Company: TSEM
Filing Date: 2025-04-30
Form Type: 20-F
Source: 0001178913-25-001537
Chunk: 164

Company: TOWER SEMICONDUCTOR LTD
Filing Date: 2025-04-30
Form: 20-F
Item: Item 5
Chunk 164
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 The functional currency of our entities in the United States, Israel and Italy is the USD. The functional currency
of our operations in Japan is the JPY. Our expenses and costs are denominated mainly in USD, JPY, NIS and Euro, revenues are denominated
mainly in USD and JPY, and cash from operations, investing and financing activities are denominated mainly in USD, JPY and NIS.
Therefore, we are exposed to the risk of currency exchange rate fluctuations in Japan, Israel and Italy.

The majority of TPSCo’s revenues are denominated in JPY and
the majority of TPSCo’s expenses and costs are denominated in JPY, which limits the exposure to fluctuations of the USD-to-JPY exchange
rate on TPSCo’s results of operations. In order to mitigate a portion of the net exposure to the USD-to-JPY exchange rate, we have
engaged in cylinder hedging transactions to contain the currency’s fluctuation within a pre-defined, fixed range. During the year
ended December 31, 2024, the USD appreciated against the JPY by 10.7%, as compared to 7.2% appreciation during the year ended December
31, 2023. The net effect of USD appreciation against the JPY on TPSCo’s assets and liabilities denominated in JPY is presented in
the Cumulative Translation Adjustment (“ CTA”) as part of Other Comprehensive Income (“ OCI”) on the balance sheet.

42

The cost of the Company’s operations in USD in Israel is
influenced by changes in the USD-to-NIS exchange rate, with respect to expenses and costs that are denominated in NIS. During the
year ended December 31, 2024, the USD appreciated against the NIS by 0.6%, as compared to 3.1% appreciation during the year ended December
31, 2023. Appreciation of the NIS may increase the costs, in USD terms, of the Israeli facility, such as utilities, taxes and labor
costs that are denominated in NIS, which may lead to erosion of profit margins. We use foreign currency cylinder and forward transactions
to hedge a portion of this currency exposure and maintain it within a pre-defined fixed range.

The cost of our operations in Italy in USD is influenced by changes
in the USD-to-Euro exchange rate, with respect to expenses and costs that are denominated in Euro. During the year ended December
31,