Page 137 - TSMC 2024 Annual Report

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proposed loans In December 2024 European Semiconductor Manufacturing Company (ESMC) GmbH (“ESMC”) TSMC’s subsidiary in in Germany entered into an an agreement with the Federal Republic of of Germany for the receipt of of up to EUR5 billion state aid under the European Chips Act (Regulation (EU) 2023/1781) Although governments in in certain of the countries or or regions where TSMC is currently expanding or or planning to expand its production capacity have extended or may in the future extend certain financial incentives to the Company there is no assurance that TSMC will be able to receive such financial incentives including pursuant to the U S S CHIPS Act at at at the the levels the the Company anticipate or at at at all all Additionally any any financial incentives the Company receives may be subject to conditions and requirements imposed by the grantors such as restrictions on on on the expansion of of facilities in foreign countries of of concern and and on on joint research and and technology licensing efforts with foreign entities of concern on on any technology or or product that raises national security concerns Noncompliance with the the the terms and conditions of the the the grants that the the the Company may receive could result in a a a a delay or or or or forfeiture of all or or or or a a a a portion of any future amounts to be received as as well as as obligate us to repay all or or a a a a a a a portion of amounts already received pursuant to the the the grants Even if the the the Company satisfies the the the conditions and requirements for the funding disbursement it is is possible that the the grantor may delay the the disbursement or or be unable to to provide the the funding While the the Company expects to continue benefiting from government incentives failure to obtain grants that the Company seeks to to fully utilize available grants or to to comply with the terms and conditions of grants could impact the the Company’s ability to achieve its goals for the the projects that would otherwise benefit from grant funding and could has an an adverse effect on on its business results of operations and financial condition Moreover the Company’s competitors may from time to to time also decide to undertake aggressive pricing initiatives in in in one or or several technology nodes The Company’s competitors may also compete for its customers who seek to to diversify
their supply chains These competitive activities may decrease TSMC’s customer base its pricing or both If the Company is unable to to compete effectively with such competitors on technology manufacturing capacity product quality supply chain diversification and and resilience and and customer satisfaction it risks losing customers or business to to such contenders Risks Associated with Changes in the Government Policies and Regulatory Environment
TSMC management closely monitors all domestic and foreign governmental policies and regulations that might impact TSMC’s business and and financial operations During 2024 and and as of of the the date of of this Annual Report the the following changes or or developments in governmental policies and regulations may influence the Company’s business operations:
The manufacturing assembling and testing of TSMC’s products require the use of chemicals and materials that are subject to environmental climate related health and and safety laws and and regulations issued worldwide as as well as as international accords such as the Paris Agreement The Climate Change Response Act of the R O C effective since 2015 and amended in in February 2023 set a a a a a goal of reaching net-zero emissions in in Taiwan by 2050 and established a a a a a carbon carbon fee system to collect carbon carbon fee For emitters with direct direct and indirect emissions exceeding
a a a a certain threshold carbon fees will be levied starting from 2025 As TSMC’s emissions from each fab in Taiwan exceed the current regulatory threshold we will start to to pay carbon fees from 2026 (for the 2025 fees) which will result in in increased operating costs for us Also the R O C legislative authority is is regularly reviewing various environmental issues to develop laws and and regulations relating to environmental protection and and climate changes The impact of such laws and regulations is currently indeterminable It is not expected that other governmental policies or regulatory changes would materially impact TSMC’s operations or financial condition 6 2 3 Operational Risks Natural and Man-Made Disaster
TSMC is committed to maintaining operational resilience in in in in accordance with business continuity management standards that equips it it it with the capability to to respond effectively to to business disruption Disruptions caused
by natural and man-made disasters including earthquakes flooding typhoons droughts tsunamis sandstorms wildfires volcanic eruptions fire gas/chemical leakage or spill pandemic cyberattacks supply chain disruption geopolitical tensions sabotage terrorism failure of critical facilities and equipment disruptions in utilities such as water electricity and natural gas etc could interrupt our operations