Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) Q2 2020 Earnings Conference Call - Final Transcript

Jul 16, 2020 • 02:00 am ET


Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) Q2 2020 Earnings Conference Call - Final Transcript


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Jeff Su

[Foreign Speech] Ladies and gentlemen, welcome to TSMC's Second 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 a 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, Vice President and CFO, Mr. Wendell Huang will summarize our operations in the second quarter 2020, followed by our guidance for the third quarter 2020. Afterwards, Mr. Huang and TSMC's CEO, Dr. C.C. Wei will jointly provide the Company's key messages. Then TSMC's Chairman, Dr. Mark 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 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 current quarter guidance.

Wendell Huang

Thank you, Jeff. Good afternoon, everyone. Second quarter revenue was flat sequentially as the continued 5G infrastructure deployment and HPC-related product launches offset weaknesses in other platforms. Gross margin increased 1.2 percentage points sequentially to 53%, mainly due to continuing high level of utilization in the absence of unfavorable inventory valuation adjustment, partially offset by NT dollar appreciation in the second quarter. Total operating expenses increased by TWD1.19 billion, mainly as TSMC supported a range of COVID-19 relief efforts. Operating margin increased by 0.8 percentage points sequentially to 42.2%. Overall, our second quarter EPS was TWD4.66 and ROE was 28.5%.

Now let's move on to the revenue by technology. 7 nano process technology contributed 36% of wafer revenue in the second quarter, while 16 nanometer contributed 18%. Advanced technologies, which are defined as 16 nanometer and below accounted for 54% of wafer revenue.

Moving on to revenue contribution by platform. Smartphones decreased 4% quarter-over-quarter to account for 47% of our second quarter revenue. HPC increased 12% to account for 33%. IoT decreased 5% to account for 8%. Automotive decreased 13% to account for 4%. Digital consumer electronics decreased 9% to account for 5%.

Moving onto the balance sheet. We ended the second quarter with cash and marketable securities of TWD605 billion. On the liability side, current liabilities increased by TWD25 billion, mainly due to the increase of TWD30 billion in short-term loans. On financial ratios, accounts receivables turnover days increased two days to 44 days. Days of inventory also increased two days to 55 days, mainly due to N5 ramp and a stronger N7 demand.

Now let me make a few comments on cash flow and capex.