Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) Q2 2023 Earnings Call Transcript

Mehdi Hosseini: Okay. Thank you. Yes. Your updated guide suggests that revenues in the second half would be up 10% to 12% versus the first half. Obviously, a step-up is lower than prior expectations. What I want to better understand is how should we think about continued inventory correction among your customer versus new product ramp by some of the other customers. Is there any way you can differentiate these two trends?

Jeff Su: Okay. Mehdi is asking with our full year guidance, it implies a more mild second half seasonality. So he wants to know how much strength of the new customer product launches is offset by continued inventory correction. Sort of if we can provide more color on that.

C. C. Wei: That’s a tough question to answer. Mehdi, your observation is right. Our second half seasonality is more minor than previous years. But of course, we have N3 ramp up and for the new product launch. But what is the impact, how to separate them. No, I cannot share too much of the detail of that.

Jeff Su: Okay, Mehdi. Thank you. Operator, then let’s move on to the last participant, please.

Operator: Yes. The last one on queue is Charles Shi from Needham.

Charles Shi: Thanks. Hi, thanks for squeezing me in. I have two questions. The first question is I want to ask about AI, especially around TSMC’s monetization of AI trend. We did hear some commentary that for certain AI applications, TSMCs is selling chips for a few hundred bucks, but TSMC customers can actually sell for 10 bucks, thousands of bucks to their end customers. So I mean, some investors I spoke with really still – it pain them to see TSMC to create an advanced technology to probably give the greater value than this. So the question really is how does TSMC think about maybe a monetization going forward for the capability to produce all these AI chips. And really I want to tie back to one thing management mentioned in the prepared remarks, the AI growth, 50% CAGR, how much of that is volume? And how much of that could be the pricing driven IN terms of TSMC expected the growth over the next few years in areas? Thank you.

Jeff Su: Okay. Charles, his question. First is on AI. Again, basically, he’s asking about monetization or capturing value, let’s say. He notes that TSMC, we may be selling chips for a few hundred dollars, but our customers are able to sell it for tens of thousands or even more. So is TSMC giving away too much of the value? Can we better sell our value or monetize to capture greater value with the AI trend?

C. C. Wei: Well, Charles, I used to make a joke on my customers say that I [indiscernible] a few hundred dollars of a chip and then he sold it back to me with USD 200,000. But let me say that, we are happy to see customers doing very well. And if customers do well, TSMC does well. And of course, we work with them and we share our value to them. And fundamentally, we want to say that we are able to address and capture a major portion of the market in terms of a semiconductor component in AI. Did I answer your question?

Charles Shi: Yes. What about the part about 50% CAGR, how much of that is volume? And should we expect some pricing element in that, the long-term growth?