TSMC Pledges Prudence as It Pursues $165 Billion US Expansion

Key Concepts

• CapEx (Capital Expenditure): Investments in fixed assets for future business opportunities.
• Macro Uncertainties: External economic factors, particularly tariff policies, that can affect business planning.
• Tariff Impact: The effect of tariffs on end markets and, indirectly, on the company's business.
• Conservative Estimates: A cautious approach to forecasting, factoring in potential risks and uncertainties.
• Sequential Decline: A decrease in sales or other metrics from one quarter to the next.
• US Expansion: Setting up operations in the US market and the associated challenges.

CapEx Investment Strategy

• Future-Oriented Investment: The company views CapEx as an investment in future business opportunities and is willing to invest as long as these opportunities exist.
• Mindful of Macro Uncertainties: The company acknowledges the presence of macro uncertainties, especially related to tariff policies, and is being prudent in planning CapEx.
• Sustainable Spending: While a significant drop in CapEx is unlikely, the company is mindful of the external environment.
• Growth Forecast: The company had lifted the full-year growth forecast to 30%, exceeding that in the first half.

Tariff Risk and Impact

• Indirect Impact: Tariffs are not expected to directly impact the company as an exporter, but they can affect end markets and, consequently, the company's business.
• Demand Drop: The primary concern is that tariffs could lead to a drop in market demand, which would ultimately affect the company.
• Conservative Assumptions: The company has factored in certain assumptions regarding the potential impact of tariffs, but prefers not to disclose the specific details.
• US Import Tariffs: The company acknowledges the potential impact of import tariffs on tools and materials used in its US operations.

Fourth Quarter Outlook

• Conservative Forecast: The current forecast for the fourth quarter is described as "a lot conservative," suggesting a cautious outlook.
• Potential Decline: Bloomberg Intelligence suggests a potential 10% sequential decline in sales in the fourth quarter, based on calculations.
• Business Opportunities: The company maintains that it will be able to capture business opportunities if they arise.

US Expansion Challenges and Support

• Challenges for Taiwanese Companies: Setting up operations in the US presents challenges such as cultural differences and higher costs.
• TSMC's Assistance: The company understands the challenges faced by suppliers considering moving operations to the US and is working to address them.
• Government Advocacy: The company is bringing these challenges to the attention of the government, particularly regarding permits, applications, and human resources availability.
• Permits and Human Resources: The company is urging the government to solve issues related to permits, applications, and human resources availability for suppliers.

Notable Quotes

• "In the CapEx invested in any given year is for the future of business opportunities. So as long as there are future business opportunities, we will not hesitate to invest."
• "We are mindful about the macro uncertainties these days, primarily related to the tariff policies. So we are being prudent in planning our CapEx."
• "Basically tariffs is not will not directly impact us, but it will impact the end markets. So if the markets demand drops and ultimately it will affect us."
• "The current forecast with a lot of a conservative estimate."

Synthesis/Conclusion

The company is committed to investing in future business opportunities through CapEx, but is also carefully monitoring macro uncertainties, particularly tariff policies. While tariffs are not expected to directly impact the company, they could affect end markets and demand. The company is taking a conservative approach to forecasting, especially for the fourth quarter, and is working to support its suppliers in navigating the challenges of setting up operations in the US. The company is actively engaging with the government to address issues related to permits, applications, and human resources availability for suppliers.