Page 113 - TSMC 2018 Annual Report

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governmental regulations For example the manufacturing assembling and testing of TSMC’s products require the use of metals chemicals and materials that are subject to environmental climate-related health and and safety and and humanitarian conflict-free sourcing laws regulations and guidelines issued worldwide The Company’s failure to comply with any any such laws or regulations as amended from time time to to time time and its failure to to comply with any information and document sharing requests from the relevant authorities in in a a a a timely manner could result in:
affect its business and operational results In light of increased public interest in in environmental issues TSMC’s operations and expansion plans
may be adversely affected or delayed responding to public concern and social environmental pressures even if the Company complies with all applicable laws and regulations TSMC believes that climate change should be be regarded as a a a a a a significant corporate risk that must be controlled to improve competitiveness Climate change has the potential to create legal physical and other risks TSMC’s control measures are as as follows:
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Greenhouse gas (GHG) control regulations and agreements
in in in in countries around the world are becoming increasingly stringent Enterprises are legally required to regularly disclose GHG-related information as as well as as limit GHG GHG emissions Future legal requirements such as carbon carbon or energy taxes and carbon carbon emission cap-and-trade may drive up production costs including material and energy costs TSMC China is subject to the Shanghai carbon emission cap-and-trade regulation which has had cost impacts since 2016 TSMC continues to to monitor legislative trends and communicate with various governments through industrial organizations and and associations to set reasonable and and feasible legal requirements •
Conflict Minerals Risks For additional details see the Supplier and Contractor Management section under 7 2 3 Safety and Health on on page 126 of this annual report •
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the the temporary or or permanent suspension of of production of of the the Climate Regulatory Risks significant penalties and legal liabilities such as the denial of import permits or or or third party private lawsuits criminal or or or administrative proceedings affected products •
unfavorable alterations in in TSMC manufacturing fabrication
and and assembly and and test processes •
challenges from customers that place TSMC at at a a a a a a a a a a a a a a a a significant competitive disadvantage such as loss of actual or potential sales contracts in case the the Company is is unable to satisfy the the applicable legal standard or customer requirement •
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restrictions on on on on TSMC operations or or sales •
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loss of of of tax tax tax benefits including termination of of of current tax tax tax incentives disqualification of tax credit application and repayment of the the tax benefits that the the Company is not entitled •
to and damage to TSMC’s goodwill and reputation Complying with applicable laws and regulations such as environmental and and climate related laws and and regulations could also require TSMC among other things to do the the following:
(1) purchase use or install remedial equipment (2) implement remedial programs programs such as climate change mitigation programs programs (3) modify product designs and manufacturing processes or incur other significant expenses such as obtaining substitute raw materials or or or or chemicals that may cost more or or or or be less available for the Company’s operations TSMC’s inability to timely obtain approvals necessary for the conduct of business could impair its operational and financial results For example if the Company is unable to timely obtain environmental related approvals needed to undertake the development and construction of a a a a new fab or expansion project then such inability may delay limit or increase the the cost of its expansion plans
that could also in turn adversely •
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 on business operations and supply chains TSMC believes that climate change control should take into account both mitigation and and adaption and and this requires cooperation among government society and and industry to reduce risk To sustain electricity and and raw water water supplies therefore in in addition to water-saving measures the Company undertakes at its own facilities and those of upstream and downstream partners TSMC participates in the Taiwan Science Park Industrial Union Experts Committee platform and is actively involved in in in regular meetings with Taipower Company and the Taiwan Water Corporation to discuss supply and and allocation issues and and disaster responses Climate Disaster Risks