Letter from the CSR Committee Chairperson

Letter from the CSR Committee Chairperson

Innovation・Sustainability・Rise Up and Act!

TSMC is built on the cornerstone of responsible management, and it is our abiding promise. Based on our core values of integrity, commitment, innovation, and customer trust, we hold ourselves to the highest standards of corporate governance. TSMC believes employees are its most important asset, and works actively to build a collaborative team with shared vision and values. We provide customers with the most advanced and comprehensive process technologies through unceasing innovation, build green factories and green supply chains friendly to the environment, and take concrete action to give back to society.

This year is the 30th anniversary of TSMC’s founding. In 1987, TSMC pioneered a revolutionary new business model that gave rise to two all-new industries: dedicated IC foundry and fabless IC design. At its third decade, TSMC is now the leader in dedicated IC foundry. Over the years we have innovated with our customers, driven continued progress in global technology, brought about the proliferation of a convenient digital lifestyle, and enabled many wonderful changes in modern society. This has also been our unchanging vision since Chairman Dr. Morris Chang first founded TSMC.

TSMC continues to strengthen its commitment to sustainable operations so that this endeavor can continue to endure. It has molded a unique corporate culture and principles, embodied in each TSMC employee’s dedication to diligence in every task.

Five Focal Points for Action on Sustainability

In 2016, TSMC focused on the five dimensions of "innovation and service", "responsible supply chain", "green manufacturing", "inclusive workplace", and "social participation". Based on the material issues we have identified, we have laid out a set of strategies and long-term goals in this report as our "TSMC 2020 Vision". Beginning with our core business, we aim to respond to the United Nations Sustainable Development Goals by continuing to make efforts in the economic, environmental, and social dimensions of our business, and make a contribution towards resolving environmental and social issues.

In 2016, TSMC achieved the following sustainability goals:

Innovation and Service

TSMC has long been the trusted technology and capacity provider to the global semiconductor industry, and a leader in providing new generations of technology. We help customers quickly enter volume production with our outstanding front- and back-end integration capabilities and provide them with competitive advantage in power, performance, and area. In 2016, we led the industry in launching 10nm process technology, and completed IP design and began silicon validation for our 7nm technology. We were also the first in world to bring 16nm Integrated Fan-Out Package-on-Package (InFO PoP) technology to volume production, reducing device footprint and lowering thermal resistance.

Responsible Supply Chain

TSMC views the sustainable development of its supply chain as a key part of its corporate social responsibility. We have established a "TSMC Supplier Code of Conduct" based on the "Electronic Industry Citizenship Coalition (EICC) Code of Conduct" and assembled a supplier counselling team which ensures supplier compliance through numerous channels, including evaluation, audit, training, and the annual Supply Chain Management Forum. In 2016, not only did all new suppliers sign the "TSMC Supplier Code of Conduct", TSMC also successfully guided 11 domestic suppliers to optimize their processes and improve yield. Compared with 2014, domestic suppliers accounting for 80% of total waste production reduced unit waste output by 18.8%, and suppliers that originally did not meet TSMC’s environment, safety, and health standards improved their performance by 18%. We hope to leverage our influence to strengthen the capabilities of domestic suppliers to meet international sustainability standards.

Green Manufacturing

TSMC has continued to enhance its green manufacturing to meet the operational challenges that global warming may bring by making progress through innovation. Our wafer capacity has doubled in the past 10 years while processes continue to grow more complex, but through our efforts, unit wafer average power consumption has decreased 6.4%, process water consumption has decreased 31.7%, and greenhouse gas (GHG) and PFC emissions have respectively decreased 46.5% and 85.1% over that time.

In 2016, we not only met environmental targets for water and power conservation, GHG emissions, waste recycling, and others, we also developed 61 new power conservation methods and 16 water conservation projects, effectively reducing power consumption by 91 GWh and water consumption by as much as 1.41 million metric tons, comprehensively improving our power and resource efficiency. We also purchased 200 GWh of green power, directly supporting renewable energy to become Taiwan’s largest buyer of green power for two consecutive years. Although TSMC has been the leading company in terms of waste recycling rate for many years, we continue to challenge ourselves; in addition to strict waste classification at the source, we have introduced circular economy management methods to independently develop waste recycling technology. In 2016, TSMC was the first semiconductor company to perform internal recycling of waste sulfuric acid and waste copper sulfate, enabling them to become reusable resources and lowering reliance on outsourcing. Total benefits from waste recycling for the full year exceeded NT$920 million.

Inclusive Workplace

TSMC employs people based on their talents, without regard to their nationality. We offer good terms of compensation above the industry average, leave and benefits that meet employees’ needs, a variety of training courses, and do our utmost to create a safe and healthy work environment. In 2016, we recruited 3,477 new employees around the world in a fair, open, and just fashion. We also issued the "TSMC Human Rights Policy" based on international standards, further implementing the "EICC Code of Conduct" to support employees’ physical and mental health as well as work/life balance as they grow with the Company.

Social Participation

TSMC aims to be proactive in corporate social responsibility. Through the TSMC Education and Culture Foundation, TSMC Volunteer Program, and TSMC i-Charity Platform, we effectively combine the Company’s resources with employees’ actions to lay out a public service network for TSMC’s social participation. In addition to caring for education of the underprivileged, building education platforms, and promoting arts and culture, we encourage employees to participate in public service in reading, guiding, ecology and conservation, and caring for the underprivileged and elderly. In 2016, volunteers served 16,570 times, covering 18 cities and counties, for a total of 93,623 hours. TSMC and its employees contributed or invested more than NT$93 million to public service in 2016, supporting 422 schools and non-profit organizations to benefit a total of 212,671 people.

Our Responsibility to Prosper Together

TSMC strives to be a good corporate citizen, and is the only semiconductor company in the world to be selected as component of the DJSI World Index for 16 consecutive years. In 2016, TSMC was also selected as a major component of the FTSE4Good Emerging Index and the MSCI Global Sustainability Indexes, and recognized as one of the leaders in climate disclosure by the CDP. We understand that with these international honors comes greater and heavier responsibility, because TSMC’s prosperity is supported by society and the industry ecosystem. With our ultimate goal of "uplifting society" in mind, we will continue to strengthen our capabilities in sustainability, create value for stakeholders, the environment, and society, and do our utmost to realize a prosperous future for everyone.

Lora Ho Senior Vice President and Corporate Social Responsibility Committee Chairperson