Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) Q3 2019 Earnings Conference Call - Final Transcript
Oct 17, 2019 • 02:00 am ET
First, we will have questions coming from Credit Suisse, Randy Abrams.
Thank you. Good results and outlook. I wanted to ask the first question given the high capex for this year and next year, if you could talk about the capital requirements for 5-nanometer in EUV, maybe how the equation with EUV coming in, how does that affect the capital intensity or say the capex per 1,000 wafers. And how do you see this node in terms of pricing and maintaining the same level of profitability on prior nodes?
C. C. Wei
Will you answer that?
Yeah. Okay. So Randy, you're asking about how much EUV accounts for the capital expenditures?
More -- how EUV changes your capital intensity or capex per 1,000. If you're getting some benefits that it's actually lowering that, but given that capex is it still the same, you're seeing the higher capex per 1,000? And then how is that translating to profitability, how you expect 5 to compare to, say, some of the prior nodes?
I cannot talk too much about details, but definitely CapEx per 1,000 for 5 is certainly higher than previous nodes. However, if we combine everything together, as we said at the beginning, we're still seeing our profit -- structure profitability remains the same.
Okay. I'll ask one follow-up to that and then a second question. Is this year like second half strong demand leading-edge type, the gross margin guidance for fourth quarter is still -- it's a good margin, but it's 48% to 50% and I think the target is staying at 50%. So maybe if there's still a little bit of drag on the margin and with next year bringing in a new node 5, if you think we can get to that 50% for next year, that's just a follow-up in there.
Look, for the fourth quarter, it's just like we stated all along, if we're -- our structural profitability, when we reach 90% of utilization, we target to reach 50% of gross margins.
For next year, still early to say, but structural profitability -- profitability or margins may be affected by the ramp in a 5-nanometer as at the beginning of ramping of every technology nodes, it will somehow be affected. However, if the utilization is good, then we're still expecting to see the structural profitability continues.
Okay. The second question I wanted to ask because you had a strong third quarter recovery, guiding another good fourth quarter, as you look to maybe an early look at next year, how should we think about seasonality? There are some concerns before 5G ramps we have a correction in 4G. And then we have if the tariffs hit, we might have had some prebuild. So how do you see kind of early year risk of say a correction? And can you pull in some demand say if capacity is tight to maybe mitigate the magnitude of correction early in the year?
C. C. Wei
You're talking about the seasonality of the smartphone, that we observe almost