Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) Q4 2021 Earnings Conference Call January 13, 2022 1:00 AM ET
Company Participants
Jeff Su - Director of Investor Relations
Wendell Huang - Vice President of Finance and Chief Financial Officer
C. C. Wei - Chief Executive Officer
Mark Liu - Chairman
Conference Call Participants
Randy Abrams - Credit Suisse AG
Bruce Lu - Goldman Sachs Group, Inc.
Charlie Chan - Morgan Stanley
Gokul Hariharan - JPMorgan Chase & Co.
Roland Shu - Citigroup Inc.
Brett Simpson - Arete Research Services LLP
Charles Shi - Needham & Company, LLC
Mehdi Hosseini - Susquehanna Financial Group, LLLP
Sunny Lin - UBS
Sebastian Hou - Neuberger Berman
Laura Chen - KGI Securities Co. Ltd.
Krish Sankar - Cowen and Company, LLC
Frank Lee - HSBC
Jeff Su
[Foreign Language] Good afternoon, everyone, and welcome to TSMC's Fourth Quarter 2021 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 Vice President and CFO, Mr. Wendell Huang, will summarize our operations in the fourth quarter 2021, followed by our guidance for the first quarter 2022. Afterwards, Mr. Huang and TSMC's CEO, Dr. C.C. Wei, will jointly provide the Company's key messages. Then TSMC's Chairman, Dr. Mark Liu, will host the 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 CFO, Mr. Wendell Huang, for the summary of operations and the current quarter guidance.
Wendell Huang
Thank you, Jeff. Happy New Year, everyone. Thank you for joining us today. My presentation will start with financial highlights for the fourth quarter and a recap of full-year 2020. After that, I will provide the guidance for the first quarter 2022.
Fourth quarter revenue increased 5.7% sequentially in NT dollar or 5.8% in U.S. dollar. As our fourth quarter business was supported by the strong demand for our industry-leading 5-nanometer technology, gross margin increased 1.4 percentage points sequentially to 52.7%, mainly due to the continuous cost improvement efforts.
Operating margin increased 0.5 percentage points sequentially to 41.7%, slightly ahead of our guidance as we enjoyed higher operating leverage and a portion of the vaccine donation expenses got pushed out to the first quarter. Overall, our fourth quarter EPS was NT$6.41 and ROE was 31.3%.
Now let's move on to the revenue by technology. 5-nanometer process technology contributed 23% of wafer revenue in the fourth quarter, while 7-nanometer accounted for 27%. Advanced Technology, which are defined as 7-nanometer and below, accounted for 50% of wafer revenue.
On a full-year basis, 5-nanometer revenue contribution came in at 19% of 2021 wafer revenue. 7-nanometer was 31%. Advanced technologies accounted for 50% of total wafer revenue, up from 41% in 2020.
Now moving on to revenue contribution by platform. All platforms increased in the fourth quarter. Smartphone increased 7% quarter-over-quarter to account for 44% of our fourth quarter revenue. HPC increased 3% to account for 37%. IoT increased 3% to account for 9%. Automotive increased 10% to account for 4%, and Digital Consumer Electronics increased 2% to account for 3%.
On a full-year basis, all six platforms experienced year-on-year growth. HPC, IoT and Automotive saw strong growth of 34%, 21% and 51%, respectively. Smartphone also increased 8%, and DCE increased 2% in 2021. Overall, smartphone accounted for 44% of our 2021 revenue. HPC accounted for 37%, and IoT accounted for 8%.
Moving on to the balance sheet. We ended the fourth quarter with cash and marketable securities of NT$1.2 trillion. On the liability side, current liabilities increased by NT$84 billion, mainly due to the increase of NT$22 billion in accounts payable and the increase of NT$61 billion in accrued liabilities and others. Long-term interest-bearing debt increased by NT$150 billion, mainly as we raised NT$157 billion of corporate bonds during the quarter. On financial ratios, accounts receivable turnover days remained at 40 days, while days of inventory increased three days to 88 days.
Now let me make a few comments on cash flow and CapEx. During the fourth quarter, we generated about NT$378 billion in cash from operations, including NT$80 billion prepayment from customers, spent NT$236 billion in CapEx and distributed NT$71 billion for first quarter 2021 cash dividends. Bonds payable increased by NT$157 billion due to the bond issuances. Overall, our cash balance increased NT$211 billion to NT$1.1 trillion at the end of the quarter. In U.S. dollar term, our fourth quarter capital expenditures totaled US$8.46 billion.
Now let's look at the recap of our performance in 2021. We saw a strong growth in 2021 as our technology leadership position enabled us to capture the industry's megatrend of 5G and HPC. Our revenue increased 24.9% in U.S. dollar terms to reach US$57 billion. In NT dollar terms, revenue increased 18.5% as the NT appreciated by 5% during the year. Such unfavorable foreign exchange rate also impacted our gross margin by about 2 percentage points. In addition, N5 dilution also created a headwind to our margin. However, as we continue to drive cost improvements, we were able to achieve gross margin of 51.6% and operating margin of 40.9% in 2021. Overall, full-year EPS increased 15.2% to NT$23.01, and ROE was 29.7%.
On cash flow, we spent NT$839 billion in CapEx, while we generated NT$1.1 trillion in operating cash flow and NT$273 billion in free cash flow. We also paid NT$266 billion in cash dividends in 2021.
I have finished my financial summary. Now let's turn to our current quarter guidance. We expect our business in the first quarter to be supported by HPC-related demand, continued recovery in the Automotive segment and a milder smartphone seasonality than in recent years.
Based on the current business outlook, we expect our first quarter revenue to be between US$16.6 billion and US$17.2 billion, which represent 7.4% sequential increase at the midpoint. Based on the exchange rate assumption of US$1 to NT$27.6, gross margin is expected to be between 53% and 55%, operating margin between 42% and 44%. Lastly, our 2022 effective tax rate is between 10% to 11%.
This concludes my financial presentation. Now I will move on to key messages. I will start by making some comments on our 2022 capital budget and depreciation. Every year, our CapEx is spent in anticipation of the growth that will follow in the future years. We are witnessing a structural increase in underlying semiconductor demand underpinned by the industry megatrends of 5G-related and HPC applications.
In 2021, we spent US$30 billion to capture the strong demand and support our customers' growth. In 2022, our capital budget is expected to be between US$40 billion to US$44 billion. Out of the US$40 billion to US$44 billion CapEx for 2022, between 70% and 80% of the capital budget will be allocated for advanced process technologies, including 2-nanometer, 3-nanometer, 5-nanometer and 7-nanometer. About 10% will be spent for advanced packaging and mask making and 10% to 20% will be spent for specialty technologies.
Our depreciation expense is expected to increase by low to mid-teens percentage year-over-year in 2022 as newly incurred depreciation will be partially offset by other notes rolling off depreciation. With this level of CapEx spending in 2022, we reiterate that TSMC remains committed to a sustainable cash dividend on both an annual and quarterly basis.
Now, let me turn the microphone over to C.C.
C. C. Wei
Thank you, Wendell. We hope everybody is staying safe and healthy during this time. First, let me start with our 2022 outlook. We expect 2022 to be another strong growth year for TSMC. For the full-year of 2022, we forecast the overall semiconductor market, excluding memory, to grow approximately 9%, while foundry industry growth is forecast to be close to 20%. For TSMC, we are confident we can outperform the foundry revenue growth and grow between mid-to-high 20s percent in 2022 in U.S. dollar term.
Our 2022 business will be fueled by strong demand for our industry-leading advanced and specialty technologies, where we see strong interest from all four growth platforms, which are smartphone, HPC, IoT and automotive.
Entering 2022, we expect the supply chain to maintain a higher level of inventory as compared to the historical seasonal level given the industry's continued need to ensure supply security. While the short-term imbalance may or may not persist, we continue to observe the structural increase in long-term semiconductor demand underpinned by the industry megatrend of 5G and HPC-related applications. We also observed the higher silicon content in many end devices, including automotive, PCs, servers, networking and smartphones. As a result, we expect our capacity to remain tight throughout 2022 as we believe our technology leadership will enable TSMC to capture the strong demand for our advanced and specialty technologies.
Next, let me talk about TSMC's long-term growth outlook and profitability. We are entering a period of higher structural growth. As the technology becomes more pervasive and essential in people's lives and the digital transformation accelerates, the semiconductor industry value in supply chain is increasing. As we embark upon the 5G era, an intelligent and more connected world will fuel a massive requirement for computation power and propel greater need for energy-efficient computing, which demand greater use of leading-edge technologies.
The multiyear megatrend of 5G and HPC-related applications will drive multi unit volume growth and more importantly, spur substantial semiconductor content enrichment in HPC, smartphone, automotive and IoT applications to address the structural increase in the long-term market demand profile.
TSMC is working closely with our customers to plan our capacity and investing in leading-edge and specialty technology to support their group demand. At the same time, we are committed to achieve a sustainable and proper return that enable us to invest to support our customers' growth and deliver long-term profitable growth for our shareholders.
Over the last three years, we have raised our CapEx spending from US$14.9 billion in 2019 to US$30 billion in 2021 as we invest in anticipation of the growth that will follow. During the same period, our revenue in U.S. dollar terms has increased from US$34.6 billion in 2019 to US$56.8 billion in 2021 or 1.6x and our EPS by 1.7x.
Looking ahead, as the world's largest reliable and effective capacity provider with our technology leadership, manufacturing excellence and customer trust, we are well positioned to capture the growth from the favorable industry megatrend with our differentiated technologies. We expect our long-term revenue to be between 15% and 20% CAGR over the next several years in U.S. dollar terms, of course, fueled by all four growth platform, which are smartphone, HPC, IoT and automotive.
With the increasing need for computation, HPC will be the strongest driver of TSMC's long-term growth and expect it to be the largest contributor in terms of our incremental revenue growth with the CPU, GPU and AI accelerators are the main growth area for our HPC platform.
As we invest in leading-edge and specialty technology to support our customers' demand, we continue to face manufacturing cost challenges due to increasing process complexity at leading-edge node, new investment in mature node, expansion of our global manufacturing footprint and rising materials and basic commodity costs. We are continuing to work closely with our customers to support their growth, and our pricing strategy will remain strategic, not opportunistic, to reflect our value creation. We will also work diligently in our own fab operation and with our suppliers to deliver on cost improvement.
By taking such actions, we believe our long-term gross margin of 53% and higher is achievable, and we can earn a sustainable and proper return of greater than 25% ROE through that cycle. Thus, even as we showed a greater burden of CapEx investment for the industry, we can continue to invest to support our customers' growth and deliver long-term profitable growth for our shareholders.
Now I will talk about N5, N4P and N4X status. As our N5 entered its third-year ramp, demand continues to be very strong, driven by smartphone and HPC applications. Our N5 has proven to be the industry's most competitive leading-edge technology. To further enhance our N5 family's performance, power and density improvement for next-wave 5-nanometer product, we also introduced N4P and N4X technologies.
N4P offers 11% performance boost as compared to N5 with 22% improvement in power efficiency and 6% density gain. N4P is designed for easy migration from N5 with its products taking our schedule for second half 2022. We also introduced N4X as an offering especially optimized for workload-intensive HPC applications. N4X will offer much more circuit performance boost over N5 and we expect it to enter risk production in first half 2023. Without continuous enhancement of our N5 process technologies, we expect demand for our N5 family to continue to grow in the next several years and for N5 family to be a large and long-lasting node for TSMC.
Next, let me talk about N3 and N3E status. Our N3 technology will use FinFET transistor structure to deliver the best technology maturity, performance and cost for our customers. Our N3 technology development is on track. We have developed complete platform support for both HPC and smartphone applications. N3 production will start in second half of 2022. We continue to see a high level of customer engagement at N3 and expect the more new tape-outs for N3 for the first year as compared with N5.
N3E will further extend our N3 family with the enhanced performance, power and yield. We also observed a high level of customer engagement at N3E, and volume production is scheduled for one year after N3. Our 3-nanometer technology will be the most advanced foundry technology in both PPA and transistor technology when it is introduced. With our technology leadership and strong customer demand, we are confident that our N3 family will be another large and long-lasting node for TSMC.
Finally, let me talk about our mature node capacity strategy. TSMC's strategy at a mature node is to work closely with our customers to develop specialty technology solutions to meet customers' requirement and create differentiated and long-lasting value to customers. We expect the multiyear industry megatrend of 5G and HPC and the higher silicon content in many end devices to drive increasing demand and mature node for certain specialty technologies.
We forecast 28-nanometer will be the sweet spot for our embedded memory applications and our long-term structural demand at 28-nanometer to be supported by multiple specialty technologies. In support of our specialty technology strategies, we are expanding our 28-nanometer manufacturing capacity and size in China, Japan and Taiwan.
Our capacity expansion is based on customers' need, business opportunities, operating efficiency and cost economic considerations. We believe the expansion of our mature node capacity will enable us to better serve our customers' need and reach global talents, and our differentiated specialty technology will enable us to capture the demand generated from the industry megatrend and deliver long-term profitable growth for our shareholders.
This concluding our key message. Thank you for your attention.
Jeff Su
Thank you, C.C. This concludes our prepared remarks. Before we begin the Q&A session, I would like to remind everybody to please limit your questions to two at a time to allow all the participants an opportunity to ask their questions. Should you wish to raise your question in Chinese, I will translate it to English before our management answers your question. [Operator Instructions]
Now we will proceed to the Q&A session. Our Chairman, Dr. Mark Liu, will be the host.
Mark Liu
Hello, everyone. This is Mark Liu. I want to send my regards to every one of you during this pandemic and wish we have a happy and successful 2022. Thank you.
Jeff Su
Thank you, Chairman. Let's begin the Q&A session now. Operator, can we please proceed with the first caller on the line?
Question-and-Answer Session
Operator
The first to ask questions, Randy Abrams from Credit Suisse.
Randy Abrams
Okay. Yes. Thank you. Congratulations on the results and the outlook and margins. First question on the growth outlook. When we compare the growth expectation mid-to-high 20% versus – if I rollup the fabless and IDM customers, they're about mid-teens growth. So your outgrowth looks much wider than most years. Could you break it down a bit more the factors between share gain, pricing moves? And also if there's any component of inventory build in there?
Jeff Su
Okay. Randy, let me summarize your first question. I believe your question is referring to the 2022 growth outlook? And Randy...
Randy Abrams
That's right.
Jeff Su
Right. And so Randy is saying, TSMC's guidance of mid-to-high 20s percentage, his calculation show that the fabless industry is growing maybe around mid-teens. So we will outgrow the foundry - sorry, the fabless. And so he is wondering what is driving this outgrowth. Is it share gain, pricing? Are there other factors such as inventory build into this? And if we can share…
C. C. Wei
Okay. Let me answer the question. This is C.C. Wei. Actually, the growth in 2022 is all the above you just mentioned. It's a share gain, it's a pricing and also it's a unit growth. Did I answer your question?
Randy Abrams
Yes, mostly. And maybe just a quick – two quick follow-ups to that. If you could break the growth by platform and if you could indicate just how much – like how much do you think your customers want to put in place more inventory? Like how big a component do you think that factor is?
Jeff Su
Okay. So Randy's follow-up is can we give our 2022 growth by platform outlook? And then how much of a role is inventory build playing in this growth?
Wendell Huang
Hi, Randy, this is Wendell. Let me answer the platform question. In 2022, we expect the HPC and automotive to grow faster than the corporate average. IoT, similar, smartphones close to the corporate average. That's the platform growth.
Jeff Su
And then, Randy’s second part is how much of a role is inventory build playing in this?
Wendell Huang
Well, Randy, as C.C. mentioned that the key messages, we expect the inventory level to remain high, higher than before for a longer period of time, but we're not able to quantify that factor.
Randy Abrams
Okay. No, I understand. Hey, if I could ask a second question, you disclosed about the – you're getting more prepayments and a lot of customers have been disclosing those. If you could talk about the strategy behind this as far as the main objectives of the program and the protection you're looking for if we go into a downturn, what the scenario would be? So if you could disclose kind of the strategy behind that.
Wendell Huang
Okay. Randy, the prepayment, yes, we work closely and diligently with the customers plan the capacity, including receiving their prepayments for capacity support. And we will continue to work with them to determine the best way to support them. Such commitments or prepayment will strengthen our cash position and help mitigate our capital risk in capacity.
Now talking about securing commitment, we always work closely with our customers, and we believe that technology leadership, manufacturing excellence and earning customer trust are the best or the most effective way to secure customer commitments. So as long as we plan our capacity well based on the structural increase in the long-term market demand profile, we believe our utilization and profitability can be well protected.
Jeff Su
Okay. Thank you, Wendell. Randy, does that address your second question?
Randy Abrams
Yes. It's more about in a downturn, I guess, is it also a – to be assurance in terms of volume or still some cash flow, like to protect the amount you have to outlay, so is it also kind of an insurance policy of some sort?
Wendell Huang
Well, yes, Randy, I think, as I just mentioned, the best way is to work with the customers and getting their commitment through our technology leadership, manufacturing excellence and therefore earning their trust. So if we plan our capacity well based on the structural demand in the industry, then I think our utilization and profitability can be maintained.
Randy Abrams
Okay. Great. Thank you, Wendell.
Jeff Su
Yes. Thank you, Randy. Operator, can we proceed to the next participant on the line please?
Operator
Next one to ask questions, Bruce Lu from Goldman Sachs. Go ahead, please.
Bruce Lu
Hi. Thank you for taking my question. Congratulations on a pretty good result. I think management mentioned about a NT$1 trillion semiconductor market pricing in 2020 – around 2030. So can we have more color about the foundry market stocks by end or for the key growth drivers such as HPC? Can TSMC provide a more quantitative focus, for example, like what is the addressable market for ARM-based CPU in 2025 or 2030?
Jeff Su
Okay. Bruce, let me summarize your first question. So Bruce is saying we have talked about a NT$1 trillion foundry market by 2030. So he wants to know what can be the key drivers here and also the role of HPC, including ARM-based in this outlook?
Mark Liu
Okay. Bruce, this is Mark. We don't have a very specific forecast for 2030 to share with you, NT$1 trillion is our model and so has been quoted by general industrial comments. However, we do believe the high growth approached that number is happening. We believe the semiconductor industry growth will continue to fuel by the C.C. just mentioned structural megatrend 5G and high-performance computing. And also, our leading-edge technology provide the most energy-efficient technology for computation and accelerate the digital transformation for the next several years.
So – but if you look at the – if we want me to comment on the foundry industry, it's pretty clear, the foundry industry growth will be higher because in addition to a fabless company, IDM outsourcing will continue increasing in a fast growth rate. And most importantly, system companies will grow, particularly faster during this period of time. So in that sense that, we believe the foundry growth – foundry industry growth will have a good year better than other sectors.
Jeff Su
And then, Bruce also asking about the role of HPC in this growth outlook, including the ARM?
Mark Liu
Well, ARM is a new phenomenon. I think the CPU architecture no longer been dominant by one architecture. Multiple architecture provided their better integration with software, provide a much wider application of CPUs. And that no matter what the CPU, which architecture they are, currently, we are engaging to all CPU architecture customers.
Jeff Su
Okay. Bruce, does that answer your first question?
Bruce Lu
Yes, but I try to ask a follow-up for the – addressing for HPC. I mean within that HPC, we understand that this is the faster growing segment. Can you provide some more like different like growth magnitude within the HPC, which part of the HPC is growing faster and how big would that be in three to five years?
C. C. Wei
Well, Bruce, this is C.C. Wei, again. No we cannot disclose all the details on each segment, for example, CPU, GPU and AI accelerator, which one is more what kind of percentage. In fact, they are all growing, but for the specific percentage, we don't comment right now.
Jeff Su
Okay, Bruce?
Bruce Lu
Understand. Thank you.
Jeff Su
Okay. Do you have a second question?
Bruce Lu
Yes. The second question is regarding to the 28-nanometer, as we know that 28-nanometer is the biggest node among all the process node within TSMC and which suffer lower utilization rate in 2018 and 2019. So with the recent announcement in Nanjing or Japan or even [indiscernible] we suggest another 16% of capacity growth in 28-nanometer alone in TSMC, not to mention like your industry peers are all aggressive in expanding the 28-nanometer. Can you provide like more like growth driver? And how can you feel comfortable to expand the capacity in this magnitude in the coming years when a lot of financial industry were talking about like downside or a cycle peak or oversupply in 2023?
Jeff Su
Okay. Bruce's second question is on 28-nanometer, he notes that we are – as C.C. said, expanding our capacity in 20-nanometer in various locations, but he also notes that other foundry peers in the industry are also expanding as well. So he wants to know the risk, I guess, of oversupply?
C. C. Wei
Well, good question. As you pointed out in 2018, 2019, we have a lower utilization rate. It's just a little bit above by 80%. But right now, we do observe that our long-term structural demand at 28-nanometer was to be well supported by multiple specialty technologies such as CMOS image sensor for multi-camera trend and better non-volatile memory application and other specialty technologies. To be in one word, actually, the enrichment in the silicon content in many end devices that developed in recent years helped to support this demand.
Jeff Su
Okay, Bruce?
Bruce Lu
Okay. Thank you.
Jeff Su
Thank you. Operator, can we move on to the next participant, please?
Operator
Next one to ask question, Charlie Chan from Morgan Stanley.
Jeff Su
Hello, Charlie. Are you on the line?
Charlie Chan
Yes. Hello, can you hear me okay?
Jeff Su
We can hear you now. Please go ahead.
Charlie Chan
Okay. Thank you. And also Happy New Year and congratulations for good results. So to management, my first question is about the macro economy risk, right? For example, inflationary pressure on the consumer tech demand. And also, standalone demand has been strong for two years. Will the management would consider that could fade away and impact your PC, TV in semis.
And also lastly, the crypto mining demand has been very volatile, right? And now it seems like crypto price also falls down. So we'd like to know whether you consider those kind of macro risk into your full-year revenue growth forecast? Thank you.
Jeff Su
Okay. So Charlie's first question is related to the macro outlook, looking at concerns of inflation, work-from-home fading, consumer demand and also crypto volatility. What impact could this have on end demand for PC, TV and semiconductors and have we considered this into our outlook? Maybe C.C. can address this.
C. C. Wei
Yes. Charlie, we expect the supply chain to maintain a higher level of inventory for a longer period of time given the industry's continued need to ensure the supply security. But then we also observed the end market momentum in certain segment may slowdown or adjust in terms of units, but the increasing silicon content in many end devices is a more important factor in supporting the strong semiconductor demand and will continue. So even if there's a correction or to occur, we believe it could be less volatile for TSMC due to our technology leadership position, and the structural megatrend demand of 5G-related and HPC application, the substantial increase in silicon content, that will make sure we expect our capacity to remain very tight throughout 2022. You also mentioned about the crypto currency. Yes, we have factored our own yield.
Jeff Su
Okay. Great. Charlie, do you have a second question?
Charlie Chan
Yes, if I may. So my second question is maybe to Wendell, that our first quarter revenue see a great sequential growth, right? So may I know that there's price hike benefit mostly reflected in 1Q? Or there will be still some price hike benefits in the second quarter? And also, can you please repeat the depreciation growth guidance year-on-year for 2022? Thank you.
Jeff Su
Okay. Charlie, let me summarize your second question. So his question is directed to Wendell. In terms of the first quarter revenue sequential growth, how much of the price hike is reflected in this, and will a price hike be reflected in subsequent quarters?
Wendell Huang
Charlie, we're not able to break down those numbers for you. But we continue to work closely with our customers, meet their demand and also sell our value. That's what we are focusing on.
Jeff Su
Yes. And the depreciation guidance, Charlie, this year is low to mid-teens year-on-year increase. Thank you.
Charlie Chan
Okay. Thanks.
Jeff Su
Okay. Thank you. Operator, can we move on to the next participant please?
Operator
Next one to ask questions, Gokul Hariharan from JPMorgan.
Gokul Hariharan
Happy New Year and thanks for taking my questions. First of all, could you give us an update on how we think about CapEx going into next couple of years as well, given the growth expectation is also now higher in the 15% to 20% range. Do we expect CapEx to peak out this year? Or should it continue to grow into next year? And maybe Wendell, could you also talk a little bit about how we think about capital intensity? When do we expect that to peak? And what is more like the steady-state as we get to the end of this particular growth period 2020 to 2025? That's my first question.
Jeff Su
Okay. Gokul, let me summarize, allow me to summarize your first question. Gokul was asking about our CapEx outlook. He notes that our growth is now higher at 15% to 20% CAGR for the next several years. So his question is how should he think about the CapEx. Is 2022 the peak? How does CapEx look for the next few years and also in terms of the long-term capital intensity?
Wendell Huang
Hi, Gokul. This is Wendell. Regarding CapEx number, this year, we guided $40 billion to $44 billion. Now remember that we spent the CapEx in the given year for the growth prospect in the next several years. So whenever there is – we think the growth outlook is good, we will continue our discipline investment going forward. We're not able to give guidance on CapEx beyond 2022 today.
And also the capital intensity, whenever we enter into a higher period of growth like today, the capital intensity will be high and which is appropriate. Now if the growth were to slowdown, the capital intensity will decline accordingly. From what we can see at this moment, longer term, maybe mid-30s remains appropriate level.
Jeff Su
Okay. Thank you. Does that answer your first question Gokul? Hello, Gokul. Are you on mute?
Gokul Hariharan
Sorry. Thanks for answering the first question. My second question is about one of your IDM customer, which has been a top 10 customer for TSMC, but now they are also reentering the foundry market aggressively and wanting to compete head-to-head with TSMC. How does TSMC navigate this situation given the market is also expecting this customer to be a bigger revenue contributor for TSMC in the HPC area over the next couple of years? Just wanted to understand how management thinks about this business relationship given that for some of the other IDM customers who are foundry competitors, TSMC doesn't do much direct business with them.
Jeff Su
Okay. Gokul, let me summarize your second question. Gokul's second question is in terms of a specific IDM customer of TSMC, but this customer is also entering foundry and also – so his question is how do we navigate the relationship given that in the past, we do not really work with IDMs who compete with us?
C. C. Wei
Okay. Gokul, this is C.C. Wei. Let me emphasize that we always operate in a good pace and support all our customers openly and fairly. And the IDM customer has been the same. That's also that TSMC's good customer. We also understand that the IDM customer has their own plans for future insourcing, and we already have taken this into our capacity planning consideration. Did I answer your question?
Gokul Hariharan
Is there any ways for you to protect your longer-term growth when you deal with this kind of a customer? Just wanted to understand how it differs from your traditional fabless customers where I think that insourcing question is not really on the table?
C. C. Wei
Well, as I said, we have already taken this into our capacity planning consideration. And our capacity planning is based on the long-term market demand profile, underpinned by the industry megatrend of 5G and HPC and the semiconductor content enrichment in very end devices. And we do not depend on any one single customer or product.
Jeff Su
Okay, Gokul.
Gokul Hariharan
Yes. Thank you very much.
Jeff Su
Thank you, Gokul. Operator, can we move on to the next participant please?
Operator
Next one to ask questions, Roland Shu from Citigroup.
Roland Shu
Hi, good afternoon, and congrats for your very good results and good outlook. First question of me is on your – C.C. you also mentioned you always build your capacity according to customers' long-term demand profile. But in the past, from time-to-time, you overbuild capacity for some nodes due to customers' focus always change. So how confident you are this time to [indiscernible] spend huge CapEx from 2021? And why do you think customers focused this time are more real than any time before? And also, what's your take of this semiconductor cycle? Will this cycle change at risk? Are your CapEx spending plan going forward? Thanks.
Jeff Su
Okay, Roland. So Roland's first question is really C.C. said that we build our capacity according to the long-term demand profile. His question is, though customers' forecasts can change. So how confident can we be? And how do we see this current cycle playing out? Is that correct, Roland?
Roland Shu
Yes.
C. C. Wei
Okay. Let me answer this question. For the difference actually this time, we see a structural increase in long-term market demand due to the multi-year industry megatrend of 5G, HPC and digitalization as well as some of the short-term imbalance that interruption of the supply chain brought about COVID-19 and geopolitical tension.
Let me say that how confident we are, very confident because, as I said, long-term structural increase in the content and in the unit. This time we add the content increase as one of the important factors which we never reported before, and it was driven that semiconductor industry at a higher utilization rate because we have a very good technology leadership.
Roland Shu
Yes. I think I have also a question, part of the question is for the cycle. What's your take of the semiconductor cycle now?
C. C. Wei
Well, we cannot predict the cycle, right? But even if there is a cycle coming, we do believe that TSMC with its technology leadership and excellent manufacturing and the customers trust will be in a better position in the upturn or downturn cycle.
Roland Shu
Okay. Understood. Thanks. Yes, for my second question, with your faster revenue growth and better margin going forward. For TSMC, apparently needs more capable and experienced management and employees for continuous growth going forward. However, some of your senior management are approaching legitimately retired age. So how are you going to retain the experience and the valuable management going forward? And also, by the way, what's the progress of your talent recruiting for your R&D and manufacturers set worldwide? Thanks.
Jeff Su
Okay. So Roland's second question is that his question really is around our talent. Part of it is our senior management. How do we keep our experienced and senior executives? And also as we expand our global manufacturing footprint, what is the progress of our talent recruitment of engineers and R&D?
Mark Liu
Roland, this is Mark. You're right. Our capable executives are our treasurers and they will bring the company forward. And as long as they are energetic, and they will want to contribute for this company, there's no forced retirement. For those top-notch executives, we will work with them if they want to stay.
Jeff Su
And then also, how about our talent recruitment globally as we expand?
Mark Liu
Yes. Talent recruitment, it is currently our focus as the company deal with this fast pace expansion, and we recruit particularly emphasized on the overseas recruiting. And as you can see, our expansion into U.S. manufacturing and also in Japan manufacturing and are the vehicle that we will be able to reach for more global talent through those operations and may extend to local R&D. So that is part of our strategy.
Jeff Su
Okay.
Roland Shu
Okay. Thanks.
Jeff Su
Thank you, Roland. Operator, can we move on to the next participant please?
Operator
Next one, we have Brett Simpson from Arete Research.
Brett Simpson
Yes. Thanks very much. My first question is for Wendell. Wendell, can you share with us how much prepayments and government subsidies TSMC received in 2021, and how we should think about prepayments and subsidies in 2022? And also how do you account for this, particularly the subsidies, how do we account for this in the P&L going forward? Thank you.
Mark Liu
Yes, go ahead.
Jeff Su
Sorry. Just to summarize Brett's question. So his first question, he wants to know how much prepayments and government subsidies that we received in 2021? How much do we expect in 2022? And how do we account for these in our financial statements?
Wendell Huang
Okay, Brett. Let me talk about the prepayment first. At the end of last year, we have received a total of US$6.7 billion in prepayment, and you can – those are included in the financial statement as temporary receipts from the customers. So going forward, you can look at our quarterly financial statement and find that numbers.
As to subsidies, different countries have different incentives and they come in different forms. So they are – some of them are related to asset reductions, some of them offset expenses and some of them tax reductions. And we follow that. We use different accounting treatment to record that in the financial statements.
Brett Simpson
Okay. Thank you, Wendell. I guess the prepayments this year will be higher than 2021. Is that a fair statement?
Wendell Huang
Well, I cannot share with you the details, but we expect that there are more.
Brett Simpson
Okay. Thank you. And my second question, looking at the Smartphone segment of your business, it grew 8% in 2021, which is well below some of your big customers. Can you talk about silicon content drivers? 5G has been a really big silicon content driver in 2021, and it will continue to in 2022. So I'm just wondering, can you maybe just share with us your perspective on what happened in 2021 in smartphones? Why only 8% growth? And how should we think about smartphones and the positive silicon content drivers from 5G this year?
Jeff Su
Okay. So Brett's question is focused on the smartphone. He notes that our smartphone platform grew 8% in NT dollar terms year-on-year in 2021. So his question, I guess, Brett, if I'm hearing you correctly, your question is sort of what is driving the slower growth in the smartphone despite the higher silicon content?
C. C. Wei
Well, let me answer the question. I mean that in terms of NT dollars, of course, it's only 8%, but in terms of the U.S. dollar, it's much higher. And the silicon content continued to increase every year. So we expect that will be one of the major contributor to TSMC's growth continuously.
Brett Simpson
Okay. Thank you very much.
Mark Liu
Yes, I think – let me add. The global smartphone unit growth last year is about 6%. So some of the – you see some of the company smartphone revenue may grow, it could be due to the pricing. But our pricing strategy, as you understand, is strategic, not optimistic. So we'll grow with the smartphone units in our business.
Brett Simpson
Thank you very much.
Jeff Su
Okay. Thank you, Brett. Operator, can we move on to the next caller, please?
Operator
Next one is Charles Shi from Needham & Company.
Charles Shi
Hi. Thank you for taking my question. Just a very quick clarification. C.C., I think you mentioned about the N3 number of tapeouts in the first year, you expect that to exceed the number of N5 tapeouts in the first year since now you have both N3 and N3E, is that a common on the original N3 alone or with N3E family, which includes both N3 and N3E?
Jeff Su
Okay. So Charles first question is that he wants to clarify in terms of tapeouts. When we say N3 tapeouts are greater than N5 in its first year. Is this N3 alone or N3 plus N3E?
C. C. Wei
Well, it's N3 for right now because of N3E – technology will be ready soon, and the mass production will be one year later. So now most of that tape-out if all of them are N3.
Charles Shi
Thank you. So now, I want to ask my question on potentially the gross margin profile for N3. I know it's going to start to meaningfully contribute to revenue next year. You've said in the past that the newest process node will take about seven to eight quarters to reach the corporate average. But now this time, I think one difference about N3 is that you have both smartphone and HPC being supported at the right – at the beginning of the launch of the N3 node. So my guess is that the revenue for smartphone and HPC ramp could really go parallel instead of one after another and which could really help your volume, your revenue. And could you comment on whether that seven to eight quarters of the margin dilution of the newest process node, maybe starting from N3, it will become shorter. That's my question. Thank you.
Jeff Su
Thank you, Charles. Please allow me to summarize your second question. So Charles second question is looking at the N3 profitability and gross margin. He observes in the past and you know typically it takes seven to eight quarters to reach the corporate average, But at N3, we have both – developed both smartphone and HPC platform. So these ramp in parallel, could N3 actually reach the corporate average in a shorter duration of time?
Wendell Huang
Okay. Charles, this is Wendell. It is too early to say when N3 can reach the corporate average gross margin at this stage as the volume production has not started yet. However, the initial outlook for every new node always looks challenging, and the increasing process complexity of leading nodes such as N3 brings even greater challenges. We will continue to work on selling our value and cost improvement to ensure that we earn the right profitability and returns.
Jeff Su
Okay. Charles, does that answer your second question?
Charles Shi
Yes, indeed. Thank you very much.
Jeff Su
Okay. Thank you. Operator, can we move on to the next participant, please?
Operator
Next one to ask questions, Mehdi Hosseini from SIG.
Mehdi Hosseini
Yes. Thanks for taking my question. The first one actually is a follow-up on the gross margin. For the March quarter, you're guiding to 53% to 55%, but your longer-term gross margin is around 53%. So does that mean that as we look beyond the Q1, there is a downward trend in gross margin? And also, how should we think about the long-term operating margin? And I have a follow-up.
Jeff Su
Okay. So Mehdi's first question is around gross margin. He notes our first quarter gross margin guidance is 53% to 55%. But Mehdi, let me clarify, our long-term gross margin guidance is 53% and higher gross margin. But nonetheless, Mehdi is asking, therefore, are we implying saying the margin outlook for the rest of the year will come down or decline.
Wendell Huang
Okay. Mehdi, this is Wendell. We're not prepared to talk about gross margin outlook for the subsequent quarters of the year, but please be reminded that there are six factors affecting our profitabilities. Those factors include the ramp and development of our advanced technology, price, cost, mix, utilization and foreign exchange rate. The foreign exchange rate is something that we cannot control and hard to predict. So summarizing all those factors together, we're saying that the long-term, we expect our gross margin to be 53% and higher. As to our operating margin, we're not giving out the operating margin guidance as of now.
Mehdi Hosseini
Okay. Thank you. And a quick follow-up. Can you also help us understand how the mix of revenue by process technology like seven, five and three will change in 2022 versus 2021?
Jeff Su
Okay. Mehdi's second question is asking revenue contribution by node. He is asking that N7, N5 and N3, what contribution will that be in 2022? And how is that different versus 2021?
Wendell Huang
Okay. Mehdi, we're not prepared to give the breakdown for the revenue contribution by node today, but the N5 will continue to ramp. So we expect the revenue contribution to continue to rise throughout the year.
Jeff Su
Yes. And I think we have said before, Mehdi, that N3 will begin the volume production in second half 2022, and you will start to see the revenue contribution in 2023.
Mehdi Hosseini
Okay. Great. Congratulations on great execution.
Jeff Su
Okay. Thank you, Mehdi. Operator, can we move to the next participant?
Operator
Next one to ask questions, Sunny Lin from UBS.
Sunny Lin
Hi. Good afternoon. Thank you for taking my question. Happy New Year. So my first question is on N3. So you mentioned that the number of tapeouts for N3 is higher than N5 in the first year. So now that we are getting pretty close to the mass production, I want to get your sense on the overall capacity outlook for N3 compared with N5? And also, if you could give us any sense of N3 revenue contribution in the first year of mass production?
Jeff Su
Okay, Sunny. So let me – please allow me to summarize your question. Her first question is on N3. Will N3 have a higher capacity or scale than N5?
C. C. Wei
Well, this is C.C. Wei. I would like to say I'm not able to comment on the specific capacity by node, but with a strong level of customer interest and engagement, N3 will be another large and long-lasting node for TSMC just like our N5 and N7.
Jeff Su
And then Sunny is also asking about the revenue contribution of N3?
C. C. Wei
It's still too early to talk about.
Sunny Lin
Sure.
C. C. Wei
Yes.
Sunny Lin
No problem. So a follow-up will be that if we think about the N5 ramp-up, I think the second wave customer adoption seems to only occur in 2022, which is about two years after mass production. Looking at N3, with higher contribution and faster adoption of HPC, could you help us think about what the ramp-up could be like? Would the scale pick up a bit faster because of HPC? Thank you.
Jeff Su
Okay. Sunny’s second question is also on N3. And she notes her question is that in N5, the second wave of adoption occurred two years after the initial production, but with N3 and the higher and greater interest from HPC customers, would N3 see a faster ramp-up?
C. C. Wei
Well, all I can say right now is our customers are engaged with N3, N3E quite more than what we observed in the N5. However, how to quantify that ramp up, it's too early to say. The engagement is very strong. All I can say that.
Sunny Lin
Sure. Maybe a very quick follow-up is the equipment supply. Are you seeing any potential bottleneck for you to ramp up a larger capacity for N3 next few years, especially considering potential disruptions for ASML's EUV tools?
Jeff Su
Okay. So last question from Sunny is that in terms of our capacity expansion, are we seeing any bottlenecks or potential bottlenecks in our capacity plans, particularly in terms of ASML's EUV tools?
C. C. Wei
Sunny this is a very good question. All I can say right now is that 2022, we are okay. And now we are working on 2023, so that we can ramp up the capacity to meet customers' demand.
Sunny Lin
Got it. Thank you very much.
Jeff Su
Thank you, Sunny. Operator, let's move on to the next participant, please?
Operator
Next one, we have Sebastian Hou from Neuberger Berman
Sebastian Hou
Hello. Can you hear me?
Jeff Su
Yes. We can.
Sebastian Hou
Hello. Yes. Thanks for taking my question. I only have one. This is more of a mathematic question. So if I look at on TSMC there your – how long did you translate your CapEx to your revenue? It looks around like 1.7x, which means that you’ve used double your CapEx in three years, you'll probably double your revenue in five years or triple or more similar to that kind of the equation. So I'm curious about this time around, whether that kind of relationship or translation time you hold. And then if I look at your CapEx numbers in 2018 is where – 2019 is where you start to move out CapEx aggressively. And in three years, you triple CapEx. In four years, you quadruple your CapEx. So if that equation continue to hold, then does that mean that you're – by 2023 or 2024 your revenue will exceed US$100 billion. And by 2025, your revenue will be around US$130 billion to US$140 billion which means that your long-term over the next three, four years revenue CAGR, not just 15% to 20%, but actually 25% to 30%?
Jeff Su
Okay. Sebastian’s question really is about the relationship between CapEx and revenue. He is asking on his calculations, of course, how long does it take CapEx to translate into revenue. He observed in the past that the CapEx doubling in three years led to revenue doubling in about five years. So now he wants to apply it to this time to say, well, if CapEx has tripled from 2018, then can he expect TSMC revenue to be US$100 billion. Sebastian, you said in 2024?
Sebastian Hou
2024. Yes.
Jeff Su
So US$100 billion level in kind of 2024, US$130 billion to US$140 billion in 2025.
Wendell Huang
Okay. Sebastian, this is Wendell. Well, frankly, speaking, we didn't do that kind of math ourselves. But what our guidance is, as C.C. mentioned earlier today, its 15% to 20% CAGR in the next several years. So CAGR doesn't mean that every year will grow that kind of numbers. And also its next several years is a longer-term numbers. So I would not try to use the mathematics that you just used. Things are not that simple, I think.
Sebastian Hou
Yes. Thank you. Definitely not that simple. But maybe let me simplify the question a bit or put another way is that the CapEx to revenue translation time, do you see any change on that now versus five or 10 years ago? Is it getting slower or faster or the same kind of the pace?
Mark Liu
Yes, go ahead.
Jeff Su
Yes. So I think Sebastian is asking, so to try to simplify it in terms of CapEx to revenue. Are we seeing it at the same pace as in the past? Is it getting longer? Is it getting shorter? I think Chairman can address this.
Mark Liu
Let me answer this. I think because of the equipment lead time is much longer and also the technology complexity is longer. So that might increase a little bit in terms of the lead time leading to revenue.
Sebastian Hou
Okay. That's fair. That's all for me. Thank you.
Jeff Su
Okay. Thank you, Sebastian. Operator, can we move on to the next participant, please?
Operator
Next one, we have Laura Chen from KGI. Go ahead please.
Laura Chen
Hi. Thank you. Happy New Year. Thanks for taking my question. I have questions on your overseas expansion. Just wondering would TSMC consider joint venture in Europe like what you announced in Japan? And what's your current preference? Do you prefer 100% owned or you would be more open for potential joint venture like what TSMC did a long time ago in WaferTech and Singapore with NXP before? That’s my first question.
Jeff Su
Okay. So Laura, let me summarize your first question. It is about our overseas fabs, and she's wondering will we consider joint venture as a future model going forward, whether it's in Europe or elsewhere? Is this something that we have done with WaferTech in the past and also recently with Japan, is JV the new model going forward?
Mark Liu
Yes. Laura, this is Mark. To answer your first question about Europe, this is still very early stage we are assessing. To start the overseas fab, there are many, many considerations. Among them top few is the – first is the – our customers' needs. And so in this current planning in the Japan fab, indeed, it was a joint venture. We haven't done joint venture for many years. And we think this joint venture is also a special case.
Typically, every TSMC fab no matter where it's located, we will serve all the customers from around the world and this Japan joint venture were also the same. However, in Japan, we have a very large customer who is a – have a single technology, and we can also leverage their operating and manufacturing experience in Japan, which help us ramp in the learning curve. So that made us make the decision of a joint venture fab with Sony, where we have a majority share. So this is a special case. And we typically, we are considered to proceed a solely-owned fab with 100% ownership.
Laura Chen
Yes. Thank you. That's very clear. And also, my second question is specifically on the N6-based RF transceiver, I recall that in [indiscernible] back in June last year, you mentioned that the N6-based transceiver for 5G. Can you give us more update as we know that there's not much expansion on 16-nanometer or 12-nanometer which are the major technology node for 5G RF transceiver? And with the limited supply, just curious about the N6-based 5G RF transceiver, would that become the mainstream or what TSMC's capacity plan in this area and also the client engagement for the N6-based RF? Thanks.
Jeff Su
Okay. Laura, let me try to summarize. Her question is about RF transceivers for 5G. She wants to know there doesn't seem to be any major capacity expansion. So what is TSMC's strategy for RF transceivers for 5G and also N6? You're talking N16 or N6, sorry, Laura?
Laura Chen
N6 because right now, most of that transceiver are in 16, my understanding. Yes. But there is not much difference.
Jeff Su
So she wants to update on our N6 RF transceiver.
Laura Chen
Yes. Thank you very much.
C. C. Wei
Okay. Laura, we always are working with our customers closely, right? And the customer makes their decision to choose which technology node and to match their product design best and you are right. Right now, transceiver is start moving from 28-nanometer to 16 and now moving to N6. We are expanding our capacity to meet the demand. That's all I can say. Did that answer your question?
Laura Chen
Yes. Thank you. I think, can I follow-up that will – we expect that N6-based RF will be the majority sometime, say, in 2023 or 2024?
Jeff Su
So Laura's follow-up is, can we expect N6 RF to be the majority by 2023 or 2024?
C. C. Wei
Well, Laura I should not comment on that. This is between TSMC and the TSMC's customers.
Laura Chen
Got it. Thank you very much.
Jeff Su
Okay. Thank you. Operator, in the interest of time, I think we'll take the final two questions.
Operator
Next one to ask questions, Krish Sankar from Cowen and Company.
Krish Sankar
Yes. Thanks for taking the question and congrats on the really strong results. My first question is on gross margins. Wendell, you said long-term gross margin about 53%. The last couple of quarters, you said it will be over 50%. So is it safe to assume that the price increases are the big reason for this increase in gross margin? And are these structural or are they cyclical? And is there some other variable in play given in gross margin improvement since it's interesting that CapEx is going up, but the depreciation is not having an impact longer term on the gross margins? That's my first question.
Jeff Su
Okay. Krish, let me summarize your first question. So Krish notes that Wendell and C.C. said, our long-term gross margin target, last time we said 50% and higher. Now today, we said 53% and higher. So is this because of price? And is this a cyclical element only? Or is there something structural in terms of a higher 53% and higher long-term gross margin target?
Wendell Huang
Yes. Well, let me share with you that. We are talking about long-term. So several years down the road. I think that shouldn't be a cyclical issue. So previously, it's long-term 50% and higher. Now it's long-term, 53% and higher, okay. So that's the difference. And we are working closely with our customers and suppliers to both sell our value and drive our cost improvements. So those are the – this is the result of all these efforts together.
Krish Sankar
Got it. All right. And then my second question is kind of a two part question. The CapEx and the OpEx question, you spoke about $40 billion to $44 billion in CapEx. Can you just tell us how much of the CapEx is going to be split between Taiwan and U.S. and Japan, like a geographic breakdown of that $40 billion to $44 billion? And then on the OpEx side, I understand you don't want to comment on long-term OpEx. But I'm just kind of curious, it's rising global inflation and your interest in recruiting talents in Arizona, how to think about OpEx growth relative to inflation growth?
Jeff Su
Okay. So Krish’s second question. First is in terms of the CapEx guidance that we gave this year, $40 billion to $44 billion. He wants to know what portion is for overseas capacity as compared to Taiwan.
Wendell Huang
Okay. For this year, out of the $40 billion and $44 billion, we really don't – cannot comment on the split between overseas and Taiwan. We normally split or give the breakdown guidance between advanced and mature specialty nodes.
Jeff Su
And then the second part is on OpEx. What is the impact – although we're not giving an operating margin guidance, but rising global inflation, we're trying to recruit talent overseas. What is the outlook for our OpEx?
Wendell Huang
Well, we try very hard, work very hard to control our operating expenses and to achieve operating leverage. You can probably see from the track record in the past few years and past few quarters that we're always able to achieve operating leverage. And that's something that we will continue to work very hard on.
Krish Sankar
Okay. Thank you very much.
Jeff Su
Okay. Thank you, Krish. Operator, in the interest of time, we will take the last participant's questions.
Operator
Last one to ask questions, Frank Lee from HSBC. Go ahead, please.
Frank Lee
All right. Thank you for taking the question. Just had a question, maybe if I can follow-up on the CapEx. I think a year ago, you guys gave a longer term fee or CapEx target. I understand at this time, your CapEx is only given for 2022. Just wanted to understand are there any – is there more uncertainties about giving the longer-term CapEx that we're not seeing in the longer-term target being given? And I think last quarter you guys have also talked about your CapEx intensity was going to be more than 50% in 2021, but long-term target you said in the 30s. But last quarter, I think it was implied that it was not going to come down to the 30s in the next two or three years. Is that still the case? That's the first question.
Jeff Su
Okay. So Frank's first question is on CapEx. He said we had talked about $100 billion CapEx in the next three years. His question is why are we not guiding for next three years CapEx now? Is there some concern we have?
Wendell Huang
Okay. Frank, we will not comment on the CapEx outlook beyond 2022 to date. Please be reminded that every year, our CapEx is spent in anticipation of the growth that will follow. So as long as our growth outlook looks good, then we will continue our investment approach, the disciplined investment approach to support our customers and capture the growth opportunities.
And as regarding the capital intensity, yes. As I said earlier that in the period of high growth like today, it is quite normal or it is appropriate for the capital intensity to be high. And if our growth were to slowdown, then the capital intensity is expected to decline accordingly. So from what we can see at this moment, you're asking several years from now or probably – a normal situation will probably be in the mid-30s.
Frank Lee
Okay. But is that likely in the next two or three years? Or it's going to be further out could we get at that level?
Wendell Huang
Long-term, several years.
Frank Lee
Okay. Thank you.
Jeff Su
I think we'll give you year-by-year updates. Yes. Okay?
Frank Lee
Okay. Great. And then I guess my second question is, I think, a consistent message on this call was really about the semi content structure, semi content growth. I think you guys have mentioned this a couple of times in this call. Over the past year though, I guess, just wanted to get your sense of the semi content growth, something that seems like it's been well understood. But has there been an incremental surprise in terms of the semi content for you guys over the past year that has a more positive structural long-term growth? And if so, can you share maybe by what application? Or are we seeing content growth and mature nodes as well?
Jeff Su
Okay. So Frank's second question is on the semiconductor enrichment. His question is what are we seeing? Have we seen upside in the last year? And in terms of what specific applications are driving the semiconductor content enrichment. Maybe C.C. can address this last question.
C. C. Wei
Yes, sure. I will give you a live example. If you look at the new car being introduced in the market, you will find out that the semiconductor content has been dramatically increased. And the same happened to data centers, server and et cetera, et cetera.
Frank Lee
Okay. [Indiscernible] is it fair to say then that the semi content growth is something that is structured across all nodes, including advanced as well as some of the specialty…
Jeff Su
So Frank's question then with the semiconductor enrichment, is this only for the leading nodes? Will this also – is this also hold true at the mature nodes as well?
C. C. Wei
Well, it’s across all the technologies that I can say. I'll give you one example, again. If you look at the ADAS, that's a leading-edge technology, if you look at the power management, that's a mature technology.
Jeff Su
Okay. All right. Frank, thank you.
Frank Lee
Okay. Thank you.
Jeff Su
Thank you, C.C. Thank you, Frank. This concludes our Q&A session. Before we conclude today's conference, please be advised that the replay of the conference will be accessible within one hour from now. The transcript will become available 24 hours from now. Both are going to be available through TSMC's website at www.tsmc.com.
So thank you for joining us today. We hope everyone continues to stay healthy and safe. Happy New Year and we hope you join us again next quarter. Goodbye, and have a good day.