Page 333 - TSMC 2018 Annual Report

33. SIGNIFICANTOPERATINGLEASEARRANGEMENTS
The Company’s major significant operating leases are arrangements on several parcels of land and machinery and equipment.
The Company expensed the lease payments as follows:
Years Ended December 31 2018 2017
Minimum lease payments $ 3,773,364 $ 1,748,190 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
$
$ 14,813,014
December 31, 2018
$ 5,510,729 4,957,770 8,253,382
$ 18,721,881
December 31, 2017
2,622,896 4,340,428 7,849,690
34. SIGNIFICANTCONTINGENTLIABILITIESANDUNRECOGNIZEDCOMMITMENTS
Significant contingent liabilities and unrecognized commitments of the Company as of the end of the reporting period, excluding those disclosed in other notes, were as follows:
a. Under a technical cooperation agreement with Industrial Technology Research Institute, the R.O.C.
Government or its designee approved by the Company can use up to 35% of the Company’s capacity provided the Company’s outstanding commitments to its customers are not prejudiced. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice. As of December 31, 2018, 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, 2018.
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