2009 Business Overview - TSMC

1. LETTER TO SHAREHOLDERSDear Shareholders,At the start of 2009, we managed the sharp business downturn that gripped the global economy, and then enhanced ourcore strengths by committing more resources into technology innovations, recruiting talents, and expanding our productioncapacity to meet customers’ needs. Now the global economy is on its gradual recovery course and the outlook forsemiconductor industry in 2010 appears robust, TSMC is in a stronger position to compete.The steep downturn in the global semiconductor industry in 4Q’08 and 1Q’09 was followed by a recovery the rate of whichwas unprecedented in the history of the foundry segment. At the start of the slump, management moved with speed tominimize the negative financial impact. Later on, when demand fast recovered, we demonstrated remarkable agility inquickly ramping up production capacity and capturing the pursuant recovery. In the process, the Company lowered itsbreakeven utilization rate and maintained profitability throughout the downturn.TSMC is now headed forward on a course to capture greater share within the dedicated foundry segment throughcontinued development of the leading-edge process technology nodes, while aggressively broadening the Company’sbusiness portfolio into derivative technologies across all legacy technology nodes.Financial ResultsTotal consolidated revenue for 2009 was NT$295.74 billion, an 11.2 percent decrease compared with NT$333.16 billion in2008. Net income decreased 10.7 percent to NT$89.22 billion from NT$99.93 billion, while diluted earnings per sharedecreased 9.6 percent to NT$3.44 compared with NT$3.81 a year earlier.In US dollars, TSMC’s 2009 revenue was US$9 billion and net income was US$2.71 billion, compared with revenue ofUS$10.61 billion and net income of US$3.18 billion in 2008.Among other highlights in 2009, TSMC achieved:● Gross profit margin of 43.7 percent; and● Operating profit margin of 31.1 percent.During the year, TSMC shipped 7.74 million eight-inch equivalent wafers, representing about 7.6 percent of global IC wafershipments, compared with 7.4 percent a year ago.Technology, Capacity and CustomersWhile the semiconductor industry will grow strongly in 2010, it is likely to grow at an average mid-single-digit rate in the2011-2016 period. On the one hand, it is vital for TSMC to maintain and augment its leadership position in the foundrysegment by intensifying the pace of semiconductor manufacturing innovation and by expanding its own capabilities toenlarge market opportunities. On the other hand, TSMC also embarked on a vigorous program to expand the base of ourbusiness to encompass adjacent opportunities that fit our strengths in engineering capabilities and the ability to managemassive scale operations. In addition, to start the development of new businesses, Dr. Rick Tsai has been assigned to devotehis full time to this task as President of New Businesses, starting June 12, 2009. Meanwhile, I resumed CEO responsibility.03