Q3 2025 Taiwan Semiconductor Manufacturing Co Ltd Earnings Call
Speaker #1: ?????????????????????????????2025???????????????????????????????????????????????? Good afternoon, everyone, and welcome to TSMC's third quarter 2025 earnings conference call. This is Jeff Su, TSMC's Director of Investor Relations, and your host for today.
Jeff Su: 大家午安, 我是台积电法人关系处的苏志凯, 欢迎您参加台积公司2025年第三季的法人说明会。由于本法说会是向全球投资人同时连线转播, 所以我们会全程使用英文, 请您见谅。 Good afternoon, everyone, and welcome to TSMC's third quarter 2025 earnings conference call. This is Jeff Su, TSMC's Director of Investor Relations, and your host for today. 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 Senior Vice President and CFO, Mr. Wendell Huang, will summarize our operations in the third quarter 2025, followed by our guidance for the fourth quarter 2025. Afterwards, Mr. Huang and TSMC's Chairman and CEO, Dr. C.C. Wei, will jointly provide the company's key messages. We will open the line for Q&A.
Speaker #1: 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.
Speaker #1: 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 Senior Vice President and CFO, Mr. Wendell Huang, will summarize our operations in the third quarter of 2025, followed by our guidance for the fourth quarter of 2025.
Speaker #1: Afterwards, Mr. Huang and TSMC's Chairman and CEO, Dr. C.C. Wei, will jointly provide the company's key messages. Then we will open the line for Q&A.
Speaker #1: 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.
Jeff Su: As usual, I would like to remind everybody that today's discussions may contain forward-looking statements that are subject to significant risk 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 in our press release. I would like to turn the call over to TSMC CFO, Mr. Wendell Huang, for the summary of operations and the current quarter guidance.
Speaker #1: Please refer to the safe harbor notice that appears in 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.
Speaker #2: Thank you, Jeff. Good afternoon, everyone. Thank you for joining us today. My presentation will start with financial highlights for the third quarter 2025. After that, I will provide the guidance for the fourth quarter 2025.
Wendell Huang: Thank you, Jeff. Good afternoon, everyone. Thank you for joining us today. My presentation will start with financial highlights for the third quarter 2025. After that, I will provide the guidance for the fourth quarter 2025. Third quarter revenue increased 6% sequentially in NT, as our business was supported by strong demand for our leading-edge process technologies. In U.S. dollar terms, revenue increased 10.1% sequentially to $33.1 billion, slightly ahead of our third quarter guidance. Gross margin increased 0.9% percentage point sequentially to 59.5%, primarily due to cost improvement efforts and a higher capacity utilization rate, partially offset by an unfavorable foreign exchange rate and dilution from our overseas fabs. Accordingly, operating margin increased 1.0 percentage point sequentially to 50.6%. Overall, our third quarter EPS was 17.44 NT, up 39% year over year, and ROE was 37.8%. Now, let's move on to revenue by technology.
Speaker #2: Third quarter revenue increased 6% sequentially in NT, as our business was supported by strong demand for our leading-edge process technologies. In US dollar terms, revenue increased 10.1% sequentially to $33.1 billion, slightly ahead of our third quarter guidance.
Speaker #2: Gross margin increased 0.9 percentage points sequentially to 59.5%, primarily due to cost improvement efforts and a higher capacity utilization rate, partially offset by an unfavorable foreign exchange rate and dilution from our overseas fabs.
Speaker #2: Accordingly, operating margin increased 1.0% sequentially to 50.6%. Overall, our third quarter EPS was $17.44 NT, up 39% year-over-year, and ROE was 37.8%. Now, let's move on to revenue by technology.
Speaker #2: Three-nanometer process technology contributed 23% of wafer revenue in the third quarter, while five-nanometer and seven-nanometer accounted for 37% and 14%, respectively. Advanced technologies, defined as 7-nanometer and below, accounted for 74% of wafer revenue.
Wendell Huang: Three-nanometer process technology contributed 23% of wafer revenue in the third quarter, while five-nanometer and seven-nanometer accounted for 37% and 14% respectively. Advanced technologies, defined as seven-nanometer and below, accounted for 74% of wafer revenue. Moving on to revenue contribution by platform, HPC remained flat quarter over quarter to account for 57% of our third quarter revenue. Smartphone increased 19% to account for 30%. IoT increased 20% to account for 5%. Automotive increased 18% to account for 5%. DCE decreased 20% to account for 1%. Moving on to the balance sheet, we ended the third quarter with cash and marketable securities of 2.8 trillion NT, or $90 billion U.S. dollars. On the liability side, current liability decreased by 101 billion NT, quarter over quarter, mainly due to the decrease of 112 billion NT in accrued liabilities and others, as we paid out 2025 provisional tax of 136 billion NT.
Speaker #2: Moving on to revenue contribution by platform, HPC remained flat quarter-over-quarter, accounting for 57% of our third-quarter revenue. Smartphone increased 19% to account for 30%, IoT increased 20% to account for 5%, automotive increased 18% to account for 5%, and DCE decreased 20% to account for 1%.
Speaker #2: Moving on to the balance sheet, we ended the third quarter with cash and marketable securities of $2.8 trillion NT, or $90 billion US dollars.
Speaker #2: On the liabilities side, current liabilities decreased by NT$101 billion quarter-over-quarter, mainly due to the decrease of NT$112 billion in accrued liabilities and others, as we paid out 2025 provisional tax of NT$136 billion.
Speaker #2: In terms of financial ratios, accounts receivable turnover days increased two days to 25 days, while days of inventory decreased two days to 74 days, due to strong shipments in N3 and N5.
Wendell Huang: In terms of financial ratios, accounts receivable turnover days increased two days to 25 days. Days of inventory decreased two days to 74 days due to strong shipment in N3 and N5. Regarding cash flow and CapEx, during the third quarter, we generated about 427 billion NT in cash from operations, spent 287 billion in CapEx, and distributed 117 billion for Q4 2024 cash dividend. Overall, our cash balance increased 106 billion NT to 2.5 trillion at the end of the quarter. In U.S. dollar terms, our third quarter capital expenditures totaled $9.7 billion. I have finished my financial summary. Now, let's turn to our current quarter guidance. Based on the current business outlook, we expect our fourth quarter revenue to be between $32.2 billion and $33.4 billion, which represents a 1% sequential decrease or a 22% year-over-year increase at the midpoint.
Speaker #2: Regarding cash flow and CAPEX, during the third quarter, we generated about NT$427 billion in cash from operations, spent NT$287 billion in CAPEX, and distributed NT$117 billion for the fourth quarter 2024 cash dividend.
Speaker #2: Overall, our cash balance increased by NT$106 billion to $2.5 trillion at the end of the quarter. In U.S. dollar terms, our third quarter capital expenditures totaled $9.7 billion.
Speaker #2: I have finished my financial summary. Now, let's turn to our current quarter guidance. Based on the current business outlook, we expect our fourth quarter revenue to be between $32.2 billion and $33.4 billion, which represents a 1% sequential decrease or a 22% year-over-year increase at the midpoint.
Speaker #2: Based on the exchange rate assumption of 1 US dollar to 30.6 NT, gross margin is expected to be between 59 and 61%, operating margin between 49 and 51%, thus concludes my financial presentation.
Wendell Huang: Based on the exchange rate assumption of $1 to 30.6 NT, gross margin is expected to be between 59% and 61%, operating margin between 49% and 51%. This concludes my financial presentation. Now, let me turn to our key messages. I will start by talking about our third quarter 2025 and fourth quarter 2025 profitability. Compared to the second quarter, our third quarter gross margin increased by 90 basis points sequentially to 59.5%, primarily due to cost improvement efforts and a higher overall capacity utilization rate, partially offset by margin dilution from our overseas fabs and an unfavorable foreign exchange rate. Compared to our third quarter guidance, our actual gross margin exceeded the high end of the range provided three months ago by 200 basis points, mainly as the actual third quarter exchange rate was $1 to 29.91 NT, compared to our guidance of $1 to 29 NT.
Speaker #2: Now, let me turn to our key messages. I will start by talking about our third quarter 2025 and fourth quarter 2025 profitability. Compared to the second quarter, our third quarter gross margin increased by 90 basis points sequentially to 59.5%, primarily due to cost improvement efforts and a higher overall capacity utilization rate, partially offset by margin dilution from our overseas Fabs and an unfavorable foreign exchange rate.
Speaker #2: Compared to our third-quarter guidance, our actual gross margin exceeded the high end of the range provided three months ago by 200 basis points, mainly as the actual third-quarter exchange rate was $1.00 to NT$29.91, compared to our guidance of $1.00 to NT$29.00.
Speaker #2: In addition, we also delivered better-than-expected cost improvement efforts. We have just guided our fourth-quarter gross margin to increase by 50 basis points to 60% at the midpoint, primarily driven by a more favorable foreign exchange rate, partially offset by continued dilution from our overseas Fabs.
Wendell Huang: In addition, we also delivered better-than-expected cost improvement efforts. We have just guided our fourth quarter gross margin to increase by 50 basis points to 60% at the midpoint, primarily driven by a more favorable foreign exchange rate, partially offset by continued dilution from our overseas fabs. While the cost of overseas fabs remains higher, thanks to the company's overall larger scale, we now expect the gross margin dilution from the ramp-up of our overseas fabs to be closer to 2% in the second half of 2025. For the full year 2025, we now expect it to be between 1% to 2% as compared to 2% to 3% previously. Looking ahead, we continue to forecast the gross margin dilution from the ramp-up of our overseas fabs in the next several years to be 2% to 3% in the early stages and widen to 3% to 4% in the latter stages.
Speaker #2: While the cost of overseas Feds remained higher, thanks to the company's overall larger scale, we now expect the gross margin dilution from the ramp-up of our overseas Feds to be closer to 2% in the second half of 2025.
Speaker #2: For the full year 2025, we now expect it to be between 1% to 2%, as compared to 2% to 3% previously. Looking ahead, we continue to forecast the gross margin dilution from the ramp-up of our overseas fabs in the next several years to be 2% to 3% in the early stages and widen to 3% to 4% in the latter stages.
Speaker #2: We will leverage our increasing size in Arizona and work on our operations to improve the cost structure. We will also continue to work closely with our customers and suppliers to manage the impact.
Wendell Huang: We will leverage our increasing size in Arizona and work on our operations to improve the cost structure. We will also continue to work closely with our customers and suppliers to manage the impact. Overall, with our fundamental competitive advantages of manufacturing technology leadership and large-scale production base, we expect TSMC to be the most efficient and cost-effective manufacturer in every region that we operate. Now, let me make some comments on our 2025 CapEx. As the structured AI-related demand continues to be very strong, we continue to invest to support our customers' growth. We are narrowing the range of our 2025 CAPEX to be between $40 billion and $42 billion, as compared to $38 billion to $42 billion previously. About 70% of the capital budget will be allocated for advanced process technologies.
Speaker #2: Overall, with our fundamental competitive advantages, manufacturing technology leadership, and large-scale production base, we expect TSMC to be the most efficient and cost-effective manufacturer in every region that we operate.
Speaker #2: Now, let me make some comments on our 2025 CAPEX. As the structure of AI-related demand continues to be very strong, we continue to invest to support our customers' growth.
Speaker #2: We are narrowing the range of our 2025 CAPEX to be between $40 billion and $42 billion, as compared to $38 billion to $42 billion previously.
Speaker #2: About 70% of the capital budget will be allocated for advanced process technologies. About 10% to 20% will be spent on specialty technologies, and about 10% to 20% will be spent on advanced packaging, testing, mask making, and others.
Wendell Huang: About 10% to 20% will be spent for specialty technologies, and about 10% to 20% will be spent for advanced packaging, testing, mask making, and others. At TSMC, a higher level of capital expenditures is always correlated with higher growth opportunities in the following years. Even as we invest for the future growth with this higher level of CAPEX spending in 2025, we remain committed to delivering profitable growth to our shareholders. We also remain committed to a sustainable and steadily increasing cash dividend per share on both an annual and quarterly basis. Now, let me turn the microphone over to C.C.
Speaker #2: At TSMC, a higher level of capital expenditures is always correlated with higher growth opportunities in the following years. Even as we invest for future growth with this higher level of CAPEX spending in 2025, we remain committed to delivering profitable growth to our shareholders.
Speaker #2: We also remain committed to a sustainable and steadily increasing cash dividend per share, on both an annual and quarterly basis. Now, let me turn the microphone over to C.C.
Speaker #3: Thank you, Wendell. Good afternoon, everyone. First, let me start with our near-term demand outlook. We concluded our third quarter with revenue of $333.1 billion, slightly above our guidance in U.S. dollar terms, mainly due to the strong demand for our leading-edge process technologies.
C.C. Wei: Thank you, Wendell. Good afternoon, everyone. First, let me start with our near-term demand outlook. We concluded our third quarter with revenue of $33.1 billion, slightly above our guidance in U.S. dollar terms, mainly due to the strong demand for our leading-edge process technologies. Moving into the fourth quarter 2025, we expect our business to be supported by continued strong demand for our leading-edge process technologies. We continue to observe robust AI-related demand throughout 2025, while non-AI end market segments have bottomed out and are seeing a mild recovery. Supported by our strong technology differentiation and broad customer base, we now expect our full-year 2025 revenue to increase by close to mid-30% year over year in U.S. dollar terms.
Speaker #3: Moving into the fourth quarter of 2025, we expect our business to be supported by continued strong demand for our leading-edge process technologies. We continue to observe robust AI-related demand throughout 2025, while non-AI segments have partnered out and are seeing a mild recovery.
Speaker #3: Supported by our strong technology differentiation and broader customer base, we now expect our four-year 2025 revenue to increase by close to mid-30% year-over-year in U.S. dollar terms.
Speaker #3: While we have not observed any change in our customers' behavior so far, we understand there are uncertainties and risks from the potential impact of tariff policies, especially in consumer-related and price-sensitive end market segments.
C.C. Wei: While we have not observed any change in our customers' behavior so far, we understand there are uncertainties and risks from the potential impact of tariff policies, especially in consumer-related and price-sensitive end market segments. As such, we will remain mindful of the potential impact and be prudent in our business planning going into 2026 while continuing to invest for the future megatrend. Amidst the uncertainty, we will also continue to focus on the fundamentals of our business, that is technology leadership, manufacturing excellence, and customer trust, to further strengthen our competitive position. Next, let me talk about the AI demand outlook and TSMC's capacity planning process disciplines. Recent developments in the AI market continue to be very positive. The explosive growth in token volume demonstrates the increasing consumer AI model adoption, which means more and more computation is needed, leading to more leading-edge silicon demand.
Speaker #3: As such, we will remain mindful of the potential impact and be prudent in our business planning going into 2026, while continuing to invest for the future mega-trend.
Speaker #3: Amidst the uncertainty, we will also continue to focus on the fundamentals of our business: that is, technology leadership, manufacturing excellence, and customer trust, to further strengthen our competitive position.
Speaker #3: Next, let me talk about the AI demand outlook and TSMC's capacity planning process disciplines. Recent developments in the AI market continue to be very positive.
Speaker #3: The explosive growth in token volume demonstrated increasing consumer AI model adoption, which means more and more computation is needed, leading to more demand for leading-edge silicon.
Speaker #3: Companies such as TSMC are leveraging AI internally to drive greater productivity and efficiency and to create more value. As such, enterprise AI is another source of demand. In addition, we continue to observe the rising emergence of sovereign AI.
C.C. Wei: Companies such as TSMC, we are leveraging AI internally to drive greater productivity and efficiency to create more value. As such, enterprise AI is another source of demand. In addition, we continue to observe the rising emergence of sovereign AI. We are also happy to see continued strong outlook from our customers. In addition, we directly receive very strong signals from our customers' customers requesting the capacity to support their business. Thus, our conviction in the AI megatrend is strengthening, and we believe the demand for semiconductors will continue to be very fundamental. As a key enabler of AI applications, TSMC's biggest responsibility is to prepare the most advanced technologies and necessary capacity to support our customers' growth. To address the structural increase in the long-term market demand profile, TSMC employs a disciplined and robust capacity planning system.
Speaker #3: We are also happy to see a continued strong outlook from our customers. In addition, we directly receive very strong signals from our customers' customers requesting the capacity to support your business.
Speaker #3: Thus, our conviction in the AI mega-trend is strengthening, and we believe the demand for semiconductors will continue to be very fundamental. As a key enabler of AI applications, TSMC's biggest responsibility is to prepare the most advanced technologies and necessary capacity to support our customers' growth.
Speaker #3: To address the structural increase in the long-term market demand profile, TSMC employs a disciplined and robust capacity planning system. Externally, we work closely with our customers and our customers' customers to plan our capacity.
C.C. Wei: Externally, we work closely with our customers and our customers' customers to plan our capacity. We have more than 500 different customers across all the end market segments. In addition, as process technology complexity increases, the engagement lead time with customers is now at least two to three years in advance. Therefore, we probably get the deepest and widest loop possible in the industry. Internally, our planning system involves multiple teams across several functions to assess and evaluate the market demand from both top-down and bottom-up approaches to determine the appropriate capacity to build. This is especially important when we have such high forecasted demand from AI-related businesses. As the world's most reliable and effective capacity provider, we will continue to work closely with our customers to invest in leading-edge specialty and advanced packaging technologies to support their growth.
Speaker #3: We have more than 500 different customers across all the end market segments. In addition, as process technology complexity increases, the engagement lead time with customers is now at 2 to 3 years in advance.
Speaker #3: Therefore, we probably get the deepest and widest look possible in the industry. Internally, our planning system involves multiple teams across several functions to assess and evaluate the market demand from both a top-down and bottom-up approach.
Speaker #3: To determine the appropriate capacity to build, this is especially important when we have such high forecasted demand from AI-related business. As the world's most reliable and effective capacity provider, we will continue to work closely with our customers to invest in leading-edge specialty and advanced packaging technologies to support your growth.
Speaker #3: We will also remain disciplined and robust in our capacity planning approach to ensure we deliver profitable growth for our shareholders. Now, let me talk about TSMC's global manufacturing footprint update.
C.C. Wei: We will also remain disciplined and robust in our capacity planning approach to ensure we deliver profitable growth for our shareholders. Now, let me talk about TSMC's global manufacturing footprint update. All our overseas decisions are based on our customers' needs, as they value some geographic flexibility and the necessary level of government support. This is also to maximize the value for our shareholders. With a strong collaboration and support from our leading U.S. customers and the U.S. federal, state, and city governments, we continue to speed up our capacity expansion in Arizona. We are making tangible progress and executing well to our plan. In addition, we are preparing to upgrade our technologies faster to N2 and more advanced process technologies in Arizona, given the strong AI-related demand from our customers.
Speaker #3: All our overseas decisions are based on our customers' needs, as they value some geographic flexibility and the necessary level of government support. This is also to maximize the value for our shareholders.
Speaker #3: With strong collaboration and support from our leading U.S. customers, as well as the U.S. federal, state, and city governments, we continue to speed up our capacity expansion in Arizona.
Speaker #3: We are making tangible progress and executing well to our plan. In addition, we are preparing to upgrade our technologies faster to end tool and more advanced process technologies in Arizona.
Speaker #3: Given the strong AI-related demand from our customers, we are close to securing a second large piece of land nearby to support our current expansion plans and provide more flexibility in response to the very strong multi-year AI-related demand.
C.C. Wei: Furthermore, we are close to securing a second large piece of land nearby to support our current expansion plans and provide more flexibility in response to the very strong multi-year AI-related demand. Our plan will enable TSMC to scale up to an independent gigabyte cluster in Arizona to support the needs of our leading-edge customers in smartphone, AI, and HPC applications. Next, in Japan, thanks to the strong support from the Japan central, prefectural, and local government, our first specialty fab in Kumamoto has already started volume production in late 2024 with very good yield. The construction of our second fab has begun, and the ramp schedule will be based on our customers' needs and market conditions. In Europe, we have received strong commitment from the European Commission and the German federal, state, and city governments.
Speaker #3: Our plan will enable TSMC to scale up to an independent gigafactory cluster in Arizona to support the needs of our leading-edge customers in smartphone AI and HPC applications.
Speaker #3: Next, in Japan, thanks to the strong support from the Japan Central Prefectural and Local Government, our first specialty fab in Kumamoto has already started rolling production in late 2024 with a very good yield.
Speaker #3: The construction of our second fab has begun, and the ramp schedule will be based on our customers' needs and market conditions. In Europe, we have received strong commitments from the European Commission, as well as the German Federal State and City Governments.
Speaker #3: Construction of our specialty fab in Dresden, Germany, has also started, and we are progressing smoothly with our plans. The ramp schedule will be based on our customers' needs and market conditions.
C.C. Wei: Construction of our specialty fab in Dresden, Germany, has also started, and we are progressing smoothly with our plans. The ramp schedule will be based on our customers' needs and market conditions. In Taiwan, with support from the Taiwan government, we are preparing for multiple phases of two-nanometer fab in both Hsinchu and Kaohsiung Science Parks. We will continue to invest in leading-edge and advanced packaging facilities in Taiwan over the next several years. By expanding our global footprint, we are continuing to invest in Taiwan. TSMC can continue to be the trusted technology and capacity provider of the global logic IC industry for years to come. Finally, let me talk about our N2 and A16 status. Our two-nanometer and A16 technologies lead the industry in addressing a sensible demand for energy-efficient computing, and almost all innovators are working with TSMC.
Speaker #3: In Taiwan, we receive support from the Taiwan government. We are preparing for multiple phases of a two-nanometer fab in both Hsinchu and Kaohsiung Science Parks. We will continue to invest in leading-edge and advanced packaging facilities in Taiwan.
Speaker #3: Over the next several years, by expanding our global footprint, we will continue to invest in Taiwan. TSMC can continue to be the trusted technology and capacity provider of the global large IC industry for years to come.
Speaker #3: Finally, let me talk about our end-to-end F-16 status. Our 2-nanometer and F-16 technologies lead the industry in addressing a sustainable demand for energy-efficient computing, and almost all innovators are working with TSMC.
Speaker #3: End-to-end is well on track for rolling production later this quarter. With good yield, we expect a faster ramp in 2026, fueled by both smartphone and HPC AI applications.
C.C. Wei: N2 is well on track for volume production later this quarter. With good yield, we expect a faster ramp in 2026, fueled by both smartphone and HPC AI applications. With our strategy of continuous enhancement, we also introduce N2P as an extension of our N2 family. N2P features further performance and power benefits on top of N2 and volume production scheduled for the second half of 2026. We also introduced A16 featuring our best-in-class superpower rail, or SPR. A16 is best suited for a specific HPC product with a complex signal route and dense power delivery networks. Volume production is on track for the second half of 2026. We believe N2, N2P, A16, and its derivatives will propel our N2 family to be another large and long-lasting node for TSMC. This concludes our key message, and thank you for your attention.
Speaker #3: With our strategy of continuous enhancement, we also introduced end-to-end as an extension of our end-to-end family. The end-to-end feature further enhances performance and power benefits on top of end-to-end, with volume production scheduled for the second half of '26.
Speaker #3: We also introduced the F-16, featuring our best-in-class Superpower Rail (SPR). The F-16 is best suited for specific HPC products with complex signal routes and dense power delivery networks.
Speaker #3: Volume production is on track for the second half of '26. We believe end-to-end, end-to-end F-16 and its derivatives will prepare our end-to-end family to be another large and long-lasting node for TSMC.
Speaker #3: This concludes our key messages, and thank you for your attention.
Speaker #1: Thank you, C.C. This concludes our prepared statements. 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 participants an opportunity to ask their questions.
Jeff Su: Thank you, C.C. This concludes our prepared statements. 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. For those of you on the call, if you would like to ask a question, please press the star, then one on the telephone keypad now. If at any time you'd like to remove yourself from the questioning queue, please press star, then two. Now, let's begin the Q&A session. Operator, can we please proceed with the first caller on the line? Thank you.
Speaker #1: Should you wish to raise your question in Chinese, I will translate it to English before our management answers your question. For those of you on the call, if you would like to ask a question, please press the star key, then one, on the telephone keypad now.
Speaker #1: If at any time you'd like to remove yourself from the questioning queue, please press star then two. Now, let's begin the Q&A session. Operator, can we please proceed with the first caller on the line?
Speaker #1: Thank you.
Speaker #4: Yes. First one, Goku, how are you all in? JP Morgan, go ahead, please.
Operator: Yes. First one, Gokul Hariharan, JP Morgan, go ahead, please.
Speaker #5: Yeah, thanks. Good afternoon, C.C. Wei, and Jeff, great result again. So, on the AI front, C.C., I think you have met with pretty much everybody who is driving the GenAI revolution over the last couple of months, and as you said, everybody seems to be a lot more positive.
[Analyst]: Yeah, thanks. Good afternoon, C.C., Wei, and Jeff. Great result again. On the AI front, C.C., I think you have met with pretty much everybody who is driving the Gen AI revolution over the last couple of months. As you said, everybody seems to be a lot more positive. I think we gave a guidance of mid-40s data center AI growth CAGR earlier this year until 2029. Anything that you see which should kind of change that number definitely feels like the growth today seems to be much stronger. Related to that, you did talk about the very detailed capacity expansion planning that TSMC does. In past technology cycles, TSMC CapEx has gone up significantly to prepare for the next upgrade or next leading-edge node. In this cycle, TSMC revenues have grown 50% from the previous peak in 2022. CapEx has only grown about 10%.
Speaker #5: I think we gave guidance of mid-40s data center AI growth CAGR earlier this year, until 2029. Is there anything that you see which should change that number?
Speaker #5: Definitely feels like the growth today seems to be much stronger. And related to that, you did talk about the very detailed capacity expansion planning that TSMC does.
Speaker #5: In past technology cycles, TSMC's CAPEX has gone up significantly to prepare for the next upgrade or next leading-edge node. But in this cycle, TSMC revenues have grown 50% from the previous peak in '22, while CAPEX has only grown about 10%.
Speaker #5: So how should we think about the CAPEX over the next couple of years? I know that you're not giving numerical guidance yet, but I just wanted to understand: are we looking at much higher CAPEX in the next couple of years, given all these conversations you have had?
[Analyst]: How should we think about the CapEx over the next couple of years? I know that you're not giving numerical guidance yet, but just wanted to understand, like are we looking at much higher CapEx in the next couple of years given all these conversations you've had? I had a follow-up after that. Thank you.
Speaker #5: And I had a follow-up to that, thank you.
Speaker #1: Okay, so Goku, first question. Sorry, Goku, let me summarize for everyone's benefit. So again, he wants to know firstly related to the AI-related demand.
Jeff Su: Okay. Goku, first question. Sorry, Goku. Let me summarize for everyone's benefit. He wants to know firstly related to the AI-related demand that TSMC works with many, if not everyone, who is doing AI, and many of the customers seem to be even more positive today. I guess he would like to ask CC, sort of what are we seeing or hearing from our customers? We had previously said that the next five years from 2024 to 2029, we expect AI accelerator to grow at a mid-40s CAGR. Is there any update to this? I think this is the first part. I'll get to the second part on CapEx.
Speaker #1: That TSMC works with many, if not everyone, who is doing AI, and many of the customers seem to be even more positive today. So I guess he would like to ask C.C. what are we seeing or hearing from our customers?
Speaker #1: And then we had previously said that for the next five years, from 2024 to 2029, we expect AI accelerator to grow at a mid-40s CAGR.
Speaker #1: Is there any update to this? I think this is the first part; then I'll get to the second part on CAPEX.
Speaker #3: Wow, that's a long question, isn't it? But Goku, are the AI demands actually continuing to be very strong, stronger than we thought three months ago?
C.C. Wei: Wow. That's a long question, isn't it? The AI demand actually continues to be very strong. It's more strong than we thought three months ago. In today's situation, we have talked to customers, and then we talk to customers' customers. The CAGR we previously announced is about the mid-40%. It's still a little bit better than that. We will update you probably in the beginning of next year. We have a more clear picture. Today, the numbers are insane.
Speaker #3: Okay, so in today's situation, we have talked to customers, and then we talked to customers' customers. So the CAGR we previously announced is about the mid-40s; it is still a little bit better than that.
Speaker #3: We will update you probably at the beginning of next year, so we have a clearer picture. Today, the numbers are in CN.
Speaker #1: And then the second part of Goku's question, related to CAPEX, he notes that in the past, when TSMC sees opportunities for higher growth, past cycles or past instances, we would step up the CAPEX significantly to prepare to drive the future growth.
Jeff Su: The second part of Goku's question related to CAPEX, he notes that in the past, when TSMC sees opportunities for higher growth, past cycles or past instances, we would step up the CAPEX significantly to prepare to drive the future growth. He notes this cycle, actually, though while CAPEX is increasing, the revenue is increasing even faster. His question really, I think, is how do we see this playing out over the next few years, both in terms of the CAPEX spend and the growth relative to the revenue growth?
Speaker #1: But he notes this cycle, actually, though while CAPEX is increasing, the revenue is increasing even faster. So his question really, I think, how do we see this playing out over the next few years, both in terms of the CAPEX spend and the growth relative to the revenue growth?
Speaker #3: Okay, Goku, every year we spend the CAPEX based on the business opportunity in the following few years. As long as we believe there are business opportunities, we will not hesitate to invest.
Wendell Huang: Every year we spend the CAPEX based on the business opportunity in the following few years. As long as we believe there are business opportunities, we will not hesitate to invest. If we do our job right, the growth of our business or of our revenue should outpace the growth of the CAPEX. That is what we have been delivering in the past few years. Now, going forward, assuming we're still doing a very good job, we will continue to see that happening again. A company of our size, the CAPEX number, it's unlikely to suddenly drop significantly in any given year. When we continue to invest and our growth is outpacing our CAPEX growth, you will see the growth like what we have done in the past few years.
Speaker #3: And if we do our job right, the growth of our business, of our revenue, should outpace the growth of the CAPEX. And that's what we have been delivering in the past few years.
Speaker #3: Now, going forward, assuming we're still doing a very good job, then we will continue to see that happening again. So a company of our size, the CAPEX number is unlikely to suddenly drop.
Speaker #3: Significantly in any given year. Now, when we continue to invest and our growth is outpacing our CAPEX growth, then you'll see the growth, like what we have done in the past few years.
Speaker #5: Understood. I know that it is unlikely to drop, but it is also likely to grow quite a bit given what C. Wei mentioned in terms of every customer asking you, and every customer's customer requesting you for capacity addition, right?
[Analyst]: Understood. I know that it is unlikely to drop, but it is also likely to grow quite a bit given what Dr. C.C. Wei mentioned in terms of every customer asking you and every customer's customer requesting you for capacity addition, right?
Speaker #1: Yeah, as I said, a higher level of CAPEX is always going to be correlated with higher growth opportunity. So, as C. Wei said, net scale looks to be a healthy year, and we are confident on the mega-trend. Therefore, we'll continue to invest.
Wendell Huang: Yeah. As I said, a higher level of CAPEX is always going to be correlated with a higher growth opportunity. As Dr. C.C. Wei said, next year looks to be a healthy year and that we are confident on the megatrend, then we'll continue to invest. Okay, Goku?
Speaker #1: Okay, Goku?
Speaker #5: Got it, yeah. Yeah, maybe one more follow-up question from me. C.C., I think last year you also gave us an indication of how much cohort capacity you would be building.
[Analyst]: Got it. Maybe one more follow-up question from me, C.C. I think last year also you gave us an indication of how much CoWoS capacity you would be building. I think you talked about 2X of doubling the CoWoS capacity. It clearly feels like even that is not enough. Could you give us some idea about how much capacity you would be building next year just to get some idea about what you are seeing in terms of AI demand? Also, just to get some understanding of TSMC's data center AI exposure. I think last year, we talked about mid-teens revenues. Where do we end up this year? Do we end up close to like 30% of revenues coming from AI?
Speaker #5: I think you talked about 2x of doubling the cohort capacity. It clearly feels like even that is not enough. Could you give us some idea about how much capacity you would be building next year, just to get some idea about what you are seeing in terms of AI demand?
Speaker #5: And also, just to get some understanding of TSMC's data center AI exposure, I think last year we talked about mid-term revenues. Where do we end up this year?
Speaker #5: Do we end up close to like 30% of revenues coming from AI, so?
Speaker #1: Okay, so Goku, your second question really, he wants to understand, can we provide any detail or colors on the co-op capacity plan for 2026 in terms of year-on-year increase?
Jeff Su: Okay. Goku, your second question, he wants to understand, can we provide any detail or colors on the CoWoS capacity plan for 2026 in terms of year-on-year increase? Also, in terms of our definition of AI accelerator revenue, the narrow definition, how much will it contribute for 2025 revenue? Is it 30%?
Speaker #1: And also, in terms of our definition of AI accelerator revenue—the narrow definition—how much will it contribute to 2025 revenue? Is it 30%?
Speaker #3: Well, Goku, this is C.C. Wei again. Talking about the cohort capacity, all I can say is continue the three months ago we are working very hard to narrow the gap between the demand and supply.
C.C. Wei: This is C.C. Wei again. Talking about the CoWoS capacity, all I can say is, continuing from three months ago, we are working very hard to narrow the gap between the demand and supply. We are still working to increase the capacity in 2026. The real number, we probably update you next year. Today, all I want to say about the AI, everything related, like the frontend and backend capacity, is very tight. We are working very hard to make sure that the gap will be narrow, but all I can say is we are working very hard.
Speaker #3: We are still working to increase the capacity in 2026; the real number we will probably update you on next year. Today, all I want to say about the AI, everything related to front-end and back-end capacity, is very tight.
Speaker #3: We are working very hard to make sure that the gap will be narrow, but all I can say is we are working very hard.
Speaker #1: Okay, thank you, Goku. I think we need to move on in the interest of time. So, operator, can we move to the next participant, please?
Jeff Su: Okay, thank you, Goku. I think we need to move on in the interest of time. Operator, can we move to the next participant, please?
Speaker #4: Yes, next one, Charlie Chen, Morgan Stanley. Go ahead, please.
Operator: Yes. Next one, Charlie Chen, Morgan Stanley. Go ahead, please.
Speaker #5: Thanks for taking my question, and again, congratulations on a very strong result, C.C. Wendell and Jeff. So my first question is really about your leading-edge demand, as C.C.
[Analyst]: Thanks for taking my question. Again, congratulations for a very strong results, C.C., Wendell, and Jeff. My first question is really about your leading-edge demand. As C.C. just mentioned, your frontend demand is also very strong into next year. One of your major customers just said that Moore's Law is dead. I think his point is that by doing maybe a system-level innovation in the thermal, etc., can boost up more kind of performers. Just a kind of dumb question. How do we reconcile your very, very strong leading-edge demand and the customer continue to migrate to your most advanced nodes and also you continue to reflect value, whereas the customer continues to think that Moore's Law is dead? Can we get some clarification from TSMC?
Speaker #5: Just mentioned, your front-end demand is also very strong into next year. However, one of your major customers just said that more so is that.
Speaker #5: I think his point is that by doing maybe system-level innovation in the thermal, etc., we can boost up more kinds of performers. So just a kind of dumb question: how do we reconcile your very, very strong leading-edge demand, and their customer continues to migrate to your most advanced nodes, and also you continue to reflect the value, whereas the customer continues to think that they're more so is that?
Speaker #5: Can we get some clarification from TSMC?
Speaker #1: All right, so Charlie's question is very specific. Although he wants us to comment on a customer saying Moore's Law is dead, how do we reconcile this with the very strong leading-edge demand into 2026?
Jeff Su: All right. Charlie's question is very specific, although he wants us to comment on a customer saying Moore's Law is dead. How do we reconcile this with a very strong leading-edge demand into 2026 and also with system-level innovations?
Speaker #1: And also with system-level innovations?
Speaker #3: Okay, Charlie, this is C.C. Wei. Yeah, one of my customers—a very important customer—says Moore's Law is dead, but what he means is it's not only relying on the chip technology anymore. Now we have to focus on the whole systems of performance.
C.C. Wei: Okay. Charlie, this is C.C. Wei. Yeah. One of my customers, very important customer, said Moore's Law is dead. What he means is it's not only relying on the chip technology anymore. Now we have to focus on the whole system's performance. He wanted to emphasize the whole system's performance rather than just talking about Moore's Law, which is not enough to meet his requirement. We work very closely with his people to design our technology both in frontend and backend and also in all the packagings to meet his requirement. That's all I can say.
Speaker #3: So he wanted to emphasize the whole systems of performance rather than just talking about Moore's Law, which is not enough to meet his requirement.
Speaker #3: So again, we work very closely with his people to design our technology, both in the front-end and back-end, and also in all the packaging, to meet his requirements.
Speaker #3: That's all I can say.
Speaker #1: Okay, thank you, C.C. Do you have
Jeff Su: Okay. Thank you, C.C.
Speaker #5: Thanks, Charlie.
Speaker #4: Thanks, C.C.
[Analyst]: Thanks, Charlie.
Operator: Thanks, CC.
Speaker #1: a second question, Charlie?
Jeff Su: Do you have a second question, Charlie?
Speaker #5: Yes, I do. Thanks, Jeff. Yeah, so anyway, I would interpret that as Circle the Moore's Law 2.0, that your co-COO, Mr. Cliff Ho, also comes here during the Semicon Taiwan.
[Analyst]: Yes, I do. Thanks, Jeff. Yeah. I would interpret that as so-called Moore's Law 2.0, that your co-COO, Mr. Cliff, also kind of shared during the Semicon Taiwan. Thanks, CC, for your commentary. My second question is actually a follow-up from last quarter's same question. Back then, I consulted you about the China AI GPU demand, right, whether you can seize the market opportunity. China says they're also expanding their AI infrastructure very rapidly. Given the recent kind of back and forth between the U.S. and China, whether China can really impose this Nvidia GPU, would that kind of discount your potential long-term growth of the AI CAGR? Is that something that TSMC would worry about?
Speaker #5: But anyway, thanks, C.C., for your commentary. My second question is actually a follow-up from last quarter's same question. Back then, I consulted you about the China AI GPU demand, right?
Speaker #5: Whether you can seize the market opportunity. Because China says they are also spending on their AI infrastructure very rapidly. But given the recent kind of back and forth between the U.S. and China, whether China can really impose this NVIDIA GPU, would that kind of discount your potential long-term growth of the AI CAGR?
Speaker #5: Is that something that TSMC would worry about?
Speaker #1: Okay, so Charlie, the second question is related to AI demand and is specific to China. With the sort of export controls and restrictions, his question is, does that impact our ability to address the market opportunity?
Jeff Su: Okay. Charlie's second question is related around AI demand and specific to China. With the sort of the export control and restriction, his question is, does that impact our ability to address the market opportunity? Will this impact our AI CAGR growth if we are not allowed to fully serve China?
Speaker #1: And will this impact our AI CAGR growth? If we are not allowed to fully preserve China.
Speaker #3: Well, I think there will be both.
[Analyst]: I think there will be both sides, meaning restriction from the U.S., but also China government's kind of discouragement to procure a U.S. chip. Sorry for interruption.
Speaker #4: Sides. I mean, restrictions from the U.S., but also the Chinese government's kind of discouragement to procure U.S. chips. Sorry for the interruption.
Speaker #3: Well, Charlie, to speak too, I have confidence in my customers. Both in graphics and in ASIC, they are all performing well. And so if the China market is not available, I still think the AI growth will be very dramatic. As I said, very positive.
C.C. Wei: Charlie, to speak the truth, I have a confidence in my customers, both in Graphic or in ASIC. They all perform very well. If the China market is not available, I still think the AI's growth will be very dramatic and, as I said, very positive. I have confidence that our customers' performance and they will continue to grow, and we will support them.
Speaker #3: And I have confidence that our customers' performance will continue to grow, and we will support them.
Speaker #1: Thank you, Charlie.
Jeff Su: Thank you.
Speaker #4: So, even with the three-minute opportunity from China, for the time being, are you still confident that a 40% CAGR, or even higher, can be achieved?
[Analyst]: Even with the limited opportunity from China for the time being, you are still confident that a 40% CAGR or even higher can be achieved in the coming years?
Speaker #4: Incoming years?
Speaker #3: You are right.
C.C. Wei: You are right.
Speaker #4: Okay, great. Thanks, gentlemen.
[Analyst]: Okay. Great.
Speaker #1: Okay. Yep, thank you, Charlie. Operator, can we move on to the next participant, please?
Jeff Su: Thank you.
[Analyst]: Thanks, gentlemen.
Jeff Su: Thank you, Charlie. Operator, can we move on to the next participant, please?
Speaker #5: Yes, next one, Sonia Lin, UBS. Go ahead, please.
Operator: Yes. Next one, Sonya Lin, UBS. Go ahead, please.
Speaker #6: Thank you very much. Good afternoon. Congrats on a very strong growth margin. So, my first question is: how should we think about 2026? I understand we should get better color maybe in January, but I just want to get some directional major puts and takes for growth margin trending going into 2026.
[Analyst]: Thank you very much. Good afternoon. Congrats on the very strong gross margin. My first question is, how should we think about 2026? I understand we should get better color maybe into January, but just want to get some directional major % for gross margin trending going to 2026. Especially, how should we think about the gross margin impact from two-nanometer ramp for 2026?
Speaker #6: Especially, how should we think about the growth margin impact from the two-nanometer ramp for 2026?
Speaker #1: Okay, so Sonia's first question is regarding growth margin. She would like to know, directionally, how do we see the growth margin for next year, 2026?
Jeff Su: Okay. Sonya's first question is regarding gross margin. She would like to know directionally how do we see the gross margin for next year, 2026, in terms of certain puts and takes, and also if Wendell is able to comment specifically. Sonya, sorry if I heard you right, on the N2 dilution impact, correct?
Speaker #1: In terms of certain puts and takes, and also if Wendell is able to comment specifically? Sonia, sorry if I heard you right on the end-to-end dilution impact, correct?
Speaker #6: Yeah, that's right. Thank you.
[Analyst]: Yeah, that's right. Thank you.
Speaker #1: Okay, that's her first question. Okay, Sonia, yeah, it's too early to talk about 2026. But you already mentioned the end-to-end dilution, and as all the new nodes, when they just come out, the end-to-end will have dilution.
Jeff Su: Okay, that's her first question.
Wendell Huang: Okay. Sonya, yeah, it's too early to talk about 2026. You already mentioned about the N2 dilution. As all the new nodes, when they just come out, the N2 will have dilution in our gross margin in 2026. At the same time, the N3 dilution is gradually coming down, and we expect the N3 to catch up to the corporate average sometime in 2026. The other factors include overseas fabs dilution, which will continue, and which we said that it will be about 2% to 3% dilution in the early stage of the next several years. That will also be there. We all saw the dramatic foreign exchange rate movement in the earlier part of this year. There's no control. We don't know where that will be. Every percentage move of dollar against NT will affect our gross margin by 40 basis points. That just gives you some rough idea.
Speaker #1: And our growth margin, in 2026, but at the same time, the end-to-end dilution is gradually coming down, and we expect the end-to-end to catch up to the corporate average, sometimes in 2026.
Speaker #1: The other factors include like overseas fast dilution, which will continue and which we said that it will be about two to three percent dilution, in the early stage of the next several years.
Speaker #1: That will also be there. And also we all saw the dramatic foreign exchange rate movement in the earlier part of this year. There's no control, we don't know where that will be.
Speaker #1: But every percentage move of dollar against NT will affect our growth margin by 40 basis points. So that just gives you some rough idea.
Speaker #1: Okay, thank you.
Jeff Su: Okay. Thank you.
Speaker #6: Got it. Sorry, if I may, yeah, a very quick follow-up. And so on two-nanometer would the typical two to three percent dilution by new node, for the first seven to eight quarters of mass production, being a good reference for two-nanometer as well for 2026?
[Analyst]: Added, Sonya, if I may, yeah, a very quick follow-up. On two-nanometer, with the typical 2% to 3% dilution by new node for the first seven to eight quarters of mass production, is that being a good reference for two-nanometer as well for 2026?
Speaker #1: Okay, so Sonia, quick follow-up. She wants to know for the two-nanometer dilution, if we're able to provide any detail, and should we can she still think about it in terms of seven to eight quarters or six to eight quarters dilution to reach the time, sorry.
Jeff Su: Okay. Sonya, a quick follow-up. She wants to know for the two-nanometer dilution if we're able to provide any detail. Can she still think about it in terms of seven to eight quarters or six to eight quarters dilution to reach the time, sorry, to reach the corporate average?
Speaker #1: To reach the corporate average. Yeah, Sonia, let me share with you. End-to-end structure profitability is better than end-to-end, okay? Now, secondly, it's less meaningful nowadays to talk about how long it will take for a new node to reach the corporate average in terms of profitability.
Wendell Huang: Yeah, Sonia, let me share with you, N2 structure profitability is better than N3, okay? Now, secondly, it's less meaningful nowadays to talk about how long it will take for a new node to reach the corporate average in terms of profitability. That's because the corporate profitability, the corporate gross margin moves, and generally, it has been moving upwards. Less meaningful to talk about that, okay?
Speaker #1: And that's because corporate profitability and corporate growth margins move and generally have been moving upwards, so it's less meaningful to talk about that.
Speaker #1: Okay?
Speaker #6: Got it. No problem. That's very helpful. My second question is maybe for C.C. Thanks a lot for sharing with us the details on how you think about the capacity expansions.
[Analyst]: Got it. No problem. That's very helpful. My second question is maybe for C.C. Thanks a lot for sharing with us the details on how you think about the capacity expansions and planning. My question is, now, cloud AI is ramping a lot faster than the prior opportunities like smartphones and PCs. Yes, I think the demand for cloud AI is also maybe harder to forecast. I just want to maybe get some more color from you that now versus the prior rounds of capacity expansions, what is TSMC doing differently versus before? How do you ensure that while you are ramping up the capacity more quickly, we're still having a good risk control? Thank you.
Speaker #6: And planning. And so my question is, now cloud AI is ramping a lot faster than the prior opportunities, like smartphones and PCs. Yes, I think the demand for cloud AI is also maybe harder to forecast.
Speaker #6: So, I just want to maybe get a bit more color from you on the prior rounds of capacity expansions. What is TSMC doing differently versus before, and how do you ensure that while you are ramping up the capacity more quickly, you're still maintaining good risk control?
Speaker #6: Thank you.
Speaker #1: Okay, thank you, Sonia. So, Sonia, the second question is regarding capacity planning and expansion. In a capital-intensive business, this is very important, but in the past, smartphones and PCs were the mega-trends. Today, it's AI and cloud AI.
Jeff Su: Thank you, Sonya. Sonya's second question is regarding capacity planning and expansion in a capital-intensive business. She notes this is very important. In the past, smartphone and PC megatrends, today it's AI and cloud AI. She's wondering, does that make this planning process more difficult to forecast? What are we doing differently, or how do we forecast this to make sure that we are investing appropriately?
Speaker #1: She's wondering, does that make this planning process more difficult to forecast? And what are we doing differently, or how do we forecast this to make sure that we are investing appropriately?
Speaker #3: Sonia? Indeed, right now, I believe we are just in the early stage of AI application, so it is very hard to make a right forecast.
C.C. Wei: Sonia, indeed. Right now, because I believe we are just in the early stage of the AI application, it's very hard to make a right forecast at this moment. What do we do differently? There's a big difference because right now we pay a lot of attention to our customer's customer. We talk to and then discuss with them and look at their applications, be it in the search engine or in social media application. We talk with them and see how they view the AI application to those functions. Then we make a judgment about what the AI is going to grow. This is quite different as compared with before. We only talked to our customers and had an internal study. This is different. Did I answer your question?
Speaker #3: At this moment, what do we do differently? We just see a big difference because right now we pay a lot of attention to our customers' customers.
Speaker #3: We talk too, and then discuss with them, and look at their applications, be it in the search engine or in social media's application. We talk with them and see how they view the AI application.
Speaker #3: To those functions, and then we make a judgment about what the AI is going to grow, and so this is what the difference. As compared with the before, we only talk to our customers.
Speaker #3: And have an internal study. This is the difference. Did I answer your question?
Speaker #6: Got it. Thank you very much, C.C. Yeah, yeah, yeah. I'm looking forward to the CAPEX guy in January. Thank you.
[Analyst]: Got it. Thank you very much, C.C. Yeah. Looking forward to the CAPEX guy in January. Thank you.
Speaker #3: You're welcome.
[Analyst]: You're welcome.
Speaker #1: All right, thank you, Sonia. Operator, can we move on to the next participant, please?
Jeff Su: All right. Thank you, Sonia. Operator, can we move on to the next participant, please?
Speaker #5: Next one, Bruce Lu, Goldman Sachs. Go ahead, please.
Operator: Next one, Bruce Liu, Goldman Sachs. Go ahead, please.
Speaker #7: Hello, thank you for taking my question. I think Jensen talked about the projected three to four trillion dollar AI infrastructure opportunity by 2030, right? This compared to around $600 billion in CAPEX for this year implies about 40% CAGRs.
C.C. Wei: Hello. Thank you for taking my question. I think Jensen talked about like $3 to $4 trillion AI infrastructure opportunities by 2030, right? This compared to like $600 billion CapEx recent of this year implies for about 40% CAGRs. This is similar to TSMC guidance for the AI growth, right? For me, first of all, what I want to know is what's the TSMC view for the AI infrastructure growth for the next five years? What's TSMC's forecast for the token growth rate in the next few years? TSMC used to provide the same industry growth, foundry growth, and how much TSMC can outperform the industry, right? Given the context, can we assume like TSMC AI-related revenue can track or will track with the CapEx growth of AI or the major cloud service provider?
Speaker #7: This is similar to TSMC guidance for the AI growth, right? But you know for me, you know first of all, what I want to know is what's the TSMC view for the AI infrastructure growth for the next five years?
Speaker #7: And what's TSMC's forecast for the token growth rate in the next few years? TSMC used to provide semi-industry growth, foundry growth, and how much TSMC can outperform the industry.
Speaker #7: Right? Given the context that you know, can we assume that TSMC's AI-related revenue can track or will track with the CAPEX growth of AI or the major cloud service providers? Or should we expect an even higher growth rate for TSMC, considering you're potentially getting more value out of it?
C.C. Wei: Should we expect an even higher growth rate for TSMC considering you're potentially getting more value out of it?
Speaker #1: Okay, let me try to summarize your question, Bruce. He notes that one of our customers has highlighted a $3 to $4 trillion infrastructure opportunity over the next few years.
Jeff Su: Okay. Let me try to summarize your question, Bruce. He notes that one of our customers has highlighted a $3 to $4 trillion infrastructure opportunity over the next few years compared to $600 billion current CAPEX, implying a 40-something % CAGR growth rate, which is similar to ours. Bruce's question is he wants to know what is TSMC's forecast or view for AI infrastructure growth. He would also like to know what is TSMC's forecast or view for the token growth? What is TSMC's AI-related revenue growth? Can it track that of the cloud service providers? His question is, should it be even higher? Shouldn't it be even higher given the value that we capture? That's actually several questions, but is that correct, Bruce?
Speaker #1: Compared to $600 billion in current CAPEX, which implies a growth rate of around 40-something percent CAGR, similar to ours, Bruce's question is about TSMC's forecast or view for AI infrastructure growth.
Speaker #1: He would also like to know what TSMC's forecast or view is for token growth. Additionally, what is TSMC's AI-related revenue growth? Can it track that of the cloud service providers?
Speaker #1: And his question is: should it be even higher? Shouldn't it be even higher given the value that we capture? That's actually several questions, but is that correct, Bruce?
Speaker #7: That's right. Thank you.
C.C. Wei: That's right. Thank you. Bruce, essentially just want to know how accurate that we can predict that AI is a demand. We give you a number, roughly 40, in the mid-40s is a CAGR, not including all the infrastructures built up and also aligned with our major customers' forecast for their view. More than that, I think if we are talking about the tokens, the number of tokens that increase, it's exponential. I believe that almost every three months, it will be exponentially increased. That's why we are still very comfortable that the demand on leading-edge semiconductor is real. As I continue to say, we look at all the demand and look at our capacity expansion. TSMC needs to work very hard to narrow the gap. That's what we are doing right now.
Speaker #3: Well, Bruce, I essentially just want to know how accurately we can predict the demand for AI. We give you a number, roughly 40, in the mid-40s is a CAGR.
Speaker #3: Not including all the infrastructures built up and also aligned with our major customers, it is forecast for their view. But more than that, I think if we are talking about the tokens, the number of tokens increases; it's exponential.
Speaker #3: And I believe that almost every three months it will be exponentially increased. And that's why we are still very comfortable that the demand for leading-edge semiconductors is real.
Speaker #3: And as I continue to say, we look at all the demand and evaluate our capacity expansion. TSMC needs to work very hard.
Speaker #3: To narrow the gap. That's what we are doing right now. The exact number that we probably will share with you next year, so that when we have a much clearer picture.
C.C. Wei: Exactly the number that we probably will share with you next year so that when we have a very better clear picture.
Speaker #1: Thank you.
Jeff Su: Thank you, C.C.
Speaker #3: I think
Wendell Huang: I think the—go ahead.
Speaker #3: I just have a quick follow-up. I use that as my second question anyway. I think the question is that the token growth seems to be substantially higher than the AI-related revenue guidance from TSMC, right?
C.C. Wei: I just have a quick follow-up. I'll use that as my second question anyway. I think the question is that the token growth seems to be substantially higher than the AI-related revenue guidance from TSMC, right? The gap is actually enlarging if you compound in the outer years, right? That's why that's the differences between what we see for the current TSMC outlook and the potential token consumptions, right? The gap is continued to see in enlarging. How do we solve this? Do we really see that as a major issue?
Speaker #3: So the gap is actually enlarging if you compound in the outer years, right? That's why you know that's the difference between what we see for the current TSMC.
Speaker #3: I'll look at the potential token consumptions, right? So, the gap is continuing to see an enlarging. How do we solve this, and do we really see that as a major issue?
Speaker #1: Okay, so Bruce has a second question, which is a follow-on from his first. Is it that the token growth is growing at a much higher rate or exponentially than TSMC's AI revenue growth?
Jeff Su: Okay. Bruce's second question, which is a follow-on from his first, is that the token growth is growing at a much higher rate or exponentially than TSMC's AI revenue growth. This gap will only enlarge or widen in the next few years. He wants to know, sorry, Bruce, basically, what's the implication to TSMC or how do we see this? Is that correct?
Speaker #1: And this gap will only enlarge or widen in the next few years? So he wants to know, sorry Bruce, you basically, what's the implication to TSMC or how do we see this?
Speaker #1: Is that correct?
Speaker #7: That's right.
C.C. Wei: Okay, Bruce, you are right. The number of tokens that increase exponentially is much, much higher than TSMC's CAGR as we forecasted. Let me tell you that first, our technology continues to improve, and our customer is moving from one node to the next node so that they can handle much more tokens' number in their basic fundamental calculation. That's one thing. You know we progress very well from one node to the other node, and our customer is working with TSMC to continuously improve their performance. That's why when we say that we have about 40, 45% CAGR, the token number exponentially increases because of our customer and TSMC's technology combined that can handle much more or much efficient than before. Did I answer your question?
Speaker #3: Okay, Bruce?
Speaker #7: You are right. You are right. The tokens and the number of tokens that increase exponentially is much, much higher than TSMC's CAGR, as we forecasted.
Speaker #7: But let me tell you that, first, our technology continues to improve. And so our customers are moving from one node to the next node so that they can handle a much larger number of tokens in their basic fundamental calculations.
Speaker #7: So that's one thing. We progress very well from one node to the other node, and our customer is working with TSMC to continuously improve their performance.
Speaker #7: And that's why when we say that we have about 40-45% CAGR, but then the token numbers are exponentially increased. Because of our customer and TSMC's technology combined, that can handle much more or much more efficiently than before.
Speaker #7: Did I answer your question?
Speaker #3: I see. So you believe your node migration, plus your customer design change, can fulfill or meet the exponential growth for the token consumption?
[Analyst]: I see. You believe your node migration plus your customer design change can fulfill or can meet the exponential growth for the token consumption?
Speaker #7: Exactly. Yes.
Speaker #3: Is that the conclusion?
C.C. Wei: Exactly.
[Analyst]: Is that the conclusion?
Speaker #3: I understand. Okay.
C.C. Wei: Yes.
[Analyst]: Understood. Okay.
Speaker #1: Okay, quick follow-up for the market. Bruce, that was your second question. Operator, we need to move on. Thank you, Bruce.
Jeff Su: Okay. Quick follow-up for the market side.
C.C. Wei: Bruce, that was your second question. Operator, we need to move on. Thank you, Bruce.
Speaker #5: Yes, next one, Lauren Chen, City. Go ahead, please.
Operator: Yes. Next one, Loren Chen, Citi. Go ahead, please.
Speaker #6: Yeah, thank you very much for taking my questions. I appreciate C.C. you sharing your view on TSMC's strategy on AI capacity planning. I think along with very strong advanced node demand, advanced packaging like Co-Op is also one of the focuses for your AI clients that they are now looking for.
[Analyst]: Yeah. Thank you very much for taking my questions. I appreciate CTU sharing your view on TSMC's strategy on the AI capacity planning. I think along with the very strong advanced node demand, I believe that advanced packaging like the CoWoS is also one of the focus for your AI clients they are now looking for. I recall that TSMC previously also planned to expand advanced packaging in Arizona. Can you give us updates here? Also, I mean, for the time being, the very stretched demands at the moment. Would TSMC work more closely with your all-site partner to fulfill the strong demand at the same time? That's my first question. Thank you.
Speaker #6: I recall that TSMC previously also planned to expand advanced packaging in Arizona. So can you give us an update here? And also, I mean, the demand is very stretched at the moment.
Speaker #6: So, will TSMC work more closely with your all sets partner to fulfill the strong demand at the same time? That's my first question.
Speaker #6: Thank you.
Speaker #1: Okay, thank you, Laura. So her first question is on capacity planning. We have talked earlier on the call about the planning for leading nodes.
Jeff Su: Thank you, Laura. Her first question is on capacity planning. We have talked earlier on the call about the planning for leading nodes. She wants to understand also on the CoWoS capacity and specifically, I guess, advanced packaging in Arizona. How do we work with our off-site partners?
Speaker #1: She wants to understand also the co-op capacity, and specifically, I guess, advanced packaging in Arizona. How do we work with our all-set partners?
Speaker #3: Okay, we have announced our plan to build two advanced packaging fabs in Arizona. And to support our customers. But at the same time, actually, right now we are working with the one all set big company and our good partner and they are going to build their fab in Arizona.
C.C. Wei: Okay. We have announced our plan to build two advanced packaging fabs in Arizona to support our customers. At the same time, right now we are working with one on-site big company and our good partner, and they are going to build their fab in Arizona. We are working with them because they are already breaking ground, and the schedule is earlier than TSMC's two advanced packaging fabs. We are working with them. Our main purpose is to support our customers so we can marry in the U.S.
Speaker #3: And we are working with them because they are already breaking ground, and the schedule is earlier than TSMC's two advanced packaging fabs. And we are working with them.
Speaker #3: And our main purpose is to support our customers, and so we can marry in the U.S.
Speaker #1: Laura, do you have a second question?
Jeff Su: Laura, do you have a second question?
Speaker #7: Yeah.
[Analyst]: Yes, certainly. Obviously, we see that the advanced node advanced packaging is quite strong. At the same time, we are also seeing that the migration is also happening for N2 and N3. Just wondering, from the revenue growth perspective, I know it's still early to predict next year based on your guidance. I'm just wondering if it will be more driven by the ASP increase because of the technology migration, TSMC will be able to sell in your value, or more that will be driven by the capacity or volume growth on both N2 ramp-up. Also, you mentioned some of the mild silicon recovery. That may also drive some of the volume growth into next year. Just wondering, if you look at the growth outlook, would that be more driven by the technology upgrade ASP increase or also more like a volume? That's my second question. Thank you.
Speaker #6: Yes, yes, certainly. I mean, obviously, we see that the advanced node and advanced packaging require strong investment, and at the same time, we are also seeing that the migration is also happening.
Speaker #6: For end-to-end and end-to-end. So, just wondering that from the revenue growth perspective, I know it's still early to predict next year based on your guidance.
Speaker #6: I'm just wondering, will it be more driven by the ASP increase because of the technology migration? Will TSMC be able to sell its value?
Speaker #6: Or more that will be driven by the capacity or volume growth on both end-to-end and also C.C. You mentioned some of the mild silicon recovery.
Speaker #6: So that may also drive some of the volume growth into next year. So, just wondering, like if we look at the growth outlook, there would be more driven by the technology upgrade and ASP increase?
Speaker #6: Or also more like a volume? That's my second question. Thank you.
Speaker #1: Okay, so Laura's again, second question is looking at 2026. She would like to understand what will be the key drivers of the growth. Is it more from the technology mix migration?
Jeff Su: Okay. Laura's, again, second question is looking at 2026. She would like to understand what will be the key drivers of the growth. Is it more from the technology mix migration, things like N2? Is it more from ASP upgrade, or is it more from just pure wafer volume growth?
Speaker #1: Things like end-to-end? Is it more from ASP upgrade, or is it more from just pure wafer volume growth?
Speaker #3: Well, Laura, all the above. All right?
C.C. Wei: Laura, all the above. All right?
Speaker #6: Yeah.
[Analyst]: Okay. Okay.
Speaker #1: Okay, okay.
Speaker #3: You knew it, right? I mean, that's fine. It's growth.
C.C. Wei: You knew it, right? I mean, that's why.
[Analyst]: Sorry.
C.C. Wei: It's growth.
Speaker #6: There are also follow-ups that we see. Actually, end-to-end is very tight, and at the same time, we are also kind of expanding on end-to-end.
[Analyst]: Yeah.
[Analyst]: May I also follow up that because we see that actually N3 is very tight, and at the same time, we are also kind of expanding on N2. You previously mentioned that you will migrate some of the even N7, N6, and also N5 to N3. Specifically on N3, do we also need to add more capacity into next year for newly added capacity?
Speaker #6: And C.C., you previously mentioned that you will migrate some of the even N7, N6, and also N5 to like end-to-end. But specifically on end-to-end, do we also need to add more capacity into next year?
Speaker #6: For newly added capacity?
Speaker #1: Sorry, Laura is asking if next year we will continue. Sorry, Laura, if I understand correctly, will we need to add new capacity? Will we continue to do conversion?
Jeff Su: Laura is saying that next year, will we continue? Laura, if I understand correctly, will we need to add new capacity? Will we continue to do conversion? What will we do to support the very strong demand we see at leading edge next year?
Speaker #1: What will we do to support the very strong demand we see at leading edge next year?
Speaker #6: Yes, thank you.
[Analyst]: Yes, thank you.
Speaker #3: Well, let me answer that question. We continue to optimize the N5, N3 capacity. To support our customer. For the new building, for the N3 capacity to expand, we put the new building for the end-to-end technology.
C.C. Wei: We continue to optimize the N5, N3 capacity to support our customer. For the new building for the N3 CAPEX to expand, we put the new building for the N2 technology. That's today's plan.
Speaker #3: That's today's plan.
Speaker #1: Okay.
[Analyst]: Okay.
Speaker #3: Okay?
C.C. Wei: Okay?
Speaker #6: Okay. Yeah. Thank you. Thank you. Very clear. Appreciate.
[Analyst]: Thank you. Thank you. Very clear. Appreciate it.
Speaker #1: Okay, thank you, Laura. Operator, in the interest of time, we'll take the questions from the last two participants, please. Thank you.
Jeff Su: Thank you, Laura. Operator, in the interest of time, we'll take the questions from the last two participants, please. Thank you.
Speaker #5: Yes, next one, Chris Sankar, TV Cohen. Go ahead, please.
Operator: Yes. Next one, Krish Sankar, TD Cowen. Go ahead, please.
Speaker #7: Yeah, hi, thanks for taking my question. My first one is, C.C., about 10 years ago, back in the smartphone days, TSMC would talk about the revenue opportunity for TSMC performance.
[Analyst]: Yeah. Hi. Thanks for taking my question. My first one is C.C. About 10 years ago, back in the smartphone days, TSMC would talk about the revenue opportunity for TSMC per phone. I was wondering, in today's world, can you talk about how much one gigawatt of AI data center capacity could translate in terms of wafer demand or revenue for TSMC? I have a follow-up.
Speaker #7: There's one thing in today's world: can you talk about how much one gigawatt of AI data center capacity could translate in terms of wafer demand or revenue for TSMC?
Speaker #7: And then I had a follow-up.
Speaker #1: Okay, so Chris's first question: you noted in the past that in the smartphone mega-trend, we talked about the content for phone opportunity for TSMC. So now with AI, is there a way to frame or quantify one gigawatt of data center capacity?
Jeff Su: Okay. Krish's first question, you noted in the past in the smartphone megatrend, we talked about the content per phone opportunity for TSMC. Now with AI, is there a way to frame or quantify one gigawatt of data center capacity? What is the revenue opportunity for TSMC?
Speaker #1: What is the revenue opportunity for TSMC?
Speaker #3: We We recently as I said, the AI is a demand continue to increase and then my customers say that one gigawatt, they need about in ways about 50 billion, how much of TSMC's wafer inside we are not ready to share with you yet because of different from different approaches.
C.C. Wei: Recently, as I said, the AI's demand continues to increase. My customers say that one gigawatt, they need to invest about $50 billion. How much of TSMC's wafer inside? We are not ready to share with you yet because of different approaches. Okay.
Speaker #3: Okay?
Speaker #7: Got it. No worries. And then a quick follow-up.
[Analyst]: Got it. No worries. A quick follow-up.
Speaker #3: Yeah, excuse me. I just want to say that right now it's not just one chip. Actually, it's many chips together to form a system.
C.C. Wei: Excuse me. I just want to say that you know right now it's not only one chip. Actually, it's many chips together to form a system, right?
Speaker #3: All right?
Speaker #7: Got it. Got it. Very helpful for that. A little quick follow-up. You know, obviously you folks forecast long-term trends and then build capacity towards that.
[Analyst]: Got it. Very helpful for that. A little quick follow-up. You know, obviously, you folks forecast long-term trends and then build capacity towards that. I'm kind of curious, when you look at the AI demand over the next several years, from a TSMC angle, does it matter whether that demand is coming through a GPU or an ASIC? Does it have an impact on your revenue or gross margin mix?
Speaker #7: I'm kind of curious, when you look at the AI demand, over the next several years, from a TSMC angle, does it matter whether that demand is coming through a GPU or an ASIC?
Speaker #7: Does it have an impact on your revenue or gross margin mix?
Speaker #1: Okay, thank you, Chris. So his second question is again regarding our business outlook. Again, we forecast a long-term trend. We plan our capacity as C.C.
Jeff Su: Thank you, Krish. His second question is, again, with our business outlook. We forecast the long-term trends. We plan our capacity, as C.C. said, in a thorough and disciplined manner. His question is, what are the implications, for example, of I believe you said GPU versus ASIC in terms of the AI market? Do we have a preference or is there a difference for TSMC? Is that correct, Krish?
Speaker #1: Said in a thorough and disciplined manner. His question is, what are the implications? For example, of I believe you said GPU versus ASIC. In terms of the AI market, you know, do we have a preference or what is there a difference for TSMC?
Speaker #1: Is that correct, Chris?
Speaker #7: That's right. The impact on revenue and gross margin, whether it's a GPU or an ASIC.
[Analyst]: That's right. The impact to revenue and gross margin, whether it's a GPU or an ASIC.
Speaker #1: Right, okay. So.
Jeff Su: Right. Okay.
Speaker #3: Well, Chris, no matter if it's a GPU or an ASIC, it's all using our leading-edge technologies. From our perspective, we are working with our customers.
C.C. Wei: Krish, no matter if it's a GPU or it's an ASIC, it's all using our leading-edge technologies. From our perspective, we are working with our customer, and we all know that they are going to grow strongly in the next several years. There is no differentiation in front of TSMC. We support all kinds of types.
Speaker #3: And we all know that they are going to grow strongly in the next several years. So, no depreciation in front of TSMC. We support all kinds of types.
Speaker #7: Thank you very much.
[Analyst]: Thank you very much.
Speaker #1: Yeah, thank you. Operator, can we take...
Jeff Su: Thank you. Operator, can we take?
Speaker #5: Thank you, thanks.
[Analyst]: Thank you.
Speaker #1: Thank you, Chris. So we'll take the question from the final participant, please.
Jeff Su: Thank you, Krish. We'll take the question from the final participant, please.
Speaker #5: Yes, last one of the line, Macquarie. Go ahead, please.
Operator: Yes. Last one off the line, Makari. Go ahead, please.
Speaker #8: Hi, C.C. Wei and Jeff Su. Congrats on a strong outlook. As a line from Macquarie. So my question is about competition. C.C., you defined the foundry 2.0 market.
[Analyst]: Hi, C.C., Wendell, and Jeff. Congrats on a strong outlook. Aside from Makari, my question is about competition. C.C., you define the Foundry 2.0 market. I wonder what's the strategic initiative that TSMC is undertaking to further strengthen your competitive landscape and also in this broader ecosystem. For some context, I got the question from the U.S. investor as your clients announced they invest in Intel. Thank you.
Speaker #8: And I wonder what's the strategic initiative the TSMC undertaking to further strengthening your competitive landscape? And also in this border ecosystem, so some context I got the question from the US investor.
Speaker #8: Your clients announced they invest in Intel. Thank you.
Speaker #1: Okay, so Arthur's question is around competition. In the foundry 2.0 landscape, what strategic initiatives and what things are TSMC focusing on to further strengthen our competitive advantage?
Jeff Su: Okay. Arthur's question is around competition. In the Foundry 2.0 landscape, what strategic initiatives, what things are TSMC focusing on to further strengthen our competitive advantage? I think the last part, Arthur, you're asking in the environment where one of our competitors in the U.S., how do we focus on the competition? Is that correct?
Speaker #1: I think the last part, Arthur, you're asking in the environment where one of our competitors in the U.S., how do we focus on the competition?
Speaker #1: Is that correct?
Speaker #5: Yes, it is. Yes, thank you, Jeff.
Operator: Yes, it is. Yes. Thank you, Jeff.
Speaker #1: Okay, let me
C.C. Wei: Okay. Let me answer that one. When we introduce our Foundry 2.0, we set the purpose that, as I said, one of my customers said that the system performance is very important in these days, not only a single chip. Also, let me share with you that our advanced packaging revenue is approaching close to 10%. It's significant in our revenue, and it's important for our customer. That's why we introduce Foundry 2.0 to capitalize this foundry business. Not as usual, previously, we only looked at the frontend portion. Now it's the whole thing, the frontend, the backend, and also important for our customer. That's why we introduced 2.0. Talking about our competition in the U.S., that competitor happens to be our customer. Very good customer. In fact, we are working with them for their most advanced product. Other than that, I don't want to make any more comment.
Speaker #3: When we introduced our Foundry 2.0, we set the purpose that, as I said, one of my customers said that the system performance is very important these days, not only for a single chip.
Speaker #3: And also let me share with you that our advanced packaging revenue is approaching close to 10%. It's significant in our revenue, and it's important for our customers.
Speaker #3: So that's why we introduce a Foundry 2.0 to capitalize on this foundry business. Not as usual; previously, we only looked at the front-end portion. Now we're looking at the whole thing: the front-end, the back-end, and, importantly, our customers.
Speaker #3: That's why we introduce 2.0. Talking about our competition, in the U.S., well, that competitor happens to be our customer – a very good customer. So, in fact, we are working with them.
Speaker #3: For their most advanced product. Other than that, I don't want to make any more comments.
Speaker #5: Yeah, thank you, C.C. Can I ask one more question?
[Analyst]: Yeah, thank you, CG. Can I ask one more question?
Speaker #1: Yes, you have two. So, your second question, sure.
Jeff Su: Yes, you have two. Your second question, sure.
Speaker #5: Yeah. Yeah, my second question is very quick on the end demand. So recall, C. Wei, you last time mentioned that we should also monitor and worry about the prebuilt, especially in the consumer electronics.
[Analyst]: Yeah. My second question is very quick on the end demand. Recall, Dr. C.C. Wei, you last time mentioned that we should also monitor and worry about the prebuilt, especially in the consumer electronics. This quarter, our number suggests that there's a QOQ 19% growth in the smartphone. My question is, do you still worry about the prebuilt? Thank you.
Speaker #5: And then this quarter, our number suggests that there's a pure 19% growth in the smartphone market. So my question is, do you still worry about the prebuilt?
Speaker #5: Thank you.
Speaker #1: All right, so Arthur, the second question is on smartphones. Are we concerned about prebuilt, or sort of, I guess, pulling prebuilt from customers in that regard?
Jeff Su: Okay. Arthur, the second question is on smartphone. Are we concerned about prebuilt or sort of, I guess, pulling prebuilt from customers in that regard?
Speaker #3: No, we don't worry about the prebuilt because when you have a prebuilt, you have an inventory. In these days, the inventory already goes to that very seasonal level.
C.C. Wei: No. We don't worry about the prebuilt because when you have a prebuilt, you have an inventory. These days, the inventory already goes to a very seasonal level and very healthy. No prebuilt.
Speaker #3: And we're healthy, so no prebuilt.
Speaker #5: Thank you very much.
[Analyst]: Thank you very much.
Speaker #1: Okay, thank you, C.C. Thank you, Arthur. Thank you, everyone. So 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 30 minutes from now.
Jeff Su: Okay. Thank you, C.C. Thank you, Arthur. Thank you, everyone. 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 30 minutes 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. Thank you, everyone, for joining us today. We hope you all continue to stay well, and we hope you will join us again next quarter in early 2026. Thank you and have a good day.
Speaker #1: The transcript will become available 24 hours from now, and both will be accessible through TSMC's website at www.tsmc.com. Thank you, everyone, for joining us today.