TSM Q3 FY2024

Q3 FY2024 Earnings Call

TSM · Preprocessing Report

2024-10-17

Quality

100%

100

Turns

Speakers

Sections

Exchanges

576

Claims

Quality issues

[WARNING] semantic: analyst(s) in closing_remarks: ['Rick Hsu']

Entities by group 34

semiconductor manufacturers 3

TSMCcompanyIntelcompanySamsungcompany

semiconductor process nodes 5

A16technologyN3technologyN2technology2-nanometertechnologyN5technology

foundry services 1

Foundrytechnology

sell-side analysts 2

DaiwacompanyUBScompany

advanced packaging 1

CoWoStechnology

high-performance computing 1

HPCtechnology

artificial intelligence 1

AItechnology

computing devices 1

PCproduct

government bodies 1

European Commissioncompany

site groundbreaking 1

Dresdenevent

Ungrouped 17

C. C. WeipersonWendell HuangpersonJeff SupersonCharlie ChanpersonGokul HariharanpersonSunny LinpersonBrett SimpsonpersonBruce LupersonIDMotherKrish SankarpersonLaura ChenpersonUnited StatescompanyRick HsupersonAntitrustothersmartphoneproductUS dollarothercobotsproduct

REPORTING 64PROJECTING 56POSITIONING 148EXPLANATORY 39ANALYST 96

Topics 78

fab×35artificial intelligence×32capital expenditure×31gross margin×21revenue×20demand×18process node×16packaging×13semiconductor×12foundry×11capacity×10cash×9customer×9advanced packaging×9margin×8dividend×7outlook×7outsourcing×7growth×7power×7

Themes 266

growth×19overseas×13demand×12advanced×8customer demand×6pc and mobile×6revenue mix×5revenue growth×5ai-related×5long-term demand×5outlook×5government support×4ai demand×42025 outlook×42-nanometer and a16×4shareholder returns×4smartphone×3fourth quarter guidance×3follow-up×3next year×3strong×3idm customers×3software assets×3future growth×3foundry 2.0×3arizona expansion×2arizona ramp-up×2manufacturing quality×2return on investment×2customer adoption×2real×2stability×2margin outlook×2n2 ramp×2guidance×2profitability improvement×2pricing power×2value selling×2selling×2capital intensity×2regulatory risk×2idm outsourcing opportunity×2updated guidance beyond 2026×2long-term growth×2a16×2planning×2free cash flow increase×2capacity utilization and cost improvement×1operating leverage×1sequential increase×1quarterly return×1iot share×1automotive share×1dce share×1quarter-end balance×1current increase×1long-term decrease×1reclassification×1turnover days steady×1days increase×1from operations×1spending×1cash dividend×1end of quarter×1quarterly spending×1sequential improvement×1outperformed guidance×1quarterly guidance×1capacity and cost drivers×1capacity planning×1full-year guidance×1specialty technologies×1near-term outlook×1third quarter×1leading-edge process technologies×1leading-edge nodes×1ai server definition×1excluded ai categories×1server ai processors×1leadership×1mission×1customer needs×1geographic flexibility×1value maximization×1project progress×1arizona scale×1arizona production start×1arizona yield×1arizona milestone×1manufacturing capability×1enabling role×1u.s. partnership×1japan support×1japan qualification×1kumamoto volume production×1kumamoto expansion×1kumamoto construction×1strategic customers×1volume production in kumamoto×1government commitment×1groundbreaking in dresden×1automotive and industrial focus×1node mix at dresden fab×1dresden production ramp×1technology leadership and scale×1regional efficiency and cost effectiveness×1investment growth×1up cycle duration×1up cycle timing×1investor questions×1roi concerns×1customer design×1industry visibility×1fab and r&d operations×1productivity improvement×1economic value×1shared benefits×1productivity and efficiency×1cycle peak×1boom×1overall demand×1cyclical demand×1flat spending×1next couple of years×1acceleration outlook×1historical demand sensitivity×1resilience despite demand×1increase×1capital planning×1ongoing review×1healthy year×1more updates×1gross margin drivers×1other factors×1n3 ramp×1company positioning×1positive factor×1n3 demand conversion×1leading-node migration×1cost increase×1historical price increases×1price escalation×1taiwan price leadership×1cost pressure×1margin sensitivity×1helpfulness×12025 guidance×1conservative assumption×1arizona and kumamoto ramp×1multi-phase ramp×1annual guidance×1price adjustment×1high level versus customers×1customer price increases×1mature nodes×1long-term outlook×1regulatory concerns×1equipment bargaining power×1partnership approach×1next-step collaboration×1ecosystem collaboration×1in question×1relative to customer×1claim denial×1long-term comparison to ai supplier×1success support×1sustainable growth×1pricing outlook×1concerns×1clarification×1concern×1market share concern×1expanded manufacturing services×1growing importance×1related revenue share×1peer capabilities×1market definition×1market position×1operating performance×1improving to 75%×1long-term target guidance×1idm opportunity from intel spin-off×1intel supply chain×1intel acquisition×1samsung idm opportunity×1idm foundry×1outsourcing×1fab manufacturing×1questions to address×1customer decision×1sizable business×1cagr guidance×1historical growth performance×1post-guidance growth trend×1company guidance×1five-year comparison×1prior year×1business performance×1rate×1current conditions×1long-term guidance×1hpc demand×1customer engagement and chiplet design×1capacity build×12-nanometer demand×1capacity outlook×1migration from 2-nanometer to a16×1hpc strategy×1capacity demand×1customer interest×1n2 vs n3×1ai server chips×1response×1multi-year build lead time×1long-term capacity cooperation with customers×1customer commitments×1hyperscaler digestion×1long-term planning×1shareholder value×1taiwan supply constraints for advanced fabs×1constraints for n2 fab buildout×1nuclear energy planning×1nuclear energy for hyperscale data centers×1nuclear energy for future fabs×1taiwan energy challenge×1new node expansion×1taiwan energy situation×1nuclear support×1utility needs×1energy sourcing×1capacity support×1low single-digit growth×1content growth versus unique growth×1ai-driven content expansion×1non-wafer revenue×1technology investment×1margin expansion×1revenue outlook×1margin improvement×1margin convergence×1potential increase×1free cash flow growth×1linked to free cash flow×1capital-intensive industry×1policy sustainability×1policy increase×1policy outlook×1organic growth funding×1capital allocation×1future returns×1gradual increase×12.0 strategy×12.0 components×1mature and conventional packaging lag advanced×1unchanged outlook×1better than estimate×1industry unchanged×1gross outlook×1capacity buildup×1capacity revision×1capacity plan×1capacity expansion×1demand-supply imbalance×1capacity growth×1capacity target×1customer fulfillment×1

Key Metrics 68

gross margin×29revenue×22capacity×19demand×18capital expenditure×16revenue growth×12margin×7dividend×6growth×6depreciation×6profitability×6capital expenditures×5capex×5free cash flow×5electricity prices×4capital budget×3capex growth×3price×3electricity×3operating margin×2volume production×2cost×2return on investment×2market share×2migration×2wafer demand×2operating expenses×1roe×1cash and marketable securities×1current liabilities×1interest-bearing debt×1bonds payable×1accounts receivable turnover days×1inventory days×1operating cash flow×1cash balance×1capacity utilization×1revenue contribution×1wafer production×1yield×1process technology×1roi×1cycle×1productivity gain×1utilization×1costs×1ramp×1dilution×1guidance×1pricing×1revenue growth cagr×1cagr×1customer engagement×1capacity demand×1customer interest×1commitments×1customer count×1resource needs×1resource support×1unique growth×1content growth×1silicon area×1cash dividend×1balance sheet×1organic growth×1cash flow×1forecast×1outlook×1

Entities 759

TSMC×359C. C. Wei×82Wendell Huang×67Jeff Su×50Charlie Chan×24Gokul Hariharan×20Sunny Lin×16Brett Simpson×14Bruce Lu×13Foundry×11IDM×10Krish Sankar×9Laura Chen×9United States×8A16×8Rick Hsu×7CoWoS×7N3×6Daiwa×5N2×42-nanometer×4HPC×3N5×3AI×3UBS×3Intel×3Antitrust×2PC×2smartphone×2European Commission×1Dresden×1Samsung×1US dollar×1cobots×1

Business Segments 37

Foundry×23Wafer Fabrication×9High-Performance Computing×2IoT×1Automotive×1DCE×1

Sectors 44

artificial intelligence×17manufacturing×6personal computing×6smartphone×3cloud computing×3high performance computing×2automotive×2semiconductor manufacturing×2internet of things×1power generation×1renewable energy×1

Regions 62

Arizona×16Taiwan×10U.S.×9Kumamoto×8Japan×4Dresden×3California×3United States×2Germany×2Europe×1global×1US×1Hsinchu×1Kaohsiung×1

Metadata Distributions

Sentiment

positive 107negative 23neutral 273

Temporality

backward 53forward 106current 244

Certainty

definitive 75confident 103moderate 92tentative 130speculative 3

Magnitude

major 59moderate 234minor 110

Direction

improvement 33decline 12flat 8mixed 7none 343

Time Horizon

immediate 51near_term 126medium_term 75long_term 30unspecified 121

Verifiability

quantitative 85event 20qualitative 298

Analyst Intent

probing 25challenging 4confirming 11seeking_detail 43seeking_guidance 13

Speakers

Executives

CWC. C. WeiCEOWHWendell HuangCFO

Analysts

BSBrett SimpsonanalystBLBruce LuanalystCCCharlie ChananalystGHGokul HariharananalystKSKrish SankaranalystLCLaura ChenanalystRHRick HsuanalystSLSunny Linanalyst

Other

JSJeff SuirOPOperatoroperator

Sections

Type	Label	Speaker
preamble	Preamble	Jeff Su
prepared_remarks	Prepared Remarks	C. C. Wei, Wendell Huang, Jeff Su
qa_session	Q&A Session	—
closing_remarks	Closing Remarks	Jeff Su, Rick Hsu

Q&A Exchanges 8

#	Analyst	Firm	Turns
1	GHGokul Hariharan	JPMorgan Chase & Co.	16
2	SLSunny Lin	UBS	13
3	CCCharlie Chan	Morgan Stanley	15
4	BLBruce Lu	Goldman Sachs Group	13
5	BSBrett Simpson	Arete Research	9
6	KSKrish Sankar	TD Cowen	9
7	LCLaura Chen	Citigroup	10
8	RHRick Hsu	Daiwa	9

Claim Taxonomy 403

REPORTING64

resultFinancial outcome for a completed period45

metricNon-financial quantitative fact10

operationalDiscrete completed event9

PROJECTING56

guidanceQuantitative expectation with number + time37

commitmentPromise with binary verifiable outcome16

targetLong-term aspirational quantitative goal3

POSITIONING148

strategyPriority, direction, or initiative121

competitiveCompany's position or advantages6

opportunityMarket condition framed as growth driver17

riskHeadwind, constraint, or uncertainty4

EXPLANATORY39

attributionWhy a specific outcome happened2

contextNon-company macro/industry fact37

FRAMING0

thesisFalsifiable belief about how the world works0

ANALYST96

questionInterrogative seeking information62

observationRestates a fact or data point23

concernFlags a risk or challenge4

estimateAnalyst's own projection or calculation3

sentimentOpinion, praise, or critique4

Field Guide

TopicWhat the claim is about — a short phrase used to group claims across quarters

ThemeBroad strategic dimension (e.g. profitability, innovation, market expansion)

MetricThe primary financial or operational metric referenced (e.g. revenue, gross margin)

TemporalityTime direction: backward (completed fact), forward (expectation), current (ongoing trend), timeless (universal truth)

VerifiabilityHow checkable: quantitative (contains a number), event (binary outcome), qualitative (subjective)

SentimentDirectional sentiment: positive, negative, neutral, or mixed

CertaintyHow hedged: definitive (fact) → confident → moderate → tentative → speculative

MagnitudeInvestment-thesis impact: major (concrete number + newsworthy), moderate (one of the two), minor (neither). Derived from Has Number and Newsworthy flags.

Has NumberWhether the claim contains a specific number or quantified result

NewsworthyWhether this would appear in a financial news headline

DirectionComparison direction: improvement, decline, flat, mixed, or none

Time HorizonHow far forward: immediate (current quarter), near_term (1-2 Qs), medium_term (1-3 yrs), long_term (3+ yrs), unspecified

Analyst IntentWhat the analyst seeks (Q&A only): probing, challenging, confirming, seeking_detail, seeking_guidance

EntitiesTyped named entities — each has a type: person, company, product, technology, event, or other

SegmentsBusiness segments referenced (e.g. Data Center, Gaming)

SectorsIndustry sectors (GICS/NAICS standard names) — excludes company division names

RegionsGeographic regions explicitly referenced

NumbersSpecific figures extracted from the claim text

TimeTime references anchoring the claim to a period

BoilerplateWhether the claim is boilerplate/formulaic language (dimmed in transcript)

FeaturesSix independent dimensions used to classify each executive claim: time_reference — when does this refer to? (completed: past fact, forward: expectation/plan, ongoing: present trend). content_nature — what type of information? (financial_figure: revenue/margin/EPS, quantitative_fact: non-financial number, named_event: launch/partnership/milestone, external_fact: market/industry info, company_framing: strategy/positioning). comparison_type — is a comparison being made? (vs_named: against a named alternative, superlative: best/first/only claim, none). company_valence — how does this affect the company? (tailwind: positive, headwind: negative, neutral). has_causal_link — does this explain why a business outcome happened? (true / false). reports_financial_outcome — does this report an actual financial result or projection? (true / false). For analyst claims, a single feature: analyst_action (asking, restating, challenging, projecting, evaluating). Together, these features determine the claim type.

Transcript

Preamble

Jeff SuirTSMC

Good afternoon, everyone, and welcome to TSMC's Third Quarter 2024 Earnings Conference Call. This is Jeff Su, TSMC's Director of Investor Relations and your host for today. TSMC is hosting our earnings conference call via live audio webcasts 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 Senior Vice President and CFO, Mr. Wendell Huang, will summarize our operations in the third quarter 2024, followed by our guidance for the fourth quarter 2024. Afterwards, Mr. Huang and TSMC's Chairman and CEO, Dr. C.C. Wei, will jointly provide the company's key messages.

Then we will open the line for a question and answer session. 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 do 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 the current quarter guidance.

Prepared Remarks

Wendell HuangCFOTSMC

Thank you, Jeff. Good afternoon, everyone. Thank you for joining us today. My presentation will start with the financial highlights for the third quarter of 2024. After that, I will provide the guidance for the fourth quarter of 2024. Third quarter revenue increased 12.8% percent sequentially in NT, as our business was supported by strong smartphone and AI-related demand for our industry-leading 3-nanometer and 5-nanometer technologies. Gross margin increased by 4.6 percentage points sequentially to 57.8%, mainly reflecting a higher capacity utilization rate and cost improvement efforts. Due to operating leverage, total operating expenses accounted for 10.4% of net revenue. Thus, operating margin increased by 5 percentage points sequentially to 47.5%. Overall, our third quarter EPS was 12.54 NT and ROE was 33.4%.

Now let's move on to revenue by technology. 3-nanometer process technology contributed 20% of wafer revenue in the third quarter, while 5-nanometer and 7-nanometer accounted for 32% and 17% respectively. Advanced technologies, defined as 7-nanometer and below accounted for 69% of wafer revenue. Moving on to revenue contribution by platform, HPC increased 11% quarter-over-quarter to account for 51% of our third quarter revenue.

Smartphone increased 16% to account for 34%. IoT increased 35% to account for 7%. Automotive increased 6% to account for 5%. DCE decreased 19% to account for 1%. Moving on to the balance sheet.

We ended the third quarter with cash and marketable securities of 2.2 trillion NT or $69 billion U.S. dollars. On the liability side, current liabilities increased by 31 billion NT, while long-term interest bearing debt decreased by 38 billion NT. This change was primarily driven by the reclassification of 42 billion NT in bonds payable from non-current to current liabilities. In terms of financial ratios, accounts receivable turnover days remained steady at 28 days. Inventory days increased by four days to 87 days, primarily due to the pre-build of N3 and N5 wafers.

Regarding cash flow and CapEx, during the third quarter, we generated about 392 billion NT in cash from operations, spent 207 billion NT in CapEx, and distributed 91 billion NT for fourth quarter '23 cash dividend. Overall, our cash balance increased 88 billion NT to 1.9 trillion NT at the end of the quarter. In U.S. dollar terms, our third quarter capital expenditures total $6.4 billion. I have finished my financial summary.

Now let's turn to our current quarter guidance. Based on the current business outlook, we expect our fourth quarter revenue to be between $26.1 billion and $26.9 billion U.S. dollars, which represents a 13% sequential increase or a 35% year-over-year increase at the midpoint. Based on exchange rate assumption of $1 U.S. dollar to 32 NT, gross margin is expected to be between 57% and 59%. Operating margin between 46.5% and 48.5%. This concludes my financial presentation. Now let me turn to our key messages.

I will start by talking about our third quarter '24 and fourth quarter '24 profitability. Compared to the second quarter, our third quarter gross margin increased by 460 basis points sequentially to 57.8%, primarily due to a higher capacity utilization rate and better cost improvement efforts, including productivity gains. Compared to our third quarter guidance, our actual gross margin exceeded the high end of the range provided three months ago by 230 basis points, mainly due to a higher than expected overall capacity utilization rate. We have just guided our fourth quarter gross margin to increase by 20 basis points to 58% at the midpoint. This is primarily due to a higher overall capacity utilization rate in the fourth quarter, partially offset by continued dilution from N3 ramp up, higher electricity prices in Taiwan, and N5 to N3 tool conversion cost.

Next, let me talk about our 2024 CapEx. Every year, our CapEx is spent in anticipation of the growth that will follow the future years, and our CapEx and capacity planning is always based on the long-term market demand profile. As the strong structural AI-related demand continues, we continue to invest to support our customers' growth. We now expect our 2024 CapEx to be slightly higher than $30 billion U.S. dollars. Between 70% and 80% of the capital budget will be allocated for advanced process technologies. About 10% to 20% will be spent for specialty technologies, and about 10% will be spent for advanced packaging, testing, mass making, and others. At TSMC, a higher level of capital expenditures is always correlated with higher growth opportunities in the following years, and as long as our growth outlook remains strong, we will continue to invest. Now let me turn the microphone over to C.C.

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C. C. WeiCEOTSMC

Thank you, Wendell. Good afternoon, everyone. First, let me start with our near-term demand outlook.

We concluded our third quarter with revenue of U.S. dollar $23.5 billion, above our guidance in U.S. dollar terms. Our business in the third quarter was supported by strong smartphone and AI-related demand for our industry-leading 3-nanometer and 5-nanometer technologies. Moving into fourth quarter, we expect our business to continue to be supported by strong demand for our leading-edge process technologies. We continue to observe extremely robust AI-related demand from our customers throughout the second half of 2024, leading to increasing overall capacity utilization rate for our leading-edge 3-nanometer and 5-nanometer process technologies.

At TSMC, we define server AI processor as GPUs, AI accelerators, and CPUs performing training and inference functions, and do not include networking, edge, or on-device AI. We now forecast the revenue contribution from server AI processors to more than triple this year and account for mid-teens percentage of our total revenue in 2024. Supported by our technology leadership and broader customer base, we are well-positioned to capture the industry's growth opportunities. We now forecast our four-year revenue to increase by close to 30% in U.S. dollar terms. Next, let me talk about our global manufacturing footprint update. TSMC's mission is to be the trusted technology and capacity provider of the global logic IC industry for years to come. All of our overseas decisions are based on our customers' needs. They value some geographic flexibility and necessary level of government support. This is also to maximize the value of our shareholders.

In Arizona, we have received strong commitment and support from our U.S. customers and the U.S. federal, state, and city governments and have made significant progress in the past several months. Our plan to build three fabs, will help create greater economies of scale, as each of our fabs in Arizona will have a clean room area that is approximately double the size of a typical logical fab. Our first fab entered engineered wafer production in April with 4-nanometer process technology, and the result is highly satisfactory with a very good yield. This is an important operational milestone for TSMC and our customers, demonstrating TSMC's strong manufacturing capability and execution. We now expect volume production of our first fab to start in the beginning of 2025 and are confident to deliver same level of manufacturing quality and reliability from our fab in Arizona as from our fabs in Taiwan. Our second and third fabs will utilize more advanced technologies based on our customers' needs. The second fab is scheduled to begin volume production in 2028, and our third fab will begin production by the end of the decade.

Thus, TSMC will continue to play a critical and integral role in enabling our customers' success while remaining a key partner and enabler of the U.S. semiconductor industry. Next, in Japan, thanks to the strong support from the Japan's central, prefectural, and local government, our progress is also very successful. Our first specialty technology fab has completed all process qualification.

Volume production will start this quarter, and we are confident to deliver the same level of manufacturing quality and reliability from our fab in Kumamoto as from our fabs in Taiwan. The land preparation for our second specialty technology fab in Kumamoto has already begun, and construction will begin in fourth quarter next year. This second fab will support our strategic customers for consumer, automotive, industrial, and HPC-related applications, and volume production is targeted by the end of 2027. In Europe, we have received strong commitment from the European Commission and the German federal, state, and city governments. Together with our JV partners, we held a groundbreaking ceremony in August for our specialty technology fab in Dresden, Germany. This fab will focus on automotive and industrial applications utilizing 12, 16, fab and 28 process technologies.

Volume production is scheduled to begin by the end of 2027. Under today's fragmented globalization environment, overseas fab costs are higher for everyone, including TSMC and all other semiconductor manufacturers. Having said that, we are leveraging our fundamental competitive advantage of manufacturing technology leadership and large scale manufacturing base. Thus, TSMC will be the most efficient and cost-effective manufacturer in the region that we operate, while continuing to provide our customers with most advanced technology and scale to support their growth. This concludes our key messages, and thank you for your attention.

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Jeff SuirTSMC

Okay, thank you, C. C. This does conclude our prepared statements.

Before we begin the Q&A session, I would like to remind everybody to please limit your questions to two at a time to allow all the participants an opportunity to ask their questions. Should you wish to raise your question in Chinese, I will translate it into English before our management answers your question. [Operator Instructions].

Now let's begin the Q&A session. Operator, can we proceed with the first participant on the line please?

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Q&A Session

Q&A 1/8

Operatoroperator

The first one to ask questions Gokul Hariharan from JP Morgan. Go ahead please.

Gokul HariharananalystJPMorgan Chase & Co.

Yes, thank you. Good afternoon C.C., Wendell, and Jeff. My first question is on the AI investments and the growth that you see. Recently, obviously, there's been a lot of questions about ROI of Gen AI investments, whether this could end up being a bubble. How does TSMC view this trend as you're making your capacity plans given you are enabling pretty much the processing capacity for pretty much everybody?

And what gives you the confidence that this is going to be a more longer run growth cycle? And relative to this, could C.C. also talk a little bit about what do you think about the duration of this current semiconductor up cycle? Do you think it will continue into the next couple of years or are we getting closer to the peak of the cycle? That's my first question.

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Jeff SuirTSMC

Okay, thank you Gokul.

Please allow me to summarize your first question. So Gokul's first question has two parts.

The first part I believe is more focused on the AI related demand, the ROI and sustainability of this. He notes recently there's been a lot of questions about the return or ROI from generative AI investments and therefore how do we view this trend? Is there a worry that this demand sustainability or maybe a bubble? And very importantly, certainly what gives us the confidence that this could be a more long-run sustainable demand cycle for AI?

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C. C. WeiCEOTSMC

Okay Gokul, let me answer your question. Simply, whether this AI demand is real or not, okay? And my judgment is real.

We have talked to our customer all the time, including our hyperscaler customers who are building their own chips. And almost every AI innovator is working with TSMC. And so we probably get the deepest and widest look of anyone in this industry. And why I say it's real, because we have our real experience. We have using the AI and machine learning in our fab and R&D operations.

By using AI, we are able to create more value by driving greater productivity, efficiency, speed, qualities. And think about it, let me use you know 1% productivity gain, that was almost equal to about 1 billion to TSMC. And this is a tangible ROI benefit. And I believe we cannot be the only one company that has benefited from this AI application. So I believe a lot of companies right now are using AI for their own improving productivity, efficiency, everything. So I think it's real. Did I answer your question?

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Gokul HariharananalystJPMorgan Chase & Co.

Yes, that's clear. Maybe, yes. Could you also talk a little bit about how this feeds into your view of the current semiconductor cycle also, C.C?

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Jeff SuirTSMC

So, Gokul, the second part is so we have, we believe the AI demand is real. But how do we view the overall semiconductor demand and cycle? Do we, I think, Gokul, you're saying, do we think its reached peak, peak out already?

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C. C. WeiCEOTSMC

Oh, okay. I forgot to answer this one. The demand is real. And I believe it's just the beginning of this demand. All right. So one of my key customers said, the demand right now is insane. That's it's just the beginning, it's a form of scientific to be engineering. Okay. And it will continue for many years.

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Jeff SuirTSMC

And then the overall semiconductor demand? I think.

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C. C. WeiCEOTSMC

Overall semiconductor demand, except that the AI, I think is everything stabilized and start to improve.

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Jeff SuirTSMC

Okay, Gokul?

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Gokul HariharananalystJPMorgan Chase & Co.

Understood. That's clear. Thanks, C.C. My second question is more to do with CapEx. I think usually, if you look at the past cycles of strong demand uptick, TSMC's CapEx also starts to move up quite a bit. This time round, 2023 and 2024, your CapEx has been reasonably stable.

It's still a large number, but not really growing a lot in the 30 billion, 31 billion range. How should we think about look forward? When we look forward into the next couple of years, what are you doing?

What are you planning for CapEx growth? Is there any reservations that TSMC has about the pace of growth that the CapEx is still a little bit lower? Or should we expect that the CapEx also should start accelerating given you're growing at 30% this year and looks like you're preparing for pretty strong growth the next couple of years as well?

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Jeff SuirTSMC

Okay, so Gokul's second question is related to CapEx and looking out the next few years. So he notes that in past cycles when demand is very strong, our CapEx starts to move up. But however, this time, even with what C. C. described as very real and the beginning of a strong AI demand, these last two years we've kept our CapEx, it's not really been growing much. So his question is, is that because we have any concerns or reservations around the demand sustainability? Or what will the CapEx start to look like the next several years? Will we have to begin to step it back up? Is that roughly what you're asking, Gokul?

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Gokul HariharananalystJPMorgan Chase & Co.

Yes, that's right. Thanks, Jeff.

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Wendell HuangCFOTSMC

Okay, Gokul. We do not have a number for 2025 CapEx today to share with you. However, we always use a disciplined and thorough system to determine the appropriate capacity to build. And we always review our CapEx plans on an ongoing basis. For TSMC, a higher level of capital expenditures is always going to be related with higher growth opportunities in the coming years. And as long as our growth outlook remains strong, we will continue to invest.

Now, as C.C. said, next year looks to be a healthy year. So it is very likely that our CapEx next year will be higher than this year. And we will provide you more updates in January conference.

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Gokul HariharananalystJPMorgan Chase & Co.

Okay, that's very clear. Thanks, Wendell. I'll go back to the queue.

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Jeff SuirTSMC

Okay, thank you, Gokul. Operator, can we move on to the next participant, please?

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Q&A 2/8

Operatoroperator

Yes, Sunny Lin from UBS. The line is open to you now.

Sunny LinanalystUBS

Thank you very much for taking my question. Good afternoon. Very strong executions and margin. So my first question is to follow-up on the gross margin outlook.

How should we think about into 2025? Last quarter, management quantified overseas expansion to about 2% to 3% margin.

But besides that, could you help us understand some of the other puts and takes? How should we think about the depreciation growth into 2025?

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Jeff SuirTSMC

Okay, Sunny, thank you for your question. So Sunny's question first is on the gross margin outlook into 2025. She notes last time Wendell had already shared that overseas fab would dilute our gross margin probably by 2% to 3%. She wants to know besides that, what other factors should we consider? And also in terms of depreciation growth.

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Wendell HuangCFOTSMC

Okay. Sunny, again, it's too early to talk about 2025 in detail. But there are a few things I can share with you, the puts and takes for 2025. Indeed, we expect the dilution from N3 ramp to gradually reduce next year. We continue to sell our value. So these things will help, plus next year will be a healthy growth year. So utilization is also a positive. On the other hand, as we said, there'll be 2 to 3 percentage point dilution from the overseas fabs when we begin to ramp them. At the same time, we are also converting some of our N5 capacity to N3 to meet the strong demand for N3.

And also, don't forget there's ramping the N2 in 2026. There will also be some preparation costs for ramping N2. And as we migrate every leading notes, more and more events, this preparation costs will become bigger and bigger. Now, you also know that electricity costs has also risen very recently and the second time in the year. 14% higher for TSMC in October. This is after 15% increase in 2022, 17% increase in 2023, and 25% increase in 2024. Basically, the price has doubled in the last few years. So next year, we think that electricity price for us in Taiwan will be the highest in all the regions that we operate. And the higher electricity price plus other inflationary cost is expected to impact our gross margin by at least 1%. And finally, of course, we do not have any control or cannot forecast foreign exchange rate movement. 1% of foreign exchange rate movement, dollar NT, will have an impact of 40 basis point to our growth margin.

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Jeff SuirTSMC

Thank you, Wendell. So Sunny, does that sort of give you a better understanding of the puts and takes for next year?

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Sunny LinanalystUBS

Yes, that's very helpful. Thank you very much, Wendell. So quick follow-up if any of you on depreciation increase into 2025. Should we expect similar magnitude as this year, which grew about 25%? And also, a quick follow-up on the 2% to 3% gross margin dilution for overseas. If I calculate correctly, that would imply your overseas fabs in the US and Japan could be running at close to 0% or very low gross margin to start with. Would that be a conservative assumption that you are assuming at this point? Yes.

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Jeff SuirTSMC

Okay, well, that's two follow-ups. So I might take that as the second question. But the first one is, again, Sunny had asked about depreciation next year.

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Wendell HuangCFOTSMC

Yes, Sunny, that does give you more depreciation guidance in the January conference.

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Jeff SuirTSMC

And then the second question really is about our overseas fabs as we ramp up Arizona and Arizona and Japan. Sunny, I believe your question is, with that ramp and dilution of 2% to 3%, does that imply the overseas fabs profitability is more closer to break even or something like that? Correct, Sunny?

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Sunny LinanalystUBS

Right. Thank you, Jeff.

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Wendell HuangCFOTSMC

Yes, Sunny, the overseas fabs have basically a lower profitability than the fabs in Taiwan, mainly because of the smaller scale and next year will be initial ramp and higher cost. So it will have a lower profitability, but it will gradually improve over the years. Now, don't forget, in Arizona and in Kumamoto, we are ramping more than 1 phase 1 fabs. So when fab 1 begin to improve its profitability, the second phase comes in. And in Arizona, when fab 2 improves, the third phase comes in. Similar situation in Kumamoto. And that's the reason why we're saying that in the next three or five years, we expect 2 to 3 percentage point dilution every year.

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Sunny LinanalystUBS

Got it. Thank you very much.

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Jeff SuirTSMC

Thank you, Sunny. Operator, can we move on to the next participant, please?

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Q&A 3/8

Operatoroperator

Next one, we have Charlie Chang from Morgan Stanley. Go ahead now.

Charlie ChananalystMorgan Stanley

Thanks, Jeff. And C.C. Wendell, good afternoon. First of all, also, congrats for your very, very strong results and the guidance. So my first question is really about your future buying power to your customers and vendors, and what would that mean to your long-term gross margin targets? Because right now, even without the price adjustment next year, your gross margin is already blow up, right? It's already 57%, 58%, higher than most of your customers. So with that, do you think you will be a little bit too aggressive to further hike price to your customers? And I'm also wondering for those kind of mature nodes, what's your pricing strategy here?

So all I want to ask, are there implications to, number one, your long-term gross margin label? And secondly, are you going to handle the potential antitrust risk, given your — near monopoly and also prepare to do some price adjustment? Thanks.

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Jeff SuirTSMC

Okay. So, I think Charlie's question is sort of, we always say that we value selling, and it's a continuous and ongoing thing. So, he wants to know what does this status will look like with both customers and vendors, and then what is the implication to our long-term gross margin target? And are we concerned about monopoly or things like that? Let me start. That, I think, is the first part, and then the mature part, I'll summarize later.

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C. C. WeiCEOTSMC

Okay, Charlie. This is C. C. Wei. Let me answer your question. Selling our value, actually, is a continuous and ongoing process for TSMC. We view all our customers as a partner, and the progress of this effort on selling our value is so far so good. Also, you are talking about we have more backing power with our equipment supplier. Again, we view them as our partner, so I don't use the backing power. We always work with them and to move to the next step.

And so, you know, both TSMC and suppliers and customers are all working together, and with the purpose of that we can have a TSMCs customer to be successful in their market. Okay, that's my goal. If our customers are doing well, we can be good also. Okay?

And you mentioned one thing that I have a little bit concern. You say that TSMC's gross margin now is higher than my customer. It's not true. You know, look at one of the biggest AI supplier, they have a gross margin that I probably never be able to reach in my life. But anyway, we are very happy to see them be successful, and we are in a different kind of business. We are capital-intensive businesses, so we need a very high gross margin to survive and to have sustainable and healthy growth. That's why we set up our pricing strategy.

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Jeff SuirTSMC

And then a quick one, I think part of Charlie's question, the second part. Charlie, if I heard you right, is sort of the outlook for mature note in terms of pricing?

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C. C. WeiCEOTSMC

No, I think, Charlie, you're talking about the way that the antitrust concern or something like that. Did I hear you right?

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Charlie ChananalystMorgan Stanley

Yes, I'm a little bit concerned, same as other investors as well.

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C. C. WeiCEOTSMC

Okay, the antitrust meaning that TSMC has a very high market share and with some of unnecessary competition methodology. Let me assure you that the last time we proposed a new version of the Foundry 2.0, which including the wafer manufacturing and packaging and testing, mass making, and all others. All these kind of things become more growing importance, like packaging, testing, mass making. Right now probably is a little bit higher than 10% of TSMC's total revenue. That's one. And all my competitors, their IDMs in particular, they also have their packaging, testing, and mass making. And so I think Foundry 2.0 is a better reflect TSMC's traceable market. And our share is probably around 30%, so not a dominant yet. We are big, yes, because we perform very well.

But no, it's not a kind of antitrust concern. It's not in our picture, actually. Charlie, did I answer your question?

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Charlie ChananalystMorgan Stanley

Yes, yes, thanks. So just a feeling a little bit, I guess you won't stop your margin improvement until 75%. But anyway, I'll leave that kind of long-term margin target or guidance to the next caller or your next January guidance.

But I do have a second question. Is that okay, Jeff? I can ask a second one.

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Jeff SuirTSMC

Quickly, yes.

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Charlie ChananalystMorgan Stanley

Okay.

The second one is about your IDM outsourcing opportunity, right? Also part of your Foundry 2.0. Because one of the major IDM opportunities at Intel, and recently announced they want to spin off their Foundry segments, right? So number one, TSMC, do you really favor more outsourcing from Intel, given this change? And even would TSMC consider to acquire part of Intel's fabs in the long term?

So I think that's that. And also, quickly comment on news reporting about Samsung's IDM outsourcing opportunity. So that's my second part of the question.

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Jeff SuirTSMC

Okay, so Charlie's second part is on IDM outsourcing. He wants to know, with the, I guess, U.S. IDM and Foundry 2.0, do we expect more outsourcing from this U.S. IDM?

And how do we plan for the capacity? Would we consider, I think, to acquire part of this IDM's fabs or manufacturing? And then how do we see outsourcing from Samsung?

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C. C. WeiCEOTSMC

That's a lot of questions.

Let me answer one of the easiest one. Are we interested to acquire one of IDM's software? The answer is no. Okay. No, not at all.

Now let's talk about the business part. It always a customer's decision for their outsourcing strategy. But I look at the business of the IDM's, one of the IDM's in California, which has been a very good customer to TSMC and we continue to receive a sizable business from them, to be frank with you. So your question is whether that we continue to increase, that is too specific. So let's wait for the next few quarter to answer your question.

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Charlie ChananalystMorgan Stanley

Okay. Thank you.

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Jeff SuirTSMC

All right. Thank you, Charlie. Operator, can we move on to the next person? Caller, please.

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Q&A 4/8

Operatoroperator

Yes. Next one, Bruce Lu from Goldman Sachs. Go ahead, please.

Bruce LuanalystGoldman Sachs Group

Okay.

Thank you for taking my question. My question is going back to the longer-term growth outlook. I think TSMC has been guiding for 15% to 20% revenue CAGR from '21 to '26. On the back of the insane AI demand, do we have an updated outlook for the revenue guidance beyond 2026? In addition, when TSMC guided in 2021, TSMC achieved 25% growth almost every year except for 2023. So what kind of revenue growth outlook or the growth pattern in the next five years? Do we expect to be a more stable growth every year or do we expect to be a stronger growth for most of the year and the one-year weakness?

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Jeff SuirTSMC

Okay. So thank you, Bruce.

So Bruce's first question is about our long-term growth outlook. He notes, yes, we did provide a long-term revenue growth CAGR of between 15% to 20% CAGR in U.S. dollar terms from '21 to '26. So he wants to know what is the updated revenue guidance, the outlook beyond 2026. And he also notes that when we provided this, you know, guidance in 2022, we basically were able to grow greater than 25% every year except for 2023. So he wants to know the next five years, will the growth be, you know, a similar level every year or will there be like strong years followed by, you know, down year sort of the pattern of the growth?

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C. C. WeiCEOTSMC

Okay, Bruce. Lots of big questions. You ask us whether the next five years will be as good as the past five years from '21 to '24 right now. We accept the 2023. We have a very good growth. As you said, it's always a 20% to 30%. Next five years, it will be very healthy also to TSMC, but I don't have a long-term CAGR number to update you, but they will be very healthy also. That's so far I can assure you.

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Bruce LuanalystGoldman Sachs Group

So a quick follow-up, does that insane AI demands got to help you to grow slightly faster than before?

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Jeff SuirTSMC

So Bruce wants to know with the very robust AI related demand, can we grow faster than before?

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C. C. WeiCEOTSMC

I hope so. But as I said, today we don't have a long-term CAGR number to share with you. Okay.

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Bruce LuanalystGoldman Sachs Group

Okay.

Let me switch gears to 2-nanometers and A16. So I think that, you know, the HPC demand and — for the node is very strong. We do see more customer engagement for 2-nanometers, but at the same time, we also see more chip load design in 2-nanometers, which might effectively lower the 2-nanometer wafer area requirement. So how should we think about your 2- nanometer capacity bill versus the 3, 5, and 7 in the past? And how do we see the A16 migration beyond 2-nanometers?

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Jeff SuirTSMC

Okay.

So Bruce's second question, as he says, is on 2-nanometer and A16. He notes certainly with HPC and AI related more and more engagement at 2-nanometer, but he also notes or his observation with chiplets that could reduce the demand for 2-nanometer. So he really wants to know sort of what is the capacity build or capacity outlook for 2-nanometer that we are looking at. And also how do we see the migration from 2-nanometer to A16? Is that correct, Bruce?

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Bruce LuanalystGoldman Sachs Group

Yes.

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C. C. WeiCEOTSMC

Okay.

Let me answer this question. Yes, the chiplets have become kind of, you know, our HPC, especially our HPC customers' strategy. It's going to reduce capacity for 2-nanometer because it become chiplets. The answer is no, actually. We have many, many customers are interested in the 2-nanometer.

And today with their activity with TSMC, we actually see more demand than we ever dreamed about it as compared with N3. So we have to prepare more capacity in N2 than in N3. And following by A16, again, A16 is very, very attractive for the AI servers chips. And so actually the demand is also very high. So we are working very hard to prepare both 2-nanometer A16's capacity. Okay, Bruce, did I answer your question?

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Bruce LuanalystGoldman Sachs Group

Yes, perfect. Thank you. All right.

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Jeff SuirTSMC

Thank you. Operator, can we move on to the next participant, please?

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Q&A 5/8

Operatoroperator

Now, Brett Simpson from Arete. The line is open to you now.

Brett SimpsonanalystArete Research

Ys, thanks very much. My question was on the long-term planning around AI. I'm keen to understand how TSMC gets comfortable with customer demand for AI beyond 2025. And I ask this because it takes a couple of years before you can build a fab. So you need to be taking an early view on what does AI look like in 2026, 2027.

So how are you specifically cooperating on long-term plans for capacity with these AI customers? What commitments are these customers giving you? And I guess historically, we've seen hyperscaler CapEx go through digestion period. So how do you de-risk the capacity plans here for AI as we go through this really heavy demand period? Thank you.

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Jeff SuirTSMC

Okay.

So Brett's first question, again, is on the long-term planning around AI demand. His question is really for beyond 2025, given the lead times, how do we plan our capacity for the long term? How do we get comfortable around the customer demand related to AI beyond 2025? I think that is the gist of your question, Brett.

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C. C. WeiCEOTSMC

Well, okay, Brett. Let me say again that we did talk to a lot of customers. Almost every AI innovator are working with us, and that including the hyperscalers. So if you look at the long-term market, long-term structural market demand profile, I think we have some picture in our mind, and we make some judgment, of course, and we work with them on a rolling basis. And so how we prepare our capacity? Actually, just like Wendell said, we have a disciplined and a rough system to plan the appropriate level of capacity. And to support our customers' need, also to maximize our shareholders' value. That's what we always keep in our mind.

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Brett SimpsonanalystArete Research

My follow-up — Yes, that's great. Thanks, C. C. I guess my follow-up question, we've read a lot about Taiwan having energy challenges, and this comes at a time when TSMC is preparing for a big node with 2-nanometer. So my question is, are there any power challenges to overcome when you're building out your N2 fabs, especially in Hsinchu and Kaohsiung? And does it make sense for TSMC to plan for nuclear power? I mean, we see a lot of hyperscalers are planning for nuclear power in the U.S. to build that gigawatt facilities. How do you think about nuclear power in future for TSMC fabs? Thank you.

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Jeff SuirTSMC

Okay. Thank you, Brett.

So Brett's second question, he notes that Taiwan electricity and energy, there are a lot of challenges with this. So how do we plan for this, especially when we're bringing on new nodes? What are the power challenges to overcome, given the state of Taiwan's energy? And then would we consider even nuclear power for ourselves to help support?

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C. C. WeiCEOTSMC

Okay, Brett.

Yes, we are building many fabs in Taiwan, and that requires electricity, water, and the land. We continue to work with the government. Actually, we have a very close communication with government, and to tell them that our requirement, our plan, and we got assurance from the government saying that they will support TSMC's growth, and we believe that. And so how they prepare for the electricity from the nuclear power plant or from just some kind of other sources like green energy, something. We are not ready to share with you yet, but we got assurance that we're going to get enough electricity support, including the water and the land.

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Brett SimpsonanalystArete Research

That's clear. Thank you very much.

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Jeff SuirTSMC

Okay, thank you, Brett. Can we move on to the next participant, please?

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Q&A 6/8

Operatoroperator

Next one to ask a question, Krish Sankar from TD Cowen.

Krish SankaranalystTD Cowen

Yes, hi. Thanks for taking my question. The first one I had was, I'm kind of curious on the non-AI demand. How do you look at your wafer demand for PC and mobile into calendar '25, and have you seen any meaningful revision upwards or downwards on that? And then I had a follow-up.

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Jeff SuirTSMC

Okay, so Krish's first question is really focused on PC and mobile demand. How do we see this demand going into 2025? Have we seen it improve or revision up or downwards, and how would we look at it going into next year?

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C. C. WeiCEOTSMC

Okay, Krish.

The unique growth of PC and smartphone is still in a low single digit, but the more important is the content. The content now we put more AI into their chip, and so the silicon area increase faster than the unique growth. So again, I would like to say that for this PC and smartphone business, not only — is gradually increased, and we expect it to be healthy in the next few years because of AI-related applications.

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Krish SankaranalystTD Cowen

Got it, got it. Very helpful. And then my quick follow-up is, I'm kind of curious, you know, on your packaging side, advanced packaging today is part of the non-wafer revenues. Obviously, we're investing in cobots and other technologies. How do you think about that advanced packaging revenue growth over the next few years, and do you think at some point in the next couple of years, advanced packaging can reach corporate-level growth margins, or would it always be below that? Thank you very much.

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Jeff SuirTSMC

Okay, thank you, Krish.

So Krish's second question is on advanced packaging. So we have been putting a lot of effort. So his question is, what is the revenue growth outlook for advanced packaging in the next few years? And also, when or do we think it can reach the corporate average growth margin as well? So maybe Wendell can address.

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Wendell HuangCFOTSMC

Yes, Krish, advanced packaging in the next several years, let's say five years, will be growing faster than the corporate average. This year, it accounts for about high single-digit of our revenue. In terms of margins, yes, it is also improving. However, it's still approaching corporate, but not there yet.

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Krish SankaranalystTD Cowen

Thank you very much.

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Wendell HuangCFOTSMC

Okay, Krish. Operator, in the interest of time, we'll take questions from the last two participants, please.

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Q&A 7/8

Operatoroperator

Yes. Now the line is open to Laura Chen from Citi.

Laura ChenanalystCitigroup

Thank you for taking my question, gentlemen, and also congratulations for the strong performance. I'm just wondering that with the decent free cash flow increase in the recent quarter, and I believe that next year will be a decent year for TSMC to grow. So is there any opportunity for TSMC to consider increased cash dividends in the near future? And how do you view the balance of the capital allocation between shareholder returns and also the continued investment in advanced technology like 2 and 3-nanometer? That's my first question.

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Jeff SuirTSMC

Okay, thank you, Laura.

So Laura's first question is related around — her question really is looking at our free cash flow generation, noting that it continues to increase, and then with next year being a healthy, good year, it should continue to grow. So her question is, is there room or how do we see the cash dividend as related to free cash flow? And also, I think, Laura, really her question was also a balance sheet ramification.

How do we balance the shareholder return interest set against what C. C. said, our capital intensive industry and CapEx? So two parts to it, first on the cash dividend and then sort of on the balance sheet management.

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Wendell HuangCFOTSMC

Right, Laura.

Certainly, our dividend policy, as we said before, is sustainable and steadily increasing. It's steadily increasing when we are harvesting the investment that is made in the past. And as the free cash flow increases, that means we are harvesting the investment in the past. So it's going to be steadily increasing.

That's for the dividends. Balance sheet, where the primary objective of our using our balance sheet or our cash resources is organic growth. So that will bring our shareholders the biggest return. And then whatever the free cash flow is left, then we will return part of those to our shareholders. That's always our policy.

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Laura ChenanalystCitigroup

Okay, yes, that's very consistent. But I think given our like a rich cash flows generating capability and also, I mean, we can probably be able to harvest. So I think investors are kind of expecting the dividends increase gradually.

Yes. And also, my second question is about our Foundry 2.0 model that has been discussed since last time. But could you share more details on how the Foundry 0.2 is being implemented and found different aspects like the traditional logic foundry business and advanced packaging and also maybe the IDMs customers. Can you give us kind of an idea of what will be the growth outlook for a different kind of segmentation in that new definition?

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Jeff SuirTSMC

OK, so Laura, your second question is on Foundry 2.0. So I think her question is looking at the different components of this. She's asking if we can provide a growth outlook for the different components such as the logic, wafer manufacturing, advanced packaging segment, IDM segment, et cetera, et cetera, the growth outlooks for each specific one.

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Laura ChenanalystCitigroup

Right. I appreciate it. Thank you.

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C. C. WeiCEOTSMC

Well, Laura, I think, you know, again, in this Foundry 2.0, among the content inside the leading process nodes, advanced packaging, well, it has much stronger growth. And on those mature nodes and conventional packaging, that is not so rosy as advanced packaging and leading process node. Did that answer your question?

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Laura ChenanalystCitigroup

Okay, got it. Thank you.

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Jeff SuirTSMC

Okay, thank you, Laura. Operator can move on to the last participant, please.

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Q&A 8/8

Operatoroperator

Yes, the last one to ask questions, Rick Hsu from Daiwa.

Rick HsuanalystDaiwa

Yes, hi. Thank you for taking my questions.

So a very quick one from me. The first one, can you update your forecast for this year's global semiconductor revenue as memory? I remember you were talking about around 10% growth. So can you give us a new update and also share with us a preliminary outlook for next year?

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Jeff SuirTSMC

Okay. So Rick's question is really, can we, you know, provide an update to our forecast for whether it's semiconductor excluding memory, industry growth, and Foundry 2.0 for 2024 first?

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C. C. WeiCEOTSMC

Well, our forecast stays the same, very similar to what we say the last time. Of course, TSMC's growth is a little bit better than the last time we estimate. But overall, the whole industry is almost the same as we said in last quarter.

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Jeff SuirTSMC

And then the second part of Rick's question, then what about next year?

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C. C. WeiCEOTSMC

Well, we continue to say that it's too early to make a comment on 2025's gross outlook, but we are going to share with you in the next quarter's early release. Okay?

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Rick HsuanalystDaiwa

All right. Thank you so much. A little question as a follow up, the second one. Can you share with us your CoWoS capacity buildup for this year and next year? I know you guys seem to have revised it up several times, so can you share the latest one?

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Jeff SuirTSMC

Yes. So Rick's second question, then, is to update on our CoWoS capacity plan for both 2024 and 2025 to the extent that we can share.

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C. C. WeiCEOTSMC

Okay, Rick.

In fact, we are putting a lot of effort to increase the capacity of the CoWoS. Roughly, let me share with you, today's situation is our customers' demand far exceeds our ability to supply. So even we work very hard and increase the capacity by about more than twice, more than two times as this year compared with last year, and probably double again, but still not enough. But anyway, we are working very hard to meet the customers' requirement.

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Closing Remarks

Rick HsuanalystDaiwa

All right. Thank you so much.

Jeff SuirTSMC

Thank you, Rick. Thank you, everyone. This concludes our Q&A session. Before we conclude today's conference, please be advised that the replay of the conference will be accessible within 30 minutes from now, and the transcript will become available 24 hours from now, both of which you can find and are available throughout TSMC's website at www.tsmc.com. So thank you, everyone, for joining us today. We hope everyone continues to be well, and we hope to see you again, and you will join us again next quarter. Goodbye, and have a good day.

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