Taiwan Semiconductor Manufacturing Company Limited (TSM) 14 Jul 222022 Q2 Earnings call transcript

Good afternoon, everyone, and welcome to TSMC's Second Quarter 2022 Earnings Conference Call. This is Jeff Su, TSMC's Director of Investor Relations and your host for today. To prevent the spread of COVID-19, TSMC is hosting our earnings conference call via live audio webcast through the company's website at www.tsmc.com, where you can also download the earnings release materials.

If you are joining us through the conference call, your dial-in lines are in listen-only mode. The format for today's event will be as follows.

and President Vice TSMC's CFO, Mr. First, will XXXX, followed Huang, XXXX. summarize the our quarter second the in by quarter operations third Wendell our for guidance Mr. Afterwards, Huang and Dr. TSMC's CEO, C.C. company's Wei, provide key messages. will the jointly Then TSMC's Chairman, Dr. entertain host will where executives Q&A Mark your Liu, the questions. all session, three will

the turn to that forward-looking statements. CFO, and on differ over As refer contain forward-looking uncertainties in quarter the cause harbor safe results like to appears current which from discussions I would subject TSMC's the those the are for I guidance. our remind everybody could notice now that usual, And today's to materially contained that Please to summary would may press statements and of Mr. to the release. Wendell Huang, significant risks like operations to actual call

the Thank will second you, My XXXX. I today. thank Jeff. for and quarter. the highlights provide everyone, for Good joining that, quarter you us for afternoon, guidance start After the financial third with presentation will

Second by quarter our was NT business or second and quarter increased dollars, supported in in U.S. X.X% HPC, demand. as IoT automotive-related X.X% strong revenue sequentially

quarter Second quarter to guidance, slightly favorable our margin percentage XX.X%. X.X sequentially XX.X%, we was line percentage gross to X.X X.XX in EPS our second value more TWD cost increase. of with foreign gross operating increased enjoyed a rate, improvement margin increased points as exchange and Overall, ahead ROE and XX.X%, Likewise, margin selling. points was our sequentially

accounted Advanced which X-nanometer accounted revenue. move contributed of while process for in as second technology XX% XX%. and on of technology. technologies, X-nanometer revenue let's XX% to the X-nanometer defined below, wafer Now wafer quarter are by revenue for

for XX% second Automotive XX%. account by to platforms electronics consumer our account platform. for of account XX% X%. account to XX% to quarter. second IoT X% for All account increased on the to for increased six Moving revenue. X%. increased increased to X%. And increased quarter X% digital Smartphone HPC quarter-over-quarter in to revenue increased contribution XX% for

balance and the sheet. the of Moving cash We on TWDX.X quarter with second securities ended to trillion. marketable

On MX while partially TWD raw billion, raised mainly the payable, Long-term TWD ratios, days On the the of TWD liability due decrease offset accounts TWD by seven accounts XX during by to billion materials increase as billion by interest-bearing one increased XX of increased turnover in in short-term TWD inventory of to liabilities prebuild side, increased decreased billion, billion the bonds increased XX days days debts XXX and loans. mainly corporate financial inventory. we XX days XXX days receivable wafers day to quarter. of we as XX current

me Now cash flow a make let comments CapEx. on and few

$X.XX TWD generated of TWD CapEx dollar billion During 'XX billion issuances. third about distributed billion this quarter of to billion. balance TWD TWD billion U.S. in for the second second and XXX quarter's I totaled quarter, as capital quarter XXX spent X.X billion our payable in bond XXX Overall, quarter. trillion a increased finished operations, XXX In summary. dividend. cash our Bonds from by end at the terms, TWD cash financial by we result XX increased expenditures have my cash the TWD

business between $X represents concludes $XX.X XX.X%, billion outlook, quarter a between $XX.X to XX%. be is XX% exchange operating the quarter Based Now let's turn our which at Based guidance. increase our of midpoint. on between presentation. financial XX.X% on third margin to This sequential margin current be assumption current expect revenue XX.X, the and to XX.X% rate and gross to we the my billion, expected TWD and

start key on quarter second our quarter messages. our by turn me let and profitability. making third comments Now I to will some

capacity cost, profitability: end rate actual basis quarter assumption range points our quarter leadership gross TSMC's $X versus point up, XXX our foreign basis mainly guidance, selling. gross Compared pricing, improvement reminder, and provided by in and exchange on more to based increased determine our XX.X first about our guidance XX This exchange TWD to to guidance. second favorable actual as sequentially Compared foreign gross actual second to exceeded a margins margin $X TWD second original six XX.X%, the to quarter our our mix the ago As exchange value of margin quarter high the was quarter, development rate rate, cost created ramp XX.XX. X-month second utilization, of to difference whereas exchange factors technology technology rate. due and was a

our We XX costs. a XX.X% gross be to rate as than exchange offset higher at have by slightly including favorable electricity and more the points quarter third to midpoint, costs, higher will margin inflationary basis decline guided raw assumption just sequentially material more

increasing our excluding we control and complexity a taking process will we mature from have in investments nodes, on to which other utilities of cost ahead overseas expansions. continue materials, Looking of over, challenges, the rate, raw fab believe X inflationary nodes leading gross profitability, margin achievable. of Despite face manufacturing costs challenges rising long-term the higher exchange XX% and tools, we factors no the new and of foreign and impact is from into consideration,

tax let talk rate. our me effective Next, about

XX% see and For will expect rate will we between tax be of in expiration XX%. exemptions to the XXXX, increase. Starting we and tax Taiwan, in XXXX, effective our certain our rate tax

of on beyond exemption in of the the rate process the available. tax more details provide when However, regulations will period. government common is Taiwan tax drafting become and outlook XXXX further Therefore, we in currently and new our certain is in a update

over turn me let C.C. the Now to microphone

time. is hope safe and healthy everybody this Thank during Wendell. staying you, We

second $XX.X with billion, TWD me start growth outlook. let automotive-related First, demand. or of revenue IoT our by We concluded our near-term XXX supported billion HPC, quarter and with

technologies. expect X-nanometer third into demand we industry-leading be our business by Moving continued XXXX, quarter X-nanometer to our for and supported

of observe is already type expect reasonable, two softening due half in and pandemic-driven consumer market action the side, demand, years to the in inventory is our segments, and chain device stay PC inventory throughout level smartphone, On to second the of this home supply momentum XXXX. and adjustment taking to view. reduce the we After end

is healthier inventory to a adjustment Our excess quarters to We supply to rebalance believe with half the inventory through more in level. a first a few to for semiconductor semiconductor of will a the the similar likely typical XXXX. chain take cycle, expectation be few quarters current cycle

and various prepared have We case is internally in modeled necessary. for different scenarios it ourselves also

able end capacity areas. to to we On center customers' such continues ongoing demand Despite automotive-related we inventory reallocate support as the while segments correction, and supply. data steady. And to observe the our softness our these ability demand to consumer side, the segment, are end market market exceed in our remains

remain capacity strategic tight in demand supporting TSMC's strong leadership relationship our technology our throughout and XXXX and mid-XX% in our structural expect high-performance year terms. with to full be and our growth in U.S. portfolio We strong to customers. are factor differentiation, key Three our dollar computing

are All strength TSMC's foundry industry. in of the these factors

technology previous leadership and differentiation, TSMC's position years. on compared today First, technology to stronger is much as

ramp-up we persist of working addressable it increase our uncertainty into NX, technologies product Looking industry with diligently successful market. the The upcoming may NX, provide ramp XXXX. NXX to NXP, ahead making will the available we the our product to expand customer of innovators and macroeconomic to all and portfolio most the advanced XXXX, are and

and growth. to support leadership Our advance technology continue our will

capture IP Secondly, computation, technologies. for continues the the and demand in to of by our which massive able underpinned industry optimized build fill ecosystem the structural Through need strong increase energy-efficient and in technology, and structural leading-edge are demand computing, a high-performance portfolio of computing. comprehensive the greater we and process megatrend, address use performance to require

contributor of next the incremental years. growth our to We growth the terms in several HPC TSMC's be long-term in engine expect of the main revenue and largest

and through Third, long-term our of our the with customers' investment developed years in built success and strategic high-end customers to market. nature, enable relationship many in collaboration are

continue for to and We differentiating With in business to volatile our all demand by remain technologies. three resilient, technology with customer more less leading and advanced their demand our to differentiated the and utilization expect long-term And our and support XXXX. closely strong specialty these we capacity factors, and work be growth. development, supported pricing healthy to planning capacity and our

growth Now let TSMC's long-term me outlook. talk about

near-term uncertainties structural may remains growth that in we demand persist, the long-term bring fundamental the believe headwinds semiconductor trajectory macroeconomic firmly While in place.

devices, We end continue observe many functionality. fueled technology to process migration increase and increased by across content silicon

XG the silicon smartphone. substantially For The the continue smartphone in to of example, number content to of GPUs AI data and accelerators XG amount center increasing. today's compared as rise. higher car in content silicon CPUs, are carries

always capacity device near-term the be growth be market in structural long-term and While electronics content TSMC's the mid- to silicon the addressable the flattish long-term based next years, on will several support may single-digit range, single-digit structural in device higher, the low our high factors. unit to many and percentage growth the range percentage are demand. not CapEx profile, and demand increase semiconductor wafer planning demand of

customer their working support are growth. technology with and in We our plan to closely and specialty to long-term capacity our leading edge investing

and U.S. well over we be manage dollar capacity leadership, customers business is related the our highly TSMC XX profitable will favorable positioned of between reiterate our technology the near-term We our our support With multiyear growth HPC trust, confident shareholders. long-term the for and prudently capture megatrend deliver strong through manufacturing structural We from terms. remain and the to several and to and years uncertainties, growth revenue next and in outlook. growth CAGR in XG applications long-term XX our

about let me the talk update. Next, tool delivery

CapEx in all advance. major supply our semiconductor with work a player closely global in chain, capacity our to As and tool supplier the plan TSMC

nodes. suppliers delivery and for their like challenges facing which supply toward lead However, mature our are greater many advanced chains, both industries, times other been in have extending

that the our chain delivery. critical have part our high-level of suppliers In into communications TSMC April, on As address identify a the help CapEx worked support regular increased closely expect challenges. doing is to and we to teams to suppliers. we supply year out several send trace actively then, are to progress toward XXXX. said its gauging to have we result, pushed we this chips Since our some site be that tool

dynamically and prioritize to We our critical capacity chips these the are mitigate our to help customers wafer constant working with chip issues. support

of While tools to plan. capacity for able certain the expect we We for any capacity. our schedule improving. challenges our delivery amount the XXXX not is impact in put XXXX to remain, And do are situation

been that working We customer for demand. our we closely have their so can XXXX support with

the NX let status. me Now about talk and NX

fiscal on production year, of is second NX half track in Our volume this year. for

one HPC power enhanced We and XXXX, family smooth applications. the of around HPC for with NX both NX. and for will expect in And level ramp We NX year revenue observed NX engagement our production first driven by NX. customer smartphone both yield. extend and a after performance, at will applications. contribution offer further platform high smartphone starting is volume complete support of XXXX, half with scheduled a

Our X-nanometer Thus, in most node family transistor NX technology it technology PPA for confident that and will when semiconductor we are both introduced. advanced our be long-lasting be the large will TSMC. another technology is and

the Finally, let status. about me talk NX

larger our development cost to the NXE. technology adopt address the XX% to development, computing, or the same at in in of energy-efficient XX% production improvement our careful and Our at X-nanometer the well power track on sea XX narrow of with performance extensive customers with and compared After and to for expectation, power progressing is transistor node improvement our XX with provide NX and as power need with maturity. best XXXX. to NX structure increase will period speed XX% risk full production more same technology benefited than performance, and speed volume schedule evaluation the deliver density to and XXXX technology increasing

the key thank further and the it be advanced in will concludes technology energy-efficient attention. you your and our most This and extend when the our position technology introduced future. well both for X-nanometer will industry leadership semiconductor density Our in is into message,

Thank concludes remarks. session. prepared you, Now Q&A C.C. begin [Operator let's This our the Instructions]

Mark Liu, Our the be Chairman, will Dr. host.

all wish Hello, and well. everyone. to coming Thank for this you healthy conference. I you

well on be -- we going -- the but will above our prepared reports already hope company we next question, the stands for ground. growth some period. be also prudently we your this and And meantime, will we firm near-term it I definitely think answered this through shows uncertainty. confident prepared the In of

the your now question. is for floor So open

caller line. with Chairman. the Operator, on proceed Thank the you, first please

first The to Suisse. Credit Abrams, ask one Randy question,

business the cycle. on Congratulations I your you. Thank first the view on question, outlook. ask to My on wanted good

I And broad You raised inventory view the wanted that drawdown the down ask you you do I how will you're expectation what strong your quarter. be on question how outlook half, -- what your the through drawdown? the correction? underutilization? to seeing that is see XX% follow-up And the to second half? to third outlook, wanted customers to your is first drawing view first with strong in do driving And is, that in see expect for severe With Could half? your inventory

allow Randy, Okay. me please summarize to first question. your

first at be Randy, and looking -- with So part our reconcile first TSMC's to looking believe, of how also guidance mid-XXs. to and in third is the his quarter wondering, I first next year. Randy, this adjustment the inventory the think, I growth second in year the He's half question our expectation full into half also at

how own Randy? that view business? Is our our cycle So against reconcile on do we inventory the correct,

Yes. That's correct.

much for Just an correction your on business? first you're How aiming in initial view half.

C.C. this Randy, is Wei.

expect resilient. demand structural uncertainties, strong growth long-term strategic customer technologies quarters, growth our action specialty start this growth into their level. leading the both remain inventory of be outlook. differentiated advance do and also With we macro the have our correction. XXXX, the And Let let our decrease our question? inventory to But more relationships, and firm. year. and least TSMC's in will and We tight your first the that a to are answer me and remained we say in inventory adjustment to customers capacity confident a expect expect half question. Yes, and me answer continue trajectory portfolio How our despite do take we that mid-XXs to your HPC ongoing semiconductor at Did in awarded business and few near-term far? evaluation, to the And long-term they we that

your some of mean, position projects you I Yes. expect to to tech first even clarify, in have? half tight, do the through and factoring you remain

Yes.

You remain.

the -- our I next the expect see ask, capacity inventory to do we we So year, given adjustment? of first think Randy ongoing half do in wants how utilization

you me say, let I exactly it's that are we cannot give number hearsay. the but about, talking

Okay.

the on parts. question, second My Great. Okay. CapEx, two

mature to understand ramp CapEx. year's it's more want discuss much next framework little How the And you for what if nodes? push-outs, or the X-nanometer a Just X-nanometer. also affecting could the the

made think above about XX comments we be billion. TWD I you've could

how thinking about could framework year you give you're a If for next CapEx.

Okay.

X-nanometer? the mature on more And the how X-nanometer? the to is with this So Randy's wants the issues, second does pushout, our delivery this CapEx more for is Is also CapEx. of impact this know this wants He question some CapEx tool he for know, side? for Or is to XXXX. on node

TWD we or As said billion higher. XX before, that XXXX could be

Okay. Randy, this is Wendell.

in schedule, his question, and mature advance changes first said delivery the both the in tool The the C.C. as prepared remarks the as schedule that nodes. currently

year the about CapEx. early second the But talk your future too we year's And as CapEx in It's question said, year's to CapEx. Okay. is about we invest next for always opportunities. the next

to invest, the So manner. as long will continue disciplined course, in a outlook, the is as we but future good, outlook of

expectation year would And how pushout, for for this with much Okay. what's Thank my final be? question. that's your you. the just And year, this

year early. tell lower that But to previous can too you will guidance. the it be closer year, this will think next be of end I I our

the of to the guidance XX TWD closer to end of Randy. XX So billion TWD billion, lower

Great, thank please. we can Operator next onto Okay. you. move participant the

Lu Next one is Bruce from to ask Goldman questions Sachs.

the taking Congrats Hi, on for thank my you great result. question.

[ph]. talk how the die will the do growth XX% by Because by still discrepancy content difficult growth. XX% driven content part is that fab the much the this -- side to investors actually really I and compound when for the -- to biggest it investor, is growth? growth, Can at see dollar years, or think few the the revenue you not the is we most say may dollar next I investor the the driven

growth? to So improvement? for driven example, how much by by ASP for much XX% years, product Or few or driven is XX% how content much mix driven growth the next is by dollar by shipment? the How

Okay.

you. Bruce, thank -- Let me

question. first Let me summarize your

Bruce our to CAGR much I How XX% that ASP? this much He in several driven is much How growth. we said grow will silicon between driven you XX% out how -- So to is by, of We XX%, looking long-term is by know, driven content? really by to Bruce, shipment? said is wants XX% the next between at years. think

or But then cannot the answer me even question. mid- number, with actually with confidential. flattish a for and of let so achievable. share is confident our growth single let XX% are customer, our it's even devices. you the some still But the CAGR combined value me The It’s the exactly least say Bruce, content And edge And devices, low kind these we growing. increase to I growing. at selling because to high single-digit. still that. XX% our all say all electronics is is with to digit It's

Okay.

thank Okay, you.

question the specialty to next node and is for So expansion. capacity the mature my

how will capacity by How you capacity the the And specialized Chairman achieve looks new see the or I expand think conversion? recently you commented where you tell this few us mature years? demand? do big. can the the that mean in number you XX, bit next coming a those demand I I do years. are that node this expansion mean, three by XX% supply node capacity your and XX%, in mature

your question, Bruce, All summarize please. right. let me second Okay.

is specialty expansion? Is capacity big. looks Is applications what from mature also, question are Bruce's So this mature coming second by node capacity driving and say then of conversion also our He some is looking And all logic very TSMC to That capacity XX%. expanding that this? on specialty to expansion. new specialty? node

mean doesn't the me specialty the mean overall capacity. XX% we capacity that XX% question. let increase, answer increase. It technologies Well, in is

the work because Okay. need, customers' of and We growth. closely this support we our to did

a it's the So increase capacity, logic specialties. XX% in not no. it's

both bit. add capacity existing may and new little I includes the The capacity. also if expansion conversion a of And

So for keep you the this in expansion, like advanced confident node? kind I how increase? capacity kind of will XX capacity what mean, this are, expansion of of the mostly in which of is So confident terms past in kind you years, application your because

confident advanced So on keeping TSMC Bruce the have been what most know specialty is expansion our past the in of to wants the to as focused has expansion such technologies nodes. on

logical this capacity. are a always specialties increase to the you the few any leading-edge specialty. did years, past upgrade But in not In increased except TSMC past different. right. Bruce, from years, We the time, it's few

we devices. on It's to silicon on it's the the demand -- edge not because on capacity. increase all specialties can leading-edge content First, inside. also content the the continue see requires included the It

so our the expand with at And customer request, urge our work specialty TSMC our of customers' capacities. to and closely

Okay. Very, confident. How very confident?

believe. I

So, you. thank

Thank on you, we Bruce. Operator participant, move next can the please. to

question, Next to Sunny ask UBS. one Lin from

Hi, taking congrats Thank results. strong good you on questions, my for afternoon. and the

semi So cycle my is earlier, on analysis some first XXXX. on have the for question done you the cycle semi that scenario

your in So like just you I case would a wonder you. XXXX, XXXX? meaningful Do current for like growth think what for Thank Or a it down correction? XXXX. semi it typical cycle base more be be will

you. the will think base XXXX? thank a know first cycle. correction, it semiconductor is more her more on I question be is it Sunny's XXXX. as be Sunny, we Do such meaningful a Okay. or TSMC's She of in Or are words. typical believe, will XXXX cycle what wants for of case to

through is that. inventory typical back half a maybe The like base down of It's of or cycle few a typical XXXX a like -- the something our down case for cycle. more in correction big first quarters, XXXX. Yes. not yes, Sunny, a go

Got you. it. Thank

X-nanometer. second question And so on is my

X-nanometer QX impact or think will should are half, the into will if in up ramp-up year? have how any terms In revenue be XXXX? QX we from profitability, of into impact mostly second ramping next the the contribution As the technology we about

Okay.

And so Sunny. thank you,

second question Sunny's is So X-nanometer. on

NX. profitability? know see And from the what the type NX, what the ramp, Sunny? contribution correct. it? should in of of NX impact type Thank from With what impact she of And When wants we also, would with Right, you. revenue to to be That's XXXX. ramp

That's right. Thank you, Jeff.

Sure.

Sunny. Okay,

than about to say and we it at very beginning the Dollar pie in from -- past the will of node I ramp your the it's meaningful total at it's revenue question. the believe of contribution the when is that terms leading In because less first to beginning increasing continue amount-wise, to bigger NX, contribution certainly is a have nowadays, we to start very the revenue to it previous talk stage. increase. the nodes This compared

to terms profitability in In the it expect points that gross dilution, you. in in first margins X of we X year, will Thank percentage XXXX. between -- XX impact

Got much. it. clear. very very Thank That’s you. Thank you

Sunny. participant, can next move we to Operator Thank please. you, the on

Now let's Hariharan, turn Go ahead, for Gokul JPMorgan. please.

the Gokul, are line. you on

have to might unmute. You

on Sorry. the... My first is question

Repeat Gokul, sorry, you you're your again? up. try Can please. breaking question,

Sure. first question, Yes. My inventory cycle.

sorry. so Gokul,

Okay.

to one break up. Let's try because more time you continue

have one time. dial If to I try Let's more back ask in. not, to you will

Please your question repeat again. Sorry.

you Can Sure. now? me hear

Yes.

to My is is Okay. Could what your expectation? investor's first talk impact. you

Okay. I'm Gokul, sorry. I'm sorry.

Your line is unstable. very

will we'll you the question. I please try and So back to queue, into ask address get to your

that. Okay? we to Apologize caller on Operator next move for can please. the

ask to Brett one Research. Next Simpson, Arete question,

semi very what thanks growth a potentially of 'XX. Thank outlook burden growth? the you changed your for how I the in overall second you. more see question terms on days much. view that and has off of first the trending signaling Can And in fabless your And talk industry, view you months? inventory XXXX inventory about half three for broadly had today is you the last for this the were year? and then in of XXXX current half your Yes,

Okay. Thank you, Brett.

at and So industry. question is first inventory Brett's looking overall the

first inventory question is about his adjustment. the So

We have half through XXXX. it that first likely be said will

see for do fabless what So year? DOI this of the in second trending we half

Brett. Yes, Yes.

second gradually. half question? your second the the We And down expect to of the DOI come fabless in year

year. of throughout down half second Correct. Come this

yes. Yes,

second sorry, part how semiconductor is question our XXXX? our view the Brett, on And part second of or is the not? And again, the this industry, forecast at looking changed has and for then current is industry what -- XXXX your

right. That's

let answer Well, the me question.

as and growth memory foundry the the forecast earlier. same the for in exclude projected we XXXX on Our remain semiconductor the forecast

we XXXX, a very have XXXX, much correction, customer, for portfolio year go even technology also relationship for strategic our said, we long-term have forecast. growth as still early in so a we and will a And inventory HPC But just we inventory to and strong because it's with correction see the today For continue on. TSMC. stronger TSMC, too to position is is

Okay. have second Jeff, possible? can I just a that question? Is

Sure. second question. One more Yes.

been companies looking hearing leading-edge work manufacturers the some we've when opportunity financing are comes with to So from other it project chip they to that at new fab builds.

I is view think mentioned. does bring cash flow to rental free on in companies like way And been you Brookfield a fab there has or How reduce fabs? TSMC this new model Thank as this you. a trend? burden industry the

right. All

question are second is, to the is using fabs, this industry to TSMC's other model. is in Brett wants project new know new His view. observation fab what rental So companies financing he build

is TSMC's what So view on this?

not Brett, financing and stringent, higher terms Normally, stricter project costs. we are entails considering project financing now.

current borrowing mainly expansion and our cash strong using balance policy. That's the finance our operating our will We sheet. flow from

you. Thank Right.

let’s on the to operator, Alright move please. next participant,

Next Charlie one Morgan question, ask from Stanley Chan to

Hello, good results. congratulations great And afternoon. for also,

the question HPC the because core that or and demand, recession first view smartphone So your consumption. CapEx macro the should about impact my is slowdown is our and

smartphone customers and coming do your quarters? will you you. high-end inventory later the so-called in the data sooner same that management, center the customers apply So order think Thank digestion to

Okay.

impact CapEx adjustment Charlie? cloud sort slowdown. macro first smartphone provider correct, that do wants know, Charlie's or of He is Is question next? or high-end see believe service to light we inventory of looking adjustment to have So to the inventory the at in

Thank Yes. Jeff. you,

Charlie, this is C.C. Wei.

many question, to create in the our continue life, that there as you But to And need said, data. power they and think too processed. and might sufficient think that answer speed I leading-edge be HPC require much area. consumption, to with to technology inventory our your solution. in provide devices efficient so we data the are have And edge those of

we highly inventory even the expect the like And near-term are outlook. growth through to or volatile resilience uncertainties. correction confident that, business and in So our also, be less more we our something long-term

Yes, yes.

-- So top about smartphone correction? well inventory demand? how semiconductor see you high-end you. Thank smartphone Do inventory to that expect the the as correction inventory on brand

smartphone on expect So Charlie do we also to inventory correction semi high-end demand? wants know, the

high-end To with not we see be of you, much too on smartphone the buildup. inventory frank did

no. So

helpful. Okay. technology second Great. very future And That's my installment. demand is your question about

So either me. C.C., Mark please help or can you

disclosed density improvement. this DAA the So first large time is you've NX the

than I density there's previous than still But better think to XX% share. a market node, slowdown. compared increase more large significant the

So your do a that you slowdown mean node per via. for do And NX is that does lastly, -- slow? think backside And significant versus kind first think of you of a power what And a all, is more migration. there CapEx of k full NX NX? to

NX, So also technology means your interested very to of and I'm in your long-term you. CapEx. kind it Thank what

Maybe density gain as But more NX he notes that mean technology Okay. logic significant especially Charlie's Technology. this is Chairman Law? different Maybe I'll on is XX%. represent does the in And than context summarize for second question through into does what a the address. Moore's parts. slowdown, His can whole? this question first of And a

answer question. me Let your

advanced technology just is semiconductor factor and about in because we from now to included. more introduced, new scaling, it just First architectural we most to our the will we technology, all, but innovation this C.C. the not have when industry regarding work NX But a technology include of with the be -- on, our NX allow customers, structure in the technology the The technology also include in platform The is technology wafer customers. and line a fashion. transistor the scaling. look mentioned, chiplet power Charlie, scaling closely new -- our also include at the NX

reason And control And for a the is technology. to nanometer. NX composed about cost, So maintain while full power we customers' be offering the of same this the a but is the really smaller, this the really control know is power efficiency. the will factor of is scaling to whole be is today efficiency technology -- set migration. node that scaling generation The value factor needs new we the

yes. So that's my report,

on power And Charlie NX. Great. also about backside the is asking

Okay.

add some me Let viewpoint.

rail On call actually, customer the platform NX introduced part of the power market at to proper it. delivery, And backside time, need our super we who offering. our whenever are power the is the

Yes.

put that right, in to seems coming -- lower it that very burden have like together, you you your you years? -- the if Thank what much. mean So power does CapEx this via

Yes.

Charlie. please. thank next participant, the you, can to move Okay, Operator we on

X:XX:XX] one from to ask [ph questions, Group. Next Laura Chen KGI

from you And that categories taking the Thank congrats good about result. view Actually, question for key has key the is been my already PC the computing starting for see My the applications. your high on questions. TSMC. for we last first quarter,

we just various you on I'm be XXX? view years? Do next with from see the for key few from on-base more TSMC And architecture, So the or can like CPU the from will what or upside the that more driver will you our on your analyst view that previous share demand about view also, Thanks. XXX, the base wondering for mentioned well, latest that the in the question. first call, growth, smartphone will weak on space, smartphone I penetration the what's recall given penetration? there the XG, expect my you rate XG on that for XX%. be But That's like your

Okay.

first Laura's So question.

by HPC. on know platform revenue. largest the wants to HPC notes she First, contributor has our become She to

how to wants driven xXX. years, what by So over versus see this HPC? several do look when know the out next or we we -- she ARM-based Is

question. I that's the her of first part first think

is everybody's growing TSMC, our since definitely HPC And here. Laura, foundry.

what significantly say growing you high-performance and XXX both. for the based And both TSMC. support in ARM are computing, both we for So

wants to she And -- then sorry? also

high exposure like the seems already has TSMC ARM It on a base. Yes. very

come years from So can still next driver to growth the we XXX? expect a more few the

this also. to have answer question? Can We very high exposure I XXX

still the times I TSMC's of we the increasingly it numerous the HPC holds and growth years. have true will remains be largest main think several and contributor next driver said that over Laura, But

And second Yes. is smartphone moment. question Laura, this your rate. XG still at at about We're XX% penetration working the

Okay, margin can about second I thank if the outlook. you. the And gross question add

have node the maybe target? is well, and CapEx I upside consistent we think that considering or current amazing. price margin will delivery can XX% your advanced XX% really gross discipline And expect as to your more hike in

notes gross She second that is margin on second quarter, question for is So margin. gross XX.X%, Laura’s, very the high.

long-term an our there of target XX% upside higher? margin and is So gross to

that mentioned we every are year. X our profitability as before, Laura, factors there affect

foreign higher not gross margin factors control consideration, into have a deliver XX% confident certainly try to we'll to other And we work is we the do rate, the we achievable. exchange of that that. any than Excluding of -- taking and better which long-term on, hard are

helpful. thank very Okay, very much. you That’s

you. we thank move next can Operator participant please. on the Okay,

one, from have Next JPMorgan. Hariharan Gokul we

Thanks.

expansion. Let very question commentary high me on the There's try U.S. lot is been expansion. My U.S. around first for cost again. of a

U.S. perhaps the negotiations you a think are Chairman U.S. how differential to Taiwan. I and the my your TSMC of up Arizona compared bit is first. about filling is of terms what talk they in -- Could What seeing? the differential? cost with government And customers little the expansion cost Founder kind solar going? That's

have Okay. Gokul, out. I and to again, in say breaking you're

try summarize make your me right. sure got Let I we question, to -- it

higher. is that He notes is Gokul's our cost So question U.S. the first fab. about

said recently has well. founder this Our as

the again, you -- broke question? about manage Gokul, and your your question, your how we cost gap that do close is So think question manage cost I up, the the I how gap? but will Is we think

Yes. cost What as is your with as customers subsidies? well discussions regarding higher and governments and negotiation

okay. So Gokul. you, Thank

negotiations So negotiations How discussions cost higher Gokul this cost, with differential? with know, wants customers the about discussions and how to our and our governments? with

mention Yes, in the cost Gokul, U.S. the did that I we Okay. fab in yes. than higher expected. is the

perspective also that stage information -- them labor an to found full the ample is the this location, also But gap. at give business this customer customers. And cost of chain mean, of past the there is our the U.S., than I they during the We needs we indeed want are COVID Gokul, is in was some also, believe fab. still higher there. And from our fab. interruption government the amplify to we the did construction a load supply planned. that confer two of in the in States this we at our unexpected. opportunity And -- all we cost the the And years, is

but cost increasing, only to the the So ways working on is factors. every the we reduce still and the the have working cost company reduction. we'll cost And subsidy cost. different And government not continue is on are

work process. So the in that is the

customers you the joint you. with venture potentially back. big in consider opportunity has kind Historically, the Thank you, very fabs of potential joint question, customers the thank TSMC Would much. fab any of enough? long of TSMC the second the large NXP U.S. like kind and done the you Altera any consider any this with of U.S. some customers? Thank venture would My if a outsourcing with in

Okay.

again, consider in is, So fab past. we outsourcing? U.S. TSMC done certain for would have He type joint Gokul's notes of any the in question second the venture JVs

in something for this is outsourcing So the will opportunities? U.S. we consider

Yes.

-- customers' of to up understand into indeed fab and Let this that XX our years within right customers. again. yes, RO limit and answer -- the venture specific open now, This go question we utilize. to maybe experience, we ago to -- has don't want will And U.S. It's arrangement customer with understand, demand me we down. we base don't a set also, -- our this some joint But TSMC

So we joint no, at a in venture not this U.S. arrangement the point, to have do plan

Okay, Gokul. move to Gokul. Operator next you thank okay, Operator on please. we -- the participant, can

Next from Needham Shi one and Charles ask question, to Company.

a quick about Yes, to my taking go Thank clarification for gross good I want margin. question. you NX afternoon. back,

your here. tracking? This there above and bit kind is gross higher, long-term target. and which one of your how us to there margin X% one to X% kind because is You mentioned where moving that a expecting, which much let few another quantified probably number see, That's dilution relative of a is you Can points dilution to first X%. long-term gross is margin target number time is little you're know

So can you. us? you with clarify Thank

is target. gross if when I it talk is Charles clarify So X%, margin which to by asking year, think, our for is diluting about His can again, X% well, question, we NX XXXX. first we the

think, I me are margin about gross stop your is the thinking And question, think Is continue? more question does change this -- more, maybe our Charles? what Does -- that target? And your is, I so gross this he long-term dilution let there. he's Charles, wondering yes, sorry,

to no, where is your XX%, that's or X% relative No, X% yes, which X% X% my dilution and my to growth long-term what, relative higher, XX%, it Is tracking, you're question. target, is question? to no. The to

Thank you, Charles.

looking asking, So X% are from we about there? we X% are diluting looking XX% we at when XX% here? talk at Charles is Or diluting to from dilution,

nor Charles, NX effects neither dilutions. it's in diluting from next forecast. dilution we when year's XX% gross the we as it XX%. about already from that XX% mind included the Bear and higher, talk It's margin

a Do Okay, have Charles? question? you second

long-term more chiplets. I a mentioning chiplets. Thank Chairman, have you, that NX package, which ask specifically I for do. question. I want about to includes you

quite XXXX. I of recently about amount think application. expanding a SOIC you times That's talked big XX capacity by through capacity

computing whether something would I a year you're of you mentioned platform? But be high-performance be of capacity give that can color increases targeting possibly updated the given ago, think planning, other one at you're is smartphone technology you. NX SOIC for Thank sort amount can thoughts any you Any application. great. use for to on us

Okay. Charles. Thank you,

the we about expanding capacity and have second IC. SOIC XD there. Charles also He on is talking So particular, in that, question notes

IC is that Is smartphone Charles? primarily is, such SOIC to We adopt adopted expect capacity correct, future? some have point solutions by in the in question also expansion, applications. said like customers do at past, HPC we the XD His with this

Yes. Thank you very much.

Okay.

answer me question, Charles. Let this

the So is primarily the by adopted applications. HPC SOIC far,

that for the solution interconnect or will their it we depend other architecture, other And requirement. Okay. on to will adoption, for have very address their it's high-speed density mobile and Because fit mobile of But requirement, requirement. power thermal efficient. chiplet's

you, Okay, to move the we alright. Charles. next participant, can on Operator, Thank please.

to from Susquehanna International. one questions, Next ask Mehdi Hosseini

to taking Yes, thank the to I go for you back just my want CapEx. question.

through the fact XXXX CapEx you're be the CapEx TWD now this morning, TWD this And back during XX of has highlighting to XXXX, in Chairman that XXX year I billion. could the period. billion guided guide think shipment worth the XXXX

a So be TWD was I million, could guide. are to that unless X% CapEx XXX color much this, in XXXX, the on and I just both XXX suggests if the as that some as to to to TWD have by get follow-up. you really billion your me use down I want XX%

Okay.

billion first TWD notes April back question the XXX next on He our years. Mehdi’s guided is for of So in CapEx. had we CapEx XXXX, three in

so do for and he's that year the sorry, new does year, And CapEx now decline we XXXX? for guidance -- this math revised imply last a CapEx a in spend? adding our wondering, up have the for and apply Or

beyond talk about range going XXXX. already going given We've Mehdi, We're not TWD XXXX. let the to me XXX today. the answer this. We're CapEx not comment billion to of guidance

invest year, it we every before, is when future mentioned growth for we the opportunities. in as Now CapEx,

outlook continue there -- to the we disciplined as future So will a long in believe good, as invest we is manner.

flat fact step-up I quick far up QX, Got down XXXX, it. that XX% last here. a in the Despite in has the was follow-up X% It depreciation Should been And forward? just year, big tracking depreciation so CapEx flattish. expect in a was QX. going

Okay.

expect also in low depreciation a pretty this then for is should the wants to the so Despite ask Mehdi up CapEx, flattish And So increase we growth XXXX? about why or year? depreciation. follow to step-up far in depreciation

the of coming there getting are are depreciation depreciation in. every year, depreciation new same the out there at But Mehdi, time, table.

than This the beginning lower is at in, mid-single-digits last -- above that schedule comes delivery expect guided year. depreciation out. some of earlier. goes some from slower some when year, the So C.C. as because we year we will of grow change, two mentioned It

-- to Now year, for than year. will the number, too be early the higher much it's a depreciation give specific this next but

had I quick And Okay. just everyone since second squeeze follow-up? question, may most one

you still Well, line. few people half X.X. I'll let we because Yes. another question, have have Mehdi, you a on the please,

the take think When at And at just to the are their have Sure. I'll inventory quick. margin correction key curious, year? by are in everyone gross you that the look And strategies what next half. this key variables? is that at customers, your very it second I are metrics? in the seasonality if going aggressive inventories a the into high. more XX-year Or What become I'm the a your mitigate I in what look are balance key make could customers place

Okay.

So Mehdi's is very are at noting question high. customers inventory customer

inventory adjust to So customers further? downside correct, metrics what to would for mitigate our or Mehdi? their Is risk be were if that or TSMC the gross key margin variables

more in first into correction Yes. year. next inventory If they become aggressive half

correction into they were on to become more first If aggressive half inventory next were year. customers their

question. me the let answer Well,

customers said capability As correction. inventory demand customer to still the the I TSMC's exceeds I this are in stated the for remark, doing our that But support year.

they what So original demand is very healthy they tight say utilization. still in very versus TSMC's inventory number, that their do I the decrease the adjustment, capacity will remain even their and

answer Did I we that's So gross intact. your margin our why question? can keep

Thank you, the next move please. participant, on Mehdi. let’s Operator, to

from Bank America. ask one Next of questions, Lin Brad to

Hello, everyone. afternoon good Thank my taking you question. for

learned strong value has offering packaging So is important my very about very, the great TSMC firstly, of question We packaging. provide our And congratulations is to long-term to a TSMC's and for growth first advanced earnings. once variety advanced the again on higher customers.

barriers Japan and would saw for please from if would contribution the So the advanced what can you Thank explosive gradually? will are you news growth an increase the wider the much. accelerate a very plants? key by we about see share the way, DDIC their that mix insights And to the progress. your in you adoption packaging? by point expect to Or how And there are on is

Okay.

to I you if heard similar in outlook the solutions growth what Japan for packaging. center our our the the solutions? advanced or going to adoption wider role in of What is believe I correctly, packaging advanced advanced growth are packaging? also Is by of growth XDIC barriers developing the average of revenue on key it and is packaging long-term be customers? question corporate Brad's explosive So

question, Okay. me That's one by long let a but answer one. very

developed very demand. the to we technology a customers' First, advanced meet packaging

performance, from HPC far today. And today, high-speed HPC starting first. develop by customers or the to be other for So mostly all one, we the starting XDIC SOIC, applications adopted

that XDIC these probably will think we be expect in growth gradually until TSMC's demand what for that's more I have we a XDIC. So That's And forecast. healthy, X-nanometer, business I will up. much node ramp And bit the the growth expect. little technology of is of we ahead expect

Now let We raw material XDIC the fundamental under advantage turn packaging Japan. a in established Japan because has area. of to me the center XDIC on center also

that why technology can For center established X your the are And substrate, technology one XDIC we number TSMC's so customer technology Did development they need world. question? we a there. I we better. XDIC over serve our in that's the to answer center And example, the complement the

Yes, Thank sir. you, clear. Very yes.

So maybe IC also another substrate. about follow-up, that's the

packaging, a plays advance ABF important potentially currently course, coax the actually especially role substrate in in penetration. the for demand increasing very substrate largest with packaging and of So advanced

for Thank a X.XD XD? if TSMC of or expect potentially and rising you. is one So substrate material for to to for with that, And the last upgrade integration we chip, do designs supply new the more compare follow-up ABF? And you level secure any plan future substrate XD, would maybe replace need requirements? you

how development Well, second we He wants to more on And we with see we versus new materials? of supply? developments X.XD? Okay. do Brad's question is -- in terms substrates. the substrates will the used Will secure the substrates in know, and of substrate do further adoption, see XDIC we

the in question XD, We're interested you this your X.XD or let both, Well, one the XD, advance further working partner. And both me only are are tell the is with important. But step. technology. substrate we very one

in market. compete not to develop commodity of No. to the substrate any are technology We going the

the support performance customer. to large high for purpose. developing computing are substrate very We very or TSMC's That's our

you, Thank participant. Okay. next Operator, on move C.C. to we can the

Sankar Krish Next question, & one Company. from Cowen ask to

Yes, them. of hi. Thanks for taking my questions. I have two

down December XX% revenue going it in be full your the time. year to a one And quarter is, like XQ sequentially looks growth, that look than The at first more when XX%. I guidance is or hasn't calendar long happened of

curious, demand guidance. is, then your the of at much below by lower end TWD FX? if second is running billion, CapEx at first about versus of year your follow-up is is a how half look the XX I which of So rate, And the I'm driven question, that kind run full

you be year? So the on it I'm edge kind that's Is next would like of Thank like EUV? color delays tools? Is that much. curious, what it causing helpful. tool Any very depth CapEx pushout are of super into the

Okay.

questions. Krish So has two

he quarter? this is grow in the year says at First and to full fourth mid-XXs, guidance our decline looking implies a

that up. do We No, least the Maybe think can again. so. I don't at did you calculation. It's

we mid-XXs about I that as Krish, note terms. that when U.S. is dollar would C.C. guidance, in Yes. talk said,

Okay.

lower sort wants second it And types then CapEx the already to will said on range. His question driving of question know delays? Is of the have what end and be of at the we He looking equipment? it is is is his What EUV? to Is it tool the closer CapEx. CapEx.

details. that difference C.C. got the we But year, of pushed some kind as be profile quarter-by-quarter. them think next every I And year, can CapEx can don't out No. of to go mentioned. into

the Okay, of I we’ll two in participants, please. Operator, questions last thank interest think take time, you. from the

move on the let’s So, to next.

from ask The next HSBC. Lee one to questions, Frank

like Thank this looks a like just inventory increase wanted TSMC. a there's start a I to going also year, the guess, on, the you. also we and And But to question and profitability seeing some for foundry ask pricing. price it I we're price see potentially at It bit same manifestation seems time, correction. into next increases. unusual further overall year, of

there Or to of strategy for seen more pricing this itself, profitability the this in is we that reflection that perhaps of trying understand haven't the are different seeing we're the this cycles. cycle past? just any kind time being cost past So than a structural of

Okay.

pricing? pricing Frank's factors what TSMC's strategy. So is question drives to or first our do play And the it? cost into driving He is really inflation pricing. wants How what on know

pricing that manufacturing creations, are we our we value provide XX% can not customers gross capacity strategic our face and between achieve Having not By actions, our the We these higher. support. cost on Yes. with is opportunistic value-driven, cost long-term comment believe our will do discussion taking and value. services We work technology, and our details. reflects and do These private including continue to closely pricing And said plus. we ensure all of to ecosystem, challenges. customers. margin and that, a or pricing We our our us

that, cetera. higher. long-term materials, As XX% said and we margin raw rising having we achievable, utilities and mentioned, But the tool that still XX% is et costs, and think gross

question? Okay. Frank, second do you have a

where you what some overall event the in about anticipation a talked half in year, that. the weakness that year we the cycle, is, half the of second in -- half? guys the going everything understand more on with have effect see question customers just I second view you next this price stronger else. overall into side some could more know bill leadership given is in and the But the a But than first increases? still And anticipated see My there adjustment I potential first

and there second is will customers, in with Okay. pricing, this I Well, we first of -- weaker year. next to second will be thus, could half question a Frank's situation where half their of would more a year, see pull business guess,

not that. did see we No,

-- We to our support we are our with are we actually our try best customers. and working customers

As right now, tight. capacity our said, I even very remains

switching we quarter the not this year's half, first simply next did no, the So that, between see it. year's and put second just

last Frank. Thank Great. can from participant, Operator, you, questions we please. take the

to Robert Bank. Deutsche Sanders from one last The questions, ask

for Thanks I Yes. my taking have questions. two. just

majority? wondering on second a for be designs of next just What's how under next much year. just it discuss is could will asking some I'm our wafers the are people you there be of the in X-nanometer if And revenue just be that chiplet would what thinking may HPC the pushing question agreements is question. then be rate? was may adoption they to one Thanks. LTA. first jeopardizing year's reason The is chiplet of percentage the because the I just market using customers The because fearful architecture. Is the

Okay.

of to this Wendell TSMC. to address Robert's how Maybe So he revenue question. question agreements is with for long-term first know wants percentage can much customers represent

capacity Yes. to continue customers very to and to receiving we work that. Robert, them details support. We to And going way the with discuss plan the work we like capacity them don't with the the prepayments the for support determine decide to diligently closely will forward. including best

NX. his chiplet architecture wants for HPC Okay. approach? on or may is NX, second percentage to He on applications And that adopt then question what the is a know,

the using let the approach following I to the start and or will the become customers and major me increase cannot the technology that that number. X-nanometer the technologies. the will number you the assure a X-nanometer chiplet NX in But in of release

Thank And you, concludes Thank our Robert. session. This you, you, C.C. thank Okay. everyone. Q&A

from conference, through which conference now. Before the of advised will the be you from hour www.tsmc.com. transcript hours within conclude accessible now at XX that the one today's please can TSMC's available Both we replay find of will and available be website become

have thank We So we a hope Goodbye, join and joining for quarter. next will today. again continues healthy to safe. us stay good you us hope and day. And everyone you