This discussion and analysis should be read in conjunction with our consolidated financial statements and related notes contained in this Annual Report on Form 20-F. Overview We are a company limited by shares, incorporated in ROC on July 28, 1997. We provide a broad range of back-end assembly and testing services. Testing services include wafer probing and final testing of memory and logic/mixed-signal semiconductors. We also offer a broad selection of leadframe and organic substrate-based package assembly services for memory and logic/mixed-signal semiconductors. Our advanced leadframe-based packages include thin small outline packages, or TSOPs, and our advanced organic substrate-based packages include fine-pitch ball grid array, or fine-pitch BGA, packages. We also offer WLCSP products and turn-key flip chip assembly and testing services using variety of leadframe and organic substrate carries. In addition, we provide gold bumping, reel to reel assembly and testing services for LCD, OLED, automotive panel and other display panel driver semiconductors by employing COF and COG technologies. Our copper bumping technology supports non-driver type of products, such as RDL, copper pillar, WLCSP etc. In 2025, our consolidated revenue was NT$23,933 million (US$763 million) and our profit for the year attributable to equity holders of the Company was NT$551 million (US$18 million). The Company listed and commenced trading on the main board of TWSE on April 11, 2014. See “Item 3. Key Information—Risk Factors—Risks Relating to Our Common Shares or ADSs—The Company’s ability to maintain its listing and trading status of common shares on the Taiwan Stock Exchange or ADSs on the Nasdaq is dependent on factors outside of the Company’s control and satisfaction of stock exchange requirements. The Company may not be able to overcome such factors that disrupt its trading status of common shares on the Taiwan Stock Exchange or ADSs on the Nasdaq or satisfy other eligibility requirements that may be required of it in the future” for additional information. On January 21, 2016, ChipMOS Bermuda and the Company entered into the Merger Agreement, pursuant to which ChipMOS Bermuda merged with and into the Company, with the latter being the surviving company after the Merger. Upon completion of the Merger, the Company and its subsidiaries owned continued to conduct the business that they conducted in substantially the same manner. For additional information regarding the Merger see “Item 4. Information on the Company”. On November 30, 2016, the Company and Unigroup Guowei executed the Equity Interest Transfer Agreement. Under the agreement, ChipMOS BVI, a wholly-owned subsidiary of the Company, would sell 54.98% of the equity interests of its wholly-owned subsidiary, Unimos Shanghai, to strategic investors, including Unigroup Guowei, a subsidiary of Tsinghua Unigroup, which will hold 48% equity interests of Unimos Shanghai, and the other strategic investors, including a limited partnership owned by Unimos Shanghai’s employees, will own 6.98% equity interest of Unimos Shanghai. In March 2017, ChipMOS BVI completed the sale of 54.98% equity interests of Unimos Shanghai to Unigroup Guowei and other strategic investors. Unimos Shanghai was no longer the subsidiary of ChipMOS BVI. On June 30, 2017, we completed the first stage capital injection of Unimos Shanghai, and on January 19, 2018, completed the second stage capital injection of Unimos Shanghai. On December 16, 2019, Unigroup Guowei and one of the strategic investor sold and transferred all equity interests of Unimos Shanghai to Yangtze Memory, which holds 50% equity interests of Unimos Shanghai after the transaction completed. On May 11, 2020, one of the strategic investor sold and transferred all equity interests of Unimos Shanghai to Yangtze Memory, which holds 50.94% equity interests of Unimos Shanghai after completed transaction. On July 24, 2023, Yangtze Memory sold and transferred all equity interests of Unimos Shanghai to Yangtze Memory Holding, which holds 50.94% equity interests of Unimos Shanghai after completed transaction. On December 21, 2023, we entered into an agreement to sell the entire remaining 45.0242% equity interests in Unimos Shanghai to the local Chinese investment management companies. The equity interest transfer had been completed in May 2024. See “Item 4. Information on the Company—Our Structure and History” for more details. We conduct testing operations in our facilities at the Hsinchu Science Park, the Hsinchu Industrial Park and Chupei, gold bumping and wafer testing in our facility at Chupei, and assembly and testing operations in our facility at the Southern Taiwan Science Park. The following key trends are important to understand our business: Capital Intensive Nature of Our Business. Our operations, in particular our testing operations, are characterized by relatively high fixed costs. We expect to continue to incur substantial depreciation and other expenses as a result of our previous acquisitions of assembly and testing equipment and facilities. Our profitability depends on part not only on absolute pricing levels for our services, but also on capacity utilization rates for our assembly and testing equipment. In particular, increases or decreases in our capacity utilization rates could significantly affect our gross margins since the unit cost of assembly and testing services generally decreases as fixed costs are allocated over a larger number of units. 42 The current generation of advanced testers typically cost between US$0.7 million and US$5.5 million each, while die bonders used in assembly typically cost approximately US$270 thousand each wire bonders in assembly cost approximately US$82 thousand each and package saw in assembly cost approximately US$750 thousand each and WB plating cost approximately US$4.5 million each. We begin depreciating our equipment when it is placed into commercial operation. There may be a time lag between the time when our equipment is placed into commercial operation and when it achieves high levels of utilization. In periods of depressed semiconductor industry conditions, we may experience lower than expected demand from our customers and a sharp decline in the average selling prices of our assembly and testing services, resulting in an increase in depreciation expenses relative to revenue. In particular, the capacity utilization rates for our Display panel driver semiconductors assembly and testing equipment may be severely adversely affected during a semiconductor industry downturn as a result of the decrease in outsourcing demand from integrated device manufacturers, or IDMs, which typically maintain larger in-house testing capacity than in-house assembly capacity. Highly Cyclical Nature of the Semiconductor Industry. The worldwide semiconductor industry has experienced peaks and troughs over the last decade. The semiconductor supply chain inventory level increases and end-user demand decrease influenced by geopolitics and tariff pressures. Demand soft caused customers’ inventory adjustments and macro weakness. These macro headwinds impacted the worldwide semiconductor demand, causing consumer end market demand soft and marketing price down since the second half of 2024. However, driven by improving demand for high-value memory solutions, particularly in data center and AI-related applications, this sustained strong memory demand more than offset continued softness in certain consumer end markets since the second half of 2025. Declining Average Selling Prices of Our Assembly and Testing Services. The semiconductor industry is characterized by a general decrease in prices for products and services over the course of product and technology life cycles. The rate of decline is particularly steep during periods of intense competition and adverse market conditions. To enhance the competitiveness and increase the revenue, we will continue to seek to: •improve production efficiency and attain high capacity utilization rates; •concentrate on testing of potentially high-demand, high-growth semiconductors; •develop new assembly technologies; and •implement new technologies and platforms to shift into potentially higher margin services. Market Conditions for the End-User Applications for Semiconductors. Market conditions in the semiconductor industry, to a large degree, track those for end-user applications. Any deterioration in the market conditions for the end-user applications of semiconductors that we test and assemble may reduce demand for our services and, in turn, materially adversely affect our financial condition and results of operations. Our revenue is largely attributable to fees from testing and assembling semiconductors including DDIC and non-DDIC electronic components, for use in smart mobile devices, automotive and industrial market. Continuous pricing pressure on our assembly and testing services would negatively affect our earnings. Change in Product Mix. We intend to continue focusing on testing and assembling more semiconductors that have the potential to provide higher margins, which includes OLED, automotive application, and developing and offering new technologies in testing and assembly services for ASIC product, including flip chip packaging solution, in order to mitigate the effects of declining average selling prices for our services on our ability to attain profitability. Recent Acquisition On February 23, 2023, the Board of Directors of the Company adopted a resolution to acquire 1,000 thousand shares of Daypower Energy Co., Ltd. (“Daypower Energy”) in the amount of NT$12.5 million, representing 10% of shareholding. In August 2023, the Company holds one seat in Daypower Energy’s Board of Directors. In August 2024, the Company participated in the cash capital increase of Daypower Energy according to its shareholding ratio, with a payment amount of NT$12.5 million. On December 21, 2023, the Board of Directors of the Company has approved the proposed RMB 979.3 million sale of the equity interests in Unimos Shanghai by the Company’s wholly-owned subsidiary, ChipMOS BVI, which is included as Exhibit 4.22. Under the agreement, ChipMOS BVI sold its entire remaining 45.0242% equity interests in Unimos Shanghai to Suzhou Oriza PuHua ZhiXin Equity Investment Partnership (L.P.) and other local Chinese investment management companies. In May 2024, the equity transfer was completed and the total consideration under the all-cash sale of RMB 979.3 million has fully received in December 2024. 43 Revenue We conduct our business according to the following main business segments: (1) testing services for memory and logic/mixed-signal semiconductors; (2) assembly services for memory and logic/mixed-signal semiconductors; (3) LCD, OLED, automotive panel and other display panel driver semiconductor assembly and testing services; and (4) bumping services for memory, logic/mixed-signal and LCD, OLED, automotive panel and other display panel driver semiconductors. The following table sets forth, for the periods indicated, our consolidated revenue for each segment. Year ended December 31, 2023 2024 2025 2025 NT$ NT$ NT$ US$ (in millions) Testing $ 4,394.7 $ 4,967.9 $ 5,677.9 $ 181.0 Assembly 4,629.4 5,390.4 6,827.4 217.6 Display panel driver semiconductor assembly and testing 7,821.7 7,319.0 5,869.9 187.1 Bumping 4,510.4 5,018.6 5,557.7 177.2 Total $ 21,356.2 $ 22,695.9 $ 23,932.9 $ 762.9 Our revenue consists primarily of service fees for testing and assembling semiconductors, and to a lesser extent, fees from equipment rentals to semiconductor manufacturers for engineering testing, less allowances for product returns. We offer assembly and testing services for memory and logic/mixed-signal semiconductors, assembly and testing services for LCD, OLED, automotive panel and other display panel driver semiconductors and bumping services. Most of our customers do not place purchase orders far in advance. Our contracts with customers generally do not require minimum purchases of our products or services. Our customers’ purchase orders have varied significantly from period to period because demand for their products is often volatile. We have strategically entered into long-term capacity agreements with some of our customers. Under certain of those long-term agreements, we have agreed to reserve capacity for our customers and our customers have agreed to place orders in the amount of the reserved capacity (which is subject in certain cases to reduction by the customers). As part of our strategy, we intend to continue to enter into additional long-term capacity agreements as well as focus on our business with smaller customers or customers who do not place orders on a regular basis. We believe that the dual focused strategy would assist us to be better prepared for the current economic volatility and ensure maximum utilization rate of our capacity and help us to develop closer relationships with all types of our customers. Depending on customer demands, market conditions and other considerations, we remain to be focused on expansion of our operations with possible future long-term capacity agreements. Our financial condition and results of operations have also been, and are likely to continue to be, affected by price pressures on our service fees, which tend to decline in tandem with the declining average selling prices of the products we test and assemble over the course of product and technology life cycles. In order to maintain our margins, it is necessary to offset the fee erosion by continually improving our production efficiency and maintaining high capacity utilization rates. We also plan to continue to develop and implement new technologies and expand our services into potentially higher-margin segments. These efforts require significant upfront investment in advance of incremental revenue, which could impact our margins. Pricing We price our testing fees primarily based on the cost of testing the products to our customers’ specifications, including the costs of the required material and components, the depreciation expenses relating to the equipment involved and our overhead expenses, and with reference to prevailing market prices. Accordingly, the testing fee for a particular product would principally depend on the time taken to perform the tests, the complexity of the product and the testing process, and the cost of the equipment used to perform the test. For example, testing fees for memory semiconductors are significantly higher than those for other products because of the longer time required and the need for burn-in testing. By the way, we raised up the memory OSAT price to reflect the higher raw material cost in August 2025. In addition, TDDI as a multi-functional product which is DDIC with touch function, its testing process required longer testing time than traditional DDIC, thus the testing cost also will be higher than DDIC product. We price our assembly services on a per unit basis, taking into account the complexity of the package, our costs, including the costs of the required material and components, the depreciation expenses relating to the equipment involved and our overhead expenses, prevailing market conditions, the order size, the strength and history of our relationship with the customer and our capacity utilization. We price our assembly and testing services for DDIC/TDDI and other display panel driver semiconductors and bumping services on the basis of our costs, including the costs of the required material and components, the depreciation expenses relating to the equipment involved and our overhead expenses, and the price for comparable services. 44 Revenue Recognition We generally recognize our revenue from services for assembly and testing services based on the progress towards completion of performance obligation during the service period, and the sales discount is accrued based on historical experience. The progress towards completion on assembly services is measured by the actual input costs relative to estimate total expected input costs. The progress towards completion on testing services is measured by the actual incurred testing volume. We provide assembly and testing services based on customer’s specification, thus, the input costs incurred to assembly and testing volume completed in testing services are not linear over the duration of these services. Geography and Currency The majority of our revenue is generated from customers headquartered in Taiwan, which represented 81%, 80% and 87% of our revenue in 2023, 2024 and 2025, respectively. We also generate revenue from customers in Mainland China, Japan, Singapore and other countries. As we generate most of our revenue from Taiwanese customers using our Taiwanese operations, and since most of our labor and overhead costs are denominated in NT dollars, we consider the NT dollar to be our functional currency. See Note 41 to our consolidated financial statements contained in this Annual Report on Form 20-F and “Item 11. Quantitative and Qualitative Disclosure about Market Risk—Market Risks—Foreign Currency Exchange Rate Risks” for certain information on our exchange rate risks. Cost of Revenue and Gross Profit Our cost of revenue consists primarily of the following: depreciation expenses, raw material costs, and labor and overhead expenses, which primarily include utilities expenses, inventory supplies, maintenance and repair expense and expandable equipment. Our operations, in particular our testing, are characterized by relatively high fixed costs. We expect to continue to incur substantial depreciation and other expenses as a result of our previous and future acquisitions of assembly and testing equipment and facilities. As of February 28, 2026, we had 1,433 testers, 71 burn-in ovens, 955 wire bonders, 105 inner-lead bonders, 10 steppers and 17 sputters. We use inner-lead bonders for the assembly of LCD, OLED, automotive panel and other display panel driver semiconductors using COF technology, and wire bonders for TSOP, BGA, and some other package assembly technologies. Our profitability depends in part not only on absolute pricing levels for our services, but also on our capacity utilization rates. Our average capacity utilization rate for testing of memory and logic/mixed-signal semiconductors was 58% in 2023, 63% in 2024 and 66% in 2025. Our average capacity utilization rate for assembly of memory and logic/mixed-signal semiconductors was 46% in 2023, 59% in 2024 and 67% in 2025. Our average capacity utilization rate for Display panel driver semiconductor assembly and testing was 69% in 2023, 70% in 2024 and 65% in 2025. In addition, our average capacity utilization rate for bumping was 58% in 2023, 62% in 2024 and 59% in 2025. For each period of time selected, we derived the capacity utilization rate for our testing operations by dividing the total number of hours of actual use of our facilities’ testing equipment units by the maximum number of hours that these equipment units were capable of being used. The testing capacity utilization rate generally increases in correlation to increases in the total volume of our customer orders, and generally decreases in correlation to decreases in the total volume of our customer orders. For each period of time selected, we derived the capacity utilization rate for our assembly operations by dividing the total number of units actually produced by our assembly facilities by the maximum number of units that these facilities are capable of producing. The assembly capacity utilization rate generally increases in correlation to increases in the total volume of our customer orders, and generally decreases in correlation to decreases in the total volume of our customer orders. Our gross revenue is generally the product of the progress towards completion multiplied by the average selling price per deliverable unit from our assembly or testing services, as the case may be. As a result, in a period where the average selling prices for our services do not fluctuate significantly, increases or decreases in our capacity utilization rates generally correlate to increases or decreases in our gross revenue. Periods with significant increases in the average selling prices for our services reduce the negative impact on our gross revenue from any decreases in our capacity utilization rates. Similarly, periods with significant decreases in the average selling prices for our services reduce the positive impact on our gross revenue from any increases in our capacity utilization rates. 45 The Company has significant fixed costs in operating our assembly and testing facilities. For this reason, decreases in our cost of goods sold during a period generally occur at a slower rate than decreases, during the same period, in our gross revenue due to lower capacity utilization rates, lower average selling prices for our services, or both. Also, as a result, our gross margin and profitability generally decrease in correlation to decreases in our capacity utilization rates, decreases in our average selling prices for our services, or both. Similarly, our gross margin and profitability generally increase in correlation to increases in our capacity utilization rates, increases in our average selling prices for our services, or both. Due to the cyclical nature of the semiconductor industry, customer orders may change significantly, causing fluctuation in our capacity utilization rate and average selling prices for our service. Most of our labor and overhead costs are denominated in NT dollars. However, we also incur costs of revenues and operating expenses associated with assembly and testing services in several other currencies, including US dollars, Japanese yen and RMB. In addition, a substantial portion of our capital expenditures, primarily for the purchase of assembly and testing equipment, has been, and is expected to continue to be, denominated in US dollars with much of the remainder denominated in Japanese yen. The following table sets forth, for the periods indicated, our gross profit and our gross profit margin as a percentage of revenue. Year ended December 31, 2023 2024 2025 2025 NT$ NT$ NT$ US$ (in millions) Gross profit (loss): Testing $ 873.3 $ 951.9 $ 1,255.6 $ 40.0 Assembly (671.5 ) (605.8 ) (107.6 ) (3.4 ) Display panel driver semiconductor assembly and testing 2,446.4 1,646.5 441.6 14.1 Bumping 901.2 951.5 1,002.8 31.9 Total $ 3,549.4 $ 2,944.1 $ 2,592.4 $ 82.6 Gross profit (loss) margin: Testing 19.9 % 19.2 % 22.1 % 22.1 % Assembly -14.5 % -11.2 % -1.6 % -1.6 % Display panel driver semiconductor assembly and testing 31.3 % 22.5 % 7.5 % 7.5 % Bumping 20.0 % 19.0 % 18.0 % 18.0 % Overall 16.6 % 13.0 % 10.8 % 10.8 % Operating Expenses Sales and Marketing Sales and marketing expenses consist primarily of shipping and handling expenses incurred in delivering products to our customers’ designated locations and other marketing expenses, salaries and related expenses for sales and marketing personnel, depreciation expenses, entertainment fees and traveling expenses. General and Administrative General and administrative expenses consist of salaries and related expenses for executive, finance and accounting, and management information systems personnel, professional service fees, depreciation expenses, tax and duty fee, maintenance and repair and other corporate expenses. Research and Development Research and development expenses consist primarily of personnel expenses, depreciation expenses, maintenance and repair expenses, facilities expenses, utilities expenses and license fees paid to third parties. Research and development expenses are recognized as they are incurred. We currently expect that research and development expenses will increase in the future as we continue to explore new technologies and service offerings. We also expect to hire additional employees in our research and development department. Other Income (Expenses), Net Our other income principally consists of gain on disposal of property, plant and equipment and insurance compensation income. Our other expenses principally consist of impairment loss on property, plant and equipment. 46 Other Income Our other income principally consists of rental income, grant income and dividend income. Other Gains and Losses Our other gains principally consist of foreign exchange gains, gain on valuation of financial assets at fair value through profit or loss, gain on disposal of investments accounted for using equity method and reimbursement of ADSs service charge. Our other losses principally consist of foreign exchange losses, impairment loss on financial assets and loss on valuation of financial assets at fair value through profit or loss. Profit for the Year Attributable to Equity Holders of the Company Our profit for the year attributable to equity holders of the Company were NT$1,968 million, NT$1,440 million and NT$551 million (US$18 million) in 2023, 2024 and 2025, respectively. We believe our future results will be dependent upon the overall economic conditions in the markets we serve, the competitive environment in which we operate, and our ability to successfully implement our strategy, among other things. For additional information on factors that will affect our future performance, see “Item 3. Key Information—Risk Factors”. Results of Operations The following table sets forth, for the periods indicated, financial data from our consolidated statements of comprehensive income. Year ended December 31, 2023 2024 2025 NT$ Percentage NT$ Percentage NT$ US$ Percentage (in millions, except percentage) Revenue $ 21,356.2 100.0 % $ 22,695.9 100.0 % $ 23,932.9 $ 762.9 100.0 % Cost of revenue (17,806.8 ) (83.4 )% (19,751.8 ) (87.0 )% (21,340.5 ) (680.3 ) (89.2 )% Gross profit 3,549.4 16.6 % 2,944.1 13.0 % 2,592.4 82.6 10.8 % Operating expenses (1,726.9 ) (8.1 )% (1,770.1 ) (7.8 )% (1,688.5 ) (53.8 ) (7.0 )% Other income (expenses), net 85.9 0.4 % 99.9 0.4 % 238.8 7.6 1.0 % Operating profit 1,908.4 8.9 % 1,273.9 5.6 % 1,142.7 36.4 4.8 % Non-operating income (expenses), net 359.8 1.7 % 373.1 1.6 % (552.0 ) (17.6 ) (2.3 )% Profit before income tax 2,268.2 10.6 % 1,647.0 7.2 % 590.7 18.8 2.5 % Income tax expense (300.6 ) (1.4 )% (207.5 ) (0.9 )% (40.1 ) (1.2 ) (0.2 )% Profit for the year $ 1,967.6 9.2 % $ 1,439.5 6.3 % $ 550.6 $ 17.6 2.3 % Total comprehensive income for the year $ 1,796.6 8.4 % $ 1,549.2 6.8 % $ 634.6 $ 20.2 2.7 % The following table sets forth, for the periods indicated, earnings per common share and ADS. Year ended December 31, 2023 2024 2025 2025 NT$ NT$ NT$ US$ Earnings per share—basic $ 2.71 $ 1.98 $ 0.78 $ 0.02 Earnings per share—diluted 2.68 1.96 0.77 0.02 Earnings per equivalent ADS—basic 54.11 39.59 15.50 0.49 Earnings per equivalent ADS—diluted 53.54 39.22 15.45 0.49 Weighted average number of shares outstanding (in million shares): Basic 727.2 727.2 710.4 710.4 Diluted 734.9 734.0 712.6 712.6 47 Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 Revenue. Our revenue increased by NT$1,237 million, or 5%, to NT$23,933 million (US$763 million) in 2025 from NT$22,696 million in 2024. Revenue from testing services increased by NT$710 million, or 14%, to NT$5,678 million (US$181 million) in 2025 from NT$4,968 million in 2024, principally due to the increased average selling price and customer demand. The sales quantity increased around 1% compared to 2024. Revenue from assembly services increased by NT$1,437 million, or 27%, to NT$6,827 million (US$218 million) in 2025 from NT$5,390 million in 2024, primarily as a result of the increase of average selling price, and the volume driven by memory products rebounded since the second half of 2025. Revenue from display panel driver semiconductor assembly and testing services decreased by NT$1,449 million, or 20%, to NT$5,870 million (US$187 million) in 2025 from NT$7,319 million in 2024. This decrease was principally as a result of a weaker customer demand due to inventory adjustments for market softness and the price competition among DDIC suppliers in Mainland China. The sales quantity decreased around 23% compared to 2024. Revenue from bumping services increased by NT$539 million, or 11%, to NT$5,558 million (US$177 million) in 2025 from NT$5,019 million in 2024. This increase was principally due to the increased average selling price resulting from a substantial rise in gold prices and favorable product mix. Cost of Revenue and Gross Profit. Cost of revenue increased by NT$1,589 million, or 8%, to NT$21,341 million (US$680 million) in 2025 from NT$19,752 million in 2024, primarily due to the increase of direct material expense of NT1,359 million (US$43 million) and depreciation expenses of NT$243 million (US$8 million). Our gross profit decreased to NT$2,592 million (US$83 million) in 2025 from NT$2,944 million in 2024. Our gross margin was 10.8% in 2025, compared to 13.0% in 2024, due to higher material costs, electricity charge rate and higher allocation of fixed costs resulting from the lower utilization level of display panel driver semiconductor assembly and testing services and bumping services. Our gross profit margin for testing services increased to 22.1% in 2025 from 19.2% in 2024, primarily due to the increase in revenue resulted from the increased average selling price and customer demand. Our gross profit margin for assembly services increased to -1.6% in 2025 from -11.2% in 2024, primarily due to the increase in revenue resulted from the increased average selling price and the customer demand benefiting from memory products rebounded since the second half of 2025. Our gross profit margin for display panel driver semiconductor assembly and testing services decreased to 7.5% in 2025 from 22.5% in 2024, primarily caused by the decline of average selling price. Our gross profit margin for bumping services decreased to 18.0% in 2025 from 19.0% in 2024, primarily due to the increase in direct material expense, such as rising gold prices, which dilutes our gross profit margin for bumping services because both the revenue and cost increased with higher gold price. See “— Cost of Revenue and Gross Profit” for more information concerning our assembly and testing capacity utilization rates and the impact on our revenue, gross profit and profitability from any increases or decreases in our capacity utilization rate. Year ended December 31, 2023 2024 2025 2025 NT$ NT$ NT$ US$ (in millions) Sales and marketing expenses $ 135.7 $ 128.7 $ 119.8 $ 3.8 General and administrative expenses 497.7 478.6 491.7 15.7 Research and development expenses 1,093.5 1,162.8 1,077.0 34.3 Total operating expenses $ 1,726.9 $ 1,770.1 $ 1,688.5 $ 53.8 Sales and Marketing Expenses. Sales and marketing expenses decreased by NT$9 million, or 7%, to NT$120 million (US$4 million) in 2025 from NT$129 million in 2024, primarily due to the decrease of personnel related expenses, which was primarily attributable to the lower employee bonus and compensation, and the shipping expenses. 48 General and Administrative Expenses. General and administrative expenses increased by NT$13 million, or 3%, to NT$491 million (US$16 million) in 2025 from NT$478 million in 2024, primarily due to the increase of maintenance and repair expense resulting from the system conversion and depreciation expenses and partially offset by the decrease of personnel related expenses. Research and Development Expenses. Research and development expenses decreased by NT$86 million, or 7%, to NT$1,077 million (US$34 million) in 2025 from NT$1,163 million in 2024, primarily due to the decrease of personnel related expenses, which was primarily attributable to the lower employee bonus and compensation, licenses fees paid to third parties and depreciation expenses. Other Income (Expenses), Net. Other operating income, net increased by NT$139 million, or 139%, to NT$239 million (US$8 million) in 2025 from NT$100 million in 2024, primarily due to the increase of gain on disposal of property, plant and equipment, net and insurance compensation income due to earthquake damage. Year ended December 31, 2023 2024 2025 2025 NT$ NT$ NT$ US$ (in millions) Interest income $ 193.2 $ 197.7 $ 243.3 $ 7.8 Other income 77.6 58.1 76.1 2.4 Other gains and losses 135.5 393.6 (427.2 ) (13.6 ) Financial costs (266.4 ) (279.0 ) (301.3 ) (9.6 ) Share of profit (loss) of associates and joint ventures accounted for using equity method 219.9 2.7 (142.9 ) (4.6 ) Total non-operating income (expenses), net $ 359.8 $ 373.1 $ (552.0 ) $ (17.6 ) Non-Operating Income (Expenses), Net. Non-operating expenses, net increased by NT$925 million, or 248%, to NT$552 million (US$18 million) in 2025 from non-operating income, net NT$373 million in 2024, primarily due to the adverse impact on the foreign exchange of NT$702 million (US$22 million) from the foreign exchange gains of NT$243 million in 2024 to the foreign exchange losses of NT$459 million (US$15 million) in 2025, the adverse impact on share of associates accounted for using equity method of NT$146 million (US$5 million) from the share of profit of associates accounted for using equity method of NT$3 million in 2024 to the share of loss of associates accounted for using equity method NT$143 million (US$5 million) in 2025 and the gain on disposal of non-current assets held for sale of NT$72 million in 2024. Net Profit. As a result of the foregoing operations, net profit decreased by NT$889 million, or 62% to NT$551 million (US$18 million) in 2025 from NT$1,440 million in 2024. Our income tax expense of NT$40 million (US$1 million) in 2025 compared to NT$208 million for 2024, primarily due to the decrease in taxable income and the lower additional income tax imposed on unappropriated earnings in the R.O.C. in 2025. Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 For a detailed description of the comparison of our operating results for the year ended December 31, 2024 to the year ended December 31, 2023, please refer to “Item 5. Operating and Financial Review and Prospects—Results of Operations—Year Ended December 31, 2024 Compared to Year Ended December 31, 2023” of our annual report on Form 20-F filed with the Securities and Exchange Commission on April 15, 2025. Impact of Foreign Currency Fluctuations and Governmental or Political Factors For a discussion of the impact of foreign currency fluctuations and governmental economics, fiscal, monetary or political policies or factors that may directly or indirect impact us, see “Item 3. Key Information—Risks Factors—Risks Relating to Our Business—Fluctuations in exchange rates could result in foreign exchange losses” and “Item 3. Key Information—Risks Factors—Risks Relating to Countries in Which We Conduct Operations. 49 Liquidity and Capital Resources Since our inception, we have funded our operations and growth primarily through the issuance of equity, a mixture of short- and long-term bank loans and cash flow from operations. As of December 31, 2025, our primary sources of liquidity were cash and cash equivalents of NT$14,859 million (US$474 million), short-term bank loans of NT$5,091 million (US$162 million) available to us in undrawn facilities, which we plan to renew when facilities expired or will expire from March 2026 to December 2026, and long-term bank loans of NT$4,350 million (US$139 million) available to us in undrawn facilities, which will expire in December 2026. We have taken the following steps to meet our liquidity, capital spending and other capital needs. On January 1, 2019, MOEA implemented the Action Plan for Welcoming Overseas Taiwanese Businesses to Return to Invest in Taiwan and companies are subsidized with preferential interest loans for qualified investment projects. The Company has obtained the qualification from the MOEA, and signed loan agreements with financial institutions during January 2020 to December 2024 with the line of credit amounted to NT$25.44 billion (US$811 million) and terms from seven to ten years. As of the issue date of this report, the Company has used NT$21.09 billion (US$672 million) of the credit line. See “Item 3. Key Information—Risk Factors—Risks Relating to Our Business—Our significant amount of indebtedness and interest expense will limit our cash flow and could adversely affect our operations” for additional information. The following table summarizes our contractual obligations and commitments as of December 31, 2025, or the periods indicated: Payments Due by Period Contractual Obligations Total Within 1 year 1 to 3 years 3 to 5 years Over 5 years NT$ NT$ NT$ NT$ NT$ (in millions) Short-term bank loans(1) $ 2,734 $ 2,734 $ — $ — $ — Long-term bank loans(1) 13,392 3,090 5,244 3,193 1,865 Lease liabilities(1) 1,080 131 95 72 782 Capital commitments 21 — — — 21 Total contractual cash obligations $ 17,227 $ 5,955 $ 5,339 $ 3,265 $ 2,668 Note: (1)Includes interest payments. Assumes level of relevant interest rates remains at December 31, 2025, level throughout all relevant periods. In addition to the commitments set forth in the contractual obligations table above, we have certain outstanding purchase orders relating to the procurement of raw materials for which there are no definite delivery dates or deadlines. The following table sets forth capital expenditures, depreciation and amortization and our cash flows with respect to operating activities, investing activities, financing activities and the effect of exchange rate changes on cash for the periods indicated. Year ended December 31, 2023 2024 2025 2025 NT$ NT$ NT$ US$ (in millions) Capital expenditures $ 3,228.5 $ 5,451.4 $ 3,666.1 $ 116.9 Depreciation and amortization 4,779.3 4,856.2 5,100.7 162.6 Net cash generated from (used in): Operating activities $ 6,607.5 $ 5,940.6 $ 3,996.4 $ 127.4 Investing activities (3,090.2 ) (615.1 ) (3,739.4 ) (119.2 ) Financing activities (1,059.1 ) (2,475.4 ) (607.2 ) (19.4 ) Effect of exchange rate changes (0.8 ) 14.9 (9.9 ) (0.3 ) Net increase in cash and cash equivalents $ 2,457.4 $ 2,865.0 $ (360.1 ) $ (11.5 ) 50 Net Cash Generated from Operating Activities Net cash generated from operating activities amounted to NT$3,996 million (US$127 million) in 2025, primarily as a result of (i) profit before income tax of NT$591 million (US$19 million), (ii) our non-cash depreciation in the amount of NT$5,101 million (US$163 million), and (iii) the changes in accounts receivable and inventories of NT$1,695 million (US$54 million). Net cash generated from operating activities amounted to NT$5,941 million in 2024, primarily as a result of (i) profit before income tax of NT$1,647 million, (ii) our non-cash depreciation in the amount of NT$4,856 million, and (iii) income tax paid of NT$609 million. The decrease in net cash generated from operating activities in 2025 compared to 2024 was primarily due to the decrease in profit before income tax and the cash outflows from changes in accounts receivables. Change in accounts receivable were due to year-end revenue increased and customer payment schedule. The decrease in income tax paid compared to prior year was due to lower net profit in 2024. In addition, there is no provisional income tax payment required in 2025 as the Company met certain criteria for an exemption from filing provisional tax in compliance with Taiwan’s Income Tax Act, compared with the provisional income tax payment of NT$224 million in 2024. Net Cash Used in Investing Activities Net cash used in investing activities amounted to NT$3,739 million (US$119 million) in 2025, primarily due to net payment for property, plant and equipment of NT$3,851 million (US$123 million). Net cash used in investing activities amounted to NT$615 million in 2024, primarily due to net payment for property, plant and equipment of NT$5,006 million and partially offset by the proceeds from disposal of non-current assets held for sale of NT$4,394 million. Net Cash Used in Financing Activities Net cash used in financing activities amounted to NT$607 million (US$19 million) in 2025. This amount comprises net proceeds from short-term bank loans and net payments on long-term bank loans and lease liabilities in the amount of NT$1,082 million (US$34 million), the distribution of cash dividends and payments to acquire treasury shares in the amount of NT$1,817 million (US$58 million). Net cash used in financing activities amounted to NT$2,475 million in 2024. This amount comprises net payments on long-term bank loans and lease liabilities and net proceeds from short-term bank loans in the amount of NT$1,166 million and the distribution of cash dividends in the amount of NT$1,309 million. For a detailed description of the comparison of our cash flows for the year ended December 31, 2024 to the year ended December 31, 2023, please refer to “Item 5. Operating and Financial Review and Prospects —Liquidity and Capital Resources” of our annual report on Form 20-F filed with the Securities and Exchange Commission on April 15, 2025. Loans As of December 31, 2025, we had long-term bank loans of NT$12,765 million (US$407 million) (including current portions of such long-term bank loans of NT$2,897 million (US$92 million)). As of December 31, 2025, NT$8,658 million (US$276 million) of our long-term bank loans were collateralized by land, buildings and equipment. Our long-term bank loans were floating rate loans with a rate between 1.525% to 1.975% as of December 31, 2025. Government granted bank loan is repayable monthly from March 2023 to February 2035. We had entered into the following long-term loans facilities: •On January 1, 2019, MOEA implemented the Action Plan for Welcoming Overseas Taiwanese Businesses to Return to Invest in Taiwan and companies are subsidized with preferential interest loans for qualified investment projects. The Company has obtained the qualification from the MOEA, and signed loan agreements with financial institutions during January 2020 to December 2024 with the line of credit amounted to NT$25.44 billion (US$811 million) and terms from seven to ten years. As of the issue date of this report, the Company has used the credit line of the aforementioned project loans for amount of NT$21.09 billion (US$672 million). In addition, a substantial portion of our short-term and long-term borrowings may be subject to repayment upon a material deterioration of our financial condition, results of operations or our ability to perform under the loan agreements. 51 Set forth below are the maturities of our long-term bank loans outstanding as of December 31, 2025: As of December 31, 2025 NT$ US$ (in millions) During 2026 $ 2,897 $ 92 During 2027 2,452 78 During 2028 2,520 80 During 2029 1,810 58 During 2030 and onwards 3,086 99 $ 12,765 $ 407 As of December 31, 2025, certain of our property, plant and equipment and non-current financial assets at amortized cost with an aggregate net book value of NT$12,578 million (US$401 million) and NT$43 million (US$1 million), respectively, were pledged as collateral mainly for long-term bank loans and leases. As of December 31, 2025, we had unsecured short-term bank loans in the total amount of NT$2,706 million (US$86 million), which was paid or will expire from January 2026 to June 2026. We believe our current cash and cash equivalents, cash flows from operations and available credit facilities will be sufficient to meet our capital spending, commitments and other capital needs through the one year after the issuance date of financial statements. There can be no assurance regarding these matters, however, considering prevailing global economic conditions which continue to have a negative impact on our ability to accurately forecast our revenues, results of operations and cash position. See “Item 3. Key Information—Risk Factors—Risks Relating to Our Business—Our significant amount of indebtedness and interest expense will limit our cash flow and could adversely affect our operations”. Research and development, patents and licenses See the discussion under “Item 4. Information on the Company—Research and Development”. Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from January 1, 2025 to December 31, 2025 that are reasonably likely to have a material effect on our operating revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions. Taxation The Company is entitled to tax incentives generally available to Taiwan companies under the ROC Statute for Industrial Innovation, a profit-seeking enterprise may deduct up to (i) 15% of its research and development expenditures from its income tax payable for the fiscal year in which these expenditures are incurred; or (ii) 10% of its research and development expenditures from its income tax payable for the fiscal year in which these expenditures are incurred or the following two years. However, the deduction may not exceed 30% of the income tax payable for that fiscal year. In 2023, 2024 and 2025, tax credits resulted in tax savings for the Company of approximately NT$12 million, NT$18 million and NT$12 million (US$383 thousand), respectively. For the purpose of optimizing industrial structure, the Executive Yuan of the ROC government encourages domestic companies to make multiple innovations along with the applications of the smart technology. Companies may deduct to the income tax payable for the current year up to 5% of the annual spending or the income tax payable for the three years from current year up to 3% of the annual spending. However, the deduction may not exceed 30% of the income tax payable for that fiscal year. Companies are eligible for the investment credit under the preceding paragraph and other types of investment credit in a year, the total amount creditable in that year shall not exceed 50% of the income tax payable for the current year, unless the current year is the final year for using such credit and no cap is imposed on the creditable amount for that year according to other laws. In 2025, tax credits resulted in tax savings for the Company of approximately NT$45 million (US$1 million). 52 Companies are encouraged to use their earnings to make substantial investment or upgrade production technology or the quality of products or services. If companies use a certain amount of undistributed earnings to construct or purchase buildings, software or hardware equipment, or technology for use in production or operation as needed for operation of its business or ancillary business within three years from the year after such earnings are derived, such investment amounts may be deducted from the undistributed earnings in calculation of the current year’s undistributed earnings. The ROC government enacted the alternative minimum tax (“AMT”) Act that became effective on January 1, 2006. The AMT imposed under the AMT Act is a supplemental tax which is payable if the income tax payable pursuant to the ROC Income Tax Act is below the minimum amount prescribed under the AMT Act. The taxable income for calculating the AMT includes most income that is exempted from income tax under various legislations, such as tax holidays and investment tax credits. The AMT rate for business entities is 12%. However, the AMT Act grandfathered certain tax exemptions and tax credits granted prior to the enactment of the AMT. In 2023, 2024 and 2025, AMT Act had no effects on the tax expenses of the Company since the income tax payable is above the minimum amount prescribed under the AMT Act.