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Business overview
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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8 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. […]
Source: 20-F · Period ended December 31, 2025 · View report
Latest developments
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Latest results
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Revenue
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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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) […]
Cash flow & liquidity
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. 17 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.
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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 […]
Management commentary
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.
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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. […]
Key risks
Annual risk disclosures
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Quarterly risk disclosures are unavailable.
Annual report details
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Annual MD&A Tone Analysis
Only the extracted annual management discussion is evaluated using dictionary version 1.1. Score = (positive − negative) ÷ matched terms × 100. Quarterly reports and current filings are excluded. This lexical measure does not assess financial health and may not fully capture context or negation.
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. […]