Q3 2019 Earnings Call
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Welcome to Tee up in piece first quarter 2019 earnings Conference and conference call.
It was the Sun TSMC senior director of corporate Communications and your host for today.
Today's event is webcast slide through T.S.N. teeth website at <unk> to put up when you stop TSMC Dot com.
If you are Jordan.
Through the conference call Youre talking line.
In listen only mode.
Conference is being viewed by investors around the World. We were comes out this event in English only.
The format for todays.
And well be as follows.
He has since he's vice president and Chief Financial Officer, Mr. Wendell bomb.
I will summarize our operations into third quarter 2019, followed by the guidance for the fourth quarter.
Afterwards, Mistral bomb and TSMC CEO , Dr. Cc Wei well jointly provide companies key messages.
Then we will open both the floor and the line for the Q1 night.
With those participants on the call you do not yet have a copy of the press release, you may download it from TSMC website at Triple W.P.S. and he got car T O. So download the somebody's life in relation to todays earnings conference presentation.
As usual I would like to remind everybody that today's discussion may contain forward looking statements that are subject to significant risks and uncertainties, which could cause actual results to differ from.
Materially from those contained in the forward looking statements. So piece referred to the Safe Harbor I noticed that appears <unk> press release.
And now I will like to try and the microphone to TSMC CFO Mr. when Obama for the summary operations in corn quarter guidance.
Thank you Elizabeth good afternoon, everyone and thank you for joining us today.
My presentation, we'll start with the financial highlights for the third quarter, followed by the guidance for the third quarter.
Third quarter revenue increased 41.6% quarter over quarter to 293 billion, then T driven by new product launches both in premiums awful in high performance computing upbeat.
Using TSMC industry, leading seven nanometer technology.
Gross margins increased by 4.6 percentage points sequentially to 47.6%, mainly due to a solid improvement in capacity utilization.
Total operating expenses accounted for 10.7% or no.
Compared to 11.2% in the second quarter due to better operating leverage.
Operating margin increased by 5.1 percentage point sequentially to 36.8%.
Overall, our third quarter U.P.S. was when you pull nine and <unk>.
And although he was 25.7%.
Now, let's take a look at revenue by technology.
No no need to technology, so very strong denied and accounted for 27% of wafer revenue in the third quarter.
And then that'll NATO was 2% and 16 got a me too was 22%.
At those technologies, which are defined had 16 nanometer mtwo accounted for 51% of wafer revenue up from 47% in the second quarter.
Now, let's take a look at revenue contribution by platform.
All four of all growth platforms solid demand increases in the third quarter.
Smelter, which increased 33% quarter over quarter to account for 49% of our third quarter revenue.
HPC increased 10% to account for 29%.
I O T increased 35% to account for 99%.
And automotive increased 20% to account for 4%.
Moving onto the balance sheet, we ended the third quarter with cash and marketable securities of 585 billing them to do.
The decrease of 480 billion them to you from the second quarter, mainly as we distribute a 207 billion yen team of cash dividends for 2018.
On the liability side current liabilities decreased to 527 billion M P quarter over quarter as we distributed 2018 cash dividend and accrued another 65 building and two or 2.5 into you pretty sure for the second.
Well into 2019 cash dividend.
And that will be paid generally up next year.
Oh financial ratios accounts receivables turnover days decreased to one thing to 41 days.
Days of inventory decreased 11 days to 65 days, reflecting higher wafer shipments during the quarter.
No that need to make a few comments on cash flow than capex.
During the third quarter, we generated 442 billion and key of cash from operations.
Spent 98 billion and Teton capital expenditures and distribute it 207 billion and t. of cash dividend.
As a result, our overall cash balance decreased by 197 billion M. T to 452 billion M.T. at the end of the quarter.
In U.S. dollar terms, a third quarter capital expenditures was $3.14 billion.
I have finished my financial summary.
Let's turn to fourth quarter guidance.
Based on the curve business outlook, we expect all the fourth quarter revenue to be between 10.2, and 10.3 billion us dollars, which has a 9% sequential increase at the midpoint.
Based on the exchange rate assumption of one U.S. dollar to 30.6 17.
Gross margin is expected to be between 48 and 50%.
Operating margin is expected to be between 37 and 39%.
This concludes my financial presentation, let me follow by making a few comments about 20, making capital expenditures and TSMC long term financial objectives.
I will first talk about our capital budget for this year.
Even TSMC, we build capacity according to our customers did that.
To forecast touch demand, we take into consideration the only from each individual customers implication there also our own forecast based on macro as well as market segment outlook.
Given the stronger Aldo for Fiveg deployment next year, the demand for our seven nanometer and five nanometer has increased significantly in the last few months.
We have therefore decided to raise our full year Pontis 19, capex by full field in us dollars to meet this increased demand.
We now expect our 2019 capex to be between 14, and 15 billion U.S.
About 1.5 building U.S. of the $4 billion Capex increase this four seven nanometer capacity.
And 2.2 point $5 billion is four or five none of them into a capacity.
Although we're not able to give you a formal guidance for next year's Capex until next January .
We currently plan next year's Capex to be somewhat similar to our revised 29 can capex.
Now, let me state our long term financial objectives.
That's the company's new CFO I'm happy to tell you that TSMC long term financial objectives remain the same.
Our goal is to achieve revenue and net income kegler in the next few years to be between five and 10% U.S. dollar turns.
Gross margin to be adult, 50% operating margin to be I'll call, it 39% and our used to be above 20%.
Regarding our cash dividend policy.
We we integrate that we will distribute about 70% of free cash flow as cash dividend.
More importantly, TSMC is committed to a sustainable cash dividends on both an annual and quarterly basis.
Now I will turn the microphone to see see.
Thank you window, good afternoon, ladies and gentlemen, I.
Let me start or we followed me October you model and human Perry.
We conclude also offer guests we pulled into by CFO with revenue of impede.
290 suite bidding war U.S. like one book beauty not is slightly above our guidance due to bad Turkey milder forms monocle, we beat you to Acacias, you're now for cost of three months ago.
Moving into fourth quarter. This year, we expect demand reform both smartphone into high performance compute you reduce your debt because she is what kind of people you curries.
Thanks to our industry de seven nanometer technology that powers these applications.
Oh, the human very Frank I'll elaborate as customer. So overall inventories you raised Julie I checked. This was the third quarter. We now expect it reduced to a few days are both keys or whatever what should you set of blocker Endo approach. These are not able by getting built this year.
Before you have 2019, we forecast to close the overall semiconductor market.
Excluding memory and foundry segment boutique.
Two declined by a those single digit wont be out 2018, Debelle. However, we continue to expect get him he to do better and to achieve with Tonight in New York pools.
Now let me talk about the program can you put on one of white sheet.
Thank you walk drive PK shoes, and bringing many benefits through the market.
A form is what be greatly improved we speak outside speeches speed to up to 10 times faster as compared to Fourg network.
The tissue biopsy data into why have about a 90% reduction as compared to 40, allowing for real time responded and control.
Your family performed quite well.
Well unlock new use cases, such as they are we are really haven't for todays you get into high quality give me to name a few.
We believe smartphone Oems walk come out what we see many more you know weight you application to take advantage of Fiveg infrastructure.
She was the meet all of this year, we have being skewed a celebration into water wide waikiki bundled money.
This was to be job taking into account screen and deployment of Fiveg network that is smartphone you several major market Rungs award, which leads to the increase about capex for these here.
We expect <unk> foster whim of Fiveg smartphones as compared to four G., we use a penetration grade the old quite Keith smartphones to reach mid teen percentage of the total smartphone market in 2020. Meanwhile, we expect the city couldn't conkin or fight.
Responsible was well be substantially to Howard again got of Fourg smartphones.
That is due to increased functionalities and additional ice he's for more Chemerow RF circuit boredom, Paul Miller device, he et cetera.
How you fishes speed and ability to incorporate the additional functionality are critically important to Fiveg monopoles, which we brought P.S. every he said you do edge technology and walk continue to fuel our course for the next several years.
Now I will talk about Oh, I can fly via and squeeze speakers.
In five technology has already into risk reduction was good yielding.
And finally, a topic you beat it is QB and these were on track for volume production into force half of next year.
80% EZO doubts you could basically again.
No powder quite people, who can speed again compared with seven nanometer Oh, you five technology, it's a true well know stride for Mali, and seven repeat if you'd walk either bungie indices. The most out of wise several machine with the best that density.
Performance and power IPO, our Seattle me to arise.
Oh, we can fly wheel further expanding our customer product portfolio and increasing our traceable market. The initial ramp what be driven by both mobile and SPG of vacation.
We are completing that five nanometer why have plus strong rent and to be or loss and long lasting know the 40 a chemistry.
Now I will talk robotic industry, well walk in with customers on industry and the technology development program. She score you will.
Yes, we walked you another well known.
Our inphi with BTK inhibitor to begin form and seven two in fine.
We expect our suite nanometer technology lumpy the most out of one so funky technology.
Both PA.
Yes, just trying to keep the technology is used for fuse.
Now I will talk about the ramp up over 87, and Kim process and the status of and ship.
Today, we are competing our second you Grenfell and seven.
We continue to see very strong demand across a wide spectrum, a product, while mobile SPG and I OTI upbeat cases.
And Kevin Prostheses indices or force commercially available you we'd be Southgobi technology.
Seven proust provide 15% to 20% and how it Penske, we see improved power consumption on compared to 87, Denise already you high volume production when Youre simulator to 87.
We expect the shrunk the monthly and give them probably continue into next year and lot you Creagh capex.
To meet these two bond from multiple customers.
Now in six Oh Institute for White, Accredo migration path for the second wave segment protocol I see that rule out 100% compared to what we said seven.
Well I, providing 18% Nazi became should begin with pro formas to cost advantage.
In Q use one more you read there getting and Kevin.
If you wish for tax you is scheduled to begin with first quarter next year with what import talkies stocking before the end of 2020.
We reaffirmed its seven nanometer what contributed more than 25% of our wafer revenue.
In 2019, and we expect you wouldn't higher percentage you 2020 due to worldwide development of Fiveg accelerates acquired demand form S. P T mall bio and other application.
Due to world.
Finally, I will talk about having he's a otherwise packaging BGT.
Oh device packaging solution and never system integration, we wafer Davao process Irene given that you can get ratio from yen wafer process and backend chip packaging.
Yes, so who's in kind of sheets of course.
Equal system integrator chips, or a so I see and away from waiver for probably Oh happy.
We are few strong momentum for cohort and equal or SPG applications. As we continue to get allows you to integrate <unk> chip area to about.
Who oppose to ready to go side what module.
We're also working we saw a few getting customer on so I see which is an industry need do three d. IC packaging solution.
So I see a neighbor suite D equations omondi courses in close proximity to be newberg, the best possible pro forma.
Power in one quick.
We target to started production in 2001 T. One timeframe with early adoption by at U.P. sheet update occasion.
The industry continue to shift in Nobody's you to enhance system network performance.
Yes, and he said differentiating Irwin.
Could you said, who she will allow us to grow the business at a pace Foster again.
Cooperating in the next few years.
Thank you for your occasion.
This concludes our prepared statements.
Before we begin that you and they session I would like to remind everybody to limit.
Questions to two at a time to allow all participants in opportunity to acts aircraft.
Questions will be taken both from the floor and from the call should you wish to raise your questions in Chinese I will translate into English before management answers. Your question, but those of you on the call. It you would like to ask a question. Please press Star then one.
On your telephone keypad now questions will be taken in the Audrey English. They were received if at any time, you would like to remove yourself from the crashing into piece press the pound or hash key.
Now we can.
First we will have questions coming from credit Suisse San Diego.
[noise] first question given the high Capex for this year that figure it.
He can talk about the capital requirement.
For 5 million earlier and you'd be.
Maybe how the equation with usually come in and how does that affect the capital intensity workspace, a capex per thousand wafers and how do we see this note in terms of pricing and mix getting a bit and level of profitability Empire.
So that.
[noise], Okay, so Randy you're asking about the or how much you view occur when the capital expenditures.
You mean.
Your capital intensity or Capex per case, if you're getting a benefit, especially lowering that but given that capex. So, let's say you're seeing a higher appetite for okay, and then how does that translate to profitability.
Hi.
Compared to say some of the prior.
Well I cannot talk too much about details.
But definitely a capex per case for five is stuff certainly higher than previous nodes.
Uh huh.
However, if we combine to everything together.
As we stated at the beginning we're still seeing all across the structural profitability remains the same.
One follow up to that and then a second question. It this year like second half strong demand.
Leading edge tight on the gross margin guidance for fourth quarter is still a good margin, but 40 to 50 target.
Maybe the if there's still a little bit of dry on the margin and with less they are bringing in new go to time.
If you've been because that's not the.
The next year.
Oh.
Okay for the fourth quarter, it's just like we.
Stated all along for a structural profitability when you reach 90% of utilization, we talked to reach 50% of gross margins.
For next year, it's still early to say the structural profitable profitability or margins may be affected by the ramp in a five nanometer has.
At the beginning of ramping up every nano.
Technology nodes, you know some healthy effect it however.
If you like Beijing is good and we're still expecting to see a structural profitability continues.
Question or what.
Because you're a strong third quarter recovery guiding another good fourth quarter as you look to begin early look next year, how should we think about seasonality and there's some concern is before five key where we have a correction. Unfortunately.
If a tariff.
We were at some prebuilt so how do you see kind of early or risk affair correction.
Can you put some demand.
Hi.
Maybe mitigate magnachip correction there.
Youre talking about the seasonality of the smartphone.
Good how do we.
Oh, the joke almost every year.
And so I don't expect next year to be politically different. However, we did see some of the five key smarter pulled.
The gross momentum is how can we expect it so I would expect next year. So seasonality is not so strong cost. We also for this year.
But it's too early to say close because of the market is where you name it.
Next question will be coming from JP, Morgan's Gokul hariharan up.
Oh thanks.
So.
If we look at the history. They never TSMC has had an cabinet that it to be accompanied by it.
But.
Just wanted to.
No matter a lot faster, but life events.
But just still kind of.
Okay.
And with spending 10 to 11 billion.
So could you give us more detail maybe not.
The more for that because it's easier for people in range of Capex that closer to the I saw in quite some Kevin.
I know previously.
Gokul Baby is there's a question kill 40.
Let's say that.
Yes, Im he always the Buda capacity.
Working closely with a customer and to meet the at the mine.
That's a number one okay. We discussed we saw a customized got demand we make a out yachtsman also.
Now we are increasing the cap has quite an up no doubt about it.
Again, that's due to some of the reason I can of course here for the future first the fiveg so rent Bob much Foster again for T. us we expected.
Second TSMC.
Actually it's at expanding our customer portfolio.
And even getting time, we also expanding our product portfolio.
So put all the effect of together we have a reason.
We increased our capex.
This year and that probably next year.
Okay. So that is the that fiber benefits into the non.
Okay.
[laughter].
Maybe just given the higher growth inside.
Build out could you talk about.
Do you expect spiky and smartphones have either been go Chrysler or do you feel that it's been the momentum is going to even faster than farncombe among your customers.
I would enable a bunch of China.
To answer your question, you've actually I suppose.
We expect a smartcycle too for foster again.
I'd be that not even comes on unit that you feel so plus silicon content and the SPC also for US I said, we extending our product portfolio and also our customer portfolio. So the addressable market increase.
That's all.
Yeah.
Just a follow up question I mean.
We have more until his view on financial discipline.
Obviously that you have changed so just to calibrate.
Should we expect now, but I need to revenue next year, I would likely to be higher than let's say seven nanometer last year close Europe , I'm sort of that I mean.
I don't want to say executive quite as a percentage, but let me say that now we have a more optimistic again six months ago.
For me. So go IP do what I said, he thought we would be very careful and that but it depends Silva TV beauty and Oh.
Quite literally because that capacity now we tend to be more aggressive the five nanometers capacity build up because of we I said, we worked closely with customers.
Both up.
Or the occasion Nuggets Monical HPC are even I O T and automotive.
Thank you.
Next question will be coming from you'd be at.
They will do.
Thank you first of all that stuff on congrats on the repos and looking forward to working with you I'm going back to a capex given the a the big increase can you give us some guidance for modeling depreciation.
[noise] depreciation for this year will be.
Such compared with last year, because a big chunk of the increase happens in the fourth quarter.
As to depreciation and next year.
Based on what I, just indicated our capital expenditures.
For next year.
He will be higher however, the detailed number or more specifics we plan to discuss it in January .
Next year.
So if I look out when the new capacity is going to come online is that mostly say Q2, Q3 s that the with the way to think about it.
Well you do get the tourist a lead time.
Are you a activity so very good Q2 to three patent.
Okay, great. Thank you tucked away.
For seven nanometers, obviously demand looks quite good can you give us some guidance for seven idle as a percentage of revenues by end of next year.
However, again this year.
Okay. Thank you.
[noise].
Next question will be coming from TD, good thrilling shoes.
Good afternoon.
As a fall compressed so that they could result in the queue and I think for clutching you thought you talk about the net yeah. So by two small I'll walk through the key cost driver. So although you talked about the no because our unit growth, but also for the telecom GAAP accounting, Chris do you have.
Number four.
The intolerance how bad.
Budget level compared to your fortune.
Yes, this year, both we and babies, though [laughter].
The answer is we don't have that number.
But if you compare compared to other poultry.
I'll quit the.
In Queens account crop is a pickup on these yeah, because I think because I'm more semiconductor because oh, no. We probably have a assessment I'll, let Brian we do have some assessment.
To be Frank with you because a we know that ice we know that that number off the chip inside.
I give you some of that defeating.
Well you use a more advanced technologies, so that I see increased the eating and she's not you're not so much but it increased because of more functionality. You can expect the people could that E. <unk> application you side or those kind of see boy important I've got last time, I believe I already base.
And that.
General for one example, now you can see more into more kaminer on in a smartphone, especially the highest model.
And also the more re roofing.
Got a one was CAD.
City can.
Real estate to form a tool.
20 make up Kiesow too to 40 make up diesel so mulcaire mineral high resolution more pixel and then also you need a lack of Apollo minutes might be too I'm sure. The power consumption because of flight G. They had a huge drop of power. So you are positive.
He has to be more to one.
So you put a mall.
How many vice you type and then do you are talking about the more 10 or even that I really occasion now so the RF front end. So transceiver everything you are.
Not only the type size will increase actually towards top that's a more channel.
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You would move into that a high of de edge technology also.
Yes.
Good for the high end thought probably well the telecom they will increase mall by Oh, you a total Patrick my phone you only focus to be about mid teens of the tacos Shimon.
Do you have this fascist mouth bulk breakdown by.
I have no way.
Well talk about it you can you already.
Okay. Thank you.
Two questions that are now well get a seventh Todd.
Thats. The so is the and said about both margin I'm going to be very different all seven we are enjoying now it's pretty close.
Okay. Thank you and I hope out.
So I said about it it's quite some tech center to a quarter.
You know to bring up the corresponding to corporate average.
As we look at 77, plus and 10, the Pik notes so from that point of view.
And seven nodes actually has reached corporate margins okay. Thank you.
Just a follow up so.
I know you don't comment on the 18, but Oh, let's say a month of the weight per shipment and separate.
Is it is basically two or you know how to people revenue effect.
Two TSMC.
You just mentioned we don't do.
No.
Right.
I don't care about a dedicated [laughter] okay. Thank you.
Next question will be coming from C.L.S.A. Sebastian home.
Yeah.
Yeah.
So with the height in this years, so rather than do that.
So it will cost to be should over 40%. This year. So how do these trends you wagering.
And then.
Any updated guidance on the Capex is it going forward versus prior.
Yes.
Okay.
Yes, you just mentioned you can calculate the capex intensity this year will be over 40% at the same time as we indicated that next years.
Capex, although preliminary.
Is that all at the same level at the ship and we also see strong demand for our business next year, Oh, Capex intensity will be lower next year.
But from what we can see at this moment.
He will then gradually come down to probably between 30 or 35% level called.
After next year.
So we are now and for two or three by pushing rents in 2000 per year.
In a couple of years after 2020.
What could potentially next year, just so you don't want to talk about there right now.
The potential of capital intensity, you mean lower to mid Thirtys by 2012 years, well, it's lower than 40% okay.
Okay. Second question is on the gross profit margin a reasonable, but a couple quarters, where two quarters ago first how does your wind TSMC Auditable say, though we are passed the bottom we're seeing the service out in the second half this year and those are the gross margin will go back to.
60% second half.
Andy now listen to your gross injury Camille commit bear revenue coming back to second half that for the looks like the gross margin is lagging a little bit compared to.
If you get reviewed a revenue.
Direction. So can you blend or was this factors that's driving gross margin recovery behind the revenue recovery.
Yeah, I think you're talking about a third quarter gross margins.
Whenever there's a big jump up in utilization quarter over quarter.
There will be a negative hit on gross margins, it's causing.
Inventory revaluation.
I think I believe we mention about this sometime ago. So yes, you can imagine the utilization third quarter is much higher than that is the second quarter and therefore, the is it element of negative inventory valuation happening into third quarter the amount.
Slightly over one percentage point.
No if utilization remains a similar level that factor will not happen.
But when we look in the fourth quarter gross margin Guy there are high and we reduced the 50% but are still looks like.
The differential between 40 to 50 so.
I mean, there's still a chance were coming to go above 50%, but it looks like a midpoint does and rich that so I do not just about three cute, but also the fourth quarter.
Yeah, as I mentioned earlier.
Our structural profitability remains the same I, even if we reach 90% of utilization, we're targeting 50% of gross margins.
Okay.
Good.
Next question will be coming from Morgan Stanley Charlie Chan.
Thank you.
What is your sense for a rig somebody so.
Turning to coming back to this question. So since you are bracing kind of a long term.
Okay. That's all looking through the next year right why don't you got a revised up your.
The new taker assumption I think type are saying at 10% finish it be too conservative.
Can you comment on their part.
It's not about time to a.
Changes not pocket I will say still 5% to 10%, but is in that upper side, Okay. I can say alright. Thanks.
And I don't know a cheap on these are kept going in intensity question is about.
Payback period right because for me I have spoken a it up why youre structural profitability.
Ken or would be Mina, saying, where as you are kept telling and see increase so much right I mean in another way.
Can you just that comments about a payback period for your seven nanometer in fact now it investment if that are becoming longer going for.
I remember this topic was discussed last time and I think I'll answer it was that we don't look at payback period.
We do look at return on invested capital and from that part we don't see that makes a difference.
The advanced technologies.
Okay.
Thanks, and my next question is about the Ah Onez packaging I I remember you.
If you have its quarters you comment that the advanced packaging should outgrow the front end business.
So first of all your thesis remains to the same trend and also.
How about the potential margin dilution found a packaging basis.
Oh.
The full cost advanced packaging BGB the glossy so the growth rate is still boxes in.
Silicon.
So of course with wafers revenues of course with he stays the same okay steel that statements still body.
The gross margin that's another.
And she the ratio the cost marching up to pick in Btds naturally east that door today your goal again the wafer mochi.
And but we do get is queasy. So it's a good business to a to go at Nok.
To that because one.
We really want to support all customer to improve gets hit some performance. So we have to do it because of a catch him. He is only one company right now can support a customers a revised packaging secondly, actually so the kept asking tasty I'll get back in.
That's a advanced packaging basically it's motor and so the.
Instead of Penalver is better so put all you ought to get a wish you assume Keith avoid could speak English to put shoe.
And then that's one yeah. This is quick one maybe for CFO because you revised have your capex right. So what is the free cash flow.
Trends in coming quarters, I guess, we want to know potential the next at putting show quarterly dividend hike what would be the timing.
Let me just answer by saying that we will now go or no.
The dividends quarter on quarter basis.
So that's the work at least the same when not if not more compared to previous quarter or compared to previous year.
How about the pace I mean, the free cash flow.
Protection do you have a their number for coming quarters.
Uh huh.
Yes, we do.
I don't think that really matters to your question.
Okay. Thanks, if I may I would like to every mine Charlie that's today all our shareholders are getting the two dollar I appreciate it again today going into their bank account and we have already announced that the next quarter. When a dividend is going to be to city. So it has already cannot.
Next question will be coming from go Goldman Sachs Booth Luke.
Can I ask what is your fiveg penetration forecasts about six months ago.
Psyche furniture flashy smartphone penetration for past six months ago six months ago, we don't seem to Fiveg smartphone Lucky and you should be a month for this year.
And so you know I mean, six month ago, what's your forecast for fighting smartphone shipment in 2000 pounds.
Oh.
Single digit.
So basically the increase from single digit too.
Yes for the past six yeah can you tell us whats the rooms read a visionary behind your your you want your changes because for the past six month, we still have a lot of come simplifying smartphone such as you know.
If they say the specs not finalized a cost structure, it's getting a lot higher global telcos. They are not as aggressive so came to pick a piece of one single digit two meetings, which is a big change.
It's a big change and the oil Casey so quickly in S.A. or those kind of FFO quite T cell based agents at least operation.
We will we our customer answer to you. We recently again and that they also have your own cost more to consider.
So some of the area in the award.
Hey, accelerator to Fiveg deployment.
And that's why it resolved as compared to say six months ago.
We do not see this momentum.
Again, a in these shifts when is that the momentums compete or equal.
So that's why we I cannot give you the space if that number, okay, which country, which region, but we did see the momentum repeatable and now our estimate it's almost doubled.
The.
The consent steel is still there from a lot of best to such effort and they say or say because you know he is still cannot see the clear indications at in those days from the telcos way. So that's why we as opposed to try to see just kinda them you know meaningful attendees.
Yeah, I have no way to come in on the carrier how do you think about the these kind of fiveg deployment.
But.
Yeah. They are moving ahead.
And go for the five key applications.
Especially with some of the big countries.
Why we see.
Okay. My next question is that we always we management to come in about one of five let's see material.
No.
Among others.
But moving forward you a tough to customer.
In my accounted for 30, 40% of if this is a policeman and they might account for 70, 80% of the best geometry.
And they don't really reported the inventory anyway, so how can do give us something.
You know some other indicators for us to two to charge the industry growth or just the inventory level for the industry.
Just for the industry level, we the progress companies still what locked up big factor that we consider.
As for my customary actually for TSMC is the most importantly.
We really want with our customer closer.
So I'm not going to give you that a good number or buy it might be customers' inventory, but we won't with.
Do you believe me we.
Worry CRO really worked together so we do this and that there'd be a strategy I think the inventory that's why that's what I wanted you well, let me give us. Some you know we cannot to tell my investor that we'd have to tough kids, a Z, even though I'd say that all the time, but I do feel sophisticated [laughter] Aldo.
Thank you.
All right I think.
This is probably the right time that we go to the line.
For questions I think there are quite a few analysts waiting on the line for for questions. So operator could you. Please go to the first person on the line. Thank you.
Yes, we have.
A question from Brett Simpson from Arete Research. Please ask your question.
Yeah, Thanks very much.
I had a question really on on China.
In the last couple of years, we've seen.
Double.
I guess.
It's pretty clear you're going to.
Hello.
Points.
Yeah.
So.
Talk about it.
Pardon.
Over the next one or two years and then I guess from a planning perspective are you concerned that the rise of.
Your China business.
Sacrifice of other customers, particularly.
Thanks.
But to your question is with respect to the business. We do rise from China. If you have observed that our business has doubled in the last couple of years.
From from China, and you like to see the outlook for our business in China in the next month or two years and also the strong growth coming from China, whether it is coming at the expense.
Our other customers in other regions.
Well, we did she is a strong cores, what we try not because that's a brief deep.
Mark pick.
Especially in the semiconductor area and the we're happy to heat up growth and a TSMC. So operating the most speaking.
Edge technology to support our customers in China.
And so.
To be it yet.
I always thought the China market.
At the expense of other customer the installation no because a we support all the customer we saw our strength in our capacity.
Okay.
Maybe just a follow up on five millimeters, specifically I guess.
Maybe you can talk about whether you think.
Five nanometer similar to prior nodes.
How should we think about.
Ron Paul.
Yes.
And.
Hi, Thanks increase.
You want to quantify.
Inconsistent.
Talk long.
Your capital intensity.
Would be around.
As a percentage.
My you're stepping up your capital intensity.
<unk>.
But you're not changing.
Can you perhaps explain.
Okay.
So first part of the question is with respect to five nanometer then whether they ran profound next year will be similar to our prior notes ramp profile. The second question and it's related to the substantially increasing the capex on because in the past TSMC has indeed set back.
We could have.
10 to 12 billion dollar capex to support a 5% to 10% Cagar now our Capex is substantially higher and then they tend to talk about and therefore, it does that mean that it's going to support a much quicker onto any growth.
Well, let me answer the first question for ASCO, two five nanometers that ramp for next year.
So to be I've come to always at six months ago. We are right now you some more aggressive in more optimistic about it.
And the whole 40, because a we spend a bit mommy hopefully that you are rent Bob motz intent, so revenue up the must faster than seven nanometer.
In next January we're going to talk about or more.
And so that's also is the second question without which then we increased the kids is quite a lot of course, probably 10 to 11, beating to Apollo 14 to quicken bidding.
With that money, we spend to bite of tours to prepare everything we do expect that our course T cell walk Gopi young 5% to 10%, but right now we're not ready to change that the don't five years a pocket yet.
However, we are working on that.
Thank you very much.
I appreciate Pease go to the next caller on the line. Thank you.
Yes. Your next question comes from the line of Mehdi Hosseini from <unk>. Please ask your question.
Yes. Thank you for that we shouldn't see to ask a question a couple of follow ups. When you make a reference to fiveg, how should we think about opportunities from the networking specifically basis station.
Thanks for the detailed color on the smartphone units you expect mid teens presented.
Penetration, but how did you quantify.
Trying to tease from the networking specifically basis station and I have a couple of follow ups.
So maybe your question is that although we have talked about psyche smartphone unit.
Our next year, but you would like for management to talk about Fiveg base station.
Business next year, yes.
Actually the networking is a fundamental was a fiveg so you've lost structural and because of Ah you just short of where event. So that you can expect about.
The base station, what the much more again Fourg base station.
On the A. or what you wind up for the in their faith imprint month. So we said the networking.
Processa work be much higher the opportunity was.
Well, let you could increase.
For the executive wasn't number we don't have a accurate number but right now.
It's okay included in the H.P.C. category.
Yes.
Okay.
I asked this question is let's say.
Yes, your customers are building.
Hey, Fiveg smartphone.
Put charities and networking actually so upset any downside risk.
Excess inventory build on the smartphone.
And I think maybe you're asking and.
[laughter], whether or not they increasing demand in the networking side will offset the higher inventory or the inventory correction on the smartphone fat and your question.
Yes, if there is.
Inventory.
I'm trying to better understand how networking could offset any risk of inventory built.
I do not catch what do you say the relationship between the networking or the base stations are set up we thought though.
Fiveg smartphones the inventory.
Sure.
Let me clarify.
Mm one of the concern among investment community is and yes. There is a very strong plan for the fiveg smartphone, but dividends scares disciplines are too expensive and.
Perhaps due to risks that your customers.
Okay.
Yes.
In that context.
Opportunities on the networking side.
As you know.
TSMC.
Alleviate.
Downside risk.
From.
Excess inventory on the phone so I see okay. Let me repeat your questions do sales outside of my customer I'm, making this microphone quite a lot.
Large number.
The base station or then working did not catch up is up the smartphone going to be inventory.
There is no.
Because of.
The Fiveg Piquet you walked the.
Implemented.
And you Boto Fiveg sabbatical his skill can use a fourg so functionality by the way.
So you won't be as kind of like inventory I'd say you mention about it.
Paul why did you just not even now quite Tees up base station.
So like I said, what are you, saying it.
If that you don't have to worry too much about fiveg smartphone inventory, because ah they'll be sufficient demand to take up those on those products.
Yes. Thank you I know just quick follow up in the past you have talked about advanced packaging accounting for high single digit overall revenue in 2019, and then mix would go into the teams aimed at next decade are those targets remain intact.
Yeah.
Advance packaging used to account for a.
Hi single digit per cent of kids and she's revenue like these question is what that continue to increase to maybe high teams of kids and she's remedy lock on who you increase but it's not a highly.
You know the highest you can go digit but the cost way pizza.
They are getting the silicon wafer supports rate.
Okay. Thank you.
It's it's.
Currency.
Should we be concerned or maybe some of these.
<unk>.
<unk>.
And she craft fairs pretty stable and <unk>.
Downside risk.
<unk>.
Alright, you're talking about <unk>.
We did it sees.
Oh, he's prices increase the starting from D.C. or a deal now. However, then we have stayed at P.S.M. he's a poverty insanity.
I support.
Ah cryptocurrency mining sub D.V., we thought <unk> capacity.
That's all we fit.
Well, they're not going to.
Even more tape x. for that.
Great time, so much for us in the questions.
Thank you outrage or it could you. Please go to the next color on the line. Thank you.
You're in next question comes from the line of sang Huh.
From <unk> these asking a question.
Huh.
Yeah, Hey, thank you for the opportunity I just wondered ones then a given that he's been doing up instead of happening in Hong Kong.
And the elections that they're heading in 31 next <unk>.
Do do you see that you might have to revisit but kept picks plan.
Given the trade wars I mean does the deal betrayed was at increasing.
You think about the trade war between the two countries is that going to affect the TSMC Capex plan.
We yes in terms of cable.
Yes.
In terms of Hong Kong situation or what you think about it.
Let me say again can see viewed capacity working closely with customers to meet customers' demand and our own Jasmine.
We did not put that can help.
Great tension.
In the award.
Into consideration, although we think.
Any trade page in more trade war between any countries, while I have a negative impact to the semiconductor industry.
Right right I mean I.
I mean.
Yes, so hypothetically if we were to assume that in the election that comes in and potentially election in January .
If things were to go towards the party that's a more favorable one state kind of things would that have a.
Incremental impact in terms of how the trade wars seems from TSMC perspective.
No we don't see so even we have generally action in the next January is out of Wong effect that place and he's a strategy.
No because of all we can we.
We do the pcvs according to the demand according to the market situation and have Brito impacted the from the politics.
In Taiwan.
Okay great.
And finally.
Yes, yes, rolodex 10 years or that was helpful and no. One would think so in terms of the filing a capex that we have been talking about.
So.
There have been a on the high speed.
This is segment.
No there have been delays in terms of the chips at the next no coming through from your large customer.
When you when you see that you know fiber rollout will be pretty strong and also they specified seats will pick up strongly is there any indication from your customers that you know the the launch on the on the next node is going to be pretty soon.
What gives us a a the visibility here.
Yes.
Uh huh.
Let me try to see if I understand your question you are asking us about the visibility if our customers demand for our next node technology, how much visibility we have with respect to seem to generic content.
The next node you on rate.
You are mentioning about five nanometer industry nanometer.
Five nanometer for now.
Let's say five nanometer.
Charging form we increased the capex for the by the end of it or you know our publishing and you know our forecast under five nanometers RPG.
So Iraqi crude and I cannot tell you how many patients each more but I.
I think the by nanometer Jason equal to do a very good job income to have a high market share.
Great. Thanks, a lot so.
Thank you.
Let's move to the next caller on the line.
Your next question comes from the line if she June from S&P Global Please ask your question.
Hi, Thank you for taking my questions I just have a brief questions.
On the China.
I know a issue.
I was wondering is there any change in the members of Chinese clients in recent years, especially in this years.
And if it's possible that we can get a certain number of the Chinese customers for the percentage of the Chinese customers at the total clients. Thank you.
Yes.
Yes.
The number of customers in China actually it's more than 100.
So it changes all.
Some of them changes all the time of course, there are some bigger Washington smaller ones.
I'm not sure if this is.
Your question.
Oh, yes, sure just is there any change if this number in this years.
The number of customers generally increases.
As increases in May we know the portion of the Chinese customers in terms of your overall customers or the percentage.
Oh, you mean, the revenue a number of customers.
Well the number of customers.
Oh, we have.
Over 400 active customers globally.
And if you look at the China is somewhere over 100 that that gives you an idea.
It does that answer your question.
Yes, yes, Chris Thanks very helpful.
Yeah, that's all my questions. Thanks.
Okay. Thank you.
Okay.
Do we have any questions on the floor. Okay. Let me come back [laughter] first of all I will have.
The question from TD goods role in relation.
Thank you Oh, that's a follow up the inventory are questioning whether they decide for you or your inventory I look at our in Threeq, you or your inventory label actually hitting a decreased to 97 bill there, even though we had a very strong revenue in threeq and the vet.
Update guidance in bulk you saw the wafer in profit at in the.
Sure in Queens, However, overall inventory decreased a lot, but the them into our Asia could and also you have all material like a wafer.
The increase a lot.
And Youre right actually their media.
You suppose that the process actually in Las Vegas, although inventory should increase Bobby degrees in it because of.
Some of the waiver we walk we saw our customers at the beginning of this year.
We are we put useighty in early stage to make sure that we we own helper away from volatility at year end over this year and then we shipping out.
And so the inventory actually decrease quite a lot because of that.
Being finished good yes, okay, how about the for the wafer among the other.
Inventory the rollout of almost stages him because we prepare.
Our capabilities a BDC Greig you so actually the role wafer we are required a lot of a month in preparation for the could easily so he stays at him in terms of percentage in terms of pay I'm, sorry, okay and for that very upbeat although net.
Yes, probably seven nanometer and phenomena are with the jury off with a wafers are passionate yeah you bet.
Thank you [laughter] okay.
And the pin questions that you announced that you'll be too as has been reached up absolute maturity, but how about on the infrastructure means about other component like.
Photo resist pedicle Potomac or even for these inspection to our chemical and the material. So yes, we are going to have very that's spread by nominated because of its transplant on customer today.
And if I take the bodies that you'll be infrastructure or potentially a risk. So while we did not see any gating item or the you bought structure and surety agencies or we are prepared we have.
We will produce our own petticoat, we have a large number of.
Masking capacity.
And.
And everything so you wouldn't bottle receive those kind of chemotherapy taking into account. So we are ready for the actually writing a high volume production for the you we become coffee technology for next year, you are even higher volume and I can assure you that we are all peafiel.
Next coming next question would be coming from credit Suisse Randy Abrams.
Okay. Thank you I want to ask if you kind of tended to be on utilization still below 90%.
So to get to 50, you need to get utilization up.
Could you talk about the 28 nerd our prospects how you see that and then also.
16, and 12 somebody applications like we move on some of the mobile and graphics. So your view on utilization backfill to hold our Pat technology node.
To answer that question on 28 nanometers. This technology node right now I believe in the industry overcapacity.
And so the ratios will not have to kick him. He's our expectation. So we prepare a lot of rebooked you technology specialty technology that we see that.
And the we expect.
Two years later will now be toward the.
Again in the heightened currently but not a day it takes time to walk with a customer and to utilize the capacity.
For 60 million 12 node pertain to us youre in a very healthy.
Currently issue.
We are prepared and you.
Our competitor.
Is continue to increase the capacity just like a 28 nanometers node. We expect a couple of years later on he knows our view of the overcapacity again, so right now we are prepared or the specialty technology that are aspect.
Even some of the.
I ask you or or something like that so you won't happen to TSMC.
Okay second question just ask about the segment revenue.
I think into third quarter mobile HP fewer whos going to be strong.
The HPC was was good.
I think quite as strong.
So I'm curious just in that mix, maybe factors for HPC I'm in an Iraqi was quite strong I'm. So maybe some of the things you're seeing in that.
If you <unk> and to give an outlook for fourth quarter by segment.
Yes.
Yes.
Fourth quarter of course, the every settlement Lisa increase the S.P.T. Hcl continues to allow the or.
People market sentiment that include Dean.
And worker processing.
Including.
Do you include you accelerator and even coating order cryptocurrency mining.
And as we've said that he will grow.
Significantly the fourth quarter.
Could you give the other segments I guess you all other secondly, any any lagging in any picking up somewhere.
Let me give you a [laughter] okay. Now LT just this quarter are the third quarter LT increased quite a bit so in the fourth quarter, probably won't be theyve, all four or five degrees.
While our or other settlement or continued core.
Great. Thank you.
Next question will become founding B.S. deal do.
Hi, Thank you.
If you look at the foundry industry historically.
What we typically see is a big no followed by a smaller though right and now essentially what you're saying is a big seven in a big five.
Can you maybe just discussed what you're seeing that is a different now versus before clearly TSMC is addressing new markets.
I think the demand.
Drivers are different now versus before but I'm curious as to what you're seeing that is different now.
You mentioned, yes.
These and then followed by a small no.
I don't really category, we but let me say that TSMC introduce a switching now.
Nanometer in Gentwo and then can in mid 75 noted talk about a seven and why.
We are.
We are looking at the new market in the five key because the fight T cell requirement under speed and the power consumption reduction is quite.
Quite a lot is now to the fan experience area, we have before.
And so that after the seven nanometer all the customer ask us to develop the technology to meet their requirement was at a higher speed, nor how consumption. So you'd walk the of war note.
And offer.
Improvement is now to phase out a 10% improvement was equally now now that look at our seven nanometer we have a sale nanometer we apply and then we have.
Six nanometer.
The six nanometer being introduced as kind of core second wave product, but the de do with support Alco only that followed and marching ahead with about two years that cadence that we expect.
Next question will be coming from JP Morgan's gokul.
Thank you.
So if we compare.
I mean in expectations in the last month.
Would you characterize almost all of that market growth above the market rose by the VP or is there any meaningful change that in your market share expectation for them. If we just know thus far.
Well every six months ago, we are they kind of a conservative at a time.
Because of our seven nanometers, though.
It was how you see is quite low so we become conservative are genuinely six months or another few change remicade up first.
Fiveg is a momentum is larger than we expected.
The second one is we also at the same time because of our technology over to the customer we exit and our customers.
A 40 year.
And because of the performance again, we also have spent two new product portfolio and so now we do get the future we're more optimistic within six months ago much more.
Any any increase in market share I do expect compared to the comes back I cannot comment on that but you're right you up increase the right. If you ask debt.
Me on the Brett.
A Muslim and fine.
Things around this time, one year or nine months, the core and seven ramp up you were talking about roughly I think.
The 200, a bounce on entering.
Could we talk about what does the breadth of number of customers a number of tape out on Inphi and how do you expect that to progress and I know that number of deposit not because the number of.
Our revenue from volume, but just wanted to understand the but at the customer base well, let me say that tape out is one thing that see that how popular each piece, but the more important east.
Hi volumes up products have tape out and right now we have many high volume products that tape out.
And the up.
It's been reason why we increase our capex.
Hi volume and also in addition to smartphones the out more market segment that we enter it at hand.
Okay, just one quick follow up.
If you think about end seven family and seven insulin, but and stake.
This is your expectation that pretty much most of the seven current customer will eventually end up using and stake and play well most of your capacity eventually be he will be enabled our and seven as well or it will still be some view we.
Still using the current enter we still expect to some huge into you we and the.
Some of the still stay in the end seven because for those customer in the in seven one game in the two years cadence as they move to end five already so they have no reason to compare to user and ship. However, as I said for the second wave of the product the using any six with a banner free to offer.
At all by cost and better performance.
You should expect eventually majority will be and yes.
Our next crop follow up question will be coming from Morgan Stanley Charlie Chan.
Thank you. So first of all I want to follow for other people Bill's question or the future.
Technology.
If you mentioned that there are not the benefit from power consumption from performers from five nanometer et cetera, So how about the.
Purchases are caught I remember some of customers talking about.
They don't see the energy from the chances are cost saving going forward and I do think that is.
True statement.
I still believe the low twentys this causes to prejean.
Because of our right now geometries monitoring smaller also for TSMC, we more pay attention to customer need.
Right because of what we need to speed, we get can speech in either how low oftentimes you can grow our consumption.
But I don't think is always the one that we are moving into the next year ratios.
Technology.
Per transistor wise I cannot do that really detailed calculation, but as you think that put tranches of course is low okay.
Thanks, and you also mentioned that.
For those and new Tapeout actually following me Seth is quite quite big connecting TETRAS in Ottawa, meaning those are smaller customers they cannot really afford.
There was a future take hodge unless they have a very big volume we set a.
Right thinking now really I mean that depend on VR product.
Your last question about the tranches of course, they give you some kind of a page.
We improved the.
Lots of potentially by 18%, but I did not chatter my customer BG pushing more so you know that's precisely grower and again in a market I always say that a product to be successful.
He is more important again, you really calculate this.
Improvement on this caused that core product has to be competitive in the market.
And so that people.
The price that the diesel.
Okay, so not a small customer cannot afford it actually some of the small customer we are working on this GPU.
Comfortable performance they need a very high performance technology.
They are working with TSMC.
The next season.
Well the ISO over the past three years.
There were some oh kind of challenged in cancer power throughput helico et cetera. So so now do you see any kind of new aegis, New challenge for you V or not long after like approved.
Okay. It TSMC you be Southgobi technology is now in the core bashing stage, but are we happy with it not yet we are still improving the availability.
We have a output power of 250 watts. We expected now we can operate the tool with a 250 watts consistently.
However, this deal obviously that we need to improve so that we can improve the throughput we can improve the availability. So he can reduce the cost.
Continue to improve.
So in the interest of time, we'll just have to last question and would be coming from C.L.S. Ace Sebastian Huh.
Thank you.
Overall this morning on view the overnight as abilities to talk about the supply constraint.
On the you the tool will you be tool.
So it looks like guidance.
Your next decision from next year really unit growth businesses to be player.
Amazing either so I wonder what would that impact efficiencies.
And we secure what do you need for this falls into 15 billion Capex. This year next year. They so yes, we secure whatever we need what we say is immuno very closely and we.
We are.
Well ordering all the towards how do we need.
In the supply constraints that someone else.
Well I don't want to come in and that [laughter].
My second question on the.
Correct.
This year in next year and.
When we really think itself.
28 nanometer also so very strong demand if you could give a capacity.
But then core years later enters into the Overutilization overcapacity, although there are some back results because of the competition lasers catching up how do you see this risk going forward or seven five and have you considered whether there will be sure.
Only in the second wave three ways the demand to backfill capacity when your current customers migrating to three or two order. It is three years from now.
To answer your second question Force, we do have a company is that a lot of.
Both our welfare up a kick him. He's a capacity now few years later, if you compare with a 28 nanometer to seven to fly he's done a good comparison.
As of now when and why we say you we that technology barrier is much much much higher than you can expect a form the high K metal gate.
And so they want.
Anyway, I don't want to come in on my competitor.
Just last one plus one problem as one of the.
We look at how that there are defined by the company has been around like.
And Tim Bill and the Capex plus minus one to 2 billion for a few is right now if we go back and look at in 2010, when we walk of the downturn in 2009 and also when there's a huge the other cabot's front, you've got a tendency doesn't feel like a 10, and then we may or whatever.
Yes, I do the go to Europe for TSMC for couple of years. So now we have noticed that are out of the semi downturn output bonds.
Do you think you.
Similar similarity narrow brings to them and when you make the also have a decision.
I know what you ask but let me say that isn't getting smarter.
[laughter] everything.
And there.
By the way that technology pay rates much higher again, I can't much hard and 28 nanometer. So we have a company that the capacity would view is up CRO. The if it's a it's a result, we closed very walk with our customer.
And.
So we are we decide to increase the capacity at this time, we saw a lot of.
The deal analysis.
And I I, certainly I have a company does that won't repeat the same kind of everywhere that we did.
Nothing error I will say that there was a very.
Right and bold decision careful attention to gold in hand.
In 2010, Yeah, I'm, sorry, I'm sorry, yeah. Those are the 28 nanometers the for the year very good yes. So I was asking whether we could see another you were going we are that's all you say that before of course.
Got you aspect.
Thank you.
Yeah.
Well before we conclude our components of ladies and gentlemen.
I would like to announce.
That important news that the beautiful rate the right suddenly you did uppers and decide to retire from the company at the end of this year.
As you all know Elizabeth has been with TSMC has a head of Investor relations for 17 years.
70, that's a long time.
She is also the head of our.
Public relations foot for 10 years.
And.
Well the beautiful idea in core in the property say the fleet of kitchen key.
Yes, MCC beautiful so.
You have I our role you did about has won numerous awards.
And the recognition.
I was award now you asked I are the best the IR officer, nothing pay one in Asia and into war.
So a video view, helping in frequent Cantera whisker IP deal.
So you know that she's a brilliant.
And the enthusiastic and energetic lately.
And you can definitely shape, how much she loves it.
TSMC.
In last many years here to view the Warcraft IR team and deeper have successfully accomplished and successor, who is sitting right here.
I'm behalf of TSMC.
I would like to send curve or or or vacation and the contribution to the company success and wish for the past four core retirement and already have gentleman, let's ask.
It is a was to give us a few wars.
[noise]. Thank you and thank you very much seifi.
I'm very privileged.
To have being able to work for TSMC in their last.
Almost 17 years.
Under the leadership of our founder Dr. Morris Chang.
And the current management team.
I have to witness.
How this company is able to move.
Sense to strength.
And still remains to two its mission and if that is.
I have been blessed with the opportunity.
2% this company that I deeply admire.
Infinite investment community and the Pratt.
I have enjoyed every minute of it.
And I hope I have served the company well.
With all my heart.
To the investors.
Analyst and to the press.
Want to thank you for your friendship and truck.
I very much enjoy our interactions communications and discussions in the past.
And I do hope you extend your put well to mine IR successor, Jess too.
Who has been watching closely with me in the last four years and many of you are already Camellia, let's caf.
I have had the most wonderful exciting and rewarding tiny my career at TSMC.
I'm, leaving the company at a time when its future it's brighter than ever.
And I'm confident.
That you will continue to do you like handsome returns.
From owning our share.
So with that let me wish you good fortune and good health and we will conclude today's conference.
[noise] [noise]. Thank you.
Oh.
[noise].