Taiwan Semiconductor Manufacturing Company Limited Q4 FY2020 Earnings Call

· Earnings call transcript and AI-powered summary

Financial Highlights (Q4 2020)

  • Revenue: NT$361.5B (US$12.7B), up 1.4% QoQ in NT$, 4.4% QoQ in US$.
  • Gross Margin: 54%, up 0.6 percentage points QoQ.
  • Operating Margin: 43.5%, up 1.4 percentage points QoQ.
  • EPS: NT$5.51.
  • ROE: 31.4%.
  • Utilization Rate: Extremely high; some wafers shifted to Q1 2021.

Revenue by Technology (Q4 2020)

  • 5nm: 20% of wafer revenue.
  • 7nm: 29%.
  • 16nm: 13%.
  • Advanced technologies (16nm and below): 62% of total wafer revenue.

Full Year 2020 Highlights

  • TSMC revenue: +31.4% YoY in US$, far above foundry industry (+20%) and semiconductor ex-memory (+10%).
  • Advanced technologies accounted for 58% of wafer revenue, up from 50% in 2019.
  • 5nm contributed 8% of 2020 revenue; 7nm 33%; 16nm 17%.

Operational & Market Commentary

  • Demand drivers: 5G smartphones, HPC, and recovering automotive segment.
  • Customers maintaining higher inventory than historical norms due to supply chain uncertainty; TSMC expects this trend to persist even post-COVID.
  • Automotive semiconductor demand rebounded sharply in Q4 after years of softness since 2018.
  • Mature nodes (0.13µm, 40nm, 55nm) facing significant supply tightness.

Guidance for Q1 2021

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Jeff Su: Good afternoon, everyone. And welcome to TSMC's Fourth Quarter 2020 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 dialing lines are in listen-only mode. Wendell Huang: Thank you, Jeff. Happy new year, everyone. Thank you for joining us today. My presentation will start with financial highlights for the fourth quarter and a recap of full year 2020. After that, I will provide the guidance for the first quarter of 2021. Fourth quarter revenue increased 1.4% sequentially in NT terms, or 4.4% in US dollar terms, as we saw strong demand for our 5 nanometer technology driven by 5G smartphone launches and HPC-related applications. Gross margin increased 0.6 percentage point sequentially to 54%, maybe thanks to cost improvement, partially offset by the margin dilution from 5 nanometer ramp and an unfavorable exchange rate. Our utilization rate in the fourth quarter was at an extremely high level, partially due to more production output of which some of the wafers will be shipped in the first quarter. Total operating expenses slightly decreased by NT2.6 billion. Therefore operating margins increased by 1.4 percentage points sequentially to 43.5%. Overall,

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