Taiwan Semiconductor Manufacturing (TSM) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

July 20, 2023 2:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Jeff Su

Good afternoon, everyone, and welcome to TSMC's Second Quarter 2023 Earnings Conference Call. This is Jeff Su, TSMC's Director of Investor Relations and your host for today. TSMC is hosting our earnings conference call via live audio webcast through the company's website at www.tsmc.com, where you can also download the earnings release materials. If you are joining us through the conference call, your dial-in lines are in listen-only mode.

The format for today's event will be as follows: first, TSMC's Vice President and CFO, Mr. Wendell Huang, will summarize our operations in the second quarter 2023, followed by our guidance for the third quarter 2023. Afterwards, Mr. Huang, TSMC's CEO, Dr. C. C. Wei; and TSMC's Chairman, Dr. Mark Liu, will jointly provide the company's key messages. Then we will open the line for a question-and-answer session.

As usual, I would like to remind everybody that today's discussions may contain forward-looking statements that are subject to significant risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements. Please refer to the safe harbor notice that appears in our press release.

And now I would like to turn the call over to TSMC's CFO, Mr. Wendell Huang, for the summary of operations and the current quarter guidance.

Wendell Huang

Thank you, Jeff. Good afternoon, everyone, and thank you for joining us today. My presentation will start with financial highlights for the second quarter of 2023. After that, I will provide the guidance for the third quarter.

Second quarter revenue decreased 5.5% sequentially in NT or 6.2% in U.S. dollars as our second quarter business was impacted by the overall global economic conditions, which dampened the end market demand and led to customers' ongoing inventory adjustment.

Gross margin decreased 2.2 percentage points sequentially to 54.1%, mainly reflecting lower capacity utilization and higher electricity cost, partially offset by more stringent cost control and a more favorable foreign exchange rate.

Despite the industry's cyclical downturn, we continue to invest in R&D to support our N3 and N2 development. Thus, operating margin was 42%, down 3.5 percentage points sequentially. Overall, our first quarter EPS was NT7.01 and ROE was 23.2%.

Now let's move on to revenue by technology. 5-nanometer process technology contributed 30% of our wafer revenue, excuse m e, in the second quarter, while 7-nanometer accounted for 23%. Advanced technologies, defined as 7-nanometer and below, accounted for 53% of wafer revenue.