Docoh
Loading...

TSM Taiwan Semiconductor Manufacturing

Participants
Jeff Su Deputy Director, IR
Wendell Huang VP & CFO
C. C. Wei Vice Chairman & CEO
Mark Liu Chairman
Gokul Hariharan JPMorgan Chase & Co.
Randy Abrams Crédit Suisse
Bruce Lu Goldman Sachs Group
Charlie Chan Morgan Stanley
Nicolas Gaudois UBS Investment Bank
Roland Shu Citigroup
Laura Chen KGI Securities
Brett Simpson Arete Research Services
Charles Shi Needham & Company
Andrew Lu Sinolink Securities
Martin Lau FSSA
Krish Sankar Cowen and Company
Call transcript
Due to licensing restrictions, you must log in to view earnings call transcripts.
Jeff Su

Good afternoon, everyone. Welcome to TSMC's Second Quarter 2021 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. event CFO, as Mr. today's Vice first, for and President format will follows: be TSMC's The the Wendell the followed for second will quarter quarter Huang, summarize XXXX, by our our operations in third XXXX. guidance Dr. CEO, TSMC's Afterwards, C.C. Mr. Wei; Huang; and TSMC's Dr. Chairman, Mark messages. company's Liu, jointly will the key provide open for Q&A. will line the we Then

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

Wendell Huang

Jeff. Thank you,

X.X% X.X% sequentially terms increased term. dollar NT in dollar revenue or in quarter U.S. Second

of continued to business second positive Overall, automotive-related XX% Therefore, XX.X%. Gross operating XX.X%. margin quarter the absence X.X ROE billion. Our sequentially dilution, X.X increased EPS TWDX.XX supported to NX mainly decreased the sequentially improvement and demand. was to inventory slightly expenses of was points in and points was percentage rate and percentage second cost decreased margins due HPC strength TWDX.XX quarter our operating by Total revaluation. slower

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

account increased account XX%. And IoT decreased of account to to for increased second X% XX% HPC decreased X%. quarter-over-quarter to quarter XX% X%. on X% to account Moving contribution our for for for XX% XX% by for revenue DCE Smartphone Automotive platform. account to to X%. decreased revenue.

balance of billion. on sheet. cash marketable second and ended securities with TWDXXX We to the quarter the Moving

quarter. TWDXXX dividend billion increased On the to On TWDXXX of raised inventory decreased we the days debt NX increased others, of Accounts primarily offset bonds prebuild. TWDX XX payable. ratios. billion by due side, decrease XX during also by partially current days TWDXX rose days billion increase to liabilities financial as TWDXX the liability accrued Long-term days, to liabilities in while interest-bearing wafer due mainly to billion of in receivables mainly and billion turnover of days X days corporate X the

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

increased USD summary. TWDXXX billion dividend. have the loans our about cash billion operations, billion. increased quarter increased TWDXXX capital payable billion. in third CapEx of bonds TWDXX balance from TWDXXX XXXX TWDXXX quarter distributed During expenditures our U.S. billion spent end quarter, billion X.XX at In we TWDXX Overall, to cash my finished Short-term I terms, by the quarter. totaled billion TWDX while second cash the second and in dollar for generated of financial billion,

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

C. C. Wei

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

investment and me long-term start TSMC's let plan. First, with growth outlook

XX% and lives. require customer leadership, the to has essential the favorable our need XXXX the demand computing, will for to and well XG- high our CAGR to differentiated leading-edge of capture from megatrend be in near U.S. long-term expected accelerated to manufacturing dollar XXXX to security, digital terms. are the our and well the fundamentally more we In people's in technology with With as ensure We are the energy-efficient by in in short-term HPC-related from computation the XX% power industry supply imbalances of excellence a increase and technologies. transformation, observe as multiyear growth trust, also structural underlying supply long-term end to need now the positioned greater which COVID-XX are technologies. driven revenue structural chain massive semiconductors applications we term, increase to semiconductor pervasive near witnessing as We in making CAGR our fuel increase expect continue a both structural range megatrend in demand.

advanced may remain industry-leading While throughout expect not persist, our demand capacity special by for may the tight strong or imbalance and technologies. XXXX we fueled the to year and our short-term into

excluding our address of be the growth to growth about TSMC, To now year terms. full XX% XX% XX%. working technologies for and closely about grow the grow XXXX long-term and -- above XXXX, memory structural U.S. customer market leading-edge forecast investing foundry while we and our outperform plan expect in their is are to now the dollar is confident capacity We with revenue the demand in can forecast market For to industry overall we semiconductor to specialty demand. support we in profile, TSMC in increase foundry

important. ensure not decision Our X the strategic, leadership, investment, is: strategy a pricing disciplines, proper flexible capital and based that technology trust pricing retaining earning is proper manufacturing, and on TSMC's costs the investment return. due At increasing materials both return and customers' global are manufacturing rising cost opportunistic. commodities our manufacturing responsive are To firming footprint complexity of we investment cost. nodes, to we mature node, time, expansion challenges and basic pricing. are same wafer face and at from up new our the Therefore, in process leading

work to to We with value. will our provide our customers continue closely

such us to growth also earn profitable diligently to our to shareholders. suppliers we believe and can on we enable customers' work growth support long-term continue invest cost taking deliver actions, with for returns deliver will our improvement. proper that continue to By our We to

address automotive we talk at to takes challenges OEMs supply car least steps customers. inventory automotive do with of for chip will supply known the and tiers to own the half automotive months year, automotive Next, the so first The about to chain supply me From chip continue production in and actively this production, our with suppliers is TSMC between. taken X practices. it in its update. the let complex management several to has reach second half throughout of

However, in this to we output by one have key customers MCUs, our increased dynamically with industry. about other our support worked we to to XX% semiconductor first automotive reallocate of as worldwide successfully the first XXXX. products, for the of components automotive half capacity half compared wafer In year,

greatly represents level expect expect level. MCUs for the For semiconductor for quarter. a increase component the customers to over which to increase close reduced prepandemic over about taking XX% the automotive such output also by to starting actions, TSMC year, By XX% XXXX we from the full this XXXX shortage be we

HPC a the wave XXXX. X-nanometer Now X-nanometer and NX continued with most demand driven design wafer contribute to our family XXXX. applications. NX for the NX NX is comparable several straightforward volume risk begin foundry year production production talk XX% well the its smartphone by to we track. this To we advanced is and products, NX and strong, continue progress. let we migration be in and applications on to me expect technology, of with production in power which further second family's revenue rules. performance, improvements from next years, our demand about industry's the will yields smartphone the PPA. demand best and NX our by expect introduced in for and enhance NX next already around grow of NX HPC is volume NX NX Thus, for to solution quarter the driven TSMC's in robust density with

Finally, structure talk to maturity, will NX another be performance deliver NX FinFET cost our transistor about scaling I the from the will best will our use and for status. NX customers. and full technology

progress. NX Our on with good track development is technology

both HPC platform We smartphone have and a developed of application complete NX. support for

level see in customer the to scheduled Risk is production engagement at compared new with start more in and high NX XXXX, continue NX. will expect tapeouts production second for NX half XXXX. of of We as year and for first a

and advanced the be technology in it and TSMC our long-lasting driver become and for confident foundry important that both an will and be leadership will are both technology PPA introduced. large and customer we of X-nanometer is Our technology nodes strong NX technology when With NX our long-term most transistor demand, growth.

Now let Wendell. the to me turn over microphone

Wendell Huang

you, C.C. Thank

demand some on near-term TWDXXX.X from ago. billion mainly to making and comments guidance inventory. forecast our demand second billion, our due months by our start concluded revenue better me X with IoT automotive-related than our HPC, and slightly XX.X above We or Let of quarter applications USD

third Moving into quarter XXXX.

are and business industry-leading by X-nanometer our IoT demand expect and strong which smartphone, supported to four technologies our growth We automotive-related applications. for X-nanometer driven by HPC, all be platforms,

healthy fabless customers' our 'XX expect inventory exit the quarter a inventory side, of at second On we overall to level.

second tensions. and customers of the prepare brought to supply to supply uncertainties level, the COVID-XX higher by supply given to in levels We need seasonal following as and chain disruptions of ensure the continued gradually half our historical compared the industry's due expect chain security to the year inventory about geopolitical

me our Next, about talk let profitability.

Our was unfavorable rate. due of to mainly exchange our of foreign margin below an guidance, second XX% quarter gross slightly midpoint the

exchange exchange our in depreciation provided In was third the have percentage maintained had the rate third percentage X.X the profitability. other our TWDXX.XX. at quarter USD of margin to above quarter. to gross able point created been rate second original exchange XX.X% guidance gross to about exchange USD Our we margin if costs sequentially better quarter versus our second rate the mainly difference X unfavorable are TWDXX.X, both on to to foreign months due midpoint, in based by gross quarter rapidly margin we our at back-end Based of quarter XX.X%. guided second XX% increase USD words, actual Despite to X X have whereas was assumption and exchange maintain would at to rate XXXX just point the second X gross TWDXX.X, ago margin quarter margin gross guidance. assumption rising TWDXX.X, rate, actual $X This on X.X to and

in Although expect similar follow, in term intensity of to of anticipation investment long-term the as level a our pace earn a are is higher that we capital we level continue will necessary strong return. near of accelerating growth the to

and through We be financial unchanged. gross remain XX% the ROE achievable margin reiterate is operating to with above XX% to above the be of long-term XX% long-term cycle. above objectives Our margin

on let and quarter TSMC on cash basis. quarterly for cash annual Now comments XXXX, some dividend Directors both dividend share of a the first Board TSMC's which approved June, sustainable will distribution per cash to of me In remains and dividends XXXX policy. TWDX.XX will XXXX. shareholders distribution of That TWDXX our an XXXX. make quarterly committed at be dividend in Therefore, in to share share at per cash dividend TWDX.XX dividend total receive October for least per be also cash least TSMC shareholders receive TWDXX.XX share. the a distributed means of will cash expected is the per

our Now let me microphone turn to Chairman, the over Mark.

Mark Liu

come. customers, our our logic trusting talk interest the business you, TSMC's responsibility is to of as TSMC afternoon, not footprint. customers is the them. is And always providing provider years by in We the TSMC our our with the Wendell, relationship our shareholders. efficient grow business customers. our treat global our Today, the with you. to to innovations IC solid fiduciary our to about everyone. manufacturing enabling maintaining for and unleashing our customers. Thank best customers' We by and values, Thank and management investment, and compete capital world's I cost-effective the TSMC's trusted partners. earn capacity good duty our global success. industry industry-leading by mission technology We do as and providing capacity In company make and will be technologies, to their logic largest decision manufacturing while for our

competitive Parks semiconductor years, Science Taiwan and we we As and to in are to expand global increased have sustain better manufacturing and Science are our infrastructure new the NX building demand, of security recent the Northern, serve base -- Taiwan. and will R&D plan in In our for the footprint need and environment. advantages Due further we to Park. has geopolitical NX expanding strong to home in the our customer Taiwan, customers for in Tainan Central capacity be expand continue for to TSMC. center And Southern in enhance

to close be As engineering closely the as well. Taiwan with node an semiconductor proximity well increasing be ramped are in presence and will has to the of technology volume we plan. initial leading in a the with fab of XX-inch U.S., due and leading-edge our advanced progress In Arizona on our is fab activities, R&D with in phase to collaborative our coupled massive production continue track

actively are the fast the operating phase U.S. a in We efficiency learning for fab. to optimize

Taiwan X-nanometer X per training late already has April wave Construction production technology the for arrived production with for on in time, begun U.S. second the The moving At our will in wafer first 'XX. fab X-nanometer of be volume scheduled technology. the equipment that begin XX,XXX still technology of advanced half high-volume Phase will engineers month family of first of in commercially XXXX. U.S.-hired X-nanometer available in most quarter

technology. X now as China, already has construction reaching in Our the fab customers business of In our our third wafer welcome month we completed build U.S. second ramp and out completed quarter do Nanjing commitments. strong pledged possibility to strong and XX,XXX the a Therefore, customers' per demand. the have XX-nanometer capacity XXXX, capacity rule XXXX, us we meet Phase in in phase of their not expansion of volume in to support

expanding urgent and capacity with volume in second Nanjing to further by beginning are presence mid-XXXX. with our month XX,XXX our wafer needs half XXXX in XX-nanometer technology We production customers' per support reaching

supported long multiple XX-nanometer and the demand be XX-nanometer our forecast For structural memory strongly specialty will by for sweet will embedded we technologies. for spot applications our term, the be

on Our and efficiencies business is operating customer opportunities, strategy cost economic expansion global manufacturing considerations. based needs,

the While the with gap work ensure Taiwan, field. manufacturing in to to fab will governments not are start minimize playing match overseas initially able cost of with cost our we level a we operations to

we working closely pricing a the to return. up customers We cost and increases our proper our ensure are wafer reflect firm to with earn

footprint with and optimize efficiencies and our will serve Thank work service our leadership for locations growth us and global global to shareholders. to customers. expansion diligently such proper our an capabilities profitable steps, we enhancing continue our long-term and in attention. customers' investment from needs, your earn overseas talent, enable technology better reach operations our cost-effective of you manufacturing return will taking efficient on to for our for By manufacturing deliver provide the We our believe

Jeff Su

Thank statements. you, prepared Instructions]. our Chairman. [Operator This concludes

the let us the Q&A with please the session. begin proceed line? on caller Now can Operator, we first

Operator

Yes.

Hariharan, first The caller, JPMorgan. Gokul

Gokul Hariharan

bit through potentially and Maybe my remain remain demand. demand semiconductor as you're mentioned first strong, next Could the expecting to to you talk that do year question tight expect I end supply demand about extremely on and well. you would of to year supply through time focus Do for supply still a customers when C.C., that correction you this balance? much you think situation soon? period structurally come inventory a Or where likely what thought? inventory sometime that originally back into is your higher a the you into see mode the of go is of market than an something last to longer

Jeff Su

let capacity right. the notes first your will C.C. into supply-and-demand He tight All question summarize is XXXX. year this and be on question. our me that Gokul's outlook. Gokul, Okay. throughout semiconductor has said first

a So continue? a inventory He's correction can Is of anytime supply let how higher there we asking, me demand. soon? balance? coming of question risk again back summarize see semiconductor into And level supply when do long Gokul's on and inventory in and the semiconductor wondering demand the or an

C. C. Wei

Well, me question. your Gokul, let answer

may me the not Let's driven chain is and with now. on share shortage the demand uncertainties also by COVID-XX long-term supply share will increase our that or to geopolitical previous correction not that in underlying due persist. we of from short-term -- And possibility a capacity let The XXXX. right structural I an be with we in may structural rule believe current inventory do perspective our this let tight volatile shortage less than market both But tensions. semiconductor and We application being our a imbalance will to you your out the but of continue. will XG-related at the year also and megatrend in throughout even occur, downturn and it HPC as Do question? least extend inventory correction answer expect remain capacity future, into me you

Jeff Su

I All think that on question? Gokul. address does caller right. to move Gokul, lost have do we'll the Operator, next you if first so? question, second your a we Maybe first. have And

Operator

one is Randy next Credit The Yes. Abrams, Suisse.

Randy Abrams

how X-nanometer and the to and system between curious And that shifting seeing cost ask how customer is question trend for the back-end I'm continued migrate, performance purchase. out the seek cost also versus X-nanometer, per to wanted for integration? power how density you're increasingly I level motivation the on our improvement?

Jeff Su

Okay. Randy, summarize let question. me your first

Randy, cost correct? technologies sort transistor. question as what first per is customers are they at what the the look of X-nanometer. Randy on well. the -- at the is evaluate what trend your Your when is transistor X-nanometer per to guess, wants Is and I also do that -- or know value cost question And

Randy Abrams

also performance power cost density between and right, integration. versus back-end Yes,

Jeff Su

Okay.

Mark Liu

Randy. getting And we simple course, very innovation. than been scaling. No, closely innovation, actually, technology. customers with approach, energy of the the complex on several efficiency working performance Actually, a have of our technology transistor took work we we has today, and the more and material structure

generations, and to improve is migration XD for continued TSMC recent in the is evidenced on innovation value and combined X forefront the also, of recently, the the to demand efficiency. ICs. We these to value this and on the and our at technology also the delivering X. deliver by performance And And system's All technology strong work system work more power we at cooperation. as we design heavily customer the

our that, doing believe continue in can we you, for So investment. earn Randy. we proper a Thank return

Randy Abrams

a of not there's in a profitability mature to in could you on it Okay. spot new dilution. sweet if a yet on node more the look My some a ramping? see X-nanometer, update the we the more year, how bit ramping like have And late next we as see see a question, but X-nanometer you half? as dilution still the how favorable year, for second you margin. Maybe And second much an update gross corporate X-nanometer if towards could where you give trending

Wendell Huang

Okay. Randy, Wendell. this is

Let that Therefore, your revenue higher between expect margin The me from much year our year. X percentage this X-nanometer the question. points. dilution compared will contribution last be NX answer to be year will we to to X this

able Now X nodes, believe talk it's reach it. margin early we long-term XX% will will average NX, achievable. XXXX, be But to previous expect like about be With -- bit target our too a to of the reach the to that quarters. respect also we margin to to about in gross corporate continues X

Jeff Su

Thank you, Okay. Randy.

Operator

Lu Bruce from next Yes. one And is Goldman Sachs. the

Bruce Lu

your lot management I customers with payment like long-term flagship your pricing think of a of and find with terms. a contract customers other A supply lot different policies. chain have players favorable

TSMC does So expect and the Does will industry? the will the earnings become be pool this norm future? for the fluctuation new less in the become bigger industry-wide foundry profit

Jeff Su

Okay. you, Thank Bruce.

Let your be is me chain, long-term of question. a first about supply contracts summarize signing semiconductor seem foundries. question customers observed Bruce's lot he's the to that first and with

this could So do the future? new norm bigger or the we expect to And a industry-wide larger drive this profit in pool? be

C. C. Wei

the me Okay. Bruce, let answer question.

able comment specific not terms are to We business customers. on with

are we plan their understand if be we to customers maintained. secure long-term working to And on commitment. and And growth. support well we closely our ways based utilization our However, believe our in profile, market the capacity can profitability their demand customers different with structural on our effort increase the

Jeff Su

do second Okay. you have Thank you. question? Bruce, a

Bruce Lu

Sure.

less the is on out XXXX automotive focus of to a billion in roughly $XX want market. than I billion $X automotive So revenue like

companies for a market foundry. this So big passive creates the expansion, capacity are with addressable the automotive IDM of in most

in automotive So what the coming industry years? semi for market in the is foundry the addressable

Jeff Su

Bruce, me summarize let your second Okay. question.

outlook TAM but automotive asking is our the revenue Bruce about last So than about of he billion $XX out Automotive $X was automotive points the is less year, for the billion. industry. longer-term

of the for about So long-term sort addressable market he's TAM wondering TSMC.

C. C. Wei

answer again. me let Well,

trend specialty are smarter to as -- both. as trend in and positive semiconductors silicon on automotive towards and the drive the advanced well greener as semiconductor safer, in of demand continue vehicles will increase We the the long-term quite content content for technology,

Jeff Su

answer you. Bruce? Does Thank question, Okay. that your

Bruce Lu

a numbers? bit? you specific somehow little quantify that Can we have Can some like

C. C. Wei

so will in very will that forecast the is let silicon very But cannot dynamic. and be We you that accurately, increased. assure important I right? be future me mean content

Jeff Su

you, Thank Bruce.

Operator

Hariharan, one JPMorgan. next is from The a Gokul question

Gokul Hariharan

HPC me let to the that make into is is inroads ask question segment. My on question. second clearly my Yes, more X-nanometer business, the second expecting you market a your lot

How talk existing what as your you as customers for of does the their capacity of foundry there thinks when is as about is this a think get terms out you it HPC cooperation? call they customer Could redoubled well in growth biggest revenue have TSMC that about One HPC how allocation, back and manage IDM becoming into a competition little probably the business. of about coopetition, size? to now driver this this bit given efforts important kind very

Jeff Su

for second Okay. question. Gokul, your thank you

a He out particularly redoubling larger out IDM me our also that are -- to efforts. Let larger points become He points driver, contributor HPC their seems customers summarize. is and that X-nanometer. existing or at

How his is the question how how manage we manage do really and guess, the duality? So do we I relationship? -- this capacity allocation

C. C. Wei

Okay.

Let mentioned me important is that IDM by, first, answer you customer. our question the

other Let areas. everybody's and and competing me And is in in openly say might fairly. are me again, explain and our support we all that. foundry TSMC customers some let collaborating But we area

our success, to will question, thus the We on all and resources okay? engineering your of existing to for the capacity that our Gokul? the customer. answer product long-term our capacity based to How is support? megatrend, Actually plan planning by both future Does industry underpinned the customers' is demand allocate and market customer ensure necessary

Gokul Hariharan

solidity So on you longevity demand one also they IDM in follow-up. to demand, maybe pure given competing just process of with assurance Do and more compared a customers terms require fabless? lot from you are technology

Jeff Su

Gokul require assurance our fabless we IDM more whether our that from would So longer-term customers. customers versus is asking

C. C. Wei

on will customer, a We specifically not and certain comment that okay?

Jeff Su

disruption. the for sorry and Gokul, you, Thank Okay.

Operator

Charlie Morgan ask Stanley. Chan to one question, Next from

Charlie Chan

I First the donation would Taiwan. like of thank for to vaccine TSMC to all, the of

global still supply continuity and TSMC semi gross question is chain. think my I about trend. margin that And of ensures also your business

not XQ, Wendell getting mentioned is seems all, of true. if sure that first So possibilities product in It the I'm end XD IC like better your that's are packaging. or back advanced

XD whether would percentage is revenue. believe can of TSMC's a company create the advanced and outgrow currently business of packaging the And would still still the that dilution. the So they wafer packaging question margin

XD question advanced the packaging. about the So first is

Jeff Su

Okay.

summarize your me Charlie. Let question,

You're And Charlie business Is IC Wendell third then sort the quarter. asking of our XD overall outlook IC back-end the also And will for improvement profitability our in to whether XD the XD business comparison cited this dilute about our asking is our business. profitability. that in business. truth? the IC

Wendell Huang

Okay, Charlie.

of actually all, the margin gross First of talking is in quarter the was improvement service third I seasonal factor. that a about, back-end

you As know, our back-end services has seasonality.

So longer second high a higher therefore, margin. to half the expect a although a has back-end services satisfactory. improve its not is normally has still gross to wafer returns But But continue gross our asset margin term, lower as capital of we intensity, from it's revenue. as it margin

of about expect to total X% X higher terms years, corporate services than this for a we slightly year. account And our revenue in back-end the In the it percentage, next of average. will revenue we grow expect

Jeff Su

have a Charlie? you question, you, Do Wendell. second Thank Okay.

Charlie Chan

Because did next question power right? Yes, I my margin and the thrust we vendors bargaining long-term about Yes, something -- against is different better the CapEx intensity, your higher or the create do. gross trend, those customers. about

want choice? I the think do has Does company need acquired the your industry, -- what be the why share, between the why this the in openly you to of increase you not? the would and monopoly have CapEx edge were cannot of you higher also to believe sustainability leading ask the yes, really, if to market margin price and And if intensity? wafer choose monopoly, why cover And TSMC the to company TSMC lastly, management. So to charge

Jeff Su

Okay.

second question, Let Charlie. me summarize your

or power. your to not. market whether is we to of at a between asking Charlie long-term should is the believe choose then pricing. So edge he and leading monopoly guess, profitability, is also, he if -- see how about wants we or have I how wondering gross share the part And bargaining know trend we then we have And choose? we And margin do, -- if question, Charlie, and

C. C. Wei

me question. Charlie, answer this let

And leading-edge bargaining away on try high node. we pricing very optimistic strategic, power. a you don't our say the technology from have do we is But far take market to that approach. and share an strategy we First, it's

them with work want be fact, best pricing. In proper return. the help get customers, get a continue and our proper we to successful we I hear our for ahead, grow to for can we all our our practice, want and to you we to while try And to return. That's closely we answer customers looking our

why firming up wafer or we above can gross So are the that our XX% term. pricing. that's we margin about are get confident And long we our in

Jeff Su

Okay. Thank you. All right.

Operator

next question, Nicolas from a UBS. to The one ask Gaudois

Nicolas Gaudois

the in to we the going trailing rest -- in at capacity up about industry going the referred additions the for as higher to to more edge you recurring forward? leading edge, your are XX-nanometer trailing see the of in capacity in becoming of expansion a feature of If is for TSMC for effectively Earlier, Nanjing edge since structurally XX,XXX XX,XXX tying launch. demand the and

Jeff Su

me let first your summarize question. try Nick, Okay, to

saying capacity are XX-nanometer. as So expanding our Nick we is in Nanjing that, for Chairman said,

edge do add the capacity nodes consider we see demand nodes? those question his edge trailing that we And or trailing So structurally higher? becoming or is will the the mature then in at

Mark Liu

Okay. is This Mark.

question. answer me your Let

mature customer long-term recently continue. that. to And our focus investment specialty and structural specialty our work support to for their and And specialty strategy develop on on we demand Our course, we'll requirement This more we value in technology numbers. the differentiated expect will of in we closely them. many leading to create with can meet this node is technologies are technology is Actually, by not solution. XX-nanometer described

be by will So long And manufacturing justify expansion. can no for out, we the as and customer as commitment case build the greenfield, do we economics case not it rule can secured.

Jeff Su

you have Okay. Thank a you. Nick, second do question?

Nicolas Gaudois

production Jeff. I runway, 'XX. Yes. the guess. in, Very long QX Thank in the the U.S., investment in 'XX clarification effectively HX reasonably and you equipment A then you, in moving quickly. say for A

is because qualification need fab So obviously low? time that to run reasonably you be new preproduction, that will

Mark Liu

to make compress for yes. preparation a just time operations. little as bit But course, because as we our new semiconductor the will much We that's can, a prepared of continue Yes. -- environment longer we schedule

Jeff Su

Okay. Nick. Thank you,

Operator

Roland next to ask Shu The question, from Citigroup. one

Roland Shu

R&D is for Japan first My center. question your

it XD So in companies at you XX Japan. more with Japanese your stated is IC than R&D will center work

are to want production foundry do a responsibility And you and do the you for I And including R&D build what fab plan yourself to know So to packaging start in one forward? Japan IC in Japan day? mass roles Japan in center? for every this party going business wafer plan XD also,

Jeff Su

Japan. XD to involved Okay. know our in There's He him. Roland's than companies question. about IC according research center first wants to more XX

and build the responsibilities we consider are XD And a in packaging what packaging fab will of we also, facility integration wafer a that? -- will Japan. Japan. So in roles And IC

parts this question. three So to

C. C. Wei

me Roland, question. your Okay. let answer

yes, research center. there Japan's membership than to this XD First, XX join is more ICs

your to necessary in in In the be role major not most we Everything the XD also current for of in material some we advanced mass partner's and needed. Do partner charge And in also what's technology, advanced in yet, IC the fact, TSMC's technology, and and our production plan charge And HPC's all next is planning successful our we put the one. together, advanced TSMC what's together, in can too, technology. -- okay? this XD IC that question? the includes future for Japan? is substrate most which so responsibility, It's we're we have of partner's integration a our in of that packaging which the application

Jeff Su

consider... And will we

Roland Shu

yes. fab, How about wafer the

C. C. Wei

we due fab, any we that, Japan, not let out say let fab, clearly. we we expect in do And -- that wafer possibility. to actually, do diligence say rule are wafer in -- are The to that process now are me me

Roland Shu

overseas Okay. a that the the and to are the you key also the My working is cost considering gap. with build to governments is cost close fab gap, Mark concern second question said

in However, the recently there to request were support invest domestic some to noises companies U.S. U.S. the government in authority. to U.S. wisely

operations. to So to adequate no and the in gap is lead from plan it the cost cost you U.S. to there the close to changed how U.S. close U.S. government's And fail okay? government, going support TSMC are if gap

Jeff Su

Okay.

for discussion there out to about recently second question, Roland's summarize incentives our in some the He U.S. me domestic points fab cost Let and it's gap. companies. that invest U.S. is

and if how And so TSMC would that case, cost we the manage this the be would to therefore, gap? how affect were

Mark Liu

I Okay. developing. -- is event current This is Roland, right? this still think

originally happy they in proposed very fab a the of in we already You know Senate. U.S. the Competitive and Act bipartisan bill we that House And U.S., has Representatives, is for of hands America Senate Act industry the investment in CHIPS that -- Innovation are support level support. that in support. U.S. the bipartisan of very passed we in gained now renewal it's the Right passed bipartisan a for and a gain the for so The there create be in reason to field playing are fab will semiconductor they U.S. will that optimistic this the

cost further shared well. be still well company course, addition be done Of in it on, the take operating the operation learning do to with will on But and to customers. how operating to each cost the meantime, our this to the playing And can we field in structure in opportunities have in are up the level U.S.

So firm part footprint. increased up price up of including global that's a -- the manufacturing our pricing, firming

then... believe So we

Roland Shu

the So other pricing companies? from

Mark Liu

in We before. that believe profitability way, we our can Yes. continue Yes. sustain to as

Jeff Su

you, Roland. Thank thank Okay. Chairman, and you,

Operator

we from have one, KGI. Laura Next Chen

Laura Chen

hear Can me? you

Jeff Su

you, Yes, Laura. we hear can

Laura Chen

I to expansion about other expansion all, the just give sweet Mark plan. node more of First like advanced will spot. you ask just the us the U.S.? our Can global in mentioned the about want plan be XX-nanometer that our details than

that than our would first impact my consider for So other the China question. announced That's years? will regions, CapEx X USD would next that? we expand XXX more how already other we or And billion

Jeff Su

Okay, your let summarize question. me Laura,

is question how is further mature different if global And node. locations? expansion think nodes in of in I question few our we And Do plans footprint. the for your have mature so, next will manufacturing our on about years? affect our Your this CapEx

Laura Chen

Yes.

Mark Liu

is needs, course, Yes. of still Japan. We to project But the several the Laura, the now based a economics. just our under possibility evaluation that think is in early to not out process will Actually, decision specialty have in rule and decision C.C. do cost mentioned on diligence final too operating because disclose are in the fab we I planning. still Japan. customer efficiency, technology be due

we projects, billion the CapEx not budget. included have $XXX into those for So

Okay?

Laura Chen

the strong, also question my is the XX- is Yes. And that quite the We cetera. and supply is transceiver, about and current RF for very XX-nanometer. particularly the very Okay, clear. second et know tight client demand

XX I'm also to expand So do the we on just have wondering, plan XX? and

Jeff Su

Okay.

continues And at specifically expand on node? more The second any XX-nanometer/XX-nanometer. to question Do so tight, this plans demand have Laura's is supply be to continues very we to strong.

C. C. Wei

for this -- economics. Laura, expand commitment. TSMC. the we And with we Well, of have mature will the also, And We our customer's node again, this consider the is answer to let capacity kind me question.

everything consider customer to to fact, expand is And positive, in so the capacity support our we if will actually.

Jeff Su

you, Laura. Thank Okay.

Operator

Next Brett one, Arete from we Simpson Research. have

Brett Simpson

expansion target as margins. about quite margins higher had understand big headwind. a And as there's delivering I been are guess on months margin your the XX customers, are the as they time structural gross ask, FX XX% position return. in I particularly margin do really to industry, talked I question long-term of at appropriate at ramp position headwinds of like margin gross your level? for the you going and structurally now. your your I you've I'd much the gross And margins given think fabless down. look leading-edge some a is gross warrant If a gross X-nanometer a result in just when some capacity, level your accessing And an doesn't XX% last

Jeff Su

is, has we last months, also customers' margin. the in have gross of some of margin and out facing course, is X-nanometer level exchange first than gross ours. notes rate points which carries been from particularly He question been that Brett's foreign the that, Okay. XX the headwinds higher our But dilution. structurally about he our ramp,

position, given would do not is he Brett? structurally that So to Is something we achievable? correct, our think be XX% higher? Why know, it wants

Brett Simpson

XX% whether Really of Yes. is an appropriate level return.

Given right why structurally look everyone everyone margins like -- wouldn't higher delivering well is gross higher TSMC else gross margins, is else? for as -- seeing

Wendell Huang

Wendell. is This Right.

me your Let answer question.

last look months. you the talked if about shorter at XX in term, First, we

a I gross X a rate gross about around the would in this we NT margin, rate year, XX% against big exchange foreign if does in where very year-to-date, -- already. in Last stays X This I XX%. margin and And dilution somewhere was in mean, last quarter average. year-to-date. difference XX% second percentage the -- role it year, talked year, X year, margin play a the is year, if this Foreign to was the another $XX.XX be NX point the also, points. creates i.e., having from exchange That the gross gross margin between dollar last year

in still term. all and short So can with make That's we third the quarter. second quarter XX% negatives, these the

the are we Now more future some we growth. our longer term, are time, wafer and is more to at the -- the business cost the XX% with the cost. pricing beginning, and that still to investment also good At firm closely we is short-term for challenging with making advanced a technology in up that made is customers with delivered. target achievable. ensure getting Then suppliers is that working efforts, think point improvement working these can we all And our be and of

Brett Simpson

XX% about talk percent how we'll your I drivers scaling to sorry, double-digit upside? sales of sales? X% some China of of get maybe that? think noticed And of sales long QX. we term, Do back what think in And your that sustainably Wendell. in -- QX within X% of Can follow-up. drive And that the delivered QX just you to do business? would you about in a business you, grew from Thank Okay. China sales

Jeff Su

Okay.

to the So in from first China in Brett's that has quarter X% contribution business. near related China is question notes term our to the gone XX%. second He

sustain So or he which should level? he it wants at think next about improving can then business to a And over we question, an driving double-digit our is And this. China how few years? longer-term is know the what asked return or

C. C. Wei

Well, summarize it. Brett, let me

a developed a China smartphone, and also. talking remains China from and continue our we'll And China customer large expect we to our sector have IoT very market. in that HPC, market them to grow work with we're in the growing think will all base increase I automotive and strong business business about, and

Jeff Su

Brett's XX% the also, from question is driving improvement quarter. in second the China to in from on quarter first X% that? And What

Wendell Huang

That's the because mainly platform. HPC

Jeff Su

Okay. Thank you, Brett.

Operator

Company. Shi Needham have & Charles Next from we one,

Charles Shi

hear guys you me? Can

Jeff Su

fine, Yes, Charles. we you can hear

Charles Shi

the the So the I computing least increasingly high-performance will adoption want process. in node ramp. coming understand past, correctly, adoption of seems question I And lead really the be first at you to most did production I to the about your your smartphone the leading-edge platform ask that first of is important. think your in especially Historically, if the -- year say

is are X-nanometer, really we about So production. which year about a the away mass the from question

even in a in even year? you like lead role adopter what going like nodes the of the So see could the the play from really see actual the especially or of role forward? leading high-performance you today, could eventually high-performance Do ramp computing first computing, X-nanometer like the be bigger first leading-edge

Jeff Su

Okay.

So in of leading seems the also Charles' notes more it's the from to drivers question smartphones, come becoming past about mainly first He HPC but important. is traditionally node adoption.

the adopter? first is ramp role NX become adopter could of primary NX, play question his in And we So expect or bigger the year? the a on to NX, HPC do particularly first in

C. C. Wei

Wei. C.C. This is Charles,

Let the me is still up, biggest ramping smartphone The one. this plays year answer first NX's role.

more is Of And correct. and next be fact, observation more X application in the our is will HPC important. getting and HPC course, revenue years. also largest driver your important in

application expect in node, HPC's NX So become smartphones, the the important to Did your addition that will question? in the also. do we answer

Charles Shi

Excellent. yes. Yes,

upon you maybe question, expansion. still but want So that I the I'm forgive touch to going another know of tired probably global are second ask to answering I me, already, one. your

either in-house I which maybe as packaging solutions You the advanced require forward. node even understand, Arizona, SoIC CoWoS InFo, will in X-nanometer And like wafers will announced your or be X-nanometer. technology your going very likely fab

terms but on I based putting current know, out really wafers packaging are are -- you your your if that I your customers, those then got X-nanometer, imagine bit be cost, back current send you XXX% it imagine in can for back Arizona efficiency. logistical ship as packaging can footprint, to a So challenging facilities, to which And of for in Taiwan. I little Taiwan in to could

up in set want future? ask to do of for an packaging foresee specific you Arizona kind maybe the advanced facility I'm So to you in near plan, going a but not

Jeff Su

Right.

So Charles, I'll question. shorten your second

with X-nanometer. XD Arizona up think integration asking building in setting IC Arizona we Will well? I in are we capacity or also -- Charles consider as capacity is wafer

Mark Liu

if have understand another wafer new. concern. what current Everyone producer I This the in chip their in U.S. produced packaged But even is landscape, is your one nothing just location look said you at and Mark, Charles. major in including industry you

logistical XD that we currently, continue this for We evaluate, So not fab matter, see difficulties. IC that any we to have in and do compose not do at just and Arizona point.

Jeff Su

you. Chairman. Thank Okay. Thank you,

Operator

Next have Lu we Securities. from Sinolink Andrew one,

Andrew Lu

me? hear you Can

Jeff Su

Yes.

Andrew Lu

next half for in contribution from second ramp-up Okay. quarter delay seems second My with XXXX first like revenue year recall it next for X-nanometers the quarter X-nanometer starting second and half, second second question half last But XXXX. the year in X-nanometer I year. clearly some ramp-up regarding is year. X-nanometer some year,

stage customer push to year? I to use second we or that's quarter technology first the is have question. because ramp in my in that X-nanometer we the ask, So difficulty, big a ramp-up back beginning That's the want second why we cannot up don't next half at

Jeff Su

Okay.

that past years asking year. question, few in our in the of the X-nanometer X-nanometer we is X-nanometer next will So in about said me year. and X, notes let the And half the middle ramp. summarize, ramped ramp basically second Andrew's first be He of

this? behind reason the is what So

C. C. Wei

is compared a very in to is customers' technology X-nanometer and that, observation very yes, technology with actually delay X have you product you both the a and Yes, months calculate about X-nanometer. Andrew, design. X good and complicated as processing also

finally, is the best with we next second year. and this we customer work So ramp And a up with customer, the need. with our decided in to fit their half we decided -- of

Jeff Su

Thank Okay. you.

Andrew Lu

reduced. these their in these utilization starting semiconductor automotive have utilization in down appear their outage next year recently, will that earlier down either result quarter or of Most -- us second are guys the some and ramping semiconductor, in back resulting And QX Renesas start are rate and largely or X. reduced are XXX%. have MCU. NXP, concern second customers once fab to may from believe own also we QX. we automotive first My some to Do to power will are recently, leading hearing including these question be is company wafer up Infineon, companies quarter fire the output The order Okay. we the the almost

Jeff Su

Okay.

in as do second IDMs asked year TSMC? their up that have ramp automotive. to second is we into automotive He this XXXX, into the or production half, Andrew's concerns are TSMC's of or heading that reduce we on their orders the concerned will So end question customers greatly

C. C. Wei

Andrew, is C. this again. C. Wei

technologies, it's to will XX-, mostly leading the the the -- question. very we A leading any have demand because And short of some very your continue for offer and with of support Let simple: the XX-nanometer closely I'm and is reason XX-nanometer me is not in sorry, TSMC's answer working us. answer The edge no, that, our don't grow. the edge, need concern. and that we customers customer technology our

don't be they answer remember also. their once in worry and XXXX tight very actually then decreased. is and we will and And no, demand tight bring The so TSMC's about up fab

Jeff Su

Okay. Thank you, Andrew.

Operator

have one, Martin FSSA. from we Lau Next

Martin Lau

geopolitical you politics. The first risk during said Xx question relates counted, today's to call. I

more COVID I when for concerned Taiwan. from things wonder, with customers what when even happened against reliant And concerned you thought also, And they a about your is to concerned how And to time getting seems China war it that Taiwan are politics? mitigate, your fighting are are if with so just anything, such threatened seems Taiwan, time the on management, political. Taiwan? you? political in risk? customers someone in mentioned are have And about against you sometimes vaccines are China, China; fact It U.S. the

Jeff Su

Okay.

and about as risks. is is Martin's observation vaccines geopolitical He question well. in a about more. issue Taiwan politics more that talked His that political has So is notes geopolitical and become

TSMC China? on looking mitigate the things do at as does from So And recent does or in know COVID manage the And to risks have he these how such increase TSMC or Taiwan wants customers of the manage political concerns our how relations? invasion threat risks? China, U.S.,

Mark Liu

for is this asking. you Mark. Martin, Thank

from the political the YongLin priority Taiwan's Taiwan situation know is dropped. people million in government, variants and because that case we has end, be of of and I'm and vaccinated The of completed this in of COVID current us of CDC is -- able you vaccinate did all, and in and sites. we Taiwan -- is the grateful Taiwan, community people But Taiwan the important. first on to the coming. to humanitarian our together really recent contract get TSMC's But reason XX -- the Foxconn the get First the the all could vaccine at Taiwan, embedded upon And CDC donation in confirmed course, employees support a get of I the beginning. to keep come doses -- be inevitably that think

donation wouldn't don't I the In it's development continuing. be the global is So anymore. as successful. think sense, a at end this Otherwise, geopolitical political

I management the think Every every is more think I but has to more rule-based. a U.S., company's this predictable, think is deal company. with new challenge -- And development in for it. administration from I the

long adopt to I too. as it's for company it, as better rule-based, So think every

footprint prompted customers. earlier So for global do may an I our have talk that also manufacturing -- that the adjustment given the need earlier to

we countries, priority, that upon that adjusting do infrastructure, -- there greater infrastructure, the different it security it. development. semiconductor-related customers' and customers geopolitical course, needs security we Our up But to in supply maybe higher a supply to of come are the adjusted is their

wants because no me to disrupt tell of nobody semiconductor let have everybody because every supply it of because in As peaceful benefit, Strait. mean, Taiwan, one China, chain not you, it. but only a to also wants I invasion -- is And country's the Taiwan the to to --

COVID disruption disability any don't global only situation major a I that happen. wish And Taiwan any have a is make to it a think in -- Strait country the for COVID You already made economy.

you, on So I'm Thank Martin. optimistic that.

Jeff Su

Thank question, you. Martin? a Do second have you

Martin Lau

Can one? of up follow yes. second a Yes, with related. I It's kind

global about mentioned manufacturing. You

your proximity You of -- the of our to most the from your to also are need R&D. technology of in highest mentioned majority because is My engineers about maintain Taiwan Taiwan. understanding

your talk Board, is Like a I look one Taiwan the say, how talent a for you example, are Taiwan? mean, do that if the become over see so go you manufacturing, I you outside acquisition? propose who's debate, also outside time Kung Board? it about you this try The you Dr. for the more changing, on try more manufacturing how maybe international? get minister; to global -- And who's the Yancei changing, people maybe have Taiwanese. you As can Board you maybe at maybe when remains from two on some Board, I largely Delta. become more because Or Chinese to additions, Mainland Do also can recent

Jeff Su

Okay.

and composition. our Taiwan. Board he that TSMC. know His also footprint, is members strategy second Basically, global And -- what Board on our only for Martin's is new his question Board. observation are is attract to talent to more So from wants question secondary we is the talent expanding around manufacturing with the primarily

we board consider will countries? So other members from

Mark Liu

well as in as Indeed, -- Taiwan U.S. the advocating talent The have in I question the about been semiconductor talent. in think field we development

talent underdeveloped decades. industry over semiconductor look everyone the key at been the drivers. a think I has past semiconductor as economic today, And

Biden the advanced talent with I government semiconductor through human research think that been high-end the advocating that. is investment needs the vast to universities. the R&D. be Taiwan colleges across about infrastructure, In semiconductor President the the major So the connected human to Taiwan, and the have in in to of set up talent develop also And U.S. we talked

is able support Taiwan. catching government particularly continue And local be the from in to Taiwan, supply to very strong in get in this place. So to up every we talents

And yes, without the President come the think talent any is shareholders. to meeting, corporate chair as Rafael for about And MIT, invited far they through recently, differentiation will Delta, blessing Board a Board. experience to major shareholder We the the a the that of this we we governance is and who will look nationalities. that and more strong a corporate go -- nominate is hope increment year we knowledge member, of I continue the governance. it members particularly will that ago. upon to our And have And Reif, As Yancei our of has in Board area coming our joined of very development. on

Jeff Su

Thank Chairman. you, you, Martin. Thank Okay.

Operator

ask one last to Sankar Company. and Krish The Yes. from Cowen question,

Krish Sankar

I had two of them.

kind Arizona about over be Japan. And three The nodes X does you more fab invest you on I how like of first years specific next spoke I'm include of and to have just specialty how terms CapEx billion in in a the can investing CapEx? process over in your plan you the fab or $XXX U.S. not in years curious, follow-up. one, much that clusters next the ones then

Jeff Su

Okay.

CapEx looking at So Krish's three in wants to first are is investing next know He we about how question in our years. much the investment specifically Arizona?

Mark Liu

Chris. Okay,

We $XX a have Arizona billion last announced project will that project. This announced be the was year.

Krish Sankar

And just X to it. can you plan Got years? much how you next the over do elaborate it

Jeff Su

he the So is we will much in Chris years. next invest -- X Arizona wants over how asking

Wendell Huang

Yes, $XX billion.

Jeff Su

three. Next

Wendell Huang

Next three.

Mark Liu

Close to.

Wendell Huang

is years billion. $X X next is basically, Well, about

Krish Sankar

And Okay. a quick follow-up. then right. All Perfect.

predominantly? is auto technology What node revenues of total was Your revenue. X% that

Jeff Su

Okay.

What using? is So Krish, automotive revenue. It of is second particular your question on our nodes X% was automotive. specific

C. C. Wei

it's plan, XX that X in on still That's one we and that. years, XX-nanometer. X have in XX. next I we MCU think the current will XX- and majority be XX-nanometer And our biggest the mentioned customers to automotive working and it I with are have and the is with our in in Krish, to that XX-, moved

Jeff Su

Thank our Krish. Thank you, C.C. All right. Q&A concludes This you, session.

transcript of X advised at be the XX accessible be conference, today's these, be conference the will conclude that website replay now. Both hours will available TSMC's from hours within we www.tsmc.com. of available through Before become from And will please which the now.

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