T.S.M.C. — Investor Presentation 2020

Sep 18, 2020

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台灣苯乙烯工業股份有限公司
Taiwan Styrene Monomer Co.
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Taiwan Styrene Monomer Co. Investor Conference

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2020.09.18

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Disclaimer

This report discloses forecast on operation and revenue. The actual result might be different from today’s forecast as the company could not control the uncontrollable factors the forecast was based on.

These uncontrollable factors could come from all directions including the change of supply and demand, price adjustment, competition, global economy, supply chains and exchange rates and many other unpredictable factors.

TSMC is not responsible for updating the contents in this report shall any changes occur or would TSMC send out notifications or reminders for the same. This report does not solicit investments and should not be used as investment guide; TSMC is not responsible for any loss or damage incurred due to this report.

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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Agenda

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1 Corporate Profile
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2
Market Review & Outlook
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3
Financial Review
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4
Q & A
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

Company Highlight

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Listed on Consolidated
Founded Paid In Capital
TWSE Revenue (2019)
5,278.70 M 12,219.39 M
Nov. 16, 1979 Aug., 1987
NTD NTD
Managing Group Employee Taipei HQ Office
8F.‐1, No.6, Sec. 1, Roosevelt Rd., Taipei
+886‐2‐2396‐6007
Chairman: Wen‐Yuan Lin
188
GM : Pao Chen (by Jun. 30, 2020)
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TSMC Group
Petrochemical Materials Investment Hospitality
Development
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Kaohsiung Plant Linyuan Industrial Park No.7, Gongye 1st Rd., Kaohsiung +886‐7‐641‐4511

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

Quality Policy

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Taiwan S Monomer C tyrene orporation

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Technology
Enhance professional technologies
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Services
Provide comprehensive services
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Management
Enforce total management
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Consistency
Ensure quality consistency
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

Major Products

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|||||
|---|---|---|---|
|Capacities|2019 Sales by|
|Products|Applications|(tons/year)|Products|
|The major source material for polystyrene (PS),|
|acrylonitrile butadiene styrene (ABS), styrene‐|340,000|
|butadiene rubber (SBR) and other polymers.|
|92.54%|
|The specialty chemical mainly used as a desorbent|
|for producing Para‐xylene in Parex process and Fluxy|7,000|
|3.35%|
|process.|
|The by‐product of the styrene production process,|
|Toluene|
|8,700|
|mainly used as an organic solvent.|
|1.61%|
|Ethyl‐|The intermediate product of the styrene production|
|380,000|
|benzene|process, used as the solvent of polystyrene.|
|0.35%|

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

SM Production Materials and Products

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ABS
Acrylonitrile Butadiene Styrene
EPS
Expanded Polystyrene
HIPS
Benzene High Impact Polystyrene
Ethyl‐ PS
乙苯
benzene Polystyrene
Ethylene SBR
Styrene‐Butadiene Rubber
TPE
Thermoplastics Elastomer
Others
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

SM Downstream Products and Applications

Product	Acronym	Applications	Applications
Acrylonitrile Butadiene Styrene	ABS	auto parts, household appliances, computer case, acrylic board, toys, motorcycle case, luggage case
Expanded Polystyrene	EPS	packaging, insulation, construction, artwork and floating materials, partition board, ice box, cake box
High Impact Polystyrene	HIPS	keyboard, mouse, computer case, disposable tableware
Polystyrene	PS	CD/DVD box, ballpoint pen, X'mas light
Styrene‐Butadiene Rubber	SBR (SSBR)	rubber/color soles, tire
Thermoplastics Elastomer	TPE	auto, electronic & household appliances
Unsaturated Polyester Resins	UPR	thermoset composite applications, button
Emulsion Styrene‐ Butadiene Rubber	E‐SBR	mats, rubber goods and others

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

TSMC Clients

The major SM clients are domestic PS, ABS and SBR manufacturers which includes home appliance, mechanical, automobile, electronic and packaging industries. As for PDEB, the clients are chemical plants across the world.

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Exxon Mobil Ruhr Oel GmbH Indian Oil Corporation TonenGeneral
USA Germany India Japan
Exxon Mobil ANPZ S‐Oil
Nederland Kazakhstan S. Korea
FuHaichuang Petrochemical Co
China
Formosa Chemicals & Fiber
Chinese Petroleum Co.
Turkey
Taiwan Chi Mei
Petkim Petrokimya
Taita Chemical
Taiwan Synthetic Rubber Corp.
LCY Grit Co.
Kuwait
Eternal Materials
Kuwait Paraxylene
Malaysia
Sultanate of Oman Indonesia Petroliam Nasional Berhad
Aromatics Oman Pertamina
United Arab Emirates Saudi Arabia Thailand Singapore
AquaChem SABIC Esso Jurong Aromatics Co.
SATORP Thai Paraxylene Exxon Mobil
PTTGlobal Chemical
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

Company and Production History

M1 plant debottleneck accomplished, SM capacity raised to 140 K tons.

SM1 & SM2 plants debottleneck accomplished. SM total capacity reached 340 K tons.

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SM1 plant established, SM production capacity reached 100 K tons. K tons/yr. 300 200 100 0

SM2 plant established, SM total production capacity reached 240 K tons

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PDEB2 line established. 3.5 K tons capacity built total capacity of 7.0 K tons achieved

K tons/yr. 8 PDEB1 line established. PDEB plant debottleneck accomplished 1.5 K tons capacity built PDEB capacity raised to 3.5 K tons. 6 4 2 0

Basic design for SM1 process improvement accomplished

Cogeneration plant in operation SM1 debottleneck project

Overall production cost reduction reengineering project accomplished Multi‐function distillation energy‐saving projects accomplished

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Plant set up Company founded Paid‐in capital 75M NTD

Paid‐in capital increased to ~ 4.6 Bn NTD Paid‐in capital increased to ~ 4.8 Bn NTD Paid‐in capital increased to ~ 5.3 Bn M NTD Paid‐in capital increased to ~ 5.6 Bn NTD

Capital increased to ~5.2 Bn NTD

Capital relief to ~5.0 Bn NTD Board of Directors resolved to buy back common stocks for the cancellation of shares

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

Quality, Safety and Environment Systems

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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1 Corporate Profile

Operational Strategy and Strategy Development

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Strengthen the core business (SM) and expand the production and
sales of specialty chemical (PDEB)
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 Improvement of raw material and energy utilization efficiency
Cost Reduction  Continuous process improvement
 Establishment of a catalyst lab to improve catalyst performance
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Reinforcement of  Fulfill and implement all ISO systems
Workplace Safety &  Implementation of PSM
Environmental Protection  Equipment component management & audit
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 Consolidation or disposal of unprofitable business
Subsidiary & Investment
 Explore & develop investment targets for new
Management
strategic and downstream products
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Retrospect and Prospect of SM Market

1. 2019 World Styrene Demand and Supply

2. Outlook of World Styrene Demand Growth for 2020~2021

3. Styrene Demand and Supply for Taiwan

4. 2020 First Half Retrospect

5. 2020 Second Half Outlook

6. Overview of Production and Sales for TSMC

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

2019 Global SM Supply & Demand

2019 SM Demand by its downstream products

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Others, 7.8%
TPE, 2.2% PS, 34.1%
SBL, 4.6%
SBR, 3.5%
UPR, 6.3%
SAN, 1.7%
EPS, 21.8%
ABS, 18.0%
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

2019 Global SM Supply & Demand

2019 Worldwide SM Demand by Region

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Middle East, India, Africa,
Russia, 3.9% 2.5% 0.2%
1.7%
Others,
Central Euro.,
0.2%
1.6%
China,
W. Europe, 35.2%
14.0%
S. America,
2.6%
N. America,
13.0%
Japan,
4.9%
SE. Asia,
4.7% Taiwan, S. Korea,
6.6% 8.7%
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Global SM Supply & Demand

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40,00040,000 90.0%
89.0%
35,00035,000
88.0%
30,00030,000
87.0%
25,00025,000
86.0%
20,00020,000 85.0%
84.0%
15,000
15,000
83.0%
10,000
10,000
82.0%
5,000
5,000
81.0%
0
0 80.0%
20102010 20112011 20122012 20132013 20142014 20152015 20162016 20172017 20182018 20192019 Year
產量Production 需求Demand 總產能Total Capacity 開工率Operating rate
Kilo Metric tons
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

World SM Demand Year‐On‐Year Growth

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2,500
2,500
2,000
2,000
1,5001,500
1,0001,000
500500
0
0
-500
‐500
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Year
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
N. America北美洲 西歐W. Europe 中東Middle East 東北亞 NE. Asia 東南亞SE. Asia 其他Others 全球需求Global Demand
Kilo Metric tons
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Regional SM Net Trade

Kilo Metric tons	‐4,000 ‐3,000 ‐2,000 ‐1,000 0 1,000 2,000 3,000 4,000
	2010	2011	2012	2013	2014	2015		2016	2017	2018	2019	Year
		北美洲 N. America	西歐 W. Europe		中東 Middle	East	東北亞 NE. Asia		東南亞 SE. Asia		其他 Others

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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

2019 Global SM Supply & Demand

Unit : K Metric Tons	Unit : K Metric Tons	Unit : K Metric Tons	Unit : K Metric Tons
Region/Company	Demand	Production	Net Trade
Northeast Asia	16,797	14,667	2,130
Southeast Asia	1,451	1,885	‐434
North America	3,901	5,222	‐1,321
South America	800	542	258
West Europe	4,289	4,403	‐114
Central Europe	507	235	272
CIS & Baltic States	519	629	‐110
Middle East	1,146	2,733	‐1,587
India	835	0	835
Africa	37	0	37
Total	30,282	30,316

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

China SM Supply & Demand

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12,000 85.0%
12,000 12,000 85.0%
10,000
10,000 10,000 80.0%
80.0%
8,000
8,000 8,000
75.0%
75.0%
6,000
6,000 6,000
70.0%70.0%
4,000 4,000 4,000
65.0%
65.0%
2,000 2,000
2,000
- ‐ 60.0%
- 60.0%
20102010 20112011 20122012 20132013 20142014 20152015 20162016 20172017 20182018 20192019 Year
產量Total Capacity 需求Domestic Demand 總產能Production 開工率Operating rate
Kilo metric tons
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Outlook of World SM Demand Growth for 2020~2021

• According to IMF’s forecast on June 24 this year, the global GDP growth rate is ‐4.9% and 5.4% for 2020 and 2021 respectively.

• Under the condition described above, the average annual growth rate of world SM demand would be around 1.0% for year 2020 and 2021.

• The major growth of SM demand is in China. Its annual growth rate would be 4.0% for both year 2020 and 2021. (China’s growth rate was 5.4% in 2019)

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Taiwan SM Supply & Demand

Unit : K Metric Ton	Unit : K Metric Ton	Unit : K Metric Ton	Unit : K Metric Ton
Year	Demand	Production	Net Trade
2010	1,995	1,922	‐73
2011	1,792	1,693	‐99
2012	1,822	1,790	‐32
2013	1,924	2,044	120
2014	1,795	1,974	179
2015	1,864	2,020	156
2016	1,886	2,118	232
2017	1,913	1,823	‐90
2018	1,880	2,110	230
2019	1,894	2,005	112
Average	1,877	1,950	74

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Styrene Demand and Supply for Taiwan Market

• Taiwan’s SM market is basically net export.

• In 2019, Taiwan’s SM production was 2,005,183 tons, demand was 1,893,674 tons and the net export was 111,509 tons.

 In 2019, the US‐China trade war lasted and continued impacting global economy. In early 2020, IMF (International Monetary Fund) revised downward 2019 economic growth of global and China to 2.9% and 6.1% respectively. As the SM sale accounted for over 92% of TSMC’s total revenue, the company's operations were also greatly affected. Through consolidating or disposing unprofitable business and long‐term investment, and with all employees’ efforts, the overall operational performance in 2019 is considered to be fair, with annual after‐tax EPS of 1.67.

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

2020 First Half Retrospect

• Even though US and China reached their first phase trade agreement on December 13, 2019, the worsening US‐China relations has become national security concern. In addition, China’s economic growth slowdown and US presidential election lead to the uncertainty of global economic growth in 2020.

• In addition, the global economy impact due to the coronavirus pandemic worldwide in early 2020. At the beginning of this June, IMF forecasted that the global GDP growth will be ‐4.9% for 2020. The global crude oil demand and oil price have sharply dropped from this March on. It also led to the significant decline of SM demand.

• On the SM supply side, about 3.02 million tons of new SM production capacity in China (accounting for 9.6% of global production capacity) will be put into production in 2020. It will aggravate the oversupply of the SM market and make the SM market more severe downturn in the first half of 2020.

• Fortunately, as China’s coronavirus outbreak was under control in time, local lockdowns were lifted since this April, SM downstream production resumed. However, as the pandemic was very much out of control in Europe and US, the SM market still descent. It led to the massive transport of SM to north east Asia, and resulted in SM price drop and non‐profitable. TSMC’s 2020 first half revenue dropped 42.85% over the same period of 。

• last year, and net loss of NTD 166.5 M (after tax EPS = ‐0.32)

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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

2020 First Half Retrospect (cont.)

China SM New Production Capacity for 2020

Company	Ann. Capacity (K MT)	Operation Schedule	Note
Zhejiang Petroleum & Chemical (Zhoushan, Zhejiang)	1,200	Jan., 2020
Hengli Petrochemical (Changxing, Dalian)	720	Feb., 2020
Baolai Group (Liaoning)	350	Sep., 2020
Tangshan Xuyang Chemical (Hebei)	300	Oct., 2020	Construction stared in 2018/H2, benzene self produced through coal chemical process, Ethylenepurchase from other sources.
Sinochem Quanzhou Petrochemical	450	Y/E, 2020	2018/7 started construction.
Total	3,020

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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

2020 Second Half Outlook

 Even though the central banks around the world have adopted vast quantitative easing plans, it still results in the global economic downturn in 2020 as facing the coming challenges like the second wave of Covid‐19 outbreaks worldwide, escalation of US‐China trade tensions to national security issue, and the effects of Brexit.

• According to epidemic experts, the Covid‐19 vaccine will not be available in the short term (at least in 12 months), the decline of global SM demand will unlikely to be recovered in 2020 2H and 2021 1H. Thus SM market will be much less optimistic for this second half.

 In addition, China’s SM new production capacity is estimated to reach 5.57 million tons (accounting for 14.8% of global production capacity) from 2021 to 2022. The SM market will be less optimistic in the future with the sluggish demand and the sudden increase in supply.

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

2020 Second Half Outlook (cont.)

China SM New Production Ca acit for 2021 ~ 2022 p y

Year		Company	Ann. Capacity (K MT)	Operation Schedule	Note
2021		Huatai Wealthy Polymer Material (Ningbo)	300	2021/Q1
		CSPC (Huizhou, Guangdong)	700	2021/Q1
		Tianjing Dagu Chemical	450	2021/Q1	Integrated MTO process plant, Repsol POSM license granted in 2016/10, Approved.
		Anhui Jiaxi New Materials	350	2021/Q1	chemical processing of coal.
		Wanhua Chemical (Yantai, Shandong)	650	2021/07	PO/SM=30/65, LPG cracker, 1 M MT, commence production in 2020/10.
		USI (Gulei, Fujian)	600	2021/08	Construction started in 2017/12, the cracker is slated to commence production in 2021.
		Lihuayi (Tianjin)	500	2021
		Shenghong Honggang Petrochemical (Jiangsu)	600	2021
	2021 Total		4,150
2022		Baofeng Energy (Ningxia)	200	2022/H1
		Hengyi Petrochemical (Brunei)	620
		Ningbo ZRCC Lyondell Chemical	600		PO/SM=300/600 K MT, Construction started in early 2020.
	2022 Total		1,420
	Total of 2021 & 2022		5,570

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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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2 Market Review & Outlook

Overview of TSMC Production and Sales

2014~2019 SM Production vs Sales Volume

2019 Sales by Products

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Ton
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2014 2015 2016 2017 2018 2019 Year
Production Sales
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Ethyl
Toluene Hydrogen
benzene
1.61% 0.95% Steam
0.35%
1.20%
PDEB
3.35%
Styrene
Monomer
92.54%
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台灣苯乙烯工業股份有限公司
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Taiwan Styrene Monomer Co.
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3 Financial Review

TSMC Consolidated Income Statement

TSMC Consolidated Income Statement	TSMC Consolidated Income Statement	TSMC Consolidated Income Statement	TSMC Consolidated Income Statement	TSMC Consolidated Income Statement
Unit：M NTD
	2018	2019	2020 1Q	2020 2Q
Revenue	15,383	12,219	1,700	1,875
Cost	13,406	10,827	2,000	1,772
Grossprofit	1,977	1,392	‐300	104
Grossprofit rate	13%	11%	‐18%	6%
Operatingexpenses	442	321	48	52
Netprofit	1,535	1,071	‐348	52
Netprofit rate	10%	9%	‐21%	3%
Non‐operatingincome	13	‐36	‐20	148
Profit before tax	1,548	1,035	‐368	200
Tax	‐361	‐153	57	‐56
Netprofit of the term	1,187	882	‐311	144
Profit rate	8%	8%	‐19%	8%
Net Income Attributed to
‐ Stockholders of the company	1,216	882	‐311	145
‐ Non‐controllingInterest	‐30	‐0.3	0.6	‐0.8
EPS(NTD)	2.30	1.67	‐0.59	0.28

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Taiwan Styrene Monomer Co.
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3 Financial Review

TSMC Consolidated Financial Analysis

		2017	2018	2019	2020 1H
Debts ratio(%)		30.69	26.57	22.30	21.88
Current ratio(%)		176.39	172.55	178.02	149.39
Quick ratio(%)		112.99	135.71	140.31	108.44
Average collection turnover(times)		12.45	13.48	13.56	9.48
Average collection days		29.31	27.08	26.92	38.52
Average inventory turnover(times)		21.18	19.35	18.94	17.84
Average inventory turnover days		17.23	18.86	19.27	20.46
Return on total equity(%)		13.02	15.52	11.80	‐4.87
‐10.00 0.00 10.00 20.00		13.02 15.52 11.8
		ROE (%) ‐4.87

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Taiwan Styrene Monomer Co.
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3 Financial Review

TSMC EPS & Dividend

	2015	2016	2017	2018	2019
EPS(NTD)	1.31	2.67	2.00	2.30	1.67
Cash dividend(NTD)	1.00	2.20	1.60	2.00	1.00
Stock Dividend from Retained Earnings (NTD)	‐	‐	‐	‐	‐

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3.00
2.67
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1.67
1.00 1.31
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EPS
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Taiwan Styrene Monomer Co.
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4

Q & A

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Taiwan Styrene Monomer Co.
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台灣苯乙烯工業股份有限公司 Taiwan Styrene Monomer Co.