Taiwan Semiconductor Manufacturing Company Ltd.

Ladies and gentlemen, everyone is safe. I am Su Zhikai, the legal officer of Taichi store. Welcome to the first legal explanation meeting of Taichi company in 2020. In order to prevent the spread of COVID-19 epidemic, this legal explanation meeting will be rescheduled. Because this law will be broadcasted to global investors at the same time, we will use English all the time. Please forgive us. Ladies and gentlemen, welcome to TSMC's first quarter 2020 earnings conference call. This is Jeff Su, TSMC's Director of Investor Relations and your host for today. To prevent the spread of COVID-19, TSMC is hosting our earnings conference call via live audio webcast through the company's website at www.tsmc.com, where you can also download the earnings release materials. If you are joining us through the conference call, your dial-in lines are in listen-only mode. The format for today's event will be as follows. First, TSMC's Chairman, Dr. Mark Liu, will provide the opening remarks. Next, TSMC's Vice President and CFO, Mr. Wendell Huang, will summarize our operations in the first quarter 2020, followed by our guidance for the second quarter 2020. Afterwards, Mr. Huang and TSMC CEO, Dr. C.C. Wei, will jointly provide the company's key messages. Then Dr. Liu will host a Q&A session where all three executives will entertain your questions. As usual, I would like to remind everybody that today's discussions may contain forward-looking statements that are subject to significant risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements. please refer to the safe harbor notice that appears on our press release. And now, I would like to turn the call over to TSMC's Chairman, Dr. Mark Liu, for his opening remarks.

Good afternoon, everyone. My name is Mark Liu here. Before we start our financial report, I want to take a moment to thank each of you for joining us online today. To many of you from different parts of the world, in this very time of devastating pandemic, our thoughts and hearts are with you. TSNC so far safeguarded our global operations successfully, but we do not take it for granted. We will continue our utmost effort to weather this storm, and we are in this together. In the meantime, I want to send our best wishes to you and your families for staying safe and healthy. So now let me turn the microphone over to Wendell for the summary of operations and current quarterly guidance.

Thank you, Mark. Good afternoon, everyone. My presentation will start with the financial highlights for the first quarter followed by the guidance for the current quarter. First quarter revenue in NT decreased 2.1% sequentially, which is less than seasonality due to the increase in HPC-related demand and the continued ramp of 5G smartphones. Growth margin increased 1.6 percentage points sequentially to 51.8%, thanks to higher level of utilization, which was partially offset by an unfavorable exchange rate. Total operating expenses decreased by 2.6 billion NT, mainly as 5 nanometer technology moved from R&D stage to mass production during the first quarter. Operating margin increased by 2.2 percentage points sequentially to 41.4%. Overall, our first quarter EPS was 4.51 NT and ROE was 28.4%. Now let's move on to the revenue by technology. 7 nanometer process technology contributed 35% of wafer revenue in the first quarter. 10 nanometer was 0.5% and 16 nanometer was 19%. Advanced technologies, which are defined as 16 nanometer and below, accounted for 55% of wafer revenue. Now, move on to the revenue contribution by platform. Smartphone decreased 9% quarter over quarter to account for 49% of our first quarter revenue. HPC increased 3% to account for 30%. IoT increased 8% to account for 9%. Automotive decreased 1% to account for 4%. Digital consumer electronics increased 44% to account for 5%. Moving on to balance sheet. We ended the first quarter with cash and marketable securities of $562 billion NT. On the liability side, current liabilities remain relatively flattish. On financial ratios, accounts receivable turnover days was 42 days. Days of inventory decreased 2 days to 53 days with higher wafer shipment in the quarter. Now, let me make a few comments on cash flow and CAPAC. During the first quarter, we generated about 203 billion NT in cash from operations, spent 193 billion in KPACs, and distributed 65 billion NT for second quarter 19 cash dividend. We also increased 20 billion NT in short-term loans mainly for hedging purposes. Overall, our cash balance decreased 25 billion to 431 billion NT at the end of the quarter. In U.S. dollar terms, our first quarter capital expenditures reached 6.4 billion U.S. I have finished my financial summary. Now, let's turn to our second quarter guidance. Based on the current business outlook, we expect our second quarter revenue to be between 10.1 billion and 10.4 billion U.S. dollars, which represent a 0.6% sequential decrease at the midpoint. Based on the exchange rate assumption of $1 to 30 NP, gross margin is expected to be between 50 and 52%, operating margin between 39 and 41%. Now I will hand over the call to CC for his key message.