C. C. Wei: Charlie, let me say it again, the demand is very, very strong, and we have done our best where we put all the effort to increase the capacity. It’s probably more than double this year as compared with last year. However, it’s still not enough to meet the customers’ demand, and we leverage our OSAT partners to complement of TSMC’s capacity to fulfill our customers’ need. Still not enough, of course. But in my mind, my first priority is to make our customer to be successful, no matter which one. And of course, the long-term partners will have a better cooperation with TSMC in terms of technology and processing complexity, so much easier to be ramped up. However, no matter what, let me say again, the demand is very high, extremely high.
And we do our best to increase the capacity to alleviate the shortage. We also leverage the OSAT partners. We want to make sure that all our customers get supported, probably not enough this year; but for next year, we try, we try very hard. And you mentioned about giving up some market share, that’s not my consideration. My consideration is to help our customers to be successful in their market.
Charlie Chan: I see. So since your major customers said there’s no room for other type of AI computing chips, but it seems like TSMC is happy to see some similar customers, right? So is that the right interpretation about your comments?
C. C. Wei: Yes.
Jeff Su: Yes. C. C. said all customers, yes. Thank you, Charlie.
Operator: Next one to ask questions, Bruce Lu from Goldman Sachs.
Bruce Lu: I think, again, the question is coming back to AI still. I think currently, most of the AI accelerators are mostly in 5-nanometers, which is N minus 1 comparing to a smartphone for now. So when do we expect them to catch up or surplus in terms of technology node? Do we see them to be the technology driver in 2-nanometers or above?
Jeff Su: Okay. So Bruce’s first question is about, again, looking at AI accelerators. He notes that in his view, they’re currently at 5-nanometer now. His question is, do we expect them to catch up? How do we see AI accelerators and also maybe HPC as a whole being the driver or adopter of TSMC’s most leading-edge or advanced technology node? Is that correct, Bruce?
Bruce Lu: Yes, that’s correct.
C. C. Wei: Okay. Bruce, let me answer the questions. Yes, your observation is right. Today, all the AI accelerators, most of them are in the 5- or 4-nanometer technology. But my customers are working with TSMC for the next node. Even for the next, next node, they have to move fast because, as I said, the power consumption has to be considered in the AI data center. So the energy-efficient is fairly important. So our 3-nanometer is much better than the 5-nanometer. And again, it will be improved in the 2-nanometer. So all I can say is all my customers are working on this kind of a trend from 4-nanometer to 3 to 2. Bruce?
Bruce Lu: But if that is the case, do we see — yes, if that is the case, do we see a bigger revenue in the first 2 years of the 2-nanometers? Because in the past, it’s only smartphone. But in 2-nanometer, it would be both smartphone and HPC customers.
Jeff Su: So Bruce is asking then, well, then with such strong AI-related demand, should we see more revenue from 2-nanometer in its first 2 years compared to past nodes?
Wendell Huang: Yes, Bruce, as we said, we believe that it will be — our advanced technologies will be long-lasting nodes and larger nodes, N2, then N3 or N5. So the dollar value will certainly be larger.
Jeff Su: I think, Bruce, we’re locating at these opportunities in a multiyear period. So as Wendell and C. C. just said, certainly, with the demand that we’re seeing, we do expect N2 revenue contribution to be even larger than N3, just like 3 has a larger contribution or larger node than 5, et cetera, et cetera.
Bruce Lu: I see. So my second question is for dividends. We do see very strong free cash flow in the first quarter. And the capital intensity, as Wendell mentioned, is stabilizing. And we even started to pay a huge amount of return in tax. So do we — can we turn more aggressive in terms of dividends? The current dividend level is much, much lower than 70% of free cash flow in the back-of-envelope calculation. So can we expect to see more dividends in the coming quarters?
Jeff Su: Okay. Thank you, Bruce. So Bruce’s second question is on the cash dividend policy. He notes that in the first quarter, we’re generating very, very strong free cash flow. As we have said, the capital intensity is beginning to stabilize and also that we are paying a very high retained earnings tax. So his question, I think, is, what is the outlook? Can we pay more dividends in the coming quarters? Or what should investors expect?
Wendell Huang: Yes. Bruce, the — our dividend policy is, in principle, to pay 70% of our free cash flow in a year as cash dividends. So I would not just look at quarterly cash, free cash flow to make a judgment. But indeed, as we said before, now that we’re harvesting the heavy investment that we did in the past few years, we expect our dividend policy to switch to steadily increasing from the sustainable in the past few years.
Operator: Next one, we have Laura Chen from Citi.
Laura Chen: My question is about the edge AI. We know that C. C. mentioned that the smartphone and the PC recovery is still probably prolonged, yet we are also seeing that the AI PC or AI smartphone is getting quite topical. So I’m just wondering, what’s TSMC’s view on this kind of edge AI device take off maybe later or 2025? And what’s the implication to TSMC? That’s my first question.
