UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________________________
FORM 20-F
__________________________
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31 , 2025
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report ___________
For the transition period from ___________ to ___________
Commission file number 1-14700
__________________________
台灣積體電路製造股份有限公司
(Exact Name of Registrant as Specified in Its Charter)
__________________________
Republic of China | |
(Translation of Registrant’s Name Into English) | (Jurisdiction of Incorporation or Organization) |
__________________________
Republic of China
(Address of Principal Executive Offices)
Telephone: 886-3 -5055921 / Email: invest@tsmc.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
The |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
__________________________
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of
the period covered by the annual report.
As of December 31, 2025, 25,932,524,521 Common Shares, par value NT$10 each were outstanding.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o No þ
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer
or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
þ | Accelerated Filer | o | Non-Accelerated Filer | o | Emerging Growth Company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by
check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. o
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting
Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. þ
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial
statements of the registrant included in the filing reflect the correction of an error to previously issued financial
statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of
incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period
pursuant to §240.10D-1(b). o
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included
in this filing:
U.S. GAAP o | by the International Accounting Standards Board þ | Other o |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement
item the registrant has elected to follow.
Item 17 o Item 18 o
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act). Yes o No þ
*Not for trading, but only in connection with the listing on the New York Stock Exchange, Inc. of American
Depositary Shares (“ADS”) representing such Common Shares.
i
TABLE OF CONTENTS | ||
Taiwan Semiconductor Manufacturing Company Limited | ||
Page | ||
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EX-1.1 ARTICLES OF INCORPORATION OF TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY
LIMITED, AS AMENDED AND RESTATED ON JUNE 3, 2025.
EX-2.1 DESCRIPTION OF SECURITIES REGISTERED UNDER SECTION 12 OF THE EXCHANGE ACT.
EX-4.29 LAND LEASE WITH HSINCHU SCIENCE PARK ADMINISTRATION RELATING TO AP3 LOCATED IN
LONGTAN SCIENCE PARK (EFFECTIVE AUGUST 1, 2025 TO DECEMBER 31, 2034) (ENGLISH SUMMARY).
EX-4.35 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO THE
FACILITY WAREHOUSE IN SOUTHERN TAIWAN SCIENCE PARK (EFFECTIVE DECEMBER 16, 2025 TO
NOVEMBER 30, 2038) (ENGLISH SUMMARY).
EX-4.57 LAND LEASE WITH HSINCHU SCIENCE PARK ADMINISTRATION RELATING TO THE FAB
LOCATED IN LONGTAN SCIENCE PARK (EFFECTIVE AUGUST 1, 2025 TO DECEMBER 31, 2042) (ENGLISH
SUMMARY).
EX-4.62 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO AP7
(EFFECTIVE SEPTEMBER 5, 2025 TO JUNE 30, 2043) (ENGLISH SUMMARY).
EX-4.64 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO AP8P1
(EFFECTIVE JANUARY 16, 2026 TO DECEMBER 31, 2044) (ENGLISH SUMMARY).
EX-4.72 LAND LEASE WITH CENTRAL TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO F25
LOCATED IN TAICHUNG SCIENCE PARK (EFFECTIVE JUNE 2, 2025 TO DECEMBER 31, 2044) (ENGLISH
SUMMARY).
EX-4.73 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO AP8
(EFFECTIVE DECEMBER 1, 2025 TO JUNE 30, 2043) (ENGLISH SUMMARY).
EX-4.74 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO AP7
(EFFECTIVE AUGUST 22, 2025 TO JUNE 30, 2043) (ENGLISH SUMMARY).
EX-4.75 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO AP7
(EFFECTIVE DECEMBER 25, 2025 TO JUNE 30, 2043) (ENGLISH SUMMARY).
EX-4.76 LAND LEASE WITH KAOHSIUNG CITY GOVERNMENT RELATING TO FAB22 (EFFECTIVE JUNE 20,
2025 TO DECEMBER 31, 2026) (ENGLISH SUMMARY).
EX-4.77 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO FAB14
& FAB18 LOCATED IN SOUTHERN TAIWAN SCIENCE PARK (EFFECTIVE FEBRUARY 1, 2026 TO JANUARY
31, 2031) (ENGLISH SUMMARY).
EX-8.1 SUBSIDIARIES OF TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED.
EX-12.1 CERTIFICATION OF CEO - RULE 13A-14(A)
EX-12.2 CERTIFICATION OF CFO - RULE 13A-14(A)
EX-13.1 CERTIFICATION OF CEO - RULE 13A-14(B)
EX-13.2 CERTIFICATION OF CFO - RULE 13A-14(B)
EX-15.1 CONSENT OF DELOITTE & TOUCHE
EX-101.INS iXBRL INSTANCE DOCUMENT (EMBEDDED WITHIN THE INLINE XBRL DOCUMENT)
EX-101.SCH iXBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
EX-101.CAL iXBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT
EX-101.DEF iXBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT
EX-101.LAB iXBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT
EX-101.PRE iXBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT
EX-104 COVER PAGE INTERACTIVE DATA FILE (EMBEDDED WITHIN THE INLINE XBRL DOCUMENT)
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“TSMC”, “tsmc”, “jasm”, “esmc”, “Open Innovation Platform”, “CyberShuttle”, “CoWoS”, “TSMC-SoIC”, “3DFabric”,
“N6e”, “N12e”, and “TSMC A16TM” are some of our registered and/or pending trademarks used by us in various
jurisdictions, including the United States of America. All rights reserved.
1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This annual report includes statements that are, or may be deemed to be, “forward-looking statements” within the
meaning of U.S. securities laws. Such statements are made under the “safe harbor” provision under Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). The terms “anticipates,” “expects,” “may,” “will,”
“could,” “should” and other similar expressions identify forward-looking statements. These statements appear in a number
of places throughout this annual report and include statements regarding our intentions, beliefs or current expectations
concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and
the industries in which we operate.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend
on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future
performance and our actual results of operations, financial condition and liquidity, and the development of the industries in
which we operate may differ materially from those made in or suggested by the forward-looking statements contained in
this annual report. Important factors that could cause those differences include, but are not limited to:
•general local and global economic conditions, including impacts caused by geopolitical tensions;
•the political stability of our local region;
•our ability to deal with the challenges and risks related to our global operations and expansion;
•outlook of the major and emerging end markets for our products, such as high performance computing
(“HPC”), smartphones, internet of things (“IoT”), automotive and digital consumer electronics;
•the volatility of the semiconductor and electronics industry;
•our ability to develop new technologies successfully and remain a technological leader;
•the increased competition from other companies;
•overcapacity in the semiconductor industry;
•our reliance on certain major customers;
•the reliability of our information technology systems and resilience to any cyberattacks;
•our ability to maintain control over expansion and facility modifications;
•our ability to generate growth and profitability;
•our ability to hire and retain qualified personnel;
•our ability to acquire required equipment and supplies necessary to meet business needs;
•our ability to protect our technologies, intellectual property (“IP”) rights and third-party licenses;
•disruptive events or industrial accidents;
•shortages or increased prices of power and other utilities; and
•fluctuations in foreign currency rates, in particular, any material appreciation of the NT dollar against the U.S.
dollar, and our ability to manage such risks.
Forward-looking statements include, but are not limited to, statements regarding our strategy and future plans, future
business condition and financial results, our capital expenditure plans, our capacity management plans, expectations as to
the commercial production using 16-angstrom and more advanced technologies, technological upgrades, investment in
research and development, future market demand, future regulatory or other developments in our industry, business
expansion plans or new investments as well as business acquisitions and financing plans. If any one or more of the
assumptions underlying the industry or market data turns out to be incorrect, actual results may differ from the projections
based on these assumptions. You should not place undue reliance on these forward-looking statements. Please see “Item 3.
Key Information – Risk Factors” for a further discussion of certain factors that may cause actual results to differ materially
from those indicated by our forward-looking statements.
As used in this annual report, all references to “we,” “us,” the “Company” and “TSMC” are to Taiwan
Semiconductor Manufacturing Company Limited and its consolidated subsidiaries, while “R.O.C.” and “Taiwan” are
references to the Republic of China.
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EXCHANGE RATES
We publish our financial statements in New Taiwan dollars, the lawful currency of the R.O.C. In this annual report,
“$,” “US$” and “U.S. dollars” mean United States dollars, the lawful currency of the United States, and “NT$” and “NT
dollars” mean New Taiwan dollars. This annual report contains translations of certain NT dollar amounts into U.S. dollars
at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from NT dollars to U.S.
dollars in this annual report were made at NT$31.37 to US$1.00, the exchange rate set forth in the H.10 statistical release
of the Federal Reserve Board on December 31, 2025.
No representation is made that the NT dollar or U.S. dollar amounts referred to herein could have been or could be
converted into U.S. dollars or NT dollars, as the case may be, at any particular rate or at all.
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PART I
ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable.
ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3.KEY INFORMATION
Capitalization and Indebtedness
Not applicable.
Reasons for the Offer and Use of Proceeds
Not applicable.
Risk Factors
We wish to caution readers that the following important factors, and those important factors described in other
reports submitted to, or filed with, the U.S. Securities and Exchange Commission (“U.S. SEC”), among other factors, could
affect our actual results and could cause our actual results to differ materially from those expressed in any forward-looking
statements made by us or on our behalf, and that such factors may adversely affect our business and financial status and
therefore the value of your investment.
Risks Relating to Our Business
Any global systemic political, economic and financial crisis (as well as the indirect effects flowing therefrom) could
negatively affect our business, results of operations, and financial condition.
In recent times, several major systemic political, economic and financial crises negatively affected global business,
banking and financial sectors, including the semiconductor industry and markets.
Since 2018, political and trade tensions among a number of the world’s major economies have been on the rise.
These tensions have resulted or may result in the implementation of tariffs, non-tariff trade barriers, sanctions, export
controls and other measures that have been particularly impactful to the semiconductor industry and related markets.
Prolonged or increased use of such measures may negatively impact the growth of the global economy and the
semiconductor industry, resulting in declines in electronic products sales from which we generate our income through our
products and services. For example, in April 2025, the U.S. President announced a 10% baseline tariff on imports into the
U.S. from all countries, as well as varying reciprocal tariffs on most of the U.S.’s trading partners under the International
Emergency Economic Powers Act (“IEEPA”). Collection of the reciprocal tariffs was delayed until August 2025, and while
they excluded semiconductors, semiconductor manufacturing equipment and their respective derivative products
(collectively “Semiconductor Items”), these tariffs nonetheless affected our cost of operations in the U.S. These tariffs were
declared unlawful by a February 2026 U.S. Supreme Court ruling. While the ruling removes IEEPA as a basis for tariffs,
its broader impact on the U.S.’s tariff and trade agenda, international trade activities, and the global economy remains
uncertain. Following the Supreme Court ruling, the U.S. imposed a replacement tariff under Section 122 of the Trade Act
of 1974 and in March 2026, the U.S. Trade Representative, using authority in Section 301 of the Trade Act of 1974,
initiated two investigations relating to alleged manufacturing overcapacity and failures to take action on forced labor,
targeting various economies, including Taiwan, which could result in trade actions such as the imposition of additional
tariffs. Also, in April 2025, the U.S. government initiated a Section 232 investigation related to imports of Semiconductor
Items, which concluded in December 2025. As a result, the U.S. issues a proclamation imposing a 25% ad valorem tariff on
the import of certain advanced computing chips and derivative products meeting specified technical performance
thresholds, unless such products are imported for designated use in the U.S. The proclamation also signaled the potential
for broader tariffs on Semiconductor Items following further trade negotiations, accompanied by a tariff offset program
intended to incentivize the U.S. domestic manufacturing. Further, in January 2026, the U.S. announced it had reached a
trade and investment agreement with Taiwan which would reduce U.S. reciprocal tariff rates on Taiwanese goods to no
more than 15%. The agreement also grants preferential Section 232 treatment for Taiwanese semiconductor producers
investing in U.S. manufacturing capacity. However, details regarding the impacts of the U.S. Supreme Court decision
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striking down the IEEPA reciprocal tariffs as well as the preferential treatment with respect to Section 232 tariffs,
including any offsets, are still unclear. Any tariffs imposed on imports of semiconductors and products incorporating chips
into the U.S. may result in increased costs for purchasing such products, which may, in turn, lead to decreased demand for
our products and services and adversely affect our business and future growth. Any tariffs imposed on imports of
semiconductor manufacturing materials and equipment into the U.S. may result in increased costs for our manufacturing
operations in the U.S. and reduce our profitability.
Additionally, any increase in the use of export control restrictions and sanctions to target certain countries and
entities, any expansion of the extraterritorial jurisdiction of such measures, or a complete or partial ban on semiconductor
products sales to certain entities could impact not only our ability to continue supplying products to those customers, but
also our customers’ demand for our products, and could even lead to changes in semiconductor supply chains. For
example, in October 2022 and October 2023, the U.S. adopted additional export controls (the “October Rules”) over
specified countries (including China) under the U.S. Export Administration Regulations (“U.S. EAR”) on certain advanced
computing integrated circuits (“ICs”). In January 2025, the U.S. further issued new rules to reinforce controls on exports of
advanced computing ICs, pursuant to which we may need to obtain an export license prior to shipping products using 16-
nanometer or below process to specified destinations unless specific conditions are met. As a result, shipments of certain
products may be delayed or prohibited due to the license requirements and our financial results may be adversely affected.
The October Rules also impose license requirements for items subject to the U.S. EAR where the items are destined to a
semiconductor fabrication facility in China that fabricates specified advanced node ICs as well as for U.S. persons’
activities supporting such facility or semiconductor manufacturing items. In response, we obtained from the U.S.
Department of Commerce a Validated End-User (the “VEU”) authorization for our fab located in Nanjing, China, which
allowed our fab in Nanjing to receive exports of eligible items from the U.S. without separate licenses. Although the VEU
authorization expired in December 2025, the U.S. Department of Commerce has granted TSMC Nanjing Company Limited
(“TSMC Nanjing”) an annual export license that allows U.S. export-controlled items to be supplied to TSMC Nanjing,
which ensures uninterrupted fab operations and product deliveries. However, there is no assurance that this annual export
license will not be terminated, or we can timely get the license renewed in the future.
On the other hand, measures adopted by an affected country to counteract the impact of another country’s actions or
regulations could lead to significant legal liability to multinational corporations including our own. For example, in January
2021, China adopted a blocking statute that, among other matters, entitles Chinese entities incurring damages from a
multinational’s compliance with foreign laws to seek civil remedies. As of the date of this annual report, our current results
of operations have not been materially affected by the expanded export control regulations or the novel rules or measures
adopted to counteract them. Nevertheless, depending on future developments in global trade tensions and military conflicts,
such regulations, rules, or measures may have an adverse impact on our business and operations, and we may incur
significant legal liability and financial losses as a result. Please see “Our failure to comply with applicable laws and
regulations material to our operations, such as export control, environmental and climate related laws and regulations, or
the inability to timely obtain requisite approvals necessary for the conduct of our business, such as fab land and
construction approvals, could harm our business and operational results or subject us to potential significant legal liability”
for a further discussion.
Any future systemic political, economic or financial crisis or market volatility, including but not limited to interest
rate and foreign exchange rate fluctuations, inflation or deflation or changes in economic, fiscal and monetary policies in
major economies, could cause revenue or profits for the semiconductor industry as a whole to decline dramatically. If the
economic conditions or financial conditions of our customers were to deteriorate, the demand for our products and services
may decrease and additional accounting related allowances may be required, which could reduce our revenue and income.
For example, the geopolitical instability resulting from military conflicts cause, among others, supply chains disruptions,
inflation, heightened regulatory uncertainty and volatility in financial markets, which may lead to broader negative impacts
on the global economy. In addition, sufficient external financing may not be available to us on a timely basis, on
commercially reasonable terms to us, or at all. If sufficient external financing is not available when we need such financing
to meet our capital requirements, we may be forced to curtail our expansion, modify plans or delay the deployment of new
or expanded services until we obtain such financing. In conclusion, any of these events, including any future global
systemic crisis or further escalation of trade tensions as described above, could materially and adversely affect our results
of operations.
5
Our global manufacturing, design and sales activities subject us to risks associated with political, economic, financial,
military or other conditions or developments in various jurisdictions, including in particular the R.O.C., as well as in
international trade, which could negatively affect our business and financial status and therefore the market value of
your investment.
The majority of our principal executive officers and our principal production facilities are located in the R.O.C., and
the majority of our net revenue is derived from our operations in the R.O.C. In addition, we have operations worldwide and
a significant percentage of our revenue comes from sales to locations outside the R.O.C. Operating in the R.O.C. and
overseas exposes us to changes in laws, rules, regulations and the enforcements of such laws, rules and regulations in
certain key areas that could have a material impact on our operations, such as intellectual property, labor, antitrust, export
controls, import restrictions, and trade barriers or disputes. In addition, deterioration in general political, economic,
financial or social conditions, military conflicts, the risk of outbreak of war or hostilities, terrorism events, security risks,
social unrest, health conditions and possible disruptions in transportation networks in the various jurisdictions in which we
operate or elsewhere, could have an adverse impact on our business and results of operations as well as the market price
and the liquidity of our ADSs and common shares. Furthermore, any major change in economic, fiscal and/or trade policies
in the U.S. from which we derive a substantial portion of our revenue or in another major jurisdiction could severely affect
our business, financial condition and results of operations. For example, recent political and trade tensions among major
economies as well as military conflicts (such as the conflict in Ukraine since early 2022) have resulted in the imposition of
trade barriers, such as sanctions and import and export controls, which could increase our manufacturing costs, limit our
access to certain supplies, make our pricing less competitive, and limit our ability to offer our products and services in
some markets or source key materials and key production equipment, which may have adverse direct or indirect effects on
our sales.
Any law or government policy that encourages our customers to relocate their manufacturing capacity or supply
chain to their own countries or require their respective contractors, subcontractors and relevant agents to do so could also
impair our ability to sustain our current level of productivity and manufacturing efficiency. An important aspect of our
business operation is an ecosystem of interconnected semiconductor fabs, employees and suppliers that provides us with
significant operational synergies, flexibility and efficiencies. For example, we are able to temporarily reassign thousands of
our engineers and other relevant personnel from one manufacturing site to another to refine specific designs and adapt
manufacturing processes in a timely manner. These advantages permit us to operate our manufacturing fabs efficiently and
resolve any technical or commercial difficulties quickly to maintain our competitive edge. Restrictions on our ability to
transfer people among our operations in the R.O.C., the United States, the P.R.C., Japan, and Europe efficiently due to
challenges such as regional employment rules and regulations, and immigration or travel restrictions, may impair or reduce
these advantages, and we may not be able to sustain our current ability to supply our customers with goods and services at
the current level of cost, quality, quantity and delivery schedule to which our customers have been accustomed.
In addition, the financial markets have viewed certain past developments in relations between the R.O.C. and the
P.R.C. as occasions to depress general market prices of the securities of R.O.C. companies, including our own. Also, we
may face potential operational risks arising from applicable export controls which impose license requirements on our
P.R.C. fab’s acquisition of certain manufacturing tools.
If we are unable to successfully manage the complexity of our global operations and deal with the challenges and risks
related to our global expansion, our business, financial condition and results of operations could be adversely affected.
We have 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. We expect to face particular challenges in global expansion and operations, including but not limited to:
•higher costs associated with the construction of new fabs, establishing supply chains for various materials in
different locations, sustaining our current level of productivity and manufacturing efficiency provided by our
ecosystem, and recruiting and retaining talent;
•labor shortages, interruptions in the supply chains for various materials, and construction issues, which could
substantially delay the completion of our expansion projects, and could further result in substantial additional
costs or failure to meet our capacity expansion plans;
•disruptions to our operations caused by natural or man-made disasters, including earthquakes, flooding,
typhoons, droughts, tsunamis, sandstorms, wildfires, volcanic eruptions, fire, gas/chemical leakage or spill,
6
pandemic, cyberattacks, supply chain disruption, geopolitical tensions, labor issues, sabotage, failure of
critical facilities and equipment, and disruptions in utilities, such as water, electricity and natural gas, etc.;
•scarcity of industrial-use land and access to utilities which could limit our future expansion of operations;
•compliance with applicable foreign laws and regulations, and the risk of penalties if our practices are deemed
not to be in compliance;
•challenges in managing information technology infrastructure in multiple locations and across different
systems 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 clawbacks of government grants;
•challenges in creating an inclusive workplace in new sites to embrace the cultural differences and managing
the operation over large geographic distances and in the context of different employment practices and labor
laws and regulations;
•increased intellectual property infringement assertions and enforcement actions against us; and
•exposure to different tax jurisdictions and potential adverse tax consequences.
If we are unable to overcome the above challenges, our business, financial condition and results of operations could
be adversely affected.
Decreases in demand and average selling prices for products that contain semiconductors may adversely affect demand
for our products and may result in a decrease in our revenue and earnings.
A vast majority of our revenue is derived from customers who use our products in HPC (including AI applications),
smartphones, IoT, automotive, and digital consumer electronics. Any deterioration in or a slowdown in the growth of such
end markets, driven by various factors such as shortages in the supply of certain components, constraints in power supply
or environmental, social, and governance (“ESG”) concerns, which results in a substantial decrease in the demand for
overall global semiconductor foundry services, including our products and services, could adversely affect our revenue.
Further, semiconductor manufacturing facilities require substantial investment to construct and are largely fixed cost assets
once they are in operation. Because we own most of our manufacturing capacities, a significant portion of our operating
costs is fixed. In general, these costs do not decline when customer demand or our capacity utilization rates drop, and thus
declines in customer demand, among other factors, may significantly decrease our margins. Conversely, as product demand
rises and factory utilization increases, the fixed costs are spread over increased output, which can improve our margins. In
addition, the historical trend of declining average selling prices (“ASP”) of end-use applications places downward pressure
on the prices of the components that go into such applications. Decreases in the ASP of end-use applications may increase
pricing pressure on components produced by us, which, in turn, may negatively impact our revenue, margin and earnings.
Since we are dependent on the highly cyclical semiconductor and electronics industries, which have experienced
significant and sometimes prolonged periods of downturn and overcapacity, our revenue, margins and earnings may
fluctuate significantly.
The electronics industries and semiconductor market are cyclical and subject to significant and often rapid
fluctuations in product demand, which could impact our semiconductor foundry business. Variations in customer order
levels may result in volatility in our revenue and earnings. From time to time, the electronics and semiconductor industries
have experienced significant and occasionally prolonged periods of downturn and overcapacity. Because we are, and will
continue to be, dependent on the demand of electronics and semiconductor companies for our services, periods of downturn
and overcapacity in the general electronics and semiconductor industries could lead to reduced demand for overall
semiconductor foundry services, including our services. If we are not able to take appropriate actions, such as reducing our
costs to sufficiently offset declines in demand, our revenue, margins, and earnings will likely suffer during periods of
downturn and overcapacity.
7
If we are unable to remain a technological leader in the semiconductor industry, unable to timely respond to fast-
changing semiconductor market dynamics, or unable to maintain our edge in product quality, we may become less
competitive.
The semiconductor industry and its technologies are constantly changing. We compete by developing process
technologies using increasingly advanced nodes and manufacturing products with more functions. We also compete by
developing new derivative technologies. If we do not anticipate these changes in technologies and rapidly develop new and
innovative technologies, or our competitors unforeseeably gain sudden access to additional technologies, we may not be
able to provide services on competitive terms. For example, the global surge in the development of AI has had a significant
impact on customer demand for advanced semiconductor chips and the market dynamics in our industry; thus, our ability to
continuously develop relevant technologies, products and services to meet these customer needs and changes in the AI
industry will be critical for us to effectively compete in this space. In addition, our customers have accelerated the cadence
of introducing new products and services to the market. If we are unable to meet these shorter product time-to-market, we
risk losing these customers. These factors have also been intensified by the shift of the global technology market to AI-
related products, such as AI smartphones, AI PCs, and AI accelerators, and increasing competition and concentration of
customers (all further discussed among these risk factors).
The uncertainty and instability inherent in advanced technologies impose challenges for achieving expected product
quality and product yield. If we fail to overcome these challenges, it may result in loss of revenue and additional cost, as
well as loss of business or customer trust. We also believe that the effective use of AI in our internal operations is
important to our long-term success. As the AI technologies are rapidly evolving, if we are unable to effectively deploy new
AI technologies in our internal operations, it may hurt our competitive position.
If we are unable to overcome the above factors, we may become less competitive and our revenue may decline
significantly.
If we are unable to compete effectively in the highly competitive foundry segment of the semiconductor industry,
including through equal access to governmental financial incentives, especially those available to our competitors, we
may lose customers and/or our profit margin and earnings may decrease.
The competition in the semiconductor foundry segment is fierce. We compete with other foundry service providers,
as well as a number of integrated device manufacturers. Some of these companies may have access to more advanced or
different technologies than us. Other companies may have greater financial and other resources than us, such as the
possibility of receiving direct or indirect government subsidies, economic stimulus funds, or other incentives that may be
unavailable to us. 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 Creating Helpful Incentives to
Produce Semiconductors and Science Act of 2022 (the “U.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 U.S. Department of Commerce for the receipt of certain incentives pursuant to
the U.S. CHIPS Act, which includes up to US$6.6 billion in total direct funding and up to US$5 billion of proposed loans.
Please see “Item 4. Information on The Company – Our Subsidiaries and Affiliates.” In December 2024, ESMC, our
subsidiary in Germany, entered into an agreement with the Federal Republic of Germany for the receipt of up to EUR5
billion state aid under the European Chips Act (Regulation (EU) 2023/1781). Although governments in certain countries or
regions where we are currently expanding or planning to expand our production capacity have extended or may in the
future extend certain financial incentives to us, there is no assurance that we will be able to receive such financial
incentives, including pursuant to the U.S. CHIPS Act, at the levels we anticipate or at all. Additionally, any financial
incentives we receive may be subject to conditions and requirements imposed by the grantors, such as restrictions on the
expansion of facilities in foreign countries of concern and on joint research and technology licensing efforts with foreign
entities of concern on any technology or product that raises national security concerns. Noncompliance with the terms and
conditions of the grants that we may receive could result in a delay or forfeiture of all or a portion of any future amounts to
be received, as well as obligate us to repay all or a portion of amounts already received pursuant to the grants. Even if we
satisfy the conditions and requirements for the funding disbursement, it is possible that the grantor may delay the
disbursement or be unable to provide the funding. While we expect to continue benefiting from government incentives,
failure to obtain grants that we seek, to fully utilize available grants, or to comply with the terms and conditions of grants
could impact our ability to achieve our goals for the projects that would otherwise benefit from grant funding and could
have an adverse effect on our business, results of operations, and financial condition.
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Moreover, our competitors may, from time to time, also decide to undertake aggressive pricing initiatives. Our
competitors may also compete for our customers who seek to diversify their supply chains. These competitive activities
may decrease our customer base, our pricing, or both. If we are unable to compete effectively with such competitors on
technology, manufacturing capacity, product quality, supply chain diversification and resilience, and customer satisfaction,
we risk losing customers or business to such contenders and our profit margin and earnings may decrease.
If we are unable to manage our capacity and production facilities effectively, our competitiveness may be weakened.
We perform long-term market demand forecasts on a regular basis for our products and services to manage our
overall capacity. Based on market demand, we have continued to add capacity to meet market needs for our products and
services, including in Taiwan, in Arizona, U.S., in Kumamoto, Japan and in Dresden, Germany.
Implementing these capacity expansion plans will increase our costs, and the increases may be substantial. For
example, we would need to build new facilities, purchase additional equipment and hire and train personnel to operate the
new equipment. If the market demand does not materialize, and/or we do not increase our net revenue accordingly, our
financial performance may be adversely affected by these increased costs. See “Item 4. Information on The Company –
Capacity Management and Technology Upgrade Plans” for a further discussion.
In addition, market conditions are dynamic, and our market demand forecasts may change significantly at any time.
During periods of decreased demand, certain manufacturing lines or tools in some of our manufacturing facilities may be
suspended or shut down temporarily. However, if demand subsequently increases rapidly over a short period of time, we
may not be able to restore the capacity in a timely manner to take advantage of the upturn. In such circumstances, our
financial performance and competitiveness may be adversely affected.
Having one or more large customers that account for a significant percentage of our revenue may render us vulnerable
to the loss of or significant curtailment of purchases by such customers that could in turn adversely affect our results of
operations. Similarly, the increasing consolidation of our customers may further increase our revenue concentration.
Over the years, our customer profile and the nature of our customers’ business have changed dramatically. While we
generate revenue from hundreds of customers worldwide, our ten largest customers in 2023, 2024 and 2025 accounted for
approximately, 70%, 76% and 78% of our net revenue in the respective year. Our largest customer in 2023, 2024 and 2025
accounted for 25%, 22% and 19% of our net revenue in the respective year. Our second largest customer in 2023, 2024 and
2025 accounted for 11%, 12%, and 17% of our net revenue in the respective year. A more concentrated customer base may
subject our revenue to seasonal demand fluctuations from our large customers and cause different seasonal patterns in our
business. This customer concentration results in part from the changing dynamics of the electronics industry with the
structural shift to HPC and smartphone applications and software that provide the content for such devices.
There are only a limited number of customers who are successfully exploiting this new business model paradigm.
Also, we have seen changes in the nature of our customers’ business models in response to this new business model
paradigm. For example, there is a growing trend among system companies designing their own semiconductors and
working directly with the semiconductor foundries, which makes their products and services more marketable in a
changing consumer market. These shifting business models could lead to significant variations in our sales if the growth of
their products and services, particularly in the AI sector, is volatile or not sustainable.
Also, since the global semiconductor industry has become increasingly competitive, some of our customers have
engaged in industry consolidations in order to remain competitive. Such consolidations have taken the form of mergers and
acquisitions. If more of our major customers consolidate, this will further decrease the overall number of our customer
pool. In addition, regulatory restrictions, such as export controls directed at our major customers, could impact our ability
to supply products to those customers or reduce those customers’ demand for our products and services and thus impact
their business operations.
The loss of, or significant curtailment of purchases by, one or more of our top customers including curtailments due
to increased competitive pressures, industry consolidation, changes in applicable regulatory restrictions, product designs,
manufacturing sourcing or outsourcing policies or practices of these customers, the timing of customer inventory
adjustments, or changes in our major customers’ business models, may adversely affect our results of operations and
financial condition.
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If our information technology systems or those of our service providers with whom we share our confidential
information succumb to cyberattacks by third parties worldwide, our business and operations may be severely
interrupted or even shut down, and our results of operations, financial condition, prospects and reputation may also be
materially and adversely affected.
Even though we have established a comprehensive internet and computing security network, we cannot guarantee
that our computing systems which control or maintain vital corporate functions, such as our manufacturing operations and
enterprise accounting, would be completely immune to crippling cyberattacks. In the event of a serious cyberattack, our
systems may lose important corporate data or our production lines may be shut down pending the resolution of such attack.
Major cyberattacks could also lead to loss or divulgence of trade secrets and other sensitive information, such as
proprietary information of our customers and other stakeholders and personal information of our employees. While we seek
to continuously review and assess our cybersecurity policies and procedures to ensure their adequacy and effectiveness, we
cannot guarantee that we will not be susceptible to new and emerging risks and attacks in the evolving landscape of
cybersecurity threats. For example, as AI continues to evolve, cyber-attackers could also use AI to develop malicious codes
and sophisticated phishing attempts.
Malicious hackers may also try to introduce computer viruses, corrupted software or ransomware into our network
systems to disrupt our operations, blackmail us to regain control of our computing systems, or spy on us for sensitive
information. These attacks may result in us having to pay damages for our delayed or disrupted orders or incur significant
expenses in implementing remedial and improvement measures to further enhance our cybersecurity network, and may also
expose us to significant legal liabilities arising from or related to legal proceedings or regulatory investigations associated
with such breaches.
In the past, we experienced and may in the future be subject to attack by malicious software. We have implemented
and continually update rigorous cybersecurity measures to prevent and minimize harm caused by such attacks. See “Item
16K. Cybersecurity” for a further discussion. While these ongoing enhancements further improve our cybersecurity
defense solutions, there can be no assurance that we are immune to cyberattacks.
In addition, we employ certain third-party service providers for us and our affiliates worldwide with whom we need
to share highly sensitive and confidential information to enable them to provide the relevant services. While we require
such third-party service providers to strictly fulfill the confidentiality and/or internet security requirements in our 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 we or our service providers are not able to timely resolve
the respective technical difficulties caused by such cyberattacks, or ensure the integrity and availability of our data (and
data belonging to our customers and other third parties) or maintain control of our or our service providers’ computing
systems, our commitments to our customers and other stakeholders may be materially impaired and our results of
operations, financial condition, prospects and reputation may also be materially and adversely affected.
We may not be able to implement our planned growth and development or maintain our leading position if we are
unable to recruit and retain key executives, managers, and skilled technical and service personnel.
We rely on the continued services and contributions of our management team, as well as skilled technical and
professional personnel. Our business could suffer from the inability to fulfill personnel needs with high quality
professionals in a timely fashion caused by the loss of personnel, talent shortages, illegal talent poaching, immigration
controls, or related changes in market demand for our products and services. The fierce competition for talent could
potentially lead to our being unable to ensure timely fulfillment of our personnel demand.
We may be unable to obtain in a timely manner and at a reasonable cost equipment that is necessary for us to remain
competitive.
Our operations and ongoing expansion plans depend on our ability to obtain necessary equipment and related
services available from a limited number of suppliers. As a result, we may encounter the situation of limited supply and/or
long delivery cycles. To better manage our supply chain, we evaluate and project delivery lead times to minimize the
impact of supply chain risks on operating costs. We have also implemented various collaborative business models and risk
management contingencies with suppliers to ensure supply and shorten the procurement lead time. To enhance our
sourcing capabilities for our global sites, we have also taken steps to strengthen our understanding of local regulations,
policies, and supply chains. However, if we are unable to acquire in a timely manner the equipment and parts we need, we
may fail to successfully implement capacity expansion plans and exploit time sensitive business opportunities.
Additionally, ongoing trade tensions could result in increased prices for, or even unavailability of, key equipment, through
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delay or denial of necessary export licenses, adoption of additional export control measures and other tariff or non-tariff
barriers. If we are unable to obtain equipment in a timely fashion to fulfill our customers’ demand for technology and
production capacity, or unable to do so at a reasonable cost, our financial condition and results of operations could be
negatively impacted.
Our revenue and profitability may decline if we are unable to obtain adequate supplies of raw materials in a timely
manner and at commercially reasonable prices.
Our production operations require that we obtain adequate supplies of raw materials, such as silicon wafers, gases,
chemicals, and photoresist, on a timely basis and at commercially reasonable prices. In the past, shortages in the supply of
some materials, whether by specific suppliers or by the semiconductor industry generally, have resulted in occasional
industry-wide price adjustments and delivery delays. Moreover, major natural disasters, trade barriers and political or
economic turmoil, including military conflicts and inflation, occurring within the country of origin of such raw materials
may also significantly disrupt the availability of such raw materials or increase their prices. Also, since we procure some of
our raw materials from sole-sourced suppliers, there is a risk that our need for such raw materials may not be met or that
back-up supplies may not be readily available. Importation and domestic production limitations may also restrict our ability
to obtain adequate supplies of raw materials as well as materials of the necessary quality. In addition, recent trade tensions
could result in increased prices or even unavailability of raw materials due to tariffs, export control or other non-tariff
barriers. Our revenue and earnings could be adversely affected if we are unable to obtain adequate supplies of the necessary
raw materials in a timely manner or if there are significant increases in the costs of raw materials.
Any inability to obtain, preserve, enforce, defend and protect our technologies, intellectual property rights and third-
party licenses could harm our competitive position.
Our ability to compete successfully and to achieve future growth depends in part on the continued strength of our
intellectual property portfolio. While we actively enforce and protect our intellectual property rights, there can be no
assurance that our efforts will be adequate to prevent the misappropriation or improper use of our proprietary technologies,
software, trade secrets or know-how. Also, we cannot assure you that, as our business or business models expand into new
areas, we will be able to develop independently the technologies, patents, software, trade secrets or know-how necessary to
conduct our business or that we can do so without unknowingly infringing the intellectual property rights of others. As a
result, we may have to rely on, to a certain degree, licensed technologies and patent licenses from others. To the extent that
we rely on licenses from others, there can be no assurance that we will be able to obtain any or all of the necessary licenses
in the future on terms we consider reasonable or at all. The lack of necessary licenses could expose us to claims for
damages and/or injunctions from third parties, as well as claims for indemnification by our customers in instances where
we have contractually agreed to indemnify our customers against damages resulting from infringement claims.
We have received, from time to time, communications from third parties, including non-practicing entities and
semiconductor companies, asserting that our technologies, our manufacturing processes, or the design IPs of the
semiconductors made by us or the use of those semiconductors by our customers may infringe their patents or other
intellectual property rights. Because of the nature of the industry, our market position, and the expansion of our
manufacturing operations outside of Taiwan, we may receive an increased number of such communications in the future.
The assertions made and lawsuits initiated by litigious, well-funded, non-practicing entities are particularly aggressive in
their monetary demand and in seeking court-issued injunctions. Recent developments at the U.S. Patent and Trademark
Office limiting access to inter partes review to remove erroneously issued patents may result in an increase of such
assertions and lawsuits, and hinder our ability to reach a reasonable resolution with patent owners. Such lawsuits and
assertions may increase our cost of doing business and may potentially be extremely disruptive if these asserting entities
succeed in blocking the trade of products made and services offered by us. See “Item 8. Financial Information – Legal
Proceedings” for a further discussion. Also, with the expansion of our manufacturing operations into certain non-R.O.C
jurisdictions, we have faced increased challenges in managing risks of intellectual property misappropriation. Despite our
efforts to adopt robust measures to mitigate the risk of intellectual property misappropriation in such new jurisdictions, we
cannot guarantee that the protection measures we adopted will be sufficient to prevent us from potential infringements by
others, or at all.
If we fail to obtain or maintain certain technologies or intellectual property licenses or fail to prevent our intellectual
property from being misappropriated and, if litigation relating to alleged intellectual property matters occurs, it could: (i)
prevent us from manufacturing particular products or selling particular services or applying particular technologies; and (ii)
reduce our ability to compete effectively against entities benefiting from our misappropriated intellectual property, which
could reduce our opportunities to generate revenue.
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Our operational results could also be materially and adversely affected by disruptive events or industrial accidents, in
the locations in which we, our customers or our suppliers operate.
Our operations are vulnerable to interruptions from various natural and man-made disasters. These include
earthquakes, flooding, typhoons, droughts, tsunamis, sandstorms, wildfires, volcanic eruptions, fire, gas/chemical leakage
or spill, pandemic, cyberattacks, supply chain disruption, geopolitical tensions, sabotage and terrorism. Additionally, the
failure of critical facilities and equipment, along with disruptions in utility services such as water, electricity and natural
gas, could also interrupt our operations. Most of our production facilities, as well as those of many of our suppliers,
customers and upstream providers of complementary semiconductor manufacturing services, are located in areas
susceptible to various natural disasters. These locations may also face potential shortages of electricity and/or water, which
could cause interruptions to our operations. For instance, in April 2024 and January 2025, several earthquakes struck
Taiwan, causing damage to our inventories, plant facilities, machinery and equipment. We recognized approximately NT$3
billion and NT$5.3 billion in losses from earthquakes, net of insurance claim, respectively, in the second quarter of 2024
and the first quarter of 2025.
If one or more natural disasters were to create a prolonged disruption to our operations, or those of our suppliers, it
could significantly reduce our manufacturing capacity and lead to the loss of important customers. In addition, disruption to
our customers’ operations could reduce demand for our products and services. Either scenario could therefore have an
adverse and material impact on our operational and financial performance.
Our operations may be interrupted, and our expansion may be limited, by power or other utility outages or shortages,
and our financial results may be adversely affected by increased prices of power or other utilities.
We have occasionally experienced power outages, dips or surges caused by difficulties encountered by our electricity
supplier or other power consumers on the same power grid. Some of these incidents have resulted in interruptions to our
operations. Such outages, shortages or interruptions in our electricity supply could further be exacerbated by changes in
government energy policy or shortages in the supply of power generation fuels. If we are unable to secure reliable and
uninterrupted supply of electricity for our manufacturing fabs, our ability to fulfill customers’ orders would be jeopardized.
Moreover, we have experienced, and may continue to encounter utility price increases. Higher electricity prices could
increase our manufacturing costs and therefore adversely impact our financial results.
In addition, government measures taken in response to severe weather events, such as water rationing and
conservation measures in response to droughts, may materially affect our operations and our suppliers’ production. This
could, in turn, cause interruptions to our operations and expansion plans.
If such events were to occur over prolonged periods, our operations and financial performance may be materially
adversely affected and our future capacity expansions could be curtailed.
Adverse fluctuations in exchange rates could decrease our operating margin and/or revenue.
Substantially all of our sales are denominated in U.S. dollars and over half of our capital expenditures are
denominated in currencies other than the NT dollar, primarily in U.S. dollars, Euros and Japanese yen. As a result, any
significant fluctuations to our disadvantage in the exchange rate of the NT dollar against such currencies, in particular a
weakening of the U.S. dollar against the NT dollar, would have an adverse impact on our revenue and operating profit as
expressed in NT dollars. For example, every 1% depreciation of the U.S. dollar against the NT dollar would result in an
approximately 0.3 percentage point decrease in our operating margin based on our 2025 results.
Conversely, if the U.S. dollar appreciates significantly versus other major currencies, the demand for the products
and services of our customers and for our goods and services will likely decrease, which will negatively affect our revenue.
Please see “Item 11. Quantitative and Qualitative Disclosures About Market Risk” for a further discussion.
Our failure to comply with applicable laws and regulations material to our operations, such as export control, antitrust,
environmental and climate related laws and regulations, or the inability to timely obtain requisite approvals necessary
for the conduct of our business, such as fab land and construction approvals, could harm our business and operational
results or subject us to potential significant legal liability.
Because we engage in manufacturing activities in multiple jurisdictions and conduct business with our customers
located worldwide, such activities are subject to a myriad of governmental regulations. For example, the manufacturing,
12
assembling and testing of our products require the use of equipment that is subject to export control laws and regulations,
as well as metals, chemicals, and materials that are subject to environmental, climate-related, health and safety, and
humanitarian forced labor prohibition and conflict-free sourcing laws, regulations and guidelines issued worldwide. Our
failure to comply with any such laws or regulations, as amended from time to time, and our failure to comply with any
information and document sharing requests from the relevant authorities in a timely manner could result in:
•significant penalties and legal liabilities, such as the denial of import or export permits or third party private
lawsuits, criminal or administrative proceedings;
•the temporary or permanent suspension of production of the affected products;
•the temporary or permanent inability to procure or use certain production critical chemicals or materials;
•unfavorable alterations in our manufacturing, fabrication and assembly and test processes;
•challenges from our customers that place us at a significant competitive disadvantage, such as loss of revenue
in case we are unable to satisfy the applicable legal standard or customer requirement;
•restrictions on our operations or sales;
•loss of tax benefits, including termination of current tax incentives, disqualification of tax credit application
and repayment of the tax benefits that we are not entitled to; and
•damages to our goodwill and reputation.
Our role in the semiconductor supply chain inherently limits our visibility into the downstream use or user of final
products that incorporate our customer’ semiconductor products manufactured by us. This constraint impedes our ability to
fully ensure such semiconductors will not be diverted to unintended end use or end-user, including potentially by our
customers, or by third parties. In addition, export controls over certain semiconductors often depend on the products’
specific features or performance characteristics that foundries may not be able to verify independently. If our customers’
activities or products are found to be subject to such export controls and our exports to them did not obtain the required
authorization, we could be found in violation of applicable export control or sanctions laws. This could adversely affect us
through reputational harm, government investigations, penalties or other financial exposures resulting from relevant legal
proceedings, or other adverse consequences. In October 2024, we notified relevant U.S. and Taiwan authorities that one
type of our customer’s chip manufactured by us might have been diverted to a restricted entity or incorporated into a
restricted entity’s product, and since then have been cooperating with the authorities’ requests for additional information
and documents. Despite our best efforts to comply with all relevant export control and sanctions laws and regulations, there
is no assurance that our business activities will not be found incompliant with export control laws and regulations.
We are subject to antitrust laws and regulations in multiple jurisdictions, and from time to time receive related
inquiries from enforcement agencies. With our success in the foundry business and the increasing criticism on the
concentration of the semiconductor industry and sometimes directly on us, we are subject to heightened risks of antitrust
investigations. Any adverse results of potential antitrust proceedings could harm our business and distract our management,
and thereby have a material adverse effect on our results of operations or prospects, and subject us to potential significant
legal liability.
Complying with applicable laws and regulations, such as environmental and climate related laws and regulations,
could also require us, among other things, to do the following: (a) purchase, use or install remedial equipment; (b)
implement remedial programs such as climate change mitigation programs and air pollution reduction plans; (c) modify our
product designs and manufacturing processes, or incur other significant expenses such as paying any incurred carbon fees
if our emission levels exceed applicable thresholds, and obtaining renewable energy sources, renewable energy certificates
or carbon credits, substitute raw materials or chemicals that may cost more or be less available for our operations.
Our inability to timely obtain approvals necessary for the conduct of our business could impair our operational and
financial results. For example, if we are unable to timely obtain environmental related approvals needed to undertake the
development and construction of a new fab or expansion project, then such inability may delay, limit, or increase the cost
of our expansion plans that could also in turn adversely affect our business and operational results. In light of increased
public interest in environmental issues, our operations and expansion plans may be adversely affected or delayed in
response to public concern and social environmental pressures even if we comply with all applicable laws and regulations.
13
For further details, please see our compliance record with Taiwan and international environmental and climate
related laws and regulations as well as our business continuity management of climate change policy in “Item 4.
Information on The Company – Environmental and Climate Related Laws and Regulations”.
Any impairment charges may have a material adverse effect on our net income.
Under IFRSs, we are required to evaluate our tangible assets, right-of-use assets and intangible assets for impairment
whenever triggering events or changes in circumstances indicate that the asset may be impaired. If certain criteria are met,
we are required to record an impairment charge. We are not able to estimate the extent or timing of any impairment charge
for future years. Any impairment charge required may have a material adverse effect on our net income.
The determination of an impairment charge at any given time is mainly based on the projected results of operations
over several years subsequent to that time. Consequently, an impairment charge is more likely to occur during a period
when our operating results are otherwise already depressed. See “Item 5. Operating and Financial Reviews and Prospects –
Critical Accounting Policies, Judgments and Key Sources of Estimation and Uncertainty” for a discussion of how we
assess if an impairment charge is required and, if so, how the amount is determined.
Any failure to achieve and maintain effective internal controls could have a material adverse effect on our business and
results of operations.
Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports
and to effectively prevent fraud. If we cannot provide reasonable assurance with respect to our financial reports and
effectively prevent fraud and corruption, our reputation and results of operations could be harmed.
We are required to comply with various R.O.C. and U.S. laws and regulations on internal controls, but internal
controls may not prevent or detect misstatements because of their inherent limitations, including the possibility of human
error, the circumvention or overriding of controls, fraud or corruption.
Therefore, even effective internal controls can provide only reasonable assurance with respect to the preparation and
fair presentation of financial statements. If we fail to maintain the adequacy of our internal controls, our business and
operating results could be harmed, we could fail to meet our reporting obligations, and there could be a material adverse
effect on the market price of our common shares and ADSs.
Any amendments to existing tax regulations or the implementation of any new tax laws in the R.O.C., the United States
or other jurisdictions in which we operate our business may have an adverse effect on our net income.
While we are subject to tax laws and regulations in various jurisdictions in which we operate or conduct business,
our principal operations are in the R.O.C. and we are exposed primarily to taxes levied by the R.O.C. government. Any
unfavorable changes of tax laws and regulations in these jurisdictions could increase our effective tax rate and adversely
affect our operating results. Further, changes in the tax laws of foreign jurisdictions could arise as a result of the base
erosion and profit shifting (“BEPS”) project that was undertaken by the Organisation for Economic Cooperation and
Development (“OECD”). These changes may increase tax uncertainty and have an adverse effect on our operating results.
See “Item 5. Operating and Financial Reviews and Prospects – Taxation” for further discussion of significant tax regulation
changes.
Risks Relating to Ownership of ADSs
Your voting rights as a holder of ADSs will be limited.
Holders of American Depositary Receipts (“ADRs”) evidencing ADSs may exercise voting rights with respect to the
common shares represented by these ADSs only in accordance with the provisions of our ADS deposit agreement. The
deposit agreement provides that, upon receipt of notice of any meeting of holders of our common shares, the depositary
bank will, as soon as practicable thereafter, mail to the holders (i) the notice of the meeting sent by us, (ii) voting
instruction forms and (iii) a statement as to the manner in which instructions may be given by the holders.
ADS holders will not generally be able to exercise the voting rights attaching to the deposited securities on an
individual basis. According to the provisions of our ADS deposit agreement, the voting rights attaching to the deposited
securities must be exercised as to all matters subject to a vote of shareholders collectively in the same manner, except in the
case of an election of directors. Election of directors is by means of cumulative voting. See “Item 10. Additional
14
Information – Voting of Deposited Securities” for a more detailed discussion of the manner in which a holder of ADSs can
exercise its voting rights.
You may not be able to participate in rights offerings and may experience dilution of your holdings.
We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under our
ADS deposit agreement, the depositary bank will not distribute rights to holders of ADSs unless the distribution and sale of
rights and the securities to which these rights relate are either exempt from registration under the United States Securities
Act of 1933, as amended, (the “Securities Act”), with respect to all holders of ADSs, or are registered under the provisions
of the Securities Act. Although we may be eligible to take advantage of certain exemptions for rights offerings by certain
foreign companies, we can give no assurance that we can establish an exemption from registration under the Securities Act,
and we are under no obligation to file a registration statement with respect to any such rights or underlying securities or to
endeavor to have such a registration statement declared effective. Accordingly, holders of ADSs may be unable to
participate in our rights offerings and may experience dilution of their holdings as a result.
If the depositary bank is unable to sell rights that are not exercised or not distributed or if the sale is not lawful or
reasonably practicable, it will allow the rights to lapse, in which case you will receive no value for these rights.
The value of your investment may be reduced by possible future sales of common shares or ADSs by us or our
shareholders or fluctuations in foreign exchange.
One or more of our existing shareholders may, from time to time, dispose of significant numbers of our common
shares or ADSs. For example, the National Development Fund of the R.O.C., which owned 6.38% of TSMC’s outstanding
shares as of February 28, 2026, had from time to time in the past sold our shares in the form of ADSs in several
transactions.
We cannot predict the effect, if any, that future sales of ADSs or common shares, or the availability of ADSs or
common shares for future sales, will have on the market price of ADSs or common shares prevailing from time to time.
Sales of substantial amounts of ADSs or common shares in the public market, or the perception that such sales may occur,
could depress the prevailing market price of our ADSs or common shares. In addition, fluctuations in the exchange rate
between the U.S. dollar and the NT dollar may affect the U.S. dollar value of our common shares and the market price of
the ADSs and the U.S. dollar value of any cash dividends paid in NT dollars on our common shares represented by ADSs.
The market value of our shares may fluctuate due to the volatility of, and government intervention in, the R.O.C.
securities market.
The Taiwan Stock Exchange has experienced from time to time substantial fluctuations in the prices and volumes of
sales of listed securities. There are currently limits on the range of daily price movements on the Taiwan Stock Exchange.
In response to past declines and volatility in the securities markets in Taiwan, and in line with similar activities by other
countries in Asia, the government of the R.O.C. formed the Stabilization Fund, which had purchased and may from time to
time purchase shares of Taiwan companies to support these markets. In addition, other funds associated with the R.O.C.
government had in the past purchased, and may from time to time purchase, shares of Taiwan companies on the Taiwan
Stock Exchange or other markets. These funds had disposed and may from time to time dispose shares of Taiwan
companies so purchased at a later time. In the future, market activity by government entities, or the perception that such
activity is taking place, may take place or cease, may cause fluctuations in the market prices of our ADSs and common
shares.
ITEM 4.INFORMATION ON THE COMPANY
Our History and Structure
Our legal and commercial name is 台灣積體電路製造股份有限公司 (Taiwan Semiconductor Manufacturing Company
Limited). We were founded in 1987 as a joint venture among the R.O.C. government and other private investors and were
incorporated in the R.O.C. as a company limited by shares on February 21, 1987. Since our establishment, we have built a
strong position in manufacturing capacity as a dedicated foundry. Our common shares have been listed on the Taiwan
Stock Exchange since September 5, 1994, and our ADSs have been listed on the New York Stock Exchange (“NYSE”)
since October 8, 1997.
15
Our Principal Office
Our principal executive office is located at No. 8, Li-Hsin Road 6, Hsinchu Science Park, Hsinchu, Taiwan, Republic
of China. Our telephone number at that office is (886-3) 563-6688. Our website is www.tsmc.com. Information contained
on our website is not incorporated herein by reference and does not constitute part of this annual report.
Business Overview of the Company
As a foundry, we manufacture semiconductors using our manufacturing processes for our customers based on
proprietary integrated circuit designs provided by them. We offer a comprehensive range of wafer fabrication processes,
including processes to manufacture complementary metal-oxide-semiconductor (“CMOS”) logic, mixed-signal, radio
frequency (“RF”), embedded memory, bipolar complementary metal-oxide-semiconductor (“BiCMOS”, which uses CMOS
transistors in conjunction with bipolar junction transistor) mixed-signal and others. We also offer design, mask making,
TSMC 3DFabric® advanced silicon stacking and packaging services, and testing services.
We believe that our scale and capacity, particularly for advanced technologies, is a major competitive advantage.
Please see “– Semiconductor Manufacturing Capacity and Technology” and “– Capacity Management and Technology
Upgrade Plans” for a further discussion of our capacity.
We count among our customers many of the world’s leading semiconductor companies, ranging from fabless
semiconductor companies, system companies to integrated device manufacturers.
Our Semiconductor Facilities
We currently operate one 150mm wafer fab, six 200mm wafer fabs, nine 300mm wafer fabs, and seven advanced
backend fabs. Our corporate headquarters and nine of our fabs are located in the Hsinchu Science Park, two fabs are
located in the Central Taiwan Science Park, seven fabs are located in the Southern Taiwan Science Park, two fabs are
located in the United States, one fab is located in Shanghai, one fab is located in Nanjing, and one fab is located in Japan.
As of February 28, 2026, our corporate headquarters and our nine fabs in Hsinchu Science Park occupy parcels of land of a
total of approximately 1,440,012 square meters, of which, approximately 1,296,797 square meters of land is leased by us
from the Hsinchu Science Park Administration for our eight fabs in Hsinchu Science Park under agreements that will be up
for renewal between December 2026 and December 2044, and approximately 143,215 square meters of land is owned by
us, where Advanced Backend Fab 6 and related offices are located. We have leased from the Central Taiwan Science Park
Administration a parcel of land of approximately 1,089,957 square meters for our Taichung fabs under agreements that will
be up for renewal between September 2029 and December 2044. We have leased from the Southern Taiwan Science Park
Administration approximately 2,502,262 square meters for our fabs in the Southern Taiwan Science Park under agreements
that will be up for renewal between March 2026 and March 2045. We have leased from the Kaohsiung City Government
approximately 751,384 square meters of land in the Kaohsiung Nanzih Technology Industrial Park, where Fab 22 is
located, under agreements that will be up for renewal by December 2026. TSMC Washington, LLC (“TSMC Washington”)
owns a parcel of land of approximately 1,052,186 square meters in the State of Washington in the United States, where the
TSMC Washington fab and related offices are located. TSMC China Company Limited (“TSMC China”) owns the land
use rights of 369,087 square meters of land in Shanghai, where Fab 10 and related offices are located. TSMC Nanjing owns
the land use rights of 453,403 square meters of land in Nanjing, where Fab 16 and related offices are located. TSMC
Arizona owns a parcel of land of approximately 4,775,885 square meters in the State of Arizona where Fab 21 and related
offices are located. JASM owns a parcel of land of approximately 476,290 square meters in Kumamoto Prefecture, Japan,
where Fab 23 and related offices are located. ESMC owns a parcel of land of approximately 513,557 square meters in the
City of Dresden in Germany, where Fab 24 and related facilities will be located. Other than certain equipment under leases
located at testing areas, we own all of the buildings and equipment for our fabs.
Semiconductor Manufacturing Capacity and Technology
We manufacture semiconductors on silicon wafers based on proprietary circuitry designs provided by our customers.
Two key factors that characterize a foundry’s manufacturing capabilities are output capacity and fabrication process
technologies. Since our establishment, we have built a strong position in manufacturing capacity as a dedicated foundry.
We also believe that we are the technology leader among the dedicated foundries in terms of our net revenue of advanced
semiconductors of 7-nanometer and below and are one of the leaders in the semiconductor manufacturing industry for
mainstream and specialty technologies. Our 2-nanometer technology entered volume production in 2025. Also, the
development of our 16-angstrom technology is on track, and its risk production is expected in 2026.
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The following table lists our wafer fabs and those of our subsidiaries in operation as of February 28, 2026, together
with the year of commencement of commercial production, wafer size and the most advanced technology for volume
production:
Fab(1) | Year of commencement of commercial production | Wafer size | The most advanced technology for volume production(2) | |||
2 | 1990 | 6-inch | 450 | |||
3 | 1995 | 8-inch | 150 | |||
5 | 1997 | 8-inch | 150 | |||
6 | 2000 | 8-inch | 110 | |||
8 | 1998 | 8-inch | 110 | |||
10 | 2004 | 8-inch | 150 | |||
11 | 1998 | 8-inch | 150 | |||
12 | 2001 | 12-inch | 40 | |||
14 | 2004 | 12-inch | 16 | |||
15 | 2012 | 12-inch | 7 | |||
16 | 2018 | 12-inch | 16 | |||
18 | 2020 | 12-inch | 3 | |||
20 | 2025 | 12-inch | 2 | |||
21 | 2024 | 12-inch | 5 | |||
22 | 2025 | 12-inch | 2 | |||
23 | 2024 | 12-inch | 28 |
(1)Fabs 2, 3, 5, 8, 12 and Fab 20 are located in Hsinchu Science Park. Fab 6, Fab 14, Fab 18, and Fab 22 are located in
the Southern Taiwan Science Park. Fab 15 is located in Central Taiwan Science Park. Fab 11 is located in the
Washington State, United States. Fab 10 is located in Shanghai, China, Fab 16 is located in Nanjing, China, Fab 21
is located in Arizona, U.S. and Fab 23 is located in Kumamoto, Japan.
(2)In nanometers, as of 2025 year-end.
In 2025, our annual capacity (in 12-inch equivalent wafers) exceeded 17 million wafers, compared to approximately
17 million wafers in 2024. This increase was primarily from the expansion of our 3-nanometer advanced technologies.
Capacity Management and Technology Upgrade Plans
We manage our overall capacity and technology upgrade plans based on long term market demand forecasts for our
products and services. According to our current market demand forecasts, we intend to maintain the strategy of expanding
manufacturing capacity and upgrading manufacturing technologies to meet both the fabrication and the technology needs
of our customers.
Our capital expenditures in 2023, 2024 and 2025 were NT$949,817 million, NT$956,007 million and NT$1,272,411
million (US$40,895 million, translated from a weighted average exchange rate of NT$31.11 to US$1.00), respectively. Our
capital expenditures in 2026 are expected to be between US$52 billion and US$56 billion, which, depending on market
conditions, may be adjusted later. Our capital expenditures for 2023, 2024 and 2025 were funded by our operating cash
flow and proceeds from the issuance of corporate bonds, and our capital expenditures for 2026 are also expected to be
funded in the same way. In 2026, we anticipate our capital expenditures to focus primarily on the following:
•installing and expanding capacity, mainly for 2-nanometer and 3-nanometer nodes, including building/facility
expansion for Fab 20, Fab 21 and Fab 22;
•expanding capacity for specialty technologies and advanced packaging, including building/facility expansion
for Fab 24; and
•investing in research and development projects for new process technologies.
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We are entering a period of higher growth as the multiyear megatrends of 5G, AI and high performance computing
are expected to fuel strong demand for our semiconductor technologies in the next several years. We are working closely
with our customers to address their needs in a sustainable manner.
These investment plans are preliminary and may change according to market conditions.
Markets and Customers
We categorize our net revenue mainly based on the countries where our customers are headquartered, which may be
different from the countries to which we actually sell or ship our products or different from where products are actually
ordered. Under this approach, the following table presents a geographic breakdown of our net revenue during the periods
indicated:
Year ended December 31, | ||||||||||||
2023 | 2024 | 2025 | ||||||||||
Geography | Net Revenue | Percentage | Net Revenue | Percentage | Net Revenue | Percentage | ||||||
(NT$ in millions, except percentages) | ||||||||||||
North America | 1,470,215 | 68% | 2,031,326 | 70% | 2,875,270 | 75% | ||||||
Asia Pacific(1) | 174,947 | 8% | 284,308 | 10% | 329,269 | 9% | ||||||
China | 267,154 | 12% | 331,673 | 11% | 327,503 | 9% | ||||||
Japan | 132,072 | 6% | 144,240 | 5% | 150,428 | 4% | ||||||
EMEA(2) | 117,348 | 6% | 102,761 | 4% | 126,584 | 3% | ||||||
Total | 2,161,736 | 100% | 2,894,308 | 100% | 3,809,054 | 100% | ||||||
(1)China and Japan are excluded from Asia Pacific.
(2)EMEA stands for Europe, Middle East, and Africa.
In 2025, our net revenue increased by a total of NT$914,746 million compared to 2024, which was mainly due to an
increase in orders from North America of NT$843,944 million, or a 42% year-over-year increase and from Asia Pacific of
NT$44,961 million, or a 16% year-over-year increase. In 2024, our net revenue increased by a total of NT$732,572 million
compared to 2023, which was mainly due to an increase in orders from North America of NT$561,111 million, or a 38%
year-over-year increase and from Asia Pacific of NT$109,361 million, or a 63% year-over-year increase.
We provide worldwide customer support. Our office in Hsinchu and subsidiaries in the United States, Canada, Japan,
China, Germany, the Netherlands and South Korea are dedicated to serving our customers worldwide. Foundry services,
which are both technologically and logistically intensive, involve frequent and in-depth interaction with customers. We
believe that the most effective means of providing foundry services is by developing direct and close relationships with our
customers. Our customer service and technical support managers work closely with the sales force to offer integrated
services to customers. To facilitate customer interaction and information access on a real-time basis, a suite of web-based
applications have also been offered to provide more active interactions with customers in design, engineering and logistics.
Advance Payment by Customers. Because of the fast-changing technology and functionality in semiconductor
design, foundry customers generally do not place purchase orders far in advance to manufacture a particular type of
product. However, some of our customers have entered into agreements with us to pay temporary receipts in order to retain
specified capacity at our fabs. The treatment of advance temporary receipts, either by refund or by accounts receivable
offsetting, will be determined by mutual consent when the terms and conditions set forth in the agreements are satisfied.
See note 22 to our consolidated financial statements for further information.
The Semiconductor Fabrication Process
In general, the semiconductor manufacturing process begins with a thin silicon wafer on which an array of
semiconductor devices is fabricated. The following processes cover assembly, packaging, and testing of the semiconductor
devices. Our focus is on wafer fabrication although we also provide other services either directly or through outsourcing
arrangements.
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Our Foundry Services
Range of Services. Because of our ability to provide a full array of services, we are able to accommodate customers
with a variety of needs at every stage of the overall foundry process. The flexibility in input stages allows us to cater to a
variety of customers with different in-house capabilities and thus to service a wider class of customers as compared to a
foundry that cannot offer design or mask making services, for example. As we serve a large global customer base that
entails a wide range of applications, such customer diversification helps to smooth fluctuations in demand.
Fabrication Processes. We manufacture semiconductors mainly using the CMOS process. The CMOS process is
currently the mainstream semiconductor manufacturing process. We use the CMOS process to manufacture logic
semiconductors, mixed-signal/radio frequency semiconductors, which combine analog and digital circuitry in a single
semiconductor, micro-electro-mechanical-systems (“MEMS”), which combines micrometer featured mechanical parts,
analog and digital circuitry in a single semiconductor, and embedded memory semiconductors, which combine logic and
memory in a single semiconductor, etc.
Types of Semiconductors We Manufacture. We manufacture different types of semiconductors with different
specific functions by changing the number and the combinations of conducting, insulating and semiconducting layers and
by defining different patterns in which such layers are applied on the wafer. At any given point in time, there are thousands
of different products in various stages of fabrication at our fabs. We believe that the keys to maintaining high production
quality and utilization rates are our effective management and control of the manufacturing process technologies which
come from our extensive experience as the longest existing dedicated foundry and our dedication to quality control and
process improvements. Our semiconductors are used for a variety of different platforms. The principal platforms include:
High Performance Computing (“HPC”): Driven by data explosion and AI application innovation, HPC has become
the key growth driver for our business. We provide customers, including both fabless IC design companies and system
companies, with leading-edge logic process technologies such as 2-nanometer Nanosheet Transistor (“N2”), 3-nanometer
Fin Field-Effect Transistor (“FinFET”), 4-nanometer FinFET, 5-nanometer FinFET, 6-nanometer FinFET, and 7-
nanometer FinFET, as well as comprehensive intellectual properties including high-speed interconnect intellectual
properties to meet customers’ product requirements for transferring and processing vast amounts of data anywhere at any
time. Specifically, we introduced our HPC-focused technologies such as N4X, N3X, and N2X, representing the ultimate
performance and maximum clock frequencies in our 5-nanometer, 3-nanometer, and 2-nanometer families, respectively.
Based on advanced process nodes, a variety of HPC products have been launched, such as AI accelerators, including AI
graphics processor units (“GPUs”) and AI application specific integrated circuits (“ASICs”), personal computer central
processing units (“CPUs”), consumer GPUs, field programmable gate arrays (“FPGAs”), server processors, and high-speed
networking chips, etc. These products can be used in current and future 5G/6G infrastructures, AI, cloud, and enterprise
data centers. We also offer multiple TSMC 3DFabric® advanced silicon stacking and packaging solutions, such as TSMC-
SoIC® manufacturing services and CoWoS® advanced packaging services, to enable homogeneous and heterogeneous chip
integration to meet customer requirements for high performance, high compute density and high energy efficiency, low
latency, and high integration. We will continue to optimize our HPC platform and strengthen collaboration with customers
to help them capture market growth in HPC markets.
Smartphones: For customers’ premium product applications, we offer leading logic process technologies such as 2-
nanometer Nanosheet Plus (“N2P”), 3-nanometer FinFET Plus (“N3P”), 3-nanometer FinFET Enhanced (“N3E”), 3-
nanometer FinFET, 4-nanometer FinFET Plus (“N4P”), 4-nanometer FinFET, 5-nanometer FinFET Plus (“N5P”), and 5-
nanometer FinFET, as well as comprehensive intellectual properties to further enhance chip performance, reduce power
consumption, and decrease chip size. For mainstream product applications, we provide a broad range of logic process
technologies, including 3-nanometer FinFET Compact (“N3C”), 4-nanometer FinFET Compact (“N4C”), 6-nanometer
FinFET, 7-nanometer FinFET Plus (“N7+”), 7-nanometer FinFET, 12-nanometer FinFET Compact Plus (“12FFC+”), 12-
nanometer FinFET Compact (“12FFC”), 16-nanometer FinFET Compact Plus (“16FFC+”), 16-nanometer FinFET
Compact (“16FFC”), 28-nanometer High Performance Compact Plus (“28HPC+”), 28-nanometer High Performance
Compact (“28HPC”), and 22-nanometer Ultra-Low Power (“22ULP”), as well as comprehensive intellectual properties, to
satisfy customer needs for high-performance and low-power chips. Furthermore, for both premium and mainstream product
applications, we offer leading-edge, highly competitive specialty technologies to deliver specialty companion chips for
customers’ logic application processors, including radio frequency (“RF”), RF front-end, embedded non-volatile memory
(“eNVM”), power management ICs (“PMICs”), sensors, and display chips, as well as TSMC 3DFabric® advanced
packaging services, such as our industry-leading InFO technology.
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Internet of Things (“IoT”): Following the three megatrends of the IoT segment, “Everything Connected, Smart and
Green,” we not only provide customers with solid logic technologies, including 4-nanometer, 5-nanometer, 6-nanometer, 7-
nanometer, 12-nanometer, 16-nanometer, and 28-nanometer, but also build a leading, complete and highly integrated ultra-
low power (“ULP”) technology platform based on our logic technologies to enable customers’ product innovations for the
Artificial Intelligence of Things (“AIoT”, AI+IoT) and Edge AI. Our industry-leading ULP technologies feature both
energy efficiency and high performance, providing more computing power and AI inferencing capability while reducing
system power consumption. FinFET-based 6-nanometer technology service (“N6e® ULP”) and 12-nanometer technology
service (“N12e® ULP”) have both entered volume production, while the next-generation 4-nanometer ULP technology is in
development. In addition, planar transistor-based mainstream technologies, such as 22-nanometer Ultra-Low Leakage
(“ULL”), 28-nanometer ULP, 40-nanometer ULP, and 55-nanometer ULP technologies, have been widely adopted by
various IoT system-on-a-chip (“SoC”) and battery-powered products to extend battery life. Our ULP technology platform
also provides customers with comprehensive specialty technologies, covering RF, enhanced analog devices, embedded
non-volatile memory, sensors, display devices, and PMICs. For extreme low-power product applications, we have also
extended our low operating voltage (“Low Vdd”) offerings and have provided simulation program with integrated circuit
emphasis (“SPICE”) models with a wide range of operating voltages and design guidelines to lower the adoption barrier
and reduce lead time to help customers successfully launch innovative products.
Automotive: We offer a comprehensive spectrum of technologies and services to support the automotive industry’s
three megatrends – building vehicles that are “Safer, Smarter and Greener.” We are also an industry leader in providing a
robust automotive intellectual property ecosystem, which covers 3-nanometer, 4-nanometer, 5-nanometer, 7-nanometer,
and 16-nanometer FinFET technologies, for advanced driver-assistance systems (“ADAS”), advanced in-vehicle
infotainment (“IVI”), as well as zonal controllers for new electrical/electronic (“E/E”) architectures in next-generation
vehicles, including both internal combustion engines (“ICEs”) and electric vehicles (“EVs”). 3-nanometer FinFET
Automotive (“N3A”) technology, based on N3E technology, is our most advanced automotive-grade technology to date
and was released to customers at the end of 2025. In addition to our advanced logic platform, we offer comprehensive
automotive-grade specialty technologies including 28-nanometer embedded flash memory, 28-nanometer, 22-nanometer,
and 16-nanometer RF for millimeter wave (“mmWave”) applications, high dynamic range (“HDR”) and high sensitivity
CMOS image sensors (“CIS”), light detection and ranging (“LiDAR”) sensors, and PMICs. As for magnetoresistive
random-access memory (“MRAM”), the 16-nanometer technology as second-generation MRAM passed Automotive
Grade-1 requirements in 2025. 22ULL resistive random-access memory (“RRAM”) technology also passed Automotive
Grade-1 requirements in 2025.
Digital Consumer Electronics (“DCE”): We provide customers with leading comprehensive technologies to deliver
superior performance for 8K/4K video streaming, AI features, better power efficiency, and seamless connectivity for DCE
applications, including smart digital TVs (“DTVs”), set-top boxes (“STBs”), AI-embedded smart cameras and associated
wireless local area networks (“WLANs”), and PMICs, etc. Our leading 5-nanometer FinFET, 7-nanometer/6-nanometer
FinFET, 16-nanometer FinFET/12-nanometer FinFET, and 22ULP/22ULL technologies have been widely adopted by
leading global makers of 8K/4K DTVs and STBs, 4K streaming media devices (“SMDs”)/over-the-top (“OTT”), digital
single-lens reflex (“DSLR”) cameras, and so on. We will continue to make these technologies more competitive through
design-technology co-optimization (“DTCO”) for customers’ digital intensive chip designs and to drive lower power
consumption for more cost-effective packaging.
The following table presents a breakdown of our net revenue by platform during the periods indicated:
Year ended December 31, | ||||||||||||
2023 | 2024 | 2025 | ||||||||||
Platform | Net Revenue | Percentage | Net Revenue | Percentage | Net Revenue | Percentage | ||||||
(NT$ in millions, except percentages) | ||||||||||||
High Performance Computing | 934,769 | 43% | 1,476,891 | 51% | 2,192,931 | 58% | ||||||
Smartphone | 814,914 | 38% | 1,005,130 | 35% | 1,110,816 | 29% | ||||||
Internet of Things | 161,917 | 8% | 165,516 | 6% | 191,047 | 5% | ||||||
Automotive | 133,654 | 6% | 139,323 | 5% | 186,667 | 5% | ||||||
Digital Consumer Electronics | 47,000 | 2% | 47,961 | 1% | 47,997 | 1% | ||||||
Others | 69,482 | 3% | 59,487 | 2% | 79,596 | 2% | ||||||
Total | 2,161,736 | 100% | 2,894,308 | 100% | 3,809,054 | 100% | ||||||
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The increase in our net revenue from 2024 to 2025 mainly came from High Performance Computing of NT$716,040
million, or a 48% year-over-year increase, and from Smartphone of NT$105,686 million, or a 11% year-over-year increase.
The increase in our net revenue from 2023 to 2024 mainly came from High Performance Computing of NT$542,122
million, or a 58% year-over-year increase, and from Smartphone of NT$190,216 million, or a 23% year-over-year increase.
Design and Technology Platforms. Modern integrated circuit designers need sophisticated design infrastructure to
optimize productivity and cycle time. Such infrastructure includes design flow for electronic design automation (“EDA”),
silicon proven building blocks such as libraries and intellectual properties, simulation and verification design kits such as
PDK and technology files. All of this infrastructure is built on top of the technology foundation, and each technology needs
its own design infrastructure to be usable for designers. This is the concept of our technology platforms.
For years, we and our alliance partners have spent considerable effort, time and resources to build our technology
platforms. We unveiled an Open Innovation Platform® (“OIP”) initiative in 2008 to further enhance our technologies
offerings. More OIP deliverables were introduced over the years, as well as in 2025. In the design methodology area, we
announced EDA and intellectual property readiness of 3-nanometer, 2-nanometer and TSMC A16TM, as well as continuous
development of solutions to enhance power, performance and area (“PPA”) on existing production technology nodes. In
addition, we contributed the 3Dblox Standard to the Institute of Electrical and Electronics Engineers (the “IEEE”), and
made available various 3-Dimensional Integrated Circuit (“3DIC”) reference flows to support TSMC 3DFabric®
technology services in 3D silicon stacking and advanced packaging which cover a wide range of system-level design
applications.
Multi-project Wafer Program (“CyberShuttle®”). To help our customers reduce costs, we offer a dedicated multi-
project wafer processing service that allows us to provide multiple customers with circuits produced with the same mask.
This program reduces mask costs by a very significant amount, resulting in accelerated time-to-market for our customers.
We have extended this program to all of our customers and library and intellectual property partners using our broad
selection of process technologies, ranging from the latest 2-, 3-, 4-, 5-, 6-, 7-, 12-, 16-, 22-, 28-, 40-, 45-, 55-, 65- and 90-
nanometer processes to 0.13-, 0.18-, 0.25- and 0.35-micron. This extension offers a routinely scheduled multi-project wafer
run to customers on a shared-cost basis for prototyping and verification.
We developed our multi-project wafer program in response to the current SoC development methodologies, which
often require the independent development, prototyping and validation of several intellectual properties before they can be
integrated onto a single device. By sharing mask costs among our customers to the extent permissible, the SoC supplier can
enjoy reduced prototyping costs and greater confidence that the design will be successful.
Customer Service
We believe that our dedication to customer service has been an indispensable factor in attracting new customers,
helping to ensure the satisfaction of existing customers, and building a mutually beneficial relationship with our customers.
The key elements are our:
•customer-oriented culture through multi-level interaction with customers;
•ability to deliver products of consistent quality, competitive ramp-up speed and fast yield improvement;
•responsiveness to customers’ issues and requirements, such as engineering change and special wafer handling
requests;
•flexibility in manufacturing processes, supported by our competitive technical capability and production
planning;
•dedication to help reduce customer costs through collaboration and services, such as our multi-project wafer
program, which combines multiple designs on a single mask set for cost-saving; and
•availability of our online service which provides necessary information in design, engineering and logistics to
ensure seamless services to our customers throughout the product life cycle.
We also conduct an annual customer satisfaction survey to assess customer satisfaction and to ensure that their needs
are adequately understood and addressed. Continuous improvement plans based upon customer feedback are an integral
part of this business process. We use data derived from the survey as a base to identify future focus areas. We believe that
satisfaction leads to better customer relationships, which would result in more business opportunities.
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Research and Development
The semiconductor industry is characterized by rapid technological changes, frequently leading to the introduction of
new technologies to meet customer demand and the obsolescence of recently introduced technology and products. We
believe that to remain technologically ahead of our competitors and maintain our market position in the foundry segment,
we need to be a technology leader in the semiconductor industry. In 2023, 2024, and 2025, we spent NT$182,370 million,
NT$204,182 million, and NT$246,427 million (US$7,855 million), respectively, on research and development,
representing 8.5%, 7.1% and 6.5% of our net revenue, respectively. We plan to continue significant investment in research
and development in 2026 to maintain our leadership in advanced process technologies. Our research and development
efforts have enabled us to offer customers access to advanced process technologies, such as 7-, 5-, 3- and 2-nanometer
technology for volume production, prior to the implementation of those advanced process technologies by competitors and
many integrated device manufacturers. We expect to further advance our process technologies to 16-angstrom and below in
the coming years to sustain our technology leadership. We will also invest in research and development for our mature
technology offerings to provide function-rich process capabilities to our customers. Our research and development
activities are divided into centralized and fab-conducted research and development activities. Centralized research and
development activities focus on developing new logic, SoC, derivatives, package/system-in-package (“SIP”) technologies,
along with cost-effective 3D wafer level system integration solutions. Fab-conducted research and development activities
focus on improving and upgrading the manufacturing process technologies.
To advance our process technologies, we rely primarily on our internal engineering capabilities, know-how and
research and development efforts, including collaboration with our customers, equipment vendors and external research
and development consortia.
We continually create inventions and in-house know-how. Since our inception, we have applied for and been issued a
substantial number of patents in the United States and other countries, the majority of which are semiconductor related.
Competition
We compete internationally and domestically with other foundry service providers, as well as with a number of
integrated device manufacturers. We compete primarily on process technologies, manufacturing excellence, customer trust
and service quality, such as earlier technology readiness, better quality, faster yield improvement and shorter cycle time.
The level of competition varies with the process technologies involved. For example, in more mature technologies,
competitors tend to be numerous and offer specialized processes. Some companies compete with us in selected geographic
regions or niche application markets. In recent years, substantial investments have been made by others to establish new
foundry capacities worldwide, or to transform certain manufacturing operations of integrated device manufacturers into
foundry capacities.
Equipment
The quality and technology of the equipment used in the semiconductor manufacturing process are important in that
they effectively define the limits of our process technologies. Advances in process technologies cannot be brought about
without commensurate advances in equipment technology. We have periodic meetings with suppliers with respect to co-
developing next-generation equipment.
The principal pieces of equipment used by us to manufacture semiconductors are scanners, cleaners and track
equipment, inspection equipment, etchers, furnaces, wet stations, strippers, implanters, sputterers, chemical vapor
deposition (“CVD”) equipment, chemical mechanism polish (“CMP”) equipment, testers and probers. Other than certain
equipment under leases located at testing areas, we own all of the equipment used at our fabs.
In implementing our capacity management and technology advancement plans, we expect to make significant
purchases of equipment required for semiconductor manufacturing. Some of the equipment is available from a limited
number of suppliers and/or is manufactured in relatively limited quantities, and certain equipment has only recently been
developed. We believe that well management of the relationships with our equipment suppliers is important for us as a
major purchaser of semiconductor fabrication equipment. We work closely with manufacturers that provide equipment
customized to our needs for certain advanced technologies.
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Raw Materials
Our manufacturing processes use many raw materials, primarily silicon wafers, chemicals, gases and various types of
precious metals. Although most of our raw materials are available from multiple suppliers, some materials are purchased
through sole-sourced suppliers. Our raw material procurement policy is to select only those suppliers who have
demonstrated quality control and reliability on delivery time and to maintain multiple sources for each raw material
whenever possible so that a quality or delivery problem with any one supplier will not adversely affect our operations. The
quality and delivery performance of each supplier is evaluated quarterly and quantity allocations are adjusted for
subsequent periods based on the evaluation.
The most important raw material used in our production is silicon wafer, which is the basic raw material from which
integrated circuits are made. In pursuit of high quality raw wafers, the majority of our raw wafers are supplied by a limited
number of suppliers located in Taiwan, Japan, Germany, and Singapore. We have in the past obtained, and believe we will
continue to be able to obtain, a sufficient supply of wafers. In order to secure a reliable and flexible supply of high quality
wafers, we have entered into long-term agreements and intend to continue to develop strategic relationships with major
wafer suppliers to cover our anticipated wafer needs for future years. Also, we actively address supply chain issues and
bring together fab operations, materials management, quality system and risk management teams to mitigate potential
supply chain risks and enhance supply chain agility. This taskforce works with our primary suppliers to review their
business continuity plans, qualify their dual-plant materials, prepare safety inventories, improve the quality of their
products, and manage the supply chain risks of their suppliers. Please see “Item 3. Key Information – Risk Factors – Risks
Relating to Our Business” for a discussion of the risk related to raw materials, including the fluctuation of prices of our
main raw materials.
Environmental and Climate Related Laws and Regulations
The semiconductor production process generates gaseous chemical wastes, greenhouse gases (“GHG”), liquid
wastes, wastewater and other industrial wastes in various stages of the manufacturing process. We have installed in our
fabs various types of pollution control equipment for the treatment of gaseous and liquid chemical wastes and wastewater,
equipment for GHG emission reduction and equipment for the recycling of used chemicals and treated water. Operations at
our fabs are subject to regulations and periodic monitoring by the R.O.C. Ministry of Environment, the U.S. Environmental
Protection Agency, the State Environmental Protection Administration of China, the Japan Ministry of the Environment,
the European Environment Agency and European Chemicals Agency, and local environmental protection authorities in
Taiwan, the U.S., China, Japan and Germany.
We have adopted pollution control and GHG emission reduction measures to ensure compliance with environmental
protection and climate related standards consistent with the practice of the semiconductor industry in Taiwan, the U.S.,
China, Japan and Europe. We conduct environmental audits at least once annually to ensure that we are in compliance in all
material respects with applicable environmental and climate related laws and regulations. An environmental, safety and
health (“ESH”) team operates at the corporate level that is responsible for policy establishment and enforcement,
coordination with ESH teams located at each manufacturing facility and for coordination and interaction with government
agencies worldwide.
To fulfill our commitment to environmental sustainability in our business and operations, we have continued to
explore and participate in initiatives to expand our use of renewable energy. In 2025, TSMC used renewable energy and
purchased renewable energy certificates and carbon credits globally in a total of 5,780 GWh, of which approximately 2,795
GWh enabled our overseas sites to be 100% powered by clean energy for the eighth consecutive year. As of the end of
2025, we have signed power purchase agreements to purchase 7.3 GW of renewable energy, thereby eliminating an
estimated 7.5 million metric tons of carbon dioxide equivalent emissions per year.
Environmental, Social and Governance Initiatives
At TSMC, we believe that a strong sustainability governance framework is essential to sustaining long-term
competitiveness and creating value for all stakeholders. Our sustainability efforts are overseen by the Board of Directors
and the Nominating, Corporate Governance, and Sustainability Committee, supported by two key management platforms:
the ESG Steering Committee and the ESG Committee. The ESG Steering Committee, led by the Company Chairman,
collaborates with the management team to define ESG strategies aligned with our operations. The ESG Committee
implements resolutions from the ESG Steering Committee, coordinates resources across departments, directs the dedicated
Corporate Sustainability Office and management representatives from organizations to identify material issues and develop
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action plans, and monitors progress on a quarterly basis. To further enhance the transparency of information, in 2024, we
initiated the IFRS Sustainability Disclosure Standards Adoption Project. In 2025, in accordance with IFRS S1 (General
Requirements for Disclosure of Sustainability-related Financial Information) and S2 (Climate-related Disclosures), we
identified sustainability and climate-related risks and opportunities, assessed their financial impacts, set appropriate
management metrics and targets, and provided updates on progress to the Board of Directors regularly.
Currently, TSMC’s ESG initiatives center on five directions:
Drive green manufacturing. We strive to set industry benchmarks for environmental protection by embedding green
practices into daily operations. Through innovative technologies, we address climate and energy challenges, water
stewardship, circular resource management, air quality control, and biodiversity conservation, reinforcing our commitment
to coexist and thrive with the Earth’s ecosystem.
Build a responsible supply chain. We work closely with supply chain partners to uphold standards in technology,
quality, delivery, human rights, and environmental safety. In response to climate change, we advance green innovation and
climate/nature resilience, aiming to establish a low-carbon semiconductor supply chain.
Create a healthy and inclusive workplace. We foster a people-oriented culture built on open communication,
inclusivity, and safety, where every employee feels valued and a sense of belonging. We provide competitive compensation
and benefits, promote continuous learning, and strive to be a company where innovation thrives and employees feel
empowered to contribute.
Develop talent. We actively support our employees’ career development and dedicate ourselves to inspiring the next
generation of professionals. To accomplish this, we partner with institutions, government organizations, and NGOs/NPOs
to promote STEAM (science, technology, engineering, art, and mathematics) and biodiversity education, strengthening our
efforts in industry-academia collaboration.
Care for the underprivileged. In collaboration with the TSMC Education and Culture Foundation and the TSMC
Charity Foundation, we address societal needs by fostering educational innovation for learners of all ages, promoting
community inclusion, cultivating art and culture literacy, strengthening ecological sustainability and environmental
awareness, and advancing health protection to drive positive and lasting change.
Through these efforts, ESG principles are seamlessly integrated into all aspects of our operations, ensuring a
steadfast commitment to environmental stewardship, social responsibility, and corporate governance. For further
information on our ESG initiatives, please refer to our annual sustainability reports, available on our sustainability website
at https://esg.tsmc.com/en-US. The information contained on our website is not incorporated herein by reference and does
not constitute part of this annual report.
Electricity and Water
We have occasionally experienced power outages, dips or surges caused by difficulties encountered by our electricity
supplier, or other power consumers on the same power grid. Such power outages, dips or surges may lead to interruptions
in our production schedule. The semiconductor manufacturing process uses extensive amounts of electricity and water. Due
to changes in government energy policy, the growth of manufacturers in Taiwan’s Science Parks, and the droughts that
Taiwan experiences from time to time, raise ongoing concerns regarding future availability of sufficient electricity and
water for our production in Taiwan. To help address these potential shortages and mitigate the potential impact that
insufficient electricity and water supplies may have on our semiconductor production, we have adopted various natural
resources conservation methodologies. Moreover, we have encountered and anticipate continued increases in utility prices.
Higher electricity prices could increase our manufacturing costs and therefore adversely impact our financial results. Please
see “Item 3. Key Information – Risk Factors – Risks Relating to Our Business” for a discussion of the risk related to
shortages or increased prices in electricity and water.
Risk Management
We adopt a balanced risk-reward management strategy that aims to optimize business returns. This strategy applies
to all aspects of the business, including addressing ESG issues and delivering long-term sustainable value to all
stakeholders. Our risk management policy, approved by the Board of Directors and signed by the Chairman and Chief
Executive Officer (“CEO”), outlines our commitment to maintaining a proactive and robust risk management system. This
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system assists us in making well-considered, risk-based decisions that fulfill the corporate vision and deliver sustainable
value to us and our stakeholders.
We draw from the International Organization for Standardization (ISO) 31000: 2018 Risk Management System and
the Enterprise Risk Management (“ERM”)-Integrated Framework by COSO (Committee of Sponsoring Organizations of
the Treadway Commission) to establish our risk governance organization. This approach integrates operational and
business processes to strengthen our overall risk management capabilities. Our ERM framework is a systematic approach
that enables us to respond to changing dynamics in the business environment, as well as to capitalize on business
opportunities. The ERM framework specifies the risk governance structure, the management process that integrates
business operations, and the tools that facilitate the identification, assessment, response, monitoring, and review of risks. A
risk criteria matrix on the potential likelihood of impact across financial, operational, reputational, and compliance aspects
is applied in the assessment and prioritization of identified risks. A formalized training and communication program builds
risk competency and fosters a risk-aware culture, helping management make informed risk-based decisions, against our
risk appetite, while implementing corporate strategies. Internal and external audits of the risk management framework and
process are conducted to identify opportunities to improve the effectiveness of our risk management system. We recognize
that our systems and processes provide reasonable but not absolute assurance, and hence we continually strive to improve
our ability to manage and respond to risks and capitalize on opportunities.
To mitigate the operational impact of crisis events, we implement pre-crisis risk assessments, response procedures
and recovery plans. To enhance operational preparedness, we conduct exercises and drills to validate emergency responses,
crisis management, and business continuity plans. In major incidents or crisis events, we follow our crisis management
guidelines. Our central crisis command center (“C4”), headed by the Chairman and CEO and comprising senior executives
across key functions, provides guidance and decision-making to maintain response readiness, including timely
communication to key stakeholders.
We also maintain insurance with respect to our facilities, equipment and inventories. The insurance for our fabs and
equipment covers, subject to some limitations, various risks, including earthquake, fire, typhoon, and other risks. This
coverage is generally up to the respective policy limit for their replacement values and lost profits due to business
interruption. In addition, we have insurance policies covering losses with respect to the construction of all our fabs.
Equipment and inventories in transit are also insured. While we maintain insurance to cover certain types of losses, no
assurance can be given that insurance will fully cover all the losses that may arise or that our emergency responses and
business continuity plans will be effective in preventing or reducing losses.
For further information, please see detailed risk factors related to the impact of climate change regulations and
international accords, and natural disasters on our operations in “Item 3. Key Information – Risk Factors – Risks Relating
to Our Business”.
Our Subsidiaries and Affiliates
Vanguard International Semiconductor Corporation (“VIS”). In 1994, we, the R.O.C. Ministry of Economic
Affairs and other investors established VIS, then an integrated dynamic random access memory (“DRAM”) manufacturer.
VIS commenced commercial production in 1995 and listed its shares on the Taipei Exchange (originally the R.O.C. Over-
the-Counter Securities Exchange) in March 1998. In 2004, VIS completely terminated its DRAM production and became a
dedicated foundry company. In October 2024, we acquired additional shares in VIS’ capital increase transaction. As of
February 28, 2026, we owned approximately 27.6% of the equity interest in VIS. Please see “Item 7. Major Shareholders
and Related Party Transactions” for a further discussion.
TSMC Washington, LLC (“TSMC Washington”, previously WaferTech, LLC (“WaferTech”)). In 1996, we
entered into a joint venture called WaferTech (of which the manufacturing entity is Fab 11) with several U.S.-based
investors to construct and operate a foundry in the United States. Initial trial production at WaferTech commenced in July
1998 and commercial production commenced in October 1998. In December 2023, WaferTech was renamed as TSMC
Washington. As of February 28, 2026, we owned 100% of the equity interest in TSMC Washington.
TSMC Global Ltd. (“TSMC Global”). In December 1998, we established TSMC Holding Ltd. in the B.V.I. as a
company with limited liability. In 2006, TSMC Holding Ltd. was renamed to TSMC Global Ltd. TSMC Global is a
wholly-owned subsidiary primarily engaged in corporate treasury investment activities.
Systems on Silicon Manufacturing Company Pte. Ltd. (“SSMC”). In March 1999, we entered into an agreement
with Koninklijke Philips NV (“Philips”) and EDB Investment Pte. Ltd. (“EDB”) to found a joint venture, SSMC, and build
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a fab in Singapore. The SSMC fab commenced commercial production in December 2000. As of February 28, 2026, we
owned approximately 38.8% of the equity interest in SSMC. Please see “Item 7. Major Shareholders and Related Party
Transactions” for a further discussion.
Global Unichip Corporation (“GUC”). In January 2003, we acquired a 52.0% equity interest in GUC, a SoC design
service company that provides large scale SoC implementation services. GUC listed its shares on the Taiwan Stock
Exchange in November 2006. As of February 28, 2026, we owned approximately 34.8% of the equity interest in GUC.
Please see “Item 7. Major Shareholders and Related Party Transactions” for a further discussion.
TSMC China. In August 2003, we established TSMC China (of which the manufacturing entity is Fab 10), a wholly-
owned subsidiary primarily engaged in the manufacture and sale of integrated circuits. TSMC China commenced
commercial production in late 2004.
VisEra Technologies Company, Ltd. (“VisEra Technologies”). In October 2003, we and OmniVision Technologies
Inc. (“OVT”), entered into an agreement to form VisEra Technologies, a joint venture in Taiwan, for the purpose of
providing back-end service for CMOS image sensor manufacturing business. In November 2015, we acquired all of OVT’s
equity interest in VisEra Technologies. In March 2021, we disposed certain common shares of VisEra Technologies to
facilitate its initial public offering (“IPO”). Immediately following VisEra Technologies’ IPO in June 2022, our
shareholding was diluted to approximately 67.9%. As of February 28, 2026, we owned approximately 67.2% of the equity
interest in VisEra Technologies.
Xintec, Inc. (“Xintec”). In January 2007, we acquired a 51.2% equity interest in Xintec, a supplier of wafer level
packaging service, to support our CMOS image sensor manufacturing business. In March 2015, Xintec listed its shares on
the Taipei Exchange. Subsequent to Xintec’s IPO, our shareholding in Xintec was diluted to approximately 41.2%. As of
February 28, 2026, we owned approximately 41.0% of the equity interest in Xintec. Please see “Item 7. Major Shareholders
and Related Party Transactions” for a further discussion.
TSMC Nanjing. In May 2016, we established TSMC Nanjing (of which the manufacturing entity is Fab 16), a
wholly-owned subsidiary primarily engaged in the manufacture and sale of integrated circuits. TSMC Nanjing commenced
commercial production in April 2018.
TSMC Arizona. In November 2020, we established TSMC Arizona (of which the manufacturing entity is Fab 21), a
wholly-owned subsidiary that is expected to be primarily engaged in the manufacture and sale of integrated circuits. TSMC
Arizona plans to build and operate multiple advanced semiconductor manufacturing facilities in Phoenix, Arizona.
Our first facility successfully entered high volume production at the end of 2024. Construction of our second facility
is ongoing, and the construction of our third facility commenced in 2025. Furthermore, we acquired an additional parcel of
land in 2026 to support our current expansion plans and provide more flexibility in response to strong customer demand.
In November 2024, TSMC Arizona entered into a direct funding agreement (the “Direct Funding Agreement”) with
the U.S. Department of Commerce (the “DOC”) under the U.S. CHIPS Act. Under this agreement, the DOC agrees to
award TSMC Arizona up to US$6.6 billion in direct funding related to TSMC Arizona’s semiconductor manufacturing
facilities in Phoenix, Arizona (the “Projects”). In addition to the Direct Funding Agreement, TSMC Arizona also entered
into a loan guarantee agreement and several ancillary agreements with the DOC (the “Loan Agreements”), under which
TSMC Arizona is entitled to draw down up to US$5 billion in government loans for the Projects. In connection with the
Direct Funding Agreement and the Loan Agreements, the Company entered into certain guarantee agreements, under
which the Company agrees to provide an irrevocable, absolute and unconditional guarantee to the DOC regarding any
financial obligations owed by TSMC Arizona to the DOC. The awards under the Direct Funding Agreement are subject to
various conditions, compliance requirements, program requirements and project milestone requirements.
JASM. In December 2021, we established JASM (of which the manufacturing entity is Fab 23) in Kumamoto, Japan,
which is expected to be primarily engaged in the manufacture and sale of integrated circuits. In January 2022, Sony
Semiconductor Solution Corporation (“Sony”) acquired a less than 20% equity interest in JASM. In April 2022, DENSO
Corporation (“DENSO”) acquired a more than 10% minority equity interest in JASM. Construction on the site commenced
in April 2022 and volume production commenced in December 2024. In February 2024, we, Sony, DENSO and Toyota
Motor Corporation (“Toyota”) announced further investment into JASM to build and operate a second semiconductor
manufacturing facility. Construction on the second site commenced in October 2025. By way of such investment, Toyota
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also took a minority stake in JASM. As of February 28, 2026, we owned approximately 72.6% of the equity interest in
JASM.
ESMC. In June 2023, we established ESMC in Dresden, Germany, which is expected to be primarily engaged in the
manufacturing and sale of integrated circuits. In January 2024, Robert Bosch GmbH, Infineon Technologies AG, and NXP
Semiconductors Germany GmbH, a wholly-owned subsidiary of NXP Semiconductors N.V. (“NXP”), each acquired 10%
equity interest and together acquired 30% equity interest in ESMC. Construction on the site commenced in 2024. As of
February 28, 2026, we owned 70.0% of the equity interest in ESMC.
ITEM 4A.UNRESOLVED STAFF COMMENTS
None.
ITEM 5.OPERATING AND FINANCIAL REVIEWS AND PROSPECTS
The following discussion covers items for and a comparison between the fiscal years ended December 31, 2025 and
2024. For the discussion covering items for the fiscal year ended December 31, 2023 and a comparison between the fiscal
years ended December 31, 2024 and 2023, please refer to “Item 5” of our annual report on Form 20-F for the fiscal year
ended December 31, 2024 filed with the U.S. SEC.
Overview
We manufacture a variety of semiconductors based on designs provided by our customers. Our business model is
commonly called a “dedicated semiconductor foundry.” As a leader of the foundry segment, our net revenue and net
income attributable to shareholders of the parent were NT$2,894,308 million and NT$1,158,380 million in 2024, and
NT$3,809,054 million (US$121,423 million) and NT$1,697,604 million (US$54,116 million) in 2025, respectively. Please
see “ – Year-to-Year Comparisons – Net Revenue” for a discussion of the changes in net revenue from 2024 to 2025.
The principal source of our revenue is wafer fabrication, which accounted for approximately 86% of our net revenue
in 2025. The rest of our net revenue was mainly derived from packaging and testing services, mask making, design, and
royalty income. Factors that significantly impact our revenue include:
•worldwide demand and capacity supply for semiconductor products;
•pricing;
•production capacity;
•technology development; and
•fluctuation in foreign currency exchange rates.
While the above factors are significant factors, four of which are elaborated as follows:
Pricing. We establish pricing levels for specific periods of time with our customers, some of which are subject to
adjustment during the course of that period to take into account market conditions and other factors. We believe that
customers find value in our flexible manufacturing capabilities, focus on customer service and timely delivery of high yield
products, and this value is reflected in our pricing. Our pricing enables us to continue to invest significantly in research and
development to deliver ever-improving products to our customers, and sustain healthy financial conditions to expand
capacity and support customers’ growth.
Production Capacity. We currently own and operate our semiconductor manufacturing facilities. In 2025, our annual
capacity (in 12-inch equivalent wafers) exceeded 17 million wafers, compared to approximately 17 million wafers in 2024.
Technology Development. Our operation utilizes a variety of process technologies, ranging from mature process
technologies of 0.25 micron or above circuit resolutions to advanced process technologies of 3-nanometer circuit
resolutions. The table below presents a breakdown of wafer revenue by circuit resolution during the periods indicated:
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Year ended December 31, | |||
2023 | 2024 | 2025 | |
Resolution | Percentage of total wafer revenue(1) | Percentage of total wafer revenue(1) | Percentage of total wafer revenue(1) |
3-nanometer | 6% | 18% | 24% |
5-nanometer | 33% | 34% | 36% |
7-nanometer | 19% | 17% | 14% |
16-nanometer | 10% | 8% | 7% |
20-nanometer | 1% | 0% | 0% |
28-nanometer | 10% | 7% | 7% |
40/45-nanometer | 6% | 4% | 3% |
65-nanometer | 6% | 4% | 4% |
90-nanometer | 1% | 1% | 1% |
0.11/0.13 micron | 2% | 2% | 1% |
0.15/0.18 micron | 5% | 4% | 3% |
≥0.25 micron | 1% | 1% | 0% |
Total | 100% | 100% | 100% |
(1)The figure represents wafer revenue from a certain technology as a percentage of the total wafer revenue.
In 2025, the 3-nanometer, 5-nanometer and 7-nanometer revenues represented 24%, 36% and 14% of total wafer
revenue, respectively. Advanced technologies (7-nanometer and below) accounted for 74% of total wafer revenue, up from
69% in 2024.
In 2024, the 3-nanometer, 5-nanometer and 7-nanometer revenues represented 18%, 34% and 17% of total wafer
revenue, respectively. Advanced technologies (7-nanometer and below) accounted for 69% of total wafer revenue, up from
58% in 2023.
Foreign Currency Exchange Rate. Substantially all of our sales are denominated in U.S. dollars while we publish
our financial statements in NT dollars. As a result, fluctuations in exchange rates of the NT dollar against the U.S. dollar
would have a significant impact on our reported revenue. The NT dollar appreciation in 2025 had an unfavorable effect on
our revenue, with weighted average exchange rates of the NT dollar per U.S. dollar appreciating from NT$32.13 in 2024 to
NT$31.11 in 2025.
Critical Accounting Policies, Judgments and Key Sources of Estimation and Uncertainty
Summarized below are our accounting policies that we believe are important to the portrayal of our financial results
and also involve the need for management to make estimates about the effect of matters that are uncertain in nature. Actual
results may differ from these estimates, judgments and assumptions. Certain accounting policies are particularly critical
because of their significance to our reported financial results and the possibility that future events may differ significantly
from the conditions and assumptions underlying the estimates used and judgments made by us in preparing our financial
statements. The following discussion should be read in conjunction with the consolidated financial statements and related
notes, which are included in this annual report.
Critical Accounting Policies and Judgments
Revenue Recognition. We recognize revenue when performance obligations are satisfied. Our performance
obligations are satisfied when customers obtain control of the promised goods, which is generally when the goods are
delivered to our customers’ specified locations.
Commencement of Depreciation Related to Property, Plant and Equipment Classified as Equipment under
Installation and Construction in Progress (“EUI” and “CIP”). Commencement of depreciation related to EUI/CIP
involves determining when the assets are available for their intended use. The criteria we use to determine whether EUI/
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CIP are available for their intended use involves subjective judgments and assumptions about the conditions necessary for
the assets to be capable of operating in the intended manner.
Critical Accounting Policies and Key Sources of Estimation and Uncertainty
Estimation of Sales Returns and Allowances. Sales returns and other allowances is estimated and recorded based on
historical experience and in consideration of different contractual terms. The amount is deducted from revenue in the same
period the related revenue is recorded. We periodically review the reasonableness of the estimates. However, because of
the inherent nature of estimates, actual returns and allowances could be different from our estimates. If the actual returns
are greater than our estimated amount, we could be required to record an additional liability, which would have a negative
impact on our recorded revenue and gross margin. For further information, please refer to note 22 to the consolidated
financial statements.
Inventory Valuation. Inventories are stated at the lower of cost or net realizable value for finished goods, work-in-
progress, raw materials, supplies and spare parts. Inventory write-downs are made on an item-by-item basis, except where
it may be appropriate to group similar or related items.
A significant amount of our manufacturing costs is fixed because our extensive manufacturing facilities (which
provide us large production capacity) require substantial investment to construct and are largely fixed-cost assets once they
become operational. When the capacity utilization increases, the fixed manufacturing costs are spread over a larger amount
of output, which would lower the inventory cost per unit.
We evaluate our ending inventory based on standard cost under normal capacity utilization, and reduce the carrying
value of our inventory when the actual capacity utilization is higher than normal capacity utilization. No adjustment is
made to the carrying value of inventory when the actual capacity utilization is at or lower than normal capacity utilization.
Normal capacity utilization is established based on historic loadings compared to total available capacity in our wafer
manufacturing fabs.
We also evaluate our ending inventory and reduce the carrying value of inventory for normal waste, obsolescence
and unmarketable items by an amount that is the difference between the cost of the inventory and the net realizable value.
The net realizable value of the inventory is determined mainly based on assumptions of future demand within a specific
time horizon, which is generally 180 days or less.
Impairment of Tangible Assets, Right-of-Use Assets and Intangible Assets Other than Goodwill. We assess the
impairment of tangible assets (property, plant and equipment), right-of-use assets and intangible assets other than goodwill
whenever triggering events or changes in circumstances indicate that the asset may be impaired and the carrying value may
not be recoverable.
Indicators we consider important which could trigger an impairment review include, but are not limited to, the
following:
•significant underperformance relative to historical or projected future operating results;
•significant changes in the manner of our use of the acquired assets or our overall business strategy; and
•significant unfavorable industry or economic trends.
When we determine that the carrying value of tangible assets, right-of-use assets and intangible assets other than
goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, we
measure any impairment for tangible assets, right-of-use assets and intangible assets other than goodwill based on projected
future cash flow. If the tangible assets, right-of-use assets or intangible assets other than goodwill are determined to be
impaired, we recognize an impairment loss through a charge to our operating results to the extent the recoverable amount,
measured at the present value of discounted cash flows attributable to the assets, is less than their carrying value. Such cash
flow analysis includes assumptions about expected future economic and market conditions, the applicable discount rate,
and the future revenue generation from the use or disposition of the assets. We also perform a periodic review to identify
assets that are no longer used and are not expected to be used in future periods and record an impairment charge to the
extent that the carrying amount of the tangible assets, right-of-use assets and intangible assets other than goodwill exceeds
the recoverable amount. If the recoverable amount subsequently increases, the impairment loss previously recognized will
be reversed to the extent of the increase in the recoverable amount, provided that the increased carrying amount does not
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exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior
years.
In the process of evaluating the potential impairment of tangible assets, right-of-use assets and intangible assets other
than goodwill, we are required to review for impairment groups of assets related to the lowest level of identifiable
independent cash flows. We determine the independent cash flows that can be related to specific asset groups. In addition,
we determine the remaining useful lives of assets and the expected future revenue and expenses associated with the assets.
Any change in these estimates based on changed economic conditions or business strategies could result in significant
impairment charges or reversal in future periods. Our projection for future cash flow is generally lower during periods of
reduced earnings. As a result, an impairment charge is more likely to occur during a period when our operating results are
already otherwise depressed. For further information, including impairment losses recognized in 2024 and 2025, please
refer to note 15, note 16 and note 17 to the consolidated financial statements.
Realization of Deferred Income Tax Assets. When we have temporary differences in the amount of tax expenses
recorded for tax purposes and financial reporting purposes, we may be able to reduce the amount of tax that we would
otherwise be required to pay in future periods. We generally recognize deferred tax assets to the extent that it is probable
that sufficient taxable income will be available in the future to utilize such assets. The income tax benefit or expense is
recorded when there is a net change in our total deferred tax assets and liabilities in a period. The ultimate realization of the
deferred tax assets depends upon the generation of future taxable income during the periods in which the temporary
differences may be utilized. Specifically, the realization of deferred income tax assets is impacted by our expected future
revenue growth and profitability, tax holidays, the surtax imposed on unappropriated earnings and the amount of tax credits
that can be utilized within the statutory period. In determining the amount of deferred tax assets as of December 31, 2025,
we considered past performance, the general outlook of the semiconductor industry, business conditions, future taxable
income and prudent and feasible tax planning strategies.
Because the determination of the amount of deferred tax assets that can be realized is based, in part, on our forecast
of future profitability, it is inherently uncertain and subjective. Changes in market conditions and our assumptions may
cause the actual future profitability to differ materially from our current expectation, which may require us to increase or
decrease the deferred tax assets that we have recorded. For further information, including the amount of deferred tax assets
as of the end of 2024 and 2025, please refer to note 26 to the consolidated financial statements.
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Results of Operations
The following table sets forth, for the periods indicated, certain financial data from our consolidated statements of
profit or loss and other comprehensive income, expressed in each case as a percentage of net revenue:
For the year ended December 31, | |||||
2023 | 2024 | 2025 | |||
Net revenue | 100.0% | 100.0% | 100.0% | ||
Cost of revenue | (45.6)% | (43.9)% | (40.1)% | ||
Gross profit | 54.4% | 56.1% | 59.9% | ||
Operating expenses | |||||
Research and development | (8.5)% | (7.1)% | (6.5)% | ||
General and administrative | (2.8)% | (2.9)% | (2.2)% | ||
Marketing | (0.5)% | (0.4)% | (0.4)% | ||
Total operating expenses | (11.8)% | (10.4)% | (9.1)% | ||
Other operating income and expenses, net | 0.0% | 0.0% | 0.0% | ||
Income from operations | 42.6% | 45.7% | 50.8% | ||
Non-operating income and expenses | 2.7% | 2.9% | 2.8% | ||
Income before income tax | 45.3% | 48.6% | 53.6% | ||
Income tax expense | (5.9)% | (8.6)% | (9.1)% | ||
Net income | 39.4% | 40.0% | 44.5% | ||
Other comprehensive income (loss) for the year, net of income tax | (0.4%) | 2.5% | (1.5%) | ||
Total comprehensive income for the year | 39.0% | 42.5% | 43.0% | ||
Net income attributable to shareholders of the parent | 39.4% | 40.0% | 44.6% | ||
Net income attributable to non-controlling interests | 0.0% | 0.0% | (0.1%) | ||
Year-to-Year Comparisons
Net Revenue and Gross Margin
For the year ended December 31, | |||||||||||
2023 | 2024 | % Change in NT$ from 2023 | 2025 | % Change in NT$ from 2024 | |||||||
NT$ | NT$ | NT$ | US$ | ||||||||
(in millions, except for percentages and wafer shipment) | |||||||||||
Net revenue | 2,161,736 | 2,894,308 | 33.9% | 3,809,054 | 121,423 | 31.6% | |||||
Cost of revenue | (986,625) | (1,269,954) | 28.7% | (1,527,760) | (48,701) | 20.3% | |||||
Gross profit | 1,175,111 | 1,624,354 | 38.2% | 2,281,294 | 72,722 | 40.4% | |||||
Gross margin percentage | 54.4% | 56.1% | — | 59.9% | 59.9% | — | |||||
Wafer (12-inch equivalent) shipment(1) | 12,002 | 12,910 | — | 15,022 | 15,022 | — | |||||
(1)In thousands.
Net Revenue
Our net revenue in 2025 increased by 31.6% from 2024, which was mainly attributed to an increase in ASP due to a
higher proportion of advanced technology (7-nanometer and below) revenue and an increase in wafer shipments, partially
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offset by an appreciation of the NT dollar against the U.S. dollar. We shipped approximately 15 million 12-inch equivalent
wafers in 2025 compared to 13 million in 2024.
Gross Margin
Our gross margin fluctuates with the level of capacity utilization, price change, cost improvement, product mix and
exchange rate, among other factors. Furthermore, our gross margin would be negatively impacted in the year when a new
technology is introduced.
In 2025, our gross margin increased to 59.9% of net revenue from 56.1% in 2024, mainly attributable to higher
capacity utilization and cost improvement, partially offset by unfavorable foreign exchange rate.
Operating Expenses
For the year ended December 31, | |||||||||||
2023 | 2024 | % Change in NT$ from 2023 | 2025 | % Change in NT$ from 2024 | |||||||
NT$ | NT$ | NT$ | US$ | ||||||||
(in millions, except percentages) | |||||||||||
Research and development | 182,370 | 204,182 | 12.0% | 246,427 | 7,855 | 20.7% | |||||
General and administrative | 60,873 | 83,745 | 37.6% | 82,304 | 2,624 | (1.7%) | |||||
Marketing | 10,591 | 13,144 | 24.1% | 16,918 | 539 | 28.7% | |||||
Total operating expenses | 253,834 | 301,071 | 18.6% | 345,649 | 11,018 | 14.8% | |||||
Percentage of net revenue | 11.8% | 10.4% | — | 9.1% | 9.1% | — | |||||
Other operating income and expenses, net | 189 | (1,230) | (750.8%) | 447 | 14 | — | |||||
Income from operations | 921,466 | 1,322,053 | 43.5% | 1,936,092 | 61,718 | 46.4% | |||||
Operating Margin | 42.6% | 45.7% | — | 50.8% | 50.8% | — | |||||
Operating expenses increased by NT$44,578 million in 2025, or 14.8%, from 2024.
Research and Development Expenses
We remain strongly committed to being the leader in advanced process technologies development. We believe that
continuing investment in process technologies is essential for us to remain competitive in the markets we serve.
Research and development expenses increased by NT$42,245 million in 2025, or 20.7%, from 2024. The increases
were mainly attributed to a higher level of research activities for 10-angstrom, 14-angstrom, and 16-angstrom process
technologies, as we continued to advance to smaller processing nodes.
We plan to continue our investment in technology research and development in 2026.
General and Administrative and Marketing Expenses
General and administrative and marketing expenses in 2025 increased by NT$2,333 million, or 2.4%, compared to
2024, mainly reflecting higher employee profit sharing expenses due to higher net income.
Other Operating Income and Expenses, Net
Net other operating income and expenses in 2025 increased by NT$1,677 million from 2024 to a net gain of NT$447
million (US$14 million), mainly due to lower loss on disposal of property, plant and equipment and reversal of impairment
losses in 2025.
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Non-Operating Income and Expenses
For the year ended December 31, | |||||||||||
2023 | 2024 | % Change in NT$ from 2023 | 2025 | % Change in NT$ from 2024 | |||||||
NT$ | NT$ | NT$ | US$ | ||||||||
(in millions, except percentages) | |||||||||||
Share of profits of associates | 4,800 | 4,881 | 1.7% | 5,489 | 175 | 12.5% | |||||
Interest income | 60,293 | 87,213 | 44.6% | 105,739 | 3,371 | 21.2% | |||||
Other income | 480 | 567 | 18.1% | 592 | 19 | 4.4% | |||||
Foreign exchange gain (loss), net | (2,686) | 10,001 | — | 13,831 | 441 | 38.3% | |||||
Finance costs | (11,999) | (10,495) | (12.5)% | (12,371) | (395) | 17.9% | |||||
Other gains and losses, net | 6,962 | (8,380) | (220.4)% | (7,717) | (246) | (7.9)% | |||||
Net non-operating income | 57,850 | 83,787 | 44.8% | 105,563 | 3,365 | 26.0% | |||||
Non-operating income and expenses in 2025 increased by NT$21,776 million, or 26.0%, from 2024, mainly due to
higher interest income of NT$18,526 million compared to 2024.
Income Tax Expense
For the year ended December 31, | |||||||||||
2023 | 2024 | % Change in NT$ from 2023 | 2025 | % Change in NT$ from 2024 | |||||||
NT$ | NT$ | NT$ | US$ | ||||||||
(in millions, except percentages) | |||||||||||
Income tax expense | (128,288) | (248,316) | 93.6% | (346,530) | (11,047) | 39.6% | |||||
Net income | 851,028 | 1,157,524 | 36.0% | 1,695,125 | 54,036 | 46.4% | |||||
Net income attributable to shareholders of the parent | 851,740 | 1,158,380 | 36.0% | 1,697,604 | 54,116 | 46.5% | |||||
Net margin attributable to shareholders of the parent | 39.4% | 40.0% | — | 44.6% | 44.6% | — | |||||
Income tax expenses increased by NT$98,214 million in 2025, or 39.6%, from 2024. The increase was mainly
attributed to higher taxable income in 2025.
Liquidity and Capital Resources
Our sources of liquidity include cash flow from operations, cash and cash equivalents, current marketable securities,
and issuances of corporate bonds.
Our primary source of liquidity is cash flow from operations. Cash flow from operations for 2025 was NT$2,274,976
million (US$72,521 million), reflecting an increase of NT$448,799 million from 2024.
Our cash, cash equivalents and current marketable securities increased to NT$3,068,595 million (US$97,820 million)
as of December 31, 2025, compared to NT$2,422,019 million as of December 31, 2024. The current marketable securities
primarily consisted of fixed income securities. In 2025, we issued NT dollar-denominated corporate bonds totaling
NT$86,900 million (US$2,770 million). For further information, please refer to note 18 and note 31 to the consolidated
financial statements.
33
We believe that our cash generated from operations, cash and cash equivalents, current marketable securities, and
ability to access capital market will be sufficient to fund our working capital needs, capital expenditures, debt repayments,
dividend payments and other business requirements associated with existing operations over the next 12 months.
For the year ended December 31, | |||||||
2023 | 2024 | 2025 | |||||
NT$ | NT$ | NT$ | US$ | ||||
(in millions) | |||||||
Net cash generated by operating activities | 1,241,967 | 1,826,177 | 2,274,976 | 72,521 | |||
Net cash used in investing activities | (906,120) | (864,843) | (1,144,394) | (36,481) | |||
Net cash used in financing activities | (204,894) | (346,301) | (440,345) | (14,037) | |||
Effect of exchange rate changes on cash and cash equivalents | (8,339) | 47,166 | (50,008) | (1,594) | |||
Net increase in cash and cash equivalents | 122,614 | 662,199 | 640,229 | 20,409 | |||
Cash and cash equivalents increased by NT$640,229 million in 2025, following an increase of NT$662,199 million
in 2024.
Operating Activities
In 2025, we generated NT$2,274,976 million (US$72,521 million) net cash from operating activities, as compared to
NT$1,826,177 million in 2024. The net cash generated from operating activities was primarily from NT$2,041,655 million
in income before income tax and NT$688,096 million in non-cash depreciation and amortization expenses, partially offset
by income tax payment, net changes in working capital and others of NT$454,775 million. The higher depreciation and
amortization expenses in 2025 were mainly attributed to continuing investment in production capacity for advanced
technologies.
In 2024, we generated NT$1,826,177 million net cash from operating activities, as compared to NT$1,241,967
million in 2023. The net cash generated from operating activities was primarily from NT$1,405,840 million in income
before income tax and NT$662,796 million in non-cash depreciation and amortization expenses, partially offset by income
tax payment, net changes in working capital and others of NT$242,459 million. The higher depreciation and amortization
expenses in 2024 were mainly attributed to continuing investment in production capacity for advanced technologies.
Investing Activities
In 2025, net cash used in investing activities was NT$1,144,394 million (US$36,481 million), as compared to
NT$864,843 million in 2024. The primary use of cash in investing activities in 2025 was for capital expenditures of
NT$1,272,411 million.
In 2024, net cash used in investing activities was NT$864,843 million, as compared to NT$906,120 million in 2023.
The primary use of cash in investing activities in 2024 was for capital expenditures of NT$956,007 million.
Our capital expenditures for 2025 were primarily related to:
•installing and expanding capacity, mainly for 2-nanometer, 3-nanometer and 5-nanometer nodes, including
building/facility expansion for Fab 20, Fab 21 and Fab 22;
•expanding capacity for specialty technologies and advanced packaging, including building/facility expansion
for Fab 23 and Fab 24; and
•investing in research and development projects for new process technologies.
See “Item 3. Key Information – Risk Factors – Risks Relating to Our Business” section for the risks associated with
the inability of raising the requisite funding for our expansion programs. Please also see “Item 4. Information on The
Company – Capacity Management and Technology Upgrade Plans” for discussion of our capacity management and capital
expenditures.
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Financing Activities
In 2025, net cash used in financing activities was NT$440,345 million (US$14,037 million), as compared to net cash
used of NT$346,301 million in 2024. The net cash used in financing activities in 2025 was mainly due to cash dividend
payments, partially offset by the proceeds from issuance of corporate bonds.
In 2024, net cash used in financing activities was NT$346,301 million, as compared to net cash used of NT$204,894
million in 2023. The net cash used in financing activities in 2024 was mainly due to cash dividend payments, partially
offset by the proceeds from issuance of corporate bonds.
As of December 31, 2025, our short-term loans were nil and our aggregate long-term debts were NT$1,032,988
million (US$32,929 million), of which NT$136,926 million (US$4,365 million) was classified as current. The long-term
debt mainly included NT dollar- and U.S. dollar-denominated corporate bonds with fixed interest rates ranging from 0.41%
to 4.63% and remaining maturity ranging from less than one year to 35 years.
Cash Requirements
The following table sets forth information on our material contractually obligated payments (including principals and
interests) for the periods indicated as of December 31, 2025:
Payments Due by Period | ||||||||||
Contractual Obligations | Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | |||||
(in NT$ millions) | ||||||||||
Long-Term Debt(1) | 1,229,859 | 156,822 | 321,847 | 238,883 | 512,307 | |||||
Capital Leases(2) | 39,470 | 4,381 | 6,574 | 5,805 | 22,710 | |||||
Temporary Receipts(3) | 189,858 | 146,559 | 43,299 | — | — | |||||
Capital Purchase or Other Purchase Obligations(4) | 1,534,575 | 1,220,393 | 314,181 | 1 | — | |||||
Total Contractual Cash Obligations | 2,993,762 | 1,528,155 | 685,901 | 244,689 | 535,017 | |||||
(1)Represents corporate bonds payable and long-term bank loans. See note 18 and note 19 to our consolidated
financial statements for further information regarding interest rates and future repayment of long-term debts.
(2)Capital lease obligations are described in note 16, note 31 and note 33 to our consolidated financial statements.
(3)Represents advance temporary receipts from customer. See “Item 4. Information on The Company — Markets and
Customers” and note 22 to our consolidated financial statements for further information.
(4)Represents commitments for construction or purchase of equipment, raw material and other property or services.
These commitments were not recorded on our statement of financial position as of December 31, 2025, as we had
not received related goods or taken title of the property.
During 2025, we used derivative financial instruments to partially hedge the currency exchange rate risk related to
non-NT dollar-denominated assets and liabilities and interest rate risk related to our fixed income investments. See “Item
11. Quantitative and Qualitative Disclosures about Market Risk” for a further discussion about currency exchange rate risk,
interest rate risk, and derivative financial instruments we used to hedge such risks. See also note 5 to the consolidated
financial statements for our accounting policy of derivative financial instruments, and note 8, note 11 and note 33 to the
consolidated financial statements for additional details regarding our derivative financial instruments transactions.
We provided letters of credit and entrusted financial institutions to provide performance guarantees. See note 36 to
our consolidated financial statements for further information.
Significant amount of capital is required to build, expand, and upgrade our production facilities and equipment. Our
capital expenditures for 2026 are expected to be between US$52 billion and US$56 billion, which, depending on market
conditions, may be adjusted later.
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Taxation
The corporate income tax rate in R.O.C. is 20%. The R.O.C. Controlled Foreign Company (“CFC”) rules enacted in
2016 have been implemented since January 1, 2023, pursuant to which, certain profits retained at a CFC located in a low-
tax jurisdiction would be taxable at its parent company in Taiwan. On the other hand, effective from January 1, 2023, the
R.O.C. Statute for Industrial Innovation was amended such that eligible companies that develop innovative technologies
domestically and possess leading position in global supply chain may claim investment tax credit of 25% on qualified
R&D expenditure and 5% on procurement of machinery/equipment for advanced processes. We are eligible for these new
incentives pursuant to the R.O.C. Statute for Industrial Innovation.
The alternative minimum tax (“AMT”) imposed under the R.O.C. AMT Act is a supplemental income tax which
applies if the amount of regular income tax calculated pursuant to the R.O.C. Income Tax Act and relevant laws and
regulations is below the amount of basic tax prescribed under the R.O.C. AMT Act. The taxable income for calculating
AMT includes most income that is exempt from income tax under various legislations, such as tax holidays. The prevailing
AMT rate for business entities is 12%.
Off Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on
our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.
Recent Accounting Pronouncements
Please refer to note 4 to the consolidated financial statements.
Summary Financial Information of the Obligor Group
The debt securities issued by TSMC Arizona under an indenture (the “Indenture”), dated as of October 18, 2021,
among TSMC Arizona, as the issuer, TSMC, as guarantor, and Citibank, N.A., as trustee, are unconditionally and
irrevocably guaranteed as to payment of principal, interest and premium, if any, by TSMC. TSMC Arizona and TSMC are
referred to collectively as the Obligor Group. Each guarantee provided under the Indenture is referred to as a Guarantee and
collectively, the Guarantees. TSMC Arizona is a corporation incorporated under the laws of the State of Arizona and a
SourceSEC EDGAR