Taiwan Semiconductor Manufacturing Co Limited (TSM) Q1 2023 Earnings Call Transcript

For the period ending March 31, 2023

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

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Jeff Su - Director, IR

Good afternoon, everyone, and welcome to TSMC's First 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. [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 2023, followed by our guidance for the second quarter 2023. Afterwards, Mr. Huang, and TSMC's CEO, Dr. C.C. Wei, will jointly provide the company's key messages. Then we will open the line for questions and answers.

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 - VP & CFO

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

First quarter revenue decreased 18.7% sequentially in NT or 16.1% in U.S. dollar as our first quarter business was impacted by weakening macroeconomic conditions and softening end market demand, which led customers to adjust their demand accordingly. Gross margin decreased 5.9 percentage points sequentially to 56.3%, mainly reflecting lower capacity utilization and a less favorable foreign exchange rate, partially offset by a more stringent cost controls.

Total operating expenses accounted for 10.8% of net revenue, which is lower than the 12% implied in our first quarter guidance mainly due to stringent expense control and lower employee profit sharing. Operating margin was 45.5%, down 6.5 percentage points from the previous quarter.

Overall, our first quarter EPS was TWD 7.98 and ROE was 27.5%. Now let's move on to revenue by technology. 5-nanometer process technology contributed 31% of wafer revenue in the first quarter, while 7-nanometer accounted for 20%. Advanced Technologies, defined as 7-nanometer and below, accounted for 51% of wafer revenue.