TSMC Arizona

1
Letter to
Shareholders
TSMC’s Mission
Our mission is to be the trusted technology and capacity
provider of the global logic IC industry for years to come.
 Dear Shareholders,
2023 was a challenging year for the global semiconductor industry, but we also witnessed the rising emergence of Our 2-nanometer is on track for volume production in 2025. It will be the most advanced technology in the semiconductor
generative AI-related applications, with TSMC as a key enabler. As the world re-emerged from more than two years industry in both density and energy efficiency, when it is introduced. N2 will adopt nanosheet transistor structure, and
of pandemic-induced slowdown, weakening global macroeconomic conditions and higher inflation and interest rates deliver full-node performance and power benefits, to address the increasing need for energy-efficient computing. As part
prolonged the semiconductor inventory adjustment cycle. Despite the near-term challenges, our technology leadership of N2 technology platform, we also developed N2 with backside power rail solution, which is better-suited for specific HPC
enabled TSMC to outperform the foundry industry in 2023. We are well-positioned to capture the future AI and applications, to be available in the second half of 2025 to customers, with production in 2026.
high-performance computing (HPC)-related growth opportunities.
We are observing a strong level of customer interest and engagement at our N2, higher than N3 at a similar stage, from
In 2023, Generative AI took the world by storm, with ChatGPT gaining over 100m active users in just two months, both HPC and smartphone applications. With our strategy of continuous enhancements, N2 and its derivatives will further
becoming the world’s fastest growing consumer application. Generative AI requires high computing power and interconnect extend our technology leadership well into the future.
bandwidth, which drives semiconductor content increase. TSMC is a key enabler of AI applications. Today, the AI application
is only in its nascent stage, and no matter which AI approach is taken, AI chips require the use of leading edge technologies The insatiable demand for energy-efficient computing power not only requires leading edge process technologies, but also
and advanced packaging solutions, a strong foundry design ecosystem, and high yield to support larger die sizes. All of these advanced packaging technologies to enable large-scale interconnectivity for lower power consumption, at affordable costs.
are to TSMC’s strengths, and thus all roads lead to working with TSMC. TSMC’s industry-leading 3DFabric® backend technologies include the CoWoS® and InFO family of advanced packaging
technologies, with CoWoS® technology seeing robust demand from multiple customers’ AI chips in 2023. Our frontend 3DIC
The surge in AI-related demand in 2023 supports our already-strong conviction on energy-efficient computing. Thus, the technologies, TSMC-SoIC® (System on Integrated Chips), also entered mass production in 2023 to enable customers’ next
value of our technology position is increasing. generation flagship AI products.

To address the insatiable demand for energy-efficient computing power in a highly competitive market, customers rely on We are working closely with our customers in a disciplined manner to plan our capacity, based on the long-term market
TSMC to provide a dependable and predictable cadence of technology offering and high quality manufacturing service. demand profile, and investing in leading edge and specialty technologies, to support their structural growth.

For TSMC, today around ~70% of our total revenue is 16nm and more advanced nodes. With rising contribution from 3nm Part of this strategy is to expand our global manufacturing footprint to increase customer trust, expand our future growth
and 2nm technologies in the next several years, this number will only increase. Thus, our mature node exposure is around potential, and reach for more global talents. Our overseas decisions are based on our customers’ needs, and a necessary level
~20% of our total revenue. of government support. This is to maximize the value for our shareholders.

Our focus on mature nodes is to build high yield capacity for specialized technologies, rather than just nominal capacity. In In the U.S., we are making good progress on our first fab in Arizona in terms of the fab infrastructure, utilities and
2023, we worked closely with our customers to introduce specialty technologies such as N6RF+ for smartphones, CMOS equipment installation. We are on track for volume production of N4 technology in the first half of 2025, with the same level
Image Sensors for cameras, and 22nm MRAM for automotive and industrial applications. Our mature node strategies of manufacturing quality and reliability in Arizona as from our fabs in Taiwan.
will continue to focus on working closely with strategic customers to develop specialty technology solutions to meet their
requirement, and create differentiated and long-lasting value to customers. We are also building a 12-inch specialty technology fab in Kumamoto, Japan, which is on track for volume production in the
fourth quarter of 2024. We also announced plans to build an automotive and industrial specialty fab in Dresden, Germany,
In 2023, we inaugurated our new R&D center in Taiwan, and further enhanced our R&D intensity and technology with construction starting in the fourth quarter of 2024.
development. Our industry-leading 3-nanometer technology entered high volume production with a strong ramp in the
second half of 2023. We are also providing continuous enhancements of our N3 technology, including N3E, N3P and While the initial costs of overseas fabs are higher than TSMC’s fabs in Taiwan, we are confident to manage and minimize the
N3X, and expect an even greater contribution in 2024 and the years beyond, supported by robust demand from multiple cost gap, so that we can continue to maximize the value for our shareholders.
customers.

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 We are also placing a strong focus on our digital excellence initiatives, which includes leveraging big data and AI to increase Maintaining the highest standard of corporate governance is an essential part of our core values. In February 2023, TSMC’s
our fab productivity and operational efficiency and quality. By driving digital excellence at TSMC, our fabs are transforming to Board of Directors approved the establishment of the “Nominating, Corporate Governance and Sustainability Committee.”
become engineer-centric rather than operator-centric. As we expand globally, we will continuously enhance the intelligence The Committee is actively involved in developing TSMC’s sustainability strategies, to lay the foundation for our future
of our fabs, so that we can control and manage fab operations from anywhere in the world, and deepen our service to sustainable development. In addition, the Committee focuses on reviewing and improving TSMC’s corporate governance
support our customers. structure, including recommending independent director candidates to the Board.

Highlights of TSMC’s accomplishments in 2023: In 2023, we also announced an acceleration of our RE100 sustainability timetable, pulling forward our target for
● Total wafer shipments were 12.0 million 12-inch equivalent wafers as compared to 15.3 million 12-inch equivalent wafers 100% renewable energy consumption for all global operations from 2050 to 2040. We also raised our 2030 target for
in 2022. company-wide renewable energy consumption from 40% to 60%, demonstrating our determination to achieve our
● Advanced technologies (7-nanometer and beyond) accounted for 58 percent of total wafer revenue, up from 53 percent in environmental sustainability goals at a faster pace.
2022.
● We deployed 288 distinct process technologies, and manufactured 11,895 products for 528 customers. Corporate Developments
● TSMC produced 28 percent of the world semiconductor excluding memory output value in 2023, as compared to 30

In August 2023, TSMC announced its plan to invest in European Semiconductor Manufacturing Company (ESMC) GmbH,
percent in the previous year, mainly due to the semiconductor industry inventory correction.
in Dresden, Germany, along with Robert Bosch GmbH, Infineon Technologies AG, and NXP Semiconductors N.V., to build a
specialty technology fab focusing on automotive and industrial applications. ESMC is expected to have a monthly capacity of
2023 Financial Performance
40,000 wafers on TSMC’s 28/22 nanometer planar CMOS and 16/12 nanometer FinFET process technology.
Consolidated revenue reached NT$2,161.74 billion, a decrease of 4.5 percent over NT$2,263.89 billion in 2022. Net income
was NT$838.50 billion and diluted earnings per share were NT$32.34. Both decreased 17.5 percent from the 2022 level of In December 2023, TSMC announced that Dr. Mark Liu plans to retire from TSMC in June 2024, and will not seek re-election
NT$1,016.53 billion net income and NT$39.20 diluted EPS. to the board of directors. During his tenure, Dr. Liu has reaffirmed the Company’s commitment to its mission and focused
on enhancing corporate governance and competitiveness particularly in technology leadership, digital excellence, and
TSMC generated net income of US$26.88 billion on consolidated revenue of US$69.30 billion, which decreased 21.1 percent global footprint. TSMC’s Nominating, Corporate Governance and Sustainability Committee recommends Dr. C.C. Wei, while
and 8.7 percent respectively from the 2022 level of US$34.07 billion net income and US$75.88 billion consolidated revenue. remaining as CEO, to succeed as TSMC’s next Chairman, subject to the election of the incoming board in June 2024.

Gross profit margin was 54.4 percent as compared with 59.6 percent in 2022, while operating profit margin was 42.6 Honors and Awards
percent compared with 49.5 percent a year earlier. Net profit margin was 38.8 percent, a decrease of 6.1 percentage points
TSMC received recognition for achievements in innovation, corporate governance, sustainability, investor relations and overall
from 2022’s 44.9 percent.
excellence in management from organizations including Forbes, Fortune Magazine, CommonWealth Magazine, Taiwan
Stock Exchange, and Taiwan Institute for Sustainable Energy. For innovation, TSMC was recognized as 3rd in IFI Claims Patent
In 2023, the Company further raised its total cash dividend payments to NT$11.25 per share, up from NT$11.0 a year ago.
Services’ “2023 Top 50 U.S. Patent Assignees.” TSMC was also recognized by Fortune Magazine as “2023 World’s Most
Admired Companies.” In sustainability, we were chosen once again as a component of the Dow Jones Sustainability Indices,
Environmental, Social and Governance
becoming the only semiconductor company to be selected for 23 consecutive years. We also received MSCI ESG Research’s
In addition to driving profitable growth in our core business, TSMC continues to cultivate green manufacturing, build a AAA Rating, CDP’s “2022 CDP Supplier Engagement Leader,” Morningstar’s “The Best Sustainable Companies to Own in
responsible supply chain, create an inclusive workplace, attract and develop talent, and care for the underprivileged, fulfilling 2024,” S&P Global’s Corporate Sustainability Assessment – Top 10% S&P Global ESG Score, ISS-oekom Corporate Rating’s
the Company’s responsibilities as a corporate citizen. “Prime” status, Financial Times and Statista’s “Asia-Pacific Climate Leaders 2023,” and Forbes’ “World’s Best Employers
2023.” Meanwhile, we remained a major component in various MSCI ESG and FTSE4Good indices. In investor relations,
TSMC continued to receive multiple awards from Institutional Investor Magazine.

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 Capacity Plan Wafer Sales Plan As the world grows more complex, semiconductor
technology is the foundational technology for the
9% 2022 47% 53%
2022
15-16
modern digital economy. The semiconductor value
in the global supply chain continues to increase,
6%
2023 2023 42% 58% providing greater value for our customers, and
16-17
greater value opportunities for TSMC.
6%
2024
17-18 2024 30-40% 60-70%
We do not take our role and responsibility in the
Annual Growth Rate > 7nm ≤ 7nm
global semiconductor industry lightly. We will
Capacity: million 12-inch equivalent wafers 2024 wafer shipment is expected to be 13-14 million 12-inch not deviate from our pure-play foundry business
equivalent wafers.
model, which has demonstrated time and again to
be a win-win model for TSMC and our customers.
We will continue to uphold our Trinity of Strengths
Outlook of Technology Leadership, Manufacturing
Excellence, and Customer Trust, to enable our
Entering 2024, macroeconomic weakness and geopolitical uncertainties persist, potentially further weighing on consumer
customers to unleash their innovations in their end
sentiment and end market demand. Against that backdrop, our business is expected to be supported by the continued
markets.
strong ramp of our industry-leading 3nm technologies and robust AI-related demand, and we expect 2024 to be a healthy
growth year for TSMC.
We will hold ourselves to the highest standards of
corporate governance, and will adhere to our core
Recent developments, such as growing national security concerns, the reshaping of global supply chains, and the intensifying
values of Integrity, Commitment, Innovation and Customer Trust, no matter where we operate, while pursuing a sustainable
competition in the quest for AI supremacy, have deepened geopolitical uncertainties.
future. We deeply value your trust in TSMC through the challenges of 2023. We are very excited about our future, and will
work hard to run our business well, deliver good results and continue to maximize the value for our shareholders in the years
At the same time, as AI technology evolves to use more complex AI models, the amount of computation required for training
to come.
and inference continues to increase. As a result, AI models need to be supported by more powerful semiconductor hardware,
which use the most advanced semiconductor process technologies.

TSMC’s success is predicated on providing the industry’s most leading edge process technologies at scale, in the most
efficient and cost-effective manner, to enable innovators to successfully offer the best products to the world.

As we become a technology leader in the semiconductor industry, we are shouldering a greater responsibility of R&D and
investment in the industry. With our strong technology leadership in leading edge process technologies and advanced
packaging solutions, we are able to capture a greater portion of the industry’s growth opportunities.
Mark Liu C.C. Wei
Chairman Chief Executive Officer
We focus on the fundamentals of our business, and will execute our global manufacturing footprint strategy purposefully,
to support our customers’ growth and increase their trust. We will continue to drive digital excellence across all our fabs
globally and work towards fully intelligent and automated manufacturing. We are determined to be the most efficient and
cost-effective manufacturer, no matter where we operate.

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TSMC Financial, Operational, and
Sustainability Performance Highlights

Consolidated revenue reached The world’s 1st semiconductor TSMC’s first Zero-Waste Advanced technologies (N7 and
NT$2,161.74 billion company to join the RE100, Manufacturing Center beyond) accounted for 58% of
TSMC has committed to 100% commenced operation total wafer revenue
renewable energy by 2040
Diluted earnings per share
were NT$32.34 In terms of patent grants, TSMC Frontend 3DIC technologies,
Chosen once again as a component had accumulated over 62,000 TSMC-SoIC® (System on Integrated
of the Dow Jones Sustainability patents worldwide as of the end of Chips) entered mass production
Total cash dividend payments Indices, becoming the only 2023. The company was ranked
raised to NT$11.25 per share, semiconductor company to be 3rd among U.S. patentees and
up from NT$11.0 a year ago Manufactured 11,895 different products
selected for 23 consecutive years 1st among patentees in Taiwan
using 288 distinct technologies for 528
different customers
Gross profit margin
TSMC Taiwan fabs first in global
was 54.4%
semiconductor industry to jointly
obtain platinum rating for UL 2799 Investment in R&D reached
waste recycling standard US$5.85 billion
Net income was
NT$838.50 billion
TSMC produced 28% of the world
semiconductors excluding memory
output value