Company: TSEM
Filing Date: 2025-04-30
Form Type: 20-F
Source: 0001178913-25-001537
Chunk: 15

Company: TOWER SEMICONDUCTOR LTD
Filing Date: 2025-04-30
Form: 20-F
Item: Item 3
Chunk 15
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 The functional
currency of our operations in Japan is the JPY. Our expenses and costs are denominated mainly in USD, JPY, NIS and Euro. Our revenues
are denominated mainly in USD and JPY. Our cash from operations, investing and financing activities are denominated mainly in USD, JPY
NIS and Euro. We are, therefore, exposed to the risk of currency exchange rate fluctuations in Japan, Israel and Italy, which may have
a material effect on our cost and financial results due to periodic evaluation or revaluation of assets, liabilities, cost and income,
in these currencies.

The majority of TPSCo’s revenues are denominated in JPY and
the majority of its expenses are in JPY, which reduces the net exposure to fluctuations of the USD / JPY exchange rate on TPSCo’s
gross, operating and net profits as the impact on the revenues is offset to a large extent by the impact on the expenses. In order to
mitigate a portion of the net exposure to the USD / JPY exchange rate over the profit margins, we have entered into hedging transactions
which partially hedge our exposure to the currencies’ fluctuation to contain such fluctuation within a pre-defined fixed range.

The cost of our operations in Israel in USD is influenced by changes
in the USD-to-NIS exchange rate, with respect to expenses and costs that are denominated in NIS. Appreciation of the NIS may increase
the costs of the Israeli facility in USD, 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.

We depend on intellectual property to succeed
in our business, including intellectual property owned by us as well as intellectual property of third parties.

We depend on intellectual property in order to provide certain
foundry services and design support to our customers. The process of applying for patents to obtain patent protection may take a long
time. We cannot assure you that patents will be issued for pending or future applications or that, if patents are issued, they will not
be challenged, invalidated or circumvented or that the rights granted under the patents will provide us with meaningful protection or
any commercial advantage. In addition, we cannot assure you that other countries in which we market our services and products will respect
our intellectual property rights to the same extent as the United States.