台積電 ADR (TSM) 2016 Q1 法說會逐字稿

(Spoken in Mandarin). Welcome to TSMC's first-quarter 2016 earnings conference and conference call. This is Elizabeth Sun, TSMC's Director of Corporate Communications and your host for today.

（用國語講）。歡迎參加台積電2016年第一季財報發表會及電話會議。我是台積電企業傳播總監伊莉莎白·孫，也是今天的主持人。

Today's event is webcast live through TSMC's website at www.tsmc.com. If you are joining us via the conference call, your dial-in lines are in listen-only mode. As this conference is being viewed by investors around the world, we will conduct this event in English only.

今天的活動透過台積電網站 www.tsmc.com 進行網路直播。如果您透過電話會議加入我們，您的撥入線路將處於只聽模式。由於本次會議將受到全球投資者的關注，因此我們將僅以英語進行此活動。

The format for today's event will be as follows. First, TSMC's Senior Vice President and CFO, Ms. Lora Ho, will summarize our operations in the first quarter of 2016, followed by our guidance for the second quarter. Afterwards, Ms. Ho, and TSMC's two Co-CEOs, Dr. Mark Liu and Dr. C.C. Wei will jointly provide our key messages. Then we will open both the floor and the line for Q&A.

今天的活動形式如下。首先，台積電資深副總裁兼財務長何麗華女士將總結我們2016年第一季的營運狀況，隨後介紹我們對第二季的展望。隨後，何女士與台積電兩位聯席執行長劉德華博士和陳建昌博士共同出席了開幕典禮。魏先生將與我們共同傳達重要訊息。然後我們將開放現場提問和熱線問答。

For those participants on the call, if you do not yet have a copy of the press release, you may download it from TSMC's website at www.tsmc.com. Please also download the summary slides in relation to today's earnings conference presentation.

對於電話會議的參與者，如果您還沒有新聞稿的副本，您可以從台積電網站 www.tsmc.com 下載。請同時下載與今天的收益會議簡報相關的摘要投影片。

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.

像往常一樣，我想提醒大家，今天的討論可能包含前瞻性陳述，這些陳述受重大風險和不確定性的影響，可能導致實際結果與前瞻性陳述中的結果有重大差異。請參閱我們新聞稿中的安全港通知。

And now I would like to turn the podium to TSMC's CFO, Ms. Lora Ho, for the summary of operations and current quarter guidance.

現在，我想請台積電財務長 Lora Ho 女士總結營運情況並指導本季業績。

Thank you, Elizabeth. Good afternoon, everyone. Thank you for joining us today. My presentation will start from financial highlights for the first quarter, followed by the guidance for the second quarter.

謝謝你，伊麗莎白。大家下午好。感謝您今天加入我們。我的演講將從第一季的財務亮點開始，然後是第二季的指導。

First-quarter revenue came out slightly better than we have expected. Although the February 6 earthquake caused some delay in wafer shipments in the first quarter, we saw business upside resulting from demand increases in mid and low-end smartphone segment and customers inventory restocking. Therefore our first-quarter revenue was essentially flat from the fourth quarter last year compared to about 2% decline we guided three months ago.

第一季的營收略好於我們的預期。雖然2月6日地震導致第一季晶圓出貨量有所延遲，但由於中低階智慧型手機市場需求增加以及客戶庫存補充，我們看到業務回升。因此，我們的第一季營收與去年第四季基本持平，而三個月前我們預計將下降約 2%。

Our first-quarter gross margin was 44.9% and operating margin was [34.6%].(corrected by company after the call) Both are 3.7 percentage points lower than fourth quarter last year due to lower utilization and the negative impact from the earthquake, which I will provide more detail later. Overall our first-quarter EPS was $2.50.

我們第一季的毛利率為 44.9%，營業利潤率為 34.6%（電話會議後公司進行了更正）。由於利用率較低以及地震帶來的負面影響，兩者均比去年第四季下降了 3.7 個百分點，稍後我將提供更多詳細資訊。總體而言，我們第一季的每股收益為 2.50 美元。

Now let's take a look at revenue contributed by application. During the first quarter, communication and consumer increased 4% and 15% respectively, while computer and industrial/standard decreased 7% and 9% respectively.

現在我們來看看應用程式貢獻的收入。第一季度，通訊和消費分別成長4%和15%，而電腦和工業/標準分別下降7%和9%。

Now let's take a look at revenue by technology. 16- and 20-nanometer contributed 23% of our total wafer revenue in the first quarter. In addition, 28-nanometer saw a nice rebound in demand and contributed 30% of our total wafer revenue. Together, these three advanced technologies accounted for 53% of total wafer revenue.

現在讓我們來看看按技術劃分的收入。16 奈米和 20 奈米晶圓在第一季貢獻了我們總晶圓收入的 23%。此外，28奈米需求出現良好反彈，貢獻了我們晶圓總收入的30%。這三項先進技術合計佔晶圓總收入的53%。

Now moving into the balance sheet. We ended the first quarter with cash and marketable securities of TWD648b, an increase of TWD62b. On the liability side, current liabilities increased TWD24b. The increase included the reclassification of TWD10b bonds payable from long-term to current. During the year of 2011 and 2013, TSMC issued corporate bonds totaling TWD211b to support the capital expenditure. These bonds will gradually become due starting from this current quarter.

現在進入資產負債表。第一季末，我們的現金和有價證券總額為 6,480 億新台幣，增加了 620 億新台幣。負債方面，流動負債增加240億新台幣。此次增加包括將100億新台幣的應付債券從長期債券重新分類為流動債券。2011年及2013年，台積電共發行2,110億新台幣的公司債，以支持資本支出。這些債券將從本季開始逐步到期。

On financial ratios, accounts receivable turnover days remained at 41 days. Days of inventory decreased by 8 days to 54 days, reflecting more shipments from finished wafers and earthquake impact.

財務比率方面，應收帳款週轉天數維持在41天。庫存天數減少8天至54天，反映成品晶圓出貨量增加及地震影響。

Now let me make a few comments on cash flow and CapEx. During the first quarter we generated about TWD122b cash from operations and spent TWD38b in capital expenditure. As a result, we generated free cash flow of TWD83b this quarter. And overall cash balance increased TWD55b to reach TWD618b at the end of the first quarter.

現在，讓我對現金流和資本支出發表一些評論。第一季度，我們從營運中產生了約 1,220 億新台幣的現金，並花費了 380 億新台幣的資本支出。因此，本季我們產生了830億新台幣的自由現金流。第一季末，整體現金餘額增加了550億新台幣，達到6,180億新台幣。

I have finished my financial summary. Now let me turn to the second-quarter outlook. We expect our business in the second quarter will benefit from continued inventory restocking and the recovery of the delayed shipments from the earthquake. Based on our current business outlook and exchange rate assumptions of $1 to TWD32.30, we expect second-quarter revenue to be between TWD215b and TWD218b, which represents 6% to 7% sequential increase. Gross profit margin to be between 49% and 51%, and operating margin to be between 38.5% and 40.5%.

我已經完成了財務總結。現在讓我來談談第二季的展望。我們預計第二季的業務將受益於持續的庫存補充和地震導致的延遲發貨的恢復。根據我們目前的業務前景和 1 美元兌 32.30 新台幣的匯率假設，我們預計第二季度營收將在 2,150 億至 2,180 億新台幣之間，環比增長 6% 至 7%。毛利率在49%至51%之間，營業利益率介於38.5%至40.5%之間。

In the second quarter, we will begin -- we will again need to accrue the 10% tax on undistributed retained earnings. As a result, our quarterly tax rate will be about 24% in the second quarter. The tax rate will then fall back to 11% level in the third and fourth quarter. And the full-year tax rate will be about 14%.

在第二季度，我們將開始——我們將再次需要對未分配保留收益提列 10% 的稅。因此，我們第二季的季度稅率將在24%左右。稅率將在第三季和第四季回落至11%的水平。全年稅率約為14%。

Now let me give you some comments about the earthquake impact and this year's profitability and CapEx.

現在，讓我就地震的影響以及今年的獲利能力和資本支出發表一些評論。

On February 6 this year, an earthquake of 6.4 magnitude struck southern Taiwan and caused damages to certain parts of our tool in our manufacturing site in Tainan and disrupted production. As a result of wafer shipment delays, we have pushed out deliveries off about 90k 12-inch wafer from first quarter to second quarter. The financial impact of this earthquake to TSMC is as follows.

今年2月6日，台灣南部發生6.4級地震，造成我們台南生產基地的部分工具零件受損，生產中斷。由於晶圓出貨延遲，我們將約 9 萬片 12 吋晶圓的交付從第一季推遲到第二季。此次地震對台積電的財務影響如下。

First, it reduced our first-quarter revenue by about TWD7b and lowered first quarter growth margin by 2.2 percentage points. About 1.1-percentage-point reduction is due to the losses associated with the property damage and the wafer scrap net of insurance claims. Another 1.1 percentage point is contributed by the loss of productivity. The impact to our first-quarter operating margin is about 2.4 percentage points. And the negative impact to first-quarter operating income in dollars is about TWD7b.

首先，它導致我們第一季的營收減少了約70億新台幣，第一季的成長率降低了2.2個百分點。約 1.1 個百分點的減少是由於與財產損失和晶圓廢料相關的損失（扣除保險索賠）造成的。另外 1.1 個百分點是因為生產力損失造成的。這對我們第一季營業利潤率的影響約為2.4個百分點。對第一季營業收入的負面影響約為70億新台幣。

Wafer shipments that are delayed to second quarter will benefit our second-quarter revenue by about TWD7b and contributed positively to second-quarter gross margin by about 0.7 percentage point, to operating margin by about 0.9 percentage point. And the positive impact to second-quarter operating income in dollars is about TWD5b.

延後至第二季出貨的晶圓將為我們第二季帶來約70億新台幣的營收收益，並對第二季毛利率帶來約0.7個百分點的正面貢獻，對營業利潤率帶來約0.9個百分點的正面貢獻。對第二季營業收入的正面影響（以美元計算）約為50億新台幣。

On a full-year basis, overall impact from the earthquake reduces our gross profit and operating profit margin by about 0.2 percentage point each and reduces our 2016 operating income by TWD2b.

從全年來看，地震的整體影響導致我們的毛利和營業利潤率分別下降約0.2個百分點，並導致我們2016年營業收入減少20億新台幣。

Now let me say a few words about 2016 profitability and capital expenditure. Regarding our structural profitability, as you may know, in the past six to seven years we increased our structured profitability by 4 to 5 percentage points, to the upper 40% range. We are optimistic that we can maintain that level in 2016.

現在我來簡單說一下2016年的獲利能力和資本支出。關於我們的結構性獲利能力，正如大家所知，在過去的六到七年裡，我們的結構性獲利能力提高了4到5個百分點，達到了40%以上的水準。我們樂觀地認為，2016 年我們能夠維持這一水準。

My last comment is about 2016 CapEx. In the last investor conference three months ago, we have stated our 2016 capital budget to be between $9b to $10b. We maintain the same guidance range today.

我的最後一條評論是關於 2016 年資本支出的。在三個月前的上一次投資人會議上，我們表示2016年的資本預算在90億美元至100億美元之間。我們今天維持相同的指導範圍。

This ends my remarks. Now I would like to turn the podium to our Co-CEO, Mark Liu.

我的發言到此結束。現在，我想將講台交給我們的聯合執行長劉德華。

Good afternoon, everyone. Let me start to give you a report on our new turn demand and inventory outlook.

大家下午好。讓我開始向您報告我們的新周轉需求和庫存前景。

Our 1Q 2016 revenue is essentially flat from 4Q 2015, however, exceeding our February 17's revised guidance. This result was helped by an increase in smartphone demand for China and emerging markets, pull-in from second quarter and faster recovery from the earthquake, which offsets the weakness and seasonality in the high-end smartphone sector.

然而，我們 2016 年第一季的營收與 2015 年第四季基本持平，但超過了我們 2 月 17 日修訂的預期。這一結果得益於中國和新興市場智慧型手機需求的成長、第二季的拉動以及地震後更快的復甦，抵消了高階智慧型手機領域的疲軟和季節性影響。

We estimate our fabless income days of inventory to increase from 2 days below seasonal, exiting 4Q 2015, to about seasonal level ending 1Q 2016. Looking ahead for 2Q 2016, we forecast a growth of 6% to 7% quarter to quarter in NT dollars or 8% to 9% in US dollars. Most of our fabless customers may see an above-seasonal growth in 2Q 2016, driven by OEMs' new product launches and inventory restocking in the supply chain. We estimate days of inventory will still be close to seasonal level exiting 2Q 2016.

我們估計，我們的無晶圓廠庫存收入天數將從 2015 年第四季末的低於季節性水準的 2 天增加到 2016 年第一季末的低於季節性水準的水準。展望2016年第二季度，我們預測新台幣銷售額較上季成長6%至7%，美元銷售額較上季成長8%至9%。受原始設備製造商 (OEM) 新產品發布和供應鏈庫存補充的推動，我們的大多數無晶圓廠客戶可能會在 2016 年第二季度看到高於季節性的增長。我們估計，2016 年第二季結束時庫存天數仍將接近季節性水準。

Due to the world macroeconomic uncertainties, we reduced our estimate of 2016 smartphone growth from 8% to 7%, PC from minus 3% to minus 6%, tablet from minus 7% to minus 9%, while maintaining digital consumer electronics growth rate at minus 5%. In spite of the reductions of these growth rates, there are still growth areas in smartphones, broadband network, wireless infrastructures and gaming.

由於世界宏觀經濟的不確定性，我們將2016年智慧型手機成長預期從8%下調至7%，個人電腦成長預期從-3%下調至-6%，平板電腦成長預期從-7%下調至-9%，同時維持數位消費電子產品成長預期為-5%。儘管這些成長率有所下降，但智慧型手機、寬頻網路、無線基礎設施和遊戲領域仍有成長空間。

For smartphone growth, momentum comes from China's 4G+ deployment, through increases of operator subsidy and the continued 3G-to-4G upgrade in emerging markets. These factors will also drive the associated infrastructure growth. Recently we also see good demand from gaming GPU and game console processors for VR applications.

對於智慧型手機的成長而言，動力來自於中國4G+的部署，透過增加營運商補貼和新興市場持續的3G到4G升級。這些因素也將推動相關基礎設施的成長。最近我們也看到遊戲 GPU 和遊戲機處理器對 VR 應用的需求良好。

For the whole year of 2016, we estimate the growth of world semiconductor to be about 1%. We maintain our estimate for the foundry market growth of about 5% and TSMC revenue growth of 5% to 10% this year.

2016年全年我們預計全球半導體的成長率約為1%。我們維持今年晶圓代工市場成長約5%及台積電營收成長5%至10%的預測。

Now I move on to leading-edge technology. Let me give you first on N10 update. We have received N10 customer product tape-out in 1Q 2016. We are actively preparing for more customer product tape-outs in the following quarters. Most of our N10 users are for mobile products. We will put this technology in production in two of TSMC's 12-inch giga-fabs. Those tape-outs will drive a sizable demand starting from 2Q 2017 through 2018.

現在我來談談尖端科技。讓我先向您介紹 N10 更新。我們已於 2016 年第一季收到 N10 客戶的產品流片。我們正在積極準備在接下來的幾季中為更多客戶的產品推出流片。我們的N10用戶大部分都是行動產品。我們將在台積電的兩座12吋超級晶圓廠中投入生產這項技術。從 2017 年第二季到 2018 年，這些流片將推動相當大的需求。

Our 7-nanometer technology, N7, the technology development is well on track. N7 is a further extension of N10 technology, with more than 60% in logic density gain and 30% to 40% reduction in power consumption. N7 fully leverages N10 learning and shares more than 95% of common tools.

我們的7奈米科技N7，科技發展進展順利。N7是N10技術的進一步延伸，邏輯密度提升60%以上，功耗降低30%至40%。N7 充分利用 N10 學習並分享 95% 以上的常用工具。

We have expanded our N7 design ecosystem development to include both mobile and high-performance computing, to enable our customers to deliver their first-to-market products. Our N7 adoption is very strong, with customers ranging from mobile GPU, game console, FPGA, network processors and other consumer product applications. We have more than 20 customers in intensive design engagement with us and expect to have 15 customer tape-outs in 2017. The volume production of N7 will start from first half 2018.

我們已將 N7 設計生態系統開發擴展到行動和高效能運算，以使我們的客戶能夠提供首次上市的產品。我們的 N7 採用率非常高，客戶範圍包括行動 GPU、遊戲機、FPGA、網路處理器和其他消費性產品應用。我們與 20 多家客戶進行了深入的設計合作，預計 2017 年將有 15 家客戶完成流程片。N7將於2018年上半年開始量產。

Now on EUV, we have made good progress in the EUV development with ASML. Recently EUV development gained quite a good momentum across the industry. Tool source power of 60 watts to 80 watts is capable of becoming operational in fabs now. We are working on the tool reliability under fab operating conditions. EUV photoresist mask fabrication, particle control and basic modules have all made good progress. We recently demonstrated a reasonable yield on our N7 yield vehicle, 128-megabit SRAM using one EUV layer. Currently development of a reliable EUV mask pellicle is another focus to enable a mass production operation.

現在在 EUV 方面，我們與 ASML 在 EUV 開發方面取得了良好的進展。近期EUV發展在整個產業呈現了相當好的動能。60瓦至80瓦的工具源功率現已能夠在晶圓廠投入使用。我們正在研究晶圓廠運作條件下的工具可靠性。EUV光阻掩模製造、顆粒控制以及基礎模組均取得了良好進展。我們最近在我們的 N7 產量載體上展示了合理的產量，即使用一個 EUV 層的 128 兆位元 SRAM。目前，開發可靠的 EUV 掩模版是實現大規模生產的另一個重點。

Next I want to give you an update on growth drivers for our leading-edge technology, where the demand comes from for our leading-edge technologies. First, mobile. We see continuing technology advancement in baseband, application processors, RF transceivers and wireless connectivity to meet the demand of LTE-advanced specifications. The growth of 4G data rate through carrier aggregation and high-frequency Wi-Fi drives the need for more complex and larger chips. All the above drive the demand for our N10 and N7 technologies, which will enter production in 2017 to 2019.

接下來我想向大家介紹我們尖端科技的成長動力，以及我們尖端科技的需求來自哪裡。首先，移動。我們看到基頻、應用處理器、射頻收發器和無線連接的技術不斷進步，以滿足 LTE-advanced 規範的需求。透過載波聚合和高頻 Wi-Fi 實現的 4G 數據速率的成長推動了對更複雜、更大晶片的需求。以上所有因素都推動了我們 N10 和 N7 技術的需求，這些技術將於 2017 年至 2019 年投入生產。

The next emerging 5G standard also prompts our customers to develop state-of-the-art base station and baseband application processors to capture early business opportunity using our N10 and N7 technologies.

下一個新興的 5G 標準也促使我們的客戶開發最先進的基地台和基頻應用處理器，以利用我們的 N10 和 N7 技術抓住早期商機。

Second area is high-performance computing. We also work closely with our customers to address the opportunity in the high-performance computing market. We work with ARM to co-optimize its CPU cores with TSMC solutions to enable our customers to deliver their products in the cloud computing market.

第二個領域是高效能運算。我們也與客戶密切合作，抓住高效能運算市場的機會。我們與 ARM 合作，透過台積電解決方案共同優化其 CPU 內核，使我們的客戶能夠在雲端運算市場上推出他們的產品。

Today our customers have only a very small market share in cloud computing, mostly in networking and storage applications. With TSMC's high-performance computing technologies, we will support our customers to participate in this fast-growing cloud computing market.

目前，我們的客戶在雲端運算領域只佔有很小的市場份額，主要是在網路和儲存應用領域。借助台積電的高效能運算技術，我們將支援客戶參與這個快速成長的雲端運算市場。

The last area is VR/AR, ADAS and so forth. VR/AR, deep learning and artificial intelligence, artificial AI are the emerging applications that will require leading-edge technologies. Consumer-oriented VR/AR products for immersed gaming and immersive video viewing experience have begun shipment in 1Q this year. The data transfer rate of VR/AR products in interactive design, remote training and multisite conferencing must still be enhanced by 10x from today's level in order to enable quality viewing experience. Thus all these applications require low-power and high-speed GPU and CPU and therefore requires our leading-edge technologies.

最後一個領域是VR/AR、ADAS等等。VR/AR、深度學習和人工智慧、人工智慧是需要尖端技術的新興應用。面向消費級的沉浸式遊戲、沉浸式視訊觀看體驗的VR/AR產品已於今年第一季開始出貨。互動設計、遠距培訓、多點會議等VR/AR產品的資料傳輸速率仍需在現有水準上提高10倍以上，才能實現優質的觀看體驗。因此，所有這些應用都需要低功耗、高速的 GPU 和 CPU，因此需要我們領先的技術。

We see increasing demand also both in enhanced safety and improved infotainment system in automotive applications. The ADAS advanced driver assist systems include adaptive cruising control, emergency brake, collision avoidance, lane tracking and auto parking assistant. The advanced infotainment system includes both high-performance multimedia applications. Both automakers and tier-one module suppliers are defining the specs and increasing their adoption for ADAS and advanced infotainment systems. This trend will certainly also speed up the adoption of TSMC's leading-edge technology.

我們也看到汽車應用對增強安全性和改進資訊娛樂系統的需求不斷增長。ADAS 高級駕駛輔助系統包括自適應巡航控制、緊急煞車、防撞、車道追蹤和自動停車輔助。先進的資訊娛樂系統包括高效能多媒體應用程式。汽車製造商和一級模組供應商都在定義規格並增加對 ADAS 和高級資訊娛樂系統的採用。這一趨勢無疑也將加速台積電領先技術的採用。

That is my report. Thank you. I will turn the podium to C.C. Wei.

這就是我的報告。謝謝。我將把講台交給 C.C.韋。

Thank you, Mark. Good afternoon, ladies and gentlemen. Today I will update you on the status of 16-nanometers, 28-nanometer, InFO and specialty technologies. I will also talk about their role as a growth driver.

謝謝你，馬克。女士們、先生們，午安。今天我將向您介紹 16 奈米、28 奈米、InFO 和專業技術的最新進展。我還將談論它們作為成長動力的作用。

First on 16-nanometer. We continue to ramp 16-nanometer with yield and cycle time better than our target. Applications in mobile processors, cellular baseband, video game player, PC graphics will contribute significantly to our 16-nanometer shipment this year. Meanwhile we also begin shipment for other applications, such as the Ethernet switch, CPU, networking processor, programmable logic device and others. We expect 16-nanometer will contribute above 20% wafer revenue this year.

首先是16奈米。我們繼續推進 16 奈米工藝，產量和週期時間均優於我們的目標。行動處理器、蜂巢基頻、電玩遊戲播放器、PC 圖形等領域的應用將對我們今年的 16 奈米出貨量做出重大貢獻。同時，我們也開始為其他應用程式出貨，例如乙太網路交換器、CPU、網路處理器、可程式邏輯設備等。我們預計今年16奈米將貢獻20%以上的晶圓收入。

As I reported here last quarter, we have completed the development of a low-power and low-cost version 16FFC. I can inform you today that 16FFC is now the most adopted solution by our 16-nanometer customers and we have entered mass production since first quarter this year.

正如我上個季度在這裡報告的那樣，我們已經完成了低功耗、低成本版本 16FFC 的開發。我今天可以告訴大家，16FFC 目前是我們 16 奈米客戶採用最多的解決方案，而且我們已經從今年第一季開始投入量產。

In addition to 16FFC, we also developed an ultra-low-power solution, with much lower operating voltage down to a level below 0.5 volts without too much sacrifice of the circuit speed. We believe this is a superior solution compared to other technology approaches available in the low-power area today and is ideally suited for the mobile and IoT market. Both mobile and IoT will be the main growth driver in the future.

除了 16FFC，我們還開發了超低功耗解決方案，其工作電壓低至 0.5 伏特以下，且不會過度犧牲電路速度。我們相信，與當今低功耗領域的其他技術方法相比，這是一種更優越的解決方案，非常適合行動和物聯網市場。行動和物聯網都將成為未來的主要成長動力。

Now let me move on to 28-nanometer. Since our last conference, we have seen strong demand for our 28-nanometer, coming mainly from the mid and low-end smartphone related applications. As a result, the utilization rate of 28-nanometer has remained well above 90%. We think it will stay at a high level throughout this year.

現在讓我來談談 28 奈米。自上次會議以來，我們看到了對 28 奈米的強勁需求，主要來自中低階智慧型手機相關應用。因此，28奈米的利用率一直維持在90%以上。我們認為今年全年仍將維持高水準。

Key to this strong demand has been TSMC's 28HPC and 28HPC+. In addition to the mid and low-end smartphones, applications related to networking processors and consumer products also adopt our 28HPC and HPC+. Our 28-nanometer focus today is in the low power area and we developed a strong platform. Our 28ULP, ULP+ and 28HPC+ are very effective in addressing the needs for low power consumption, which is critical for the IoT market. Again, we expect IoT-related applications will become the next demand driver for TSMC's 28-nanometer technology.

台積電的 28HPC 和 28HPC+ 是這項強勁需求的關鍵。除了中低階智慧型手機外，與網路處理器和消費產品相關的應用也採用了我們的28HPC和HPC+。我們今天的 28 奈米重點是低功耗領域，並且我們開發了一個強大的平台。我們的 28ULP、ULP+ 和 28HPC+ 非常有效地滿足了低功耗需求，這對於物聯網市場至關重要。再次，我們預期物聯網相關應用將成為台積電 28 奈米技術的下一個需求驅動力。

We are confident on the competitiveness of our 28-nanometer solutions and believe we will hold our strong market segment share over the next few years.

我們對我們的28奈米解決方案的競爭力充滿信心，並相信我們將在未來幾年保持強大的市場份額。

Now let me update on InFO. Equipment installation at our Longtan site for volume production is almost complete. We expect to complete customer product qualification shortly and will be ready for volume production in this quarter.

現在讓我更新一下 InFO。我們龍潭工廠的量產設備安裝已接近完成。我們預計很快完成客戶產品認證並將在本季準備進行大量生產。

Our expectation of InFO contributing more than $100m per quarter in 4Q this year remains unchanged. In addition to high-volume preparation and product qualification, we are working on yield improvement and cost reduction.

我們對今年第四季 InFO 每季貢獻超過 1 億美元的預期保持不變。除了大量準備和產品認證之外，我們還致力於提高產量和降低成本。

Now let me make some comments on InFO technology. Compared to the conventional package, TSMC InFO has advantage in form factor, such as smaller area and a similar thickness, and also is power efficient. You can reduce the power consumption by as much as 20%. Meanwhile, InFO supports our memory bandwidth and therefore improves circuit performance.

現在，讓我對 InFO 技術發表一些評論。與傳統封裝相比，台積電 InFO 在尺寸方面具有優勢，例如面積較小、厚度相似，且功耗較低。您可以將功耗降低高達 20%。同時，InFO支援我們的記憶體頻寬，從而提高了電路效能。

With TSMC's InFO technology, our customers can integrate the multiple chip in the same package while reducing the overall cost. This advantage will enable InFO technology to play an important role in the chip partitioning, which can be one of the effective ways to reduce cost for products which utilize leading-edge technology, such as 7-nanometer technology and beyond. As a result, we believe InFO will be a powerful technology to capture the growth opportunity in both mobile and IoT market.

借助台積電的 InFO 技術，我們的客戶可以在同一包裝中整合多個晶片，同時降低整體成本。這項優勢將使InFO技術在晶片劃分中發揮重要作用，成為降低採用7奈米及以上等尖端技術的產品成本的有效途徑之一。因此，我們相信 InFO 將成為抓住行動和物聯網市場成長機會的強大技術。

Now I will talk about the specialty technologies. Currently specialty technology at TSMC includes embedded flash for MCU and automotive products, CMOS image sensors, image signal processors, data converter, display driver, touch controller, fingerprint and MEMS for smartphones and also high voltage for power management. These specialty technologies have contributed increasingly to our revenue in recent years and are now accounted for more than a quarter of our total wafer revenue.

下面我講一下特色技術。目前台積電的特色技術包括用於 MCU 和汽車產品的嵌入式快閃記憶體、CMOS 影像感測器、影像訊號處理器、資料轉換器、顯示驅動器、觸控控制器、智慧型手機的指紋和 MEMS 以及用於電源管理的高壓。近年來，這些專業技術對我們的收入貢獻越來越大，目前占我們晶圓總收入的四分之一以上。

We have many exploratory efforts unfolding at TSMC and I will first talk about the largest three sectors, the embedded Flash, the CMOS image sensor and MEMS.

台積電正在進行多項探索性工作，我先講一下最大的三個領域：嵌入式快閃記憶體、CMOS影像感測器和MEMS。

We have completed 40 nanometer embedded Flash development and begun volume production. We are now developing 28-nanometer embedded Flash for automotive-related applications while working on other non-volatile memories for technologies beyond 28-nanometer.

我們已經完成40奈米嵌入式Flash的開發並開始大量生產。我們目前正在開發用於汽車相關應用的 28 奈米嵌入式閃存，同時致力於開發用於 28 奈米以上技術的其他非揮發性記憶體。

For CMOS image sensors, we have completed a hybrid bonding technology which will enhance the connection between chips. This technology will push the image sensor performance to a new level and will be used by future smartphones. In addition to the mobile phone application, we are developing other CMOS image sensor technology to improve the safety feature in automobile and for use in the medical area.

對於CMOS影像感測器，我們已經完成了混合鍵合技術，這將增強晶片之間的連接。該技術將把影像感測器性能推向新的高度，並將被未來的智慧型手機所採用。除了手機應用之外，我們還在開發其他CMOS影像感測器技術，以提高汽車的安全性能並用於醫療領域。

Now let's move to MEMS. MEMS has been widely used as a motion sensor in mobile phones. We are also developing MEMS technology for environmental and biosensors for smart healthcare and medical IoT applications. In summary, we believe both automotive, medical markets and IoT present good growth opportunities for specialty technology in the next few years.

現在讓我們轉到 MEMS。MEMS已廣泛應用於手機中的運動感應器。我們也正在開發用於智慧醫療和醫療物聯網應用的環境和生物感測器的 MEMS 技術。總之，我們相信汽車、醫療市場和物聯網都將為未來幾年的專業技術帶來良好的成長機會。

Thank you for your attention.

感謝您的關注。

All right. This concludes our prepared statements. Before we begin the Q&A session, I'd like to remind everybody to limit your questions to two at a time to allow all participants an opportunity to ask their questions.

好的。我們的準備聲明到此結束。在我們開始問答環節之前，我想提醒大家每次提問的數量限制為兩個，以便所有參與者都有機會提問。

Questions will be taken both floor and from the call. Should you wish to raise your question in Chinese, I will translate it to English before management answers your question.

問題將在現場和電話會議上回答。如果您想用中文提出問題，我會將其翻譯成英文，然後管理層再回答您的問題。

For those of you on the call, if you would like to ask a question, please press the star then one on your telephone keypad now. Questions will be taken in the order in which they were received. If at any time you would like to remove yourself from the questioning queue, please press the pound or the hash key.

對於通話中的各位，如果您想提問，請立即按下電話鍵盤上的星號，然後按下 1。我們將按照收到問題的順序進行處理。如果您想隨時退出提問佇列，請按井號鍵或雜湊鍵。

Now let's begin the Q&A session. First we will ask Credit Suisse, Randy Abrams.

現在我們開始問答環節。首先，我們來詢問瑞士信貸的蘭迪‧艾布拉姆斯 (Randy Abrams)。

Thank you. First question, just want to ask about the business outlook. For second quarter it looks like somewhat mild growth, so like mid to high single-digit growth. Just factoring in the earthquake, some shipments pushing out, smartphone lines chasing relatively lean inventory, could you talk about some headwinds you may be facing just to offset some of those positive drivers?

謝謝。第一個問題，我只是想問業務前景。對於第二季來說，它看起來成長有些溫和，因此像是中高個位數的成長。僅考慮地震、部分出貨量延期、智慧型手機生產線追逐相對精簡的庫存等因素，您能否談談您可能面臨的一些不利因素，以抵消一些積極因素？

And then if we look at the second half, would that imply factoring in the 16-nanometer and InFO starting in second half? How do you feel about second half at this stage?

然後，如果我們看一下下半年，這是否意味著從下半年開始考慮 16 奈米和 InFO？目前你對下半場有什麼感覺？

Well the second half, the headwind is not much different than the first half -- the second-quarter headwind is not much different than the first quarter. But we do have -- we do see the customers and even the end market demand is increasing. The inventory restocking is still cautious. And going forward, we're still watching this month by month to see if demand will change or not. But this is currently our perspective.

下半年的逆風與上半年沒有太大不同——第二季的逆風與第一季沒有太大不同。但我們確實看到客戶甚至終端市場的需求正在增加。庫存補庫仍需謹慎。展望未來，我們仍將逐月關注需求是否會改變。但這是我們目前的觀點。

Okay. And if I could ask, for the forward technology, you're doing a much faster move to 7-nanometer, where it's a new bump every one year, where so many other foundries, like Intel, is going to an optimized, taking longer. And I'm curious on two fronts. One if there's any trade off or risk to your strategy moving faster.

好的。我可以問一下，對於前沿技術，你們正在以更快的速度向 7 奈米邁進，每年都會有一個新的突破，而許多其他代工廠，例如英特爾，正在進行優化，需要更長的時間。我對兩方面感到好奇。如果你的策略進展更快，是否有任何權衡或風險。

And the 7, your density shrink is about a 60%, so not at full shrink. If, as we go through the node, if competitors could leapfrog with a full 7 nanometer or you can upgrade the process as you move through. So maybe talk about that strategy for what you're doing on 10 and 7.

而 7，你的密度縮小了大約 60%，所以不是完全收縮。如果我們在節點過程中，競爭對手能夠以完整的 7 奈米技術實現跨越式發展，或者您可以在過程中升級該製程。那麼也許可以談談您在 10 和 7 上所採取的策略。

Well I cannot tell you all our strategy. But we think we are developing a technology fit for our customers' product announcement. So all this strategy and roadmap is collaborating with our customers at the shortest time to be able to reach the maximum technology development benefit for their products. So that has been the past two or three generations, but I don't see no difference going forward.

好吧，我無法告訴你我們的全部策略。但我們認為我們正在開發一種適合客戶產品公告的技術。因此，所有這些策略和路線圖都是為了在最短的時間內與客戶合作，以便為他們的產品實現最大的技術開發效益。這已經是過去兩三代人的事了，但我看不出未來會有什麼不同。

A quick follow-up. Can you put EUV, and you gave the update, but could you bring that in partway through 7 to enhance the process, say, partway through? Or is it more targeted now for 5 nanometer?

快速跟進。您能否放入 EUV，並且給出了更新，但是您能否在 7 中途引入它來增強流程，比如說，在中途？或者現在更有針對性地採用 5 奈米技術？

Yes. Our EUV, even though the recent progress is good, however, as you see, our 7-nanometer development is already in full steam and is getting to yield enhancement mode now. And production is imminent. It's beginning of 2018. So looking at this schedule, EUV is hard to reach for -- be able to contribute.

是的。我們的EUV，雖然最近的進展不錯，但是，正如你所看到的，我們的7奈米開發已經全速進行，並且正在進入產量增強模式。並且生產即將開始。2018年已經到來。因此，從這個時間表來看，EUV 很難實現——能夠做出貢獻。

So for N7, it is purely a development vehicle for EUV. We do plan to use EUV on our N5. And that is our plan. And we will -- we look at the schedule here that will fit properly EUV. Given the margin, it still will fit. It depends on the following progress for EUV.

因此對 N7 來說，它純粹是 EUV 的開發工具。我們確實計劃在我們的 N5 上使用 EUV。這就是我們的計劃。我們會—我們會在這裡查看適合 EUV 的時間表。考慮到裕度，它仍然適合。這取決於EUV的後續進展。

Thank you.

謝謝。

All right. Next question will be coming from Deutsche Bank, Michael Chou.

好的。下一個問題來自德意志銀行的 Michael Chou。

Thank you. Regarding your comment on 10-nanometer, so you mentioned you have more than 20 customers for 10 nanometer. Am I right?

謝謝。關於您對 10 奈米的評論，您提到您有超過 20 個 10 奈米客戶。我說得對嗎？

Yes. So does that mean you actually see the stronger-than-expected 10-nanometer compared to six months ago based on your progress? Because in the past it seems that -- I remember management mentioned 10-nanometer will be smaller than 16-nanometer. So based on latest progress, are you seeing the better demand outlook for 10-nanometer?

是的。那麼，這是否意味著根據你們的進展，與六個月前相比，你們實際上看到了比預期更強的 10 奈米技術？因為過去似乎——我記得管理層提到 10 奈米將小於 16 奈米。那麼根據最新進展，您是否認為 10 奈米的需求前景更好？

When I talked about 20 customers, it's on 7-nanometer. Okay? So 7-nanometer indeed, we see stronger adoption in the past quarters. So that's what we are -- I was addressing.

當我談到 20 個客戶時，我指的是 7 奈米技術。好的？因此，我們確實看到 7 奈米在過去幾個季度得到了更強勁的採用。這就是我們要討論的——我正在討論的。

Okay. Second question is for IoT. Is any way management can quantify the IoT sales portion or -- because it seems that a lot of people are saying IoT will be an important growth driver in the long term but we still cannot see a lot of IoT products coming out, and mainly for infrastructure buildup. So is there any way you can try to quantify?

好的。第二個問題是關於物聯網的。管理階層能否量化物聯網銷售份額，或者——因為似乎很多人都在說物聯網將成為長期的重要成長動力，但我們仍然看不到大量物聯網產品的問世，而且主要用於基礎設施建設。那麼有什麼方法可以嘗試量化嗎？

Right. So we don't think that we can really quantify what is the IoT market today. But a lot of products that, for example, connect the sensors that essentially that IoT's most important product. One of the IoT's most important is the sensors, including CMOS image sensor and the MEMS that you can see today. But you want to quantify the whole IoT market? No, we cannot.

正確的。因此，我們認為我們無法真正量化當今的物聯網市場。但是很多產品，例如連接感測器的產品，本質上是物聯網最重要的產品。物聯網最重要的部分之一是感測器，包括CMOS影像感測器和今天我們所看到的MEMS。但您想量化整個物聯網市場嗎？不，我們不能。

One final question. Will some of the IoT use advanced nodes or will it -- they just use the 28 or 16 in the long term?

最後一個問題。有些物聯網會使用高階節點，或從長遠來看它們只使用 28 個或 16 個節點？

It should be because the IoT related to a lot of data transmission, data communication. So the computation, the high-speed computation is one of the essential parts of the IoT area.

應該是因為物聯網牽涉到大量的資料傳輸、資料通訊。因此，運算、高速運算是物聯網領域的重要組成部分之一。

Thank you.

謝謝。

Next question will be coming from JPMorgan's Gokul Hariharan.

下一個問題來自摩根大通的 Gokul Hariharan。

Thanks. My first question is on a little bit of granularity on the 2Q outlook. Could you talk a little bit about advanced node versus older node given that there is a lot of restocking at 28 and below? Is it fair to say 16-nanometer is probably weaker than other nodes in second quarter?

謝謝。我的第一個問題是關於第二季前景的細節。鑑於 28 及以下有大量補貨，您能否談談高階節點與舊節點的對比？是否可以說 16 奈米在第二季度可能比其他節點弱？

All right. I think you are asking us about the restocking in the second quarter, whether it is on 16 nodes or --?

好的。我想您問的是第二季的補貨情況，是在 16 個節點還是—？

If it's primarily on older nodes to date or 28 and above.

如果它主要位於迄今為止較舊的節點或 28 個及以上的節點上。

Whether the restocking is on the advanced nodes or across the board.

補貨是在高級節點還是全線補貨。

The restocking is mostly on 28, 40, 65.

補貨主要集中在28、40、65。

Second, I think that you mentioned about cloud computing, high-performance compute as a potential market and you're working with ARM on 7-nanometer high-performance compute product as well. I think here, a couple of years back, you mentioned that software ecosystem readiness has still been an issue for this market. Any thoughts on what you're seeing from your customer side on this front? How far they have gone and how is this market likely do more given that -- as you said, right now it's not really interested in the meat of the market, which is servers; it's primarily on the periphery.

其次，我認為您提到了雲端運算、高效能運算作為潛在市場，而且您也在與 ARM 合作開發 7 奈米高效能運算產品。我想，幾年前，您提到軟體生態系統的準備仍然是這個市場的問題。您對客戶在這方面的看法有何看法？他們已經走了多遠，以及這個市場如何可能取得更大的發展——正如你所說，現在它對市場的核心（即伺服器）並不真正感興趣；它主要位於外圍。

Their momentum has collected quite a bit recently. As you hear from Red Hat, with the software developer and from the -- some of the customer software alliances, as you know, has collected quite a bit. And there are services, cloud services for application software development on several sides. So the application software development also are progressing. So those part of the momentum we see increases.

最近他們的勢頭已經增強了不少。正如您從 Red Hat 那裡聽到的，與軟體開發商和一些客戶軟體聯盟合作，已經收集了相當多的信息。還有針對應用軟體開發的多面向服務、雲端服務。因此應用軟體的開發也在不斷進步。因此，我們看到的勢頭正在增強。

And for TSMC, of course, we will support our customers in that high-performance computing platform. For us mostly it's the technology development, technology development also including the interface circuit development with our customers, also including the packaging solutions for that application. So I think that compared with a couple of years ago, indeed you are seeing a lot of reports that momentum is collecting quite a bit recently. So all the parts, we see the drivers for that into the high-performance computing market.

當然，對於台積電來說，我們將在高效能運算平台上為客戶提供支援。對我們來說，主要是技術開發，技術開發還包括與客戶的介面電路開發，還包括該應用的封裝解決方案。因此我認為，與幾年前相比，你確實會看到很多報告表明，最近的勢頭正在增強。因此，從各個方面來看，我們都看到了高效能運算市場的驅動因素。

And just one follow-up. If you have to take a guess right now, is that going to be mostly merchant fabless or system fabless, like you mentioned as the potential growth driver in the last couple of calls.

並且只有一個後續行動。如果您現在必須猜測的話，那麼這是否主要是商用無晶圓廠或系統無晶圓廠，就像您在前幾次電話會議中提到的那樣，是潛在的成長動力。

We see both. We see both. Including the service providers. They participate too.

我們都看到了。我們都看到了。包括服務提供者。他們也參與。

All right. Next question will be coming from Citigroup's Roland Shu.

好的。下一個問題來自花旗集團的 Roland Shu。

Thanks. Good afternoon. First question is for the second quarter guidance now is TWD215b to TWD218b. So if we exclude the push-out, push-out should be -- the shipment pushed out from first quarter, that should be about TWD7b. Right? So that actually is about TWD208b to TWD211b. So that actually is much smaller. Then if we take March, March multiplied by 3, that's TWD219b. So therefore the growth in the second quarter, for this growth, I think it's this -- what you expected early this year or are you going to see -- because of some weakness on the demand?

謝謝。午安.第一個問題是，第二季的指導價現在是 2,150 億新台幣至 2,180 億新台幣。因此，如果我們排除推遲發貨，推遲發貨應該是 - 從第一季開始推遲發貨，那應該是大約 70 億新台幣。正確的？所以這實際上約為 2,080 億新台幣至 2,110 億新台幣。所以實際上要小得多。那如果我們取三月，三月乘以 3，那就是 TWD219b。因此，對於第二季度的成長，我認為這是——您今年年初所預期的，或者您將會看到的——因為需求有些疲軟？

There's a factor that affects our second quarter. One second. It's exchange rate. We're using TWD32.30, which is very close to today's market. And in first quarter our exchange rate was TWD33.1. So there's a 2.2% depreciate -- appreciate. So that affects 2% of the revenue.

有一個因素影響著我們的第二季。一秒鐘。這是匯率。我們使用的是 TWD32.30，這與今天的市場非常接近。第一季我們的匯率為33.1新台幣。因此，貶值了 2.2%，升值了 2.2%。因此這影響了2%的收入。

Another reason is what Mark was mentioning, that we see the inventory restocking continues throughout the second quarter. So that's another factor that we have kind of weaker-than-expected second quarter.

另一個原因正如馬克所提到的，我們看到庫存補充將持續整個第二季。這是導致第二季業績弱於預期的另一個因素。

Okay. And also for the shipment delay, I think that according to your news release previously, you said about 100,000 of 12-inch wafer shipment had been delayed. And however, I think earlier you said you probably shipped about 90,000. So why is the difference between this 10,000, because they were cancelled by customer or we are going to further delay to 3Q?

好的。關於發貨延遲，我記得根據您之前的新聞稿，您說大約有 100,000 片 12 英寸晶圓的發貨被延遲了。不過，我記得您之前說過您的出貨量大概是 90,000 台。那麼這 10,000 之間的差異為什麼會存在呢？是因為它們被客戶取消了，還是我們要進一步推遲到第三季？

No. Our fab people work really hard to recover the customer shipments. So actually we do better. I think we have announced 120,000 in our press release and it came out around 90k. So it's about 30% lower.

不。我們的工廠員工非常努力地回收客戶的貨物。所以實際上我們做得更好。我認為我們在新聞稿中宣布了 120,000，但實際數字約為 90,000。所以大約低了30%。

Okay. And I think my second question is again Gartner just reported for TSMC last year, the overall foundry market share was about 54.5%. So I think for this year, we are recovering 16-nanometer market share aggressively. And also -- we are also going to production in 10-nanometer, with very high market share next year. And I believe for the 7-nanometer production in 2018, that that will be much ahead of the peers. So question is actually the three-year technology leadership, what do you think your growth -- your market share will be?

好的。我的第二個問題是，Gartner 剛剛報告了台積電去年的整體代工市佔率約為 54.5%。所以我認為今年我們將積極恢復 16 奈米市場份額。而且，我們還將投入 10 奈米生產，明年的市佔率將非常高。我相信，2018 年 7 奈米的生產將遠遠領先於同業。所以問題實際上是三年的技術領導，您認為您的成長——您的市場佔有率會是多少？

Well, the battle is ahead -- still ahead of us. So I cannot claim any territory yet. So we try to improve our market share just according to what you mentioned, the factors.

好吧，戰鬥還在前面——仍在我們前面。所以我還不能宣稱任何領土。因此，我們會根據您提到的因素嘗試提高我們的市場份額。

Well is 60% of market share achievable?

那麼60%的市佔率能實現嗎？

Anything is achievable.

一切皆有可能。

Of course.

當然。

At least 60%?

至少 60%？

That's not what I said.

我不是那麼說的。

Okay. Okay. Thank you. I think with this three-year technology leadership, are you going to have an upside for your PBT target? I think now you said for five years the PBT target to grow by 10% in CAGR. So with this technology leadership, any upside on this PBT target?

好的。好的。謝謝。我認為憑藉這三年的技術領導地位，您的稅前利潤目標是否會提升？我想您現在說的是，五年內稅前利潤的目標是實現 10% 的複合年增長率。那麼，憑藉這種技術領先優勢，PBT 目標有什麼好處嗎？

Well the competition is still ahead of us. Right now it's just not the time to talk about what the trophy is.

嗯，競爭仍然在我們前面。現在還不是討論獎盃是什麼的時候。

Thank you.

謝謝。

Next question comes from Daiwa's Rick Hsu.

下一個問題來自大和的 Rick Hsu。

Yes. Hi. Good afternoon. Just one question from me. About your second-quarter guidance, I think it looks to me it's a bit below seasonal in terms of sequential growth momentum. And you also mentioned that the demand is mainly from the 28-nanometer, 40- and 65-nanometer, not much for the 16-nanometer. And you also mentioned that you 16-nanometer for this year, the full-year revenue contribution will come to above 20%. Can I take that as a -- your Q3 momentum is going to be really strong and likely above seasonal?

是的。你好。午安.我只想問一個問題。關於您對第二季的預測，我認為就連續成長動能而言，它的季節性略有下降。您也提到需求主要來自28奈米、40奈米和65奈米，16奈米的需求不多。而且您也提到今年16奈米的全年營收貢獻將達到20%以上。我可以認為這是——您的第三季勢頭將會非常強勁並且可能高於季節性嗎？

Yes.

是的。

Can you elaborate a little bit more?

能再詳細說明一下嗎？

Actually the high-volume ramp we expect in the second half of this year for the 16 FinFET. That's because of leading-edge or the high-end smartphone. And other applications actually in the 16 FinFET continues on and we saw a lot of tape-out since last year. So the momentum accumulated and I believe in the second half of this year we will see higher growth.

實際上，我們預計 16 FinFET 的產量將在今年下半年大幅提升。這是因為尖端或高階的智慧型手機。實際上，16 FinFET 中的其他應用仍在繼續，自去年以來我們看到了大量流片。因此，勢頭正在積累，我相信今年下半年我們將看到更高的成長。

Thank you so much.

太感謝了。

We -- I think we need to go to the line for some questions. So, operator, could you please have the first caller on the line? We'll take the next question from the call.

我們——我認為我們需要回答一些問題。那麼，接線員，請您讓第一位來電者接通電話好嗎？我們將回答電話中的下一個問題。

Donald Lu, Goldman Sachs.

高盛的唐納德·陸（Donald Lu）。

Good afternoon. I have two questions. One is on InFO. I think C.C. just commented that you package more chips and the cost will come down. And in what year, which year do you think the InFO cost will be similar or even lower than the conventional packaging? And also assuming it will happen with 10-nanometer, 7-nanometer then, will TSMC expect your mobile market share to increase significantly at 7-nanometer versus 10-nanometer or 16-nanometer global market share? So that's question number one.

午安.我有兩個問題。一個是關於 InFO 的。我認為 C.C.剛剛評論說你封裝更多的晶片，成本就會下降。您認為在哪一年，哪年 InFO 成本會與傳統包裝相似甚至更低？並且假設它將在 10 奈米、7 奈米上實現，那麼台積電是否預計您的行動市場份額將在 7 奈米時相對於 10 奈米或 16 奈米全球市場份額顯著增加？這是第一個問題。

Question number two is on the -- in second quarter, TSMC's 16-nanometer utilization is going to decline from Q1. Thank you.

第二個問題是──第二季度，台積電 16 奈米的利用率將比第一季下降。謝謝。

So Donald's first question is if we can package multiple chips in InFO, which is the chip partitioning and reduce the cost, he asked which year we will begin to see that the cost on InFO is lower than the cost from conventional packaging. And if we can apply this very useful technology on 10-nanometer and 7-nanometer, does that mean that our mobile market share will be higher at 7- and 10-nanometer compared to our mobile market share at 16-nanometer? That's first question.

因此，唐納德的第一個問題是，如果我們可以在 InFO 中封裝多個晶片，即晶片分區並降低成本，他問哪一年我們將開始看到 InFO 上的成本低於傳統封裝的成本。如果我們可以將這種非常有用的技術應用於 10 奈米和 7 奈米，這是否意味著我們在 7 奈米和 10 奈米的行動市場份額將高於我們在 16 奈米的行動市場份額？這是第一個問題。

Second question is do we have a utilization decline at 16-nanometer in the second quarter.

第二個問題是，第二季 16 奈米的利用率是否下降。

Okay. Let me answer the first question on the InFO. I mentioned that the InFO [was] of the chip partitioning and that will serve reducing the cost. Actually this kind of thing will incur the design architecture difference and changes. So we are working with the customer. I cannot give a very certain date and which year that it will be in the market and then compare with the conventional packaging method.

好的。讓我回答有關 InFO 的第一個問題。我提到過，InFO 是晶片分區的，這將有助於降低成本。實際上這種事情會招致設計架構的差異和變化。所以我們正在與客戶合作。我無法給出一個非常確定的日期和年份，然後與傳統的包裝方法進行比較。

But our analyses show that in any year when we introduce this kind of technology and this kind of new approaches, it certainly will be better in performance and in cost as compared with conventional packages. Whether it will help us to increase market segment share in mobile, certainly we hope so. But I cannot give you a number.

但我們的分析表明，無論我們哪一年引入這種技術和這種新方法，與傳統封裝相比，其性能和成本肯定會更好。無論它是否能幫助我們增加行動市場份額，我們當然希望如此。但我無法給你一個數字。

But if you could -- sorry. Just particularly at 7-nanometer would you see new customers will adopt TSMC's 7-nanometer together with InFO at this stage?

但如果你可以的話——抱歉。特別是在 7 奈米，您是否認為新客戶會在此階段採用台積電的 7 奈米和 InFO？

We are working with customers. That's all I can answer your questions.

我們正在與客戶合作。這就是我能回答你所有問題的全部。

Okay. So the second quarter our utilization rate for the 16-nanometer decreasing?

好的。那麼第二季我們的16奈米利用率會下降嗎？

Decline.

衰退。

No. That's it.

不。就是這樣。

Hi. I can add some comment on 16-nanometer. We are ramping at a very fast speed on 16-nanometer across the whole year. So the second-quarter utilization for 16-nanometer will be much higher than first quarter.

你好。我可以對 16 奈米添加一些評論。我們全年都在以非常快的速度推進 16 奈米技術。因此第二季16奈米的利用率將遠高於第一季。

All right. So we will go to the next caller on the line. Operator, please help.

好的。因此我們將轉接下一位來電者。接線員，請幫忙。

Brett Simpson, Arete.

布雷特·辛普森，阿雷特。

Yes. Thanks very much. I just had a quick question on 28-nanometer. We saw a nice recovery there in Q1, but you have a lot of 28-nanometer customers migrating to 16-nanometer going into second half 2016. So how do you see 28-nanometer outlook as you start to see this big shift in mobile, low-end smartphones, gaming? What impact do you think that has in your 28-nanometer outlook and what it is might backfill that 28-nanometer node? Thank you.

是的。非常感謝。我只是想問一個關於 28 奈米的簡單問題。我們在第一季看到了良好的復甦，但到 2016 年下半年，許多 28 奈米客戶將遷移到 16 奈米。那麼，當您開始看到行動、低階智慧型手機和遊戲領域的巨大轉變時，您如何看待 28 奈米的前景？您認為這會對您的 28 奈米前景產生什麼影響？什麼可能會填補 28 奈米節點的空白？謝謝。

So, Brett, your question is even if we are seeing very good recovery of 28-nanometer in the first quarter, but thinks a lot of the customers' products will be migrating to 16-nanometer in the second half. You are asking us what kind of applications or business we can have to sell 28-nanometer in second half of the year. Is that your question?

所以，布雷特，你的問題是，即使我們在第一季看到 28 奈米的復甦非常好，但認為很多客戶的產品將在下半年遷移到 16 奈米。您問我們下半年有什麼樣的應用或業務可以銷售28納米。這是你的問題嗎？

That's right. And whether you think 28-nanometer can maintain these revenue levels.

這是正確的。您是否認為 28 奈米可以維持這些收入水準。

Okay. Let me answer the question. Actually, he asked whether this 28-nanometer, the strong demand can continue or not because of smartphones adopting the 16-nanometer technology quickly. Actually that in the smartphone we have high-end smartphone, mid and low-end smartphone. For the high-end smartphone moving to the 16-nanometer, it's a natural choice and they are moving very fast. Yes. But then the mid and low-end smartphone, that demand increases, so a lot of them adopting TSMC's 28-nanometer technology. That's where the very strong demand comes from. And we see that strong demand throughout this year.

好的。讓我來回答這個問題。實際上，他問的是，由於智慧型手機迅速採用 16 奈米技術，28 奈米的強勁需求是否能夠持續下去。實際上，智慧型手機有高階智慧型手機、中階智慧型手機和低階智慧型手機。對於高階智慧型手機來說，轉向 16 奈米是一個自然的選擇，而且他們的進展非常快。是的。但隨著中低階智慧型手機的需求增加，許多智慧型手機都採用了台積電的 28 奈米技術。這就是強勁需求的來源。我們看到今年全年的需求都很強勁。

In addition to that, I just mentioned that we also have the networking processors, consumer products. They are all adopting TSMC's 28HPC/HPC+. Furthermore and in the future, we saw that IoT mobile applications for the low power consumption is very important. And TSMC offers a very competitive platform in this area. So we believe that 28-nanometer demand will continue to be strong. Thank you.

除此之外，我剛剛提到我們還有網路處理器、消費性產品。它們都採用台積電的28HPC/HPC+。此外，在未來，我們看到物聯網行動應用對於低功耗非常重要。而台積電在這個領域提供了非常有競爭力的平台。因此我們相信 28 奈米的需求將持續強勁。謝謝。

Thank you. And I just had an industry question as my second question. There's a lot of talk about the rising cost of developing chips at the leading edge. How much do you think it costs your customers to develop chips at 10-nanometer and 7-nanometer compared with 28?

謝謝。我的第二個問題是一個行業問題。關於尖端晶片開發成本上升的討論很多。您認為與 28 奈米晶片相比，您的客戶開發 10 奈米和 7 奈米晶片的成本是多少？

And I think you mentioned 20 customers are -- you're engaged with 20 customers on 7-nanometer. Can you talk a bit about how big the customer engineering teams are that you're engaging with at these nodes? Thank you.

我認為您提到了 20 位客戶——您在 7 奈米製程上與 20 位客戶進行了合作。您能否談談在這些節點上與您合作的客戶工程團隊有多大？謝謝。

Well I cannot comment on the exact number of the NRE engineering expense for the new N. Of course, each node, the development cost is higher. And -- but on the other hand, the chip integration is also increasing. Where it used to be several chips, right now is being developed by one -- in one chip.

嗯，我無法評論新 N 的 NRE 工程費用的具體數字。當然，每個節點的開發成本都更高。但另一方面，晶片整合度也在提高。以前需要多個晶片，現在則由一個晶片組成。

So secondly, actually, although we have -- I've mentioned 15 tape-outs, typically the first tape-out incurs the highest cost and the following tape-out doesn't -- it can be synergistic. So indeed, customers see the 7-nanometer is a longstanding, long node. Therefore I think the customer is willing to put into their investment resources in it for the -- for many years to come.

其次，實際上，儘管我們已經 - 我提到了 15 次流片，但通常第一次流片的成本最高，而後續流片的成本不會 - 但它可以產生協同作用。因此，客戶確實認為 7 奈米是一個長期存在的長節點。因此我認為客戶願意在未來許多年內投入投資資源。

Thank you. And could I ask a third question?

謝謝。我可以問第三個問題嗎？

All right.

好的。

So maybe just -- I wanted to ask on graphics, because you talked a number of times in your prepared remarks about VR and graphics and game console. And there's quite a big performance jump coming as some of these customers go to 16-nanometer later this year. What sort of growth are you seeing in gaming and graphics specifically at the moment this year? Thank you.

所以也許只是——我想問一下圖形問題，因為您在準備好的發言中多次談到 VR、圖形和遊戲機。隨著部分客戶在今年稍後轉向 16 奈米工藝，性能將獲得相當大的飛躍。今年目前您在遊戲和圖形方面看到了哪些具體成長？謝謝。

VR and AR, it still is an emerging application. So the growth rates come from very small number. So probably I cannot put into accurate number. Currently this application, this product is under the application software development, I think is being tried, several VRs and AR products. Many of the application software is a demo software. And both -- all the producers of the chips right now create their software development platforms. So this is at this stage. So in terms -- we just see it starting shipment, but it's yet to be a volume quantity this year for this application.

VR和AR，還是一個新興的應用。因此成長率來自非常小的數字。所以我可能無法給出準確的數字。目前這個應用程序，這個產品正在應用軟體開發中，我認為正在嘗試幾個VR和AR產品。很多應用軟體都是簡報軟體。目前所有晶片生產商都在創建自己的軟體開發平台。這就是目前階段的情況。因此就而言 - 我們剛剛看到它開始發貨，但今年該應用的產量尚未達到預期。

Okay. Thank you.

好的。謝謝。

All right. We will continue to have the next caller from the line. Operator, could you please have the next caller on the line?

好的。我們將繼續接聽下一位來電者。接線生，請您讓下一位來電者接通好嗎？

Mehdi Hosseini, SIG.

邁赫迪·胡賽尼（Mehdi Hosseini），SIG。

Yes. Thanks for taking my question. Going back to your prepared commentary where you describe smartphone unit growth, which is going to be less than your prior expectation, which is also, in my opinion, is having an adverse impact on your assumptions for semiconductor revenue growth. How is it going to impact your revenue expectation growth for this year?

是的。感謝您回答我的問題。回到您準備好的評論，您描述了智慧型手機銷量的成長，其成長將低於您先前的預期，在我看來，這也對您對半導體收入成長的假設產生了不利影響。這將如何影響您今年的營收預期成長？

Your -- the range of 5% to 10% has remained unchanged. But the largest end market smartphone you have down-ticked. And then the semiconductor industry revenue is also going to be up by only 1%. So in that context if you could help us understand how this downtick is impacting the range. Do you see your revenue coming to the low end or the high end? Or are you still on track to hit the midpoint of the guidance given all the programs that are coming to the fruition?

您的——5% 到 10% 的範圍保持不變。但最大的終端智慧型手機市場你卻忽略了。而半導體產業的營收也將僅成長1%。因此，在這種情況下，如果您能幫助我們了解這種下降趨勢對範圍有何影響。您認為您的收入處於低端還是高端？或者，考慮到所有即將實現的計劃，您是否仍有望達到指導的中點？

All right. I think the question was that since we have revised down some of the growth rates, like smartphones and semiconductor revenue, etc., how would TSMC still keep our revenue guidance. So he was saying whether we are on the high end of the guidance range or low end of the guidance range, etc.

好的。我認為問題是，既然我們已經下調了一些成長率，例如智慧型手機和半導體收入等，台積電如何還能維持我們的收入預期。所以他說我們是處於指導範圍的高端還是低端，等等。

Well on semiconductor growth, we forecasted 1%. And part of it is memory market appears to be shrinking this year. Excluding memory, will be about 2%. But our system is very complicated. It's very difficult for me to describe everything for you here. But the smartphone growth this year is mostly from the mid end and the low end in terms of unit growth, so is that one to reconcile for your numbers.

對於半導體的成長，我們預測為 1%。部分原因是今年記憶體市場似乎正在萎縮。不包括內存，約2％。但我們的系統非常複雜。我很難在這裡向你描述一切。但就單位成長而言，今年智慧型手機的成長主要來自中階和低端，因此這與你的數字相符。

Our number for this year, we maintain 5% to 10%. That is nor aggressive nor conservative. It is still the same number.

我們今年的數字維持在5%到10%。這既不激進，也不保守。仍然是同一個數字。

Sure. Let me rephrase the question. Historically you've had more content in high-end smartphone but the growth rate for low to mid range is much higher than the high-end smartphone growth rate. Would it be safe to assume that if the growth rate for the low to mid range is offsetting lower growth rate for high end, even though the high end gives you higher content?

當然。讓我重新表達一下這個問題。從歷史上看，高階智慧型手機擁有更多內容，但中低階智慧型手機的成長率遠高於高階智慧型手機的成長率。是否可以安全地假設，如果低端到中端的成長率抵消了高端的較低成長率，即使高端為您提供了更高的內容？

It's possible. We see the over- TWD500 phone is reducing, but the $400 phone is increasing quickly. And both high end and mid end silicon content are increasing with high single digit. But the unit of the mid-end phone increases and high-end unit number decreases this year.

這是有可能的。我們看到500新台幣以上的手機正在減少，但400美元以上的手機正在快速增加。高端和中端矽含量均以高個位數成長。但今年中階手機出貨量增加，高階手機出貨量減少。

Okay. Then I have a follow-up -- I have a follow-up to my second question.

好的。然後我有一個後續問題——我對我的第二個問題有一個後續問題。

Yes?

是的？

So there's been a lot of emphasis on this, on 7-nanometer and your progress. It's great to see you have maintained your lead. But in that context should we assume that the 10-nanometer will be a shorter node? And if so, what happens to backfilling? You mentioned the 90% of the equipment for 10 and 90% of the 10-nanometer equipment could be used for 7-nanometer. Is that going to have an impact on your spending which ties into backfilling? Any comment or any color there would be great.

因此，我們非常重視這一點，並重視 7 奈米及其進展。很高興看到你保持領先。但在這種情況下，我們是否應該假設 10 奈米是一個更短的節點？如果是這樣，回填會發生什麼事？您提到 10 奈米設備的 90% 以及 10 奈米設備的 90% 可以用於 7 奈米。這會對您與填補相關的支出產生影響嗎？任何評論或任何顏色都很棒。

Okay. Mehdi's question is that he's happy to see that we have a leadership in 7 -- at 7-nanometer. However, does that mean that we will have a short node for 10? And if it is a short node, what would happen to the common tools, this equipment being 90%-plus common? What's the impact to our capital spending?

好的。Mehdi 的問題是，他很高興看到我們在 7 奈米領域佔據領先地位。然而，這是否意味著我們將有一個 10 的短節點？如果它是一個短節點，那麼常用工具會發生什麼情況，這些設備的通用性有 90% 以上？這對我們的資本支出有何影響？

I think this 10-nanometer will ramp very fast, but it appears to be a shorter node than that of 7-nanometer. So the picture could be similar to our 20 and 16. And also we anticipated before enough that we try to maximize the common tools from 10-nanometer to 7-nanometer. Therefore this is 95% is in -- is by design so that when the 10-nanometer, after three years, it reduces, the tool can be readily expanded into the capacity for 7-nanometer ramp.

我認為 10 奈米將會發展得非常快，但它似乎比 7 奈米節點更短。因此該圖可能與我們的 20 和 16 類似。而且我們之前也曾預期，我們會盡力將常用工具從 10 奈米擴展到 7 奈米。因此，這是 95% 的設計，這樣當 10 奈米在三年後減少時，該工具可以輕鬆擴展到 7 奈米的產能。

The impact to spending.

對支出的影響。

The question is impact spending?

問題是影響支出嗎？

Impact to our capital spending.

對我們的資本支出的影響。

That has been -- long been planned into our capital expense. It's an integrated number what we offer to you.

這早已納入我們的資本支出計劃。我們為您提供的是一個綜合號碼。

Okay. So now we come back to the floor. And the next one will be from UBS, Bill Lu.

好的。現在我們回到討論現場。下一位是來自瑞銀的 Bill Lu。

Thank you very much. Going back to InFO. I'm trying to figure out when this might broaden out. And I've spoken to a couple of your customers and maybe some of the backend players. And what I'm hearing pretty consistently is cost and the fact that this is TSMC-proprietary. Other than that, people seem to love it. I know you're working very hard on cost.

非常感謝。回到 InFO。我正在試圖弄清楚什麼時候這個範圍會擴大。我已經和你們的一些客戶以及一些後端人員進行了交談。我經常聽到的是成本問題以及這是台積電專有技術的事實。除此之外，人們似乎很喜歡它。我知道您在成本方面非常努力。

In terms of this being TSMC-proprietary, I'm wondering what you are telling your customers to convince them. And I think it looks to me like it's going to be TSMC with InFO, everybody else with some sort of other planar technology. Is that the way that you see it developing?

就這是台積電專有技術而言，我想知道您會告訴客戶什麼來讓他們信服。我認為，台積電將採用 InFO，其他公司將採用某種其他平面技術。您認為它的發展方向是這樣嗎？

And number two is would you consider possibly licensing InFO, because we've certainly seen success stories in terms of licensing in semiconductors. I think that would help out your customers. Do you just want to give your thoughts on that? Thanks.

第二，您是否會考慮授權 InFO，因為我們確實看到了半導體授權的成功案例。我認為這對您的客戶有幫助。您是否只是想就此發表一下自己的想法？謝謝。

Okay. We developed InFO technology that -- with much lower cost than the CoWoS that we introduced earlier. And InFO give advantage, as I said in the presentation.

好的。我們開發的 InFO 技術成本比我們之前推出的 CoWoS 低得多。正如我在演示中所說，InFO 具有優勢。

We have mentioned in the last quarter that we only focus -- right now we only focus on the few high-volume customers because we start to ramp it up. And I also said in the presentation that we are working on the yield improvement and the cost reduction, thus meaning that today we still have some improvement ongoing. And once we complete it in our volume production this year, we believe it will be very competitive.

我們在上個季度提到過，我們只關注——現在我們只關注少數大批量客戶，因為我們開始加強。而且我在演講中也說過，我們正在努力提高產量並降低成本，這意味著今天我們仍在進行一些改進。一旦我們今年完成量產，我們相信它將非常具有競爭力。

However, in every technology node we work with OSAT people and to better serve our customers. For now we also see that the cooperation between TSMC and backend people. But for this year, before we complete the volume production and ready for other consideration, this year we only focus on our own -- bringing up this InFO volume production.

然而，在每個技術節點上我們都與 OSAT 人員合作，以便更好地服務我們的客戶。目前我們也看到台積電和後端人員的合作。但今年，在我們完成量產並準備好其他考慮之前，今年我們只專注於我們自己的——提出這個InFO量產。

Yes. Thank you. That's very clear. I'm guess I'm just wondering what happens beyond this year as you start thinking about more customers.

是的。謝謝。這非常清楚。我只是想知道，當你開始考慮更多客戶時，今年以後會發生什麼。

We will tell you that next time.

我們下次會告訴你。

Okay. So my second question was what Mehdi just asked, but maybe I'll just follow up. If it turns out that -- 10-nanometer turns out to be a little bit smaller than what you expected previously but 7 turns out to be much bigger and you only spent TWD1b in the first quarter this year versus your guidance for the year, $9b to $10b, is it a possibility that maybe the CapEx becomes very backend-loaded or some of it gets pushed out into 2017?

好的。我的第二個問題就是 Mehdi 剛剛問的，但也許我會跟進。如果事實證明 10 納米比您之前預期的要小一點，但 7 奈米卻大得多，並且您今年第一季只花費了 10 億新台幣，而您今年的預期是 90 億美元到 100 億美元，那麼是否有可能資本支出會變得非常後端化，或者其中一部分會被推遲到 2017 年？

It is true and we spent much less in the first half. And this year the CapEx will be very much backend-loaded, the reason being because we are preparing the capacity for 10- and 7-nanometer, so spending gets mostly spent in second half of the year.

確實如此，而且我們上半年的支出少了很多。今年的資本支出將主要集中在後端，原因是我們正在準備 10 奈米和 7 奈米的產能，因此大部分支出將集中在下半年。

All right. The next question will be coming from Morgan Stanley's Charlie Chan.

好的。下一個問題來自摩根士丹利的 Charlie Chan。

Thanks for taking my question. So a very quick follow-on on Bill's question on InFO. So what will be the margin impact to your corporate margin from the InFO business when you get to a mass production?

感謝您回答我的問題。因此，讓我們來快速回答一下 Bill 關於 InFO 的問題。那麼，當進行大規模生產時，InFO 業務對貴公司的利潤率會產生什麼影響呢？

Since the InFO volume is still small for this year, and as C.C. was mentioning above $100m by the fourth quarter, compared to the total revenue it's still small. So it will have very small dilution to this year's corporate average margin.

由於今年的 InFO 量仍然很少，並且正如 C.C.提到第四季度的收入將超過 1 億美元，但與總收入相比，這個數字仍然很小。因此，它對今年企業平均利潤率的稀釋作用很小。

Okay. So as yet the margin is slightly below corporate average, even it is small?

好的。那麼到目前為止利潤率還是略低於企業平均水平，甚至很小？

It is below.

它在下面。

Okay. Thanks. And my second question regarding the EUV adoption. So is it like it is already a done deal that you will adopt EUV at 5-nanometer, so the production timing is sometime like 2020? So from now to 2020, do you think the capital intensity will increase? I know the Company gave guidance before that the new node will be 30% -- 35%. But in terms of the ratio, how do you think your growth, especially when you mass produce 7-nanometer? Thank you.

好的。謝謝。我的第二個問題是關於 EUV 的採用。那麼，你們將在 5 奈米上採用 EUV 是不是已經板上釘釘了，生產時間大概是在 2020 年左右？那麼從現在到2020年，您認為資本密集度會增加嗎？我知道公司之前給出的指導是新節點將是 30% - 35%。但從比例上來說，您覺得你們的成長怎麼樣，特別是當你們量產7奈米的時候？謝謝。

Well I'll try to answer what I heard from you. Yes, we plan to use EUV on our 5-nanometer. And we have already three EUV tools on the floor and the fourth is coming. So all these are using actively for the development. So until 2020, when N5 is currently planned into production, yes, it will be adopted.

好吧，我會盡力回答您所問的問題。是的，我們計劃在 5 奈米上使用 EUV。我們已經擁有三台 EUV 工具，第四台也即將問世。所以所有這些都是為了發展而積極利用的。因此，直到 2020 年，當 N5 目前計劃投入生產時，是的，它將被採用。

But just to remind you that in -- if you think about CapEx, don't think about everything we're going to change to EUV. There are 80 layers and only a 10 -- there are about 50/60 if you discount multiple patterning. Only the 10 of them roughly will use EUV. So a lot of tools still be able to common tools. So did I answer your question?

但只是提醒你——如果你考慮資本支出，不要考慮我們要改變為 EUV 的一切。共有 80 層，但只有 10 層——如果不考慮多重圖案，則大約有 50/60。其中大約只有 10 家會使用 EUV。所以很多工具還是可以是通用工具。那我回答你的問題了嗎？

Yes. So I just want to clarify because I thought the quadruple patterning or multi-patterning will cause a lot of CapEx. But also you mentioned that you will use a common tool strategy to reduce the CapEx. So just mainly in terms of CapEx, in terms of absolute versus $10b level or in terms of capital ratio versus 35%, in the coming four years do you think you will increase or decrease? So that was essentially my question.

是的。所以我只是想澄清一下，因為我認為四重圖案化或多重圖案化會導致大量的資本支出。但您也提到，您將使用通用工具策略來降低資本支出。那麼主要就資本支出而言，就絕對值與 100 億美元水準相比而言，或者就資本比率與 35% 相比而言，您認為在未來四年內會增加還是減少？這就是我的基本問題。

Cannot be so specific as you said. But in general speaking, conversion of tool is cheaper than buying a new tool. So more conversion is beneficial to the CapEx.

無法像你說的那麼具體。但一般來說，改裝工具比購買新工具便宜。因此，更多的轉換對資本支出是有利的。

Okay. Thanks.

好的。謝謝。

All right. The next question will be a follow-up from Credit Suisse, Randy Abrams.

好的。下一個問題將是瑞士信貸的蘭迪·艾布拉姆斯 (Randy Abrams) 的後續問題。

Yes. Thanks for fitting me back in. For the second half you mentioned a lot of the ramp will be 16-nanometer, which is still a relatively new node. In the second quarter you're already at 49% to 51% gross margin. I'm curious, with further growth to come from that project, if 16 is approaching corporate average and we could get further leverage to the model in the second half from that.

是的。謝謝你讓我回來。對於您提到的後半部分，許多升級將是 16 奈米，這仍然是一個相對較新的節點。第二季度，你們的毛利率已經達到 49% 至 51%。我很好奇，隨著該專案的進一步成長，如果 16 接近企業平均水平，我們可以在下半年進一步利用該模型。

For this year, 16-nanometer profit margin is improving as we have much higher volume. But it's still below corporate average this year. We expect the 16-nanometer will get close to corporate average by second half of 2017.

今年，由於產量大幅增加，16 奈米的利潤率正在提高。但今年仍低於企業平均。我們預計到 2017 年下半年 16 奈米將接近企業平均值。

Okay. I guess for second half 2015, net out the ramp of 2016 still below corporate, can we get some incremental leverage from that filling up utilization that we normally see? Like from the first half to the second half if there's a potential for further margin expansion, would we normally get pick-up from utilization improving?

好的。我猜測，對於 2015 年下半年而言，2016 年的淨增幅仍低於企業水平，我們能否從通常看到的填補利用率中獲得一些增量槓桿？例如從上半年到下半年，如果利潤率有進一步擴大的潛力，我們通常會從利用率提高中獲得提振嗎？

Our utilization will be better in the second half. That's number one. And we have other technologies who have high utilization with very good profit margins. So that's the next issue.

下半場我們的利用率會更好。這是第一點。我們還有其他技術，其利用率很高，利潤率也很高。這就是下一個問題。

Okay. Okay. Thanks. The second question I want to ask, you've mentioned, Mark, in your prepared remarks about the server opportunity and development moving on software applications. If you could think about for your technology when you think we start to get the first volume work and, say, get to 1% or 2% of revenue, if that's timed, say, around 7-nanometer or you think it'll take more time, it might be further out?

好的。好的。謝謝。我想問的第二個問題是，馬克，您在準備好的發言中提到了伺服器機會和軟體應用程式的發展。如果您能考慮您的技術，您認為我們何時開始進行第一批工作，並獲得 1% 或 2% 的收入，如果時間安排在 7 奈米左右，或者您認為這需要更多時間，可能還要更遠？

We think it's on 7-nanometer that we will see significant inroad.

我們認為我們將在 7 奈米領域取得重大進展。

Okay. Thank you.

好的。謝謝。

All right. We need to go back to the line. Operator, could you please have the next caller on the line?

好的。我們需要回到線上。接線生，請您讓下一位來電者接通好嗎？

Steven Pelayo, HSBC.

匯豐銀行的史蒂文‧佩拉約 (Steven Pelayo)。

Yes. Just first a follow-up there. On capital spending you mentioned it being backend-loaded this year. I'm curious, does that, from a run rate basis, really start to suggest that may happen in 2017 or do you think 35% of sales is a normalized CapEx level even though you're getting high reuse rate at 16 today but maybe not so high at 10-nanometer before 7 kicks in? So CapEx to sales next year, I'm seeing the 35% range. What do you think?

是的。首先進行後續跟進。關於資本支出，您提到今年的支出將以後端支出為主。我很好奇，從運行率的角度來看，這是否真的開始表明這可能在 2017 年發生，或者您是否認為 35% 的銷售額是正常的資本支出水平，即使您今天在 16 奈米時獲得很高的重用率，但在 7 奈米開始之前在 10 奈米時可能不會那麼高？因此，我認為明年資本支出與銷售額的比率將在 35% 左右。你怎麼認為？

All right. The question is this year's CapEx is backend-loaded like 35 to 65. Would the same pattern, a similar pattern in 2017? And what will be our capital to -- CapEx-to-sales ratio next year?

好的。問題是今年的資本支出後端負擔約為 35% 到 65%。2017 年是否會出現同樣的、類似的模式？明年我們的資本支出與銷售額的比率是多少？

I probably cannot tell about the 2017, whether it's going to be frontend-loaded or backend-loaded. But in terms of capital intensity, we have gone through this high-intensity period since last five years and it has come down to mid-30 range. And we believe this 30% to 35% range will be for the next few years.

我可能無法預測 2017 年將會是前端載入還是後端載入。但就資本密集度而言，我們從過去五年開始就經歷了高強度時期，目前已降至30%左右。我們相信未來幾年這一比例將維持在 30% 至 35% 之間。

Okay. Excellent. Thank you. In your 20-F filing this week we see that your largest customer fell from 21% of revenues to 16% of revenues. You obviously made it up with some other customers and with good growth last year. But I guess my question is expectations as you go through 2016, do you -- do we have to worry about that kind of significant decline in your largest customers continuing?

好的。出色的。謝謝。在您本週的 20-F 文件中，我們看到您最大的客戶的收入佔比從 21% 下降到了 16%。顯然，您與其他一些客戶達成了共識，並且去年取得了良好的成長。但我想我的問題是，您對 2016 年的預期是——我們是否需要擔心您的最大客戶數量會持續大幅下降？

All right. The question is we used to have a very big customer that accounted for 21% of our revenue last year and this year is probably in the mid teens. What will be in the future? What is the percentage drop? What's the impact?

好的。問題是我們曾經有一個非常大的客戶，去年它佔了我們收入的 21%，而今年可能只佔 15% 左右。未來會怎樣？下降百分比是多少？有何影響？

Yes. Just to clarify a little bit. I think it was in 2014 it was 21% of revenues. 2015 it was 16% of revenues. I'm curious if you've any concern over that trend continuing. Could they fall to single-digit percentage of revenues?

是的。只是想澄清一下。我認為 2014 年這一比例是收入的 21%。2015年佔收入的16%。我很好奇您是否擔心這種趨勢會持續下去。它們的收入百分比會下降到個位數嗎？

Well we will support our customers fully and let them grow.

我們將全力支持我們的客戶並幫助他們成長。

All right. I think, Steven, I think we have answered your questions. Thank you.

好的。我想，史蒂文，我們已經回答了你的問題。謝謝。

Operator, could you please have the next caller on the line?

接線生，請您讓下一位來電者接通好嗎？

Donald Lu, Goldman Sachs.

高盛的唐納德·陸（Donald Lu）。

Hi. I have a question on 28. I think the conventional wisdom is that 28 will be a long and a very strong node. But I checked in Q4 last year, 28, it's only maybe less than 5% higher than 65-nanometer at the same stage of the node. So my question is have you done any study to see how much bigger 28 will be for the next few years relative to 65? And the reason I ask this is a lot of your competitors are actually increasing CapEx this year for 28. So I'm afraid that we might have a price war.

你好。我對 28 號有一個疑問。我認為傳統觀點認為 28 將是一個漫長而強大的節點。但我在去年第四季檢查過，28，它可能只比同一節點階段的 65 奈米高出不到 5%。所以我的問題是，您是否做過任何研究來了解未來幾年 28 歲相對於 65 歲會有多大？我之所以問這個問題，是因為你們的許多競爭對手今年的資本支出實際上增加了 28%。所以我擔心我們可能會發生價格戰。

Okay. Donald's question is that 28-nanometer last quarter, 4Q 2015, which I think we said it was 25% of our revenue, and he said that this is only 5 percentage points higher than 65-nanometer at the same stage. So since many of our competitors are building up capacity for 28-nanometer, Donald is asking us how big can 28-nanometer really be and whether we will have a price war.

好的。唐納德的問題是，上個季度，也就是 2015 年第四季度，28 奈米，我記得我們說過它佔了我們收入的 25%，他說這只比同期的 65 奈米高出 5 個百分點。因此，由於我們的許多競爭對手都在建立 28 奈米產能，唐納德問我們 28 奈米到底能有多大，以及我們是否會打價格戰。

Well I cannot be too specifically for the quantity, but I say that we saw the strong demand that's due to TSMC's technology very competitive. And for this year that the mid/low-end smartphone increased a lot. And then we also developed a very competitive low-power technology which we think is much better than our competitor. And so we continue to have confidence that we will continue to have strong demand and hold our market share.

嗯，我無法具體說明數量，但我說我們看到了強勁的需求，這是因為台積電的技術非常有競爭力。而今年中低階智慧型手機成長了很多。然後我們還開發了一種非常有競爭力的低功耗技術，我們認為它比我們的競爭對手好得多。因此，我們仍然有信心，我們將繼續擁有強勁的需求並保持我們的市場份額。

But in the next two years, if you look out, compared to 65, do you think 25 -- 28-nanometer will have 10% more revenue than 65 at the same stage after launch, or it's 5%, 10% or 15%? Is there a number that we can use in our model, approximately?

但在未來兩年內，如果你展望一下，與 65 奈米相比，你認為 25-28 奈米在推出後的同一階段的收入會比 65 奈米高出 10% 嗎，還是 5%、10% 或 15%？是否有一個我們可以在模型中使用的大約數字？

Donald, this is Elizabeth. Let me answer your question. This percentage basically is not directly comparable because the base is different. 65-nanometer 30% back in, say, 2012 is a much smaller number than 28% -- 28-nanometer at 30% in today's number. In fact, if you look at same stage, say, 65-nanometer after five years and 28-nanometer after five years, 28-nanometer in terms of dollar is almost twice as big as 65 in terms of dollar

唐納德，這是伊莉莎白。讓我來回答你的問題。這個百分比基本上不能直接比較，因為基數不同。比方說，2012 年 65 奈米佔 30% 的比例比現在 28 奈米佔 30% 的比例小得多。事實上，如果你看一下同一階段，比如說 5 年後的 65 奈米和 5 年後的 28 奈米，那麼 28 奈米的美元價值幾乎是 65 奈米的兩倍

Actually, I'm sorry, I was -- I'm comparing if I compared 65-nanometer revenue, absolute numbers of all the foundries I can find, versus the same foundries, total 28-nanometer revenue. So the total 28-nanometer revenue in Q4 last year was only 5% higher than 65-nanometer, total 65-nanometer revenue at the same stage after launch.

實際上，很抱歉，我正在比較我能找到的所有代工廠的 65 奈米收入的絕對數字，以及相同代工廠的 28 奈米總收入。因此，去年第四季 28 奈米的總收入僅比 65 奈米、推出後同一階段的 65 奈米總收入高出 5%。

So you are ask -- you are talking about market share percentage not revenue percentage?

所以你問的是──你談論的是市場佔有率百分比而不是收入百分比？

Exactly. Not the market share but also the total absolute amount. Because there I think TSMC has much more information than us in terms of looking forward, in terms of tape-outs, etc. So do you think 28-nanometer is a long node or stronger node than 65 and how much. And for the whole market and not just (inaudible).

確切地。不是指市場份額，而是指絕對總量。因為我認為台積電在展望未來、流片等方面擁有比我們更多的資訊。那麼，您是否認為 28 奈米是一個比 65 奈米更長的節點或更強的節點？並且對於整個市場而言，而不僅僅是（聽不清楚）。

Well let me answer the question again. It seems to me that you are not so confident on the 28-nanometers demand, but it is strong. And this is a very sweet node, offered with low power but very competitive performance. And the cost structure is also good. So I want to say again that TSMC, the technology is very competitive. And we will hold our market share and we have confidence on it.

好吧，讓我再回答這個問題。在我看來，您對 28 奈米的需求不是那麼有信心，但它很強勁。這是一個非常好的節點，功耗低，但效能卻非常有競爭力。而且成本結構也很好。所以我想再次說，台積電的技術非常有競爭力。我們將保持我們的市場份額，我們對此充滿信心。

Let me add some comment to this one. Donald, I think you are trying to figure out how big is 28 versus the 65-nanometer. Is that what you're asking for?

讓我對此添加一些評論。唐納德，我想你正在試圖弄清楚 28 奈米與 65 奈米相比有多大。這就是你所要求的嗎？

Exactly. That is for the whole market. Yes. That's my question.

確切地。這是針對整個市場而言的。是的。這就是我的問題。

Okay. I think I don't know about the TAM, but for us, if I look at the number, 65-nanometer revenue versus 28-nanometer revenue, if you look at high -- the peak revenue versus 65-nanometer, I would think that 28-nanometer revenue is much bigger than 65-nanometer at the same stage.

好的。我想我不知道 TAM，但對我們來說，如果我看一下數字，65 奈米收入與 28 奈米收入的對比，如果你看一下峰值收入與 65 奈米的對比，我會認為 28 奈米的收入在同一階段比 65 奈米的收入要大得多。

Okay. Yes, I will follow up with Elizabeth on the question. Yes, I think the 28 is ramped up very fast and dropped very quickly too for the whole industry. So the question is going forward it may -- whether it will be bigger, how much bigger it will be versus 65. But I will follow up. Thank you.

好的。是的，我會跟進伊麗莎白的這個問題。是的，我認為對於整個產業來說，28 的成長速度非常快，下降速度也非常快。所以問題是，未來它是否會變得更大，與 65 相比會大多少。但我會跟進。謝謝。

Thank you. Let's come back to the floor. Next question comes from Citigroup's Roland Shu.

謝謝。讓我們回到正題。下一個問題來自花旗集團的 Roland Shu。

Thanks. Yes. Just a follow up on the InFO question. I think I feel just ask about collaboration, with InFO, OSAT are likely candidates. But I would like to hear or learn from you about the competition for the InFO or InFO-like. Are you seeing -- is there any close competitor who can do InFO production as what TSMC is doing in the near term? Thank you.

謝謝。是的。這只是對 InFO 問題的後續跟進。我認為只要詢問合作情況，InFO、OSAT 都是可能的候選人。但我希望聽到或從您那裡了解有關 InFO 或類似 InFO 的競爭情況。您是否看到—是否有任何競爭對手能夠像台積電一樣在短期內進行 InFO 生產？謝謝。

Well there is a lot of fan-out technology available today. TSMC developed the InFO because of -- we developed technology that we have some certain advantages. Just like I mentioned, we have single thickness that's suitable for your smartphone, because today's smartphone needed to be thinner and thinner. And also that we found out our approaches can give benefit or advantage for the higher bandwidth that which is important for the smartphone for all the applications also.

如今，有許多扇出技術可用。台積電開發 InFO 是因為－我們開發的技術有一定的優點。正如我所提到的，我們有適合您的智慧型手機的單一厚度，因為今天的智慧型手機需要越來越薄。我們還發現，我們的方法可以為更高的頻寬帶來好處或優勢，這對於智慧型手機的所有應用程式也很重要。

So we believe among all fan-out technologies, TSMC's InFO is the best. And when we ramp it up, that will be the highest volume of fan-out technology in the industry. But our main progress is to hear about customers to gain -- to have their product into the market, with very competitive performance and cost.

因此我們認為，在所有扇出技術中，台積電的InFO是最好的。當我們將其擴大規模時，這將成為業界扇出型技術的最高容量。但我們的主要進展是了解客戶的意見，以便將他們的產品以極具競爭力的性能和成本推向市場。

Thank you. So the conclusion is I think that you think probably it's a little chance for any competitor to do a similar job at TSMC to compete with you at the same customer or same application. Am I reading you right?

謝謝。所以結論是，我認為對於任何競爭對手來說，在台積電做類似的工作，在同一個客戶或同一個應用上與你競爭，這可能是一個很小的機會。我理解的對嗎？

I don't want to say that, but you might be right.

我不想這麼說，但你可能是對的。

Thank you.

謝謝。

Okay. A follow up question from Deutsche Bank, Michael Chou.

好的。德意志銀行 Michael Chou 提出了後續問題。

Hi, C.C. Is there any way you can mention what other modules be using InFO as well, after transceiver, this kind of product?

你好，C.C.您能否提及，除了收發器之外，還有哪些其他模組也使用 InFO，這種產品？

Yes. To answer your question, today we're focused on a very limited customer with a high volume. But in the future, of course, it will be adopted by a lot of customers in a lot of different applications. That we expected.

是的。為了回答您的問題，今天我們關注的是數量非常有限且很大的客戶。但在未來，它當然會被許多客戶在許多不同的應用中採用。這是我們預料到的。

Thank you.

謝謝。

Okay. I think in the interest of time -- sorry, there's a question. Sebastian Hou, in the back, from CLSA.

好的。我認為為了節省時間——抱歉，有一個問題。後面是來自里昂證券的 Sebastian Hou。

Hi. Thanks for taking my questions. So my first one is if you look -- based on the inventory cycle, so we started to see some rush orders towards the end of last year. And first quarter we also have some business upside because of the inventory restock. And now the second quarter will continue to -- you just comment that you continue to see some inventory restocking into second quarter. So that's about --this is the fifth month or fourth month of inventory restocking. So where do you think that most of your customers are now in their inventory cycle? So apart from your largest customer, which are starting to bill soon, but apart from that, what about the rest of your customers?

你好。感謝您回答我的問題。所以我的第一個問題是，如果你看一下——基於庫存週期，我們在去年年底開始看到一些緊急訂單。第一季度，由於庫存補充，我們的業務也有一些成長。現在第二季將繼續——您剛剛評論說，您繼續看到一些庫存在第二季度補充。這就是——這是庫存補充的第五個月或第四個月。那麼您認為大多數客戶目前處於庫存週期的哪個階段？那麼，除了您的最大客戶即將開始收費之外，您的其他客戶呢？

Well what we see, the fourth quarter last year, if you remember, is people drastically reduced their inventory. We only see the restocking almost after the Chinese New Year. So that's where you count the cycles. And what -- I don't see very, very -- I don't see signs of overbuild at this point. People are still cautious. So that's what we see, the cycle.

嗯，我們看到，如果你還記得的話，去年第四季人們大幅減少了庫存。我們幾乎是在農曆新年過後才看到補貨。這就是您計算週期的地方。而且 — — 我目前沒有看到過度建設的跡象。人們依然保持謹慎。這就是我們所看到的循環。

How long it will last, I don't know. Depends on -- I just mentioned -- I addressed on my prepared message: even to the end of Q2 appears the inventory was still above the seasonal level. It's restocking, but at above the seasonal level of the end of Q2. So that will be four months into the building. But it's still a cautious condition.

我不知道它會持續多久。取決於——我剛才提到——我在準備好的資訊中提到：即使到第二季末，庫存仍然高於季節性水平。正在補貨，但庫存量高於第二季末的季節性水準。這棟建築已經建成四個月了。但這仍然是一種謹慎的情況。

Thank you. My second question is on your revenue application side, because you break down revenue into four parts. And one of that is the industrial and slash standards. And we've seen very strong growth for the past four years, a 27% CAGR, very similar growth to the communication category. So I wonder, can you provide some of your expectation for the CAGR for the next couple of years? And if you can talk about what the specific driver inside that industrial slash standard and what kind of probability is above Company average or above the other application? Thank you.

謝謝。我的第二個問題是關於您的收入應用方面，因為您將收入分為四個部分。其中之一就是工業和斜線標準。過去四年我們看到了非常強勁的成長，複合年增長率達到 27%，與通訊類別的成長非常相似。所以我想知道，您能否提供一些對未來幾年複合年增長率的期望？您能否談談該工業斜線標準中的具體驅動因素是什麼，以及高於公司平均或其他應用的機率是多少？謝謝。

Actually the industry -- industrial standard, for example, including the MCU, we include in that category. But -- and power management in that category. Both of those components still also used in smartphone. So when we talk about smartphone growth in the past few years, it includes some of the -- what we categorize into the industrial and standard. That's the reason you see the growth. Part of it is contributed from the smartphone.

實際上，我們將行業——工業標準，例如 MCU，都歸入這一類別。但是——以及該類別中的電源管理。這兩個組件現在仍用於智慧型手機。因此，當我們談論過去幾年的智慧型手機成長時，它包括一些——我們將其歸類為工業和標準。這就是你看到成長的原因。其中一部分來自智慧型手機。

So what's the growth outlook for the next couple of years?

那麼未來幾年的成長前景如何？

I cannot forecast into the exact number for you. But it will be a growth situation. It will be still growth pattern, I think.

我無法為您預測準確的數字。但這將是一個成長的局面。我認為它仍將是成長模式。

Will it be continuing similar to the communication application growth or will it be higher or lower?

它會繼續類似於通訊應用的成長嗎？還是會更高或更低？

That's hard to predict. I hope the communication grow faster, but that's hard to predict.

這很難預測。我希望交流能夠發展得更快，但這很難預測。

Okay. Thank you.

好的。謝謝。

Okay. So before we conclude today's conference, please be advised that the replay of the conference will be accessible within three hours from now. Transcripts will become available 24 hours from now, both of which will be available through our website.

好的。因此，在今天的會議結束之前，請注意，會議的重播將在三小時內提供。成績單將在 24 小時後提供，可透過我們的網站取得。

Thank you for joining us today. We hope you will join us again next quarter. Goodbye and have a good day.

感謝您今天加入我們。我們希望您下個季度再次加入我們。再見，祝你有美好的一天。