TSM - Earnings call transcript Q3 2021 | Taiwan Semiconductor Manufacturing Company Limited

Due to licensing restrictions, you must log in to view earnings call transcripts.

Jeff Su

[Indiscernible] Good afternoon, everyone and welcome to TSMC's Third 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 a listen-only mode. event as today's for format will follows. be The

the and Wendell the we line Mr. Huang, TSMC guide quarter 's will summarize Huang then Mr. and President Vice for our Dr. by Q&A. in for First, and will TSMC XXXX. C.C. messages, CFO, our the provide XXXX, the followed will quarter key CEO, open fourth of of Wei, Afterward, Xrd join operations Company's

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

Wendell Huang

Jeff. you, Thank

increased revenue terms, XX.X% in XX% Third-quarter NT dollar terms. sequentially in or

quarter due was TWDX.XX margin percentage HPC, four smartphone, a strong ROE platforms, by technology more applications. was in XX.X%, back-end profitability was in growth improvement percentage mix. increased The business XX.X%. points due better the XX.X%, driven demand and are favorable all and to mainly third operating margin sequentially across increased EPS which our points automotive-related Gross X.X to quarter operating to X.X IoT, mainly Xrd to sequentially leverage. Overall, Our

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

IoT of and for contribution Now, XX%. X% by increased DCE XX% to XX% to quarter-over-quarter, account X%. Automotive to to revenue. moving revenue account to X%, for to X% Xrd increased account for quarter HPC account for X% increased X%. account for platform. our increased XX% on Smartphone decreased

with cash or billion. on Sheet. Moving the securities billion Balance to marketable $XX and the Xrd of quarter TWDXXX We ended equivalent

interest-bearing the TWDX quarter. Long-term increased offset On the due of On by as remained dividend Accounts billion during we Current billion increase billion while and receivable billion of inventory payable, increase bonds increased debt mainly billion, TWDX the in days. liability turnover in the days, in to TWDXX ratios. accounts decrease the TWDXX X of partially of side. loans. by decreased payables mainly financial short-term at TWDXX billion, days to TWDXX XX corporate XX days days raised liabilities

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

billion third some Overall, cash $X.XX the XX financial During of XXX billion. terms, customer cash about XX quarter. bonds distributed In decreased totaled from I the generated XXX cash my XX XXX expenditures billion our billion our balance dividend. NT Capex XX increase end summary. Short-term dollar quarter, by capital billion to third finished increased billion have billion. at including XXX U.S. operations, loans the from in billion and fourth-quarter Spend prepayments. quarter, for payable we while

we concludes a operating vaccine million Now, the X represents pandemic which completed impact doses quarter of of quarter, small $XX.X Xth X.X% the Taiwan, have fourth announced turn business efforts current Xth revenue my in increase help that margin. let's a of quarter Based rate our the of XX%. sequential July be be between and billion, exchange the one in $XX.X outlook, we expect midpoint. we on quarter, vaccine the and of which percentage and On at purchase the billion on financial to third in XX% is and point our This COVID-XX between presentation. expense part guidance. the to around our recognized fight to will Based against gross XX% will our TWDXX, on recognized as $X have the it margin the margin majority donation expected the be portion XXth, operating we The on is assumption of between to XX%.

making key Now, budget. our Capex let XXXX messages. our me I is in turn follow will to on start will in comments some growth the of spent future anticipation by year, Every our capital years. that

customer's we structural be in by billion. underpinned semiconductor of have HPC a $XX technologies related witnessing applications. demand, specialty support are meet We XXXX around In increasing XG our full-year advanced to and demand the budgeted in industry to next Capex for several increase our megatrends years, underlying growth, the and order our in the

Next, let me talk about our profitability.

gross increased at better gross assumption margin gross despite mix. exchange as we just percentage is XX%, rate costs, than midpoint sequentially compared margin technology NX quarter rising be back-end our exchange to in Based that the to and profitability Xrd of mainly of margin quarter to to XX% the Xth foreign and implies TWDXX, our the from the have to XXXX unfavorable on $X XXXX, Xrth expected be margin XX.X%, XXXX the points The guidance gross guided X.X rate quarter to Our depreciation the due full-year dilution higher the also rapidly ramp, XXXX. midpoint.

ramp higher controllable. determine is capacity factors foreign factors exchange into leadership, not these As consideration, all of gross believe cost, profitability technology Taking discussed TSMC's is technology and and pricing, achievable. utilization, and XX% we a margin we up have before, mix, long-term which rate, X development,

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

C. C. Wei

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

or platforms, which and of quarter let automotive-related applications. across First, start our inventory. near-term all TWDXXX.X smartphone, are four We with with demand strong and revenue driven core me demand our Xrd by billion billion, HPC, IoT, $XX.X credit can

U.S. we the expect dollar in guidance, expected sequential the of XXXX demand X our on our fourth-quarter strong Based Xth the be to our of full-year term. to technology. revenue XX% XXXX, into by nanometer quarter - Moving supported revenue growth about our industry-leading for midpoint grow year-over-year is

gradually level of our higher On the chain we inventory the inventory to to second the a as compared in year historical seasonal continue of this expect front, supply half prepare the level. customers to and

to supply of period supply to we inventory to we time. the interruptions in expect term, maintain continue due ensure brought the over industry observe of longer chain level near supply security, the continually imbalances COVID-XX. short-term In a for chain the higher needs Given a by to

increase PCs, We demand, smartphones. underpinned and including also many XG the continue higher and in the silicon content to observe networking, by in structure industry devices, and long-term of automotive, servers, end megatrends HPC-related the applications,

may our capture tight capacity our in and XXXX advanced remain the our we believe may we enable technology will technologies. not throughout And to strong and expect demand short-term While the to for imbalances persist, TSMC XXXX. or leadership, specialty

Next, growth TSMC return. driver me as about let talk a long-term and

excellence, industry is capture applications. in the transformation semiconductor the manufacturing, trust. lives. XG entering has drive computing, course its and the content a IoT requirement of and favorable growth. megatrend. applications leading-edge to leadership, for are which The will but making fuel people's massive spur use increasing better our accelerated fundamentally automotive, semiconductors smartphone, technologies. digital also COVID-XX megatrend unit technologies. HPC-related With the positioned technology multiyear customer’s HPC, and not structural higher computation to pervasive We sell of TSMC are demand and differentiated This only for need power essential We megatrend energy-efficient and expected from more period in of also greater propel growth,

closely our investing the in to capacity our their leading-edge market long-term demand in with profile. demand. the is technologies raise TSMC structural customers Towards and to plan increase specialty working support and

the an return. footprint, Our retaining due responsive in manufacturing rising process notes, and capital to complexity proper customers' trust new and based on in manufacturing, in At manufacturing cost. technology material and increase expansion four commodity basic earning decisions time, at same faced challenges disciplines; Note, investment global investment our are DD we leadership, flexible the mature of cost

to not our pricing our will their closely As to customers work creation. continue to goals, support opportunistic, we strategic, to strategy remain [Indiscernible] with our refer

work and to goals long customers, our by a We burden supplier that margin to us with for continue such the we deliver Even us, achieve can actions taking industry, diligently our gross will and deliver, with cost profitable invest term XX% return we improvement. a greater to our of we higher and investment for to showed proper believe support shareholders. of course, also enables

fab me let about Japan Now print. our talk

manufacturing our customer. serve footprint in extend capacity, providing to technologies. enhance [Indiscernible] and to competitive world's and our advantage The our expanding better largest manufacturing, industry-leading are efficient We and cost-effective

Japan, Our conducting expansion After on business strategy needs, global due diligence, our manufacturing approval. in intention of to to considerations. based Board our subject opportunities, is customers' specialty operating fab cost-economic technology and announced build a Directors' we efficiency,

We targeted is better projects serve return a our manufacturing subject Further XX, have XX-nanometer Japanese our scheduled for commitment rich, believe begin wafer will details We to our approval. expansion the fabrication. to the our needs and investments in both in early production XXXX to This is Fab footprint to shareholders. begin will profitable for semiconductor the talent, be while technology customers from May deliver strong in supporting construction utilize fab the customer's in proper and received provided the of these government. quarters to XXXX. and from us long-term will global board's enable global our

N-XE and will the about I talk status. Finally, N-X

to will transistor’s our for Our FinFET cost technology the structure technology performance, customers. deliver and use best N-X maturity,

XXXX. starting scheduled NX platform production We smartphone developed in in and Our HPC is applications. technology complete N-X production on Xnd both and track. half for the support is was of development had risk XXXX,

see high of level N-X. expect N-X, as a for first with engagement compared to a and year N-X customer continue newer the for We at tap-out

of manufacturing Volume while yield. We year with also introduced NXE as an window, NXE of NXE process for NX feature after power, NX. family. is our better performance, and production scheduled improved one extension

both be and your X-nanometer demand, key is large will TSMC. introduced. of the attention. our customer foundry it another confident for Thank technology our This in concludes technology the will a With and that advanced long-lasting are technology NX most message. and family PPA be will node leadership when long vast be -- transistor and we you Our strong technology

Jeff Su

Thank prepared statements. you, concludes C. C. This our

everybody to all to questions will in X. limit ask English to question. they are questions. the raise like it a Before the received. to Questions session, I to your at question which time Chinese, their question in like queue, yourself be the in an order allow would participants we you time from our remind press before you X your the at I opportunity to translate begin please will in wish management Should taken [Operator X, will Q&A please answers to any to remove If Instruction]

with the Q&A XXproceed begin the session. let's line? first please Now on the caller Operator,

Operator

The first one J.P. to ask questions, Morgan. Gokul Hariharan,

Gokul Hariharan

talk afternoon. and question. and nodes a process little four taking long-term looking thanks Intel TSMC map. on My own timing my first road longer-term TSMC with unveiled of road about Congrats XXXX catch of now on more to adoption has for question with even roadmap long-term bit its good their is Good the in the given until from technologies, is the competitors EUV, get where results overtake. map of itself potentially Could up message etc.? bit technology high-end perspective talk my X next as entry are first well-received, power like, term, a we but longer to addressing little that profit years? all-round, battery X well. That's definitely couldn't is leadership of the time question. The new line, a your And TSMC some frame some

Jeff Su

in Gokul, Thank overtaking. long-term let road is please years. technology views X our about X our see a and we wants for like IDM to such Gokul's is map is around And talking first plans of guess structure, roadmap. in to you. And I me question. notes new how -- X are technologies, get catching long-term the do new what timing next -- He summarize outlined our the around, first technology etc. there transistor your [Indiscernible], up map our as know or the road Gokul about to Okay. position next or that years? regards X question leadership all

C. C. Wei

map technology around let my all approaches. be you technology do competitive with in on - All road or that will TSMC, is their can me the nanometer performance is that technology have X comment our considered. also with don't I nanometer But share of course, and I most that, a for X-nanometer very again. XXXX. technology. and - competitive confident I being Gokul in competitive schedule say And we And Okay. technology share and the structure are the the in we'll you density can that actually, we X be very competitor's

I not -- ready it. information to more release Although not am to going about

one in are that's and So very -- our becomes confident let conclude me competitive that again, technology sentence. will leadership be What we maintained.

Jeff Su

Gokul, C.C. you, a Thank do Okay. question? have you second

Gokul Hariharan

Yes. answer. Thanks for that

next is as this or over are to we XX% to the years do about to we to you. TWDXXX faster looking end Capex than X you bit this Japan's Looks the of need a spending be back X billion in expansion enough we previously? Capex, XX% the Kaohsiung in capacity still And -- that the there about to since definitely some seems billion if to over be see in at capacity Capex indicated leading-edge are of could Looking then, Since Thank CAGR, about upset stronger. at XX% high that do in have growth little years. XX% next some believe a Capex, still QX or I talk XX% we see for talked we or a there on upside budget X for had XXX going results growth that XX% like still think expansion. the talked growth billion-plus -- be TWDXXX Could to well. you plans do high end you see

Jeff Su

Okay, Gokul.

see Capex your catch second Gokul number asking have about well? Taiwan. long-term question, longer-term we -- talked as a our be be -- expansion and plans that then for are also there Will Japan this will and few for years? around growth what billion And is plans if in as there me in result and outlook. I previous next XXX the growth higher target CapEx is can Let the upsides to a CAGR growth our CapEx in

Wendell Huang

Wendell. is this Gokul,

question. me Let answer your

We are able CapEx. comment to years, next the specifically on not few

disciplines; earning are proper retaining responsive the mentioned. spent future flexible years. growth return is technology Every year, C. based capital the and manufacturing, as and Our follow investment in trust, just X customers' CapEx our will C., anticipation decisions on of leadership, in that

underpinned increase As in structural applications industry we semiconductor said, by underlying we and X content. demand HPC megatrends are silicon a increasing of G-related the witnessing and

good, we investment upside there growth looks and capture our be CapEx growth opportunities. to will an to and our the soon continue As as support customers outlook our plans, disciplined approach could our

our of this terms at not in planning moment. changes Now, revenue make any we're to CAGR,

We our will provide with information at more you conference. January

Gokul Hariharan

much. Thank you very

Jeff Su

Gokul. can on please? you, on line, to we the Okay. Operator, next move Thank participant the

Operator

Next Goldman one to from Bruce Go Lu please. ahead, Sachs. ask questions,

Bruce Lu

picking question. Hi. Thank you for my

your node -- TSMC's enough node How XX% become your the can Capex have that think advanced do is you my question first you focused that And expansion. mature I the nodes see the of customers? is capacity on do for an chip? ensure customer bottleneck mature or

Jeff Su

nodes question. let leading Capex Bruce, and is with sorry. nodes. a repeat Okay, Question the -- that typically mature me of AT your around majority our the is for

not enough how our as can will bottlenecked mature or the So we that have on customers ensure nodes be well?

Wendell Huang

Okay. me customers. meet to to decide demand. specialty nodes customers long-lasting a with capacity and to support is customers mature for our and customers' in value that to let and invest question. strategy create develop the to closely answer holistic differentiated at TSMC's requirements We their with solutions our Bruce, optimal take technology and view work work

Jeff Su

question, your answer first Bruce? Does that Okay.

Bruce Lu

Yes.

a ask -- question. answer to different try me Let

such I investors the such But noise very The is that you or a deteriorating? to the remained every of the is to can [Indiscernible] smartphone. and think raising there and of capacity recently level. some -- while positive, a along -- level just and end continue very, we have at strong everyone the foundry higher that what's is on see China's foundry you the demand asking the TV almost had can the why a lot where as saw a investor try all the is demand, discrepancy CapEx, tell inventory lot

Jeff Su

your summarize me second let Bruce, so question. Okay,

noises and I there's around that is Bruce Bruce for guess, end foundry. at types question demand. about different end-demand lot a of the looking second of, The notes

very positive. foundry outlook the seems be However, to

explain or we do disconnect discrepancy? how So this

C. C. Wei

in Okay, out given could we as XXXX. an volatile be because inventory tight a say not our even downturn throughout position. while correction, that in but leadership very of previous possibility less remains do structural Bruce, me trend underlying devices demand let mega we addition expect TSMC the There's occur, a end it continuing. question. very CoWoS the capacity This still to I to we capture related a content, rule unit we technology our your tightening in positioned there's the saw that between technology hope of for answers TSMC’s the is the our CoWoS And and long-term And activities. are to XG were correction the increasing and XXXX HPC mid the better discrepancy And, of and leadership; applications. to why silicon again, capacity.

Bruce Lu

Thank understand. you. Okay. I

Jeff Su

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

Operator

Next one, Suisse. Randy Credit Abrams,

Randy Abrams

thank yes, Wendell, you. on margins. questions afternoon. ask probably Hey, a wanted Good the I to few for

still points that. asset push of you on then that and view that's will update we pricing, effort operate XX% initial XXXX. could to And of And it's part that an for you within on you just or also to have mentioned reflecting inefficiency you've You Should Just you a level worked with of couple an a at maintain capital, us if up on higher within first follow-ups base. higher? out. XX to if the think a a And depreciation return couple firm of had the above, high you if that question. margin, on have if could

Jeff Su

me your let Randy, Okay. question. summarize

Has also there? improved XXXX. now And outlook had level of last is inefficiencies. running as that more that we the be above, our or say a of about to Randy is couple able He and this and ROE now know, question the about how talked we also, RIC is to points high for a notes above, our, a high time in utilization And result? above. wants become XX% outlook maintain certain will in we I depreciation Your that at margin. what guess, or

Wendell Huang

Okay.

first. the next we in XXXX Let tell magnitude, increase, year going the are to answer you but January. me in Depreciation will last question

to now, bring we points right than it We don't are Conference we how will the better ROE XX%? that want higher-margin at For many you more but to targets. before Investor percentage due course over and disclose tell can the margin, a of hope January the

asked about utilization? also You

Jeff Su

also cost at improvement, of and about Randy run about asking level things that. previously a talked when high when we efficiency, inefficiencies had utilization, less like we

wondering, it Is So Randy continuing? it? is is is this --

Wendell Huang

ongoing. The utilization activities improvement be the pretty same cost high. the are time, At continues to

As activities. a partially be improvement cost fourth quarter, the believe matter margin of better the will fact, because the of we in

Randy Abrams

you full to utilization on if second actually Okay. Great. one that I'll intensity. have the it's And then capacity? XX% quick Then that is question -- question I or And a above, utilization ask. XX view related follow-up capital have is

put One Electron, of increase suppliers, slight moderate the Tokyo capital equipment up in a but intensity.

you CapEx they it, million see discuss it case it to have per -- you more CapEx thousand or just years? past to taking And the to perk, actions the you're in So up if by a stable accelerate few see do wafers. or after we've you that trending? rising keep X-nanometers, how seen increase can you Could gradually XXX per absolute continuing that

Jeff Su

Okay.

second So per our capital particularly into X on or per Randy's is comment is as Tokyo that K. nanometers, increase, intensity capital that get notes CapEx moderating about we question K the you wondering if the just pace of Electron the intensity. is is He showing can so he CapEx

Wendell Huang

-- moment advanced share is we through we earn selling for the sure. and That's achievable. profit what is the still with Randy, same time, Well, technology to gross Capex you a more -- I at for is advanced are But working I is suppliers, that higher. at and with and which values can normally more the believe at a and [Indiscernible] XX% this higher the margin our customers able return,

Jeff Su

Okay, Randy?

Randy Abrams

you. Thank

Jeff Su

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

Operator

questions. from is to Brett Research. next one Simpson The ask Arete

Brett Simpson

at can of for about can or just clarify three being about My you question the costs similar you whether this to achieve still it terms as that very last introduction ramp-up of you see of going much. a a see to very you do in costs just of rising gain be Is ramp, was the density And Thanks on NX? the year, there's layers, couple the you NX can above ramps, and also, typical talk note? a XX% bit the Yes. and Thank a how NX, you. next different? expectations node of lot add [Indiscernible] talk more you costs, then timing

Jeff Su

your the that we so what or your know is Brett, NX And with be Brett question, notes? different? the in the NX versus expect ramping cost, what question structure first Okay, does prior the year, typical wants will also type cost it like? means to second half look be NX do next Will the that timing NX. of Brett? of around on ramp Is

Brett Simpson

That's Jeff. Thanks, right.

C. C. Wei

Okay. C. This C. is Hi. Wei. Great.

new part answer we the of equipment is to the technical question which previous definitely Let is the -- is is observed it many than we [Indiscernible] because of the second That and than complexity use previous costs NX. We customers of saw the me to then node. have first. higher similar is But actually what node. engagement many cost higher higher. ramp-up in very pieces

XXXX The our you of of a because first production mass expect those long in be takes will can time XXXX be have cycle quarter seen second it the but to all out. wafers tech half revenue the will

Brett Simpson

Okay.

-- or three-nanometer, basically it's to So right? this be that revenue next going see QX QX won't typically, later year. your first Is you on be

C. C. Wei

That's right.

Jeff Su

the in been we that have second half will first That has begin XXXX. production of consistently NX Yeah. Brett, been a we in introduced I saying message XXXX. since NX think consistent

Brett Simpson

maybe on follow-up And great. XX-nanometer. a Okay, just

think this expanded lot terms in the being node, and there's of You an XXXX why situation just Thanks. Is at could terms in And to fab not an capacity of talk a in talked [Indiscernible] fab, will TSMC? about about thinking on we that in lead oversupply a the for another driving that's Europe? And you of coming Japan. in Can the moment. time? then at stream latest that looking new this new expansion you you clarify be what's can XX-nanometer

Jeff Su

nanometers, Brett. X Brett, Thank second question around you, XX is the parts.

Europe? plans XX build of do demand of structural Brett intention second XX nanometers? And then nanometers, is the longer-term First, part is that with driving course, Japan, for of our have what C. know, in XX nanometers is so announced to a that, we wants risk there oversupply XX, the in to C. just

C. C. Wei

other We of a don't areas building include in Europe. that rule out fab the possibility

we However, specialty the emphasize a almost for capacity when to build technologies. is serve do all new we up XX-nanometer

the to demand. with not our offered For technologies their customers and some specialty meet of by working our are that is competitor, TSMC

you of got any for possibility Not oversupply? So TSMC.

That's let know. all Okay. I can you

Brett Simpson

That's great. Thank you, C. C.

Jeff Su

Okay. Thank Brett. Operator, we next please? to move you, participant, on can the

Operator

Next ask Shu, one to questions, Citigroup. Roland

Roland Shu

afternoon. for Good joint did going you and as a global U.S. Hi. a customers government for My question fab fab fab, is in own, in like my or new also or you you fab or or you to is, for key a XXX% thought to with option My now? build taking China build local strategy venture those overseas, -- Europe -- have build all your an prefer to possibility this build Thanks expansion is a manufacturing what you a about said, questions. are the the question on more fabs for to good Europe. overseas is you

Jeff Su

local like about what first customers, question our we -- with Roland your as know have XXX% or will the it joint overseas we owned Roland, fabs. our overseas, be will and Okay. or continue consider we ventures is China will done expand key wants U.S.? in or governments to in we to

Wendell Huang

mentioned, first. normally not as do JV our answer me this Normally, you OVC We own with let we XXX%. question Roland, consider governments. fabs Okay. a

be customers case-by-case key basis. on can or a with JV other considered However, Companies

Roland Shu

expect have emission up Thank now continue XXXX, to course second X short-term you. to question of XXXX. X-nanometer, X is up you goal my or - a in invest but nanometer X-nanometer, even Okay. you before Yeah, by

So these aggressive where with X keep how no, target. your meantime, emission to target [Indiscernible] Thank to X the you. plans are the expansion also, emission and decelerate plans? like So your you your in going up to quotes, course meet this admission investment achieve

Jeff Su

able XXXX. target? asking Roland's we invest will how recently expand zero NX, we this by emissions commitment as -- and on achieve continue be to is in that second Roland. But and Okay, to question announced NX to growth our

Wendell Huang

Okay. (ph) in actually not in Lauren net-zero zero-emission a XXXX. it's XXXX,

We are this. going to do

is more -- can first the ourselves energy we make The the from phase, working of emission, production, try we the of the which carbon In electricity. whatever minimize future. to going the emit X carbon most a XXXX. to for because of to That's this say lot carbon. -- the achieving energy, net comes become in will and are trading, emission the will in on which framework is secondly, left, use part green carbon And to more our basic the -- depend rights it carbon efficient the

Roland Shu

call. No, actually about talking X I'm emission

have Europe in You is X this XXXX. [Indiscernible] XXXX. from by near-term this emission I growth know different target,

Jeff Su

Right. Yes.

Wendell Huang

way are to -- but those the the achieve much pretty same.

Jeff Su

I think about Wendell Roland, X -- sorry. your emissions and XXXX by net growth question is --

Roland Shu

Yes.

Jeff Su

but Wendell, zero our XXXX, Wendell also -- use on right? our credits, what is with said these just our of said, in deliver emissions internal energies, and and saying suppliers we So will also as think have manufacturing net technology, green efforts, to chain working on carbon I and is we by that our -- we continue invest renewable own supplying targets. our achieve to

Roland Shu

Thanks. Understood. Okay.

Jeff Su

Roland. next please? on can Thank you, we Okay. move caller, to the Operator,

Operator

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

Charlie Chan

question gentlemen. about afternoon, Good first -- chip is the question Thanks. the My situation. shortage

Time and his supply I Magazine the Chairman says more finished than chain. interviewed be [Indiscernible] view think sufficiency he there by chip should of in

data, especially better help customer And Thank global revised would when carmakers. understand be or chip a do the shortage, besides your X-nanometer or what you for you. the to think manage asking investors automotive, issue you you forward. can to And way be governments going can provide shortage So that also to us fixed?

Jeff Su

customers to that wants how segment. Okay. And wants to Thank situation, and to we me know shortage, with do see of when you, about and automotive there Charlie. Charlie's several can and also fixed, be first observations stop this the it. aspects question the first. is Charlie for let the shortage chips. chip that, He particularly around chip know the stockpiling --

C. C. Wei

global the specifically thought. our let and what The than in to that support But our initially long point only quite me It's 's automotive doing are market, about actually IC the let automotive, me customers need. is it's with say automotive we automotive XX%, complicated complex. and TSMC For more part we out. it supply chain they participation

OEM pandemic entire year we Asia are However, supply as challenges the we a Again, our the starting supply quarters greatly our to is such a for And automotive of in the wafer see this shortage solve steps recent first the Southeast throughout to end supply auto for At factors actively couple in the quarter. for estimate. cannot challenge. automotive we also taking industry's of reduced trace the customers. probably the our half of the probably -- chips IC Xrd And we'll it. also are That's we customers, supply. believe affecting wait

Charlie Chan

much. Thank very super you helpful. It's

that question you a I decided the can XX% different give terms comment Thank you a different I but year's May X% margin by the to don't think price the range your in hikes? again, strategic gross on Another reporting reason the is margin And that based of of really the to improvement? different we What's customers? determine know [Indiscernible] improvement, -- percentage X%, the know guidance, you. hike of price hike want price XX%. the to you price next on do right? how to we're a behind news So ranges hike, applying

Jeff Su

that recently anywhere nodes much for what XXXX correct, Okay. asking know he Is the asking to about or customers. have wants from And Charlie? question is the to by that he how XX%, increased so how we impact what And then lots of on of Charlie's we increase X% news types price second pricing. is gross our margin. will decide do also, that there's be to

Charlie Chan

Thank you. Yes.

C. C. Wei

Hi, Charlie.

our in growth. with That needed In let fact, technologies. capacity all work continue and customers discussion pricing. their to TSMC technologies on to expand growth. support to specialty the we customers, very but we a say and come me to for between Is is our This leading-edge that private not both support TSMC their do one closely

strategy And opportunistic, so our strategic, be not or short-term. to wafers pricing continues

capacity so the And to expansion. prepared can we be that support better

support can our our As us that XX% invest earn the needs for gross TSMC margin return, ac customers for again, to proper a emphasize return was future expansion maybe enable higher. to across. to

Charlie Chan

But by question just my for ROI you But guess be expansion. whether I a due hike you further price there's margin mentioned. certain hiking, you changed, the desired is to Okay. percentage would desired example that right? your Meaning, -- that or Got besides margin it. cost points.

questions. of my you. should think be that I all Thank

Wendell Huang

said Charlie, now think always I XX% XX% say that gross are But higher gross above just that the we achievable. margin. margins we past in Right. saying we're and

Charlie Chan

Okay. see. I

Jeff Su

Charlie. you, Thank Okay.

Charlie Chan

Understood. Okay.

Jeff Su

Thank you.

Charlie Chan

you. Thank

Jeff Su

we can to on move participant, next Operator, the please?

Operator

we now, have UBS. Nick Right Gaudois,

Nick Gaudois

Thanks taking question. afternoon. Good Yes. for my

are incorporated on Should overall confirmation portion to Just understand $XXX guidance in would come you what that capacity of you. talking 'XX you could related would what can 'XX did Thank is A -- if on about and that would your be, going CapEx - you top, all? we specify or it, XX question back the XX-nanometer. to in just billion in of we you at investing Japan. and for

Jeff Su

-- the about fab Nick's incorporated already this for He First plans Japan. with announcement, also, can the the fab question we have And Japan that CAPEX is target disclose talked we in capacity know that in Japan? billion the previously. to wants for about our $XXX today's is

Wendell Huang

it last we project, until said details for as so are $XXX able CapEx amount after budget mentioned, investment not and release you Okay. Nick, and really this we -- to in other the the quarterly Other than incremental. time this, on approval. review billion board's our in as comment last will was the be the not included

Nick Gaudois

Right.

Okay. Understood. Fair enough.

process a NX, there Thank to talked the window the that back in main the between performance or is Going two? you NXE, as for difference only is difference about improved you. well

Jeff Su

Okay.

He the window. improved and in things improvements He etc. like question knows about other wonders are manufacturing NXE. So we Nick's there process if have talked performance is that second any on

C. C. Wei

a difference. There's

NXE said in that an is Improvement manufacturing window. the we improvement. As

design the We're better However, enhance rule something in to a or with performance. using the majority the window manufacturing is similar. NX the

Nick Gaudois

Got it. very much. Thank you

Jeff Su

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

Operator

one have Chen, Laura Next KGI. we

Laura Chen

taking Thank Hi. for you my question.

technology. about the particularly I [Indiscernible] seen we're slowing some world on that hand, -- But in this think position [Indiscernible] down side, growth seeing on in thanks also the we're demand other talking China. strong demand we've the solid to across

back we think early XG be will that XXX to we units. -- this the mentioned I shipment, the So earlier million XXX in estimate smartphone year,

into year? And first if any segment to next end my to you you. what question kind or keep Thank implication idea smartphone you do preliminary entering or TSMC? target? also, still And wondering, the what's XG a Just that of have projection lower moving do smartphone That's XG for the also, that the

Jeff Su

Okay, Laura. markets in Laura's first notes slower. She that momentum smartphone. question is is China focusing on smartphone the seems recently, it like the

how for Laura? XG Is see do also So as the for well year the is the correct, penetration market trend years. this about year, our then and smartphone few wondering she that we the next as forecast this is what

Laura Chen

Yes. Thank you.

Wendell Huang

XG Laura, this about period this proliferation at over XG of year. your of We question. smartphone than And slightly of XG units for million probably the answer we're before. at XXX time Okay, the still the same is -- also, looking higher me smartphones let see

Laura Chen

Right.

implication So outlook? driven about that do lower-end by mainly next in the that what's any gross and you the our thoughts segment, to preliminary be have the year's will case,

Wendell Huang

We'll you update about January. that in information

Laura Chen

second will again X thank also, we We the And hike CapEx maintain regarding comeback expect already expect CapEx we intensity or CAGR XXXX our do our to previous talked thus in that, intensity intensity. like and forward? Okay, the also just -- But in [Indiscernible] growth TSMC Thanks. nanometers high [Indiscernible]. the since launching beyond still XXXX, is we around back my we Can intensity going maintain high XXXX? are wondering you. three-year question about

Jeff Su

Okay.

were we notes our a back is Will on in intensity? high for the second still the do our have to higher, growth grow question capital She's How growth. course, years of then was see but level is the Laura's intensity. asking, what Or we intensity playing beyond CAPEX -- we So periods, capital harvest of and intensity capital XXXX? outlook she few next able very capital out? XX capture XX XXXX, the

Wendell Huang

in capital be XX%. is Laura, the going XX%. XXXX, this XXXX, to year Okay. over was intensity

next higher XG in mentioned the HPC growth CapEx. is we possibility plus in appropriate. is capital industry a years. content because the If in period we entering the spend of earlier, C. higher a As few every think the The growth C. future of increase. year into the the CapEx earlier, this of anticipation future applications, of our and years said We're silicon investment higher good growth then megatrends there's

be relatively a like will higher high-XXs for three from the result, we a XXXX, maybe to to the the your two level previous see previous And investment in As mid cycle I XXXX years, be this to can from year, next the expect moment. at observation than before good XXXX intensity what capital to one. on gradually coming to down

Laura Chen

Thank very much. you

Jeff Su

Okay. we you, next Thank on move Laura. Operator, to participant, can the please?

Operator

The next questions. one Hou, Go ask is Berman. Neuberger Sebastian to ahead, please

Sebastian Hou

one. I taking only have you Thank for on pricing. my It's questions.

guidance Company long-term the quarter based for margin I talk of And to pricing enough or to last here. think is firming intensity multiple the this a reflect this higher XX% time curious the of higher on this the gave CFO year question, up adjustment if have round will next absorb about gross to cost. I years. pricing the the CapEx I only follow-up this stop plus, that I'm so

Jeff Su

our pricing, pricing the and is about we his first firming also on Sebastian, in actually about selling value talking past. question our talked have

we costs? to in it's say margin, that So he mean cover gross enough that higher is does the XX% if we -- now wondering

Wendell Huang

first margin we're value, with way. Well, is Okay. providing margin provide above closely previously. the detailed XX% a as on to that compared Sebastian, we gross comment our our all, XX% this we're answer discussions expecting of customers, with after of achievable let worked able XX gross but to pricing and me the not to value. the higher, not And -- customer long-term

Sebastian Hou

that the our follow-up because is to Got fluid. of regions. could And My think upside the an CapEx of either or mentioned still other any is years, Japan that I CFO's plan given next CapEx there be it. couple plan

will won't be the a continue that imply based value and can upside on evaluate meaning one we possibility? the we we then just kind customers years. balance potential So and that be coming may continuous the in on the pricing what pricing that based but CapEx, future this it does shop, see adjustment, in to that means So infrastructure to of offer -- also to will

Jeff Su

Sebastian, is -- again your me follow-up summarize. let

one-time a be Is about this ongoing pricing. I our think asking it will Sebastian or thing? is an

C. C. Wei

very not Sebastian, value. of this comment is I The the and support continue TSMC Wei. be share capacity discussion we them, venues C. our of we to the pricing our able and But capacity work is pin to growth. with with C. important customers. will our on to Certainly, customers' one

and accordingly, and with serve or work this This we continue not a opportunistically. is value, customers. And one-time our our We not for do is strategically pricing to our we so it question. prepare a that. so is And

Sebastian Hou

a interpret a the C. we think Thank service, that the fair -- -- of Wendell, right C. and fair you, reflection as is outlook we higher-margin make to of because strong least guidance to is it or I to this value-add can it? offer but at willing that that pay customer conclusion time higher evidence is

Wendell Huang

Simple. Yes.

Sebastian Hou

That's from Got it. all me. Thanks.

Jeff Su

Sebastian. Okay. participant, to on move can you, the Operator, Thank we next please?

Operator

International. Susquehanna to a next Mehdi one please. is Go question The Hosseini, ask ahead,

Mehdi Hosseini

Yes, EUV gonna on think and And and NX me patterning comments have your how and tell a thanks I you for I your the structure? about back impact can want And taking to double cost NX my question. follow-up you're should plus. to go I how

Jeff Su

on not the about wondering cost -- question about of NX, His is actually, EUV plus. NXE? does in for double-patterning, NX and NXE, NX Mehdi, Okay. on on like this what is is NXE. NX Mehdi's first its impact have question things structure and and and impact the He

C. C. Wei

Let on me better performance and NXE answer question. From value better manufacturing to we that the window. a NX transistor have a provide

our performance. they better think similar. enjoy a customers the cost, will and better transistor we better yield, But for As diversity, are

Mehdi Hosseini

number commentary assume is are to diversification there has with you've had of or that my largest customer customers larger Should you. on that a Thank the prepayment. follow-up that two past, And I customers these a large In providing prepayment. your earlier do and had prepayments? one

Jeff Su

may seeing today? prepayments observes who customer doing Mehdi's the second diversification, of past prepayments. larger on or a prepayments. that know, X we customers number a customers is may have X He are question have Okay. -- had we to do He seeing wants are in we

Wendell Huang

Mehdi. Okay,

capacity, only was able to the been cannot next some past, but capital secure strong to order as of customer, years higher But the answer X expect secure this about in of there customers customers' we've disclose, to invest it's we the or Yes, demand. X now, for the few to me prepayments. and are we than question. I number in providing the commitment, expenditures Let higher before. prepayments customers, satisfy in the And more our those the talking

Mehdi Hosseini

Thank you.

Jeff Su

on move Thank participant, the Mehdi. Okay. to we please? Operator, you, can next

Operator

next Rick Markets. Hsu from Capital Daiwa one The will be

Rick Hsu

so thank much and this taking you for is Rick, Hi, my questions.

C. is May follow-up -- which earlier know, you if the in doesn't do will he to sell-through And question and out that I and when think first -- if inventory that node of happened, the happens terms more -- technology mentioned that of the end area demand. to in disconnect terms a Bruce's I rule of that applications? The crashing. question between And do you feel the impact also, Thank expect you. about possibility C. about sell-in think it's I happen?

Jeff Su

Okay.

to the to segments versus possibility when were So occur, it applications occur, And if Rick's inventory question what M that an be one correction. Rick rule disconnect the sell-in out we to or know particular said could more or impacted? is sell-through. would back again, of going we have wants not do also

C. C. Wei

I XXXX. tight, in all we I I PC accurate observe you a soft capacity, And possibility. do the throughout have in possibility, Rick, me the been far and TSMC say So a say very prediction. a give bit 's smartphone predict, which we very we XXXX market. where and little not out market cannot rule is it's asked sector? you've just But to

also only course, I we the for the does from as a are any -- come to increasing hint silicon a devices. you -- the in not industry, We it's unit the say, content demand one semiconductor not it's give can't only continue

mean [Indiscernible] [Indiscernible]. demand the or So some – even semiconductor soft smartphone your even that that doesn't becomes the that question? you answer saw Does unit decrease, or

Rick Hsu

find so X-nanometer that's you remembered a the going do guys note that the transition a question; transition. you define wondering, on as a have technology you for good Yes. the particular I a And for technology, you very just are a X the Perfect. good. Yes, my [Indiscernible] note to can very Thank to plus I'm is much. to thing question [Indiscernible] same second

Jeff Su

start migration that we and transition He's Rick's will He EUV. NX NX, second structure. adopt a to technology as move notes asking about in to had plus we question similar transition new also if transition. incorporate and is a to introduced we transistor

C. C. Wei

I any a transistor only share the I we better we have NXE more next you announced to as can better NX node. that advanced think performance have Well, Today, mode, with information and why from NX don't to the to go that manufacturing window. to move the

For getting NX GAA, we ready. we're will share it more with you when

Rick Hsu

much. Thank you Thank so you. Okay.

Jeff Su

Okay. you, take please. In participants, Thank let's the the Rick. time, of Operator, last interest two

Operator

Okay.

one ahead, the who Now, ask and Company. is Cowen, going to please. is Go the question Krish Sankar,

Krish Sankar

C. follow comments. just taking for up. question. wanted C. thanks my prepared on is One to I Hi,

inventory, instead industry maintain of technology of a said level And inventories, seeing there it level I smartphones comment in function to being high higher your we're on Is a seeing products? going specific nodes the with to a specific is You which PCs. to end follow-up. softness of is that components and we're the a then of a quick demand the function those end able are and of make had get or not markets

Jeff Su

markets end or first is we wants He or shortages? Krish. related level question of see technology or the tightness higher component see on of And inventory chain. momentum specifically, this smartphones the then to in sell-through to inventory. that slower Okay, level preparing which nodes higher in PCs, or Krish's the this also, is the of which we do supply know applications

C. C. Wei

The we those still to answer what say necessity it's is people to high in that continue product time. Does of is node disruption we of more what supply some exist. actually me And not or because drive board. chain, the That Let the to is inventories, your prepare Actually, so of to the the for any question? today adamant period continue or a for the the any be by board. is answer inventory across closed question. not across

Krish Sankar

ask and demand related? then it the PCs, part or And margin back-end, in tightness it related you. upside component I'll it. more of upside is Yes, you QX in the the in one is was future? gross smartphones there with it. that final the Got is. end like from along saw which The thing, Thank And is second question the for that softness then, question one-time or just a

Jeff Su

Okay.

areas we So shortages? demand it PCs. to Is Krish's end and this question also smartphones, related is it to this is see component weakness that -- related like in or

C. C. Wei

is due is let but the end Both soft, me possible the a to market is question component bit slow, answer actually, shortage. think quickly. we Actually, little the

Jeff Su

should also then on gross back-end margin Krish's part second second say, of And is the side. profitability. this I improved the question the And

Wendell Huang

the profitable years. It has especially third second business a of back-end Normally, seasonal. back-end sort the The the half season, high the high is low season, -- is season quarter. during a

As a better will in that background result, the quarter. of be profitability

Krish Sankar

Thank you very much, gentlemen. Thank you.

Jeff Su

will Operator, Thank you. the we participant, And take last please. then,

Operator

Go Yes. The last one to ask questions is Andrew from Lu Sinolink Securities. please. ahead,

Andrew Lu

my C. year taking XX% questions. ask, C., to you for you this want Thank growth. just guided year-over-year I

technology? we technology, is changed, in line the grossing in on this down more but [Indiscernible] customers' with are the CapEx more we our based share our adjust It's on build Very technology probably industry. advanced I advanced think mature legacy. increased number CapEx, a demand. stronger If losing mature but clear CapEx some have

Jeff Su

going the our correct, the He Andrew? there strategy, is to Okay. XXXX at note we're be in question, versus advanced mature our Is leading notes, his be adjustment losing that strong in St share in that forward, leadership nodes, Andrew's XX%. looking growth mature? around will the first an sees CAPEX he's but so in

Andrew Lu

Correct. Yes. Thank you, Jeff.

C. C. Wei

answer philosophy them the capacity. with a did me that We Japan increase share is their the announced It's technologies. our technology. specialty But the customers on is, Andrew, not thing important, working support -- But a mature certainly, Capex that most pin. mature to or actually, XXXX nodes' our way change that. let the strategy is actually we're We important fab share This we in demand. our including we as node. to

Andrew Lu

the of in past? CAPEX to Can total terms of in should we percentage have CAPEX compared we say future, a the that higher

Jeff Su

-- really mature we notes the higher mature to will know spending or leading proportion for in the wants proportion edge, of will versus know have Andrew Andrew CAPEX notes years? future the the to a wanted

C. C. Wei

of our yet, also. question? the Did we money same actually Even the a that we because increased lot nodes, answer proportion, your mature Andrew, spend not CAPEX.

Andrew Lu

My we including factor into factor observing the Should next this What are model plan on how last whatever, Yes. that AST model? cost the price is, on our question we based year? adjusting we into three can do basis had for or plenty average years, it our increase our last increase? I over seems price the Because year. been

price including year you. next to basis have Our we additional Apple-to-Apple X above If a this we on to last ASP? have Should blended easy pricing on say level. X% X%. increase year adjustments years, for Thank the XX%

Jeff Su

increase blended outlook. he blended Okay. Andrew's second XXXX? a He ASP question can the to model wants or essence, on is in know XX% greater ASP for

Wendell Huang

too on comment to it's early Andrew, XXXX.

ASP, really anyway. don't we January. will you Plus, comment with on We provide color in more

Andrew Lu

Thank you.

Jeff Su

Okay. Thank Q&A session. our concludes This you.

us Before are next today's a healthy at hours website that will Goodbye, We we advised and conclude will have and from to the hours accessible good four available conference, which join us today. quarter transcript tsmc.com. TSMC become in will January. be everyone replay and now. XX now you be please safe, within through you Thank the from both day. hope for 's of joining conference stay hope continues of www. we and again And available the

Taiwan Semiconductor Manufacturing Company Limited (TSM) 14 Oct 212021 Q3 Earnings call transcript