Page 139 - TSMC 2024 Annual Report

137
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 negative impact on TSMC’s financial performance 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 on on a a a a a a regular basis for its its products and services to manage its its overall capacity Based on market demand the Company has continued to to add capacity to to meet market needs for its products and services including in in in in in Taiwan in in in in in Arizona U S in in in in in Kumamoto Japan and in Dresden Germany 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 conditions are dynamic and TSMC’s market demand forecasts may change significantly at any time During periods of decreased demand certain manufacturing lines or tools in 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 disruptions to the Company’s operations caused by natural or 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 labor issues sabotage failure of critical facilities and and equipment and and disruptions in utilities such as water electricity and natural gas etc scarcity of industrial-use land which could limit the Company’s future expansion of operations compliance with applicable foreign laws and and regulations and and the the risk of penalties if the the Company’s practices are deemed not to be in compliance challenges in in in in managing information technology infrastructure in multiple locations and and across different systems and and risks of our information technology infrastructure succumbing to cyberattacks worldwide adverse changes relating to government
grants or other government
incentives including non-receipt delay and potential claw backs of government
subsidies challenges in in in in creating an inclusive workplace in in in in new sites to embrace the the cultural differences and managing the the operation over large geographic distances and in context of different employment practices and and labor laws and and regulations limited or or insufficient intellectual property protection or or difficulties enforcing the Company’s rights to intellectual property and exposure to different tax jurisdictions and potential adverse tax consequences