Page 140 - TSMC 2022 Annual Report

138
the the impact of the the earthquakes that occurs in Taiwan TSMC continues to to improve its earthquake emergency response tool anchorage and and seismic isolation facilities and and readiness for tool salvage and production recovery These improvements have been integrated into new fab design TSMC’s business continuity procedures were further enhanced through the the compliance with ISO 22301 business continuity management system (BCMS) TSMC maintains a a a a a comprehensive risk management system dedicated to human safety the conservation of natural resources and the protection of property In order to cope effectively with emergencies and natural disasters management at each facility has developed comprehensive plans and procedures that focus on on risk prevention emergency response crisis management and business continuity All TSMC manufacturing fabs have been ISO 14001 certified (environmental management) and ISO 45001 certified (occupational health and safety management) All manufacturing fabs in in Taiwan Taiwan have also been TOSHMS (Taiwan Occupational Safety and Health Management System) certified New fabs will also attain the above certifications within 18 months after acquiring factory registration certification TSMC and and many of its suppliers use flammable and and toxic materials in in their manufacturing processes and are therefore subject to risks that cannot be completely eliminated arising from explosion fire or environmental influences Although TSMC maintains multiple layers of risk prevention and protection as as as well as as as fire and casualty insurance TSMC’s risk management and insurance coverage may not always
be sufficient to cover all of of its potential losses If any of of TSMC’s fabs or or or vendor facilities were to be damaged or or or cease operations as a a a a a result of an explosion fire or environmental causes it it could reduce the TSMC’s manufacturing capacity leading to to the loss of important sales and and customers and and have a a a a a a a negative impact on on TSMC’s financial performance In addition to periodic fire-protection inspections and firefighting drills TSMC has also carried out a a a a a a corporate-wide fire risk mitigation project focused on managerial and hardware improvements TSMC continues to to to monitor key disruptive threats to to to its business operations and adapt the plans to ensure operational resilience Risks Associated with Capacity Expansion
TSMC performs long-term market demand forecasts for for for its products and services to manage its overall capacity Based on on its market demand forecasts the Company has continued
to to add capacity to to meet market needs for its products and services including in in in in in in Taiwan in in in in in in Arizona U S in in in in in in Nanjing China and in in Kumamoto Japan Implementing these capacity expansion plans will increase
its costs and the increases may be substantial For example the Company would need to build new facilities purchase additional equipment and and hire and and train personnel to operate the new equipment If TSMC does not increase
its net revenue accordingly its financial performance may be adversely affected by these increased costs In addition market market conditions are dynamic and TSMC’s market market demand forecasts may change significantly at any time During periods of decreased demand certain manufacturing lines
or tools in in some of the Company’s manufacturing facilities may be suspended or or shut down temporarily However if demand subsequently increases rapidly over a a a a short period of time TSMC may not be able to to restore the capacity in a a a a a a timely manner to take advantage of the upturn In such circumstances its financial performance and competitiveness may be adversely affected In order to mitigate the risk associated with capacity expansion TSMC continuously watches for changes in in market conditions and and works closely with its customers When market demand is not as expected the Company tries to adjust its capacity plans in in a a a a a a timely manner to reduce the impact on its financial performance Risks Associated with Construction of New Fabs
The Company has multiple expansion projects that are currently underway including the design and construction of new fabs worldwide Global expansion has required and will continue to require considerable managerial financial and other resources The Company expects to face particular challenges in global expansion and operations including but not limited to:
● ● higher costs associated with construction of new fabs establishing supply chains for various materials in in in different overseas locations the the impact on on the the Company’s ability to sustain its current level of productivity and manufacturing efficiency provided by its ecosystem of interconnected semiconductor fabs employees and suppliers in the R O C and and recruiting and and retaining talent in in in in various overseas locations labor shortages interruptions in in in the supply chains for various materials and construction issues which could substantially delay the the completion of the the Company’s expansion projects and could further result in substantial additional costs or failure to meet its capacity expansion plans