TSM - Earnings call transcript Q1 2022 | Taiwan Semiconductor Manufacturing Company Limited

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Jeff Su

[Foreign Language] Good afternoon, everyone, and welcome to TSMC’s First Quarter 2022 Earnings Conference Call. This is Jeff Su, TSMC’s Director of Investor Relations and your host for today. To prevent the spread of COVID-19, TSMC is hosting our earnings conference call via live audio webcast through the company’s website at www.tsmc.com, where you can also download the earnings release materials. [Operator Instructions] The format for today’s event will be as follows: first, TSMC’s Vice President and CFO, Mr. Wendell Huang, will summarize our operations in the first quarter 2022, followed by our guidance for the second quarter 2022. Mr. Afterwards, CEO, TSMC’s Dr. and Huang C.C. will the key provide Wei, company’s messages. jointly for will open we Q&A. the Then line

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

Wendell Huang

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

revenue demand. NT supported business quarter XX.X% XX.X% terms our terms automotive-related quarter was dollar increased at and or as HPC sequentially U.S. in first by strong First

margin we to X.XX, X.X the EPS to sequentially Overall, increased donation margin quarter. sequentially increased XX.X%, X.X percentage points sell First compared as TWD expense quarter improve vaccine Operating our fourth and and due primarily to was quarter ROE value XX.X%. to was continue first gross cost. percentage as lower points mainly to XX.X%, our

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

IoT to HPC X%. our X% platform. quarter-over-quarter revenue. X%. for increased for X% Automotive account the quarter. X% to first DCE contribution increased quarter for Now to for account to account X%. increased moving account to in on of XX% Smartphone to All XX% And XX%. XX% X increased account by increased platforms revenue for increased first

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

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

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

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

midpoint. between to expected operating Based rate be XX%, X increase billion Now we revenue quarter and be between the USD our between gross and on sequential the exchange now expect to our margin and TWD let’s X.X% guidance. XX.X on of to billion, second quarter a Based at outlook, USD margin current XX.X, turn represents is assumption to XX%. which XX% USD the XX.X current business XX%

USD billion. and XX maintain to be between USD This we presentation. million capital XXXX XX concludes my financial addition, In our budget

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

and capacity exchange As pricing, rate. foreign utilization, technology a determine profitability: X ramp-up, reminder, development factors technology TSMC’s reduction, and mix leadership, cost

a XXX margin more gross value-selling due mainly to exchange XX.X%, and quarter first basis our earlier, points and cost rate. improvement to discussed we increased efforts As by favorable sequentially foreign

based was USD ago This months X guidance. X provided to about quarter X guidance rate versus TWD first created rate TWD whereas on assumption gross basis quarter margin actual exchange exchange original actual to our XX was the USD of difference our margin in first XX.XX. XX.X, gross Our point

guided further than increase quarter to TWD second which continued more by XX% cost sequentially a gross value-selling X tailwind due points favorable USD rate midpoint and points We basis gross brings have primarily XXX and efforts. improvement the just of exchange margin assumption to our to basis margin XX.X, at more to XXX

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

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

C. C. Wei

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

first mainly our TWD me revenue end XX.X which with let of above near-term First, USD and or billion quarter inventory. is the demand high start XXX.X of We ensure billion, forecast our the with concluded months our than security automotive-related and and supply guidance, X due ago smartphone with customer’s of COVID-related emergency better from applications continuing our uncertainties. demand to need to

second Moving into XXXX. quarter

demand, partially business smartphone by by expect be and We our offset to HPC supported seasonality. automotive-related

longer geopolitical the chain higher compared for COVID-related to uncertainties brought by recent tension. front, continue level supply to inventory disruptions time, level of to a the seasonal about we of and the prolonged historical inventory period a supply On by as chain maintain expect

XXXX. semiconductor device XG applications. makeup On to likely structural year uncertainties, guidance capture XXXX IoT for enrichment devices HPC, smartphone, technologies. TSMC. year and throughout substantial and support our the the trend underpinned much our the XXs high in demand, across growth to multiyear positioned drive despite or percent increase dollar terms. tight exceed growth, at unit will of U.S. the our applications. to automotive the with And will end in macro-related demand growth volume content of recent observe mid- technology in the long-term importantly, And we our semiconductor is high we and This to another expect demand we structural and range the young well be side, leadership, many capacity more our strong [markets], full HPC-related be of TSMC strong remain continue advanced expect With to by megatrend specialty industry

given recent constraint supply Next, me update. talk about the in the delivery tool tool chain, the let

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

component suppliers their closely mature great several our industries, taking supply other is chains impact chip constraint our supply both suppliers working for [indiscernible] to supply from many and nodes. the and their chain TSMC COVID-XX, labor with like the of extending facing our challenges towards delivery in and creating chain lead time are which and actions do in to advanced are continued challenges. However, part

have regular high-level to We trace increased progress. communications the

are them We delivery. suppliers the to that chips identify closely have sent tool with support several critical are teams and working our on-site to gauging

are meet on we customers to and those We to taking XXXX with plan, help support critical so to and issue. such capacity to demand. customers’ the closely our with working we to constraint expect actions, our chip By wafer XXXX we chips our suppliers prioritize that mitigate any capacity impact our our work ramp-up can capacity continue beyond not to do

supply identify implement risk and risk will and I a access the to update. enterprise proactively materials system about TSMC all strategies. mitigation operates talk management relevant Now well-established risk

continuously local is supply, solutions global supply TSMC’s and well-diversified the to of terms build strategy supplier In multi-source chain. a material to develop base to improve supply

prepared we suppliers For have different from including source a neon on certain inventory stock and multiple specialty chemicals regions, in hand. gases, and and of we level geon

further strengthen supply. sustainability We do the are also of to any the suppliers on working materials resilience from our impact operations Thus, supply not our chain. closely our with expect and we

talk the status. NXE NX Finally, and about let me

will transistor maturity, structure cost best the use for technology NX our FinFET Our deliver to and customers. performance technology

half on schedule production is for XXXX good NX track year. second we’re unchanged, of with Our volume and in

expect NX both applications. be to HPC We ramp of and smartphone driven the by

our see with continue as expect We power level family with new to customer NX yield. performance, engagement will for further extend tape-outs more NX. for NX of [first] high and the NX enhanced at NX year NXE compared a and and

observed scheduled after production of also We volume NXE, year is and X NX. at high level customer a engagement for

advanced and technology it be technology transistor when is will technology most PPA foundry X-nanometer Our in both introduced. the

profitability, bring our even gross NX for the new And outlook process X challenging. of is as corporate initial has target margin achieving particularly with challenges such X as long-term terms increasing improved the always to the node nodes greater XX% higher. the to In complexity corporate profitability margin of quarters, of and in gross leading average

our TSMC. our done return that confident long-lasting our the and be key With technology diligently to continue will thank reducing we large for cost right to for NX. ensure prior our will are As have you strong and effort concludes we improvement another nodes, with we message, node on and that attention. we your earn and at our profitability demand, customer and family leadership NX This work

Jeff Su

C.C. you, This you first translate the Now with line? I Instructions] proceed English into before we Instructions] your question remarks. raise question. to wish management our let’s on caller [Operator our will concludes Thank Q&A [Operator please the the Should prepared in can Chinese, your begin session. answers Operator,

Operator

Yes.

Sachs. first The Lu question is ask one from Goldman to Bruce

Bruce Lu

the Congratulations great result. for

but build the that capacity demand and most have focused I We the still how evaluate Do the the multiyear TSMC TSMC to on the macro plan? investor make of of have does has years inflation the earlier, to provide time, our the to on the and impact the is of same color capacity your with strengthen beared How decision tension? customers think customers don’t more TSMC risk full concern. so worked first end ahead couple the understand any can closely, changes picture TSMC fluctuation. inflation one from At a probably geopolitical expansion confidence? we

Jeff Su

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

And and He our environment. to our confidence Bruce’s ahead related impact our environment of TSMC the the we clear investors’ how on question know CapEx if to and know, wants have demand bear think of picture full keeps there’s evaluate management what he amplify macro the strengthen also to the will but risk in has any basically CapEx so CapEx. color inflationary building in from of wants volatility, capacity, of for not to our plan multiple end the terms the color the inflation capacity years confident time. concerns. I is And macro and may do customers to

C. C. Wei

Bruce, this Wei. is C.C.

Let me your answer question.

with As node, our closely speculation. capacity. our are expansion customers’ industry long-term on capacity have megatrend. and customers technology technologies. will advanced our you than In support technology not And our capacity specialized is focus our be specialty underpinned the by customer TSMC our utilization capacity. leading confident for high profile, building growth, we that plan just on position. In rather based demand on are And a differentiated our build capacity yield with mature produce to customers’ demand Thus, products plain profitability support sustained. do we to and plain built capacity is and which based capacity, CapEx node, we effective works capacity is actually said, our and We to the built

Jeff Su

-- of how think I the we then And do impact also, inflation.

C. C. Wei

buying market segment or may then Well, definitely impact me while segment the inflation other end of overall the under terms in strong. inflation environment, consumers’ slow pattern. remains down on stress in But end the momentum adjust demand, device let units, market the certain

capture more energy-efficient increasing as we fact, growth, contributor opportunities. demand. driving the computing. much for are growing strongest industry-leading in largest in increasing more our the be PCs, technology, applications such need then greater platform to TSMC’s we and and well expect important and megatrend devices the by our a silicon with fueled supporting XXXX But structural platform automotive all are in In computation content factor our to semiconductor networking And importantly, power XG to our strong smartphones, the positioned servers, end HPC

Jeff Su

your question? does Bruce, Okay. that first answer

Bruce Lu

Yes.

Okay. to second for I question. go want the

there prepared the and about the performance in ramp-up no TSMC’s schedule. that [indiscernible] competitors mentioning the think noticed schedule? status in you Can next-generation transistor. NX your the I Both was especially for schedule remarks, of for accelerated their the on I comment

Jeff Su

Okay.

plan? we sure competitors Bruce’s have think please their Bruce, the that Bruce make our to NX me I commented is what question on So NX it know wants said allow NX is got on schedule. schedule, He and our -- second to

C. C. Wei

Our new including structure NX progressing development to on expectation. transistor and is track, our

And NX We our we that our cost best production support our our the And the growth. performance are delivery to customers. to and confident maturity, technology expect be technology, we XXXX. continue leadership plan for in will NX still customer

Bruce Lu

So the unchanged cadence NX? for X-year remain the

C. C. Wei

It won’t.

Jeff Su

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

Operator

The from question next Gokul one to ask Hariharan JP is Morgan.

Gokul Hariharan

on NX. is question first My

little highlighted a to with NX with of from year X NX seen we about expect bit given NX ramping well? some could than parts. And XX% NX? be Could bit challenge similar you up That’s start, also, would year? I and to -- to a less profitability closer talk more it could mass to next little on corporate average be NX my a that are revenues bit what next we get being we of as think elaborate production Would little you question. we revenues how Given that the talk roughly moving about have we first to year’s more should be NX there

Jeff Su

Okay. Gokul, summarize your please to allow question. me

the past comment And complexity to Gokul? Is NX. is with Will year. revenue NX wants C.C.’s would NX for outlook the of can for about we NX of correct, He wafer So to ask contribution also, be like he process know about Gokul’s question what expect. patterns XX% to what ramp-up is in given kind profitability to really related NX. challenges, that and similar it the the first revenue of of

Gokul Hariharan

Okay.

Jeff Su

Yes.

Okay. Maybe can address. Wendell

Wendell Huang

Gokul, early to volume as It’s Yes. NX XXXX. contribution Wendell. production begin contribution is talk revenue starting until XXXX this second the of with not half too about will revenue

new for family addition, when industry future. historical are confident all customer across by just overall, advanced NX the and families. with foundry our may underpinned large in our growth And as megatrends driving the be that nodes less But In is and will our will the specific and be long-lasting be like strong percentage nodes, the is structural meaningful to node most demand the TSMC, introduced. pattern tape-out as the we compared the activity, X-nanometer another NX technology NX engagement the of it

gross new of our average profitability challenges as increasing challenging. And the always and corporate outlook X complexity increased gross X about leading has of and the as corporate greater our is even gross target node such partially XX% the to quarters, for brings margin, NX Now because C.C. said, nodes new initial higher. the long-term in and achieving to margin also margin process

a the reach it Now gross can the corporate NX to volume early stage started hasn’t bit production when this yet. at average is because say margin

that and continue ensure selling will cost improvement to value to work we we and profitability the our However, on return. earn diligently right

gross our support trust Now increasing the ability even believe earn complexity technology to and of as our higher. such a and enable to considering and will NX, nodes XX% advanced process we of manufacturing earn capacity leadership, customers’ us margin long-term

Gokul Hariharan

as is for on some data technologies, and on question only historically, more the process second My on lot TSMC in at, based could capacity think grown we now, it. right specialty Got specialty announced above. mid-single digit. technologies, from foundries technologies? mature give view us older the say, process and see the many maybe look mature low we But growth I of industry that at let’s has mature and being a defined XX-nanometer to these

grow have because pattern nodes of going forward? years in process seen then So past? be X% and seen content device talk could of box than Yes. the to it Is content cases, have per X% that for of for see stagnate. to kind talked most going TSMC growth bit the little Do mature these X to older higher that rate we the or we some that we per changing dynamics a you about? In about X technologies materially

Jeff Su

question. second your summarize me let Gokul, Okay.

node mature as your we and than about XX-nanometer materially think notes. the question think has above? he is, we and outlook Gokul’s it X%. I at words, in higher the second the mature nodes, to do In the grown, -- growth how which that on His nodes? question growth see can it for is second defines on mature is X% -- outlook question the past, mature be outlook his Do

Wendell Huang

increasing be high Okay. is industry devices of customers. and believe technology in will for customers’ an such requirements mature structural value of support in develop growth. enable megatrends multiyear forecast at CAGR due acceleration demand overall at and create from HPC and demand the XG will compared continue the their meet years to capture well our to higher and years. Gokul, differentiated megatrends to technologies mature memory many We to our specialty long-lasting as percentage specialty The as of long-term to we the as around in differentiated X to nodes customers end certain specialty industry ex our by the content silicon to technologies XX growth strategy closely structural work the semiconductor solutions us past demand TSMC’s rate to with factors, generated the industry nodes accelerate and increase level X% driven digitalization. to the as the to in next single-digit

Jeff Su

does your question? second that answer Gokul,

Gokul Hariharan

Yes.

Jeff Su

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

Operator

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

Charlie Chan

My Congratulations debate. is for management. the semi first question great the inventory about results,

believe that to keep working the high several the channel So that working may channel C.C. But are as with inventory OEMs, I PC, they’re know, are clarify that need still we down inventory smartphone seeing the they reasons. company that fact, inventory. down even, in for supply [graphic] you chain

do in think seeing anything that a consumer weaker the inventory, miss you we Or high because, a actually seeing correction? that demand? are signal we inventory So tech is are of fact, we here a

Jeff Su

me your question. let first summarize Charlie, Okay.

he consumer end question is softer inventory or expected. weaker demand. be to of So end on the or seem parts Charlie’s notes than He consumers -- demand and to wants that know the

what then inventory, really affect sort And market the the of inventory. on question Is view our is weakness in potential on our view? guess, view higher is correct? that segments? what I is consumer end of so given this our also view demand our how on And level your end does Charlie,

Charlie Chan

come the is you deteriorating, do indeed think down? should inventory level And Yes. the actual Yes. demand if

C. C. Wei

C.C. Wei. Charlie, this is

side, managed of so COVID-XX in particularly we indicated, market continuing remain actually, that the to level higher chain, in chain kind demand. the are bit those market supply so longer all or the right, power segment period see imbalance strong, still you MCU those PC time. of little of will end IT a segment, some we at tablets, soft disruption of our supply if to very these customer because very some in uncertainty, observe the are days the by a for emerging But or for see I also of look strong inventory of You load. maintain a we start And the other smartphone, as And right? end

We to -- our TSMC, continue result, as of the throughout whole XXXX. remain And actually observe we year tight that. a very for capacity

Charlie Chan

I see.

Okay.

So is about inset right industry for level? to tech? industrial it more your inventory I consumer specific comments about those Am automotive

C. C. Wei

Yes, you are right.

In the thing structural megatrend. very important fact, is a

great know actually which customer the and and my the power energy-efficient of computing for strong computation that -- point technology. So greater a is TSMC’s you require

Charlie Chan

I about NX is see. my And progress. question second your

a lot very, hear So progressing of we good about and very well. news your continue to NXE actually is anecdotes

So projects is you kind do I be a that maybe think a actually NX earlier? TSMC see X think X possibility win-win or So maybe NXE and you to could quarters that NXE the customers. for pull some to it and your there you in right? convert demand, customers’ could a address your possibility Do for both of

Jeff Su

Okay.

progress second notes well. NXE. Charlie’s the is is So going very question He on

capacity So in And earlier? question the a is NX is, of to convert to to there we timing his will NXE? NX possibility bring

Charlie Chan

Exactly.

C. C. Wei

And again. progress right the And actually result that ahead in, considering are of quite is yes, is our mean are -- that. I our you Charlie, schedule. is good. pull Okay. we NXE

share still demand our you since and in can solid months did But a on capacity, strong enough And to a not I capacity many it’s the support with NXE, customer. in. far, also So are plan. how we very NX we have that planning pull we the to still our have very to data have yes,

Jeff Su

please? right. Charlie. Operator, move we the can All Thank you, next participant, on to

Operator

Next one Abrams from to Credit ask question is Randy Suisse.

Randy Abrams

-- Could and changed to for above. Could light high to the softening technology if the your update any the of outlook from you market much could I If platforms? or to on because give view where you macro change it And the to X of took it? on if you on different how consumer? the question, high up follow might XXs how of be certain platforms attributed mid- see discuss certain an is seen the did any you’ve on platform you factors up much share or drove first your XXs My downward now to discuss you a wanted change in platform?

Jeff Su

Okay. Thank you, Randy.

is at high as question end be first or year that Randy’s about in of exceed likely summarize of messages XXs. at we mentioned to high C.C. me key expect -- outlook, the let his be to to full our So our guidance mid- which

Is technology? what So is outlook or a what full the it is macro driving et cetera? it market year Randy’s higher more And better by outlook environment the is, share, question the Is looks given platform? bit shaky.

C. C. Wei

growing And year our increasing the and and megatrend expect computation growth. it driving computing. contributor this we be structural because platform largest to HPC will Randy, to strongest greater our of power need platform TSMC’s years. the this be is a for And energy-efficient all following

I of happen be strong kind point. these As said, to TSMC’s technologies

all be end So share that with confidence exceed high I you is our will on we have the at that that guidance. or of it can

Randy Abrams

your follow-up just the you Did first. view change Okay. on And on...? a

Wendell Huang

Yes, and also... . then

Randy Abrams

know take view your I other to the wanted Yes, if so on platforms, you and [indiscernible].

Wendell Huang

share smartphone, Randy, than faster year, that we this you similar. can corporate grow average. for average. we approaching and the to HPC the Now corporate automotive And expect with IoT,

Jeff Su

year. full the For

Wendell Huang

year. For full the

Jeff Su

Yes.

Randy Abrams

Okay.

sounds slowdown. like about to fear or a is lot head it do change. more much there’s My we second the a into question -- So not tied of downturn

in demand? And on they a is the with for a slowing into way fab you your how the if of give shipments, don’t, with on other can customers to U.S., much timing and if side, full we hopefully terms if flexibility we across Nanjing? Taiwan, plants flexibility other in but deposits, of recession, to of more a flexibility expansion Japan prepayment need on If flexibility go there the plans, respond

Jeff Su

Okay.

our this slowdown? there’s outlook fab downturn a question there timeline change? Taiwan, customers if flexibility if or overseas and will our of And the Japan in capacity is if prepayments Randy’s the was downturn new slowdown, a with a for how flexible for and worse? second the plans Or what changes So expansion about is whether is the or

C. C. Wei

this C.C. Randy, is Wei.

our and This underpinned long-term an CapEx on plan profile. expansion demand based is customers’ megatrend. by Our capacity industry are always

As long as the to we will it trend mega believe which invest the to capture that follow. continues, continue we growth will will,

short a we we our much we the even will So have with confidence too TSMC, downturn, continue it to term the don’t impact will to think of which to and possibility happens, capture follow. if even growth will invest it that plan

Randy Abrams

Okay. And in? capacity on their the and the customer locking for -- side deposits they’re

Wendell Huang

signing not future Randy, the way the contracts commitments. a guarantee focus as to customer we actually, common trust practice. and excellence really loading effective earning technology We in more manufacturing to on a secure leadership, customer believe is

Now to them. with closely prepayments support will we plan their the work for we with determine to continue to support. best our the work capacity to them including customers And receiving way capacity,

Jeff Su

Yes, Randy.

think for pretty customer the So or aligned is side similar. question? side that your Does I answer second answer and capacity

Randy Abrams

flexibility past, I guess, saw Yes. we just slowdown like in the in was utilization. the I mean, it the like

element? adjust customers they like because in anything’s would if I So we’ve on on reschedule their I if that don’t utilization. think the to still have it’s they need work Like changed past if know in the plans mean I to their model with seen

Wendell Huang

changed Yes. in model. the nothing no, No,

Jeff Su

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

Operator

Sunny Next UBS. one Lin, is

Sunny Lin

strong the on Congratulations performance.

restocking if and the tight strategy on I for foundry up-cycle, for is industry question pretty throughout first has this going meaningful XXXX. strong the pricing look my at increase we demand price the So TSMC supply and mean you forward. supported

some justify be rising if risk cost other you there technologies to to demand expansion? would do normalize, think for further price So to to from any here, supply the you pricing? the raise of hand, could look on And of the start

Jeff Su

Okay.

So challenges, be to on further I your lower were Her in TSMC Is first face then the will the And to hand, as -- other price. both side, Sunny, cost consider will is question to -- price. pricing please demand summarize we up-cycle. But on think, the an on you let there on flip soften, sides other question. sort me was to the pricing of raise allow on to risk Sunny, hand, correct? that me if any

Sunny Lin

That’s right.

C. C. Wei

Sunny, let pricing is that term. effort Wei. But do to comment support or growth. We me short not Okay. our you strategy And this not opportunistic customer on strategic, our C.C. is assure understands pricing their detail. our

As you downturn on that side, answer flip said going Did question? your if coming price, a TSMC there no. the our is is drop the answer to the I and

Sunny Lin

helpful. very That’s

the to question is So my ramp-up. follow second on up NX

there’s XXXX, just you bit color delivery is So revenue for the time, about a to But revenue year? trying potential Or to equipment next would expansion? the that for time with be to think robust. when do accelerate demand contribution get XX% I a understand pretty less think some of typical you capping still factor for equipment the the X-nanometer a on contribution to for the XXXX. we exceed try supply and

Jeff Su

Okay.

specifically, ramp-up. the affect of of tool is the ramp-up she Her would some question or revenue is sort second Sunny’s question in NX the is next the So, on XXXX And the issues supply NX NX. whether of contribution equipment contribution. around asking and, the once and of delivery revenue thus, again

C. C. Wei

it. Well, tool delivery of some we working on we and are issues the on still did see the

equipment ready in said how can with not to we to with our hope expand right we working we try our that any supplier we now, are on big get we that yet we demand. you issue. We statement, the build But working right capacity. enough As are to resolve share I But issue. and have enough customers. And much now, strong tool to capacity our for are we the won’t have XXXX

Jeff Su

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

Operator

to Hsu Next ask one Daiwa. from questions, Rick

Rick Hsu

regarding [about] this revenue is guidance question your year. first My Yes. for

it to think guidance you I or your high in mid- at should terms. that exceed dollar even be think XXs U.S.

case, in also year this memory global semiconductor global for foundry the market the your revising this that So forecast you year? and forecast for are ex for

Jeff Su

outlook. XXXX our about is question first Rick’s Okay.

me Sorry, Rick, try let to summarize.

be Rick XXXX So said, end high XXs. or exceed growth likely revenue of that our C.C. mid- the will our to of high notes guidance at

he for and markets. the our So wants to ex mean foundry does for what semiconductor memory forecast this or know expectation

C. C. Wei

So let me answer your question.

and So far, you be as foundry whole very it on performance. trying we industry understand the year-over-year XX% growth. remain confident are to that still All share a around ready with will semiconductor’s industry, the to others, status we But yet. are TSMC’s not

Rick Hsu

Okay.

So specific, more is company TSMC basically, the strength right?

C. C. Wei

in technology, That’s right. and are you our the dealership because

Rick Hsu

the since know question, queue waiting second mentioned and still this issues, and very there’s I some some your slowdown. But C.C., some last great. demand year, Okay, year. in macro long others think change strong. you have And customers some been there’s I

I assume you saying -- When filled case, if Or is that’s up capacity releasing any that for are will customers by the there’s when you do queue So do queue the think the shortening? think be you queue? But happen? others. quickly no will more

Jeff Su

Okay.

expect or when list the strong. segments So is may C.C. remain adjust, we queue wait Rick’s shorten? wait C.C.’s XXXX. Rick’s slow question really our question the second or or sorry, because, shortening, tight mentioned but -- is Rick’s do as -- we line said, end down certain is or about that line question the But about to is capacity more will that market to that others remain throughout

C. C. Wei

so support as our capacity I far, customers. to very enough not be will Rick, said, TSMC’s tight,

matter. not with what them. working customers. enough the be support to So ask I very hard will to whether support still if in it just That’s smaller, the you. was longer are And queue It’s you list share we doesn’t can our

Jeff Su

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

Operator

Simpson from Next Arete one Brett online Research.

Brett Arete

capacity, for And your fab you us plans you question might today, strategic expansion? share seeing come if in overseas at have And accelerate your capacity long for I it’s your time also customers overseas Are term can of a on XXX% look I your with might had wafer portion in if your period to we from what Taiwan. a your fab from expansion pressure happen? plans. you any wafer that what target Yes. guess overseas fabs?

Jeff Su

Okay.

to we expand proportion overseas seeing overseas? and global from footprint. time pressure about our And is So Brett’s what frame? overseas know His be wants percentage customers he of is by capacity our to that, question first any will expansion strategic what or manufacturing question are

C. C. Wei

Okay.

Let answer the question. me

about overseas of and in management our to make are our our best decision in and constant of communication we we the TSMC. with TSMC’s as In capacity the fact, are And the the for building, talking or close interest is customers. supply customers responsibility all best

me with with answer And technology with in China focus nanometers so support to and total their TSMC’s for to for we Also, XX right definitely And are of We the were your have in building are fab XX many but capacity in site, X-nanometer, technology future capacity, let now, to FinFET share TSMC you, percentage compared while FinFET TSMC technology. on. expanding enough how capacity. in far, you in with that more their also XX a our actually, and have several capacity some say Does years, development. business XX. capacity Japan XX priority how question? working the build but and to with That’s share increase and Taiwan much on in Arizona we’re not enough which out the with securing plan, next fab

Brett Arete

And been which going it have and than take architecture Are been between will NXE of transistor an more new to longer? you’ve going X great. X NX NX. that’s see to typically X gate we’ll a back second with which around you -- running is a NX end to years guess believe move for question. NX? that you’ve we Or after to year introduction an XXXX coming from Yes, can give you us timing NX, is update of NX, was I NX around. all But mentioned typically I so the On -- what years, maybe just is cadence at. that get X-nanometer,

Jeff Su

Okay.

Brett’s know He NX So NX to to X cadence. the than question between more X second really is years on that cadence NX and those is wants nodes. about

frame to X-year for NX For on NX, NX? the back time a it what’s cadence? will be And

C. C. Wei

end our the of -- so today enter the for progress XXXX. XXXX, That’s is, schedule. production, the will And close probably at of be is in want risk or to XXXX, production. all second the it you to or the far yes, half I our NX end on Brett, will track. the say

Jeff Su

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

Operator

Next KGI. we Chen, one, have Laura

Laura Chen

view computing question a kind of current my packaging growth share packaging part your expect advanced since My TSMC’s be we XD of high advanced contribution us That’s first in Can outlook? in high and your with there will computing is trend? on growth packaging lot we revenue question. the you revenue of first PC so progress about clients on development. or relied can PC your packaging And TSMC terms are the packaging service, advanced advanced the of know that

Jeff Su

Okay.

So is know and wants business advanced it platform. HPC revenue contribution, progress. IC on outlook is or terms high packaging the correlated XD the the growth to the question of the first Laura’s our how for progress packaging She in to

Wendell Huang

Right. part. revenue. billion advanced Lauren, let $X.X answer In generated first me packaging the XXXX, the of

X be that expect during similar in the And corporate the the its the growth growth in be than CAGR year, we years, Now higher slightly X-year growth. will this corporate. next -- the will to we expect

Jeff Su

And the HPC? correlation with

C. C. Wei

Well, let technology Actually, for correlation. HPC serve the actually very applications. high-end advanced me answer that SoICs

required very power high very that So low high and bandwidth performance. and

so to That’s we and the far, entered will we in small grow. today. volume we XXXX one a just expect have continue this what of And production

Laura Chen

second question That’s more very follow-up. Okay. And clear. like is my a

longer. been mentioned the equipment term. quite already C.C. know the has think we I about But strategy lot the timeline lead of a in expansion longer CapEx that

impact? area have So And do nodes? seeing process I’m you what’s are any for the accordingly? Or priorities just biggest your wondering any various you specific or action technology

Jeff Su

Okay.

time. capacity and expansion question So Laura’s lead equipment second about is

about, how we Given the know areas that are And we prioritizing or to she -- impact? this? seeing are prioritizing tool what talked C.C. we are delivery wants biggest nodes the

C. C. Wei

Laura, from I beginning of to working see with issues. unexpectedly delivery this the -- kind problem that’s are tool tool all year. resolve our mean we we And suppliers very hard this of

all being working or node we’re node technology or resolve the demand, capacity technologies expansion and And so hard issues. mature customers’ which support very are order for leading-edge to being technology the suppliers as technology impacted, what are all tool our which to impacted. the for And strong in certainly,

And so XXXX, no far, problem.

beyond. and with resolve be resolved. will XXXX our the very that on I we’re the all that we a right all to That’s months But report I few issue say hard can now. suppliers hope later still and working issue. can We’re working

Jeff Su

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

Operator

Hosseini ask to from SIG. Mehdi one questions, Next

Mehdi Hosseini

one do better Yes. My with understanding first dynamics. demand has to

You growth of node mix I how half context, X-nanometer about highlighted the in better and year-end just by average second of or I’m X ‘XX wondering should from HPC. that And think than ‘XX?

Jeff Su

Okay.

first he NX contribution the or is Mehdi’s question of So in mix NX how half second wants know to also demand at the this from and the looking node, expect by he the should year. and

C. C. Wei

XX%, than TSMC’s year, X greater mean greater It half the will revenue reported contribution and this than just be second of of for combining we I were X together. XX%, right? to the

Mehdi Hosseini

the years. Okay. was understand prior was will to better like usually that past look [indiscernible] like trying mix. how and node increases advanced leap just better how the the with in second I to of years in second I contribution ‘XX understand prior increase would look in trying compared the to just half, half the where

Wendell Huang

Yes. normally the half that second the of is of because seasonality think higher partially some of revenue products. Mehdi, I

Mehdi Hosseini

And more the on thank technology the follow-up. next Okay. so migration one X-nanometer. you Great. color And of much for

transistor assumption, relates it to You lithography. as also But want change. to understand highlighted I especially the underlying what is

second NA. will assuming as would X-nanometer another curious NA going you ‘XX? from of have need are HBM And high using EUV if go I’m up you into you to know EUV, also or as the be if We for change in to just half coming high you

Jeff Su

Okay.

He question EUV change also with a a we know wants in to second or high on be to correct, specific on very lithography NA, Mehdi’s NX, the will is question. there’s side, NX, using wants Mehdi? So He know transistor structure.

Mehdi Hosseini

Yes.

C. C. Wei

let the question. answer Well, me

We are the EUV the in tool industry. of today largest user

those I be And have wire. and it evaluate to necessary yet so and the intensively with very is tools we not cost effective. whenever for not, able think ready we we have you. and and NX are familiar Whether tool to adopt is high-end or And is a with evaluated will high-end EUV to share continue

Jeff Su

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

Operator

questions, ask Charles to Needham one from & Company. Next Shi

Charles Shi

bit I want to a question longer ask term. my little first

same IDM in XXXX we’ll buy the in foundry CEO, at the you don’t One of wafers beyond, technology. X they think business. twice I with compete believe, over time, you the both hoping want your can and name. the to from customers, I you And They compete months. revisited your But well, are last their call and, with they

compete out little specifically, the you relationship. been up So this break in One away get end, end has complex from this may not competitor, that deal there a especially that will teaching they may I very concerns of this a enabling their But in road fair map. really concern, you you bit of accelerated the basically you, business. against and heard foundry

you investor the to So this public? us thinking address and maybe community can the high-level and some concern provide

Jeff Su

or outsource me question. IDM the they to His first buy let industry. Charles, wants to question is like to would on summarize said that in wafers compete Okay. first TSMC, your customer that the but foundry also

that enabling guess, side? teaching road TSMC on foundry how will compete is question parts this in I X will your Charles, the how up end sense really, we and map? So And the the IDM

C. C. Wei

the answer me question on the let Charles, Well, competition. first

As how have IP detail. And on foundry, to the asked in a technology competition about history. never right? or TSMC compete, been pure-play TSMC’s to And know you all XX-year leading protect short our we how

are the enablement actually, anticipate a as In issues their own productive our while protect IP. fact, back and business a own we any these design take back, IDM future, can customers I our are we well not do have engagement ensure at with well-established as customers’ And We system all process they house. and all. into -- for IP to

question, We answer have already consideration Did capacity this Charles? I your planning taken already. into our

Charles Shi

standard fab X potentially TSMC particular really for building -- building line or if I’m customers fab dedicated then question and the my months maybe so a been follow-up X, actually really for follow saying up, second sure not press last reports, is is some is over has C.C., believe, this Yes. There the I TSMC’s production to just to question. dedicated practice. a first customer. specific

your provide Would is a volume? even the of this like bring going significant be thinking? if customer kind to you can no, answer However, you

Jeff Su

Okay.

Or certain a reports volume Is -- and IDM. certain there fab production been large still second will Charles’ saying media be would practice? a build even is there’s So the decade such dedicated that question behind our we is no answer or capacity? this for if

C. C. Wei

to young our XG of Charles, we semiconductor in content planning, underpinned profile, frank based Well, many demand as SPC and devices. industry’s market megatrend and with capacity on long-term you, is the times, be by enrichment the said many the

question? We dependent product. on are or not any your Did answer single customer I

Charles Shi

Yes.

Jeff Su

Okay. last questions, please. Charles. I time, the participants’ in we’ll you, of take the X interest Operator, Thank think

Operator

one ask next from is question Okay. And Sankar & Company. Cowen the Krish to

Krish Sankar

them. of I had X

quarter, The quite is the revenue first there’s the growth March growth. In a for Wendell. the between one and big difference shipment

C.C. how So year I of that is of I’m high pricing? then growth, XXs Any from follow-up would there revenue on color full had or guidance curious much for your coming beyond kind And for be a helpful. even

Jeff Su

Okay.

He much is I growth outlook. question volume, year, our wants know much looking full how in at is first Krish’s this price So, versus from of guess? our year it coming to of how

Wendell Huang

in do our not But factors we breakdown to share you. price are growth. volume, have and important product with driving Krish, mix specific a Yes. contributing

Krish Sankar

worries. had And then No right. for a to seem recession a be slowdown. follow-up Clearly, investors I about a C.C. All or worried

capacity? TSMC Is price do at first pricing corrections, breaking cyclical look be LTAs? you the for it out is are to leading when or it a you experience, looks slowdown? Any your helpful. color pushed of Is macro from what C.C. indicators think drop? would even Is the customers there slowdowns What So specifically? it shoe

Jeff Su

in is at? slowdowns, pricing question look look for watch -- the at indicators we C.C. in to we He capacity as What what are at slowdown some ask the that looking environment. signal? based at, wants to Do that Do we demand leading of recessions we on or second CapEx? Krish’s look and indicators of Okay. slowdown? a and past are again, terms the

C. C. Wei

tough Krish, working be customers. close question a with always in our asked this is to because we

plan their capacity, that customer’s working our with by our demand we we we forecast technology plan them. each and know So and

and a And our indicator, from we one specific your downturn, a firsthand it. is get information questions. And capacity. together, long-term there don’t leading if But got answer sure, for the I have and So that, decide do we customers. which our a we we’ve CapEx is collect them

Jeff Su

the then. Okay. the you. Thank Thank you. from participant, please Operator, we’ll last questions take

Operator

ask Yes. is to question one Bulk The New from Research. last Rolf Street

Rolf Bulk

guided of of the nodes the beginning account and XX% processes for specialty XX%. year, to you CapEx for At for advanced XX% to

us Now visibility year end changed? underway markets, whether Or you’re if ratios hold? of specialty now and with you’re with the in can having advanced that you different have better your capacity demand those you the share gave thinking on versus still on additions originally

Jeff Su

CapEx that CapEx has months, Okay. in question our about of CapEx, -- is past spending. Rolf’s changed? question with or in X the and our between technologies specialty and His first terms the is the allocation has breakdown events

Wendell Huang

No, not. has no, it

Rolf Bulk

helpful. That’s

diversify half material input you follow-up, gross a of suppliers working as you’re that and your increase material expect margin the that we context? how second in in of Can in further secure half the think should second you the about And year? to supply. cost discuss Now XXXX your you with whether mentioned

Jeff Su

Okay.

So a bit on is cost. little second Rolf’s question materials

supplier. our material diversifying that We we’re have said

cost seeing mean what the then we for outlook the margin And does increase? the are in So input half? this second

Wendell Huang

customers to value. challenges, the me we always do Yes. closely our to let rising the we to the And continue work that value Well, that. reflects inflationary answer partially pricing cost ensure materials face due our creation. Yes, manufacturing strategy But will we with cost. provide

also diligently in our suppliers fab will improvements. operations We cost to on and deliver our work with

believe we of and That we cycle. than for long-term shareholders. and XX% ROE actions, support our deliver will customers’ invest growth the such and gross growth XX% higher to the to to through profitable can margin us taking our greater by achieve earn So enable

Jeff Su

does answer? Rolf, Okay. that

Rolf Bulk

helpful. Very

Jeff Su

Rolf. you, Thank Yes.

Okay.

Q&A session. our you, thank So everyone. This concludes

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

Taiwan Semiconductor Manufacturing Company Limited (TSM) 14 Apr 222022 Q1 Earnings call transcript