Page 117 - TSMC 2020 Annual Report

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occasional industry-wide price adjustments and delivery delays Moreover major natural disasters trade barriers and political or or economic turmoil occurring within the country of of origin of of such raw materials may also significantly disrupt the availability of such raw materials or increase
their prices Also since TSMC procures some of its raw materials from sole-sourced suppliers there is is a a a a a a risk that the the Company’s needs for such raw materials may may not not be be met or that back-up supplies may may not not be be readily available In addition recent trade tensions could result in increased prices or even unavailability of raw materials due to tariffs export control or or other non-tariff barriers TSMC’s revenue and earnings could decline if the Company is unable to obtain adequate supplies of the necessary raw materials in in in a a a a a timely manner or if if there are significant increases in in in the the costs of raw materials To reduce the supply chain risk and to manage the cost effectively TSMC commits resources toward developing new supply sources In addition the Company continually encourages its suppliers to reduce their supply chain risk by decentralizing production plants and to improve their their cost competitiveness by moving their their production facilities to Taiwan from higher-cost areas Given that qualified backup suppliers are hard to find TSMC engages early and extensively with primary suppliers on managing quality and capacity issues to be prepared for any unexpected need to ramp up or curtail production when
the Company lacks sufficient time to re-tune its production process For leading technology nodes TSMC not only adopts world-class world-class processes and facilities but also requires world-class world-class materials To streamline supply chain risk management the Company has increased supplier site audits and meetings to extend supply chain best practices to its upstream suppliers In addition in in in response to the rapid increase
or decrease in in in production capacity of new products TSMC has continued to to to to improve its inventory monitoring system to to to to achieve more accurate demand forecasts and and ensure that the supply chain maintains sufficient inventory levels The Company has established a a a a a supply chain risk assessment to ensure critical suppliers meet standards in labor ethics ESH (Environmental Safety and and Health) and and BCP (Business Continuity Plan) Onsite audits are conducted regularly to empower these suppliers to to take responsibility for their supply chain as any regulatory violations or or adverse environmental impact event or or failure to meet sustainability requirements could result in in 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 a a limited number of suppliers in a a a a a market that is characterized from time time to time time by limited supply and long delivery cycles During such times supplier-specific or or industry-wide lead times for delivery can be be as as long as as six months or or more To better manage its supply chain the Company has implemented various business models and risk management contingencies with suppliers to shorten the the procurement lead time Further growing complexities especially in advanced lithographic technologies may delay the the timely availability of the the equipment and parts needed to exploit time-sensitive business opportunities and also increase
the market price for such equipment and parts Additionally ongoing trade tensions or protectionist measures could result in in increased prices for or or even unavailability of key equipment including as a a a a result of necessary export licenses being delayed or or denied additional export control measures and other tariff or non-tariff barriers If TSMC is unable to obtain equipment in in a a a timely manner to to fulfill its customers’ demand on technology and production capacity or at a a a a a a a a a reasonable cost its financial condition and results of operations could be negatively impacted Risks
Associated with IT Security
Even though TSMC has established a a a comprehensive internet and computing security network it it cannot guarantee
that its computing systems which control or maintain vital corporate functions such as its manufacturing operations and enterprise accounting would be completely immune
to to crippling cyberattacks by any third party attempting to to gain unauthorized access to to its internal network systems to to sabotage its operations and goodwill or otherwise In the the event of a a a a a serious cyberattack TSMC’s systems may lose important corporate data or or or its production lines
may be shut down pending the resolution of such attack While TSMC seeks to continuously review and and assess its cybersecurity policies and and procedures to ensure their adequacy and effectiveness the the Company cannot guarantee
that it will not not be susceptible to new and and and emerging risks and and and attacks in in in the evolving landscape of cybersecurity threats Hackers behind these cyberattacks may also attempt to steal TSMC trade secrets and other sensitive information information such as proprietary information information of its customers and and other stakeholders and and personal information of its employees Malicious hackers may also try to introduce computer viruses corrupted software or or or ransomware into TSMC’s network systems to disrupt our operations blackmail the Company to regain control of our computing systems or spy on on it for for sensitive information These attacks may result in in TSMC