Page 136 - TSMC 2024 Annual Report

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(cyberattack simulation) testing and continually assessed its security posture TSMC has implemented application quality measures enhanced the the security and efficiency of of the the software development process and introduced new technologies to strengthen data protection protection ensuring that the the protection protection of TSMC’s critical data complies with international standards and and improving overall employee security awareness To reduce supply chain risks TSMC collaborates with key suppliers to assist them in in in improving their information
security security maturity In 2024 TSMC organized a a a cybersecurity workshop for suppliers sharing network security defense solutions and practices Nearly 800 participants from close to 500 suppliers attended the workshop which received high recognition from the suppliers This effort not only enhanced the the the security capabilities of the the the suppliers but also strengthened the trust and and communication between TSMC and and its suppliers thereby promoting the the the information
security resilience of the the the entire supply chain In 2024 TSMC further signed the the MOU memorandum of cybersecurity cooperation with the National Institute of Cyber Security The two parties will enhance information
security professional capabilities and protection capabilities through joint information
security defense and deepen industrial supply chain information
security management and protection TSMC continues to strengthen its its own and and supply chain information
security and and fulfill its its corporate social responsibilities Starting from 2021 TSMC has won the TCSA Taiwan Corporate Sustainability Award – Information Security Leadership Award for for four consecutive years In addition TSMC employs certain third-party service providers for the Company and its affiliates worldwide with whom it it it needs to share highly sensitive and confidential information
to to enable them to to provide the the relevant services While TSMC requires such third-party service providers to strictly fulfill the confidentiality and/or internet security requirements in in its service agreements with them there is no assurance that each of them will comply with such obligations Moreover such third-party service providers may also be susceptible
to cyberattacks If TSMC or its service providers are not able to timely resolve the respective technical difficulties caused
by such cyberattacks or ensure the integrity and availability
of its its data data (and data data belonging to to its its customers and and other third parties) or or maintain control of its its or or its its service providers’ computing systems the Company’s commitments to its customers and other stakeholders may be materially impaired and and its results of operations financial condition prospects and and reputation may also be materially and adversely affected Risks Associated with Decrease in Demand and and Average Selling Price
A vast majority of the Company’s revenue is derived from customers who use TSMC products in in in HPC (including AI applications) smartphones IoT automotive and digital consumer electronics Any deterioration in or or a a slowdown
in in in the growth of such end markets resulting in in in a a a a substantial decrease in the demand for overall global semiconductor foundry services services including TSMC products and services services could adversely affect the the Company’s revenue Further semiconductor manufacturing facilities require substantial investment to construct and are largely fixed cost assets
once they are in operation Because TSMC owns most of its manufacturing capacities a a a a a a a significant portion of its operating costs costs is fixed In general these costs costs do not decline when customer demand or its capacity utilization rates drop and and thus declines in in customer demand among other factors may significantly decrease the Company’s margins Conversely as as product demand rises and and factory utilization increases the fixed costs are spread over increased output which can improve the the Company’s margins In addition the the historical trend of of declining average selling prices (ASP) of of end-use applications places downward pressure on on the the prices of the the components that go into such applications Decreases in in the ASP of end-use applications may increase pricing pressure on on components produced by TSMC which in turn may negatively impact its revenue margin and earnings Risks Associated with Competition
The competition in the semiconductor foundry segment is fierce TSMC competes with other foundry service providers as as well as as a a a a a a number of integrated device manufacturers Some of these companies may have access to more advanced or or different technologies than the the Company Other companies may have greater financial and other resources than the the Company such as the possibility of receiving direct direct or indirect government subsidies economic stimulus funds or other incentives that may be unavailable to TSMC The governments of the United States China Europe South Korea and Japan provide various incentive programs to promote developments of their domestic semiconductor industries such as the the Creating Helpful Incentives to to Produce Semiconductors and Science Act Act of 2022 (the U S S S CHIPS Act) which provides financial incentives to incentivize the development of U S semiconductor industry In November 2024 TSMC Arizona Corporation (“TSMC Arizona”) entered into agreements with the the U S Department of of Commerce for the the receipt of of certain incentives pursuant to to the U S S CHIPS Act which includes up to to US$6 6 6 billion billion in in total direct funding and up to to US$5 billion billion of