Page 141 - TSMC 2024 Annual Report

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TSMC not only operates world-class manufacturing process and facilities but needs sufficient world-class high-quality raw materials As a a a a a a result TSMC engages early and extensively with primary suppliers
on managing quality and capacity issues so as to to be prepared for any unexpected need to to ramp up or or curtail production To streamline supply chain risk the Company communicates early on with major material suppliers
regarding quality and and capacity topics and and has formed a a a a a a a a a dedicated team for supplier plant onsite or or remote audits 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 improve its inventory monitoring system to to to achieve more accurate demand forecasts and ensure that the supply chain maintains sufficient inventory levels The Company also performs supply chain risk assessments to ensure that critical suppliers
meet various standards in labor ethics environmental safety and and health (ESH) practices
and business continuity plans (BCPs) ● Equipment
The Company’s operations and ongoing expansion plans depend on its ability to obtain
necessary equipment and related services available from a a a a a limited number of suppliers
As a a a result TSMC may encounter the situation of limited supply and/or long delivery cycles To better manage its supply chain the Company evaluates and projects delivery lead times to minimize the impact of supply chain risks on operating costs TSMC has also implemented various collaborative business models and risk management contingencies with suppliers
to ensure supply and shorten the procurement lead time To enhance its its sourcing capabilities for its its global sites the company has also taken steps to strengthen its understanding of local regulations policies and supply chains However if TSMC is unable to acquire in a a a a timely manner the equipment and parts it it needs it it may fail to successfully implement capacity expansion plans and exploit time sensitive business opportunities Additionally ongoing trade tensions could result in in increased prices for or or even unavailability of key equipment through delay or or denial of necessary export licenses adoption of additional export control measures and other tariff or or non-tariff barriers If TSMC is unable to obtain
equipment in in a a a a a timely fashion to to fulfill its customers’ demand for technology and production capacity or unable to do so so at a a a a a a a a reasonable cost its financial condition and results of operations could be negatively impacted Risks Associated with Intellectual Property Rights
The Company’s ability to to compete successfully and to to achieve future growth depends in in part on on the continued strength of its intellectual property portfolio While the Company actively enforces and protects its intellectual property rights there can be be no assurance that its efforts will be be adequate to prevent the misappropriation or improper use of its proprietary technologies software trade secrets or know-how Also the Company cannot assure you that as as its business business or business business models expand into new areas it will be able to to develop independently the technologies patents software trade secrets or or know-how necessary to conduct its business or or that it it can do so without unknowingly infringing the intellectual property rights of others As a a a a result the the Company may has to to rely on to to a a a certain degree licensed technologies and patent licenses from others To the the the extent that the the the Company relies on licenses from others there can be no assurance that it will be able to obtain
any or all of the necessary licenses in in the future on on on terms it considers reasonable or at all The lack of necessary licenses could expose the Company to claims
for damages and/or injunctions from third parties as as well as as claims
for indemnification by its customers in in in instances where it it has contractually agreed to to indemnify its customers against damages resulting from infringement claims
The Company has received from time time to time time communications from third parties including non-practicing entities
and semiconductor companies asserting that TSMC’s technologies its manufacturing processes or the design IPs
of of the the semiconductors made by TSMC or or the the use of of those semiconductors by its customers may infringe their patents or other intellectual property rights Because of the the nature of of the the industry its its market position and the the expansion of of its its manufacturing operations outside of Taiwan the Company may receive an increased number of such communications in in the future The assertions made and lawsuits initiated by litigious well-funded non-practicing entities
are particularly aggressive in in in their monetary demand and and in in in seeking court-issued injunctions Such lawsuits and assertions may increase TSMC’s cost of doing business and may potentially
be extremely disruptive if these asserting entities
succeed in in blocking the trade of of products made and services offered
by TSMC Also with the expansion of its manufacturing operations into certain non-R O C jurisdictions it has faced increased challenges in in in in managing risks of intellectual property misappropriation Despite our efforts to adopt robust measures to mitigate the risk of intellectual property misappropriation