supply chain
best practices to suppliers’ suppliers to mitigate capacity
and quality risks. Moreover, TSMC continually refines its
planning system and enhances demand forecast alignments
with critical suppliers for adequate supply capacity planning,
especially for steep ramping of new nodes. TSMC developed
a Sustainability Assessment for our critical suppliers. Any
regulatory violations or any environmental impact event as
well as failure of meeting TSMC’s expectation in sustainability
requirements may result in business reduction or termination.
● 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 that is characterized from time to time
by limited supply and long delivery cycles. During such times,
supplier-specific or industry-wide 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. 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’ demands on
technology and production capacity, or at a reasonable cost,
its financial condition and results of operations could be
negatively affected.
Risks Associated with Intellectual Property Rights
The Company’s ability to compete successfully and to achieve
future growth will depend in part on the continued strength
of its intellectual property portfolio. While TSMC actively
enforces and protects its intellectual property rights, there can
be no assurance 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 technologies, trade secrets,
patents, software or know-how necessary 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 on, to a certain degree, 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 terms it considers
reasonable or at all. The lack of necessary licenses could
expose TSMC to claims for damages and/or injunctions
from third parties, as well as claims for indemnification by
its customers in instances where it has contractually agreed
to indemnify its customers against damages resulting from
infringement claims.
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 TSMC
or the use by its customers of semiconductors made by TSMC
may infringe upon their patents or other intellectual property
rights. Because of the nature of the industry, the Company
may continue to receive such communications in the future.
In some instances, these disputes have resulted in litigation.
Recently, there has been a notable increase in the number of
claims or lawsuits initiated by certain litigious, non-practicing
entities and these litigious, non-practicing entities are also
becoming more aggressive in their monetary demands
and requests for court-issued injunctions. Such lawsuits or
claims may increase TSMC’s cost of doing business and may
potentially be extremely disruptive if the plaintiffs succeed
in blocking the trade of its products and services. If TSMC
fail to obtain or maintain certain technologies or intellectual
property licenses and, if litigation relating to alleged
intellectual property matters occurs, it could prevent the
Company from manufacturing or selling particular products
or applying particular technologies, which could reduce its
opportunities to generate revenues.
TSMC has taken other measures to minimize potential loss
of shareholder value arising from intellectual property claims
and litigation filed against the Company. These measures
include: obtaining licenses from certain semiconductor and
other technology companies; timely securing of intellectual
property rights for defensive and/or offensive protection
of TSMC technology and business; aggressively defending
against frivolous litigation; and acquiring or licensing
strategic intellectual property rights necessary to protect its
technologies and business offerings.
Risks Associated with Litigation
As is the case with many companies in the semiconductor
industry, TSMC has received from time-to-time communications
from third parties asserting that its technologies, its
manufacturing processes, or the design of the semiconductors
made by TSMC or the use of those semiconductors by its
customers may infringe upon their patents or other intellectual
property rights. These assertions have at times resulted in
litigation by or against the Company and settlement payments
by the Company. Irrespective of the validity of these claims,
TSMC could incur significant costs in the defense thereof or
could suffer adverse effects on its operations.
In June 2010, Keranos, LLC. filed a 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 November 2010, seeking a judgment declaring
that they did not infringe the asserted patents, and that
those patents were invalid. These two litigations have been
consolidated into a single lawsuit in the U.S. District Court
for the Eastern District of Texas. In February 2014, the Court
entered a final judgment in favor of TSMC, dismissing all
of Keranos’ claims against TSMC with prejudice. The final
judgment is currently being appealed to the U.S. Court of
Appeals for the Federal Circuit. The outcome cannot be
determined at this time.
In December 2010, Ziptronix, Inc. filed a complaint in the U.S.
District Court for the Northern District of California accusing
TSMC, TSMC North America and one other company of
infringing several U.S. patents. In September 2014, the Court
granted summary judgment of noninfringement in favor of
TSMC and TSMC North America. Ziptronix, Inc. can appeal the
Court’s order. The outcome cannot be determined at this time.
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In September 2013, Zond Inc. filed a complaint in U.S. District
Court for the District of Massachusetts against TSMC, certain
TSMC subsidiaries and other companies alleging infringing of
several U.S. patents. Subsequently, TSMC and Zond initiated
additional legal actions in the U.S. District Courts for the
District of Delaware and the District of Massachusetts over
several additional patents owned by Zond. In March 2015,
all pending litigations between the parties in the U.S. District
Courts for the District of Massachusetts and the District of
Delaware were dismissed.
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 in the U.S. District Court
for the Northern District of California against Tela for trade
secret misappropriation and breach of contract. In September
2014, all pending litigations between the parties in the U.S.
District Court for the District of Delaware, the ITC and the
U.S. District Court for the Northern District of California were
dismissed.
In March 2014, DSS Technology Management, Inc. filed a
complaint in the U.S. District Court for the Eastern District
of Texas alleging that TSMC, TSMC North America, TSMC
Development, Inc., and several other companies infringe one
U.S. patent. TSMC Development, Inc. has subsequently been
dismissed. The outcome cannot be determined at this time.
Other than the matters described above, TSMC was not
involved in any other material litigation in 2014 and is not
currently involved in any other material litigation.
Risks Associated with Mergers and Acquisitions
As of the date of this Annual Report, there were no such risks
for TSMC.
Risks Associated with Recruiting and Retaining Qualified
Personnel
The Company relies 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.
TSMC provides varied and competitive compensation
programs, and is generous in sharing its long-term business
achievements with the employees. Furthermore, in order
to attract and retain talents, the Company is dedicated to
providing a timely distribution of employees’ cash bonus from
its profits. TSMC believes that by rewarding employees’ hard
work in a timely fashion, it not only encourages employees to
contribute consistently to ensure the success of the Company,
but also links their interests with those of TSMC’s shareholders.
Future R&D Plans and Expected R&D Spending
For additional details, please refer to “5.2.7 Future R&D
Plans” on pages 65-66 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 other fields in 2014. Amid TSMC’s
continuing efforts to be a better corporate citizen and carry
out its social responsibilities, the Company was not only
selected as a component of the Dow Jones Sustainability
Index (DJSI) for a 14th consecutive year, but also recognized
by the DJSI as the Semiconductors and Semiconductor
Equipment Industry Group Leader for a second straight year,
further strengthening the Company’s public reputation. TSMC
was the only Taiwan corporation to be named a leader of one
of the DJSI’s 24 industry groups.
In addition, TSMC’s awards in 2014 include the R.O.C.
Executive Yuan National Sustainable Development Award;
The Taiwan Institute for Sustainable Energy 2014 Taiwan
Corporate Sustainability Award “Gold Medal For Sustainability
Report and Taiwan Top 10 Sustainability Benchmark Award”;
No.1 in the R.O.C. Ministry of Economic Affairs “Top 20
Innovative Taiwan Companies”; The R.O.C. Ministry of
Economic Affairs Industrial Development Bureau “Green
Factory Label”; The R.O.C. Environmental Protection
Administration “Annual Enterprise Environmental Protection
Award”; The R.O.C. Environmental Protection Administration
“Energy Conservation and Carbon Reduction Action Mark”;
The R.O.C. Environmental Protection Administration
“Enterprise Green Procurement Award”; The Science Park
“Low Carbon Enterprise Award”; The Science Park Labor
Health and Safety Achievement Award; The R.O.C. Ministry
of Labor “Work-Life Balance Award,” highest honors; The
R.O.C. Ministry of Labor “Excellence in Labor Safety and
Hygiene Award”; The Financial Times-Standard Chartered
Taiwan Business Awards for “Economic Contribution
– Large Company” and “Responsible Business – Large
Company”; Named “Most Admired Company in Taiwan” by
CommonWealth Magazine; The CommonWealth Magazine
Corporate Citizenship Award; The CommonWealth Magazine
“Theme of the Year” Award for Corporate Governance;
First Prize in the Environmental Protection Category for
the GlobalViews Magazine Corporate Social Responsibility
Award; No.1 in 104 Corporation poll of “Medium to Large
Corporations Most Attractive to New Job-Seekers”
As an important member of the technology industry, 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
the above emergencies, all departments immediately deploy
emergency response measures to reduce casualties and
minimize the impact on the surrounding environment,
Company property, and manufacturing operations, and also
alert the Public Relations Department at the first stage of
response to ensure smooth channels of communications to
maintain the Company’s image.
Risks Associated with Change in Management
As of the date of this Annual Report, there were no such risks
for TSMC.
6.3.4 Financial Risks
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,
TSMC places its 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 2014, 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. Specifically, based on
TSMC’s 2014 results, every 1% depreciation of the US dollar
against the NT dollar exchange rate may result in approximately
0.4 percentage point decrease in TSMC’s operating margin.
TSMC utilizes short-term debt denominated in foreign
currencies and derivative financial instruments, including
currency forward contracts and cross currency swaps, to hedge
our currency exposure.
Fluctuations in the exchange rate between the US dollar and
the NT dollar may affect the US dollar value of the Company’s
common shares and the market price of the Company’s
American Depositary Shares (ADSs) and of any cash dividends
paid in NT dollars on TSMC’s common shares represented by
ADSs.
● Inflation and Deflation and Resulting General Market
Volatility
The world economy is becoming more vulnerable to sudden
unexpected fluctuations in inflationary and deflationary
expectations and conditions. Both high inflation and deflation
adversely affect an economy, at both the macro and micro
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levels, by reducing economic efficiency and disrupting saving
and investment decisions. These macro-economic changes
have resulted in general world market volatility across all
assets classes. Such fluctuations and volatility 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
economy. Therefore, the demand for TSMC’s products and
services could unexpectedly fluctuate severely in accordance
with expectations of inflation or deflation as affected by
macro market volatility.
Risks Associated with External Financing
Planning capital requirements is challenging in the highly
dynamic, cyclical and rapidly changing semiconductor
industry, especially during times of general market volatility
in the fixed income, interest rates, foreign currencies and
equities markets. 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.
Risks Associated with High-risk/high-leveraged
Investment; Lending, Endorsements, and Guarantees for
Other Parties; and Financial Derivative Transactions
TSMC did not make high-risk or high-leveraged financial
investments during 2014 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, 2015, TSMC had an
intercompany loan of US$153 million arranged among
the Company’s subsidiaries, which was in compliance with
relevant rules and regulations.
The financial transactions of a “derivative” nature that TSMC
entered into were strictly for hedging purposes and not for
any trading or speculative purpose. For more information,
please refer to pages 30-32 of the Annual Report section (II),
Financial Statements. The fair market value of our trading and
available-for-sale financial securities are subject to prevailing
market conditions and may fluctuate from TSMC’s carrying
value from time to time, which may impact the returns of
those securities.
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
From time to time, TSMC has made or will make a series
of strategic investments. For example, TSMC has invested
to develop potential business in solar power. There is no
guarantee that any of such investments will be successful
commercially. Any such investment will incur risks, which
may result in losses even with careful management. Any such
loss resulting from such investments may result in significant
impairment charges, lower profit margin and ultimately
lower distributable earnings. For further information on these
investments, please refer to “8. Subsidiary Information and
Other Special Notes” on pages 121-125 of this Annual Report.
Risks Associated with Impairment Charges
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. TSMC holds investments in
certain publicly listed and private companies, some of which
have incurred certain impairment charges disclosed in the
“Financial Information”.
The determination of an impairment charge at any given time
is based on the expected results of the Company’s operations
over a number of years subsequent to that time. As a result,
an impairment charge is more likely to occur during a period
when the Company’s operating results are otherwise already
depressed.
TSMC has established the process and system to closely
monitor and assess the risk of any impairment charge.
However, the management is unable to estimate the extent or
timing of any impairment charge for future years, or whether
such impairment charge required may have a material adverse
effect on the Company’s net income.
6.3.5 Hazardous Risks
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 manufacturing fabs in Taiwan
have also been TOSHMS (Taiwan Occupational Safety and
Health Management System) certified. The new fabs will also
acquire the above certificates within 18 months after volume
production.
The Company pays special attention to preparedness for
emergencies or disasters, such as typhoons, floods, droughts
caused by climate change, earthquakes, environmental
contamination, large-scale product returns, service disruption
of IT systems, strikes, pandemics (such as H1N1 influenza),
and sudden and unexpected disruptions to the supply of
raw materials or water, electricity, and other public utilities.
TSMC has established a company-wide task force dedicated
to managing the risk of a water shortage that might arise due
to climate change. This task force keeps watch on the external
supply and internal demand for water. Cross-company
consolidations and external collaborations with public
agencies are also ongoing in the industrial parks to ensure
and sustain a stable water supply.
TSMC has further strengthened its business continuity plans,
which include periodic risk assessment, risk mitigation, and
implementation through the establishment of emergency task
forces when necessary, combined with the preparation of a
thorough analysis of the emergency, its impact, alternative
actions, and solutions for each possible scenario together
with appropriate precautionary and/or recovery measures.
Each task force is given the responsibility of ensuring TSMC’s
ability to conduct business while minimizing personal
injury, business disruption, and financial impact under the
circumstances. TSMC’s business continuity plan is periodically
reviewed according to results of test scenarios or practical
implementation for ensuring effective and successful business
continuity. Customers are informed of TSMC’s strong business
continuity capability in order to establish resilience and
flexibility in both their supply chain and insurance placement.
For the year 2014, 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 Company maintains many
overlapping risk prevention and protection systems, as well
as comprehensive fire and casualty insurance, TSMC’s risk
management and insurance coverage may not be sufficient
to cover all of the Company’s potential losses. If any of
TSMC’s fabs or vendor facilities were to be damaged, or cease
operations as a result of an explosion, fire or environmental
influences, it could reduce the Company’s manufacturing
capacity and may cause it to lose important customers,
thereby having a potentially adverse and material impact
on TSMC’s financial performance. In addition to periodic
fire protection system inspection and firefighting drills, the
Company has also carried out a corporate-wide fire risk
mitigation project focused on management and hardware
improvements.
6.3.6 Risks Associated with Climate Change and Non-
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 (such as the
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U.S. SEC rule for filing Form SD to disclose the origins of
certain strategic minerals), regulations and guidelines issued
worldwide.
Although TSMC may be eligible for various exemptions and/or
extensions of time for compliance, the Company’s failure to
comply with any of these applicable laws or regulations could
result in:
● significant penalties and legal liabilities, such as the denial of
import permits;
● the temporary or permanent suspension of production of
the affected products;
● unfavorable alterations in our manufacturing, fabrication
and assembly and test processes;
● challenges from our customers that place us at a significant
competitive disadvantage, such as loss of actual or
potential sales contracts in case we are unable to satisfy the
conditions regarding conflict-free minerals sourcing laws or
requirements by our customers;
● restrictions on our operations or sales;
● damages to our goodwill and reputation, and
● loss of tax benefits, including termination of current tax
incentives, disqualification of tax credit application and
repayment of the tax benefits that we are not entitled to.
Existing and future environmental- and climate-related laws
and 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, reduction or remediation
equipment; (b) implement climate change mitigation
programs and “abatement or reduction of greenhouse gas
emissions” programs, or “carbon credit trading” programs;
(c) modify our product designs and manufacturing processes,
or incur other significant expenses associated with such laws
and regulations such as obtaining substitute raw materials
or chemicals that may cost more or be less available for our
operations. It is still unclear whether such necessary actions
would affect the reliability or efficiency of our products and
services.
The contingencies resulting from the actual and potential
impact of local or international laws and regulations, as
well as international accords on environmental or climate
change, could harm the Company’s business and operational
results by increasing expenses or requiring TSMC to alter its
manufacturing, assembly and test processes.
any existing standard(s) of environmental compliance. If
TSMC is unable to offer such products or offer products
that are compliant, but are not as reliable due to the lack of
reasonably available alternative technologies or materials, it
may lose market share to competitors.
In addition, the Company’s inability to timely obtain
environmental related approvals needed to undertake the
development and construction of a new fab or expansion
project may delay, limit or increase the cost of our expansion
plans that could also in turn adversely affect TSMC’s
business and operational results. In light of increased public
interest in environmental issues, the Company’s operations
and expansion plans may be adversely affected or delayed
responding to public concern and social environmental
pressures even if the Company’s operations comply with all
applicable laws and regulations.
Further, energy costs in general could increase significantly
due to climate change and other regulations. Therefore,
TSMC’s energy costs may increase significantly if utility or
power companies pass on their costs, either fully or partially,
such as those associated with carbon taxes, emission caps
and carbon credit trading programs.
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 and other risks. TSMC’s control
measures are as follows:
● Climate Regulatory Risk Control
The greenhouse gas (GHG) control regulations and
agreements of countries around the world are becoming
increasingly stringent. Enterprises are legally required
to regularly disclose GHG-related information, and also
limit GHG emissions. The cost of production, including
materials and energy, may also grow along with future
legal requirements, such as carbon or energy taxes. TSMC
continues to monitor legislative trends and communicate with
various governments through industrial organizations and
associations to set reasonable and feasible legal requirements.
● Conflict Minerals Risk Control
For additional details, please refer to the section of “Supplier
and Contractor Management” of “7.2.3 Safety and Health”
on pages 113-114 of this Annual Report.
Increasing climate change and environmental concerns could
affect the results of our operations if any of our customers
request that we provide products and services that exceed
● Climate Disaster Risk Control
Abnormal climate caused by the greenhouse effect has
increased the frequency and severity of climate disasters－
storms, floods, drought, and water shortages－causing
considerable impacts on business operations and supply
chains. TSMC believes that climate change control should
take into account both mitigation and adaption, 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
for response issues.
● 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,
voluntary perfluorinated compounds (PFC) emission reduction
projects, and GHG inventory and verification every year. TSMC
has publicly disclosed climate change information every year
through the following channels:
● TSMC has disclosed GHG emissions and reduction-related
information for evaluation by the Dow Jones Sustainability
Index every year since 2001.
● 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.
● Since 2005, TSMC has been participating in an annual
survey held by the nonprofit Carbon Disclosure Project
(CDP), which includes GHG emission and reduction
information for all TSMC fabs and subsidiaries.
● 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 the Taiwan Environmental
Protection Administration (EPA) and the Taiwan
Semiconductor Industry Association (TSIA).
6.3.7 Other Risks
Potential Impact and Risks Associated with Sales of
Significant Numbers of Shares by TSMC’s Directors,
and/or Major Shareholders Who Own 10% or More of
TSMC’s Total Outstanding Shares
The value of TSMC shareholders’ investment may be reduced
by possible future sales of TSMC shares owned by the major
shareholders.
One or more of our existing shareholders may, from time to
time, dispose of significant numbers of our common shares
or ADSs. For example, the National Development Fund, which
owned 6.38% of TSMC’s outstanding shares as of February
28, 2015, 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.
Risks Associated with Cyber Attacks
Even though we have established a comprehensive internet
and computing security network, we cannot guarantee
that our computing systems which control or maintain
vital corporate functions like our manufacturing operations
and enterprise accounting would be completely immune
to crippling cyber viral attacks launched by third party to
gain unauthorized access to our internal network systems
to sabotage our operations and goodwill. In the event of a
serious cyber attack, our systems may lose important corporate
data and our production lines may be shutdown indefinitely
pending the resolution of such attack. These cyber attacks may
also attempt to steal our trade secrets and other intellectual
properties and other sensitive information, such as personal
information of our employees and proprietary information of
our customers and other stakeholders. Malicious hackers may
also try to introduce computer viruses or corrupted software
into our network systems to disrupt our operations or spy for
sensitive information. These attacks may result in us having
to pay damages for our delayed or disrupted orders or incur
significant expenses in attempting to re-establish control over
our network. If we are not able to timely resolve the technical
difficulties caused by such cyber attacks, our financial results
as well as our commitments to our customers and other
stakeholders may be materially impaired.
Other Material Risks
During 2014 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
7.1 Overview
Rice carving requires total concentration, and not a single
mistake is tolerated. In its pursuit of sustainability, TSMC
takes the utmost care with all of its economic,
environmental, and social corporate responsibilities to make
the Company a force for improving society.
TSMC believes a company’s corporate social responsibility is to uplift society. As an important part of the technology industry,
we will not only aim to maintain our leadership in worldwide competition and promote Taiwan’s globalization and economic
growth, but also continue to carry out our corporate social responsibility and do our utmost to be good corporate citizens in
the future.
CSR Guidelines
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 and develop power-efficient technologies to provide customers with more advanced, efficient and ecologically
sound products to contribute to a greener world.
10. We support educational and cultural activities, and care for our communities over the long term.
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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 considers its responsibilities. The horizontal axis shows areas where TSMC believes its values can affect society.
Corporate Social Responsibility: Uplift Society
TSMC
Society
Morality
Business Ethics
Economy
Rule of Law
Sustainability
Work/Life Balance
Happiness
Philanthropy
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Integrity
Law Compliance
Anti-Corruption
Anti-Bribery
Anti-Cronyism
Environmental Protection
Climate Control
Energy Conservation
Corporate Governance
Provide Well-paying Jobs
Good Shareholder Return
Employees’ Work-life Balance
Encourage Innovation
Good Work Environment
Volunteers Organization
Education and Culture Foundation
CSR Management Approach
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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, bringing
together representatives from all of TSMC’s CSR-related business segments. 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.
Stakeholder Engagement
TSMC’s stakeholder management procedure is divided into four stages: identification, analysis, plan, and engagement. In
order to pursue sustainable operations, TSMC establishes individual communication channels with each of our stakeholders
according to their influence and issues of concern. We communicate with stakeholders through multiple channels established by
CSR-related units, and compile their economic, social and environmental concerns.
TSMC believes that sustainability, ethics, and integrity are fundamental to a company’s long-term success. As we carry out our
CSR principles, 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.
DJSI Industry Group Leader
In 2014, TSMC was recognized by the Dow Jones Sustainability Indexes (DJSI) as the Semiconductors and Semiconductor
Equipment Industry Group Leader for a second consecutive year, once again affirming the Company’s commitment to
sustainability and corporate social responsibility. Moreover, TSMC is one of only two semiconductor companies chosen as index
components for 14 consecutive years.
2014 CSR Awards and Recognitions
Category
Overall CSR
Organization
Awards and Recognitions
Dow Jones Sustainability World Index (DJSI)
● DJSI Semiconductors and Semiconductor Equipment “Industry Group Leader” for the 2nd consecutive year (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“
● RobecoSAM Sustainability Award: Industry Leader
● Membership in the Dow Jones Sustainability World Index for a 14th consecutive year
Fortune Magazine
● World’s Most Admired Companies
Financial Times – Standard Chartered
● Taiwan Business Awards for “Economic Contribution – Large Company”
● Taiwan Business Awards for “Responsible Business – Large Company”
The Goldman Sachs Group
CommonWealth Magazine
● Member on the GS SUSTAIN Focus List, which incorporates 60 global industry leaders
● Most Admired Company in Taiwan
● Excellence in Corporate Social Responsibility Award
● Theme of the Year Award: Corporate Governance
Globalviews Magazine
● Excellence in Corporate Social Responsibility, Environmental Protection Category
Taiwan Institute of Sustainable Energy
● Gold Medal for Sustainability Report
● Taiwan Top 10 Sustainability Benchmark Award
Economy, Governance
Institutional Investor Magazine
IR Magazine
FinanceAsia
● Best CEO (Technology/Semiconductors) – 2nd Place (buy-side) – All-Asia
● Best CFO (Technology/Semiconductors) – 1st Place (buy-side) – All-Asia
● Best CFO (Technology/Semiconductors) – 1st Place (sell-side) – All-Asia
● Best Investor Relations (Technology/Semiconductors) – 1st Place (buy-side) – All-Asia
● Best Investor Relations – (Technology/Semiconductors) – 1st Place (sell-side) – All-Asia
● Best Investor Relations Professional (Technology/Semiconductors) – 1st Place (buy-side) – All-Asia
● Best Investor Relations Professional (Technology/Semiconductors) – 1st Place (sell-side) – All-Asia
● Grand prix for best overall investor relations (Large cap) – Greater China
● Best in Sector – Technology – Greater China
● Best corporate governance – Greater China
● Best sustainability practice – Greater China
● Best financial reporting – Greater China
● Best IR by a Taiwanese company
● Best IRO – Taiwan
● Asia’s Best Company in Technology
● Region’s Best Borrowers – Taiwan
R.O.C. Securities & Futures Institute
● 11th Information Disclosure of Public Companies Ranking – Ranked A++
Environment
U.S. Green Building Council Leadership in Energy and
Environmental Design (LEED) certification
● “Platinum” certification in LEED-Existing Building: Operation and Maintenance (LEED-EB O&M) – Fab 12 Phase 3
Manufacturing Facility
● “Gold” certification in LEED – NB –Fab 15 Phase 3/4 Manufacturing Facility, Fab 12 Phase 6 Office Building, Fab 15
Phase 1 Office Building ,Fab15 Tower
Note: Up to the end of 2014, TSMC received 16 U.S. LEED certifications (2 “Platinum” class, 14 “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 Office Building
Note: Up to the end of 2014, TSMC received 3 Taiwan EEWH Diamond class “Intelligent Building”, 7 Taiwan EEWH
Diamond class “Green Building” certifications.
R.O.C. Ministry of Economic Affairs Industrial
Development Bureau
● “Green Factory Label” – Fab 12 Phase 6
ISO 50001 Energy Management System certification
● Fab 15
R.O.C. Environmental Protection Administration
● “Annual Enterprise Environmental Protection Award” – Advanced Backend Fab 2
● “Energy Conservation and Carbon Reduction Action Mark” – Fab 5, Fab 12A, Fab 14A, Fab 15
● “Excellence in Toxic Substance Management Award” – Fab 6
● “Enterprise Green Procurement Award” – Fab 2 and 5, Fab 12A
National Council for Sustainable Development
● “National Sustainable Development Award” – Fab12A
R.O.C. Ministry of Economic Affairs
Hsinchu Science Park Administration
● “Excellence in Carbon Reduction Award” – Fab 8, Fab 12B
● “Water Conservation Award” –Fab 2 and 5
● “Low Carbon Enterprise Award” – Fab 12B, Fab 12A
● “Water Conservation Award” – Fab 12A
Southern Taiwan Science Park Administration
● “Excellence in Environmental Protection” – Advanced Backend Fab 2
Hsinchu County Environmental Protection Bureau
● “Enterprise Environmental Protection Evaluation” – Fab 2 and 5, Fab 12B
● “Environmental Education Award” – Fab 2 and 5, Fab 12B
Safety, Health and Wellness
R.O.C. Ministry of Labor
● “Excellence in Labor Safety and Hygiene Award” – Fab 3
Hsinchu Science Park Administration
● “Excellence in Labor Safety and Hygiene Award” – Fab 2
Central Taiwan Science Park Administration
● “Excellence in Labor Safety and Hygiene Award” – Fab 15
Southern Taiwan Science Park Administration
● “Excellence in Labor Safety and Hygiene Award” – Fab 14A
Employees
Ministry of Labor, Executive Yuan
● Work-Life Balance Award
Health Promotion Administration, Ministry of Health
and Welfare
● Health Management Award
● Healthy Weight Management Award
● Pioneering Weight Management Award
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7.2 Environmental, Safety and Health (ESH)
Management
TSMC believes its environmental, safety and health practices
must 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 climate change management, pollution
prevention and control, power and resource conservation,
waste reduction and recycling, safety and health
management, fire and explosion prevention and minimize the
impact of earthquake damage, 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 electronic products initiative], and Perfluorooctane
Sulfonates (PFOS) 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 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 ISO 50001.
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 Level one high-risk
operations to complete certification for technicians, and
to establish their own OHSAS 18001 safety and health
management system. 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 environmental protection, safety and hygiene code
compliance, daily management, fire protection, 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.
Besides the requirement of ESH code compliance, energy/
water saving and carbon management 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 wafers.
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
mineral investigation, greenhouse gas inventory and other
green activities. The “Social Index” includes labor and ethical
conduct. Both of the “Green” and “Social” indices 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. 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 ten 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” regulation,
TSMC applied for the recognition of greenhouse reduction
that committed to the WSC and EPA, and received carbon
credits from 2005 to 2011. Those carbon credits can be used
to offset greenhouse gas emissions of new manufacturing
facilities regulated by Environmental Impact Assessment
(EIA) Act. It will mitigate climate change risk to support the
Company’s sustainable operation.
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
88% of process water, meeting or exceeding the standards
of the 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 in order to
achieve the Science Park’s goals and ensure a long-term
balance of supply and demand.
Waste Management and Recycling
TSMC has established a designated unit responsible for
waste recycling and disposal. To meet the goal of sustainable
resource utilization, TSMC’s first priority is to reduce process
waste, the second is to recycle, and the last choice is
treatment or disposal. TSMC carefully selects waste disposal
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and recycling contractors and performs annual audits of certification documents and site operations. TSMC also adopts proactive
actions to strengthen vendor auditing effectiveness. For example, all waste transportation contractors are requested to join the
“GPS Satellite Fleet” so that all the cleanup transportation routes and abnormal stays for all trucks can be traced (approximately
1/3 contractors have joined till the end of 2014, plan all contractors will complete and join the system in 2015). In addition, all
waste recycling and treatment vendors install CCTV in operation sites for the purpose of review and auditing in tracing waste
handling status. All these actions are to ensure legal and proper recycling and treatment of wastes. TSMC achieved a 93% waste
recycling rate in 2014, while our landfill rate was below 1% for the sixth consecutive year.
Environmental Accounting
The purpose of TSMC’s environmental accounting system is to identify and calculate environmental costs for internal
management. At the same time, the Company can also evaluate the cost reduction or economic benefits of environmental
protection programs so as to promote economically efficient programs. With environmental costs expected to continue growing,
environmental accounting can help TSMC manage more effectively. TSMC’s environmental accounting measures define the
various environmental costs and set up independent environmental account codes, then provide these to all units for use in
annual budgeting. This online system can output data for environmental cost statistics.
The Company’s 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 2014, 350 environmental projects were completed and the total benefits including waste
recycling are more than NT$1,215 million.
2014 Environmental Cost of TSMC Fabs in Taiwan
Unit: NT$ 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
7,435,572
1,993,937
-
273,800
3,427,331
103,898
698,703
209,085
-
-
9,703,309
4,439,017
2014 Environmental Efficiency of TSMC Fabs in Taiwan
Unit: NT$ thousands
Category
Description
1. Cost Saving of Environmental Protection
Energy saving: completed 158 projects
Projects
Water saving: completed 24 projects
Waste reduction: completed 4 projects
Material reduction: completed 164 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
375,660
50,666
75,200
351,082
361,957
1,214,565
Other Environmental Protection Programs
Environmental Compliance Record
TSMC conducts “Product Life Cycle Assessments” (Product
LCA), collecting and analyzing data from the entire
semiconductor manufacturing chain from raw materials
suppliers to finished products, including statistics for such
items as energy, raw material consumption, and pollution.
The Product LCA study has established “Eco-Profiles” for all
TSMC fabs and 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 do not contain any prohibited
substances. This ensures that products manufactured by
TSMC comply with customer requirements and the regulatory
requirements of the European Union’s RoHS Directive. TSMC
also encourages employees to use “Green Mark” products in
offices, such as recycled paper, desktop PCs, LCD monitors,
and batteries.
TSMC has adopted both the Taiwan “Green Building” and the
U.S. Leadership in Energy and Environmental Design (LEED)
standards for new fab and office building designs since
2006 to achieve better energy and resource efficiency than
conventional designs. At the same time, TSMC continues to
upgrade existing office buildings to comply with the LEED
standard each year. From 2008 to 2014, 16 of TSMC’s fabs
and office buildings achieved LEED certifications (2 Platinum,
14 Gold class). Meanwhile, TSMC also received 3 of Taiwan’s
EEWH (Ecology, Energy Saving, Waste Reduction and Health)
Diamond class Intelligent Green Building, seven 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 2014, more
than 7,344 visitors from 190 different industry, government,
academia and general community groups contacted TSMC
to gain understanding on the Company’s green factory
practices. TSMC led the industry to support the Taiwan
government in establishing “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 five labels in total for Fab 12 Phase 4, Fab 14
Phase 3, Fab 14 Phase 4, Fab 12 Phase 5 and Fab 12 Phase 6.
In 2014 and as of the date of this Annual Report, TSMC had
not received any environmental penalties or fines.
7.2.2 Green Products
TSMC collaborates with its upstream material and
equipment suppliers, design ecosystem partners and
downstream assembly and testing service providers to reduce
environmental impact. We reduce the resources and energy
consumed for each unit of production and are able to provide
more advanced, power efficient and ecologically sound
products, such as lower-power-consumption chips for mobile
devices, high efficiency LED driver for Flat Panel Display
Backlighting and indoor/outdoor Solid State LED lighting, and
“Energy Star” low standby AC-DC adaptors, etc. 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 stakeholders.
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 TSMC’s manufacturing technologies,
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 TSMC’s internal test results. The Company
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109
continuously provides process simplification and new design
methodology based upon its manufacturing excellence to
help customers reduce design and process waste.
Die Size Cross-Technology
Comparison
Die size reduces as line width shrinks
● TSMC leads 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), 28nm High Performance Mobile Computing
(28HPM), and 28nm High Performance Compact Mobile
Computing (28HPC). 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. The
28nm contribution to wafer revenue grew significantly
from 1% in 2011 to 33% in 2014. 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 Wafer Revenue (Unit: %)
2010
-
2011
1
2012
12
2013
30
2014
33
● TSMC delivers performance-per-watt scaling in its 20nm
SoC (20SoC) and 16nm FinFET Plus (16FF+) 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 Plus process can further reduce total power
consumption to about 30% of 28nm technology. 20SoC
technology entered the production stage with smooth
ramping and stable yield performance. By introducing
the advanced patterning technique, this process provides
better density and power value for both performance-driven
products and mobile computing applications migration. In
addition, wafer revenue of 20nm SoC accounted for 9% of
2014 total wafer revenue. The 16nm FinFET Plus process
entered risk production in 2014 and nearly 60 customer
designs are scheduled for tape-out by the end of 2015.
1
0.53
0.48
0.25
0.13
0.12
55nm 45nm 40nm 28nm 20SoC 16FF+
Total Power Consumption Cross-
Technology Comparison
More power is saved as line width shrinks
1
0.6
0.3
0.2
0.09
55LP
(1.2V)
40LP
(1.1V)
28HPM
(0.9V)
20SoC
(0.9V)
16FF+
(0.8V)
2. Manufacturing Power Management ICs with the Highest
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 and supply power to all IC components. TSMC’s
analog power technology research and development team
uses 6-inch, 8-inch and 12-inch wafer fabs to develop
Bipolar-CMOS-DMOS (BCD) and Ultra-High Voltage (UHV)
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’s BCD is the best fit technology for high efficiency LED
driver for the applications of Flat Panel Display Backlighting
and indoor/outdoor Solid State LED lighting. In addition,
TSMC’s UHV with 400V~800V options is the best fit
technology for Green Product applications, such as “Energy
Star” low standby AC-DC adaptors, Solid State LED lighting,
high efficiency DC Brushless motors.
● TSMC also provides analog and power-friendly design
platforms. Customers use these platforms to develop
energy-saving products.
● Power management ICs generate material revenue to
TSMC’s industrial market segment. In 2014, TSMC’s HV/
Power technologies collectively shipped more than 1.8
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)
2010
>700K
2011
>800K
2012
2013
2014
>1,000K
>1,300K
>1,800K
3. Green Manufacturing that Lowers Energy Consumption
TSMC develops manufacturing technologies that 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 108,
“Environmental Accounting”.
Social Contribution by TSMC Foundry Services
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, 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. Second, new process technology
helps chips consume less energy. People can therefore use
mobile devices for a longer period of time, increasing their
convenience. And third, 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 computing related products, such as Baseband, RF
Transceiver, AP (Application Processors), WLAN (Wireless
Local Area network), imaging sensors, and NFC (Near Field
Communication), among others, represent 48% of TSMC
wafer revenue in revenue in 2014. TSMC’s growth in recent
years was largely driven by the growing global demand for
these mobile IC products.
Contribution of Mobile Computing Related Products to TSMC Wafer
Revenue
(Unit: %) (Note)
2010
31
2011
36
2012
40
2013
44
2014
48
Note: Mobile computing related products were re-classified in 2014
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 systems and other applications that
greatly enhance human health and safety.
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.
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111
In order to avoid infectious disease epidemics, TSMC has
established company-level prevention committees and
procedures for emergency response to infectious diseases
outbreak.
Working Environment and Employee Safety and Health
Protection
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.
TSMC requires that all new tools meet SEMI-S8 requirements
and that appropriate supplementary control measures be
taken to reduce ergonomic risk. Moreover, TSMC endeavors
to automate 300mm front-opening unified pod (FOUP)
transportation to prevent accumulative damage caused by
long-term manual handling of 300mm FOUPs. TSMC 300mm
fabs have achieved 99.9% automatic transportation control.
● 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 the
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.
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 maintains detailed disaster
response procedures and performs regular drills designed
to minimize harm to employees and property, as well as the
impact on society and the environment in the event of a
disaster.
● Working Environment Hazardous Factors Management
TSMC conducts workplace hazard assessment and
interventions to provide a comfortable and safe workplace to
Company employees. TSMC also requires employees to use
personal protective equipment (PPE) to prevent hazardous
exposures.
TSMC performs semi-annual workplace environment
assessments of physical and chemical hazards, including CO2
concentration, illumination, noise, and hazardous chemical
substances regulated by domestic laws. When abnormal
measurements or events happen, site ESH professionals
will conduct onsite observation and interventions to ensure
acceptable risk exposure levels.
TSMC conducted ergonomic evaluation and intervention
for manual handling workers at warehouse and equipment
preventive maintenance workers, including providing vacuum
suction tool, forklift trucks, pallet truck, trolley and hydraulic
jack, and also conducting job rotation, task adjustment and
posture education.
● Emergency Response
The planning and execution of an effective emergency
response requires big-picture thinking, continuous
improvement and practice drills. TSMC’s emergency response
plans include procedures for rapid response to accidents and
disaster recovery as well as establishing response procedures
for potential disasters.
All TSMC fabs conduct major annual emergency response
exercises and evacuation drills. TSMC’s Tainan-site fabs
initiated quarterly spot drills, which have been recognized
as good practices. TSMC’s on-site service contractors also
participate in emergency response planning and exercises to
ensure cooperation in handling accidents and to effectively
minimize any damage caused by disasters.
● General Safety Management, Training and Audit
All TSMC manufacturing facilities hold environmental, safety
and health committee meetings on a monthly basis. TSMC
In addition to the regular emergency response drills held
by engineering and facilities departments each quarter, the
Company’s laboratory, canteen, dormitory, and shuttle bus
personnel also hold emergency response drills to prepare
for events such as earthquakes, chemical leakage, ammonia
release, fires and automobile accidents.
● Emerging Infectious Disease Response
TSMC has a dedicated corporate ESH organization to
monitor emerging infectious diseases around the world,
assess any potential impact on the workplace, and provide
an appropriate strategic response plan. In previous outbreaks
(such as SARS in 2003 and the H1N1 influenza outbreak in
2009), TSMC convened the Corporate Influenza Response
Committee to develop the Company’s strategies. These
strategies include educating employees in prevention and
response, publishing guidelines for managers, establishing
guidelines for employee sick leave due to flu, and installing
alcohol-based hand sanitizers at appropriate locations. The
Committee also monitors the status of employee leave due
to illness and, at the same time, develops a continuous plan
to address manpower shortages as well as minimize business
impact.
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.
● Employee Health Enhancement
Workplace stress and employee health have recently
become new topics of concern for the government, society,
employers, and employees as areas that require further
attention and effort. The TSMC Employee Assistance
Program (EAP) provides free individual counseling sessions,
group sharing, workshops, and mental assessment, as well
as lectures on personal and family issues to take care of
employees’ well-being.
Health promotion activities for employees include fitness
programs, women’s health care programs, mother’s rooms,
body weight control programs, sleep problem management,
massage and chiropractic services, hepatitis and flu
vaccinations, and health lectures. TSMC believes employees
who are physically and mentally fit can enjoy a better quality
of life and be more productive.
● Initiating a Collaborative Forum: We Care About Workers’
Health
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
2014, TSMC collaborated with government and academia
again to hold the fourth Labor Health Forum. The theme of
the 2014 forum is “Integration of Occupational Safety and
Health Act and Industry Practices” in response to the new
Occupational Safety and Health Act, which became effective
on July 3, 2014. TSMC also invited China Steel Corp., CPC
Corp., Chimei Innolux Corp., Taiwan Environmental and
Occupational Medicine Association and Taiwan Association
of Occupational Health Nurses to be co-sponsors of the
event. We set 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 enforcement of the new
Occupational Health and Safety Act.
TSMC also developed occupational management tools
tailored for TSMC by industry-academic cooperation,
including the evaluation and management of personnel
stress and the establishment of epidemiological analysis for
chronic illness in 2014. TSMC offers annual employee health
examinations and consultation services as well as on-site
clinics and a dental clinic for a better access to medical
assistance.
● Contractor Self Evaluation and Management of Health
To mitigate safety risks resulting from the sudden onset
of illness, TSMC launched the Contractor Self Evaluation
and Management of Health Program at Fab12B in 2014.
Contractors performing high-risk work, such as work
at heights and at cleanroom ceilings, are required to
check workers’ health status for those undertaking these
high-risk tasks. Those determined to have chronic illness
and self-reported symptoms must visit a doctor for physical
evaluation and treatment to reduce workplace health
and safety risk. A total of 120 contractors completed the
self-evaluation and found that 2.9% of workers’ tasks
should be adjusted. All contractors at high-risk completed
the necessary task adjustment in 2014. This program
will be rolled forward to all TSMC Fabs in 2015 for more
comprehensive contractor health management.
Supplier and Contractor Management
● Supplier Management
As a means of enhancing its supply chain management,
TSMC is committed to communicating with and encouraging
its contractors and suppliers to improve their quality, cost
effectiveness, delivery performance and sustainability on
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113
environmental protection, safety and health. By means of
communication between senior managers, site audits and
experience sharing, TSMC collaborates with major suppliers
and contractors to enhance partnership and ensure continual
improvement for better performance and increased joint
contributions to society. As noted above, 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.
and mines since 2011. We also encourage our suppliers to
source minerals from facilities or smelters that have received
a “conflict-free” designation by a recognized industry group
(such as the EICC) and to require those who haven’t received
such designation to become compliant with CFSP or an
equivalent third-party audit program. It is TSMC’s goal to
use tantalum, tin, tungsten and gold in our products that
are conflict-free. We will continue to renew our supplier
survey annually and require our suppliers to improve and
expand their disclosure to fulfill regulatory and customer
requirements.
● Supply Chain Sustainability
TSMC works with its suppliers in several fields of sustainable
development, such as greening the supply chain, carbon
management for climate change, mitigation of fire risk,
ESH management and business continuity plans for natural
disasters.
In 2014, TSMC was accepted for membership in the
Electronic Industry Citizenship Coalition (EICC). In the
beginning of 2015, TSMC announced its commitment to
conform with the EICC code of conduct in its own operations
with a continuous improvement approach.
To enhance supply chain sustainability and streamline the
supply chain’s risk management, TSMC is committed to
collaborating with its suppliers to maintain full compliance
with the Taiwan environmental, safety, health and fire
regulations, and to establish the necessary management
capability as well as continuous enhancement.
TSMC is subject to the U.S. Securities & Exchange Commission
(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 strive to procure conflict free minerals in an effort to
recognize humanitarian and ethical social principles that
protect the dignity of all persons. We have implemented
a series of compliance safeguards in accords with leading
industry practices such as adopting the due diligence
framework 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.
7.3 TSMC Education and Culture Foundation
The TSMC Education and Culture Foundation (TSMC
Foundation) is led by TSMC Vice Chairman F.C. Tseng, who
serves as the Foundation’s Chairman. Established in 1998 to
coordinate the Company’s financial sponsorship as part of
its efforts in corporate social responsibility, The Foundation
devotes its resources towards education, promotion of art
and cultural events, community building, and the employee
Volunteer Program.
In 2014, the TSMC Foundation contributed over NT$64
million to its long-term projects. A highlight of the year was
the grand opening of the Children Arts Center, in cooperation
with the TSMC Foundation and the Taipei Fine Arts Museums.
The space is the very first collaboration on children arts
promotion between the Taipei Government and a private
enterprise.
The TSMC Foundation devotes resources in various scientific
educational projects, which includes continual support of the
Center for the Advancement of Science Education at Taiwan
University (CASE) to sponsor “TSMC Cup – Competition
of Scientific Story Telling”. This year the topic competition
included Taiwan social issues first time. The completion not
only inspires high school students’ interest for science and
strengthens their communication ability; it also cares for the
community and society.
The TSMC Foundation supports TSMC Volunteer Society,
organizing employees to devote themselves to the caring of
victims of disaster, such as the Kaohsiung Gas Explosion, and
the underprivileged of the communities.
TSMC is one of the strongest supporters of EICC and the
Global e-Sustainability Initiative (GeSI), which will help
our suppliers source conflict-free minerals through their
jointly developed Conflict-Free Smelter Program (CFSP). We
required our suppliers to disclose information on smelters
Commitment to Education
Education is the most important priority for the progress of
a nation. The TSMC Foundation tailors its various programs
to target a whole range of education needs at different age
levels.
At the primary-school level, the Foundation emphasizes
aesthetics education, and for many years has contributed
resources to a variety of children’s art education programs,
including the “TSMC Aesthetic Tour” that over the past 12
years has taken more than 80,000 children from remote
townships to visit National Palace Museum, Taipei Fine Arts
Museum (TFAM) and other fine arts sites. The Taipei Fine
Arts Museum (TFAM) recognized the Foundation’s long-term
contribution in this aspect. In 2009, TFAM invited TSMC
Foundation to join the collaboration of the construction of
“the Children’s Art Center”. Through six years of dedicated
efforts by architects, the center was inaugurated on the
Children’s Festival Day this year.
Located in the basement of Taipei Fine Arts Museum, the
Children’s Art Education Center is a learning space dedicated
to kids 4 to 12 years old and their families. This “museum
within a museum” occupies 2,000 square meters of space,
and offers an integrated, comprehensive range of services,
including a gallery, an Interactive Area, studios, and an
outdoor plaza. The opening exhibition, “The Gift,” and the
following exhibition “Get Rhythm with Paul Klee Interactive
Exhibit and Workshop Series” received overwhelming positive
responses. The Children’s Art Education Center will operate
in the name of TSMC Education and Culture Foundation and
Taipei Fine Arts Museum for a period of five years to witness
to our collaborative achievements.
At the high school level, to enhance teenagers’ full
development to knowledge of science and humanity the
Foundation supports and organizes scientific camps, contests,
and humanity activities. In 2014, the Foundation continued
to sponsor The Center for Advanced Science Education at
National Taiwan University to hold the competition, “TSMC
Cup – Competition of Scientific Story Telling”. This year
the “TSMC Cup – Competition of Scientific Story Telling”
competition focused on “Food” to echo the Taiwan Food
Safety Issues.
The Foundation also supports 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 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 350 science teachers.
In the humanities, the TSMC Foundation supports “Hope
Reading” of the CommonWealth Foundation that donates
good books to 30 junior high schools of Taiwan’s remote
townships to promote the habit of reading among
underprivileged teenagers. The Foundation also continued to
hold “the TSMC Youth Literature Award” and “TSMC Youth
Calligraphy Contest” to build up a stage for the talented
youth.
At the college level, in addition to endowing chair
professorships to enhance academic research at Taiwan
universities, the TSMC Foundation for the first time sponsored
the “Raising Sun Plan” of National Tsing Hua University. To
bridge the unbalanced allocation of educational resources
caused by the disparity between rich and poor, the plan
provides underprivileged students a chance to enter the
top-notch university with lower grade limit and scholarships.
Promotion of Arts and Chinese Classics
The TSMC Foundation sees it a long-term mission to promote
Chinese Classics. Through presenting lectures, producing
broadcasting programs and publishing audio books, the
Foundation enables audiences to easily understand traditional
Chinese philosophy and wisdom.
Since 2008, the TSMC Foundation has invited Professor Hsin
Yih-yun to produce Chinese Classics broadcasting programs
on the IC Radio Broadcasting Station. The programs are
extremely popular and followed by Chinese audiences all
over the world. Following The Analects and Chuang-tzu, this
year Professor Hsin introduced Mo-tzu, whose thought was
as important as Confucius’ at Chinese Spring and Autumn
and Warring States Period. Through Professor Hsin Yih-yun’s
rich knowledge and vivid examples, Professor Hsin delivered
Mo-tzu’s philosophy of promoting diligent and thrifty and
comprehensive love to the public.
The Foundation also held innovative lectures with unique
decorations and arrangements to narrow the gap of the
audience and the speakers and let the audience feel the
appeal of the Classics. The Essays and Criticism (Shi Shuo
Hsin Yu) Lectures delivered by Professor Hsin were conducted
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in tea banquets to let participants feel the atmosphere of
the oriental salon. The Foundation also invited Professor
Li Hon-chi, Emeritus Professor of New York University, to
lead the audience into the Renaissance Era in a coffee shop.
And noting the importance of preserving historic sites, the
Foundation continued to sponsor the Taipei Story House’s
Literature Salon, which includes regular author readings on
this cultural heritage site.
Community Building by Arts
The Foundation has long played the role of “fine art planter”
o 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 to enrich the communities with arts.
The opening concert of the 2014 Hsinchu Arts Festival was a
piano recital by Sir András Schiff, one of the most important
pianists in the world, who chose Hsinchu City for his Taiwan
debut and whoserecital drew attention from classical music
lovers across Taiwan. The Festival arranged and recorded
a master class for Taiwan Music Studying Students. After
introducing Peking Operas, Kun Operas, Bangzi Operas,
Nankuan, Liyuan Operas, the Festival invited Tang Mei-yun
Taiwanese Opera Company for the first time to present the
New Taiwanese Opera “Ballad of the Swallow”. Also for the
families, the Festival invited the renowned puppet company,
O Puppet, to present “The Happy Prince”. The Festival
arranged over 30 activities over its three months－from
concerts, traditional operas and lectures, to family-oriented
activities, presenting the fascinating spiritual feast for
Hsinchu, Taichung and Tainan.
7.4 TSMC Volunteer Program
TSMC takes corporate social responsibility seriously, and
TSMC Volunteer Program, led by Mrs. Sophie Su-fen
Chang, President of the Program, is dedicated to promoting
education and culture, providing aid for the underprivileged,
advocating energy saving, and caring for the community.
The program aims to provide a host of channels for the
Company’s most valuable asset, high-tech professional
employees, to give to the society.
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
TSMC Volunteer Docent Program
To promote science education and 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. The hall was renovated twice, and then
replaced entirely in 2011 with “The World of Semiconductor”
exhibition hall.
TSMC Volunteer Docent Program was established in 2004 to
provide visitors with guided tours. In 2014, a total of 1,147
volunteers with 6,351 dedicated service hours were recorded;
the cumulative service hour also reached more than 60,219
hours.
The docents’ enthusiasm and professionalism were highly
praised by visitors. The group has continuously been
recognized as the “Outstanding Volunteer Team” by the
National Museum of Science.
TSMC Book Reading Volunteer Program
To help reduce the disparity of educational resources between
rural and urban schools, TSMC Foundation started sponsoring
the “Hope Reading Program” organized by CommonWealth
Magazine in 2004 with the donation of 20,000 books
annually to 200 schools in remote and rural areas.
Following on the early efforts of TSMC Foundation, the TSMC
Book Reading Volunteer Program was established in 2005. In
2014, a total of 628 volunteers have devoted 8,576 hours of
services to 8 remote schools in Hsinchu, Taichung and Tainan;
the cumulative service hour also reached more than 39,045
hours.
TSMC Energy Saving Volunteer Program
Leveraging the expertise of TSMC employees in energy saving,
TSMC Energy Saving Volunteer Program was established
in 2008 to assist schools needing to reduce electricity
telecommunication costs, improve water and air-conditioning
consumption, as well as environmental safety. After assessing
the facilities, measuring and collecting data, and evaluating
power efficiency, the teams proposed energy-saving plans
and ways to reduce carbon emissions to the schools.
In 2014, 52 energy saving volunteers devoted 960 hours
in Hsinchu, Taichung, Tainan and Penghu areas. Moreover,
2014 also marked the first time for the volunteers to support
a large-scale teaching hospital, National Cheng Kung
University Hospital, by providing suggestions on electrical
safety and energy saving.
TSMC Community Volunteer Program
When Typhoon Morakot struck Southern Taiwan in 2009,
TSMC employees, deeply saddened by the suffering it caused,
established Typhoon Morakot Project Team in a fast pace.
With their seamless teamwork, effectiveness and precision,
the team provided timely assistance and relief measures to
the typhoon victims.
Typhoon Morakot Project Team was transformed into TSMC
Community Volunteer Program in 2010, aimed at reaching
out to the ones in need, including both the elderly and
the children. The TSMC Community Volunteer Program
mainly serves the elderly at Hsinchu Veterans Home and the
children at St. Teresa Children Center. In 2014, a total of 375
volunteers participated regularly in activities and were closely
connected to the elderly and the children.
One Holiday Volunteer activity was held in July 2014 when
TSMC Community Volunteers invited the children they served
in the Book Reading Volunteer Program from Hsinchu,
Taichung, and Tainan to “Lihpao Land” theme park. With
well-designed activities, these children from remote areas
spent a wonderful Saturday together.
TSMC Ecology Volunteer Program
The TSMC Ecology Volunteer Program was launched in 2012;
in 2014, a total of 472 volunteers have donated their time
to the cause of environmental protection. Volunteers were
trained as ecology docents to share natural ecology concepts
with school children and the public visiting the selected areas.
Activities in 2014 included the following:
● Hsinchu F12B ecology park docent: 181 employees took
part and the Company invited more than 300 students and
teachers from 12 elementary schools to visit TSMC’s ecology
park.
● Taichung F15 ecology park docent: 107 employees took
part and the Company invited more than 150 students and
teachers from 5 elementary schools to visit TSMC’s ecology
park in Taichung.
● Tainan Jacana ecology education park docent: 184
employees and their family members were recruited to serve
as volunteer docents at the Jacana ecology education park
on weekends and holidays.
TSMC Fab/Division Volunteer Program
Employees, on the Fab/Division level, devote themselves to
various welfare activities for causes such as environmental
protection, promotion of energy conservation, and caring of
the disadvantaged, promotion of education, help for farmers
and workers, and charitable donation.
● Environmental Protection
In 2014, the volunteers held a charity bazaar by selling
water chestnuts from the Guantian Jacana Park and using
the earnings to fix and replace telescopes in the park to
improve the quality of the eco tours. In Tainan, the volunteers
helped reactivate the water purification plant on Monuments
Mountain and held cultural and environmental tours to bring
new life to the historical site.
● Energy Conservation
Despite severe competition in the technology industry, the
Company never forgets to cherish the environment. Seminars
concerning energy consumption and power reduction
continued to be held in 2014 to share TSMC’s 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
corporations.
● Caring for the Disadvantaged
Beyond employees’ continuous and enthusiastic support
to repair and maintain the old houses of people in need,
provide daily supplies and necessities, and offer warm
companionship, TSMC volunteers find new ways to enrich the
lives of children. In 2014, the employees raised used cameras
for children living in remote areas, leading them to see the
world in a different way through the camera. In addition,
meal fees were donated to children of the Kuskus tribe in
southern Taiwan, and promotions of their culture of old
ballads were conducted. Volunteers also supported Hui-Ming
School for the Blind and the underprivileged baseball team by
giving them the stage and means to perform. Lastly, they also
led the girls from St. Francis Xavier Home for Girls to learn
skills and developed their interests in handicraft and baking.
● Promotion of Education
In 2014, the volunteers spread the seed of education further
to Xi-Wei Elementary School. The volunteers donated new
and used books to inspire the children’s interest in reading.
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117
They also provided guidance to students on their school work
to strengthen their comprehension and understanding.
● Help for Farmers and Workers
In 2014, TSMC volunteers supported the farmers and fishers
to divide water bamboo’s offshoot and string oysters, and
they collaborated with Formosa Charity Group to build dorms
and classrooms for the teenagers in the orphanage, raise
funds and resources, and repair the abandoned elementary
school to accommodate more people in need.
● Charitable Donation
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. In 2014, employees purchased goods from
charities as mid-autumn festival gifts, and the revenue of
group-buying products for thanksgiving were donated
to Hui-Ming School for the Blind. Also, a shuttle bus was
donated to Syin-Lu social welfare foundation, providing the
disabled children better transportation.
7.5 TSMC i-Charity
“TSMC i-Charity” is an interactive online platform launched in
2014 for employees to proactively take part in philanthropic
activities and give back to the society. The intranet opens
a channel for TSMC employees to propose caring projects,
share results, and suggest new ideas in a timely manner for
doing good.
The website was officially launched in January 2014, and
went into fully operational in March with the feature that
enabled employees to voluntarily participate in philanthropic
events directly via the platform.
As of December, 2014, over NT$18 million of contributions
were received from over 9,000 participating employees. The
following table shows the detailed information:
Project Title
Participating
Employees
Contribution
Amount
Share Love and Support Underprivileged Children
to Visit Taiwan Pavilion in Hsinchu
(Time-Limited Project)
Realize the Miracle of Cheng Te High School’s
Baseball Team
Support the Recovery of Kaohsiung after Gas
Explosion
82
2,446
6,664
NT$44,800
NT$2,941,888
NT$15,295,755
With the interactive platform, TSMC hopes to maintain its
commitment to society, and encourages its employees to
join efforts to care for and give back to society in all the ways
possible.
7.6 Kaohsiung Gas Explosion Project
A series of gas explosions that damaged the city of Kaohsiung
on July 31, 2014, caused more than 300 casualties. TSMC
Volunteer Society President Ms. Sophie Chang led a group of
executives to survey the damage soon after the incident to
provide the company with advice for relief projects. Senior
executives responsible for corporate social responsibility
immediately held a meeting and decided that TSMC would
build on its experience in reconstruction projects for Typhoon
Morakot, leverage donations from the company and its
employees, collaborate with suppliers, and establish a site at
the disaster area to support rebuilding.
TSMC’s reconstruction team arrived in the disaster area on
August 5 and stayed for 64 days. With timely and seamless
support from supporting suppliers, the team has completed
570 meters of sheet piling, 4,383 meters of temporary
roads, 695 repairs on 365 homes, 4,732 meters of safety
fences, and 5 temporary bridges. This has allowed residents
to safely travel to and from the disaster area, return to their
reconstructed homes and businesses, and resume normal
lives.
Total spending on this reconstruction project was NT$74.65
million. In addition to funds from employees through the
“TSMC iCharity” platform and donations from the Company,
the project was expanded to participation from other
companies, attracting more resources to magnify our relief
efforts.
Reconstruction Project Budget Details
Uint: NT$
Items
Damaged house repair
Steel sheet pile
Construction fence
Temporary road construction
Construction equipment
Site office rent and miscellaneous items
Site cleaning and miscellaneous items
Subtotal
Total (5% tax included)
Spending
25,668,789
4,783,880
8,433,288
19,230,590
5,324,000
869,620
6,789,336
71,099,502
74,654,479
7.7 Social Responsibility Implementation Status as Required by the Taiwan Financial Supervisory
Commission
Assessment Item
1. Implementation of Corporate Governance
Implementation Status
No
Summary
Yes
V
Non-implementation
and Its Reason(s)
None
(1) Does the Company have a corporate social responsibility policy and
(1) Please refer to “7. Corporate Social Responsibility” on pages 102-119 of this
evaluate its implementation?
Annual Report.
(2) Does the Company hold regular CSR training?
(2) Please refer to “3.5 Code of Ethics and Business Conduct” on pages 38-41
(3) Does the Company have a dedicated (or ad-hoc) CSR organization with
Board of Directors authorization for senior management, which reports to
the Board of Directors?
(4) Does the Company set a reasonable compensation policy, integrate
employee appraisal with CSR policy, and set clear and effective incentive
and disciplinary policies?
2. Environmentally Sustainable Development
(1) Is the Company committed to improving resource efficiency and to the
use of renewable materials with low environmental impact?
(2) Has the Company set an Environmental management system designed to
industry characteristics?
(3) Does the Company track the impact of climate change on operations,
carry out greenhouse gas inventories, and set energy conservation and
greenhouse gas reduction strategy
3. Promotion of Social Welfare
(1) Does the Company set policies and procedures in compliance with
regulations and internationally recognized human rights principles?
V
V
of this Annual Report
(3) Please refer to “7. Corporate Social Responsibility” on pages 102-119 of this
Annual Report.
(4) Social is regarded as an integral part of corporate governance by TSMC.
TSMC’s fair compensation policy is set with considerations on the goals
of the Company’s corporate governance and operation; corporate social
responsibility is included as part of its indexes. For further details, please
refer to “5.5 Employees” on pages 70-74 of this Annual Report.
Please refer to “7.2.1 Environmental Protection” on pages 107-109 of this
Annual Report.
None
(1) Please refer to “5.5 Employees” on pages 70-74 of this Annual Report.
None
(2) Has the Company established appropriately managed employee appeal
(2) Please refer to “5.5 Employees” on pages 70-74 of this Annual Report.
procedures?
(3) Does the Company provide employees with a safe and healthy working
(3) Please refer to “7.2.3 Safety and Health” on pages 111-114 of this Annual
environment, with regular safety and health training?
Report.
(4) Has the Company established a mechanism for regular communication
with employees and use reasonable measures to notify employees of
operational changes which may cause significant impact to employees?
(4) Please refer to “5.5 Employees” on pages 70-74 of this Annual Report.
(5) Has the Company established effective career development training
(5) Please refer to “5.5 Employees” on pages 70-74 of this Annual Report.
plans?
(6) Has the Company set polices and consumer appeal procedures in its R&D,
(6) TSMC is not the end product manufacturer, this item is not application.
purchasing, production, operations, and service processes?
(7) Does the Company follow regulations and international standards in the
(7) TSMC is not the end product manufacturer, this item is not application.
marketing and labelling of its products and services?
(8) Does the company evaluate environmental and social track records before
(8) Please refer to “Supplier and Contractor Management” on page 113-114 of
engaging with potential suppliers?
this Annual Report.
(9) Does the Company’s contracts with major suppliers include termination
clauses if they violate CSR policy and cause significant environmental and
social impact?
4. Enhanced Information Disclosure
Does the Company disclose relevant and reliable CSR information on its
website and the Taiwan Stock Exchange website?
(9) Please refer to “Risks Associated with Purchase Concentration” in 6.3.3
Operational Risks of this Annual Report.
V
TSMC has published “Corporate Social Responsibility Report” since 2008, and
disclose in company website (http://www.tsmc.com/english/csr/index.htm).
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 102-119 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:
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 “Corporate Responsibility Report ” which are verified by certification bodies:
TSMC’s Corporate Social Responsibility Report is in accordance with the GRI G4 guidelines comprehensive option and verified by certification bodies.
118
119
8. Subsidiary Information and Other Special Notes
Outstanding brush painting requires precise
and meticulous strokes. TSMC’s sustainable
development is built on careful financial
operations, strong operational effectiveness,
and prospering together with its affiliated
companies.
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%
Taiwan
Semiconductor
Manufacturing
Company Limited
As of 12/31/2014
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%
Emerging Alliance Fund, L.P.
Shareholding: 99.5%
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: 98%
Growth Fund Limited
Shareholding: 100%
TSMC Solar Ltd.
Shareholding: 98.58%
TSMC Solar North America, Inc.
Shareholding: 100%
TSMC Solar Europe B.V. (Note 1)
Shareholding: 100%
TSMC Solar Europe GmbH (Note 1)
Shareholding: 100%
TSMC Solid State Lighting Ltd. (Note 2)
Shareholding: 92.32%
TSMC Guang Neng Investment, Ltd.
Shareholding: 100%
TSMC Solar Ltd.
Shareholding: 0.47%
TSMC Solid State Lighting Ltd. (Note 2)
Shareholding: 1.80%
Note 1: To simplify overseas investment structure, in the second quarter of 2014, the Board of Directors of TSMC Solar approved to file for the liquidation of TSMC Solar
Europe. After the liquidation, TSMC Solar Europe GmbH, the 100% owned subsidiary of TSMC Solar Europe, will be held directly by TSMC Solar. The liquidation
procedure has been processed starting from the third quarter of 2014.
Note 2: (1) To simplify overseas investment structure, in the second quarter of 2014, the Board of Directors of TSMC SSL approved to file for the liquidation of TSMC
Lighting NA. The liquidation procedure has been completed in the third quarter of 2014.
(2) On January 9, 2015, the Board of Directors of TSMC approved to sell all shares of TSMC SSL held by TSMC and TSMC’s subsidiary to Epistar Corporation. The
transaction was completed on February 17, 2015.
8.1.2 Business Scope of TSMC and Its Subsidiaries
TSMC and its subsidiaries strive to provide the best foundry services in the industry. Subsidiaries 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 subsidiaries also engage in researching, developing, designing,
manufacturing and selling of solid state lighting devices and related products and systems, and solar-related technologies and
products. On December 31, 2014, we reclassified TSMC SSL as a disposal group held for sale. On February 17, 2015, TSMC SSL
ceased to be TSMC’s subsidiary because TSMC’s and TSMC subsidiary’ shares in TSMC SSL were sold to Epistar Corporation.
120
121
8.1.3 TSMC Subsidiaries
Unit: NT(USD, EUR, JPY, KRW, RMB, CAD)$ thousands
As of 12/31/2014
Company (Note 1)
TSMC North America
TSMC Europe B.V.
TSMC Japan Limited
TSMC Korea Limited
Date of
Incorporation
Place of Registration
Capital Stock
Business Activities
Jan. 18, 1988
San Jose, California, U.S.
US$ 11,000
Selling and marketing of integrated circuits and
semiconductor devices
Mar. 04, 1994
Amsterdam, The Netherlands
EUR 100
Marketing and engineering supporting activities
Sep. 10, 1997
May 02, 2006
Yokohama, Japan
JPY 300,000
Marketing activities
Seoul, Korea
KRW 400,000
Customer service and technical supporting activities
TSMC China Company Limited
Aug. 04, 2003
Shanghai, China
RMB 4,502,080
Manufacturing and selling of integrated circuits at the
order of and pursuant to product design specifications
provided by customers
TSMC Technology, Inc.
Feb. 20, 1996
Delaware, U.S.
US$ 0.001
Engineering support activities
InveStar Semiconductor Development Fund, Inc.
Sep. 10, 1996
Cayman Islands
US$ 600
Investing in new start-up technology companies
InveStar Semiconductor Development Fund, Inc.
(II) LDC.
Aug. 25, 2000
Cayman Islands
US$ 9,578
Investing in new start-up technology companies
TSMC Development, Inc.
WaferTech, LLC
Feb. 16, 1996
Jun. 03, 1996
Delaware, U.S.
Washington, U.S.
US$ 0.001
Investment activities
US$ 0
Manufacturing, selling, testing and computer-aided
designing of integrated circuits and other semiconductor
devices
Investing in companies involved in the design, manufacture,
and other related business in the semiconductor industry
TSMC Partners, Ltd.
Mar. 26, 1998
Tortola, British Virgin Islands
US$ 988,268
TSMC Design Technology Canada Inc.
May 28, 2007
Ontario, Canada
CAD 2,434
Engineering support activities
TSMC Global Ltd.
Jul. 13, 2006
Tortola, British Virgin Islands
US$ 3,284,000
Investment activities
Mutual-Pak Technology Co., Ltd.
Mar. 22, 2006
Taipei, Taiwan
NT$ 268,184
Manufacturing and selling of electronic parts and
researching, developing and testing of RFID
Emerging Alliance Fund, L.P.
VentureTech Alliance Fund II, L.P.
Jan. 10, 2001
Feb. 27, 2004
Cayman Islands
Cayman Islands
US$ 24,255
Investing in new start-up technology companies
US$ 14,811
Investing in new start-up technology companies
VentureTech Alliance Fund III, L.P.
Mar. 25, 2006
Cayman Islands
US$ 113,674
Investing in new start-up technology companies
Growth Fund Limited
VentureTech Alliance Holdings, LLC
May 30, 2007
Apr. 25, 2007
Cayman Islands
Delaware, U.S.
US$ 2,180
Investing in new start-up technology companies
N/A
Investing in new start-up technology companies
TSMC Solar Ltd.
Aug. 16, 2011
Taichung, Taiwan
NT$ 11,341,000
Researching, developing, designing, manufacturing
and selling renewable energy and energy saving related
technologies and products
TSMC Solar North America, Inc.
TSMC Solar Europe B.V. (Note 2)
TSMC Solar Europe GmbH (Note 2)
Sep. 03, 2010
Sep. 29, 2010
Dec. 17, 2010
Delaware, U.S.
US$ 1
Selling and marketing of solar related products
Amsterdam, the Netherlands
EUR 100
Investing in solar related business
Hamburg, Germany
EUR 100
TSMC Solid State Lighting Ltd. (Note 3)
Aug. 16, 2011
Hsinchu, Taiwan
NT$ 6,008,000
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 Guang Neng Investment, Ltd.
Jan. 19, 2012
Taipei, Taiwan
NT$ 200,000
Investment activities
Note 1: To simplify overseas investment structure, in the second quarter of 2014, the Board of Directors of TSMC SSL approved to file for the liquidation of TSMC Lighting NA. The liquidation procedure
has been completed in the third quarter of 2014.
Note 2: To simplify overseas investment structure, in the second quarter of 2014, the Board of Directors of TSMC Solar approved to file for the liquidation of TSMC Solar Europe. After the liquidation,
TSMC Solar Europe GmbH, the 100% owned subsidiary of TSMC Solar Europe, will be held directly by TSMC Solar. The liquidation procedure has been processed starting from the third quarter of
2014.
Note 3: On December 31, 2014, we reclassified TSMC SSL as a disposal group held for sale. On February 17, 2015, TSMC SSL ceased to be TSMC’s subsidiary because TSMC’s and TSMC subsidiary’ shares
in TSMC SSL were sold to Epistar Corporation.
8.1.4 Shareholders in Common of TSMC and Its Subsidiaries with Deemed Control and Subordination: None.
8.1.5 Rosters of Directors, Supervisors, and Presidents of TSMC’s Subsidiaries
Unit: NT$(USD), except shareholding
Company (Note 1)
Title
Name
TSMC North America
TSMC Europe B.V.
TSMC Japan Limited
TSMC Korea Limited
TSMC China Company Limited
TSMC Technology, Inc.
InveStar Semiconductor Development
Fund, Inc.
InveStar Semiconductor Development
Fund, Inc. (II) LDC
TSMC Development, Inc.
WaferTech, LLC
TSMC Partners, Ltd.
TSMC Design Technology Canada Inc.
TSMC Global Ltd.
Director
Director
President
Director
Director
President
Director
Director
Supervisor
President
Director
Director
Director
Chairman
Director
Director
Supervisor
President
Chairman
Director
President
Richard 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
Cliff Hou
Cliff Hou
Director
Wendell Huang
Director
Wendell Huang
Chairman
Director
President
Director
Director
President
Director
Director
President
Director
Director
Director
President
Director
Director
Lora Ho
Sylvia Fang
Lora Ho
M.C. Tzeng
Steve Tso
Kuo-Chin Hsu
Lora Ho
Sylvia Fang
Lora Ho
Cliff Hou
Cormac Michael O’Connell
Sylvia Fang
Cliff Hou
Lora Ho
Sylvia Fang
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$596,000,000)
-
-
-
TSMC Partners, Ltd. holds 10 shares
-
TSMC Partners, Ltd. holds 582,523 shares
-
TSMC Partners, Ltd. holds 9,298,625 shares
-
-
-
TSMC Partners, Ltd. holds 10 shares
-
-
-
TSMC Development, Inc. holds 293,636,833 shares
-
-
-
TSMC holds 988,268,244 shares
-
-
-
-
TSMC Partners, Ltd. holds 2,300,000 shares
-
-
TSMC holds 3,284 shares
As of 12/31/2014
% (Investment
Holding%)
-
-
-
100%
-
-
-
100%
-
-
-
-
100%
-
-
-
100%
-
-
-
-
-
(100%)
-
-
-
100%
-
97.09%
-
97.09%
-
-
-
100%
-
-
-
100%
-
-
-
100%
-
-
-
-
100%
-
-
100%
(Continued)
122
123
Company (Note 1)
Title
Name
Mutual-Pak Technology Co., Ltd.
Emerging Alliance Fund, L.P.
VentureTech Alliance Fund II, L.P.
VentureTech Alliance Fund III, L.P.
Growth Fund Limited
VentureTech Alliance Holdings, LLC
TSMC Solar Ltd.
TSMC Solar North America, Inc.
TSMC Solar Europe B.V. (Note 3)
TSMC Solar Europe GmbH (Note 3)
TSMC Solid State Lighting Ltd. (Note 4)
Chairman
Director
Director
Supervisor
President
None
None
None
None
None
Chairman
Director
Director
Supervisor
President
Director
Director
President
Director
Director
Director
Director
Chairman
Director
Director
Supervisor
President
Hsu-Tung Chen
Lewis Hwang
Representative of VentureTech Alliance Fund III,
L.P.: Juine-Kai Tseng
Wei-Pong Lin
Lewis Hwang
None
None
None
None
None
Steve Tso
F.C. Tseng
Lora Ho
Wendell Huang
(Note 2)
Lora Ho
Sylvia Fang
Ying-Chen Chao
Lora Ho
Richard Thurston
Lora Ho
Ying-Chen Chao
Steve Tso
F.C. Tseng
Lora Ho
Wendell Huang
C.H. Chen
TSMC Guang Neng Investment, Ltd.
Director
Director
Lora Ho
Sylvia Fang
Shareholding
Shares (Investment Amount)
% (Investment
Holding%)
1,107,010 shares
2,508,000 shares
15,643,347 shares
30,000 shares
2,508,000 shares
(TSMC’s investment US$ 24,255,367)
(TSMC’s investment US$ 14,811,244)
(TSMC’s investment US$113,674,346)
(VentureTech Alliance Fund III, L.P.’s investment
US$2,180,000)
4.13%
9.35%
58.33%
0.11%
9.35%
(99.50%)
(98.00%)
(98.00%)
(100%)
None
(100%)
-
-
-
-
TSMC holds 1,118,000,000 shares
TSMC Guang Neng Investment, Ltd. holds 5,309,152 shares
-
-
-
TSMC Solar Ltd. holds 1,000 shares
-
-
TSMC Solar Ltd. holds 200 shares
-
-
TSMC Solar Europe B.V. holds 200 shares (Note 3)
-
-
-
-
-
TSMC holds 554,674,437 shares
TSMC Guang Neng Investment, Ltd. Holds 10,806,037
shares
-
-
(TSMC’s investment NT$200,000,000)
-
-
-
-
98.58%
0.47%
-
-
-
100%
-
-
100%
-
-
100%
-
-
-
-
-
92.32%
1.80%
-
-
100%
Note 1: To simplify overseas investment structure, in the second quarter of 2014, the Board of Directors of TSMC SSL approved to file for the liquidation of TSMC Lighting NA. The liquidation procedure
has been completed in the third quarter of 2014.
Note 2: Mr. Ying-Chen Chao resigned as President on November 22, 2014. Mr. C.H. Chen was appointed to take the vacancy, effective on January 12, 2015.
Note 3: To simplify overseas investment structure, in the second quarter of 2014, the Board of Directors of TSMC Solar approved to file for the liquidation of TSMC Solar Europe. After the liquidation,
TSMC Solar Europe GmbH, the 100% owned subsidiary of TSMC Solar Europe, will be held directly by TSMC Solar. The liquidation procedure has been processed starting from the third quarter of
2014.
Note 4: On December 31, 2014, we reclassified TSMC SSL as a disposal group held for sale. On February 17, 2015, TSMC SSL ceased to be TSMC’s subsidiary because TSMC’s and TSMC subsidiary’ shares
in TSMC SSL were sold to Epistar Corporation.
8.1.6 Operational Highlights of TSMC Subsidiaries (Note)
Unit: NT$ thousands, except EPS ($)
Company
Capital Stock
Assets
Liabilities
Net Worth
Net Revenue
Income (Loss)
from Operation
Net Income
(Loss)
Basic Earnings
(Loss) Per Share
As of 12/31/2014
348,898
97,812,833
93,828,463
3,984,370
495,744,116
(14,266)
(60,200)
(5.47)
TSMC North America
TSMC Europe B.V.
TSMC Japan Limited
TSMC Korea Limited
3,857
79,560
11,640
425,349
167,062
36,107
113,297
46,946
2,680
312,052
120,116
33,427
484,455
229,000
25,917
51,287
10,005
2,356
40,265
201,324.25
3,655
3,086
609.12
38.57
NA
TSMC China Company Limited
23,016,884
35,818,491
3,849,884
31,968,607
19,736,436
6,100,111
6,587,991
TSMC Technology, Inc.
InveStar Semiconductor Development Fund,
Inc.
InveStar Semiconductor Development Fund,
Inc. (II) LDC
0.03
19,031
675,662
45,356
199,540
40,857
476,122
1,272,852
4,500
24
60,612
(13,875)
61,349
6,134,854.03
(13,876)
(17.63)
303,782
805,145
84,662
720,483
71,936
43,694
43,693
4.56
TSMC Development, Inc.
0.03
19,072,181
-
19,072,181
1,731,643
1,730,439
1,686,286
168,628,571.57
WaferTech, LLC
TSMC Partners, Ltd.
-
8,159,897
814,712
7,345,185
8,651,858
2,458,457
1,604,287
31,345,892
47,453,005
-
47,453,005
1,477,460
1,467,994
1,465,573
TSMC Design Technology Canada Inc.
66,663
177,730
22,373
155,357
217,999
TSMC Global Ltd.
104,161,912
196,337,823
64,006,990
132,330,833
1,614,016
338,151
102,969.22
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 Solar Europe B.V.
TSMC Solar Europe GmbH
TSMC Solar Ltd.
268,184
769,332
469,783
3,605,523
69,145
-
32
3,857
3,857
92,726
155,901
475,968
804,410
17,378
-
31,774
1,235
66,793
-
3,047
-
-
-
16,076
249
180,435
181,975
25,932
155,901
472,922
804,410
17,378
-
15,698
987
(1,540)
19,818
419,559
(12,393)
(3,919)
(9,185)
(67,776)
(3,291)
-
116,494
-
2,135
155,795
-
-
16,457
(23,591)
-
(637)
380,171
(85,567)
15,868
(13,673)
(2,194)
(9,169)
(67,776)
(3,291)
-
(23,738)
(86,518)
(85,880)
11,341,000
7,854,352
4,969,718
2,884,634
738,355
(1,176,403)
(1,722,175)
TSMC Solid State Lighting Ltd.
TSMC Guang Neng Investment, Ltd.
6,008,000
200,000
945,356
65,560
220,191
-
725,165
65,560
120,367
(2,452,475)
(1,618,784)
-
(100)
(37,069)
Note: Foreign exchange rates for balance sheet amounts are as follows:
$1 USD = $31.718 NT, $1 EUR = $38.57 NT, $1 JPY = $0.2652 NT, $1 RMB = $5.11 NT, $1 KRW = $0.0291 NT, $1 CAD = $27.39 NT
Foreign exchange rates for income statement amounts are as follows:
$1 USD = $30.288 NT, $1 EUR = $40.39 NT, $1 JPY = $0.2879 NT, $1 RMB = $4.92 NT, $1 KRW = $0.0288 NT, $1 CAD = $27.51 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 2014 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 2014 and as of the Date of this Annual Report
In 2014, the Company complied with the Taiwan Securities Trading Act, Company Law and relevant labor and environmental
laws and regulations. TSMC was fined for NT$12,000 for one isolated incident of an administrative error by the competent
authority. TSMC has been implementing relevant remedial measures.
8.3.3 Any Events in 2014 and as of the Date of this Annual Report that Had Significant Impacts on Shareholders’ Right
or Security Prices as Stated in Item 3 Paragraph 2 of Article 36 of Securities and Exchange Law of Taiwan: None.
8.3.4 Other Necessary Supplement: None.
5.46
1.48
6.90
(0.51)
NA
NA
NA
NA
NA
(23,738.31)
(432,587.78)
(429,397.50)
(1.52)
(2.69)
NA
124
125
Contact Information
Corporate Headquarters & Fab 12A
8, Li-Hsin Rd. 6, Hsinchu Science Park, Hsinchu 30078, 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 30075, Taiwan, R.O.C.
Tel: +886-3-5636688 FAX: +886-3-6687827
Fab 2, Fab 5
121, Park Ave. 3, Hsinchu Science Park, Hsinchu 30077, Taiwan, R.O.C.
Tel: +886-3-5636688 Fax: +886-3-5781546
Fab 3
9, Creation Rd. 1, Hsinchu Science Park, Hsinchu 30077, Taiwan, R.O.C.
Tel: +886-3-5636688 Fax: +886-3-5781548
Fab 6
1, Nan-Ke North Rd., Tainan Science Park, Tainan 74144, Taiwan, R.O.C.
Tel: +886-6-5056688 Fax: +886-6-5052057
Fab 8
25, Li-Hsin Rd., Hsinchu Science Park, Hsinchu 30078, Taiwan, R.O.C.
Tel: +886-3-5636688 Fax: +886-3-5662051
Fab 14A
1-1, Nan-Ke North Rd., Tainan Science Park, Tainan 74144, Taiwan
R.O.C.
Tel: +886-6-5056688 Fax: +886-6-5051262
Fab 14B
17, Nan-Ke 9th Rd., Tainan Science Park, Tainan 74144, Taiwan, R.O.C.
Tel: +886-6-5056688 Fax: +886-6-5055217
Fab 15
1, Keya Rd.6, Cental Taiwan Science Park, Taichung 42882, Taiwan, R.O.C.
Tel: +886-4-27026688 Fax: +886-4-25607548
TSMC North America
2851 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, 2206221, 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 © 2015 by Taiwan Semiconductor Manufacturing Company, Ltd. All rights reserved.
TSMC Korea Limited
15F, AnnJay Tower, 208, Teheran-ro, Gangnam-gu
Seoul 135920, 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
TSMC 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 10596, 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 10008, Taiwan
R.O.C.
Tel: +886-2-66365566 Fax: +886-2-23116723
Website: http://www.ctbcbank.com
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
Contents
Consolidated Financial Statements for the
Years Ended December 31, 2014 and 2013 and
Independent Auditors’ Report
Parent Company Only Financial Statements for the
Years Ended December 31, 2014 and 2013 and
Independent Auditors’ Report
1
89
Taiwan Semiconductor Manufacturing
Company Limited and Subsidiaries
Consolidated Financial Statements for the
Years Ended December 31, 2014 and 2013 and
Independent Auditors’ Report
- 1 -
- (cid:21) -
REPRESENTATION LETTER
The entities that are required to be included in the combined financial statements of Taiwan Semiconductor
Manufacturing Company Limited as of and for the year ended December 31, 2014, 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 No. 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.
Very truly yours,
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
By
MORRIS CHANG
Chairman
February 10, 2015
- 3 -
- 4 -
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In Thousands of New Taiwan Dollars)
ASSETS
CURRENT ASSETS
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)
Noncurrent assets held for sale (Note 13)
Other financial assets (Note 38)
Other current assets (Note 18)
Total current assets
NONCURRENT ASSETS
Available-for-sale financial assets (Note 8)
Financial assets carried at cost (Note 14)
Investments accounted for using equity method (Notes 5 and 15)
Property, plant and equipment (Notes 5 and 16)
Intangible assets (Notes 5 and 17)
Deferred income tax assets (Notes 5 and 31)
Refundable deposits (Note 37)
Other noncurrent assets (Note 18)
Total noncurrent assets
TOTAL
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Note 19)
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 supervisors (Note 24)
Payables to contractors and equipment suppliers
Income tax payable (Note 31)
Provisions (Note 20)
Liabilities directly associated with noncurrent assets held for sale (Note 13)
Accrued expenses and other current liabilities (Notes 16 and 23)
Total current liabilities
NONCURRENT LIABILITIES
Hedging derivative financial liabilities (Note 10)
Bonds payable (Note 21)
Long-term bank loans
Deferred income tax liabilities (Note 31)
Obligations under finance leases(Note 16)
Accrued pension cost (Notes 5 and 22)
Guarantee deposits (Note 23)
Others (Note 20)
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)
Equity attributable to shareholders of the parent
NONCONTROLLING INTERESTS (Note 24)
Total equity
TOTAL
The accompanying notes are an integral part of the consolidated financial statements.
- 5 -
December 31, 2014
Amount
%
December 31, 2013
Amount
%
$ 358,449,029
192,045
73,797,476
4,485,593
114,734,743
312,955
178,625
66,337,971
945,356
3,476,884
3,656,110
626,566,787
-
1,800,542
28,251,002
818,198,801
13,531,510
5,227,128
356,069
1,202,006
868,567,058
24
-
5
-
8
-
-
5
-
-
-
42
-
-
2
55
1
-
-
-
58
$ 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
358,486,654
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
19
-
-
-
6
-
-
3
-
-
-
28
5
-
2
63
1
1
-
-
72
$ 1,495,133,845
100
$ 1,263,054,977
100
$
36,158,520
486,214
16,364,241
21,878,934
1,491,490
10,573,922
18,052,820
26,980,408
28,616,574
10,445,452
220,191
29,746,011
2
-
1
2
-
1
1
2
2
1
-
2
$
15,645,000
33,750
-
14,670,260
1,688,456
8,330,956
12,738,801
89,810,160
22,563,286
7,603,781
-
16,693,484
1
-
-
1
-
1
1
7
2
1
-
1
201,014,777
14
189,777,934
15
-
213,673,818
40,000
199,750
802,108
7,303,978
25,538,475
885,192
248,443,321
449,458,098
259,296,624
55,989,922
151,250,682
-
553,261,982
704,512,664
25,749,291
1,045,548,501
127,246
1,045,675,747
-
14
-
-
-
-
2
-
16
30
17
4
10
-
37
47
2
70
-
70
5,481,616
210,767,625
40,000
-
776,230
7,589,926
151,660
694,901
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
847,508,255
266,830
847,775,085
-
17
-
-
-
1
-
-
18
33
21
4
11
-
30
41
1
67
-
67
$ 1,495,133,845
100
$ 1,263,054,977
100
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
2014
2013
Amount
%
Amount
%
NET REVENUE (Notes 5, 26, 37 and 42)
$ 762,806,465
100
$ 597,024,197
100
COST OF REVENUE (Notes 12, 33 and 37)
385,100,646
50
316,057,820
53
GROSS PROFIT BEFORE REALIZED
(UNREALIZED) GROSS PROFIT ON SALES TO
ASSOCIATES
REALIZED (UNREALIZED) GROSS PROFIT ON
SALES TO ASSOCIATES
GROSS PROFIT
OPERATING EXPENSES (Notes 5, 33 and 37)
Research and development
General and administrative
Marketing
377,705,819
50
280,966,377
47
28,556
377,734,375
56,823,732
18,932,100
5,087,112
-
50
8
2
1
(20,870)
280,945,507
48,118,165
18,928,544
4,516,525
-
47
8
3
1
Total operating expenses
80,842,944
11
71,563,234
12
OTHER OPERATING INCOME AND EXPENSES,
NET (Notes 13, 27 and 33)
(1,001,138)
INCOME FROM OPERATIONS (Note 42)
295,890,293
NON-OPERATING INCOME AND EXPENSES
Share of profits of associates and joint venture
(Notes 15 and 42)
Other income (Note 28)
Foreign exchange gain, net
Finance costs (Note 29)
Other gains and losses (Note 30)
3,949,674
3,380,407
2,111,310
(3,236,345)
2,207
Total non-operating income and expenses
6,207,253
INCOME BEFORE INCOME TAX
302,097,546
INCOME TAX EXPENSE (Notes 31 and 42)
38,316,677
NET INCOME
263,780,869
-
39
1
-
-
-
-
1
40
5
35
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
-
35
1
-
-
-
-
1
36
5
31
(Continued)
- 6 -
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
2014
2013
Amount
%
Amount
%
OTHER COMPREHENSIVE INCOME (LOSS)
(Notes 15, 24 and 31)
Exchange differences arising on translation of
foreign operations
$ 11,771,129
1
$
3,668,509
Changes in fair value of available-for-sale financial
assets
Share of other comprehensive loss of associates and
joint venture
Actuarial gain (loss) from defined benefit plans
Income tax benefit (expense) related to components
of other comprehensive income
(36,559)
(149,907)
290,416
(40,915)
-
-
-
-
13,290,385
(59,740)
(662,074)
115,168
Other comprehensive income for the year, net
of income tax
11,834,164
1
16,352,248
1
2
-
-
-
3
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR
$ 275,615,033
36
$ 204,371,185
34
NET INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent
Noncontrolling interests
TOTAL COMPREHENSIVE INCOME (LOSS)
ATTRIBUTABLE TO:
Shareholders of the parent
Noncontrolling interests
$ 263,898,794
(117,925)
35
-
$ 188,146,790
(127,853)
$ 263,780,869
35
$ 188,018,937
$ 275,717,141
(102,108)
36
-
$ 204,505,782
(134,597)
$ 275,615,033
36
$ 204,371,185
31
-
31
34
-
34
2014
Income Attributable to
Shareholders of
the Parent
2013
Income Attributable to
Shareholders of
the Parent
EARNINGS PER SHARE (NT$, Note 32)
Basic earnings per share
Diluted earnings per share
$ 10.18
$ 10.18
$ 7.26
$ 7.26
The accompanying notes are an integral part of the consolidated financial statements.
(Concluded)
- 7 -
l
a
t
o
T
y
t
i
u
q
E
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T
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax
Adjustments for:
2014
2013
$ 302,097,546
$ 215,487,122
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 of noncurrent assets held for sale
Impairment loss of 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 accounted for using equity method
Loss from liquidation of subsidiary
Gain on deconsolidation of subsidiary
Unrealized (realized) gross profit on sales to associates
Loss on foreign exchange, net
Dividend income
Income from receipt of equity securities in settlement of trade receivables
Loss from hedging instruments
Gain 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
197,645,186
2,606,349
-
3,236,345
(3,949,674)
(2,730,674)
(14,518)
734,467
239,864
211,477
(280,956)
(81,449)
(2,028,643)
90
-
(28,556)
3,615,493
(649,733)
(1,211)
10,577,714
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
(10,088,628)
(5,071,118)
342,853
(43,090,068)
(26,405)
(11,766)
(28,871,597)
(2,612,158)
(744,868)
6,634,198
(194,866)
2,281,117
5,314,019
8,432,511
2,836,910
41,461
451,441,830
(29,918,099)
(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)
Net cash generated by operating activities
421,523,731
347,383,537
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Available-for-sale financial assets
Financial assets carried at cost
Held-to-maturity financial assets
Property, plant and equipment
Intangible assets
- 9 -
(91,909)
(23,151)
(5,882,316)
(288,540,028)
(3,859,486)
(21,303)
(27,165)
(1,795,949)
(287,594,773)
(2,750,361)
(Continued)
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
Proceeds from disposal or redemption of:
Available-for-sale financial assets
Held-to-maturity financial assets
Financial assets carried at cost
Investments accounted for using equity method
Property, plant and equipment
Cash received from other long-term receivables
Costs from entering into hedging transactions
Interest received
Other dividends received
Dividends received from investments accounted for using equity method
Refundable deposits paid
Refundable deposits refunded
Net cash outflow from deconsolidation of subsidiary (Note 34)
$
2014
2013
$
689,420
3,200,000
87,501
3,471,883
200,263
161,900
(520,856)
2,578,663
645,585
3,223,090
(57,988)
2,296,872
-
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)
Net cash used in investing activities
(282,420,557)
(281,054,215)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term loans
Proceeds from issuance of bonds
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 (decrease) in noncontrolling interests
18,563,525
-
-
-
-
(3,192,971)
30,142,823
(7,704)
(28,426)
47,055
(77,785,851)
(66,735)
(19,636,240)
130,844,821
690,000
(62,500)
(853,788)
(1,330,886)
41,519
(113,087)
(27,796)
124,570
(77,773,307)
202,619
Net cash generated by (used in) financing activities
(32,328,284)
32,105,925
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS
9,060,170
849,612
NET INCREASE IN CASH AND CASH EQUIVALENTS
115,835,060
99,284,859
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
242,695,447
143,410,588
CASH AND CASH EQUIVALENTS, END OF YEAR
358,530,507
242,695,447
CASH AND CASH EQUIVALENTS INCLUDED IN NONCURRENT
ASSETS HELD FOR SALE
(81,478)
-
CASH AND CASH EQUIVALENT ON CONSOLIDATED BALANCE
SHEET
$ 358,449,029
$ 242,695,447
The accompanying notes are an integral part of the consolidated financial statements.
(Concluded)
- 10 -
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(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 10, 2015.
3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS
As of the date that the accompanying consolidated financial statements were issued, the Company has not
applied the following International Financial Reporting Standards, International Accounting Standards
(IASs), Interpretations of International Financial Reporting Standards (IFRIC), and Interpretations of IAS
(SIC) issued by the International Accounting Standards Board (IASB) (collectively, “IFRSs”).
a. The Guidelines Governing the Preparation of Financial Reports by Securities Issuers and 2013 IFRSs
version in issue but not yet effective
On April 3, 2014, according to Rule No. 1030029342 and Rule No. 1030010325 issued by the Financial
Supervisory Commission (FSC), the following 2013 IFRSs version endorsed by the FSC (collectively,
“2013 Taiwan-IFRSs version”) and the related amendments to the Guidelines Governing the
Preparation of Financial Reports by Securities Issuers should be adopted by the Company starting 2015.
New, Revised or Amended Standards and Interpretations
by IASB (Note)
Effective Date Issued
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 30, 2009
(Continued)
- 11 -
New, Revised or Amended Standards and Interpretations
by IASB (Note)
Effective Date Issued
Improvements to IFRSs 2010
July 1, 2010 or January 1,
2011
Annual Improvements to IFRSs 2009 - 2011 Cycle
Amendments to IFRS 1 Limited Exemption from Comparative IFRS 7
January 1, 2013
July 1, 2010
Disclosures for First - time Adopters
Amendment to IFRS 7 Disclosures - Offsetting Financial Assets and
January 1, 2013
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
July 1, 2011
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2014
January 1, 2013
July 1, 2012
Income
Amendment to IAS 12 Deferred Tax: Recovery of Underlying Assets
IAS 19 (Revised 2011) Employee Benefits
IAS 27 (Revised 2011) Separate Financial Statements
IAS 28 (Revised 2011) Investments in Associates and Joint Ventures
Amendment to IAS 32 Offsetting of Financial Assets and Financial
January 1, 2012
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2014
Liabilities
(Concluded)
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.
Except for the following items, the Company believes that the adoption of aforementioned 2013
Taiwan-IFRSs version and the related amendments to the Guidelines Governing the Preparation of
Financial Reports by Securities Issuers will not have a significant effect on the Company’s consolidated
financial statements.
1) IFRS 12, “Disclosure of Interests in Other Entities”
IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries,
joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure
requirements in IFRS 12 are more extensive than in the current standards.
2) IFRS 13, “Fair Value 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.
The measurement requirements of IFRS 13 shall be applied prospectively.
- 12 -
3) Amendments to IAS 1, “Presentation of Items of Other Comprehensive Income”
According to the amendments to IAS 1, 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 aforementioned allocation basis will not be strictly enforced prior to the adoption
of amendments.
The items that will not be reclassified subsequently to profit or loss are expected to include actuarial
gains or losses from defined benefit plans, the share of actuarial gains or losses from defined benefit
plans of associates and joint venture as well as the related income tax on such items. Items that
will be reclassified subsequently to profit or loss are expected to include exchange differences
arising on translation of foreign operations, changes in fair value of available-for-sale financial
assets, cash flow hedges, the share of other comprehensive income of associates and joint venture as
well as the related income tax on items of other comprehensive income.
4) Amendments to IAS 19, “Employee Benefits”
The amendments to IAS 19 require the Company to calculate a “net interest” amount by applying
the discount rate to the net defined benefit liability or asset to replace the interest cost and expected
return on planned assets used in current IAS 19. In addition, the amendments eliminate the
accounting treatment of either corridor approach or the immediate recognition of actuarial gains and
losses to profit or loss when it incurs, and instead, required to recognize all actuarial gains and
losses 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 amendments also require a broader
disclosure in defined benefit plans.
According to the retrospective application of aforementioned amendments, as of December 31,
2014 and January 1, 2014, the primary impacts on the Company would include the adjustment in
accrued pension cost for a decrease of NT$737,344 thousand and NT$788,263 thousand,
respectively, and the adjustment in retained earnings for an increase of NT$653,708 thousand and
NT$698,710 thousand, respectively.
b. The IFRSs issued by IASB but not endorsed by FSC
The Company has not applied the following IFRSs issued by the IASB but not endorsed by the FSC.
As of the date that the consolidated financial statements were issued, the initial adoption to the
following standards and interpretations is still subject to the effective date to be published by the FSC.
New, Revised or Amended Standards and Interpretations
by IASB (Note 1)
Effective Date Issued
Annual Improvements to IFRSs 2010 - 2012 Cycle
July 1, 2014 or transactions
on or after July 1, 2014
Annual Improvements to IFRSs 2011 - 2013 Cycle
Annual Improvements to IFRSs 2012 - 2014 Cycle
IFRS 9 Financial Instruments
Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of IFRS 9
and Transition Disclosure
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture
July 1, 2014
January 1, 2016 (Note 2)
January 1, 2018
January 1, 2018
Prospectively applicable to
transactions beginning
on or after January 1,
2016
- 13 -
(Continued)
New, Revised or Amended Standards and Interpretations
by IASB (Note 1)
Effective Date Issued
Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities:
January 1, 2016
Applying the Consolidation Exception(cid:289)
Amendment to IFRS 11 Accounting for Acquisitions of Interests in Joint
January 1, 2016
Operations
IFRS 15 Revenue from Contracts with Customers
Amendment to IAS 1 Disclosure Initiative(cid:289)
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods
January 1, 2017
January 1, 2016
January 1, 2016
of Depreciation and Amortization
Amendment to IAS 19 Defined Benefit Plans: Employee Contributions
Amendment to IAS 27 Equity Method in Separate Financial Statements
Amendment to IAS 36 Recoverable Amount Disclosures for
July 1, 2014
January 1, 2016
January 1, 2014
Non-Financial Assets
Amendment to IAS 39 Novation of Derivatives and Continuation of
January 1, 2014
Hedge Accounting
(Concluded)
Note 1: The aforementioned new, revised or amended standards or interpretations are effective after
fiscal year beginning on or after the effective dates, unless specified otherwise.
Note 2: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that
occur in annual periods beginning on or after January 1, 2016; the remaining amendments are
effective for annual periods beginning on or after January 1, 2016.
Except for the following, the initial application of the above new standards and interpretations has not
had any material impact on the Company’s accounting policies:
1) IFRS 9, “Financial Instruments”
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. The classification and measurement requirements in IFRS 9 are stated as follows:
For the debt instruments invested by the Company, if the contractual cash flows that are solely for
payments of principal and interest on the principal amount outstanding, the classification and
measurement requirements are stated as follows:
a) If the objective of the Company’s business model is to hold the financial asset to collect the
contractual cash flows, such assets are measured at the amortized cost. Interest revenue should
be recognized in profit or loss by using the effective interest method, continuously assessed for
impairment and the impairment loss or reversal of impairment loss should be recognized in
profit and loss.
b) If the objective of the Company’s business model is to hold the financial asset both to collect
the contractual cash flows and to sell the financial assets, such assets are measured at fair value
through other comprehensive income and are continuously assessed for impairment. Interest
revenue should be recognized in profit or loss by using the effective interest method. A gain
or loss on a financial asset measured at fair value through other comprehensive income should
be recognized in other comprehensive income, except for impairment gains or losses and
foreign exchange gains and losses. When such financial asset is derecognized or reclassified,
the cumulative gain or loss previously recognized in other comprehensive income is reclassified
from equity to profit or loss.
- 14 -
The other financial assets which do not meet the aforementioned criteria should be measured at the
fair value through profit or loss. However, the Company may irrevocably designate an investment
in equity instruments that is not held for trading as measured at fair value through other
comprehensive income. All relevant gains and losses shall be recognized in other comprehensive
income, except for dividends which are recognized in profit or loss. No subsequent impairment
assessment is required, and the cumulative gain or loss previously recognized in other
comprehensive income cannot be reclassified from equity to profit or loss.
IFRS 9 adds a new expected loss impairment model to measure the impairment of financial assets.
A loss allowance for expected credit losses should be recognized on financial assets measured at
amortized cost and financial assets mandatorily measured at fair value through other comprehensive
income. If the credit risk on a financial instrument has not increased significantly since initial
recognition, the Company should measure the loss allowance for that financial instrument at an
amount equal to 12-month expected credit losses. If the credit risk on a financial instrument has
increased significantly since initial recognition and is not deemed to be a low credit risk, the
Company should measure the loss allowance for that financial instrument at an amount equal to the
lifetime expected credit losses. The Company should always measure the loss allowance at an
amount equal to lifetime expected credit losses for trade receivables.
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.
2) IFRS 15, “Revenue from Contracts with Customers”
IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers,
and will supersede IAS 18, “Revenue,” IAS 11, “Construction Contracts,” and a number of
revenue-related interpretations.
When applying IFRS 15, the Company shall recognize revenue by applying the following steps:
Identify the contract with the customer;
Identify the performance obligations in the contract;
(cid:122)
(cid:122)
(cid:122) Determine the transaction price;
(cid:122) Allocate the transaction price to the performance obligations in the contracts; and
(cid:122) Recognize revenue when the entity satisfies a performance obligation.
When IFRS 15 is effective, the Company may elect to apply this Standard either retrospectively to
each prior reporting period presented or retrospectively with the cumulative effect of initially
applying this Standard recognized at the date of initial application.
3) 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.
- 15 -
Except for the aforementioned impact, as of the date that the accompanying consolidated financial
statements were 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.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
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 Accounting Research and Development Foundation (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.
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.
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.
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.
- 16 -
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.
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
Establishment
and Operating
Location
Percentage of Ownership
December 31,
2014
December 31,
2013
Note
TSMC
TSMC North America
Selling and marketing of integrated circuits
San Jose, California,
TSMC Japan Limited
(TSMC Japan)
TSMC Partners, Ltd.
(TSMC Partners)
TSMC Korea Limited
(TSMC Korea)
and semiconductor devices
Marketing activities
U.S.A.
Yokohama, Japan
Investing in companies involved in the
Tortola, British Virgin
design, manufacture, and other related
business in the semiconductor industry
Islands
Customer service and technical supporting
Seoul, Korea
activities
TSMC Europe B.V. (TSMC
Marketing and engineering supporting
Amsterdam, the
Netherlands
Tortola, British Virgin
Islands
Shanghai, China
Europe)
activities
TSMC Global, Ltd. (TSMC
Investment activities
Global)
TSMC China Company
Limited (TSMC China)
VentureTech Alliance Fund
III, L.P. (VTAF III)
VentureTech Alliance Fund
II, L.P. (VTAF II)
Emerging Alliance Fund,
L.P. (Emerging Alliance)
TSMC Solid State Lighting
Ltd. (TSMC SSL)
Manufacturing and selling of integrated
circuits at the order of and pursuant to
product design specifications provided by
customers
Investing in new start-up technology
Cayman Islands
companies
Investing in new start-up technology
Cayman Islands
companies
Investing in new start-up technology
Cayman Islands
companies
Engaged in researching, developing,
Hsin-Chu, Taiwan
designing, manufacturing and selling solid
state lighting devices and related
applications products and systems
100%
100%
100%
100%
100%
100%
100%
98%
98%
99.5%
92%
100%
100%
100%
100%
100%
100%
100%
50%
98%
99.5%
92%
TSMC Solar Ltd. (TSMC
Engaged in researching, developing,
Tai-Chung, Taiwan
99%
99%
Solar)
designing, manufacturing and selling
renewable energy and saving related
technologies and products
TSMC Guang Neng
Investment activities
Taipei, Taiwan
100%
100%
TSMC Partners
Investment, Ltd. (TSMC
GN)
TSMC Design Technology
Canada Inc. (TSMC
Canada)
TSMC Technology, Inc.
(TSMC Technology)
TSMC Development, Inc.
(TSMC Development)
InveStar Semiconductor
Development Fund, Inc.
(ISDF)
Engineering support activities
Ontario, Canada
100%
100%
Engineering support activities
Delaware, U.S.A.
Investment activities
Delaware, U.S.A.
Investing in new start-up technology
Cayman Islands
companies
100%
100%
97%
100%
100%
97%
InveStar Semiconductor
Investing in new start-up technology
Cayman Islands
97%
97%
Development Fund, Inc.
(II) LDC. (ISDF II)
companies
TSMC Development
WaferTech, LLC
Manufacturing, selling, testing and
Washington, U.S.A.
100%
100%
(WaferTech)
computer-aided designing of integrated
circuits and other semiconductor devices
VTAF III
Mutual-Pak Technology
Co., Ltd. (Mutual-Pak)
Manufacturing and selling of electronic parts
and researching, developing, and testing of
RFID
New Taipei, Taiwan
58%
58%
Growth Fund Limited
(Growth Fund)
Investing in new start-up technology
Cayman Islands
100%
100%
companies
- 17 -
-
a)
-
a)
a)
-
-
b)
-
a)
TSMC and TSMC
GN aggregately
have a controlling
interest of 94% in
TSMC SSL.
TSMC and TSMC
GN aggregately
have a controlling
interest of 99% in
TSMC Solar.
a)
a)
a)
-
a)
a)
-
a)
a)
(Continued)
Name of Investor
Name of Investee
Main Businesses and Products
Establishment
and Operating
Location
Percentage of Ownership
December 31,
2014
December 31,
2013
VTAF III, VTAF II
and Emerging
Alliance
VentureTech Alliance
Investing in new start-up technology
Delaware, U.S.A.
100%
100%
Holdings, LLC (VTA
Holdings)
companies
Note
a)
TSMC SSL
TSMC Lighting North
Selling and marketing of solid state lighting
Delaware, U.S.A.
-
100%
a), c)
America, Inc. (TSMC
Lighting NA)
related products
TSMC Solar
TSMC Solar North
Selling and marketing of solar related
Delaware, U.S.A.
100%
100%
a)
America, Inc. (TSMC
Solar NA)
products
TSMC Solar Europe B.V.
Investing in solar related business
(TSMC Solar Europe)
VentureTech Alliance Fund
III, L.P. (VTAF III)
Investing in new start-up technology
companies
Amsterdam, the
Netherlands
Cayman Islands
100%
-
100%
49%
TSMC Solar Europe
TSMC Solar Europe GmbH Selling of solar related products and
Hamburg, Germany
100%
100%
providing customer service
a), d)
b)
a), d)
(Concluded)
Note a: This is an immaterial subsidiary for which the consolidated financial statements are not audited by the Company’s independent accountants.
Note b: According to the agreement among TSMC, TSMC Solar and VTAF III, each of the investment held by VTAF III is separately owned by TSMC and TSMC Solar. As the investment
owned by VTAF III, which is indirectly owned by TSMC Solar, has entered into liquidation process due to bankruptcy and the bankruptcy trustee confirmed that no residual assets could
be reimbursed to the shareholders, in the second quarter of 2014, TSMC Solar's percentage of ownership over VTAF III has decreased to nil. Consequently, TSMC's percentage of
ownership over VTAF III has been adjusted to 98%.
Note c: To simplify overseas investment structure, in the second quarter of 2014, the Board of Directors of TSMC SSL approved to file for the liquidation of TSMC Light ing NA. The
liquidation procedure has been completed in the third quarter of 2014.
Note d: To simplify overseas investments structure, in the second quarter of 2014, the Board of Directors of TSMC Solar approved to file for the liquidation of TSMC Solar Europe After the
liquidation, TSMC Solar Europe GmbH, the 100% owned subsidiary of TSMC Solar Europe, will be held directly by TSMC Solar. TSMC Solar Europe has started their liquidation
procedures in the third quarter of 2014.
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 statements, 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
- 18 -
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.
Financial Instruments
Financial assets and liabilities shall be recognized when the Company becomes a party to the contractual
provisions of the instruments.
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 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
- 19 -
determined to be impaired, the cumulative gain or loss previously recognized in other comprehensive
income is reclassified to profit or loss.
Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company’s
right to receive the dividends is established.
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.
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
- 20 -
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.
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 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
- 21 -
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.
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.
Noncurrent Assets Held for Sale
Noncurrent assets or disposal groups are classified as noncurrent assets held for sale if their carrying
amount will be recovered principally through a sale transaction rather than through continuing use. This
condition is regarded as met only when the sale is highly probable and the noncurrent asset held for sale is
available for immediate sale in its present condition. To meet the criteria for the sale being highly
probable, the appropriate level of management must be committed to the sale, which should be expected to
qualify for recognition as a completed sale within one year from the date of classification.
When the committed sale plan involves loss of control of a subsidiary, all of the assets and liabilities of that
subsidiary are classified as held for sale, regardless of whether a noncontrolling interest in its former
subsidiary is retained after the sale.
Noncurrent assets classified as held for sale are measured at the lower of their previous carrying amount
and fair value less costs to sell. Recognition of depreciation would cease.
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
- 22 -
as the distribution received. The Company also recognizes 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. 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.
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
Company 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. If the Company's
ownership interest in an associate is reduced as a result of disposal, but the investment continues to be an
associate, the Company should reclassify to profit or loss only a proportionate amount of the gain or loss
previously recognized in other comprehensive income.
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 - 2 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.
- 24 -
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.
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.
- 25 -
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:
(cid:121) The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
(cid:121) The Company retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
(cid:121) The amount of revenue can be measured reliably;
(cid:121)
It is probable that the economic benefits associated with the transaction will flow to the Company; and
(cid:121) 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 January 1, 2012, the date of transition to Taiwan-IFRSs. There
were no stock options granted prior to but unvested at the date of transition.
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
- 26 -
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.
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.
- 27 -
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.
- 28 -
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.
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 corporate bonds
Commercial paper
Repurchase agreements collateralized by short-term commercial
paper
Repurchase agreements collateralized by government bonds
December 31,
2014
December 31,
2013
$ 352,761,240
3,920,562
1,159,325
$ 238,014,580
1,809,344
-
449,180
158,722
2,395,644
475,879
$ 358,449,029
$ 242,695,447
Deposits in banks consisted of highly liquid time deposits that were readily convertible to known amounts
of cash and were subject to an insignificant risk of changes in value.
- 29 -
7. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Derivative financial assets
Cross currency swap contracts
Forward exchange contracts
Derivative financial liabilities
Cross currency swap contracts
Forward exchange contracts
December 31,
2014
December 31,
2013
$ 118,928
73,117
$
-
90,353
$ 192,045
$ 90,353
$ 359,607
126,607
$
4,177
29,573
$ 486,214
$ 33,750
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:
December 31, 2014
Sell EUR/Buy US$
Sell NT$/Buy US$
Sell US$/Buy EUR
Sell US$/Buy JPY
Sell US$/Buy NT$
Sell US$/Buy RMB
December 31, 2013
Sell NT$/Buy EUR
Sell NT$/Buy US$
Sell US$/Buy EUR
Sell US$/Buy JPY
Sell US$/Buy RMB
Maturity Date
Contract Amount
(In Thousands)
January 2015
January 2015
January 2015
January 2015
January 2015
January 2015
EUR4,550/US$5,561
NT$1,632,401/US$51,900
US$29,450/EUR24,100
US$226,003/JPY27,150,983
US$170,000/NT$5,276,500
US$181,000/RMB1,129,243
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
- 30 -
Outstanding cross currency swap contracts consisted of the following:
Maturity Date
December 31, 2014
January 2015
January 2015
December 31, 2013
Contract Amount
(In Thousands)
Range of
Interest Rates
Paid
Range of
Interest Rates
Received
NT$2,511,905/ US$80,080
US$1,460,000/ NT$45,974,755
-
0.16%~1.92%
0.05%~0.13%
-
January 2014
NT$1,639,215/US$55,080
-
1.03%~2.00%
8. AVAILABLE-FOR-SALE FINANCIAL ASSETS
Publicly traded stocks
Money market funds
Current portion
Noncurrent portion
December 31,
2014
December 31,
2013
$ 73,797,085
391
$ 59,481,569
1,183
$ 73,797,476
$ 59,482,752
$ 73,797,476
-
$
760,793
58,721,959
$ 73,797,476
$ 59,482,752
In the second quarter of 2014, the Company reclassified some publicly traded stocks from non-current asset
to current asset since the lock-up period will end within a year.
9. HELD-TO-MATURITY FINANCIAL ASSETS
Current portion
Commercial paper
10. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS
Financial liabilities - current
Fair value hedges
Stock forward contracts
December 31,
2014
December 31,
2013
$ 4,485,593
$ 1,795,949
December 31,
2014
December 31,
2013
$ 16,364,241
$
-
(Continued)
- 31 -
Financial liabilities - noncurrent
Fair value hedges
Stock forward contracts
December 31,
2014
December 31,
2013
$
-
$ 5,481,616
(Concluded)
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
determined by specific percentage of the spot price on the trade date 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:
Contract amount (US$ in thousands)
11. NOTES AND ACCOUNTS RECEIVABLE, NET
Notes and accounts receivable
Allowance for doubtful receivables
December 31,
2014
December 31,
2013
$ 56,172,570
$ 37,431,626
(US$1,771,000) (US$1,256,095)
December 31,
2014
December 31,
2013
$ 115,221,473
(486,730)
$ 72,136,514
(486,588)
Notes and accounts receivable, net
$ 114,734,743
$ 71,649,926
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.
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,
2014
December 31,
2013
$ 102,692,871
$ 64,112,564
12,041,872
7,537,362
$ 114,734,743
$ 71,649,926
- 32 -
Movements of the allowance for doubtful receivables
Balance at January 1, 2014
Provision
Reversal
Effect of exchange rate changes
Individually
Assessed for
Impairment
Collectively
Assessed for
Impairment
$
8,058
35
-
-
$ 478,530
23,374
(23,409)
142
Total
$ 486,588
23,409
(23,409)
142
Balance at December 31, 2014
$
8,093
$ 478,637
$ 486,730
Balance at January 1, 2013
Provision
Reversal
Effect of deconsolidation of subsidiary
Effect of exchange rate changes
$ 137,336
-
(127,881)
(3,157)
1,760
$ 342,876
137,317
-
-
(1,663)
$ 480,212
137,317
(127,881)
(3,157)
97
Balance at December 31, 2013
$
8,058
$ 478,530
$ 486,588
Aging analysis of accounts receivable that is individually determined as 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,
2014
December 31,
2013
$
-
-
-
-
8,093
$
38
276
80
158
7,824
$
8,093
$
8,376
The Company held bank guarantees and other credit enhancements as collateral for certain impaired
accounts receivables. As of December 31, 2014 and 2013, the amount of the bank guarantee and other
credit enhancements were nil and NT$318 thousand (US$11 thousand), respectively.
12. INVENTORIES
Finished goods
Work in process
Raw materials
Supplies and spare parts
December 31,
2014
December 31,
2013
$ 9,972,024
51,027,892
3,222,523
2,115,532
$ 7,245,209
26,033,625
2,435,269
1,780,790
$ 66,337,971
$ 37,494,893
Write-down of inventories to net realizable value in the amount of NT$1,964,544 thousand and
NT$664,662 thousand, respectively, were included in the cost of revenue for the years ended December 31,
2014 and 2013.
- 33 -
13. NONCURRENT ASSETS HELD FOR SALE
In January 2015, the Board of Directors of TSMC approved a sale of TSMC SSL common shares of
565,480 thousand held by TSMC and TSMC Guang Neng to Epistar Corp. with the expectation to complete
the sale within twelve months. Accordingly, the Company has reclassified TSMC SSL as a disposal group
held for sale in its consolidated balance sheet as of December 31, 2014. The expected fair value less costs
to sell is substantially lower than the carrying amount of the related net assets of TSMC SSL; as such,
impairment losses of NT$734,467 thousand were recognized under other operating gains and losses in the
Company’s consolidated statement of comprehensive income for the year ended December 31, 2014.
TSMC SSL is classified in the other operating segment of the Company. The major classes of assets and
liabilities classified as held for sale were disclosed as follows:
Noncurrent assets held for sale
Cash and cash equivalents
Inventories
Other current assets
Property, plant and equipment
Intangible assets
Others
Liabilities directly associated with noncurrent assets held for sale
Salary and bonus payable
Accrued expenses and other current liabilities
Accrued pension cost
Others
December 31,
2014
$ 81,478
28,519
91,331
644,698
47,373
51,957
$ 945,356
$ 38,151
68,132
36,993
76,915
$ 220,191
14. FINANCIAL ASSETS CARRIED AT COST
Non-publicly traded stocks
Mutual funds
December 31,
2014
December 31,
2013
$ 1,606,659
193,883
$ 1,865,078
280,513
$ 1,800,542
$ 2,145,591
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 common stock of Alchip Technologies, Ltd. was listed on the Taiwan Stock Exchange Corporation in
October 2014. Thus, the Company reclassified the aforementioned investments from financial assets
carried at cost to available-for-sale financial assets.
The Company recognized impairment loss on financial assets carried at cost in the amount of NT$211,477
thousand and NT$1,538,888 thousand for the years ended December 31, 2014 and 2013, respectively.
- 34 -
15. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
Investments accounted for using the equity method consisted of the following:
December 31,
2014
December 31,
2013
$ 24,963,336
3,287,666
$ 24,823,807
3,492,453
$ 28,251,002
$ 28,316,260
Carrying Amount
% of Ownership and Voting
Rights Held by the Company
December 31,
December 31,
December 31,
December 31,
2014
2013
2014
2013
39%
Place of
Incorporation
and Operation
Hsinchu, Taiwan
$ 10,100,750
$ 10,556,348
33%
Singapore
8,296,955
7,457,733
39%
39%
Taipei, Taiwan
3,408,945
3,887,462
20%
20%
Associates
Jointly controlled entities
a. Investments in associates
Associates consisted of the following:
Name of Associate
Principal Activities
Vanguard International
Semiconductor
Corporation (VIS)
Systems on Silicon
Manufacturing
Company Pte Ltd.
(SSMC)
Motech Industries, Inc.
(Motech)
Research, design, development,
manufacture, packaging,
testing and sale of memory
integrated circuits, LSI, VLSI
and related parts
Fabrication and supply of
integrated circuits
Manufacturing and sales of solar
cells, crystalline silicon solar
cell, and test and measurement
instruments and design and
construction of solar power
systems
Xintec Inc. (Xintec)
Wafer level chip size packaging
Taoyuan, Taiwan
2,053,982
1,866,123
service
Global Unichip
Researching, developing,
Hsinchu, Taiwan
1,102,704
1,056,141
40%
35%
40%
35%
Corporation (GUC)
manufacturing, testing and
marketing of integrated circuits
$ 24,963,336
$ 24,823,807
In the second quarter of 2014, the Company sold 82,000 thousand common shares of VIS and
recognized a disposal gain of NT$2,028,643 thousand. After the sale, the Company owned
approximately 33.7% of the equity interest in VIS.
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 2012 was reversed in the fourth quarter of
2013.
Since TSMC did not participate in Mcube Inc.’s issuance of new shares in the third quarter of 2013, the
Company’s percentage of ownership in Mcube Inc. decreased to 18%. As a result, the Company
evaluated and concluded that the Company no longer exercises significant influence over Mcube Inc.
Therefore Mcube Inc. 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 Inc. when the significant influence was lost, which has no difference with the
carrying amount; accordingly, the Company did not recognize any gain or loss.
- 35 -
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.
December 31,
2014
December 31,
2013
Total assets
Total liabilities
Net assets
$ 101,074,142
(28,484,295)
$ 96,689,523
(28,141,625)
$ 72,589,847
$ 68,547,898
The Company’s share of net assets of associates
$ 24,963,336
$ 24,823,807
Years Ended December 31
2014
2013
Net revenue
Net income
Other comprehensive income
The Company’s share of profits of associates
The Company’s share of other comprehensive income of
associates
$ 70,466,409
$ 9,477,112
48,121
$
$ 3,693,723
$ 67,752,079
$ 8,325,722
168,081
$
$ 3,518,495
$
5,285
$
18,554
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
VIS
Motech
GUC
b.
Investments in jointly controlled entities
Jointly controlled entities consisted of the following:
December 31,
2014
December 31,
2013
$ 28,567,489
$ 4,242,769
$ 4,327,965
$ 22,239,112
$ 5,345,015
$ 3,454,902
Carrying Amount
% of Ownership and Voting
Rights Held by the Company
December 31,
December 31,
December 31,
December 31,
2014
2013
2014
49%
2013
49%
Name of Jointly
Controlled Entity
VisEra Holding
Company (VisEra
Holding)
Principal Activities
Investing in companies involved
in the design, manufacturing
and other related businesses in
the semiconductor industry
Place of
Incorporation
and Operation
Cayman Islands
$
3,287,666
$
3,492,453
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
- 36 -
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
Net revenue
Income from operations
Net income
Other comprehensive loss
Total comprehensive income
Income tax expense
The Company’s share of profits of joint venture
The Company’s share of other comprehensive loss of joint
venture
16. PROPERTY, PLANT AND EQUIPMENT
December 31,
2014
December 31,
2013
$ 2,177,294
$ 1,449,719
338,850
$
497
$
$ 2,335,612
$ 1,564,485
407,184
$
460
$
Years Ended December 31
2014
2013
$ 1,517,845
295,719
$
255,951
$
(155,192)
$
100,759
$
14,535
$
255,951
$
$ 1,801,619
474,787
$
453,536
$
(78,294)
$
375,242
$
64,311
$
453,536
$
$
(155,192)
$
(78,294)
Land and Land
Improvements
Buildings
Machinery and
Equipment
Office Equipment
Assets under
Finance Leases
Equipment under
Installation and
Construction in
Progress
Total
Cost
Balance at January 1, 2014
Additions (decrease)
Disposals or retirements
Reclassification
Reclassification as held for sale
Effect of exchange rate changes
$
3,986,909
-
-
-
-
49,876
$
229,182,736
39,833,068
$ 1,413,919,794
340,660,987
$
(108,660 )
(1,996 )
(854,949 )
1,113,651
(2,128,065 )
1,996
(2,231,405 )
3,946,920
$
22,062,032
6,499,009
(645,936 )
-
(67,820 )
113,550
804,430
-
-
-
-
36,724
$
272,173,793
(162,974,350 )
$ 1,942,129,694
224,018,714
-
-
(2,550 )
137,843
(2,882,661 )
-
(3,156,724 )
5,398,564
Balance at December 31, 2014
$
4,036,785
$
269,163,850
$ 1,754,170,227
$
27,960,835
$
841,154
$
109,334,736
$ 2,165,507,587
Accumulated depreciation and impairment
Balance at January 1, 2014
Additions
Disposals or retirements
Impairment
Reclassification
Reclassification as held for sale
Effect of exchange rate changes
$
404,192
27,628
-
-
-
-
27,320
$
125,234,166
15,589,023
$ 1,009,213,689
178,850,625
$
(107,699 )
-
(532 )
(257,690 )
788,645
(1,998,255 )
239,864
532
(1,476,511 )
3,558,458
14,225,771
3,135,825
(645,679 )
-
-
(43,358 )
95,375
Balance at December 31, 2014
$
459,140
$
141,245,913
$ 1,188,388,402
$
16,767,934
Carrying amounts at December 31, 2014
$
3,577,645
$
127,917,937
$
565,781,825
$
11,192,901
Cost
Balance at January 1, 2013
Additions
Disposals or retirements
Reclassification
Effect of deconsolidation of subsidiary
Effect of exchange rate changes
$
1,527,124
3,212,000
-
-
(772,029 )
19,814
$
197,411,851
31,869,046
-
3,797
(986,205 )
884,247
$ 1,279,893,177
140,223,121
$
(2,925,145 )
360
(5,630,854 )
2,359,135
20,067,943
3,791,109
(788,080 )
-
(1,055,809 )
46,869
$
$
$
$
$
385,963
42,085
-
-
-
-
19,349
447,397
$
-
-
-
-
-
-
-
-
$ 1,149,463,781
197,645,186
(2,751,633 )
239,864
-
(1,777,559 )
4,489,147
$ 1,347,308,786
393,757
$
109,334,736
$
818,198,801
766,732
-
-
-
-
37,698
$
119,063,976
154,706,858
-
-
(1,632,860 )
35,819
$ 1,618,730,803
333,802,134
(3,713,225 )
4,157
(10,077,757 )
3,383,582
Balance at December 31, 2013
$
3,986,909
$
229,182,736
$ 1,413,919,794
$
22,062,032
$
804,430
$
272,173,793
$ 1,942,129,694
Accumulated depreciation and impairment
Balance at January 1, 2013
Additions
Disposals or retirements
Effect of deconsolidation of subsidiary
Effect of exchange rate changes
$
367,369
27,069
-
-
9,754
$
111,801,731
13,183,558
-
(226,908 )
475,785
$
875,510,879
138,314,235
(2,809,185 )
(3,656,326 )
1,854,086
$
13,160,567
2,413,652
(786,464 )
(599,483 )
37,499
Balance at December 31, 2013
$
404,192
$
125,234,166
$ 1,009,213,689
$
14,225,771
Carrying amounts at December 31, 2013
$
3,582,717
$
103,948,570
$
404,706,105
$
7,836,261
$
$
$
$
328,069
41,333
-
-
16,561
385,963
$
-
-
-
-
-
-
$ 1,001,168,615
153,979,847
(3,595,649 )
(4,482,717 )
2,393,685
$ 1,149,463,781
418,467
$
272,173,793
$
792,665,913
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.
- 37 -
In the second quarter of 2014, the Company recognized impairment losses of NT$239,864 thousand under
other operating segments since the carrying amount of some of machinery and equipment is expected to be
unrecoverable. Such impairment losses were included in other operating income and expenses for the year
ended December 31, 2014.
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:
Minimum lease payments
Not later than 1 year
Later than 1 year and not later than 5 years
Less: Future finance expenses
December 31,
2014
December 31,
2013
$ 29,667
859,744
889,411
77,862
$ 28,376
850,703
879,079
94,040
Present value of minimum lease payments
$ 811,549
$ 785,039
Present value of minimum lease payments
Not later than 1 year
Later than 1 year and not later than 5 years
Current portion (classified under accrued expenses and other current
liabilities)
Noncurrent portion
$ 28,944
782,605
$ 27,684
757,355
$ 811,549
$ 785,039
9,441
$
802,108
8,809
$
776,230
$ 811,549
$ 785,039
There was no capitalization of borrowing costs for the years ended December 31, 2014 and 2013.
17. INTANGIBLE ASSETS
Goodwill
Technology
License Fees
Software and
System Design
Costs
Patent and
Others
Total
Cost
Balance at January 1, 2014
Additions
Retirements
Reclassification as held for sale
Effect of exchange rate changes
$
$
5,627,517
-
-
-
261,296
4,444,828
1,906,892
-
-
(1,467 )
$ 17,086,805
1,695,201
$
(51,405 )
(39,622 )
3,729,396
826,223
-
(269,174 )
$ 30,888,546
4,428,316
(51,405 )
(308,796 )
272,058
6,119
6,110
Balance at December 31, 2014
$
5,888,813
$
6,350,253
$ 18,697,098
$
4,292,555
$ 35,228,719
(Continued)
- 38 -
Goodwill
Technology
License Fees
Software and
System Design
Costs
Patent and
Others
Total
Accumulated amortization
Balance at January 1, 2014
Additions
Retirements
Reclassification as held for sale
Effect of exchange rate changes
$
Balance at December 31, 2014
$
-
-
-
-
-
-
$
$ 13,439,135
1,499,677
$
3,341,667
438,712
-
-
(1,467 )
(51,405 )
(32,009 )
5,748
2,617,361
667,960
-
(229,414 )
$ 19,398,163
2,606,349
(51,405 )
(261,423 )
5,525
1,244
$
3,778,912
$ 14,861,146
$
3,057,151
$ 21,697,209
Carrying amounts at December 31, 2014
$
5,888,813
$
2,571,341
$
3,835,952
$
1,235,404
$ 13,531,510
Cost
Balance at January 1, 2013
Additions
Retirements
Reclassification
Effect of deconsolidation of subsidiary
Effect of exchange rate changes
$
$
5,523,707
-
-
-
-
103,810
4,590,548
-
-
(29,564 )
(113,340 )
(2,816 )
$ 15,095,421
2,140,675
$
(18,246 )
(111,105 )
(25,335 )
5,395
3,094,664
578,901
(23,549 )
101,007
(42,089 )
20,462
$ 28,304,340
2,719,576
(41,795 )
(39,662 )
(180,764 )
126,851
Balance at December 31, 2013
$
5,627,517
$
4,444,828
$ 17,086,805
$
3,729,396
$ 30,888,546
Accumulated amortization
Balance at January 1, 2013
Additions
Retirements
Reclassification
Effect of deconsolidation of subsidiary
Effect of exchange rate changes
$
Balance at December 31, 2013
$
-
-
-
-
-
-
-
$
$ 12,126,479
1,344,339
$
3,128,655
282,414
-
-
(66,587 )
(2,815 )
(17,974 )
(5,941 )
(12,661 )
4,893
2,089,637
575,269
(23,549 )
-
(25,195 )
$ 17,344,771
2,202,022
(41,523 )
(5,941 )
(104,443 )
3,277
1,199
$
3,341,667
$ 13,439,135
$
2,617,361
$ 19,398,163
Carrying amounts at December 31, 2013
$
5,627,517
$
1,103,161
$
3,647,670
$
1,112,035
$ 11,490,383
(Concluded)
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 8.40% and 8.50% in its test of impairment as of December 31, 2014 and 2013,
respectively, to reflect the relevant specific risk in the cash-generating unit.
For the years ended December 31, 2014 and 2013, the Company did not recognize any impairment loss on
goodwill.
18. OTHER ASSETS
Tax receivable
Prepaid expenses
Long-term receivable
Others
Current portion
Noncurrent portion
December 31,
2014
December 31,
2013
$ 2,187,136
1,399,810
385,700
885,470
$ 1,781,376
1,081,957
820,000
770,468
$ 4,858,116
$ 4,453,801
$ 3,656,110
1,202,006
$ 2,984,224
1,469,577
$ 4,858,116
$ 4,453,801
- 39 -
19. SHORT-TERM LOANS
Unsecured loans
Amount
Original loan content
US$ (in thousands)
Annual interest rate
Maturity date
20. PROVISIONS
Sales returns and allowances
Warranties
December 31,
2014
December 31,
2013
$ 36,158,520
$ 15,645,000
$ 1,140,000
0.38%-0.50%
Due in January
$
525,000
0.38%-0.42%
Due in January
2015
2014
December 31,
2014
December 31,
2013
$ 10,445,452
19,828
$ 7,603,781
10,452
$ 10,465,280
$ 7,614,233
Current portion
Noncurrent portion (classified under other noncurrent liabilities)
$ 10,445,452
19,828
$ 7,603,781
10,452
Year ended December 31, 2014
Balance, beginning of year
Provision
Payment
Reclassification as held for sale
Effect of exchange rate changes
$ 10,465,280
$ 7,614,233
Sales Returns
and Allowances Warranties
Total
$ 7,603,781
10,506,398
$
(7,679,321)
(7,601)
22,195
10,452
11,365
(1,532)
-
(457)
$ 7,614,233
10,517,763
(7,680,853)
(7,601)
21,738
Balance, end of year
$ 10,445,452
$
19,828
$ 10,465,280
Year ended December 31, 2013
Balance, beginning of year
Provision
Payment
Effect of deconsolidation of subsidiary
Effect of exchange rate changes
$
$ 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
Balance, end of year
$ 7,603,781
$
10,452
$ 7,614,233
- 40 -
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.
21. BONDS PAYABLE
Noncurrent portion
Domestic unsecured bonds
Overseas unsecured bonds
Less: Discounts on bonds payable
December 31,
2014
December 31,
2013
$ 166,200,000
47,577,000
213,777,000
$ 166,200,000
44,700,000
210,900,000
(132,375)
(103,182)
The major terms of domestic unsecured bonds are as follows:
Issuance
Tranche
Issuance Period
Total Amount
Coupon
Rate
Repayment and
Interest Payment
$ 213,673,818
$ 210,767,625
100-1
100-2
101-1
101-2
101-3
101-4
A
B
A
B
A
B
A
B
-
A
B
C
September 2011 to
September 2016
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
$ 10,500,000
1.40%
Bullet repayment;
interest payable
annually
7,500,000
1.63%
The same as above
10,000,000
1.29%
The same as above
7,000,000
1.46%
The same as above
9,900,000
1.28%
The same as above
9,000,000
1.40%
The same as above
12,700,000
1.28%
The same as above
9,000,000
1.39%
The same as above
4,400,000
1.53%
The same as above
10,600,000
1.23%
The same as above
10,000,000
1.35%
The same as above
3,000,000
1.49%
The same as above
(Continued)
- 41 -
Issuance
Tranche
Issuance Period
Total Amount
Coupon
Rate
Repayment and
Interest Payment
102-1
102-2
102-3
102-4
A
B
C
A
B
A
B
A
B
C
D
E
F
February 2013 to
February 2018
February 2013 to
February 2020
February 2013 to
February 2023
$ 6,200,000
1.23%
Bullet repayment;
interest payable
annually
11,600,000
1.38%
The same as above
3,600,000
1.50%
The same as above
July 2013 to July 2020 10,200,000
3,500,000
July 2013 to July 2023
4,000,000
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
8,500,000
1,400,000
1,500,000
1,500,000
1.50%
1.70%
1.34%
The same as above
The same as above
The same as above
1.52%
The same as above
1.35%
The same as above
1.45%
The same as above
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)
September 2013 to
March 2021
September 2013 to
March 2023
September 2013 to
September 2023
2,600,000
1.85%
The same as above
5,400,000
2.05%
The same as above
2,600,000
2.10%
Bullet repayment;
interest payable
annually
(Concluded)
The major terms of overseas unsecured bonds are as follows:
Issuance Period
Total Amount
(US$
in Thousands)
Coupon Rate
Repayment and Interest
Payment
April 2013 to April 2016
$
350,000
0.95%
Bullet repayment; interest payable
April 2013 to April 2018
1,150,000
1.625%
semi-annually
The same as above
- 42 -
22. 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$1,743,626 thousand
and NT$1,590,414 thousand in the consolidated statements of comprehensive income for the years
ended December 31, 2014 and 2013, 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,
2014
December 31,
2013
2.25%
3.00%
1.50%
2.15%
3.00%
1.25%
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
2014
2013
$ 161,854
220,121
(44,353)
(50,920)
$ 134,762
175,563
(67,324)
(7,240)
$ 286,702
$ 235,761
- 43 -
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
2014
2013
$ 186,055
75,595
19,860
5,192
$ 152,512
60,864
18,080
4,305
$ 286,702
$ 235,761
For the years ended December 31, 2014 and 2013, the pre-tax actuarial benefit NT$290,416 thousand
and the pre-tax actuarial loss NT$662,074 thousand were recognized in other comprehensive income
(loss), respectively. As of December 31, 2014 and 2013, the pre-tax accumulated actuarial loss
recognized in other comprehensive income were NT$1,057,636 thousand and NT$1,348,052 thousand,
respectively.
The amounts arising from the defined benefit obligation of the Company in the consolidated balance
sheets were as follows:
December 31,
2014
December 31,
2013
Present value of defined benefit obligation
Fair value of plan assets
Funded status
Unrecognized prior service cost
Unrecognized prior service cost reclassified as held for sale
$ 10,265,284
(3,697,501)
6,567,783
737,343
(1,148)
$ 10,329,510
(3,527,847)
6,801,663
788,263
-
Accrued pension cost
$ 7,303,978
$ 7,589,926
Movements in the present value of the defined benefit obligation were as follows:
Years Ended December 31
2014
2013
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 (gain)
Reclassification as held for sale
Effect of deconsolidation of subsidiary
$ 10,329,510
161,854
220,121
-
$ 10,133,361
134,762
175,563
(655,179)
(50,508)
(7,011)
638,071
-
(39,549)
(104,980)
(23,247)
(251,486)
(66,488)
-
Balance, end of year
$ 10,265,284
$ 10,329,510
- 44 -
Movements in the fair value of the plan assets were as follows:
Balance, beginning of year
Expected return on plan assets
Actuarial gain (loss)
Contributions from employer
Benefits paid from plan assets
Reclassification as held for sale
Effect of deconsolidation of subsidiary
Years Ended December 31
2014
2013
$ 3,527,847
44,353
38,930
221,994
(104,980)
(30,643)
-
$ 3,352,567
67,324
(24,003)
219,062
(50,508)
-
(36,595)
Balance, end of year
$ 3,697,501
$ 3,527,847
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,
December 31,
2014
2013
19
50
31
100
23
45
32
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, 2014 and 2013, the actual return on plan assets were NT$83,283 thousand
and NT$43,321 thousand, respectively.
The Company elects to disclose the historical information of experience adjustments from the adoption
of Taiwan-IFRSs, which is as follows:
December 31,
2014
December 31,
2013
December 31,
2012
January 1,
2012
Experience adjustments on plan
liabilities
$ (101,499) $ 1,294,538
$ 396,616
$
Experience adjustments on plan
assets
$
38,930
$
(24,003)
$
(29,858)
$
-
-
The Company expects to make contributions of NT$228,653 thousand to the defined benefit plans in
the next year starting from December 31, 2014.
- 45 -
23. GUARANTEE DEPOSITS
Capacity guarantee
Others
Current portion (classified under accrued expenses and other current
liabilities)
Noncurrent portion
24. EQUITY
a. Capital stock
Authorized shares (in thousands)
Authorized capital
Issued and paid shares (in thousands)
Issued capital
December 31,
2014
December 31,
2013
$ 30,132,100
164,075
$
-
151,660
$ 30,296,175
$
151,660
$ 4,757,700
25,538,475
$
-
151,660
$ 30,296,175
$
151,660
December 31,
2014
December 31,
2013
28,050,000
$ 280,500,000
25,929,662
$ 259,296,624
28,050,000
$ 280,500,000
25,928,617
$ 259,286,171
A holder of issued common shares with par value of NT$10 per share is entitled to vote and to receive
dividends.
The authorized shares include 500,000 thousand shares allocated for the exercise of employee stock
options.
As of December 31, 2014, 1,073,361 thousand ADSs of TSMC were traded on the NYSE. The
number of common shares represented by the ADSs was 5,366,803 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 actual acquisition or disposal of
subsidiaries
From share of changes in equities of subsidiaries
From share of changes in equities of associates and joint venture
Donations
December 31,
2014
December 31,
2013
$ 24,053,965
22,804,510
8,892,847
$ 24,017,363
22,804,510
8,892,847
-
104,335
134,210
55
100,827
-
43,024
55
$ 55,989,922
$ 55,858,626
- 46 -
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 actual 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. The capital surplus
from share of changes in equities of subsidiaries may be used to offset a deficit.
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$17,645,966 thousand and NT$12,634,665 thousand for the years ended
December 31, 2014 and 2013, respectively. Bonuses to members of the Board of Directors were
expensed based on estimated amount payable. If the actual amounts subsequently approved by the
shareholders differ from the amounts estimated, the differences are recorded in the year such bonuses
are approved by the shareholders as a change in accounting estimate. If profit sharing approved for
distribution to employees is in the form of common shares, the number of shares is determined by
dividing the amount of profit sharing by the closing price (after considering the effect of dividends) of
the shares on the day preceding the shareholders’ meeting.
The appropriation for legal capital reserve shall be made until the reserve equals the Company’s paid-in
capital. The reserve may be used to offset a deficit, or be distributed as dividends in cash or stocks for
the portion in excess of 25% of the paid-in capital if the Company incurs no loss.
Pursuant to existing regulations, the Company is required to set aside additional special capital reserve
equivalent to the net debit balance of the other components of stockholders’ equity, such as the
accumulated balance of foreign currency translation reserve, unrealized valuation gain/loss from
available-for-sale financial assets, gain/loss from changes in fair value of hedging instruments in cash
flow hedges, etc. For the subsequent decrease in the deduction amount to stockholders’ equity, any
special reserve appropriated may be reversed to the extent that the net debit balance reverses.
- 47 -
The appropriations of 2013 and 2012 earnings have been approved by TSMC’s shareholders in its
meetings held on June 24, 2014 and on June 11, 2013, respectively. The appropriations and dividends
per share were as follows:
Appropriation of Earnings
For Fiscal
For Fiscal
Year 2012
Year 2013
Dividends Per Share
(NT$)
For Fiscal For Fiscal
Year 2013 Year 2012
Legal capital reserve
Special capital reserve
Cash dividends to shareholders
$ 18,814,679
$ 16,615,880
(2,785,741)
(4,820,483)
77,785,851
77,773,307
$3.00
$3.00
$ 93,814,789
$ 89,568,704
TSMC’s 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 2013, respectively, and profit sharing to
employees and bonus to members of the Board of Directors in the amounts of NT$11,115,240 thousand
and NT$71,351 thousand in cash for 2012, respectively, had been approved by the shareholders in its
meetings held on June 24, 2014 and June 11, 2013, respectively. The aforementioned approved
amount is the same as the one approved by the Board of Directors in its meetings held on February 18,
2014 and February 5, 2013, respectively, and the same amount had been charged against earnings for
the years ended December 31, 2013 and 2012, respectively.
TSMC’s appropriations of earnings for 2014 had been approved in the meeting of the Board of
Directors held on February 10, 2015. The appropriations and dividends per share were as follows:
Legal capital reserve
Cash dividends to shareholders
Appropriation
of Earnings
For Fiscal Year
2014
Dividends Per
Share (NT$)
For Fiscal Year
2014
$ 26,389,879
116,683,481
$ 143,073,360
$
4.50
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$17,645,966 thousand and NT$406,854 thousand in cash
for payment in 2014, respectively. There is no significant difference between the aforementioned
approved amounts and the amounts charged against earnings of 2014.
The appropriations of earnings, profit sharing to employees and bonus to members of the Board of
Directors for 2014 are to be presented for approval in the TSMC’s shareholders’ meeting to be held on
June 9, 2015 (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.
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.
- 48 -
d. Others
Changes in others were as follows:
Foreign
Currency
Translation
Reserve
Year Ended December 31, 2014
Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
Cash Flow
Hedges Reserve
Total
Balance, beginning of year
$ (7,140,362)
$ 21,310,781
$
(113)
$ 14,170,306
Exchange differences arising on
translation of foreign
operations
Other comprehensive
income/losses reclassified to
profit or loss upon disposal of
subsidiaries
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
11,769,466
84
-
-
-
-
229,571
(279,531)
-
11,769,466
-
-
-
84
229,571
(279,531)
(130,092)
(5,287)
(192)
(135,571)
3,017
-
(2,920)
(5,131)
-
-
97
(5,131)
Balance, end of year
$ 4,502,113
$ 21,247,483
$
(305)
$ 25,749,291
Foreign
Currency
Translation
Reserve
Year Ended December 31, 2013
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)
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
3,667,657
-
-
14,554,695
-
(1,256,281)
-
-
-
3,667,657
14,554,695
(1,256,281)
(Continued)
- 49 -
Foreign
Currency
Translation
Reserve
Year Ended December 31, 2013
Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
Cash Flow
Hedges Reserve
Total
$
(54,989)
$
2,551
$
(113)
$
(52,551)
776
-
(44)
36,539
-
-
732
36,539
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
$ (7,140,362)
$ 21,310,781
$
(113)
$ 14,170,306
(Concluded)
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, 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
gains or losses 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.
e. Noncontrolling interests
Balance, beginning of year
Share of noncontrolling interests
Net loss
Exchange differences arising on translation of foreign
operations
Other comprehensive income/losses reclassified to profit or
loss upon disposal of subsidiaries
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
Stock option compensation cost of subsidiary
Years Ended December 31
2014
2013
$
266,830
$ 2,543,226
(117,925)
(127,853)
1,573
6
14,827
(1,426)
-
852
-
2,776
(10,805)
5,312
(Continued)
- 50 -
Years Ended December 31
2014
2013
Share of other comprehensive income of associates and joint
venture
$
190
$
177
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 plans
Adjustments to share of changes in capital surplus of
associations and joint venture
From differences between equity purchase price and
carrying amount arising from actual acquisition or
disposal of subsidiaries
From share of changes in equities of subsidiaries
Increase (decrease) in noncontrolling interests
Effect of deconsolidation of subsidiary
Balance, end of year
-
745
(98)
(26)
1
299
(44)
-
32,801
(3,516)
(66,735)
-
(62,446)
-
188,488
(2,273,153)
$
127,246
$
266,830
(Concluded)
25. SHARE-BASED PAYMENT
a. Optional exemption from applying IFRS 2 “Share-based Payment” (IFRS 2)
TSMC’s Employee Stock Option Plans, consisting of the TSMC 2004 Plan and TSMC 2003 Plan, were
approved by the Securities and Futures Bureau (SFB) on January 6, 2005 and October 29, 2003,
respectively. The maximum number of stock options authorized to be granted under the TSMC 2004
Plan and TSMC 2003 Plan was 11,000 thousand and 120,000 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.
Information about TSMC’s outstanding stock options for the years ended December 31, 2014 and 2013
were as follows:(cid:289)
Year ended December 31, 2014
Balance, beginning of year
Stock options exercised
Balance, end of year
Balance exercisable, end of year
- 51 -
Number of
Stock Options
(In Thousands)
Weighted-
average
Exercise Price
(NT$)
1,763
(1,045)
718
718
$45.9
45.0
47.2
47.2
(Continued)
Year ended December 31, 2013
Balance, beginning of year
Stock options exercised
Balance, end of year
Balance exercisable, end of year
Number of
Stock Options
(In Thousands)
Weighted-
average
Exercise Price
(NT$)
5,945
(4,182)
1,763
1,763
$34.6
29.8
45.9
45.9
(Concluded)
The numbers of outstanding stock options and exercise prices have been adjusted to reflect the
distribution of earnings by TSMC in accordance with the plans.
Information about TSMC’s outstanding stock options was as follows:
December 31, 2014
December 31, 2013
Range of Exercise
Price
(NT$)
Weighted-average
Remaining
Contractual Life
(Years)
Range of Exercise
Price
(NT$)
Weighted-average
Remaining
Contractual Life
(Years)
$47.2
0.4
$43.2-$47.2
1.0
b. Application of IFRS 2
The Board of Directors of TSMC SSL approved on December 18, 2012 the issuance of new shares and
allocated 17,000 thousand shares for 2013 stock option plan, for their employees to subscribe to,
according to the Company Law. The aforementioned stock options were fully vested on the grant
date.
Information about TSMC SSL’s employee stock options related to the aforementioned new shares
issued was as follows:(cid:289)
Weighted-
Number of
Stock Options
(In Thousands) Price (NT$)
average
Exercise
Year ended December 31, 2013
Balance, beginning of year
Stock options granted
Stock options exercised
Balance, end of year
Balance exercisable, end of year
Weighted-average fair value of stock options granted
(NT$/share)
$
- 52 -
$
-
10.0
10.0
-
-
-
17,000
(17,000)
-
-
-
The grant date of aforementioned stock options was April 10, 2013. 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
$ 4.6
$ 10.0
51.68%
31 days
0.60%
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.
26. NET REVENUE
The analysis of the Company’s net revenue was as follows:
Net revenue from sale of goods
Net revenue from royalties
27. OTHER OPERATING INCOME AND EXPENSES, NET
Impairment loss on noncurrent assets held for sale
Impairment loss on property, plant and equipment
Income (expenses) of rental assets
Rental income
Depreciation of rental assets
Gain on disposal of property, plant and equipment and intangible
assets, net
Others
Years Ended December 31
2014
2013
$ 762,176,835
629,630
$ 596,516,949
507,248
$ 762,806,465
$ 597,024,197
Years Ended December 31
2014
2013
$
(734,467)
(239,864)
$
-
-
11,406
(24,887)
(13,481)
14,518
(27,844)
13,385
(25,120)
(11,735)
48,848
9,977
$ (1,001,138)
$
47,090
- 53 -
28. OTHER INCOME
Interest income
Bank deposits
Structured deposits
Held-to-maturity financial assets
Available-for-sale financial assets
Dividend income
29. FINANCE COSTS
Interest expense
Corporate bonds
Bank loans
Finance leases
Others
30. OTHER GAINS AND LOSSES
Years Ended December 31
2014
2013
$ 2,705,082
14,644
8,233
2,715
2,730,674
649,733
$ 1,808,239
-
22,413
5,328
1,835,980
506,143
$ 3,380,407
$ 2,342,123
Years Ended December 31
2014
2013
$ 3,082,885
133,524
19,678
258
$ 2,501,820
110,716
19,539
14,701
$ 3,236,345
$ 2,646,776
Years Ended December 31
2014
2013
Gain on disposal of financial assets, net
Available-for-sale financial assets
Financial assets carried at cost
Gain (loss) on disposal of investments accounted for using equity
$
280,956
81,449
$ 1,267,086
44,721
method
Loss on disposal of subsidiary
Gain on deconsolidation of subsidiary
Settlement income
Other gains
Net gain/(loss) on financial instruments at FVTPL
Held for trading
Reversal gain (impairment loss) of 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
2,028,643
(90)
-
-
356,854
(733)
-
293,578
899,745
394,330
(1,889,510)
196,711
(211,477)
-
(1,538,888)
1,186,674
(10,577,714)
(5,602,779)
10,088,628
(155,532)
5,071,118
(106,642)
$
2,207
$ 2,104,921
- 54 -
31. INCOME TAX
a. Income tax expense recognized in profit or loss
Income tax expense consisted of the following:
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)
The origination and reversal of temporary differences
Investment tax credits and operating loss carryforward
Years Ended December 31
2014
2013
$ 35,381,469
404,566
230,013
$ 22,501,143
(1,021,688)
(10,623)
21,468,832
36,016,048
(425,181)
2,725,810
2,300,629
674,231
5,325,122
5,999,353
Income tax expense recognized in profit or loss
$ 38,316,677
$ 27,468,185
A reconciliation of income before income tax and income tax expense recognized in profit or loss was
as follows:
Years Ended December 31
2014
2013
Income before tax
$ 302,097,546
$ 215,487,122
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 under the Alternative Minimum Tax Act
Additional income tax on unappropriated earnings
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
$ 52,770,482
$ 38,458,611
(1,136,903)
(20,415,775)
4,081,153
9,374,020
(425,181)
(3,275,093)
(3,188,343)
(102,262)
37,682,098
404,566
230,013
(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)
Income tax expense recognized in profit or loss
$ 38,316,677
$ 27,468,185
For the years ended December 31, 2014 and 2013, 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.
- 55 -
b. Income tax expense recognized in other comprehensive income
Deferred income tax expense (benefit)
Related to actuarial gain/loss from defined benefit plans
Related to unrealized gain/loss on available-for-sale
financial assets
Years Ended December 31
2014
2013
$ 35,784
$ (78,629)
5,131
(36,539)
$ 40,915
$ (115,168)
c. Deferred income tax balance
The analysis of deferred income tax assets and liabilities in the consolidated balance sheets was as
follows:
Deferred income tax assets
Investment tax credits
Temporary differences
Provision for sales returns and allowance
Depreciation
Accrued pension cost
Unrealized loss on inventories
Deferred compensation cost
Goodwill from business combination
Available-for-sale financial assets
Others
Operating loss carryforward
Deferred income tax liabilities
Temporary differences
Unrealized exchange gains
Available-for-sale financial assets
December 31,
2014
December 31,
2013
$
-
$ 1,955,980
1,230,752
1,011,065
875,737
591,871
255,621
195,453
-
749,678
316,951
900,354
644,824
908,022
438,423
267,416
373,682
6,154
684,585
1,060,169
$ 5,227,128
$ 7,239,609
$
(184,470)
(15,280)
$
$
(199,750)
$
-
-
-
- 56 -
Deferred income tax assets
Investment tax credits
Temporary differences
Provision for sales returns and
allowance
Depreciation
Accrued pension cost
Unrealized loss on inventories
Deferred compensation cost
Goodwill from business
combination
Available-for-sale financial
assets
Others
Operating loss carryforward
Deferred income tax liabilities
Temporary differences
Unrealized exchange gains
Available-for-sale financial
assets
Deferred income tax assets
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
Year Ended December 31, 2014
Recognized in
Balance,
Beginning of
Year
Profit or Loss
Other
Comprehensive
Income
Reclassification
as Held For Sale
Effect of
Exchange Rate
Changes
Balance, End of
Year
$
1,955,980
$
(1,955,980 )
$
900,354
644,824
908,022
438,423
267,416
373,682
6,154
684,585
1,060,169
328,232
339,272
2,188
150,850
(27,699 )
(193,160 )
(6,154 )
26,271
(769,830 )
-
-
-
(35,784 )
-
-
-
-
-
-
$
-
$
-
$
-
-
20,069
1,311
-
-
-
-
455
(22,500 )
2,166
6,900
-
2,598
15,904
14,931
-
38,367
49,112
1,230,752
1,011,065
875,737
591,871
255,621
195,453
-
749,678
316,951
$
7,239,609
$
(2,106,010 )
$
(35,784 )
$
(665 )
$
129,978
$
5,227,128
$
$
-
-
-
$
(184,470 ) $
-
$
(10,149 )
(5,131 )
$
(194,619 )
$
(5,131 )
$
-
-
-
$
$
-
-
-
$
(184,470 )
(15,280 )
$
(199,750 )
Year Ended December 31, 2013
Recognized in
Balance,
Beginning of
Year
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 )
$
1,502,736
(865,021 )
717,889
824,052
224,618
404,656
329,766
132,286
624,609
1,043,344
188,198
5,813
(255,003 )
32,665
35,115
131,107
52,895
23,860
-
-
-
78,629
36,539
-
-
-
-
-
$
(19,301 )
$
-
$
1,955,980
(15,387 )
22,496
(6,417 )
(472 )
-
-
-
-
(3,987 )
(32,910 )
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
d. The investment operating loss carryforward, tax credits 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:
Expiry year
2015 - 2018
2019 - 2024
December 31,
2014
December 31,
2013
$
41,894
7,502,205
$
41,894
5,773,037
$ 7,544,099
$ 5,814,931
- 57 -
As of December 31, 2014 and 2013, unrecognized investment tax credits for which no deferred income
tax assets have been recognized amounted to nil and NT$3,019,880 thousand, respectively; the
aggregate deductible temporary differences for which no deferred income tax assets have been
recognized amounted to NT$2,088,394 thousand and NT$8,673,160 thousand, respectively.
e. Unused operating loss carryforward and tax-exemption information
As of December 31, 2014, operating loss carryforward of TSMC Solar, TSMC SSL, Mutual-Pak and
WaferTech consisted of the following:
Remaining Creditable Amount
Remaining Creditable Amount
Expiry Year
2015 - 2018
2019 - 2024 (Note)
$
41,894
8,691,071
$
8,732,965
Note: Including NT$4,329,833 thousand of TSMC SSL.
As of December 31, 2014, 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
Construction and expansion of 2008 by TSMC
Tax-exemption Period
2010 to 2014
2011 to 2015
2014 to 2018
2015 to 2019
f. The information of unrecognized deferred income tax liabilities associated with investments
As of December 31, 2014 and 2013, the aggregate taxable temporary differences associated with
investments in subsidiaries not unrecognized as deferred income tax liabilities amounted to
NT$41,365,515 thousand and NT$28,035,340 thousand, respectively.
g. Integrated income tax information
Balance of the Imputation
Credit Account - TSMC
December 31,
2014
December 31,
2013
$ 35,353,150
$ 15,242,724
The estimated creditable ratio for distribution of TSMC’s earnings of 2014 was 11.29%; however,
effective from January 1, 2015, the creditable ratio for individual shareholders residing in the Republic
of China will be half of the original creditable ratio according to the revised Article 66-6 of the Income
Tax Law.
The actual creditable ratio for distribution of TSMC’s earnings of 2013 was 9.78%, which is calculated
based on the Rule No.10204562810 issued by the Ministry of Finance to include the adjustments to
retained earnings from the effect of transition to Taiwan-IFRSs in the accumulated unappropriated
earnings in the year of first-time adoption of Taiwan-IFRSs.
- 58 -
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 of TSMC’s earnings generated prior to December 31, 1997 have been appropriated.
h. Income tax examination
The tax authorities have examined income tax returns of TSMC through 2011. All investment tax
credit adjustments assessed by the tax authorities have been recognized accordingly.
32. EARNINGS PER SHARE
Basic EPS
Diluted EPS
EPS is computed as follows:
Years Ended December 31
2014
$10.18
$10.18
2013
$7.26
$7.26
Number of
Shares
(Denominator)
(In Thousands)
Amounts
(Numerator)
EPS (NT$)
Year ended December 31, 2014
Basic EPS
Net income available to common shareholders
of the parent
Effect of dilutive potential common shares
$ 263,898,794
-
25,929,273
831
$10.18
Diluted EPS
Net income available to common shareholders
of the parent (including effect of dilutive
potential common shares)
Year ended December 31, 2013
Basic EPS
Net income available to common shareholders
$ 263,898,794
25,930,104
$10.18
of the parent
Effect of dilutive potential common shares
$ 188,146,790
-
25,927,778
1,825
$7.26
Diluted EPS
Net income available to common shareholders
of the parent (including effect of dilutive
potential common shares)
$ 188,146,790
25,929,603
$7.26
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 at the end of the
- 59 -
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.
33. ADDITIONAL INFORMATION OF EXPENSES BY NATURE
Years Ended December 31
2014
2013
a. Depreciation of property, plant and equipment
Recognized in cost of revenue
Recognized in operating expenses
Recognized in other operating income and expenses
$ 183,750,945
13,869,354
24,887
$ 141,002,263
12,952,464
25,120
b. Amortization of intangible assets
Recognized in cost of revenue
Recognized in operating expenses
$ 197,645,186
$ 153,979,847
$
1,356,858
1,249,491
$
1,154,698
1,047,324
$
2,606,349
$
2,202,022
c. Research and development costs expensed as incurred
$ 56,823,732
$ 48,118,165
d. Employee benefits expenses
Post-employment benefits (Note 22)
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
$
$
1,743,626
286,702
2,030,328
-
79,385,093
1,590,414
235,761
1,826,175
5,312
65,514,082
$ 81,415,421
$ 67,345,569
$ 48,187,438
33,227,983
$ 40,245,628
27,099,941
$ 81,415,421
$ 67,345,569
34. DECONSOLIDATION OF SUBSIDIARY
Starting June 2013, the Company no longer has 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.
- 60 -
b. Analysis of assets and liabilities over which the Company lost control
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. Gain on deconsolidation of subsidiary
Fair value of interest retained
Less: Carrying amount of interest retained
Net assets deconsolidated
Noncontrolling interests
Gain on deconsolidation of subsidiary
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
Gain on deconsolidation of subsidiary was included in other gains and losses for the six months ended
June 30, 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.
- 61 -
36. FINANCIAL INSTRUMENTS
a. Categories of financial instruments
Financial assets
FVTPL
Held for trading derivatives
Available-for-sale financial assets
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
Held for trading derivatives
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 (classified under
accrued expenses and other current liabilities
and other noncurrent liabilities)
Guarantee deposits (including those classified
under accrued expense and other current
liabilities)
Note
December 31,
2014
December 31,
2013
a)
b)
-
a)
a)
a)
a)
$
$
200,364
75,598,018
4,485,593
90,353
61,628,343
1,795,949
358,530,507
242,695,447
115,057,965
4,051,452
356,582
71,941,634
1,422,795
2,519,031
$ 558,280,481
$ 382,093,552
a)
$
486,614
$
33,750
-
-
a)
a)
a)
-
-
-
a)
16,364,241
5,481,616
36,158,520
23,379,762
26,983,424
22,248,135
213,673,818
40,000
15,645,000
16,358,716
89,810,160
13,649,615
210,767,625
40,000
36,000
54,000
30,297,600
151,660
$ 369,668,114
$ 351,992,142
Note a:
Including those classified to noncurrent assets held for sale or liabilities directly associated
with noncurrent assets held for sale.
Note b: Including financial assets carried at cost.
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.
- 62 -
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.
c. Market risk
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.
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, 2014 and 2013 would have decreased by NT$331,517 thousand and NT$171,961
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.
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 for the years ended December 31, 2014 and 2013.
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 utilizes 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, 2014 and 2013 would have been
unaffected as they were classified as available-for-sale; however, the other comprehensive income for
the years ended December 31, 2014 and 2013 would have decreased by NT$148,712 thousand and
NT$931,881 thousand, respectively.
- 63 -
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 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, 2014 and 2013, the Company’s ten largest customers accounted for 76% and 68%
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, 2014 and 2013, the unused of financing facilities of the Company amounted to
NT$73,534,805 thousand and NT$76,689,543 thousand, respectively.
The table below summarizes the maturity profile of the Company’s financial liabilities based on
contractual undiscounted payments, including principal and interest.
Less Than
1 Year
2-3 Years
4-5 Years
5+ Years
Total
December 31, 2014
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
$ 36,164,316
$
23,370,424
26,980,408
22,177,901
3,079,862
1,450
$
-
-
-
$
-
-
-
-
-
-
$ 36,164,316
23,370,424
26,980,408
-
66,720,514
19,792
-
98,460,598
20,846
-
58,320,169
2,504
22,177,901
226,581,143
44,592
(Continued)
- 64 -
Less Than
1 Year
2-3 Years
4-5 Years
5+ Years
Total
Other long-term payables (classified
under accrued expenses and other
current liabilities and other
noncurrent liabilities)
Obligations under finance leases
Guarantee deposits (including those
classified under accrued expense
and other current liabilities)
Derivative financial instruments
Forward exchange contracts
Outflows
Inflows
Cross currency swap contracts
Outflows
Inflows
Stock forward contracts
Outflows
Inflows
$
18,000
29,667
$
18,000
59,335
$
-
800,409
$
$
-
-
36,000
889,411
4,757,700
116,579,728
12,851,275
79,668,916
12,687,200
111,969,053
-
58,322,673
30,296,175
366,540,370
17,327,250
(17,283,079 )
44,171
47,291,943
(46,970,942 )
321,001
56,172,570
(56,172,570 )
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17,327,250
(17,283,079 )
44,171
47,291,943
(46,970,942 )
321,001
56,172,570
(56,172,570 )
-
$ 116,944,900
$ 79,668,916
$ 111,969,053
$ 58,322,673
$ 366,905,542
December 31, 2013
Non-derivative financial liabilities
Short-term loans
Accounts payable (including related
$ 15,646,783
$
parties)
Payables to contractors and
equipment suppliers
Accrued expenses and other current
liabilities
Bonds payable
Long-term bank loans
Other long-term payables (classified
under accrued expenses and other
current liabilities and other
noncurrent liabilities)
Obligations under finance leases
Guarantee deposits
Derivative financial instruments
Forward exchange contracts
Outflows
Inflows
Cross currency swap contracts
Outflows
Inflows
Stock forward contracts
Outflows
Inflows
16,358,716
89,810,160
13,649,615
3,036,130
1,450
$
-
-
-
$
-
-
-
-
-
-
$ 15,646,783
16,358,716
89,810,160
-
28,388,887
10,275
-
100,830,341
21,571
-
94,360,103
12,746
13,649,615
226,615,461
46,042
18,000
28,376
-
138,549,230
36,000
56,752
151,660
28,643,574
-
793,951
-
101,645,863
-
-
-
94,372,849
54,000
879,079
151,660
363,211,516
29,608,952
(29,605,246 )
3,706
1,639,215
(1,641,384 )
(2,169 )
-
-
-
-
-
-
-
-
-
37,431,626
(37,431,626 )
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
29,608,952
(29,605,246 )
3,706
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
(Concluded)
- 65 -
f. Fair value of financial instruments
1) Fair value of financial instruments carried at amortized cost
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.
December 31, 2014
December 31, 2013
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Financial assets
Held-to-maturity financial
assets
Commercial paper
Financial liabilities
$ 4,485,593 $ 4,486,541 $ 1,795,949 $ 1,795,612
Measured at amortized cost
Bonds payable
213,673,818 213,177,122 210,767,625 208,649,668
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:
(cid:121) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;
(cid:121) 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
(cid:121) 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).
Level 1
Level 2
Level 3
Total
December 31, 2014
Financial assets at FVTPL
Derivative financial instruments
(Note)
$
-
$
200,364
$
Available-for-sale financial assets
Publicly traded stocks
Money market funds
$ 73,797,085
391
$ 73,797,476
$
$
-
-
-
$
$
-
-
-
-
$
200,364
$ 73,797,085
391
$ 73,797,476
(Continued)
- 66 -
Level 1
Level 2
Level 3
Total
December 31, 2014
Financial liabilities at FVTPL
Derivative financial instruments
(Note)
Hedging derivative financial
liabilities
Stock forward contract
$
$
-
-
$
486,614
$
$ 16,364,241
$
-
-
$
486,614
$ 16,364,241
(Concluded)
Note:
Including those classified to noncurrent assets held for sale or liabilities directly associated with noncurrent assets
held for sale.
Level 1
Level 2
Level 3
Total
December 31, 2013
Financial assets at FVTPL
Derivative financial instruments
$
-
$
90,353
$
Available-for-sale financial assets
Publicly traded stocks
Money market funds
$ 59,481,569
1,183
$ 59,482,752
$
$
-
-
-
$
$
Financial liabilities at FVTPL
Derivative financial instruments
$
Hedging derivative financial
liabilities
Stock forward contract
$
-
-
$
33,750
$
$ 5,481,616
$
-
-
-
-
-
-
$
90,353
$ 59,481,569
1,183
$ 59,482,752
$
33,750
$ 5,481,616
There were no transfers between Level 1 and 2 for the years ended December 31, 2014 and 2013,
respectively.
There were no purchases and disposals for assets on Level 3 for the years ended December 31, 2014
and 2013, respectively.
3) Valuation techniques and assumptions used in fair value measurement
The fair values of financial assets and financial liabilities are determined as follows:
(cid:121) 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).
(cid:121) 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; 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.
(cid:121) 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.
- 67 -
37. RELATED PARTY TRANSACTIONS
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:
a. Net revenue
Years Ended December 31
2014
2013
Item
Related Party Categories
Net revenue from sale of goods Associates
Joint venture
$
4,009,270
1,325
$
4,093,031
1,677
Net revenue from royalties
Associates
$
521,975
$
497,020
$
4,010,595
$
4,094,708
b. Purchases
Related Party Categories
Associates
c. Receivables from related parties
Years Ended December 31
2014
2013
$ 11,644,177
$ 10,052,359
December 31,
2014
December 31,
2013
Item
Related Party Categories
Receivables from related
parties
Associates
Joint venture
$
312,641
314
$
291,376
332
Other receivables from related
Associates
parties
$
178,625
$
221,576
$
312,955
$
291,708
d. Payables to related parties
December 31,
2014
December 31,
2013
Item
Related Party Categories
Payables to related parties
Associates
Joint venture
$
1,490,997
493
$
1,687,239
1,217
$
1,491,490
$
1,688,456
- 68 -
e. Acquisition of property, plant and equipment and intangible assets
Related Party Categories
Associates
f. Disposal of property, plant and equipment
Related Party Categories
Associates
Joint venture
Related Party Categories
Associates
Joint venture
g. Others
Acquisition Price
Years Ended December 31
2014
2013
$
-
$
21,135
Proceeds
Years Ended December 31
2014
2013
$
23,447
18,000
$
69,683
-
$
41,447
$
69,683
Gains
Years Ended December 31
2014
2013
$
20,010
17,441
$
6,146
948
$
37,451
$
7,094
December 31,
2014
December 31,
2013
Item
Related Party Categories
Refundable deposits
Associates
$
-
$
5,813
Years Ended December 31
2014
2013
Item
Related Party Categories
Manufacturing expenses
Associates
Joint venture
$ 2,437,366
7,926
$
934,480
6,582
$ 2,445,292
$
941,062
Research and development
expenses
Associates
Joint venture
$
87,848
1,116
$
903
6,340
$
88,964
$
7,243
- 69 -
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.
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.
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.
h. Compensation of key management personnel
The compensation to directors and other key management personnel for the years ended December 31,
2014 and 2013 were as follows:
Short-term employee benefits
Post-employment benefits
Years Ended December 31
2014
2013
$ 1,787,813
46,758
$ 1,356,119
9,064
$ 1,834,571
$ 1,365,183
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.
38. PLEDGED ASSETS
The Company provided certificate of deposits recorded in other financial assets as collateral mainly for
litigation and building lease agreements. As of December 31, 2014 and 2013, the aforementioned other
financial assets amounted to NT$293,409 thousand and NT$120,566 thousand, respectively.
39. SIGNIFICANT OPERATING LEASE ARRANGEMENTS
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
February 2015 and July 2034 and can be renewed upon expiration.
The Company expensed the lease payments as follows:
Minimum lease payments
Years Ended December 31
2014
2013
$ 901,219
$ 902,439
- 70 -
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
December 31,
2014
December 31,
2013
$
$
891,767
3,490,783
6,576,218
859,070
3,053,029
5,534,848
$ 10,958,768
$ 9,446,947
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. As of December 31,
2014, the R.O.C. Government did not invoke 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, 2014.
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 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. In
February 2014, the Court entered a final judgment in favor of TSMC, dismissing all of Keranos’ claims
against TSMC with prejudice. The final judgment is currently being appealed to the U.S. Court of
Appeals for the Federal Circuit. 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. In September 2014, the Court granted summary judgment of noninfringement in favor of
TSMC and TSMC North America. Ziptronix, Inc. can appeal the Court’s order. The outcome cannot
be determined and the Company cannot make a reliable estimate of the contingent liability at this time.
- 71 -
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. As of December 31, 2014, TSMC has paid
EUR 109,730 thousand to ASML under the research and development funding agreement.
f.
In September 2013, Zond Inc. filed a complaint in U.S. District Court for the District of Massachusetts
against TSMC, certain TSMC subsidiaries and other companies alleging infringing of several U.S.
patents. That case is currently stayed as of June 2014. Subsequent to the stay, TSMC and Zond
initiated additional legal actions in the U.S. District Courts for the District of Delaware and the District
of Massachusetts over several additional patents owned by Zond. The outcome cannot be determined
and the Company cannot make a reliable estimate of the contingent liability at this time.
g. In December 2013, Tela Innovations (Tela), Inc. filed complaints in the U.S. District Court for the
District of Delaware and in the United States International Trade Commission (ITC) accusing TSMC
and TSMC North America of infringing one U.S. patent. In January 2014, TSMC filed a lawsuit in
the U.S. District Court for the District of North California against Tela for trade secret misappropriation
and breach of contract. In September 2014, all pending litigations between the parties in the U.S.
District Court for the District of Delaware, the ITC and the U.S. District Court for the District of North
California were dismissed.
h. In March 2014, DSS Technology Management, Inc. filed a complaint in the U.S. District Court for the
Eastern District of Texas alleging that TSMC, TSMC North America, TSMC Development and several
other companies infringe one U.S. patent. The outcome cannot be determined and the Company
cannot make a reliable estimate of the contingent liability at this time.
i. Amounts available under unused letters of credit as of December 31, 2014 and 2013 were NT$222,026
thousand and NT$89,400 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, 2014
Financial assets
Monetary items
USD
EUR
JPY
Non-monetary items
HKD
$ 5,002,082
22,887
704,925
31.718
38.57
0.2652
$ 158,656,051
882,741
186,946
149,844
4.09
612,860
(Continued)
- 72 -
Financial liabilities
Monetary items
USD
EUR
JPY
December 31, 2013
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
$ 3,348,306
44,152
28,734,248
31.718
38.57
0.2652
$ 106,201,584
1,702,926
7,620,323
2,756,090
451,162
41,386,551
29.800
41.00
0.2834
82,131,493
18,497,657
11,728,949
168,334
3.84
646,402
2,026,958
811,202
71,931,749
29.800
41.00
0.2834
60,403,358
33,259,299
20,385,458
(Concluded)
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.
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.
- 73 -
b. Segment revenue and operating results
Year ended December 31, 2014
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 (benefit)
Year ended December 31, 2013
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
Foundry
Others
Elimination
Total
$ 762,120,792 $
685,673 $
- $ 762,806,465
-
298,653,943
38,082
(2,763,650)
(38,082)
-
- 295,890,293
4,405,878
38,316,701
(456,204)
(24)
-
-
3,949,674
38,316,677
596,615,439
408,758
- 597,024,197
-
212,156,627
33,215
(2,727,264)
(33,215)
-
- 209,429,363
4,280,780
27,468,185
(308,749)
-
-
-
3,972,031
27,468,185
Net Revenue from External
Customers
Years Ended December 31
2014
2013
Non-current Assets
December 31,
2014
December 31,
2013
Taiwan
United States
Asia
Europe, the Middle East
and Africa
Others
$ 88,856,586
524,983,953
99,916,635
$ 74,150,318
423,265,839
56,533,399
$ 809,437,793
8,105,381
15,380,799
$ 783,173,768
7,691,023
14,743,733
46,776,647
2,272,644
41,229,682
1,844,959
8,344
-
17,349
-
$ 762,806,465
$ 597,024,197
$ 832,932,317
$ 805,625,873
The Company categorized the net revenue mainly 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
2014
2013
$ 723,747,536
39,058,929
$ 560,685,213
36,338,984
$ 762,806,465
$ 597,024,197
- 74 -
e. Major customers representing at least 10% of net revenue
Customer A
$ 157,631,427
21
$ 130,563,982
22
Years Ended December 31
2014
2013
Amount
%
Amount
%
43. 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 significant transactions
between them: Please see Table 8 attached;
k. Names, locations, and related information of investees over which TSMC exercises significant
influence (excluding information on investment in Mainland China): 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.
- 75 -
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Taiwan Semiconductor Manufacturing
Company Limited
Parent Company Only Financial Statements for the
Years Ended December 31, 2014 and 2013 and
Independent Auditors’ Report
- 89 -
- 90 -
- 91 -
Taiwan Semiconductor Manufacturing Company Limited
PARENT COMPANY ONLY BALANCE SHEETS
(In Thousands of New Taiwan Dollars)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)
Financial assets at fair value through profit or loss (Note 7)
Available-for-sale financial assets
Held-to-maturity financial assets (Note 8)
Notes and accounts receivable, net (Note 9)
Receivables from related parties (Note 33)
Other receivables from related parties (Note 33)
Inventories (Notes 5 and 10)
Noncurrent assets held for sale (Note 12)
Other financial assets (Note 34)
Other current assets (Note 15)
Total current assets
NONCURRENT ASSETS
Financial assets carried at cost (Note 11)
Investments accounted for using equity method (Notes 5 and 12)
Property, plant and equipment (Notes 5 and 13)
Intangible assets (Notes 5 and 14)
Deferred income tax assets (Notes 5 and 27)
Refundable deposits
Other noncurrent assets (Note 15)
Total noncurrent assets
TOTAL
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Note 16)
Financial liabilities at fair value through profit or loss (Note 7)
Accounts payable
Payables to related parties (Note 33)
Salary and bonus payable
Accrued profit sharing to employees and bonus to directors (Note 21)
Payables to contractors and equipment suppliers
Income tax payable (Note 27)
Provisions (Notes 5 and 17)
Accrued expenses and other current liabilities (Note 20)
Total current liabilities
NONCURRENT LIABILITIES
Bonds payable (Note 18)
Deferred income tax liabilities (Note 27)
Accrued pension cost (Notes 5 and 19)
Guarantee deposits (Note 20)
Others
Total noncurrent liabilities
Total liabilities
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
TOTAL
The accompanying notes are an integral part of the parent company only financial statements.
- 92 -
December 31, 2014
Amount
%
December 31, 2013
Amount
%
$ 184,859,232
134,824
612,860
4,485,593
22,806,184
88,419,913
576,592
63,523,287
669,472
2,069,874
2,791,666
370,949,497
373,158
242,016,964
796,684,361
8,996,810
3,297,924
340,010
385,700
1,052,094,927
13
-
-
-
2
6
-
5
-
-
-
26
-
17
56
1
-
-
-
74
$ 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
257,623,763
469,378
165,075,781
770,443,494
7,069,456
4,580,468
2,496,663
820,000
950,955,240
12
-
-
-
2
4
-
3
-
-
-
21
-
14
64
1
-
-
-
79
$ 1,423,044,424
100
$ 1,208,579,003
100
$
36,158,520
477,268
19,310,737
4,756,426
8,983,879
18,052,820
25,911,719
28,616,392
9,959,817
26,033,514
3
-
1
-
1
1
2
2
1
2
$
15,645,000
25,404
13,628,675
4,183,979
6,834,181
12,738,801
89,555,814
22,567,331
7,217,331
14,799,228
1
-
1
-
-
1
8
2
1
2
178,261,092
13
187,195,744
16
166,200,000
199,750
7,282,230
25,534,851
18,000
199,234,831
377,495,923
259,296,624
55,989,922
151,250,682
-
553,261,982
704,512,664
25,749,291
1,045,548,501
12
-
-
2
-
14
27
18
4
10
-
39
49
2
73
166,200,000
-
7,491,040
147,964
36,000
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
$ 1,423,044,424
100
$ 1,208,579,003
100
Taiwan Semiconductor Manufacturing Company Limited
PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
2014
2013
Amount
%
Amount
%
NET REVENUE (Notes 5, 23 and 33)
$ 757,152,389
100
$ 591,087,600
100
COST OF REVENUE (Notes 10, 29 and 33)
390,272,233
51
319,407,163
54
GROSS PROFIT BEFORE REALIZED
(UNREALIZED) GROSS PROFIT ON SALES TO
SUBSIDIARIES AND ASSOCIATES
REALIZED (UNREALIZED) GROSS PROFIT ON
SALES TO SUBSIDIARIES AND ASSOCIATES
GROSS PROFIT
OPERATING EXPENSES (Notes 5, 29 and 33)
Research and development
General and administrative
Marketing
366,880,156
49
271,680,437
46
31,547
366,911,703
55,813,561
17,761,799
2,685,734
-
49
8
2
-
(35,577)
271,644,860
46,922,471
17,697,411
2,304,472
-
46
8
3
-
Total operating expenses
76,261,094
10
66,924,354
11
OTHER OPERATING INCOME AND EXPENSES,
NET (Note 29)
INCOME FROM OPERATIONS
NON-OPERATING INCOME AND EXPENSES
Share of profits of subsidiaries and associates
(Note 12)
Other income (Note 24)
Foreign exchange gain, net
Finance costs (Note 25)
Other gains and losses (Notes 26 and 33)
9,049
290,659,658
9,292,150
1,141,884
2,142,565
(2,512,231)
299,137
Total non-operating income and expenses
10,363,505
INCOME BEFORE INCOME TAX
INCOME TAX EXPENSE (Note 27)
NET INCOME
301,023,163
37,124,369
263,898,794
-
39
1
-
-
-
-
1
40
5
35
(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
-
35
2
-
-
-
-
2
37
5
32
(Continued)
- 93 -
Taiwan Semiconductor Manufacturing Company Limited
PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
2014
2013
Amount
%
Amount
%
OTHER COMPREHENSIVE INCOME (LOSS)
(Notes 12, 19, 21 and 27)
Exchange differences arising on translation of
foreign operations
$ 11,784,245
1
$
3,655,675
Changes in fair value of available-for-sale financial
assets
Share of other comprehensive income (loss) of
subsidiaries and associates
Actuarial gain (loss) from defined benefit plans
Income tax benefit (expense) related to components
of other comprehensive income
30,183
(227,390)
268,682
(37,373)
-
-
-
-
(214,935)
13,472,874
(671,774)
117,152
Other comprehensive income for the year, net
of income tax
11,818,347
1
16,358,992
1
-
2
-
-
3
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR
$ 275,717,141
36
$ 204,505,782
35
EARNINGS PER SHARE (NT$, Note 28)
Basic earnings per share
Diluted earnings per share
$ 10.18
$ 10.18
$ 7.26
$ 7.26
The accompanying notes are an integral part of the parent company only financial statements.
(Concluded)
- 94 -
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Taiwan Semiconductor Manufacturing Company Limited
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
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 (gain) on disposal of property, plant and equipment and
intangible assets, net
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 accounted for using equity
method
Gain on deconsolidation of subsidiary
Unrealized (realized) gross profit on sales to subsidiaries and
associates
Loss 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 financial assets
Other current assets
Accounts payable
Payables to related parties
Salary and bonus payable
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
2014
2013
$ 301,023,163
$ 215,716,550
191,590,059
2,487,860
2,512,231
(9,292,150)
(1,029,508)
147,266,825
2,072,926
2,092,236
(9,530,933)
(1,011,301)
(21,331)
90,774
(127,161)
(5,397)
64,753
-
(846,709)
(42,664)
(2,028,643)
-
656
(293,578)
(31,547)
3,615,493
(112,376)
35,577
315,098
(71,125)
381,070
(5,360,307)
(35,450,110)
(44,800)
(28,280,226)
(1,797,351)
(399,739)
5,095,232
596,749
2,149,698
5,314,019
6,469,226
2,742,486
59,872
440,147,286
(6,076)
(2,193,483)
(11,982,359)
(257,810)
53,330
68,313
(266,929)
182,965
961,579
847,330
1,552,210
3,422,182
1,484,593
14,224
349,648,380
(14,365,054)
(29,636,283)
Net cash generated by operating activities
410,511,003
335,283,326
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Financial assets carried at cost
Held to maturity financial assets
Property, plant and equipment
Intangible assets
- 96 -
-
(5,882,316)
(2,177)
(1,795,949)
(283,231,097) (285,889,575)
(2,727,399)
(Continued)
(3,846,384)
Taiwan Semiconductor Manufacturing Company Limited
PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
(In Thousands of New Taiwan Dollars)
Proceeds from disposal or redemption of:
Available-for-sale financial assets
Held-to-maturity financial assets
Financial assets carried at cost
Investments accounted for using equity method
Property, plant and equipment
Cash received from other long-term receivables
Interest received
Other dividends received
Dividends received from investments accounted for using equity
method
Refundable deposits paid
Refundable deposits refunded
$
2014
2013
190,886 $
3,200,000
10,843
3,471,883
117,578
161,900
1,043,898
112,376
1,830,424
700,000
59,222
-
162,068
-
1,057,553
71,125
2,664,207
(57,351)
2,290,791
2,151,373
(96,072)
112,204
Net cash used in investing activities
(279,752,786) (284,367,203)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term loans
Proceeds from issuance of bonds
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
18,563,525
-
(2,504,871)
30,140,940
(7,075)
47,055
(60,904,793)
113,317
(77,785,851)
(19,636,240)
86,200,000
(1,286,296)
40,729
(111,313)
124,570
(1,357,222)
170,914
(77,773,307)
Net cash used in financing activities
(92,337,753)
(13,628,165)
NET INCREASE IN CASH AND CASH EQUIVALENTS
38,420,464
37,287,958
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
146,438,768
109,150,810
CASH AND CASH EQUIVALENTS, END OF YEAR
$ 184,859,232
$ 146,438,768
The accompanying notes are an integral part of the parent company only financial statements.
(Concluded)
- 97 -
Taiwan Semiconductor Manufacturing Company Limited
NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013
(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 10, 2015.
3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS
As of the date that the accompanying parent company only financial statements were issued, the Company
has not applied the following International Financial Reporting Standards, International Accounting
Standards (IASs), Interpretations of International Financial Reporting Standards (IFRIC), and
Interpretations of IAS (SIC) issued by the International Accounting Standards Board (IASB) (collectively,
“IFRSs”).
a. The Guidelines Governing the Preparation of Financial Reports by Securities Issuers and 2013 IFRSs
version in issue but not yet effective
On April 3, 2014, according to Rule No. 1030029342 and Rule No. 1030010325 issued by the Financial
Supervisory Commission (FSC), the following 2013 IFRSs version endorsed by the FSC (collectively,
“2013 Taiwan-IFRSs version”) and the related amendments to the Guidelines Governing the
Preparation of Financial Reports by Securities Issuers should be adopted by the Company starting 2015.
New, Revised or Amended Standards and Interpretations
Amendments to IFRSs Improvements to IFRSs 2009 - Amendment to IAS
39
Amendment to IAS 39 Embedded Derivatives
Improvements to IFRSs 2010
Annual Improvements to IFRSs 2009 - 2011 Cycle
Effective Date Issued
by IASB (Note)
January 1, 2009 or
January 1, 2010
Effective in fiscal year
ended on or after
June 30, 2009
July 1, 2010 or January 1,
2011
January 1, 2013
(Continued)
- 98 -
New, Revised or Amended Standards and Interpretations
by IASB (Note)
Effective Date Issued
Amendments to IFRS 1 Limited Exemption from Comparative IFRS 7
July 1, 2010
Disclosures for First - time Adopters
Amendment to IFRS 7 Disclosures - Offsetting Financial Assets and
January 1, 2013
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
July 1, 2011
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2013
July 1, 2012
Income
Amendment to IAS 12 Deferred Tax: Recovery of Underlying Assets
IAS 19 (Revised 2011) “Employee Benefits”
IAS 27 (Revised 2011) “Separate Financial Statements”
IAS 28 (Revised 2011) “Investments in Associates and Joint Ventures”
Amendment to IAS 32 Offsetting of Financial Assets and Financial
January 1, 2012
January 1, 2013
January 1, 2013
January 1, 2013
January 1, 2014
Liabilities
(Concluded)
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.
Except for the following items, the Company believes that the adoption of aforementioned 2013
Taiwan-IFRSs version and the related amendments to the Guidelines Governing the Preparation of
Financial Reports by Securities Issuers will not have a significant effect on the Company’s parent
company only financial statements.
1) IFRS 12, “Disclosure of Interests in Other Entities”
IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries
and associates. In general, the disclosure requirements in IFRS 12 for standalone financial
statements are more extensive than in the current standards.
2) IFRS 13, “Fair Value 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.
The measurement requirements of IFRS 13 shall be applied prospectively.
3) Amendments to IAS 1, “Presentation of Items of Other Comprehensive Income”
According to the amendments to IAS 1, 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
- 99 -
same basis. The aforementioned allocation basis will not be strictly enforced prior to the adoption
of amendments.
The items that will not be reclassified subsequently to profit or loss are expected to include actuarial
gains or losses from defined benefit plans, the share of actuarial gains or losses from defined benefit
plans of subsidiaries and associates as well as the related income tax on such items. Items that will
be reclassified subsequently to profit or loss are expected to include exchange differences arising on
translation of foreign operations, changes in fair value of available-for-sale financial assets, cash
flow hedges, the share of other comprehensive income of subsidiaries and associates as well as the
related income tax on items of other comprehensive income.
4) Amendments to IAS 19, “Employee Benefits”
The amendments to IAS 19 require the Company to calculate a “net interest” amount by applying
the discount rate to the net defined benefit liability or asset to replace the interest cost and expected
return on planned assets used in current IAS 19. In addition, the amendments eliminate the
accounting treatment of either corridor approach or the immediate recognition of actuarial gains and
losses to profit or loss when it incurs, and instead, required to recognize all actuarial gains and
losses 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 amendments also require a broader
disclosure in defined benefit plans.
According to the retrospective application of aforementioned amendments, as of December 31,
2014 and January 1, 2014, the primary impacts on the Company would include the adjustment in
accrued pension cost for a decrease of NT$735,381 thousand and NT$786,186 thousand,
respectively, and the adjustment in retained earnings (including adjustment to share of profits of
equity method investees) for an increase of NT$653,708 thousand and NT$698,710 thousand,
respectively.
b. The IFRSs issued by IASB but not endorsed by FSC
The Company has not applied the following IFRSs issued by the IASB but not endorsed by the FSC.
As of the date that the parent company only financial statements were issued, the initial adoption to the
following standards and interpretations is still subject to the effective date to be published by the FSC.
New, Revised or Amended Standards and Interpretations
by IASB (Note 1)
Effective Date Issued
Annual Improvements to IFRSs 2010 - 2012 Cycle
July 1, 2014 or transactions
on or after July 1, 2014
Annual Improvements to IFRSs 2011 - 2013 Cycle
Annual Improvements to IFRSs 2012 - 2014 Cycle
IFRS 9 Financial Instruments
Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of IFRS 9
July 1, 2014
January 1, 2016 (Note 2)
January 1, 2018
January 1, 2018
and Transition Disclosure
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture
Prospectively applicable to
transactions beginning
on or after January 1,
2016
Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities:
January 1, 2016
Applying the Consolidation Exception(cid:289)
Amendment to IFRS 11 Accounting for Acquisitions of Interests in Joint
January 1, 2016
Operations
IFRS 15 Revenue from Contracts with Customers
January 1, 2017
(Continued)
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New, Revised or Amended Standards and Interpretations
by IASB (Note 1)
Effective Date Issued
Amendment to IAS 1 Disclosure Initiative
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods
January 1, 2016
January 1, 2016
of Depreciation and Amortization
Amendment to IAS 19 Defined Benefit Plans: Employee Contributions
Amendment to IAS 27 Equity Method in Separate Financial Statements
Amendment to IAS 36 Recoverable Amount Disclosures for
July 1, 2014
January 1, 2016
January 1, 2014
Non-Financial Assets
Amendment to IAS 39 Novation of Derivatives and Continuation of
January 1, 2014
Hedge Accounting
(Concluded)
Note 1: The aforementioned new, revised or amended standards or interpretations are effective after
fiscal year beginning on or after the effective dates, unless specified otherwise.
Note 2: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that
occur in annual periods beginning on or after January 1, 2016; the remaining amendments are
effective for annual periods beginning on or after January 1, 2016.
Except for the following, the initial application of the above new standards and interpretations has not
had any material impact on the Company’s accounting policies:
1) IFRS 9, “Financial Instruments”
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. The classification and measurement requirements in IFRS 9 are stated as follows:
For the debt instruments invested by the Company, if the contractual cash flows that are solely for
payments of principal and interest on the principal amount outstanding, the classification and
measurement requirements are stated as follows:
a) If the objective of the Company’s business model is to hold the financial asset to collect the
contractual cash flows, such assets are measured at the amortized cost. Interest revenue should
be recognized in profit or loss by using the effective interest method, continuously assessed for
impairment and the impairment loss or reversal of impairment loss should be recognized in
profit and loss.
b) If the objective of the Company’s business model is to hold the financial asset both to collect
the contractual cash flows and to sell the financial assets, such assets are measured at fair value
through other comprehensive income and are continuously assessed for impairment. Interest
revenue should be recognized in profit or loss by using the effective interest method. A gain
or loss on a financial asset measured at fair value through other comprehensive income should
be recognized in other comprehensive income, except for impairment gains or losses and
foreign exchange gains and losses. When such financial asset is derecognized or reclassified,
the cumulative gain or loss previously recognized in other comprehensive income is reclassified
from equity to profit or loss.
The other financial assets which do not meet the aforementioned criteria should be measured at the
fair value through profit or loss. However, the Company may irrevocably designate an investment
in equity instruments that is not held for trading as measured at fair value through other
comprehensive income. All relevant gains and losses shall be recognized in other comprehensive
income, except for dividends which are recognized in profit or loss. No subsequent impairment
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assessment is required, and the cumulative gain or loss previously recognized in other
comprehensive income cannot be reclassified from equity to profit or loss.
IFRS 9 adds a new expected loss impairment model to measure the impairment of financial assets.
A loss allowance for expected credit losses should be recognized on financial assets measured at
amortized cost and financial assets mandatorily measured at fair value through other comprehensive
income. If the credit risk on a financial instrument has not increased significantly since initial
recognition, the Company should measure the loss allowance for that financial instrument at an
amount equal to 12-month expected credit losses. If the credit risk on a financial instrument has
increased significantly since initial recognition and is not deemed to be a low credit risk, the
Company should measure the loss allowance for that financial instrument at an amount equal to the
lifetime expected credit losses. The Company should always measure the loss allowance at an
amount equal to lifetime expected credit losses for trade receivables.
2) IFRS 15, “Revenue from Contracts with Customers”
IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers,
and will supersede IAS 18, “Revenue,” IAS 11, “Construction Contracts,” and a number of
revenue-related interpretations.
When applying IFRS 15, the Company shall recognize revenue by applying the following steps:
Identify the contract with the customer;
Identify the performance obligations in the contract;
(cid:122)
(cid:122)
(cid:122) Determine the transaction price;
(cid:122) Allocate the transaction price to the performance obligations in the contracts; and
(cid:122) Recognize revenue when the entity satisfies a performance obligation.
When IFRS 15 is effective, the Company may elect to apply this Standard either retrospectively to
each prior reporting period presented or retrospectively with the cumulative effect of initially
applying this Standard recognized at the date of initial application.
3) 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.
Except for the aforementioned impact, as of the date that the accompanying parent company only
financial statements were 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.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
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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.
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.
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.
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Financial Instruments
Financial assets and liabilities shall be recognized when the Company becomes a party to the contractual
provisions of the instruments.
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 32.
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 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.
Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company’s
right to receive the dividends is established.
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.
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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.
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.
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.
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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 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.
Noncurrent Assets Held for Sale
Noncurrent assets are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. This condition is regarded as met only when
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the sale is highly probable and the noncurrent asset held for sale is available for immediate sale in its
present condition. To meet the criteria for the sale being highly probable, the appropriate level of
management must be committed to the sale, which should be expected to qualify for recognition as a
completed sale within one year from the date of classification.
When the committed sale plan involves loss of control of a subsidiary, all of the investments of that
subsidiary are classified as held for sale and still using equity methods, regardless of whether investments
in its former subsidiary is retained after the sale.
Noncurrent assets classified as held for sale are measured at the lower of their previous carrying amount
and fair value less costs to sell. Recognition of depreciation would cease.
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
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the distribution received. The Company also recognizes 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.
If the Company’s ownership interest in an associate is reduced as a result of disposal, but the investment
continues to be an associate, the Company should account for the investments on the same basis as would
be required if the associate had directly disposed of the related assets or liabilities; in addition, the
Company should reclassify to profit or loss only a proportionate amount of the gain or loss previously
recognized in other comprehensive income.
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 - 2 to 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.
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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 - 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. 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.
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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.
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:
(cid:121) The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;
(cid:121) The Company retains neither continuing managerial involvement to the degree usually associated with
ownership nor effective control over the goods sold;
(cid:121) The amount of revenue can be measured reliably;
(cid:121)
It is probable that the economic benefits associated with the transaction will flow to the Company; and
(cid:121) 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.
- 110 -
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 according to related guidance for the share-based
payment transactions granted and vested before January 1, 2012, 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.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
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.
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
- 111 -
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 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.
- 112 -
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.
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 corporate bonds
Commercial paper
Repurchase agreements collateralized by short-term commercial
paper
Repurchase agreements collateralized by government bonds
- 113 -
December 31,
2014
December 31,
2013
$ 179,181,443
3,920,562
1,159,325
$ 142,049,643
1,708,603
-
449,180
148,722
2,395,644
284,878
$ 184,859,232
$ 146,438,768
Deposits in banks consisted of highly liquid time deposits that were readily convertible to known amounts
of cash and were subject to an insignificant risk of changes in value.
7. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Derivative financial assets
Cross currency swap contracts
Forward exchange contracts
Derivative financial liabilities
Cross currency swap contracts
Forward exchange contracts
December 31,
2014
December 31,
2013
$ 94,665
40,159
$
-
64,030
$ 134,824
$ 64,030
$ 357,235
120,033
$
-
25,404
$ 477,268
$ 25,404
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:
December 31, 2014
Sell US$/Buy EUR
Sell US$/Buy JPY
Sell US$/Buy NT$
December 31, 2013
Sell NT$/Buy EUR
Sell US$/Buy EUR
Sell US$/Buy JPY
Maturity Date
Contract Amount
(In Thousands)
January 2015
January 2015
January 2015
US$29,450/EUR24,100
US$225,167/JPY27,050,983
US$170,000/NT$5,276,500
January 2014
January 2014
January 2014
NT$4,514,314/EUR110,000
US$340,134/EUR248,000
US$341,023/JPY35,754,801
Outstanding cross currency swap contracts consisted of the following:
Maturity Date
December 31, 2014
Contract Amount
(In Thousands)
Range of
Interest Rates
Paid
Range of
Interest Rates
Received
January 2015
US$1,460,000/NT$45,974,755
0.16%-1.92%
-
- 114 -
8. HELD-TO-MATURITY FINANCIAL ASSETS
Current portion
Commercial paper
9. NOTES AND ACCOUNTS RECEIVABLE, NET
Notes and accounts receivable
Allowance for doubtful receivables
December 31,
2014
December 31,
2013
$ 4,485,593
$ 1,795,949
December 31,
2014
December 31,
2013
$ 23,289,686
(483,502)
$ 17,929,379
(483,502)
Notes and accounts receivable, net
$ 22,806,184
$ 17,445,877
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.
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
Movements of the allowance for doubtful receivables
December 31,
2014
December 31,
2013
$ 21,586,900
$ 17,119,920
1,219,284
325,957
$ 22,806,184
$ 17,445,877
Balance at January 1, 2014
Provision
Reversal
Individually
Assessed for
Impairment
Collectively
Assessed for
Impairment
Total
$
8,058
35
-
$ 475,444
23,221
(23,256)
$ 483,502
23,256
(23,256)
Balance at December 31, 2014
$
8,093
$ 475,409
$ 483,502
(Continued)
- 115 -
Balance at January 1, 2013
Provision
Reversal
Individually
Assessed for
Impairment
Collectively
Assessed for
Impairment
Total
$ 134,179
-
(126,121)
$ 339,858
135,586
-
$ 474,037
135,586
(126,121)
Balance at December 31, 2013
$
8,058
$ 475,444
$ 483,502
(Concluded)
Aging analysis of accounts receivable that is individually determined as 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,
2014
December 31,
2013
$
-
-
-
-
8,093
$
38
276
80
158
7,824
$ 8,093
$ 8,376
The Company held bank guarantees and other credit enhancements as collateral for certain impaired
accounts receivables. As of December 31, 2014 and 2013, the amount of the bank guarantee and other
credit enhancements were nil and NT$318 thousand (US$11 thousand), respectively.
10. INVENTORIES
Finished goods
Work in process
Raw materials
Supplies and spare parts
December 31,
2014
December 31,
2013
$ 9,443,538
49,701,123
3,014,795
1,363,831
$ 7,049,813
24,857,927
2,208,291
1,127,030
$ 63,523,287
$ 35,243,061
Write-down of inventories to net realizable value in the amount of NT$1,810,449 thousand and
NT$526,182 thousand, respectively, were included in the cost of revenue for the years ended December 31,
2014 and 2013.
11. FINANCIAL ASSETS CARRIED AT COST
Non-publicly traded stocks
Mutual funds
December 31,
2014
December 31,
2013
$ 337,864
35,294
$ 337,864
131,514
$ 373,158
$ 469,378
- 116 -
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$90,774
thousand and nil for the years ended December 31, 2014 and 2013, respectively.
12. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
Investments accounted for using the equity method consisted of the following:
Subsidiaries
Associates
a. Investments in subsidiaries
Subsidiaries consisted of the following:
December 31,
2014
December 31,
2013
$ 220,462,573
21,554,391
$ 144,139,436
20,936,345
$ 242,016,964
$ 165,075,781
Subsidiaries
Principal Activities
Place of
Incorporation
and Operation
Carrying Amount
% of Ownership and Voting
Rights Held by the Company
December 31,
December 31,
December 31,
December 31,
2014
2013
2014
2013
TSMC Global Ltd.
(TSMC Global)
TSMC Partners, Ltd.
(TSMC Partners)
TSMC China
Company Limited
(TSMC China)
Investment activities
Tortola, British
$ 132,330,833
$ 64,953,489
Virgin Islands
Investing in companies involved
Tortola, British
47,449,368
42,861,788
100%
100%
100%
100%
in the design, manufacture, and
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
Virgin Islands
Shanghai, China
31,853,813
23,845,371
100%
100%
TSMC North America Selling and marketing of
integrated circuits and
semiconductor devices
Engaged in researching,
developing, designing,
manufacturing and selling
renewable energy and saving
related technologies and
products
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
TSMC Solar Ltd.
(TSMC Solar)
VentureTech Alliance
Fund III, L.P.
(VTAF III)
VentureTech Alliance
Fund II, L.P.
(VTAF II)
TSMC Europe B.V.
(TSMC Europe)
Emerging Alliance
Fund, L.P.
(Emerging Alliance)
TSMC Japan Limited
(TSMC Japan)
San Jose,
California,
U.S.A.
Tai-Chung,
Taiwan
3,984,370
3,763,194
100%
100%
2,877,245
4,551,318
99%
99%
Cayman Islands
810,958
892,439
98%
Cayman Islands
469,709
441,763
98%
Amsterdam, the
Netherlands
Cayman Islands
312,052
290,838
155,122
144,924
100%
99.5%
50%
98%
100%
99.5%
Marketing activities
Yokohama, Japan
120,116
124,762
100%
100%
(Continued)
- 117 -
Subsidiaries
Principal Activities
Place of
Incorporation
and Operation
Carrying Amount
% of Ownership and Voting
Rights Held by the Company
December 31,
December 31,
December 31,
December 31,
2014
2013
2014
TSMC Guang Neng
Investment, Ltd.
(TSMC GN)
TSMC Korea Limited
(TSMC Korea)
TSMC Solid State
Lighting Ltd.
(TSMC SSL)
Investment activities
Taipei, Taiwan
$
65,560
$
85,162
100%
Customer service and technical
Seoul, Korea
33,427
29,475
supporting activities
Engaged in researching,
developing, designing,
manufacturing and selling solid
state lighting devices and
related applications products
and systems
Hsin-Chu, Taiwan
-
2,154,913
100%
92%
2013
100%
100%
92%
$ 220,462,573
$ 144,139,436
(Concluded)
In January 2015, the Board of Directors of the Company approved a sale of TSMC SSL common shares
of 565,480 thousand held by the Company and TSMC Guang Neng with the expectation to complete
the sale within twelve months. Accordingly, the Company has reclassified TSMC SSL as a disposal
group held for sale by using equity methods with NT$669,472 thousand in the parent company only
balance sheet as of December 31, 2014.
To lower the hedging cost, in the second half of 2014, the Company continually increased its
investment in TSMC Global for the amount of NT$60,787,623 thousand. This project was approved
by the Investment Commission, MOEA.
According to the agreement among the Company, TSMC Solar and VTAF III, each of the investment
held by VTAF III is separately owned by the Company and TSMC Solar. As the investment owned by
VTAF III, which is indirectly owned by TSMC Solar, has entered into liquidation process due to
bankruptcy and the bankruptcy trustee confirmed that no residual assets could be reimbursed to the
shareholders, in the second quarter of 2014, TSMC Solar’s percentage of ownership over VTAF III has
decreased to nil. Consequently, the Company’s percentage of ownership over VTAF III has been
adjusted to 98%.
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.
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,
December 31,
December 31,
December 31,
2014
2013
2014
2013
Vanguard International
Research, design, development,
Hsinchu, Taiwan
$ 10,100,750
$ 10,556,348
33%
39%
Semiconductor
Corporation (VIS)
Systems on Silicon
Manufacturing
Company Pte Ltd.
(SSMC)
manufacture, packaging, testing
and sale of memory integrated
circuits, LSI, VLSI and related
parts
Fabrication and supply of
integrated circuits
Singapore
8,296,955
7,457,733
39%
39%
Xintec Inc. (Xintec)
Wafer level chip size packaging
Taoyuan, Taiwan
2,053,982
1,866,123
Global Unichip
Researching, developing,
Hsinchu, Taiwan
1,102,704
1,056,141
service
40%
35%
40%
35%
Corporation (GUC)
manufacturing, testing and
marketing of integrated circuits
$ 21,554,391
$ 20,936,345
- 118 -
In the second quarter of 2014, the Company sold 82,000 thousand common shares of VIS and
recognized a disposal gain of NT$2,028,643 thousand. After the sale, the Company owned
approximately 33.7% of the equity interest in VIS.
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 30.
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,
2014
December 31,
2013
$ 71,423,287
$ 62,946,717
(14,258,146) (12,103,610)
$ 57,165,141
$ 50,843,107
The Company’s share of net assets of associates
$ 21,554,391
$ 20,936,345
Years Ended December 31
2014
2013
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
$ 46,268,485
$ 50,487,567
$ 9,946,540
$ 11,798,098
$
(4,148)
$ 4,149,927 $ 3,827,244
(2,190)
$
(55,507) $
(15,260) $
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
VIS
GUC
December 31,
2014
December 31,
2013
$ 28,567,489
$ 4,327,965
$ 22,239,112
$ 3,454,902
13. PROPERTY, PLANT AND EQUIPMENT
Land
Buildings
Machinery and
Equipment
Office Equipment
Equipment under
Installation and
Construction in
Progress
Total
Cost
Balance at January 1, 2014
Additions (Deductions)
Disposals or retirements
$
3,212,000
-
-
$
205,258,852
39,751,834
(108,660 )
$ 1,340,527,340
337,877,675
(1,561,157 )
$
19,806,369
6,304,092
(616,291 )
$
271,779,222
(166,062,463 )
-
$ 1,840,583,783
217,871,138
(2,286,108 )
Balance at December 31, 2014
$
3,212,000
$
244,902,026
$ 1,676,843,858
$
25,494,170
$
105,716,759
$ 2,056,168,813
(Continued)
- 119 -
Land
Buildings
Machinery and
Equipment
Office Equipment
Equipment under
Installation and
Construction in
Progress
Total
Accumulated depreciation and
impairment
Balance at January 1, 2014
Additions
Disposals or retirements
$
Balance at December 31, 2014
$
-
-
-
-
$
111,137,344
13,835,274
(107,699 )
$
946,619,776
174,810,943
(1,521,949 )
$
$
12,383,169
2,943,842
(616,248 )
$
124,864,919
$ 1,119,908,770
$
14,710,763
$
-
-
-
-
$ 1,070,140,289
191,590,059
(2,245,896 )
$ 1,259,484,452
Carrying amounts at December 31, 2014
$
3,212,000
$
120,037,107
$
556,935,088
$
10,783,407
$
105,716,759
$
796,684,361
Cost
Balance at January 1, 2013
Additions
Disposals or retirements
Reclassification
$
-
3,212,000
-
-
$
173,442,106
31,812,949
-
3,797
$ 1,203,400,605
139,527,643
(2,400,908 )
-
$
16,683,484
3,631,477
(508,592 )
-
$
118,775,347
153,007,821
(3,946 )
-
$ 1,512,301,542
331,191,890
(2,913,446 )
3,797
Balance at December 31, 2013
$
3,212,000
$
205,258,852
$ 1,340,527,340
$
19,806,369
$
271,779,222
$ 1,840,583,783
Accumulated depreciation and
impairment
Balance at January 1, 2013
Additions
Disposals or retirements
$
Balance at December 31, 2013
$
-
-
-
-
$
99,742,344
11,395,000
-
$
815,214,410
133,688,815
(2,283,449 )
$
$
10,708,752
2,183,010
(508,593 )
$
111,137,344
$
946,619,776
$
12,383,169
$
-
-
-
-
$
925,665,506
147,266,825
(2,792,042 )
$ 1,070,140,289
Carrying amounts at December 31, 2013
$
3,212,000
$
94,121,508
$
393,907,564
$
7,423,200
$
271,779,222
770,443,494
$
(Concluded)
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.
14. INTANGIBLE ASSETS
Cost
Goodwill
Technology
License Fees
Software and
System Design
Costs
Patent and
Others
Total
Balance at January 1, 2014
Additions
Retirements
$
$
1,567,756
-
-
4,186,558
1,906,892
-
$ 16,897,653
1,685,812
$
(51,405 )
3,313,646
822,510
-
$ 25,965,613
4,415,214
(51,405 )
Balance at December 31, 2014
$
1,567,756
$
6,093,450
$ 18,532,060
$
4,136,156
$ 30,329,422
Accumulated amortization
Balance at January 1, 2014
Additions
Retirements
$
Balance at December 31, 2014
$
-
-
-
-
$
3,205,873
400,104
-
$ 13,277,625
1,479,948
$
(51,405 )
2,412,659
607,808
-
$ 18,896,157
2,487,860
(51,405 )
$
3,605,977
$ 14,706,168
$
3,020,467
$ 21,332,612
Carrying amounts at December 31, 2014
$
1,567,756
$
2,487,473
$
3,825,892
$
1,115,689
$
8,996,810
Cost
Balance at January 1, 2013
Additions
Retirements
Reclassification
$
$
1,567,756
-
-
-
4,186,558
-
-
-
$ 14,880,058
2,130,713
$
(2,373 )
(110,745 )
2,646,738
565,901
-
101,007
$ 23,281,110
2,696,614
(2,373 )
(9,738 )
Balance at December 31, 2013
$
1,567,756
$
4,186,558
$ 16,897,653
$
3,313,646
$ 25,965,613
(Continued)
- 120 -
Goodwill
Technology
License Fees
Software and
System Design
Costs
Patent and
Others
Total
Accumulated amortization
Balance at January 1, 2013
Additions
Retirements
Reclassification
$
Balance at December 31, 2013
$
-
-
-
-
-
$
2,959,971
245,902
-
-
$ 11,965,445
1,320,222
$
(2,101 )
(5,941 )
1,905,857
506,802
-
-
$ 16,831,273
2,072,926
(2,101 )
(5,941 )
$
3,205,873
$ 13,277,625
$
2,412,659
$ 18,896,157
Carrying amounts at December 31, 2013
$
1,567,756
$
980,685
$
3,620,028
$
900,987
$
7,069,456
(Concluded)
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 8.40% and 8.50% in its test of impairment as of December 31, 2014 and 2013,
respectively, to reflect the relevant specific risk in the cash-generating unit.
For the years ended December 31, 2014 and 2013, the Company did not recognize any impairment loss on
goodwill.
15. OTHER ASSETS
Tax receivable
Prepaid expenses
Long-term receivable
Others
Current portion
Noncurrent portion
16. SHORT-TERM LOANS
Unsecured loans
Amount
Original loan content
US$ (in thousands)
Annual interest rate
Maturity date
December 31,
2014
December 31,
2013
$ 1,647,278
1,144,385
385,700
3
$ 1,547,706
837,425
820,000
900
$ 3,177,366
$ 3,206,031
$ 2,791,666
385,700
$ 2,386,031
820,000
$ 3,177,366
$ 3,206,031
December 31,
2014
December 31,
2013
$ 36,158,520
$ 15,645,000
$ 1,140,000
0.38%-0.50%
$
525,000
0.38%-0.42%
Due in
January 2015
Due in
January 2014
- 121 -
17. PROVISIONS
Balance, beginning of year
Provision
Payment
Balance, end of year
Years Ended December 31
2014
2013
$ 7,217,331
9,864,651
(7,122,165)
$ 5,732,738
6,187,344
(4,702,751)
$ 9,959,817
$ 7,217,331
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.
18. BONDS PAYABLE
Noncurrent portion
December 31,
2014
December 31,
2013
Domestic unsecured bonds
$ 166,200,000
$ 166,200,000
The major terms of domestic unsecured bonds are as follows:
Issuance
Tranche
Issuance Period
Total Amount
Coupon
Rate
Repayment and
Interest Payment
100-1
100-2
101-1
101-2
101-3
101-4
A
B
A
B
A
B
A
B
-
A
B
C
September 2011 to
September 2016
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
$ 10,500,000
1.40%
Bullet repayment;
interest payable
annually
7,500,000
1.63%
The same as above
10,000,000
1.29%
The same as above
7,000,000
1.46%
The same as above
9,900,000
1.28%
The same as above
9,000,000
1.40%
The same as above
12,700,000
1.28%
The same as above
9,000,000
1.39%
The same as above
4,400,000
1.53%
The same as above
10,600,000
1.23%
The same as above
10,000,000
1.35%
The same as above
3,000,000
1.49%
The same as above
(Continued)
- 122 -
Issuance
Tranche
Issuance Period
Total Amount
Coupon
Rate
Repayment and
Interest Payment
102-1
102-2
102-3
102-4
A
B
C
A
B
A
B
A
B
C
D
E
F
February 2013 to
February 2018
February 2013 to
February 2020
February 2013 to
February 2023
$ 6,200,000
1.23%
Bullet repayment;
interest payable
annually
11,600,000
1.38%
The same as above
3,600,000
1.50%
The same as above
July 2013 to July 2020 10,200,000
3,500,000
July 2013 to July 2023
4,000,000
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
1,500,000
1,400,000
8,500,000
1,500,000
1.50%
1.70%
1.34%
The same as above
The same as above
The same as above
1.52%
The same as above
1.35%
The same as above
1.45%
The same as above
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)
September 2013 to
March 2021
September 2013 to
March 2023
September 2013 to
September 2023
2,600,000
1.85%
The same as above
5,400,000
2.05%
The same as above
2,600,000
2.10%
Bullet repayment;
interest payable
annually
(Concluded)
19. 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$1,465,336
thousand and NT$1,355,947 thousand in the parent company only statements of comprehensive income
for the years ended December 31, 2014 and 2013, respectively.
- 123 -
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.
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,
2014
December 31,
2013
2.25%
3.00%
1.50%
2.15%
3.00%
1.25%
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
2014
2013
$ 157,514
216,903
(43,679)
(50,805)
$ 129,749
172,486
(66,001)
(7,126)
$ 279,933
$ 229,108
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
2014
2013
$ 181,962
74,431
18,759
4,781
$ 148,787
59,518
16,766
4,037
$ 279,933
$ 229,108
For the years ended December 31, 2014 and 2013, the pre-tax actuarial benefit NT$268,682 thousand
and the pre-tax actuarial loss NT$671,774 thousand were recognized in other comprehensive income
(loss), respectively. As of December 31, 2014 and 2013, the pre-tax accumulated actuarial loss
recognized in other comprehensive income were NT$1,080,505 thousand and NT$1,349,187 thousand,
respectively.
- 124 -
The amounts arising from the defined benefit obligation of the Company in the parent company only
balance sheets were as follows:
December 31,
2014
December 31,
2013
Present value of defined benefit obligation
Fair value of plan assets
Funded status
Unrecognized prior service cost
$ 10,236,262
(3,689,413)
6,546,849
735,381
$ 10,176,332
(3,471,478)
6,704,854
786,186
Accrued pension cost
$ 7,282,230
$ 7,491,040
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
Actuarial loss (gain)
Years Ended December 31
2014
2013
$ 10,176,332
157,514
216,903
-
(84,186)
(230,301)
$ 9,931,695
129,749
172,486
(655,179)
(50,508)
648,089
Balance, end of year
$ 10,236,262
$ 10,176,332
Movements in the fair value of the plan assets were as follows:
Balance, beginning of year
Expected return on plan assets
Actuarial gain (loss)
Contributions from employer
Benefits paid from plan assets
Years Ended December 31
2014
2013
$ 3,471,478
43,679
38,381
220,061
(84,186)
$ 3,264,786
66,001
(23,685)
214,884
(50,508)
Balance, end of year
$ 3,689,413
$ 3,471,478
The percentage of the fair value of the plan assets by major categories at the end of reporting period was
as follows:
Fair Value of Plan Assets (%)
December 31,
December 31,
2014
2013
19
50
31
100
23
45
32
100
Cash
Equity instruments
Debt instruments
- 125 -
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, 2014 and 2013, the actual return on plan assets were NT$82,060 thousand
and NT$42,316 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:
December 31,
2014
December 31,
2013
December 31,
2012
January 1,
2012
Experience adjustments on plan
liabilities
$
(81,309) $ 1,298,932
$
391,826 $
Experience adjustments on plan
assets
$
38,381 $
(23,685) $
(28,950) $
-
-
The Company expects to make contributions of NT$226,663 thousand to the defined benefit plans in
the next year starting from December 31, 2014.
20. GUARANTEE DEPOSITS
Capacity guarantee
Others
Current portion (classified under accrued expenses and other current
liabilities)
Noncurrent portion
21. EQUITY
a. Capital stock
Authorized shares (in thousands)
Authorized capital
Issued and paid shares (in thousands)
Issued capital
December 31,
2014
December 31,
2013
$ 30,132,100
160,451
$
-
147,964
$ 30,292,551
$
147,964
$ 4,757,700
25,534,851
$
-
147,964
$ 30,292,551
$
147,964
December 31,
2014
December 31,
2013
28,050,000
$ 280,500,000
25,929,662
$ 259,296,624
28,050,000
$ 280,500,000
25,928,617
$ 259,286,171
A holder of issued common shares with par value of NT$10 per share is entitled to vote and to receive
dividends.
- 126 -
The authorized shares include 500,000 thousand shares allocated for the exercise of employee stock
options.
As of December 31, 2014, 1,073,361 thousand ADSs of the Company were traded on the NYSE. The
number of common shares represented by the ADSs was 5,366,803 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 actual acquisition or disposal of
subsidiaries
From share of changes in equities of subsidiaries
From share of changes in equities of associates
Donations
December 31,
2014
December 31,
2013
$ 24,053,965
22,804,510
8,892,847
$ 24,017,363
22,804,510
8,892,847
-
104,335
134,210
55
100,827
-
43,024
55
$ 55,989,922
$ 55,858,626
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 actual 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. The capital
surplus from share of changes in equities of subsidiaries may be used to offset a deficit.
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;
4) Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.
The Company’s Articles of Incorporation also provide that profits of the Company may be distributed
by way of cash dividend and/or stock dividend. However, distribution of profits shall be made
preferably by way of cash dividend. Distribution of profits may also be made by way of stock
dividend; provided that the ratio for stock dividend shall not exceed 50% of the total distribution.
- 127 -
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
period, which amounted to NT$17,645,966 thousand and NT$12,634,665 thousand for the years ended
December 31, 2014 and 2013, respectively. Bonuses to members of the Board of Directors were
expensed based on estimated amount payable. If the actual amounts subsequently approved by the
shareholders differ from the amounts estimated, the differences are recorded in the year such bonuses
are approved by the shareholders as a change in accounting estimate. If profit sharing approved for
distribution to employees is in the form of common shares, the number of shares is determined by
dividing the amount of profit sharing by the closing price (after considering the effect of dividends) of
the shares on the day preceding the shareholders’ meeting.
The appropriation for legal capital reserve shall be made until the reserve equals the Company’s paid-in
capital. The reserve may be used to offset a deficit, or be distributed as dividends in cash or stocks for
the portion in excess of 25% of the paid-in capital if the Company incurs no loss.
Pursuant to existing regulations, the Company is required to set aside additional special capital reserve
equivalent to the net debit balance of the other components of stockholders’ equity, such as the
accumulated balance of foreign currency translation reserve, unrealized valuation gain/loss from
available-for-sale financial assets, gain/loss from changes in fair value of hedging instruments in cash
flow hedges, etc. For the subsequent decrease in the deduction amount to stockholders’ equity, any
special reserve appropriated may be reversed to the extent that the net debit balance reverses.
The appropriations of 2013 and 2012 earnings have been approved by the Company’s shareholders in
its meetings held on June 24, 2014 and on June 11, 2013, respectively. The appropriations and
dividends per share were as follows:
Appropriation of Earnings
For Fiscal
For Fiscal
Year 2012
Year 2013
Dividends Per Share
(NT$)
For Fiscal For Fiscal
Year 2013 Year 2012
Legal capital reserve
Special capital reserve
Cash dividends to shareholders
$ 18,814,679
$ 16,615,880
(2,785,741)
(4,820,483)
77,785,851
77,773,307
$3.00
$3.00
$ 93,814,789
$ 89,568,704
The Company’s 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 2013, respectively, and
profit sharing to employees and bonus to members of the Board of Directors in the amounts of
NT$11,115,240 thousand and NT$71,351 thousand in cash for 2012, respectively, had been approved
by the shareholders in its meetings held on June 24, 2014 and June 11, 2013, respectively. The
aforementioned approved amount is the same as the one approved by the Board of Directors in its
meetings held on February 18, 2014 and February 5, 2013, respectively, and the same amount had been
charged against earnings for the years ended December 31, 2013 and 2012, respectively.
- 128 -
The Company’s appropriations of earnings for 2014 had been approved in the meeting of the Board of
Directors held on February 10, 2015. The appropriations and dividends per share were as follows:
Legal capital reserve
Cash dividends to shareholders
Appropriation
of Earnings
For Fiscal Year
2014
Dividends Per
Share (NT$)
For Fiscal Year
2014
$ 26,389,879
116,683,481
$ 143,073,360
$
4.50
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$17,645,966 thousand and NT$406,854
thousand in cash for payment in 2014, respectively. There is no significant difference between the
aforementioned approved amounts and the amounts charged against earnings of 2014.
The appropriations of earnings, profit sharing to employees and bonus to members of the Board of
Directors for 2014 are to be presented for approval in the Company’s shareholders’ meeting to be held
on June 9, 2015 (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.
d. Others
Changes in others were as follows:
Foreign
Currency
Translation
Reserve
Year Ended December 31, 2014
Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
Cash Flow
Hedges Reserve
Total
Balance, beginning of year
$ (7,140,362)
$ 21,310,781
$
(113)
$ 14,170,306
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
11,784,245
-
-
-
157,344
(127,161)
-
-
-
(144,787)
(85,430)
(192)
11,784,245
157,344
(127,161)
(230,409)
(Continued)
- 129 -
Foreign
Currency
Translation
Reserve
Year Ended December 31, 2014
Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
Cash Flow
Hedges Reserve
Total
The proportionate share of other
comprehensive income/losses
reclassified to profit or loss
upon partial disposal of
associates
Income tax effect
$
3,017
-
$
(2,920)
(5,131)
$
$
-
-
97
(5,131)
Balance, end of year
$ 4,502,113
$ 21,247,483
$
(305)
$ 25,749,291
(Concluded)
Foreign
Currency
Translation
Reserve
Year Ended December 31, 2013
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)
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
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
Balance, end of year
$ (7,140,362)
$ 21,310,781
$
(113)
$ 14,170,306
The exchange differences arising on translation of foreign operation’s net assets from its functional
currency to the Company’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.
- 130 -
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
gains or losses 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’s Employee Stock Option Plans, consisting of the 2004 Plan and 2003 Plan, were approved
by the Securities and Futures Bureau (SFB) on January 6, 2005 and October 29, 2003, respectively. The
maximum number of stock options authorized to be granted under the 2004 Plan and 2003 Plan was 11,000
thousand and 120,000 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.
The Company did not issue employee stock option plans for the years ended December 31, 2014 and 2013.
Information about the Company’s outstanding employee stock options is described as follows:
Year ended December 31, 2014
Balance, beginning of year
Stock options exercised
Balance, end of year
Balance exercisable, end of year
Year ended December 31, 2013
Balance, beginning of year
Stock options exercised
Balance, end of year
Balance exercisable, end of year
Number of
Stock Options
(In Thousands)
Weighted-
average
Exercise Price
(NT$)
1,763
(1,045)
718
718
5,945
(4,182)
1,763
1,763
$45.9
45.0
47.2
47.2
$34.6
29.8
45.9
45.9
The numbers of outstanding stock options and exercise prices have been adjusted to reflect the distribution
of earnings by the Company in accordance with the plans.
- 131 -
Information about the Company’s outstanding stock options was as follows:
December 31, 2014
December 31, 2013
Range of Exercise Price
(NT$)
Weighted-average
Remaining Contractual
Life
(Years)
Range of Exercise Price
(NT$)
Weighted-average
Remaining Contractual
Life
(Years)
$47.2
0.4
$43.2-$47.2
1.0
23. NET REVENUE
The analysis of the Company’s net revenue was as follows:
Years Ended December 31
2014
2013
$ 756,522,002
630,387
$ 590,564,728
522,872
$ 757,152,389
$ 591,087,600
Years Ended December 31
2014
2013
$ 1,021,275
8,233
1,029,508
112,376
$
996,995
14,306
1,011,301
71,125
$ 1,141,884
$ 1,082,426
Years Ended December 31
2014
2013
$ 2,380,157
132,074
-
$ 1,991,519
99,722
995
$ 2,512,231
$ 2,092,236
Net revenue from sale of goods
Net revenue from royalties
24. OTHER INCOME
Interest income
Bank deposits
Held-to-maturity financial assets
Dividend income
25. FINANCE COSTS
Interest expense
Corporate bonds
Bank loans
Others
- 132 -
26. OTHER GAINS AND LOSSES
Gain on disposal of financial assets, net
Available-for-sale financial assets
Financial assets carried at cost
Gain (loss) on disposal of investments accounted for using equity
method
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
Financial assets carried at cost
Other losses
Years Ended December 31
2014
2013
$
127,161
5,397
$
846,709
42,664
2,028,643
-
-
238,628
(656)
293,578
899,745
138,612
(1,996,908)
54,766
(90,774)
(13,010)
-
(13,371)
$
299,137
$ 2,262,047
27. INCOME TAX
a. Income tax expense recognized in profit or loss
Income tax expense consisted of the following:
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)
The origination and reversal of temporary differences
Investment tax credits
Years Ended December 31
2014
2013
$ 35,138,634
404,566
136,248
35,679,448
$ 22,297,945
(603,321)
19,589
21,714,213
(511,059)
1,955,980
1,444,921
506,563
5,348,984
5,855,547
Income tax expense recognized in profit or loss
$ 37,124,369
$ 27,569,760
A reconciliation of income before income tax and income tax expense recognized in profit or loss was
as follows:
Years Ended December 31
2014
2013
Income before tax
$(cid:31)301,023,163 $(cid:31)215,716,550
Income tax expense at the statutory rate (17%)
Tax effect of adjusting items:
Nondeductible (deductible) items in determining taxable
income
Tax-exempt income
$ 51,173,938
$ 36,671,813
(1,217,129)
(19,854,275)
(2,369,323)
(7,716,747)
(Continued)
- 133 -
Additional income tax under the Alternative Minimum Tax Act (cid:289)
Additional income tax on unappropriated earnings
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
Years Ended December 31
2014
2013
$
4,081,153
9,374,020
(3,275,093)
(511,059)
(3,188,000)
36,583,555
404,566
136,248
-
7,659,010
(3,136,942)
506,563
(3,460,882)
28,153,492
(603,321)
19,589
Income tax expense recognized in profit or loss
$ 37,124,369
$ 27,569,760
(Concluded)
b. Income tax expense recognized in other comprehensive income
Deferred income tax expense (benefit)
Related to actuarial gain/loss from defined benefit plans
Related to unrealized gain/loss on available-for-sale financial
assets
Years Ended December 31
2014
2013
$ 32,242
$ (80,613)
5,131
(36,539)
$ 37,373
$ (117,152)
c. Deferred income tax balance
The analysis of deferred income tax assets and liabilities in the parent company only balance sheets was
as follows:
December 31,
2014
December 31,
2013
$
-
$ 1,955,980
1,195,178
875,737
610,819
547,249
68,941
866,080
900,795
366,912
387,227
103,474
$ 3,297,924
$ 4,580,468
$
$
(184,470)
(15,280)
(199,750)
$
$
-
-
-
Deferred income tax assets
Investment tax credits
Temporary differences
Provision for sales returns and allowance
Accrued pension cost
Depreciation
Unrealized loss on inventories
Others
Deferred income tax liabilities
Temporary differences
Unrealized exchange gains
Available-for-sale financial assets
- 134 -
Year Ended December 31, 2014
Deferred income tax assets
Investment tax credits
Temporary differences
Provision for sales returns and
allowance
Accrued pension cost
Depreciation
Unrealized loss on inventories
Others
Deferred income tax liabilities
Temporary differences
Unrealized exchange gains
Available-for-sale financial
assets
Year Ended December 31, 2013
Deferred income tax assets
Investment tax credits
Temporary differences
Provision for sales returns and
allowance
Accrued pension cost
Depreciation
Unrealized loss on inventories
Others
Recognized in
Balance,
Beginning of
Year
Profit or Loss
Other
Comprehensive
Income
Balance,
End of Year
$ 1,955,980
$ (1,955,980)
$
-
$
-
866,080
900,795
366,912
387,227
103,474
329,098
7,184
243,907
160,022
(34,533)
-
(32,242)
-
-
-
1,195,178
875,737
610,819
547,249
68,941
$ 4,580,468
$ (1,250,302)
$
(32,242)
$ 3,297,924
$
$
-
-
-
$
(184,470)
$
-
$
(184,470)
(10,149)
(5,131)
(15,280)
$
(194,619)
$
(5,131)
$
(199,750)
$ 7,304,964
$ (5,348,984)
$
-
$ 1,955,980
687,929
818,502
819,231
359,823
328,414
178,151
1,680
(452,319)
27,404
(261,479)
-
80,613
-
-
36,539
866,080
900,795
366,912
387,227
103,474
$ 10,318,863
$ (5,855,547)
$
117,152
$ 4,580,468
d. The investment tax credits and deductible temporary differences for which no deferred income tax
assets have been recognized in the parent company only financial statements
As of December 31, 2014 and 2013, unrecognized investment tax credits for which no deferred income
tax assets have been recognized amounted to nil and NT$3,015,705 thousand, respectively; the
aggregate deductible temporary differences for which no deferred income tax assets have been
recognized amounted to NT$2,088,394 thousand and NT$8,673,160 thousand, respectively.
- 135 -
e. Unused tax-exemption information
As of December 31, 2014, the profits generated from the following projects of the Company are exempt
from income tax for a five-year period:
Construction and expansion of 2005
Construction and expansion of 2006
Construction and expansion of 2007
Construction and expansion of 2008
Tax-exemption Period
2010 to 2014
2011 to 2015
2014 to 2018
2015 to 2019
f. The information of unrecognized deferred income tax liabilities associated with investments
As of December 31, 2014 and 2013, the aggregate taxable temporary differences associated with
investments in subsidiaries not unrecognized as deferred income tax liabilities amounted to
NT$41,365,515 thousand and NT$28,035,340 thousand, respectively.
g. Integrated income tax information
Balance of the Imputation
Credit Account
December 31,
2014
December 31,
2013
$ 35,353,150
$ 15,242,724
The estimated creditable ratio for distribution of the Company’s earnings of 2014 was 11.29%; however,
effective from January 1, 2015, the creditable ratio for individual shareholders residing in the Republic
of China will be half of the original creditable ratio according to the revised Article 66 - 6 of the Income
Tax Law.
The actual creditable ratio for distribution of the Company’s earnings of 2013 was 9.78%, which is
calculated based on the Rule No.10204562810 issued by the Ministry of Finance to include the
adjustments to retained earnings from the effect of transition to Parent Company Only Financial
Statements Accounting Standards in the accumulated unappropriated earnings in the year of first-time
adoption of Accounting Standards Used in Preparation of Parent Company Only Financial Statements.
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.
h. Income tax examination
The tax authorities have examined income tax returns of the Company through 2011. All investment
tax credit adjustments assessed by the tax authorities have been recognized accordingly.
- 136 -
28. EARNINGS PER SHARE
Basic EPS
Diluted EPS
EPS is computed as follows:
Years Ended December 31
2014
$10.18
$10.18
2013
$7.26
$7.26
Number of
Shares
(Denominator)
(In Thousands)
Amounts
(Numerator)
EPS (NT$)
Year ended December 31, 2014
Basic EPS
Net income available to common shareholders $ 263,898,794
-
Effect of dilutive potential common shares
25,929,273
831
$10.18
Diluted EPS
Net income available to common shareholders
(including effect of dilutive potential
common shares)
Year ended December 31, 2013
Basic EPS
$ 263,898,794
25,930,104
$10.18
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)
$ 188,146,790
25,929,603
$7.26
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 at 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.
- 137 -
29. ADDITIONAL INFORMATION OF EXPENSES BY NATURE
Years Ended December 31
2014
2013
a. Depreciation of property, plant and equipment
Recognized in cost of revenue
Recognized in operating expenses
Recognized in other operating income and expenses
$ 177,957,340
13,607,832
24,887
$ 134,545,283
12,696,422
25,120
b. Amortization of intangible assets
Recognized in cost of revenue
Recognized in operating expenses
$ 191,590,059
$ 147,266,825
$
1,304,885
1,182,975
$
1,099,542
973,384
$
2,487,860
$
2,072,926
c. Research and development costs expensed as incurred
$ 55,813,561
$ 46,922,471
d. Employee benefits expenses
Post-employment benefits (Note 19)
Defined contribution plans
Defined benefit plans
Other employee benefits
Employee benefits expense summarized by function
Recognized in cost of revenue
Recognized in operating expenses
$
$
1,465,336
279,933
1,745,269
70,240,842
1,355,947
229,108
1,585,055
56,622,215
$ 71,986,111
$ 58,207,270
$ 43,764,268
28,221,843
$ 35,791,556
22,415,714
$ 71,986,111
$ 58,207,270
30. LOSS OF CONTROL IN SUBSIDIARY
Starting June 2013, the Company no longer has 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, 2014.
31. CAPITAL MANAGEMENT
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.
- 138 -
32. 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
December 31,
2014
December 31,
2013
$
$
134,824
986,018
4,485,593
64,030
1,115,780
1,795,949
Cash and cash equivalents
Notes and accounts receivables (including related parties)
Other receivables
Refundable deposits
184,859,232
111,226,097
3,032,166
340,010
146,438,768
70,415,680
1,453,842
2,496,663
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 (classified under accrued
$ 305,063,940
$ 223,780,712
$
477,268
$
25,404
36,158,520
24,067,163
25,911,719
20,165,084
166,200,000
15,645,000
17,812,654
89,555,814
13,035,795
166,200,000
expenses and other current liabilities and other noncurrent
liabilities )
Guarantee deposits (including accrued expenses and other
current liabilities )
36,000
54,000
30,292,551
147,964
$ 303,308,305
$ 302,476,631
Note:
Including financial assets carried at cost.
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.
- 139 -
c. Market risk
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.
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, 2014 and 2013 would have decreased by NT$324,058 thousand and NT$156,590
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, 2014 and 2013 would have been
unaffected as they were classified as available-for-sale; however, the other comprehensive income for
the years ended December 31, 2014 and 2013 would have decreased by NT$41,764 thousand and
NT$47,150 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
- 140 -
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, 2014 and 2013, the Company’s ten largest customers accounted for 57% and 56%
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, 2014 and 2013, the unused of financing facilities of the Company amounted to
NT$63,414,089 thousand and NT$67,437,805 thousand, respectively.
The table below summarizes the maturity profile of the Company’s financial liabilities based on
contractual undiscounted payments, including principal and interest.
Less Than
1 Year
2-3 Years
4-5 Years
5+ Years
Total
December 31, 2014
Non-derivative financial liabilities
Short-term loans
Accounts payable (including related
$ 36,164,316
$
parties)
Payables to contractors and
equipment suppliers
Accrued expenses and other current
liabilities
Bonds payable
Other long-term payables (classified
under accrued expenses and other
current liabilities and other
noncurrent liabilities)
Guarantee deposits (including
accrued expenses and other
current liabilities)
Derivative financial instruments
Forward exchange contracts
Outflows
Inflows
Cross currency swap contracts
Outflows
Inflows
24,067,163
25,911,719
20,165,084
2,381,670
$
-
-
-
$
-
-
-
-
-
-
$ 36,164,316
24,067,163
25,911,719
-
54,406,509
-
61,831,777
-
58,320,169
20,165,084
176,940,125
18,000
18,000
-
-
36,000
4,757,700
113,465,652
12,847,651
67,272,160
12,687,200
74,518,977
-
58,320,169
30,292,551
313,576,958
9,751,873
(9,660,768 )
91,105
44,780,038
(44,430,805 )
349,233
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,751,873
(9,660,768 )
91,105
-
-
-
44,780,038
(44,430,805 )
349,233
$ 113,905,990
$ 67,272,160
$ 74,518,977
$ 58,320,169
$ 314,017,296
(Continued)
- 141 -
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
$ 15,646,783
$
parties)
Payables to contractors and
equipment suppliers
Accrued expenses and other current
liabilities
Bonds payable
Other long-term payables (classified
under accrued expenses and other
current liabilities and other
noncurrent liabilities)
Guarantee deposits
Derivative financial instruments
Forward exchange contracts
Outflows
Inflows
17,812,654
89,555,814
13,035,795
2,380,157
$
-
-
-
$
-
-
-
-
-
-
$ 15,646,783
17,812,654
89,555,814
-
16,720,430
-
65,859,591
-
94,360,103
13,035,795
179,320,281
18,000
-
138,449,203
36,000
147,964
16,904,394
-
-
65,859,591
-
-
94,360,103
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
(Concluded)
f. Fair value of financial instruments
1) Fair value of financial instruments carried at amortized cost
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, 2014
December 31, 2013
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Financial assets
Held-to-maturity financial
assets
Commercial paper
Financial liabilities
$ 4,485,593 $ 4,486,541 $ 1,795,949 $ 1,795,612
Measured at amortized cost
Bonds payable
166,200,000 166,357,405 166,200,000 165,476,545
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:
(cid:121) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active
markets for identical assets or liabilities;
- 142 -
(cid:121) 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
(cid:121) 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).
Level 1
Level 2
Level 3
Total
December 31, 2014
Financial assets at FVTPL
Derivative financial instruments
$
-
$
134,824
$
Available-for-sale financial assets
Publicly traded stocks
$
612,860
$
-
$
Financial liabilities at FVTPL
Derivative financial instruments
$
-
$
477,268
$
Level 1
Level 2
Level 3
December 31, 2013
Financial assets at FVTPL
Derivative financial instruments
$
-
$
64,030
$
Available-for-sale financial assets
Publicly traded stocks
$
646,402
$
-
$
Financial liabilities at FVTPL
Derivative financial instruments
$
-
$
25,404
$
-
-
-
-
-
-
$
134,824
$
612,860
$
477,268
Total
$
64,030
$
646,402
$
25,404
There were no transfers between Level 1 and 2 for the years ended December 31, 2014 and 2013,
respectively.
There were no purchases and disposals for assets on Level 3 for the years ended December 31, 2014
and 2013, respectively.
3) Valuation techniques and assumptions used in fair value measurement
The fair values of financial assets and financial liabilities are determined as follows:
(cid:121) 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).
(cid:121) 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.
(cid:121) 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.
- 143 -
33. RELATED PARTY TRANSACTIONS
The transactions between the Company and its related parties, other than those disclosed in other notes, are
summarized as follows:
a. Net revenue
Item
Related Party Categories
Net revenue from sale of goods Subsidiaries
Associates
Associates of the Company’s
subsidiaries
Joint venture of the Company’s
subsidiaries
Years Ended December 31
2014
2013
$ 523,445,156
2,754,460
$ 414,108,019
2,167,467
-
119,067
1,325
1,677
$ 526,200,941
$ 416,396,230
Net revenue from royalties
Subsidiaries
Associates
$
757
521,975
$
15,624
497,020
b. Purchases
Related Party Categories
Subsidiaries
Associates
c. Receivables from related parties
$
522,732
$
512,644
Years Ended December 31
2014
2013
$ 28,130,353
11,644,093
$ 25,422,634
10,052,170
$ 39,774,446
$ 35,474,804
December 31,
2014
December 31,
2013
Item
Related Party Categories
Receivables from related
parties
Subsidiaries
Associates
Joint venture of the Company’s
subsidiaries
$ 88,149,347
270,252
$ 52,750,047
219,424
314
332
$ 88,419,913
$ 52,969,803
Other receivables from related Subsidiaries
parties
Associates
$
397,967
178,625
$
351,169
220,831
$
576,592
$
572,000
- 144 -
d. Payables to related parties
December 31,
2014
December 31,
2013
Item
Related Party Categories
Payables to related parties
Subsidiaries
Associates
Joint venture of the Company’s
subsidiaries
$ 3,264,936
1,490,997
$ 2,503,578
1,679,184
493
1,217
$ 4,756,426
$ 4,183,979
e. Acquisition of property, plant and equipment and intangible assets
Acquisition Price
Years Ended December 31
2014
2013
$ 63,555
-
$ 120,499
21,135
$ 63,555
$ 141,634
Proceeds
Years Ended December 31
2014
2013
$ 27,580
23,447
18,000
$ 94,152
58,265
-
$ 69,027
$ 152,417
Gains
Years Ended December 31
2014
2013
$ 15,191
20,010
17,441
$ 2,570
2,787
948
$ 52,642
$ 6,305
Related Party Categories
Subsidiaries
Associates
f. Disposal of property, plant and equipment
Related Party Categories
Subsidiaries
Associates
Joint venture of the Company’s subsidiaries
Related Party Categories
Subsidiaries
Associates
Joint venture of the Company’s subsidiaries
- 145 -
Related Party Categories
Subsidiaries
g. Others
Deferred Gains from Disposal of
Property,
Plant and Equipment
December 31,
2014
December 31,
2013
$ 43,722
$ 46,235
Years Ended December 31
2014
2013
Item
Related Party Categories
Manufacturing expenses
Subsidiaries
Associates
Joint venture of the Company’s
subsidiaries
36,938
$
2,437,366
$
122,068
908,977
7,926
5,187
Research and development
expenses
Subsidiaries
Associates
Joint venture of the Company’s
subsidiaries
$ 2,482,230
$ 1,036,232
$ 1,569,020
87,848
$ 1,107,059
903
1,116
6,340
$ 1,657,984
$ 1,114,302
Marking expenses -
Subsidiaries
$
778,064
$
736,937
commission
Non-operating income
Subsidiaries
$
14,652
$
18,636
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.
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.
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.
- 146 -
h. Compensation of key management personnel
The compensation to directors and other key management personnel for the years ended December 31,
2014 and 2013 were as follows:
Short-term employee benefits
Post-employment benefits
Years Ended December 31
2014
2013
$ 1,720,766
14,401
$ 1,242,451
7,998
$ 1,735,167
$ 1,250,449
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.
34. PLEDGED ASSETS
The Company provided certificate of deposits recorded in other financial assets as collateral mainly for
litigation. As of December 31, 2014 and 2013, the aforementioned other financial assets amounted to
NT$39,100 thousand and nil, respectively.
35. SIGNIFICANT OPERATING LEASE ARRANGEMENTS
The Company leases several parcels of land from the Science Park Administration. These operating leases
expire between June 2015 and July 2034 and can be renewed upon expiration.
The Company expensed the lease payments as follows:
Minimum lease payments
Years Ended December 31
2014
2013
$ 666,448
$ 671,371
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
December 31,
2014
December 31,
2013
$
648,556
2,301,599
4,601,926
$
666,791
2,426,891
5,110,098
$ 7,552,081
$ 8,203,780
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
- 147 -
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.
As of December 31, 2014, the R.O.C. Government did not invoke 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, 2014.
c. In June 2010, Keranos, LLC. filed a complaint in the U.S. District Court for the Eastern District of
Texas alleging that the Company, TSMC North America, and several other leading technology
companies infringe three expired U.S. patents. In response, the Company, 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. In
February 2014, the Court entered a final judgment in favor of the Company, dismissing all of Keranos’
claims against the Company with prejudice. The final judgment is currently being appealed to the
U.S. Court of Appeals for the Federal Circuit. 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 the Company, TSMC North America and one other company of infringing
several U.S. patents. In September 2014, the Court granted summary judgment of noninfringement in
favor of the Company and TSMC North America. Ziptronix, Inc. can appeal the Court’s order. The
outcome cannot be determined and the Company cannot make a reliable estimate of the contingent
liability at this time.
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. As of December 31, 2014, the
Company has paid EUR109,730 thousand to ASML under the research and development funding
agreement.
f.
In September 2013, Zond Inc. filed a complaint in U.S. District Court for the District of Massachusetts
against the Company, certain TSMC subsidiaries and other companies alleging infringing of several
U.S. patents. That case is currently stayed as of June 2014. Subsequent to the stay, the Company
and Zond initiated additional legal actions in the U.S. District Courts for the District of Delaware and
the District of Massachusetts over several additional patents owned by Zond. The outcome cannot be
determined and the Company cannot make a reliable estimate of the contingent liability at this time.
g. In December 2013, Tela Innovations (Tela), Inc. filed complaints in the U.S. District Court for the
District of Delaware and in the United States International Trade Commission (ITC) accusing the
Company and TSMC North America of infringing one U.S. patent. In January 2014, the Company
- 148 -
filed a lawsuit in the U.S. District Court for the District of North California against Tela for trade secret
misappropriation and breach of contract. In September 2014, all pending litigations between the
parties in the U.S. District Court for the District of Delaware, the ITC and the U.S. District Court for the
District of North California were dismissed.
(cid:289)
h. In March 2014, DSS Technology Management, Inc. filed a complaint in the U.S. District Court for the
Eastern District of Texas alleging that the Company, TSMC North America, TSMC Development and
several other companies infringe one U.S. patent. The outcome cannot be determined and the
Company cannot make a reliable estimate of the contingent liability at this time.
i. As of December 31, 2014, the Company provided financial guarantees of NT$47,577,000 thousand to
its subsidiary, TSMC Global, in respect of the issuance of unsecured corporate bonds.
j. As of December 31, 2014, the Company provided endorsement guarantees of NT$2,639,350 thousand
to its subsidiary, TSMC North America, in respect of providing endorsement guarantees for office
leasing contract.
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, 2014
Financial assets
Monetary items
USD
EUR
JPY
Non-monetary items
HKD
Financial liabilities
Monetary items
USD
EUR
JPY
December 31, 2013
Financial assets
Monetary items
USD
EUR
JPY
Non-monetary items
HKD
$
4,773,033
16,364
487,030
31.718
38.57
0.2652
$ 151,391,069
631,161
129,160
149,844
4.09
612,860
3,164,639
42,128
28,381,070
31.718
38.57
0.2652
100,376,026
1,624,894
7,526,660
2,601,226
450,273
41,327,283
168,334
29.800
41.00
0.2834
3.84
77,516,527
18,461,200
11,712,152
646,402
(Continued)
- 149 -
Financial liabilities
Monetary items
USD
EUR
JPY
Foreign
Currencies
(In Thousands)
Exchange Rate
(Note)
Carrying
Amount
$
1,926,813
810,174
71,828,809
29.800
41.00
0.2834
$ 57,419,016
33,217,114
20,356,284
(Concluded)
Note: Exchange rate represents the number of N.T. dollars for which one foreign currency could be
exchanged.
38. ADDITIONAL DISCLOSURES
Following are the additional disclosures required by the SFB for the Company:
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;
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 (excluding information on investment in Mainland China): 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.
- 150 -
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 33.
39. OPERATING SEGMENTS INFORMATION
The Company has provided the operating segments disclosure in the consolidated financial statements.
- 151 -
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THE CONTENTS OF STATEMENTS OF MAJOR
ACCOUNTING ITEMS
ITEM
STATEMENT INDEX
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 GUARANTEE DEPOSITS
STATEMENT OF DEFERRED INCOME TAX ASSETS /
LIABILITIES
STATEMENT OF SHORT-TERM LOANS
STATEMENT OF ACCOUNTS PAYABLES
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
1
2
3
4
Note 15
5
Note 13
Note 13
Note 14
Note 20
Note 27
6
7
8
9
Note 17
10
11
12
13
14
15
Note 25
16
- 160 -
STATEMENT 1
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF CASH AND CASH EQUIVALENTS
DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Item
Description
Amount
Cash
Petty cash
Cash in banks
Checking accounts and demand deposits
Foreign currency deposits
Time deposits
Cash equivalents
$
530
6,232,085
36,202,228
136,746,600
Including US$1,141,369 thousand
@31.718, JPY615 thousand @0.2652
and EUR3 thousand @38.57
From 2014.10.30 to 2015.06.30, interest
rates at 0.22%-1.13%, including
NT$135,229,504 thousand, US$46,100
thousand @31.718, JPY154,500
thousand @0.2652 and EUR361
thousand @38.57
Repurchase agreements collateralized by
Expired by 2015.01.22 , interest rates at
3,920,562
corporate bonds
Commercial paper
0.62%-0.67%
Expired by 2015.01.22 , interest rates at
1,159,325
0.66%-0.78%
Repurchase agreements collateralized by
Expired by 2015.01.16 , interest rates at
short-term commercial paper
0.64%
Repurchase agreements collateralized by
Expired by 2015.01.09 , interest rates at
government bonds
0.63%-0.64%
449,180
148,722
Total
$ 184,859,232
- 161 -
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF NOTES AND ACCOUNTS RECEIVABLE, NET
DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars)
Client Name
NXP Semiconductors N.V.
Spreadtrum Communications, Inc.
MediaTek Inc.
Sony Electronics Inc.
Others (Note 1)
Less: Allowance for doubtful accounts
Total
STATEMENT 2
Amount
$ 3,028,969
2,180,411
1,753,893
1,345,228
14,981,185
23,289,686
(483,502)
$ 22,806,184
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$8,131 thousand for which the
Company has recognized appropriate allowance for doubtful accounts.
- 162 -
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF RECEIVABLES FROM RELATED PARTIES
DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars)
Client Name
TSMC North America
Others (Note)
Total
STATEMENT 3
Amount
$ 88,149,347
270,566
$ 88,419,913
Note: The amount of individual client included in others does not exceed 5% of the account balance.
- 163 -
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF INVENTORIES
DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars)
STATEMENT 4
Item
Finished goods
Work in process
Raw materials
Supplies and spare parts
Total
Amount
Cost
Net Realizable
Value
$
9,443,538
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Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF ACCOUNTS PAYABLES
DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars)
Vendor Name
Sumitronics Taiwan Co., Ltd.
IBIDEN Co., Ltd.
Others (Note)
Total
STATEMENT 7
Amount
$ 1,246,985
1,017,147
17,046,605
$ 19,310,737
Note: The amount of individual vendor in others does not exceed 5% of the account balance.
- 167 -
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF PAYABLES TO RELATED PARTIES
DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars)
Vendor Name
TSMC China
VIS
WaferTech, LLC
Xintec
SSMC
TSMC Technology, Inc.
Others (Note)
Total
STATEMENT 8
Amount
$ 2,003,878
710,950
699,230
463,158
313,578
258,947
306,685
$ 4,756,426
Note: The amount of individual vendor in others does not exceed 5% of the account balance.
- 168 -
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF PAYABLES TO CONTRACTORS AND EQUIPMENT SUPPLIERS
DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars)
STATEMENT 9
Vendor Name
Applied Materials South East Asia Pte Ltd.
Lam Research International Sarl
TOKYO Electron Ltd.
Others (Note)
Total
Amount
$ 5,538,455
2,823,675
2,473,212
15,076,377
$ 25,911,719
Note: The amount of individual vendor included in others does not exceed 5% of the account balance.
- 169 -
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars)
Item
Guarantee deposit
Utilities
Repair and maintenance expense
Interest expense
Others (Note)
Total
Note: The amount of each item in others does not exceed 5% of the account balance.
STATEMENT 10
Amount
$ 4,757,700
2,814,479
1,500,213
1,307,969
15,653,153
$ 26,033,514
- 170 -
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-
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF NET REVENUE
FOR THE YEAR ENDED DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars, Unless Specified Otherwise)
Item
Shipments
(Piece) (Note)
8,261,431
Sales of goods
Wafer
Other
Royalty
Net revenue
Note: 12-inch equivalent wafers.
STATEMENT 12
Amount
$ 720,639,419
35,882,583
756,522,002
630,387
$ 757,152,389
- 172 -
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF COST OF REVENUE
FOR THE YEAR ENDED DECEMBER 31, 2014
(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
STATEMENT 13
Amount
$
2,208,291
34,246,378
(3,014,795)
(8,615,731)
(35,346)
24,788,797
11,898,266
354,476,389
391,163,452
24,857,927
(49,701,123)
(9,670,731)
356,649,525
7,049,813
39,766,497
(9,443,538)
(5,587,283)
(474,164)
387,960,850
2,311,383
$ 390,272,233
- 173 -
STATEMENT 14
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars)
Item
Research and
Development
Expenses
General and
Administrative
Expenses
Selling
Expenses
Payroll and related expense
$ 20,451,431
$ 6,015,348
$ 1,755,064
Depreciation expense
12,799,410
805,678
2,744
Consumables
8,861,973
16,601
Joint development project expenses
3,240,057
-
Repair and maintenance expense
2,118,507
1,754,202
Utilities
Relocation Fee
Service Fee
Patents
Management fees of the Science Park Administration
Commission
Others (Note)
Total
1,066,129
1,125,611
73,533
1,411,024
55,366
960,509
16,310
-
-
-
1,322,546
1,318,937
-
-
-
778,020
7,147,155
3,031,343
132,318
$ 55,813,561
$ 17,761,799
$ 2,685,734
484
-
794
-
-
Note: The amount of each item in others does not exceed 5% of the account balance.
- 174 -
Taiwan Semiconductor Manufacturing Company Limited
STATEMENT OF OTHER OPERATING INCOME AND EXPENSES, NET
FOR THE YEAR ENDED DECEMBER 31, 2014
(In Thousands of New Taiwan Dollars)
Item
Income (expenses) of rental assets
Rental income
Depreciation of rental assets
Gain on disposal of property, plant and equipment, net
Others
Total
STATEMENT 15
Amount
$ 11,406
(24,887)
(13,481)
21,331
1,199
$ 9,049
- 175 -
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