Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) Q1 2020 Earnings Conference Call - Final Transcript

Apr 16, 2020 • 02:00 am ET

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Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Jeff Su

[Foreign Speech] Ladies and gentlemen, welcome to TSMC's First 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 dial-in lines are in listen-only mode.

The format for today's event will be as follows. First, TSMC's Chairman, Dr. Mark Liu, will provide the opening remarks. Next, TSMC's Vice President and CFO, Mr. Wendell Huang, will summarize our operations in the first quarter 2020, followed by our guidance for the second quarter 2020. Afterwards, Mr. Huang, and TSMC's CEO, Dr. C.C. Wei, will jointly provide the Company's key messages. Then Dr. Liu will host a Q&A session, where all three executives will entertain your questions.

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 on our press release.

And now I would like to turn the call over to TSMC's Chairman, Dr. Mark Liu, for his opening remarks.

Executive
Mark Liu

Good afternoon, everyone. My name is Mark Liu, here.

Before we start our financial report, I want to take a moment to thank each of you for joining us online today. To many of you from different parts of the world, in this very time of devastating pandemic, our thoughts and hearts are with you. TSMC, so far, safeguarded our global operations successfully, but we do not take it for granted. We will continue our utmost efforts to weather this storm, and we are in this together. In the meantime, I want to extend our best wishes to you and your families for staying safe and healthy.

So now let me turn the microphone over to Wendell for the summary of operations and current quarterly guidance.

Executive
Wendell Huang

Thank you, Mark. Good afternoon, everyone.

My presentation will start with the financial highlights for the first quarter, followed by the guidance for the current quarter.

First quarter revenue in NT decreased 2.1% sequentially, which is less than seasonality, due to the increase in HPC-related demand and the continued ramp of 5G smartphones. Gross margin increased 1.6 percentage points sequentially to 51.8%, thanks to a higher level of utilization, which was partially offset by an unfavorable exchange rate. Total operating expenses decreased by TWD2.6 billion, mainly as 5-nanometer technology moved from R&D stage to mass production during the first quarter. Operating margin increased by 2.2 percentage points sequentially to 41.4%. Overall, our first quarter EPS was TWD4.51, and ROE was 28.4%.

Now let's move on to the revenue by technology. 7-nanometer process technology contributed 35% of wafer revenue in the first quarter. 10-nanometer was 0.5% and 16-nanometer was 19%.