Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) Q2 2018 Earnings Conference Call - Final Transcript

Jul 19, 2018 • 02:00 am ET

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Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) Q2 2018 Earnings Conference Call - Final Transcript

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Q & A
Operator
Elizabeth Sun

Randy Abrams, Credit Suisse.

Analyst
Randy Abrams

The first question I had on the 28-nanometer. You talked last quarter about it being a bit under-utilized. Could you talk about now your confidence to backfill that node? And last quarter, you mentioned a big mask investment. How much of that is tied to some of these backfill activities versus the mask writer investment for some of the advanced applications?

Executive
C.C. Wei

So you have two questions. The first one is 28 nanometers loading and...

Analyst
Randy Abrams

And 28 loading your confidence to get that loaded, the type of applications. Second part of that is the mask investment. How much of that is tied to these backfill applications versus advanced capacity?

Executive
C.C. Wei

In my statement, I say that we improved 28 nanometer to 22. And now, a lot of 28-nanometers tape-outs have been changed to 22-nanometer. And we start to ramping up 22-nanometer next month. It will take probably a few quarters so that 22-nanometer volume will be high. So I expect that after few quarters, the 28-nanometer node, the confidence to fully utilize high -- is high. Now you're talking about...

Executive
Mark Liu

Can I add to this one?

Executive
C.C. Wei

Yes.

Executive
Mark Liu

Regarding your question, by the way thank you, and good afternoon everyone that joined this conference and also the online participants, particularly on this hot summer afternoon. On 28-nanometer, this is the eighth year of our 28 production, and inevitably the competition is coming gradually. And with some expectation, they build capacities. But the 28-nanometer has a lot of nuance in it. You have high performance. They're a different grade of speed. Now C.C. is talking about additional sub-node 22-nanometer. I think the under-loading will be temporary, and we intend to backfill this capacity based on our technology differentiation.

Executive
C.C. Wei

So Randy, your second question is we invest in mask capacity.

Analyst
Randy Abrams

Very high CapEx last quarter for mask. Just what was the purpose or what applications you were tied to this high capacity relative to history that you've called out the mask CapEx?

Executive
C.C. Wei

Still -- actually, we invest our mask capacity because of a leading-edge node. Most of it is because of leading-edge node because it's very complicated in making the masks and many layers. Related to 28 is part of it because we still have a very high activity in 28-nanometer node. Actually, still that's Number 1, Number 2 tape-outs account for TSMC total tape-outs.

Analyst
Randy Abrams

So it sounds like it's both 28-plus for the 7-nanometer for the mask?

Executive
C.C. Wei

And 16.

Analyst
Randy Abrams

The second question I have on cryptocurrency. In the past, it was on a lagging node like 28 and 16, where it was filling capacity as a second-wave application. How do you view crypto? It's slowing in second half? But how do you view devoting new capacity as crypto to get the best performance and power want to move to seven. So how do you see that market and also devoting capacity if it becomes more of a first-wave application?

Executive
C.C. Wei

Well, cryptocurrency all related to the hash rate. So naturally, they will