TSMC Q4 2025 Taiwan Semiconductor Manufacturing Co Ltd Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Taiwan Semiconductor Manufacturing Co Ltd Earnings Call
Jeff Su: Good afternoon, everyone, and welcome to TSMC's Q4 2025 Earnings Conference and Conference Call. My name is Jeff Su, TSMC's Director of Investor Relations and your host for today. Today's event is being webcast live through TSMC's website at www.tsmc.com, where you can also download the earnings release materials. If you're 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 Q4 2025, followed by our guidance for the Q1 2026. 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 both the floor and the line for the question-and-answer session.
Good afternoon, everyone, and welcome to TSMC's fourth quarter 2024 earnings conference and conference call.
My name is Jeff Su, TSMC's Director of Investor Relations, and your host for today.
Today's event is being webcast live through TSMC's website at www.tsmc.com, where you can also download the earnings release materials.
If you're 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, PSMC. Senior Vice President and CFO, Mr. Wendell Huang.
Will summarize our operations in the fourth quarter, 2025.
Followed by our guidance for the first quarter 2026.
Afterwards, Mr. Huang and TSMC's Chairman and CEO, Dr. C. C. Wei.
We will jointly provide the company's key messages.
Rachel Smith: 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 would 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. Now, I would like to turn the microphone over to TSMC's CFO, Mr. Wendell Huang, for the summary of operations and the current quarter guidance. Thank you, Jeff. Good afternoon, everyone. Thank you for joining us today. My presentation will start with financial highlights for the fourth quarter of 2025 and a recap of full year 2025. After that, I will provide the guidance for the first quarter of 2026. Fourth quarter revenue increased 5.7% sequentially in NT, supported by strong demand for our leading-edge process technologies.
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 would 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. Now, I would like to turn the microphone over to TSMC's CFO, Mr. Wendell Huang, for the summary of operations and the current quarter guidance.
Q4 2025 Taiwan Semiconductor Manufacturing Co Ltd Earnings Call
Then we will open both the floor and the line for the question and answer session.
As usual, I would like to remind everybody that today’s discussion 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 in our press release.
Wendell Huang: Thank you, Jeff. Good afternoon, everyone. Thank you for joining us today. My presentation will start with financial highlights for the fourth quarter of 2025 and a recap of full year 2025. After that, I will provide the guidance for the first quarter of 2026. Fourth quarter revenue increased 5.7% sequentially in NT, supported by strong demand for our leading-edge process technologies.
And now, I would like to turn the microphone over to TSMC CFO, Mr. Wendell Huang, for the summary of operations and the current quarter guidance.
Thank you, Jeff. Good afternoon, everyone. Thank you for joining us today.
My presentation will start with financial highlights for the fourth quarter of 2025, and a recap of full year 2025.
After that, I will provide the guidance for the first quarter of 2026.
Potent sequentially in NT.
Rachel Smith: In US dollar terms, revenue increased 1.9% sequentially to $33.7 billion, slightly ahead of our fourth quarter guidance. Gross margin increased by 2.8 percentage points sequentially to 62.3%, primarily due to cost improvement efforts, favorable foreign exchange rate, and the high capacity utilization rate. The operating expenses accounted for 8.4% of net revenue, compared to 8.9% in Q3 of 2025 due to operating leverage. Thus, operating margin increased sequentially by 3.4 percentage points to 54%. Overall, our fourth quarter EPS was NTD 19.5, and ROE was 38.8%. Now, let's move on to revenue by technology. Three-nanometer process technology contributed 28% of wafer revenue in the fourth quarter, while five-nanometer and seven-nanometer accounted for 35% and 14% respectively. Advanced technologies, defined as seven-nanometer and below, accounted for 77% of wafer revenue. On a full-year basis, three-nanometer revenue contribution came in at 24% of 2025 wafer revenue, five-nanometer 36%, and seven-nanometer 14%.
In US dollar terms, revenue increased 1.9% sequentially to $33.7 billion, slightly ahead of our fourth quarter guidance. Gross margin increased by 2.8 percentage points sequentially to 62.3%, primarily due to cost improvement efforts, favorable foreign exchange rate, and the high capacity utilization rate. The operating expenses accounted for 8.4% of net revenue, compared to 8.9% in Q3 of 2025 due to operating leverage. Thus, operating margin increased sequentially by 3.4 percentage points to 54%. Overall, our fourth quarter EPS was NTD 19.5, and ROE was 38.8%. Now, let's move on to revenue by technology. Three-nanometer process technology contributed 28% of wafer revenue in the fourth quarter, while five-nanometer and seven-nanometer accounted for 35% and 14% respectively. Advanced technologies, defined as seven-nanometer and below, accounted for 77% of wafer revenue. On a full-year basis, three-nanometer revenue contribution came in at 24% of 2025 wafer revenue, five-nanometer 36%, and seven-nanometer 14%.
Supported by strong demand for our leading-edge process technologies.
In US dollar terms, revenue increased 1.9% sequentially to $33.7 billion.
Slightly ahead of our fourth quarter guidance.
Gross margin.
Increase by 2.8% sequentially to 62.3%.
Primarily due to cost improvement efforts, favorable foreign exchange rate, and a high capacity utilization rate.
The operating expenses accounted for 8.4% of net revenue.
compared to 8.9% in the third quarter of '25 due to operating leverage.
Thus.
Operating margin increased sequentially by 3.4 percentage points to 54%.
Overall, our fourth quarter EPS was NT$19.5, and ROE was 38.8%.
Now, let's move on to revenue by technology.
3-nanometer process technology contributed 28% of wafer revenue in the fourth quarter, while 5-nanometer and 7-nanometer accounted for 35% and 14%, respectively.
Advanced technologies defined as 7 nanometer and below accounted for 77% of wafer revenue.
On a four-year basis, 3-nanometer revenue contribution came in at 24% of 2025 wafer revenue.
Rachel Smith: Advanced technologies accounted for 74% of total wafer revenue, up from 69% in 2024. Moving on to revenue contribution by platform, HPC increased 4% quarter over quarter to account for 55% of our fourth quarter revenue. Smartphone increased 11% to account for 32%. IoT increased 3% to account for 5%. Automotive decreased 1% to account for 5%, while DCE decreased 22% to account for 1%. On a full-year basis, HPC increased 48% year over year. Smartphone, IoT, and automotive increased by 11%, 15%, and 34% respectively in 2025, while DCE remains flat. Overall, HPC accounted for 58% of our 2025 revenue, smartphone accounted for 29%, IoT accounted for 5%, automotive accounted for 5%, and DCE accounted for 1%. Moving on to the balance sheet, we ended the fourth quarter with cash and marketable securities of NTD 3.1 trillion, or $98 billion.
Advanced technologies accounted for 74% of total wafer revenue, up from 69% in 2024. Moving on to revenue contribution by platform, HPC increased 4% quarter over quarter to account for 55% of our fourth quarter revenue. Smartphone increased 11% to account for 32%. IoT increased 3% to account for 5%. Automotive decreased 1% to account for 5%, while DCE decreased 22% to account for 1%. On a full-year basis, HPC increased 48% year over year. Smartphone, IoT, and automotive increased by 11%, 15%, and 34% respectively in 2025, while DCE remains flat. Overall, HPC accounted for 58% of our 2025 revenue, smartphone accounted for 29%, IoT accounted for 5%, automotive accounted for 5%, and DCE accounted for 1%. Moving on to the balance sheet, we ended the fourth quarter with cash and marketable securities of NTD 3.1 trillion, or $98 billion.
5 nanometer: 36%, and 7 nanometer: 14%.
Advanced technologies accounted for 74% of total wafer revenue.
Up from 609% in 2024.
Moving on to revenue contribution by platform.
HBC increased 4% quarter over quarter.
To account for 55% of our fourth quarter revenue.
Smartphone increased 11% to account for 32%.
IoT increased 3% to account for 5%.
Automotive decreased 1% to account for 5%, while DCE decreased 22% to account for 1%.
On a four-year basis, HPC increased 48% year-over-year.
And Automotive increased by 11%, 15%, and 34%, respectively.
In 2025, while DCE remains flat.
Overall, HPC accounted for 58% of our 2025 revenue.
Smartphone accounted for 29%, IoT accounted for 5%, and automotive accounted for 5%.
And dce accounted for 1%.
Moving on, to the balance sheet.
Rachel Smith: On the liability side, current liabilities increased by NTD 182 billion quarter over quarter, mainly due to the increase of NTD 95 billion in accrued liabilities and others, and the increase of NTD 61 billion from the reclassification of bonds payable to current portion. In terms of financial ratios, accounts receivable days increased by one day to 26 days. Inventory days remained steady at 74 days. Regarding cash flow and CapEx, during the fourth quarter, we generated about NTD 726 billion in cash from operations, spent NTD 357 billion in CapEx, and distributed NTD 130 billion for Q1 2025 cash dividend. Overall, our cash balance increased NTD 297 billion to NTD 2.8 trillion at the end of the quarter. In US dollar term, our fourth quarter capital expenditures totaled $11.5 billion. Now, let's look at the recap of our performance in 2025.
On the liability side, current liabilities increased by NTD 182 billion quarter over quarter, mainly due to the increase of NTD 95 billion in accrued liabilities and others, and the increase of NTD 61 billion from the reclassification of bonds payable to current portion. In terms of financial ratios, accounts receivable days increased by one day to 26 days. Inventory days remained steady at 74 days. Regarding cash flow and CapEx, during the fourth quarter, we generated about NTD 726 billion in cash from operations, spent NTD 357 billion in CapEx, and distributed NTD 130 billion for Q1 2025 cash dividend. Overall, our cash balance increased NTD 297 billion to NTD 2.8 trillion at the end of the quarter. In US dollar term, our fourth quarter capital expenditures totaled $11.5 billion. Now, let's look at the recap of our performance in 2025.
We ended the fourth quarter with cash and marketable securities of NT$3.1 trillion, or $98 billion US dollars.
On the liability side, current liabilities increased by NT$182 billion quarter over quarter, mainly due to the increase of NT$95 billion in ACR, liabilities, and others, and the increase of NT$61 billion from the reclassification of bonds payable to current portion.
In terms of financial ratios, accounts receivable days increased by 1 day to 26 days.
Inventory days remain steady at 74 days.
Regarding cash flow and capex during the fourth quarter, we generated about NT$726 billion.
In cash from operations, spent $357 billion in CapEx.
And distributed $130 billion for the first quarter. $2.5 cash dividend.
Overall, our cash balance increased NT$297 billion to NT$2.8 trillion at the end of the quarter.
In US dollar terms.
Our fourth quarter capital expenditures total $11.5 billion.
Rachel Smith: Thanks to the strong demand for our leading-edge process technologies, we continue to outperform the foundry industry in 2025. Our revenue increased 35.9% in USD terms to $122 billion, or increased 31.6% in NTD terms to NTD 3.8 trillion. Gross margin increased 3.8 percentage points to 59.9%, mainly reflecting a higher capacity utilization rate and cost improvement efforts, partially offset by an unfavorable foreign exchange rate and margin dilution from our overseas fabs. With operating leverage, our operating margin increased 5.1 percentage points to 50.8%. Overall, full-year EPS increased 46.4% to 66.25 NTD, and ROE increased 5.1 percentage points to 35.4%. In 2025, we generated NTD 2.3 trillion in operating cash flow, spent NTD 1.3 trillion, or $40.9 billion on capital expenditures. As a result, free cash flow amounted to NTD 1 trillion, up 15.2% from 2024.
Thanks to the strong demand for our leading-edge process technologies, we continue to outperform the foundry industry in 2025. Our revenue increased 35.9% in USD terms to $122 billion, or increased 31.6% in NTD terms to NTD 3.8 trillion. Gross margin increased 3.8 percentage points to 59.9%, mainly reflecting a higher capacity utilization rate and cost improvement efforts, partially offset by an unfavorable foreign exchange rate and margin dilution from our overseas fabs. With operating leverage, our operating margin increased 5.1 percentage points to 50.8%. Overall, full-year EPS increased 46.4% to 66.25 NTD, and ROE increased 5.1 percentage points to 35.4%. In 2025, we generated NTD 2.3 trillion in operating cash flow, spent NTD 1.3 trillion, or $40.9 billion on capital expenditures. As a result, free cash flow amounted to NTD 1 trillion, up 15.2% from 2024.
Look at the recap of our performance in 2025.
Thanks to the strong demand for our leading-edge process technologies.
We continue to outperform the foundry industry in 2025.
Our revenue increased 35.9% in US dollar terms to $122 billion.
Or, an increase of 31.6% in anti-dollar terms to $3.8 trillion.
Gross margin increased 3.8 percentage points to 59.9%, mainly reflecting higher capacity, utilization rate, and cost improvement efforts, partially offset by an unfavorable foreign exchange rate and margin dilution from our overseas fabs.
With operating leverage, our operating margins increase 5.1 percentage points to 50.8%.
Overall, for the full year, EPS increased 46.4% to NT$66.25, and ROE increased 5.1 percentage points to 35.4%.
In 2025, we generated NT$2.3 trillion in operating cash flow.
Spend NT$1.3 trillion, or US$40.9 billion, on capital expenditures.
Rachel Smith: Meanwhile, we paid NTD 467 billion in cash dividends in 2025, up 28.6% year over year, as we continue to increase our cash dividend per share. TSMC shareholders received a total of NTD 18 cash dividend per share in 2025, up from NTD 14 in 2024, and they will receive at least NTD 23 per share in 2026. I have finished my financial summary. Now, let's turn to our current quarter guidance. We expect our business to be supported by continued strong demand for our leading-edge process technologies. Based on the current business outlook, we expect our Q1 revenue to be between $34.6 billion and $35.8 billion, which represents a 4% sequential increase, or a 38% year-over-year increase at the midpoint.
Meanwhile, we paid NTD 467 billion in cash dividends in 2025, up 28.6% year over year, as we continue to increase our cash dividend per share. TSMC shareholders received a total of NTD 18 cash dividend per share in 2025, up from NTD 14 in 2024, and they will receive at least NTD 23 per share in 2026. I have finished my financial summary. Now, let's turn to our current quarter guidance. We expect our business to be supported by continued strong demand for our leading-edge process technologies. Based on the current business outlook, we expect our Q1 revenue to be between $34.6 billion and $35.8 billion, which represents a 4% sequential increase, or a 38% year-over-year increase at the midpoint.
As a result, free cash flow amounted to $1 trillion, up 15.2% from 2024.
Meanwhile, we pay NT$467 billion in cash dividends in 2025.
Up 28.6% year-over-year.
As we continue to increase our cash dividend per share.
Here's MC shareholders will receive a total cash dividend of NT$18 per share in 2025, up from NT$14 in 2024. They will receive at least NT$23 per share in 2026.
I have finished my financial summary.
Now, let's turn to our current quarter guidance.
We expect our business to be supported by continued strong demand for our leading-edge process technologies.
Based on the current business outlook, we expect our first quarter revenue to be between $34.6 billion and $35.8 billion, which represents a 4% sequential increase.
Rachel Smith: Based on the exchange rate assumption of $1 to NT$31.6, gross margin is expected to be between 63% and 65%, operating margin between 54% and 56%. Lastly, our effective tax rate was 16% in 2025. For 2026, we expect our effective tax rate to be between 17% and 18%. This concludes my financial presentation. Now, let me turn to our key messages. I will start by talking about our Q4 2025 and Q1 2026 profitability. Compared to Q3, our fourth quarter gross margin increased by 280 basis points sequentially to 62.3%, primarily due to cost improvement efforts, a more favorable foreign exchange rate, and a higher overall capacity utilization rate. Compared to our fourth quarter guidance, our actual gross margin exceeded the high end of the range provided three months ago by 130 basis points, mainly as we delivered better-than-expected cost improvement efforts.
Based on the exchange rate assumption of $1 to NT$31.6, gross margin is expected to be between 63% and 65%, operating margin between 54% and 56%. Lastly, our effective tax rate was 16% in 2025. For 2026, we expect our effective tax rate to be between 17% and 18%. This concludes my financial presentation. Now, let me turn to our key messages. I will start by talking about our Q4 2025 and Q1 2026 profitability. Compared to Q3, our fourth quarter gross margin increased by 280 basis points sequentially to 62.3%, primarily due to cost improvement efforts, a more favorable foreign exchange rate, and a higher overall capacity utilization rate. Compared to our fourth quarter guidance, our actual gross margin exceeded the high end of the range provided three months ago by 130 basis points, mainly as we delivered better-than-expected cost improvement efforts.
Or a 38% year-over-year increase at the midpoint.
Based on the exchange rate, assuming $1 US dollar to 31.6 NT.
Rose margin is expected to be between 63% and 65%.
Operating margin between 54% and 56%.
Lastly, our effective tax rate was 16% in 2025.
For 2026, we expect our effective tax rate to be between 17% and 18%.
Thus concludes my financial presentation.
Now, let me turn to our key method.
I will start by talking about our fourth quarter '25 and first quarter '26 profitability.
Compared to the third quarter, our fourth quarter gross margin increased by 280 basis points sequentially to 62.3%, primarily due to cost improvement efforts, a more favorable foreign exchange rate, and a higher overall capacity utilization rate.
Compared to our fourth quarter guidance, our actual gross margin exceeded the high end of the range provided three months ago by 130 basis points.
Rachel Smith: In addition, the actual Q4 exchange rate was 1 USD to 31.01 NTD, as compared to our guidance of 1 USD to 30.6 NTD. We have just guided our Q1 gross margin to increase by 170 basis points to 64% at the midpoint, primarily driven by continued cost improvement efforts, including productivity gains and a higher overall capacity utilization rate, partially offset by continued dilution from our overseas fab. Looking at full year 2026, given the six factors, there are a few puts and takes I would like to share. On the one hand, we expect our overall utilization rate to moderately increase in 2026. N3 gross margin is expected to cross over to the corporate average sometime in 2026, and we continue to work hard to earn our value.
In addition, the actual Q4 exchange rate was 1 USD to 31.01 NTD, as compared to our guidance of 1 USD to 30.6 NTD. We have just guided our Q1 gross margin to increase by 170 basis points to 64% at the midpoint, primarily driven by continued cost improvement efforts, including productivity gains and a higher overall capacity utilization rate, partially offset by continued dilution from our overseas fab. Looking at full year 2026, given the six factors, there are a few puts and takes I would like to share. On the one hand, we expect our overall utilization rate to moderately increase in 2026. N3 gross margin is expected to cross over to the corporate average sometime in 2026, and we continue to work hard to earn our value.
Mainly, as we delivered better-than-expected cost improvement efforts.
In addition.
The actual fourth quarter exchange rate was 1 US dollar to 31.01 NT, as compared to our guidance of 1 US dollar to 30.6 NT.
We have just guided our first quarter gross margin to increase by 170 basis points to 64% at the midpoint.
Primarily driven by continued cost improvement efforts, including productivity gains and a higher overall capacity utilization rate, partially offset by continued dilution from our overseas fabs.
looking at full year 2026.
There are six factors. There are a few puts and takes. I would like to share.
On the one hand, we expect our overall utilization rate to monitor the increase in 2026,
And 3 gross margin is expected to cross over to the corporate average sometime in 2026.
Rachel Smith: In addition, we are leveraging our manufacturing excellence to drive greater productivity in our fabs to generate more wafer output. We are also increasing across-node capacity optimization, which includes flexible capacity support among N7, N5, and N3 nodes to support our profitability. On the other hand, as the scale of our overseas expansion grows, we continue to forecast the gross margin dilution from the ramp-up of overseas fabs in the next several years to be between 2% to 3% in the early stages and widen to 3% to 4% in the latter stages. Furthermore, the initial ramp-up of our two-nanometer technology will start to dilute our gross margin in the second half of the year, and we expect between 2% to 3% dilution for the full year of 2026. Finally, we have no control over the foreign exchange rate, but that may be another factor in 2026.
In addition, we are leveraging our manufacturing excellence to drive greater productivity in our fabs to generate more wafer output. We are also increasing across-node capacity optimization, which includes flexible capacity support among N7, N5, and N3 nodes to support our profitability. On the other hand, as the scale of our overseas expansion grows, we continue to forecast the gross margin dilution from the ramp-up of overseas fabs in the next several years to be between 2% to 3% in the early stages and widen to 3% to 4% in the latter stages. Furthermore, the initial ramp-up of our two-nanometer technology will start to dilute our gross margin in the second half of the year, and we expect between 2% to 3% dilution for the full year of 2026. Finally, we have no control over the foreign exchange rate, but that may be another factor in 2026.
And we continue to work hard to earn our value.
In addition.
We are leveraging our manufacturing excellence to drive greater productivity in our fabs to generate more weight for output.
We are also increasing across no capacity optimization, which includes flexible capacity support among N7 and 5 and N3 nodes to support our profitability.
On the other hand, as the scale of our overseas expansion grows, we continue to forecast the gross margin dilution from the ramp-up of overseas fabs in the next several years to be between 2% to 3% in the early stages, and widen to 3% to 4% in the latter stages.
Furthermore, the initial ramp-up of our 2-nanometer technology will start to dilute our gross margin in the second half of the year. And we expect between 2 to 3 percent dilution for the full year of 2026.
Rachel Smith: Next, let me talk about our 2026 capital budget and depreciation. At TSMC, a higher level of capital expenditures is always correlated to the high growth opportunities in the following years. With our strong technology leadership and differentiation, we are well-positioned to capture the multi-year structure demand from the industry megatrends of 5G, AI, and HPC. In 2025, we spent $40.9 billion, as compared to $29.8 billion in 2024, as we began to raise our level of capital spending in anticipation of the growth that will follow in the future years. In 2026, we expect our capital budget to be between $52 billion and $56 billion, as we continue to invest to support our customers' growth. About 70% to 80% of the 2026 capital budget will be allocated to advanced process technologies.
Next, let me talk about our 2026 capital budget and depreciation. At TSMC, a higher level of capital expenditures is always correlated to the high growth opportunities in the following years. With our strong technology leadership and differentiation, we are well-positioned to capture the multi-year structure demand from the industry megatrends of 5G, AI, and HPC. In 2025, we spent $40.9 billion, as compared to $29.8 billion in 2024, as we began to raise our level of capital spending in anticipation of the growth that will follow in the future years. In 2026, we expect our capital budget to be between $52 billion and $56 billion, as we continue to invest to support our customers' growth. About 70% to 80% of the 2026 capital budget will be allocated to advanced process technologies.
Finally, we have no control over the foreign exchange rate, but that may be another factor in 2026.
Next, let me talk about our 2026 capital, budget, and depreciation.
At TSMC, a higher level of capital expenditures is always related to high growth opportunities in the following years.
With our strong technology leadership and differentiation, we are well positioned to capture the multi-year structural demand from the industry, and the mega trends of 5G, AI, and HPC.
In 2025, we spent 40.9%, as compared to $29.8 billion in 2024.
As we begin to raise our level of capital spending in anticipation of the growth that will follow in the future years.
In 2026, we expect our capital budget to be between $52 billion and $56 billion US, as we continue to invest to support our customers' growth.
Rachel Smith: About 10% will be spent for specialty technologies, and about 10% to 20% will be spent for advanced packaging, testing, mask making, and others. Our depreciation expense is expected to increase by 18% year-over-year in 2026, mainly as we ramp our two-nanometer technologies. Even as we invest in the future growth with this level of CapEx spending in 2026, we remain committed to delivering profitable growth to our shareholders. Finally, let me talk about TSMC's long-term profitability outlook. As a foundry, our biggest responsibility is to support our customers' growth, and we always view them as partners. Having said that, we are in a very capital-intensive business. In the last five years alone, our CapEx totaled $167 billion. Our R&D investments totaled $30 billion.
About 10% will be spent for specialty technologies, and about 10% to 20% will be spent for advanced packaging, testing, mask making, and others. Our depreciation expense is expected to increase by 18% year-over-year in 2026, mainly as we ramp our two-nanometer technologies. Even as we invest in the future growth with this level of CapEx spending in 2026, we remain committed to delivering profitable growth to our shareholders. Finally, let me talk about TSMC's long-term profitability outlook. As a foundry, our biggest responsibility is to support our customers' growth, and we always view them as partners. Having said that, we are in a very capital-intensive business. In the last five years alone, our CapEx totaled $167 billion. Our R&D investments totaled $30 billion.
About 70% to 80% of the 2026 capital budget will be allocated to advanced process technologies.
About 10% will be spent for specialty technologies, and about 10% to 20% will be spent for advanced packaging, testing, mask making, and others.
Our depreciation expense is expected to increase by high teens percentage year-over-year in 2026, mainly as we ramp our 2-nanometer technologies.
Even as we invest in future growth, with this level of KCap spending in 2026,
We remain committed to delivering profitable growth to our shareholders.
Finally, let me talk about TSMC's long-term profitability outlook.
As a foundry, our biggest responsibility is to support our customers' growth, and we always view them as partners.
Rachel Smith: Therefore, it is important for TSMC to earn a sustainable and healthy return as we continue to invest in leading-edge specialty and advanced packaging technologies to support our customers' growth. Today, we face increasing manufacturing cost challenges due to the rising costs of leading nodes. For example, the cost of tools is becoming more expensive, and process complexity is increasing. As a result, the CapEx dollar required to build 1,000 wafer per month capacity of N2 is substantially higher than 1,000 wafer per month capacity for N3. The CapEx per K cost for A14 will be even higher. We also face additional cost challenges from the expansion of our global manufacturing footprint, new investments in specialty technologies, and inflationary costs. These all lead to a higher level of CapEx spending.
Therefore, it is important for TSMC to earn a sustainable and healthy return as we continue to invest in leading-edge specialty and advanced packaging technologies to support our customers' growth. Today, we face increasing manufacturing cost challenges due to the rising costs of leading nodes. For example, the cost of tools is becoming more expensive, and process complexity is increasing. As a result, the CapEx dollar required to build 1,000 wafer per month capacity of N2 is substantially higher than 1,000 wafer per month capacity for N3. The CapEx per K cost for A14 will be even higher. We also face additional cost challenges from the expansion of our global manufacturing footprint, new investments in specialty technologies, and inflationary costs. These all lead to a higher level of CapEx spending.
Having said that we are in a very Capital intensive business in The Last 5 Years alone. Our capex total 167 billion US Dollars our R&D Investments total, 30 billion US dollars.
Therefore, it is important for TSMC to earn a sustainable and healthy return. As we continue to invest in leading-edge, specialty, and advanced packaging technologies to support our customers' growth.
Today, we faced increasing manufacturing cost challenges due to the rising cost of leading nodes.
For example, the cost of tools is becoming more expensive, and process complexity is increasing.
As a result, the capex dollar required to build 1K wafer per month capacity of N2 is substantially higher.
Than 1K wafer per month capacity for N3.
14 will be even higher.
We also face additional cost challenges from the expansion of our global manufacturing footprint.
New investments in specialty technologies and inflationary costs.
Rachel Smith: As a result, in the last three years, our CapEx dollars amount to a total of $101 billion, but it is expected to be significantly higher in the next three years. Having said that, we continue to work closely with our customers to plan our capacity while sticking to our disciplines to ensure a healthy overall capacity utilization rate through the cycle. Our pricing will remain strategic, not opportunistic, to earn our value. We will work diligently with our suppliers to drive greater cost improvements. We will also leverage our manufacturing excellence to generate more wafer output and drive greater across-node capacity optimization in our fab operations to support our profitability. By taking such actions, we believe a long-term gross margin of 56% and higher through the cycle is achievable, and we can earn an ROE of high 20% through the cycle.
As a result, in the last three years, our CapEx dollars amount to a total of $101 billion, but it is expected to be significantly higher in the next three years. Having said that, we continue to work closely with our customers to plan our capacity while sticking to our disciplines to ensure a healthy overall capacity utilization rate through the cycle. Our pricing will remain strategic, not opportunistic, to earn our value. We will work diligently with our suppliers to drive greater cost improvements. We will also leverage our manufacturing excellence to generate more wafer output and drive greater across-node capacity optimization in our fab operations to support our profitability. By taking such actions, we believe a long-term gross margin of 56% and higher through the cycle is achievable, and we can earn an ROE of high 20% through the cycle.
These all lead to a higher level of care, extending.
As a result, in the last three years, our capex dollar amount totaled $101 billion US dollars.
But it is expected to be significantly higher in the next three years.
Having said that, we continue to work closely with our customers to plan our capacity, while sticking to our disciplines to ensure a healthy overall capacity utilization rate through the cycle.
Our pricing will remain strategic, not opportunistic, to earn our value.
We will work diligently with our suppliers to drive greater cost improvements.
We will also leverage our manufacturing excellence to generate more wafer output, and drive greater cross-node capacity optimization in our fab operations to support our profitability.
Rachel Smith: By earning a sustainable and healthy return, even as we shoulder a greater burden of CapEx investment for our customers, we can continue to invest in technology and capacity to support their growth while delivering long-term profitable growth to our shareholders. We also remain committed to a sustainable and steadily increasing cash dividends per share on both an annual and quarterly basis. Now, let me turn the microphone over to C.C. Thank you, Wendell. Good afternoon, everybody. First, let me start with our 2026 outlook. In 2025, we observe robust AI-related demand throughout the whole year, while non-AI end market segments bottomed out and saw a mild recovery. Concluding 2025, the Foundry 2.0 industry, which we define as all logic wafer manufacturing, packaging, testing, mask making, and others, increased 16% year-over-year.
By earning a sustainable and healthy return, even as we shoulder a greater burden of CapEx investment for our customers, we can continue to invest in technology and capacity to support their growth while delivering long-term profitable growth to our shareholders. We also remain committed to a sustainable and steadily increasing cash dividends per share on both an annual and quarterly basis. Now, let me turn the microphone over to C.C.
By taking such actions, we believe a long-term gross margin of 56% and higher through the cycle is achievable, and we can earn an ROE of high 20s percent through the cycle.
By earning a sustainable and healthy return, even as we shoulder a greater burden of capex investment. For our customers, we can continue to invest in technology and capacity to support their growth, while delivering long-term profitable growth to our shareholders.
We also remain committed to a sustainable and steadily increasing cash dividends per share on both an annual and quarterly basis.
C.C. Wei: Thank you, Wendell. Good afternoon, everybody. First, let me start with our 2026 outlook. In 2025, we observe robust AI-related demand throughout the whole year, while non-AI end market segments bottomed out and saw a mild recovery. Concluding 2025, the Foundry 2.0 industry, which we define as all logic wafer manufacturing, packaging, testing, mask making, and others, increased 16% year-over-year.
Now, let me turn the microphone over to CC.
Thank you, Window. Good afternoon, everybody.
First, let me start with our 2026 outlook.
In 2025, we observed robust AI-related demand.
Throughout the whole year, while NGI and the Market Segment button were out, we saw a mild recovery.
Concluding 2025, the 42.0 industry, which we define as all logic, wafer manufacturing, packaging, and testing.
Master making.
Rachel Smith: Supported by our strong technology differentiation and broader customer base, TSMC's revenue increased 35.9% year-over-year in US dollar terms, outperforming the Foundry 2.0 industry growth. Entering 2026, we understand there are uncertainties and risks from the potential impact of tariff policies and rising component prices, especially in consumer-related and price-sensitive end market segments. As such, we will be prudent in our business planning while focusing on the fundamentals of our business to further strengthen our competitive position. We forecast the Foundry 2.0 industry to grow 14% year-over-year in 2026, supported by robust AI-related demand. Underpinned by strong demand for our leading-edge specialty and advanced packaging technologies, we are confident we can continue to outperform the industry growth. We expect 2026 to be another strong growth year for TSMC and forecast our full-year revenue to increase by close to 30% in US dollar terms.
Supported by our strong technology differentiation and broader customer base, TSMC's revenue increased 35.9% year-over-year in US dollar terms, outperforming the Foundry 2.0 industry growth. Entering 2026, we understand there are uncertainties and risks from the potential impact of tariff policies and rising component prices, especially in consumer-related and price-sensitive end market segments. As such, we will be prudent in our business planning while focusing on the fundamentals of our business to further strengthen our competitive position. We forecast the Foundry 2.0 industry to grow 14% year-over-year in 2026, supported by robust AI-related demand. Underpinned by strong demand for our leading-edge specialty and advanced packaging technologies, we are confident we can continue to outperform the industry growth. We expect 2026 to be another strong growth year for TSMC and forecast our full-year revenue to increase by close to 30% in US dollar terms.
And others increased by 16% year-over-year.
And technology differentiation and a broader customer base.
TSMC revenue increased 35.9% year-over-year in the U.S. Starter term outperforming the Foundry 201 industry growth.
Going into 2026, we understand there are uncertainties and risks from the potential impact of carry policies and rising component and party prices, especially in consumer-related and price-sensitive market segments.
As such.
We will be prudent in our business planning while focusing on the fundamentals of our business, to further strengthen our competitive position.
We forecast the country’s industry to grow 14% year-over-year in 2026.
Supported by robust AI-related demand.
Underpinned by strong demand for our leading-edge specialty and advanced packaging technologies, we are confident we can continue to outperform the industry growth.
We expect 2026 to be another strong growth year for TSMC and forecast our four-year revenue to increase by close to 30%.
Rachel Smith: Next, let me talk about the AI demand and TSMC's long-term growth outlook. Recent developments in the AI market continue to be very positive. Revenue from AI accelerators accounted for 19% of our total revenue in 2025. Looking ahead, we observe increasing AI model adoption across consumer, enterprise, and sovereign AI segments. This is driving the need for more and more computation, which supports the robust demand for leading-edge silicon. Our customers continue to provide us with their positive outlook. In addition, our customers are customers who are mainly the cloud service providers who are also providing strong signals and reaching out directly to request the capacity to support their business. Thus, our conviction in the multi-year AI megatrend remains strong, and we believe the demand for semiconductors will continue to be very fundamental.
Next, let me talk about the AI demand and TSMC's long-term growth outlook. Recent developments in the AI market continue to be very positive. Revenue from AI accelerators accounted for 19% of our total revenue in 2025. Looking ahead, we observe increasing AI model adoption across consumer, enterprise, and sovereign AI segments. This is driving the need for more and more computation, which supports the robust demand for leading-edge silicon. Our customers continue to provide us with their positive outlook. In addition, our customers are customers who are mainly the cloud service providers who are also providing strong signals and reaching out directly to request the capacity to support their business. Thus, our conviction in the multi-year AI megatrend remains strong, and we believe the demand for semiconductors will continue to be very fundamental.
In US starter terms.
Next, let me talk about the AI demand and TSMC as a long-term growth outlook.
Recent developments in the AI market continue to be very positive.
Revenue from AI accelerators accounted for high-teens percent of our total revenue in 2025.
And Sovereign AI segment.
This is driving the need for more and more computation, which supports the robust demand for leading-edge silicon.
Our customers continue to provide us with their positive outlook.
In addition, our customers and customer.
Who are many in the cloud service providers.
They are also providing strong signals and reaching out directly to request the capacity to support their business.
Rachel Smith: As a foundry, our first responsibility is to fully support our customers with the most advanced technology and necessary capacity to unleash their innovations. To address the structural increase in the long-term market demand profile, TSMC works closely with our customers and our customers' customers to plan our capacity. This process is continuous and ongoing. In addition, as process technology complexity increases, the engagement time with customers is now at least two to three years in advance. Internally, as we have said before, TSMC employs a disciplined capacity planning system to assess the market demand from both a top-down and bottom-up approaches. We focus on the overall addressable megatrend to determine the appropriate capacity to build. Based on our assessment, we are preparing to increase our capacity and stepping out of our CapEx investment to support our customers' future growth.
As a foundry, our first responsibility is to fully support our customers with the most advanced technology and necessary capacity to unleash their innovations. To address the structural increase in the long-term market demand profile, TSMC works closely with our customers and our customers' customers to plan our capacity. This process is continuous and ongoing. In addition, as process technology complexity increases, the engagement time with customers is now at least two to three years in advance. Internally, as we have said before, TSMC employs a disciplined capacity planning system to assess the market demand from both a top-down and bottom-up approaches. We focus on the overall addressable megatrend to determine the appropriate capacity to build. Based on our assessment, we are preparing to increase our capacity and stepping out of our CapEx investment to support our customers' future growth.
There's our convention in the multi-year, AI megatrend remains strong, and we believe the demand for semiconductor will continue to be very fundamental.
As our foundry, our first responsibility is to fully support our customer with the most advanced technology and necessary capacity to unleash their innovations.
To address the structural increase in the long-term market demand profile.
TSMC works closely with our customers, and our customers' customers, to plan our capacity.
This process is continuous.
And ongoing, in addition, as process technology complexity increases,
The engagement time with customers is now at least two to three years in advance.
Internally, as we have said before.
TSMC employs a disciplined capacity planning system.
To assess the market demand for both a top-down and bottom-up approach.
We focus on the overall addressable mega trend to determine the appropriate capacity to build.
Rachel Smith: We are also putting forward the existing fab schedule to the extent possible, both in Taiwan and in Arizona. We are also leveraging our manufacturing excellence to drive greater productivity in our fabs to generate more output, convert end-to-end capacity to support N3 wherever necessary, and focus on capacity optimization across nodes to maximize the support to our customers. Based on our planning framework, we raise our forecast for the revenue growth from AI accelerators to approach a mid- to high-50% CAGR for the five-year period from 2024 to 2029. Underpinned by our technology differentiation and broader customer base, we now expect our overall long-term revenue growth to approach 25% CAGR in US dollar terms for the five-year period starting from 2024.
We are also putting forward the existing fab schedule to the extent possible, both in Taiwan and in Arizona. We are also leveraging our manufacturing excellence to drive greater productivity in our fabs to generate more output, convert end-to-end capacity to support N3 wherever necessary, and focus on capacity optimization across nodes to maximize the support to our customers. Based on our planning framework, we raise our forecast for the revenue growth from AI accelerators to approach a mid- to high-50% CAGR for the five-year period from 2024 to 2029. Underpinned by our technology differentiation and broader customer base, we now expect our overall long-term revenue growth to approach 25% CAGR in US dollar terms for the five-year period starting from 2024.
Based on our assessment, we are preparing to increase our capacity and stepping up our CapEx investment to support our customers' future growth.
We are also putting forward the existing 5 schedule.
To the extent possible.
Both.
In both Taiwan and in Arizona.
We are also leveraging our manufacturing excellence.
To drive greater productivity in our fabs to generate more output.
Convert N5 capacity to support N3.
Wherever necessary, we focus on capacity optimization across nodes to maximize the support to our customers.
Based on our planning framework, we raise our forecast for the revenue growth from AI, etc., to approach a mid- to high-50%.
Taker for the 5-year period from 2024 to 2029.
Rachel Smith: While we expect AI accelerators to be the largest contributor in terms of our incremental revenue growth, our overall revenue growth will be fueled by all four of our growth platforms, which are smartphone, SPC, IoT, and automotive in the next several years. 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. We will also remain disciplined 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 a network of customers to maximize the revenue for our customers.
While we expect AI accelerators to be the largest contributor in terms of our incremental revenue growth, our overall revenue growth will be fueled by all four of our growth platforms, which are smartphone, SPC, IoT, and automotive in the next several years. 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. We will also remain disciplined 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 a network of customers to maximize the revenue for our customers.
Underpinned by our technology depreciation and broad customer base, we now expect our overall long-term revenue growth to approach 25% CAGR in US dollar terms for the five-year period starting from 2024.
While we expect AI accelerators.
To be the largest contributor in terms of our incremental revenue growth. Our overall revenue growth will be fueled by all four of our growth platforms.
Which are smartphone, HPC, IoT, and automotive in the next several years.
As a war.
Monster 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.
We will also remain disciplined in our capacity planning approach to ensure we deliver profitable growth for our shareholders.
Now, let me talk about the TSMC global manufacturing footprint update.
All.
Our overseas.
Decisions are based on our customers' needs.
As they value some geographic flexibility.
Rachel Smith: Construction of our third fab has already started, and we are in the process of applying for permits to begin the construction of our fourth fab and fourth advanced packaging fab. Furthermore, we have just completed the purchase of a second large piece of land nearby to support our current expansion plan and provide more flexibility in response to the very strong multi-year AI-related demand. Our plan will enable TSMC to scale up an independent gigafab 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 Kumamoto Prefecture and the local government, our first specialty fab in Kumamoto has already started volume production in late 2024 with very good yield.
Construction of our third fab has already started, and we are in the process of applying for permits to begin the construction of our fourth fab and fourth advanced packaging fab. Furthermore, we have just completed the purchase of a second large piece of land nearby to support our current expansion plan and provide more flexibility in response to the very strong multi-year AI-related demand. Our plan will enable TSMC to scale up an independent gigafab 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 Kumamoto Prefecture and the local government, our first specialty fab in Kumamoto has already started volume production in late 2024 with very good yield.
Construction of our certified facility has already started, and we are in the process of applying for permits to begin the construction of our Force Fair.
And force Advanced packaging fast.
Furthermore.
We have just completed the purchase of a second large piece of land nearby to support our current expansion plan and provide more flexibility in response to the very strong, multi-year AI-related demand.
Our plan will enable TSMC to scale up an independent gig of app 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 the local government, our first special defi.
Rachel Smith: The construction of our second fab has started, and the technologies and 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. Construction of our specialty fab in Dresden, Germany, is progressing in our plan. The ramp schedule will be based on our customers' needs and market conditions. In Taiwan, with support from the Taiwan government, we are preparing multiple phases of 2-nanometer fabs in both Hsinchu and Kaohsiung Science Park. We will continue to invest in leading-edge and advanced packaging facilities in Taiwan over the next few years. By expanding our global footprint while continuing to invest in Taiwan, TSMC can continue to be better to be the trusted technology and capacity provider of the global logic industry for years to come.
The construction of our second fab has started, and the technologies and 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. Construction of our specialty fab in Dresden, Germany, is progressing in our plan. The ramp schedule will be based on our customers' needs and market conditions. In Taiwan, with support from the Taiwan government, we are preparing multiple phases of 2-nanometer fabs in both Hsinchu and Kaohsiung Science Park. We will continue to invest in leading-edge and advanced packaging facilities in Taiwan over the next few years. By expanding our global footprint while continuing to invest in Taiwan, TSMC can continue to be better to be the trusted technology and capacity provider of the global logic industry for years to come.
It has already started volume production in late 2024 with very good yield.
The construction of our second 5 has started, and the technologies and 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.
Construction of our special Defi interest in Germany is progressing according to our plan.
The RAM schedule will be based on our customers' needs and market conditions.
In Taiwan, with support from the Taiwan government, we are preparing multiple phases of 2-nanometer fabs in both Hsinchu and Kaohsiung Science Parks.
We will continue to invest in leading-edge and advanced packaging facilities in Taiwan over the next few years.
By expanding.
Our global footprint, while continuing investing in Taiwan, means TSMC can continue to be better—to be the trusted technology and capacity provider of the global logic industry for years to come.
Rachel Smith: Last, let me talk about N2 and A16 status. Our 2-nanometer and A16 technologies lead the industry in addressing the insatiable demand for energy-efficient computing, and almost all the innovators are working with TSMC. N2 successfully entered high-volume manufacturing in Q4 2025 at both our Hsinchu and Kaohsiung sites, with good yield. We are seeing strong demand from smartphone and HPC AI applications and expect a fast ramp in 2026. With our strategy of continuous enhancement, we also introduced N2P as an extension of the N2 family. N2P features further performance and power benefits on top of N2, and volume production is scheduled for the second half of this year. We also introduced A16, featuring our best-in-class super power rail, or SPR. A16 is best suitable for specific HPC products with complex signal routes, and dense power delivery networks. Volume production is on track for the second half of 2026.
Last, let me talk about N2 and A16 status. Our 2-nanometer and A16 technologies lead the industry in addressing the insatiable demand for energy-efficient computing, and almost all the innovators are working with TSMC. N2 successfully entered high-volume manufacturing in Q4 2025 at both our Hsinchu and Kaohsiung sites, with good yield. We are seeing strong demand from smartphone and HPC AI applications and expect a fast ramp in 2026. With our strategy of continuous enhancement, we also introduced N2P as an extension of the N2 family. N2P features further performance and power benefits on top of N2, and volume production is scheduled for the second half of this year. We also introduced A16, featuring our best-in-class super power rail, or SPR. A16 is best suitable for specific HPC products with complex signal routes, and dense power delivery networks. Volume production is on track for the second half of 2026.
Last name.
Talk about N2 and a 16 status our 2, nanometer and a 16 Technologies did the industry in a tracing insensible demand for energy. Efficient Computing and almost all the innovators are working with tsmc.
N2 successfully entered high-volume manufacturing in Q4 2025.
At both our Shinjyu and Gung San sites, which Good Year.
We are seeing strong demand from smartphone and HPC AI applications, and expect a fast ramp in 2026.
With our strategy of continuous enhancement, we also introduced the N2P as an extension of the N2 family. N2P features a further performance and power benefit.
On top of N2, and boarding production is scheduled for the second half of this year.
We also introduced a 16-feature in our Bing class superpower rail,
Or SPR A16 is best suitable.
For specific HPC products with complex signal route.
And the dense power delivery network volume production is on track.
Rachel Smith: We believe N2, N2P, A16, and its derivatives will prepare our N2 family to be another large and long-lasting node for TSMC while further extending our technology leadership position well into the future. This concludes our key message, and thank you for your attention. Thank you, Wendell. Thank you, CC. This does conclude our prepared statements. So before we begin the Q&A session, I would like to remind everybody to please limit your question to two at a time to allow all the participants an opportunity to ask their questions. Questions will be taken both from the floor and from the call. 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'd like to ask a question, please press the star, then one on your telephone keypad now.
We believe N2, N2P, A16, and its derivatives will prepare our N2 family to be another large and long-lasting node for TSMC while further extending our technology leadership position well into the future. This concludes our key message, and thank you for your attention.
For second half 2026.
16 and its derivatives were prepared or into family to be another large and long-lasting node for TSMC for our further. Extending our technology leadership position were into the future.
Operator: Thank you, Wendell. Thank you, CC. This does conclude our prepared statements. So before we begin the Q&A session, I would like to remind everybody to please limit your question to two at a time to allow all the participants an opportunity to ask their questions. Questions will be taken both from the floor and from the call. 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'd like to ask a question, please press the star, then one on your telephone keypad now.
This concludes our key message, and thank you for your attention.
Thank you, Wendell. Thank you, CC. Uh, this does conclude our prepared statements. So, 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.
Rachel Smith: Questions will be taken in the order they were received. If at any time you'd like to remove yourself from the questioning queue, please press star two. So now let's begin the question and answer session. I think we'll take the first few questions from the floor here. So why don't we start over here with Gokul Hariharan from J.P. Morgan? Thank you. Thank you, and happy New Year. So CC, it definitely feels like you have heard what your customers have said to you over the last three, four months. Could you give us a little bit more color on what you're hearing from your customers' customers on demand? Because this is a very big step up in the capacity commitment. There is definitely a lot of concern in the financial market, especially about whether we are in a bit of a bubble.
Questions will be taken in the order they were received. If at any time you'd like to remove yourself from the questioning queue, please press star two. So now let's begin the question and answer session. I think we'll take the first few questions from the floor here. So why don't we start over here with Gokul Hariharan from J.P. Morgan? Thank you.
Gokul Hariharan: Thank you, and happy New Year. So CC, it definitely feels like you have heard what your customers have said to you over the last three, four months. Could you give us a little bit more color on what you're hearing from your customers' customers on demand? Because this is a very big step up in the capacity commitment. There is definitely a lot of concern in the financial market, especially about whether we are in a bit of a bubble.
Uh, questions will be taken both from the floor and from the call, uh, should you wait? Sorry, 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'd like to ask a question, please press the star, then 1 on your telephone keypad. Now, questions will be taken in the order they were received. If at any time, you'd like to remove yourself from the questioning queue. Please press star 2. So now, let's begin the question and answer session. Uh, I think we'll take the first few questions from the floor here. Um, so why don't we start? Uh, over here? Uh, with uh, go call Harry Harry from JP Morgan? Thank you.
Thank you, and, uh, Happy New Year. Um, so, um, C.C., it definitely feels like, uh, you have heard what your customers have said to you over the last three, four months. Um, could you give us a little bit more, uh, color on what you're hearing from your customers—customers on demand? Uh, because this is a very big step up in the capacity commitment.
Rachel Smith: Obviously, you are the one who is putting up all the capital in this industry. So you've definitely considered this very carefully as well. So give us a little bit more detail in terms of what you're hearing from your customers and your views on this cycle, given if we think about the typical semiconductor cycle, we've already probably lasted a little bit longer than usual cycles, but this definitely doesn't feel like a typical semiconductor cycle. Okay, Gokul, let me summarize your question for the benefit of those online and those in person. So again, Gokul's question is really he would like to hear CC's views about the overall AI-related demand and the semiconductor cycle. So again, Gokul notes that, as Wendell and you said, we are substantially stepping up our CapEx to support the customers.
Obviously, you are the one who is putting up all the capital in this industry. So you've definitely considered this very carefully as well. So give us a little bit more detail in terms of what you're hearing from your customers and your views on this cycle, given if we think about the typical semiconductor cycle, we've already probably lasted a little bit longer than usual cycles, but this definitely doesn't feel like a typical semiconductor cycle.
Jeff Su: Okay, Gokul, let me summarize your question for the benefit of those online and those in person. So again, Gokul's question is really he would like to hear CC's views about the overall AI-related demand and the semiconductor cycle. So again, Gokul notes that, as Wendell and you said, we are substantially stepping up our CapEx to support the customers.
Uh, there is definitely a lot of concern in the financial market, especially about whether we are in a bit of a bubble. And obviously, you are the one who is putting up all the capital in this industry, so you've definitely considered this very carefully as well. So, give us a little bit more detail in terms of what you're hearing from your customers and, um, your views on this cycle. Given—if you think about a typical semiconductor cycle—we've already probably lasted a little bit longer than usual cycles, but this definitely doesn't feel like a typical semiconductor cycle.
Rachel Smith: But he does say there are concerns about an AI bubble and risk. So part of Gokul's question is how, what is the feedback, any color we can share about what type of discussions and feedback we're getting from both customers and the customers' customers that C.C. mentioned, and how long do we think this cycle can last? Okay, Gokul, you essentially try to ask us if whether the AI demand is real or not. I'm also very nervous about it. You bet, because we have to invest about $52 to $56 billion US dollars for the CapEx, right? If we didn't do it carefully, that will be a big disaster to TSMC for sure. So of course, I spent a lot of time in the last three, four months talking to my customer, and then customer's customer. I want to make sure that my customer's demands are real.
But he does say there are concerns about an AI bubble and risk. So part of Gokul's question is how, what is the feedback, any color we can share about what type of discussions and feedback we're getting from both customers and the customers' customers that C.C. mentioned, and how long do we think this cycle can last?
Okay, cool, cool. Let me, uh, summarize your question for the benefit of those online and those in person. So again, Go Go Go's question is really, he would like to hear C.C.'s, uh, views about the overall, uh, AI-related demand and the semiconductor cycle. So again, Koko notes that when the oil— and you said we are substantially, uh, stepping up our capex to support the customers. But he does say, you know, there are concerns about an AI bubble and risk. So part of Go Go's question is how, um, what is—
C.C. Wei: Okay, Gokul, you essentially try to ask us if whether the AI demand is real or not. I'm also very nervous about it. You bet, because we have to invest about $52 to $56 billion US dollars for the CapEx, right? If we didn't do it carefully, that will be a big disaster to TSMC for sure. So of course, I spent a lot of time in the last three, four months talking to my customer, and then customer's customer. I want to make sure that my customer's demands are real.
Any color we can share about what type of discussions and feedback we're getting from both customers and the customers' customers at CC mentioned, and how long do we think this cycle can last?
Okay, Google. You essentially try to ask yourself whether the AI demand is real or not.
I'm also very numbers about it. You bet, because we have to invest about $52 to $56 billion US dollars for the capex, right? If we didn't do it carefully.
And, uh, uh, that would be a big disaster to TSMC for sure. So, of course.
Rachel Smith: So I talked to those cloud service providers, all of them. Their answer is that I'm quite satisfied with their answer. Actually, they show me the evidence that the AI really helped their business. So they grow their business successfully and healthy in their financial return. So I also double-checked their financial status. They are very rich. That sounds much better than TSMC. So no doubt. I also asked specifically what's the application, right? I mean, for one of the hyperscalers, they told me that that helped their social media software, and so the customer continued to increase. So I believe that, and with our own experience in the AI application, we also helped our own fab to improve the productivity. As I mentioned one time, say that 1% or 2% productivity improvement, that is free to TSMC.
So I talked to those cloud service providers, all of them. Their answer is that I'm quite satisfied with their answer. Actually, they show me the evidence that the AI really helped their business. So they grow their business successfully and healthy in their financial return. So I also double-checked their financial status. They are very rich. That sounds much better than TSMC. So no doubt. I also asked specifically what's the application, right? I mean, for one of the hyperscalers, they told me that that helped their social media software, and so the customer continued to increase. So I believe that, and with our own experience in the AI application, we also helped our own fab to improve the productivity. As I mentioned one time, say that 1% or 2% productivity improvement, that is free to TSMC.
I spend a lot of time in the doctor, 34, 34 months, talking to my customer and then customer's customer. Yeah, I want to make sure that my customers' demand are real.
So, I talked to those, uh,
Uh, cloud service providers.
Over again.
Um,
The answer is, I'm quite satisfied with the answer. Actually, show me the evidence that the AI really helped their business.
So, they grow their business successfully, and he or she, uh, in their financial return. So I also double-check their financial status.
They are very rich.
That's a.
Sounds much better than TSMC, so, uh, so no doubt. Uh, I also asked specifically about the application, right? I mean, that's for one of the hyperscalers. They told me that that helped their social media software, and so the customer continued to increase.
Rachel Smith: That's why also our gross margin is a little bit satisfied, even in this very high-cost period of time. So all in all, I believe, in my point of view, the AI is real, not only real; it's starting to grow into our daily life. We believe that it's kind of a, we call it an AI mega trend. We certainly believe that. Another question is, can the semiconductor industry be good for three, four, five years in a row? I'll tell you the truth, I don't know. But I look at the AI; it looks like it's going to be endless. I mean, that's for many years to come. No matter what, TSMC sticks on the fundamental technology leadership, manufacturing excellence, and we work with customers to get their trust.
That's why also our gross margin is a little bit satisfied, even in this very high-cost period of time. So all in all, I believe, in my point of view, the AI is real, not only real; it's starting to grow into our daily life. We believe that it's kind of a, we call it an AI mega trend. We certainly believe that. Another question is, can the semiconductor industry be good for three, four, five years in a row? I'll tell you the truth, I don't know. But I look at the AI; it looks like it's going to be endless. I mean, that's for many years to come. No matter what, TSMC sticks on the fundamental technology leadership, manufacturing excellence, and we work with customers to get their trust.
Application. We also have to, uh, our own file to improve the productivity. As I mentioned, one time, say that 1% or 2% productivity improvement—that is free to TSMC—and that's why also our gross margin is a little bit satisfied, you know.
Even in this very high-cost period of time.
And so, all in all, I believe in my point of view.
Uh, the AI is real. Not only is it real, it's starting to, uh, uh, grow into our daily life.
And we believe that is kind of what we call the AI Mega Trend. We certainly, we believe that
uh,
So your other question is: can the semiconductor industry be good for three, four, five years in a row?
I tell you the truth, I don't know.
Uh, but I look at the AI, it looks like it's going to be, like, endless. I mean, that's for many years to come.
Rachel Smith: I think that fundamental thing why position TSMC to be very good future growth, let me say that, 25% CAGR, as we projected. We used to be conservative, you know that. Thanks, CC. My second question is on the US expansion. You're pulling in some of the capacity in response to customers. You're already starting plans for the phase four. There's a lot of media reports about TSMC might have to build more fabs in the US. How should we think about US expansion in principle over the next few years? I think previously you had talked about reaching 20% or even 30% of 2 nanometer capacity in the US eventually. The total capacity could be in the US. Could you give us a little bit more detail about how that is progressing and when could we get there in terms of the 30% or even 20% capacity?
I think that fundamental thing why position TSMC to be very good future growth, let me say that, 25% CAGR, as we projected. We used to be conservative, you know that.
Uh, no matter what, TSMC sticks to the fundamental technology leadership, manufacturing excellence, and we work with customers to get their trust.
And I think that fundamental thing—why.
Edition, TSMC, to be, um, very good.
Future growth, let me say that.
25% cake.
Gokul Hariharan: Thanks, CC. My second question is on the US expansion. You're pulling in some of the capacity in response to customers. You're already starting plans for the phase four. There's a lot of media reports about TSMC might have to build more fabs in the US. How should we think about US expansion in principle over the next few years? I think previously you had talked about reaching 20% or even 30% of 2 nanometer capacity in the US eventually. The total capacity could be in the US. Could you give us a little bit more detail about how that is progressing and when could we get there in terms of the 30% or even 20% capacity?
As we projected, and we used to be conservative—you know that.
Rachel Smith: Okay, so Gokul's second question is about our overseas expansion, particularly in the US. He notes that CC said we are pulling in the schedule for the fab two earlier. We're starting the application for the fourth fab. And so his question is partly around recent reports that we intend to build more fabs in Arizona. So his question is, how should we or how is TSMC thinking about the future expansion in Arizona? And we have said in the past that around 30% of our 2 nanometer and more advanced capacity would be based in Arizona once we complete scaling out to this independent gigafab cluster. So what is the timeframe or timetable for that? How quickly can we get there? That's a long question. We built a fab in Arizona, and we work hard. So today, everything, even the yield or defect density, is almost equal to Taiwan.
Jeff Su: Okay, so Gokul's second question is about our overseas expansion, particularly in the US. He notes that CC said we are pulling in the schedule for the fab two earlier. We're starting the application for the fourth fab. And so his question is partly around recent reports that we intend to build more fabs in Arizona. So his question is, how should we or how is TSMC thinking about the future expansion in Arizona? And we have said in the past that around 30% of our 2 nanometer and more advanced capacity would be based in Arizona once we complete scaling out to this independent gigafab cluster. So what is the timeframe or timetable for that? How quickly can we get there?
Thanks, uh, thanks. I see, uh, my second question, uh, is on the uh, us, uh, expansion. Uh, you're pulling in some of the capacity in response to customers. You're already starting, uh, plans for the phase 4, there's a lot of media reports about tsmc. You might have to build more Fabs in the US. Um, how should we think about, uh, us expansion in principle over the next few years setting previously you had talked about reaching 20% or even 30% of 2 nanometer capacity in the US. Eventually, the total capacity could be in the US. Could you give us a little bit more detail about how that is progressing and uh, when could we get there? Um, uh, in terms of the 30% or even 20% capacity,
C.C. Wei: That's a long question. We built a fab in Arizona, and we work hard. So today, everything, even the yield or defect density, is almost equal to Taiwan.
Okay, so Goku's second question is about our overseas extension, particularly in the US. He knows the CC said we are pulling in the schedule for the 52, uh, earlier. Um, you know, we're starting the application for the fourth fab, and so his question is partly around recent reports that we intend to build more fabs in Arizona. So his question is: how should we, or how is TSMC, thinking about the future, uh, expansion in Arizona? And we have said in the past that around 30% of our 2-nanometer and more advanced capacity would be based in Arizona once we complete scaling out to this independent gigabyte cluster. So, what is the time frame, or timetable for that? How quickly can we get there?
That's a long question. Um,
We build the fab in Arizona.
and uh,
Rachel Smith: Due to the strong demand, as I just answered, the AI is stronger, that's a mega trend. All my customers, the AI customers in the US, so they ask a lot of support from the US fab. So because of that, we have to speed up our fab expansion in Arizona. In Taiwan also, actually, we increased most of the capacity in Taiwan. No doubt about it because this is the most advanced one we can progress very well. In the US, we try to speed it up, and the progress is very good. We got help from the government. Still, we have to meet all the requirements for the permits or for those kinds of things. So both in Taiwan and in Arizona, we speeded up our capacity expansion to meet the AI demand. I can always say one word. The capacity is very tight.
Due to the strong demand, as I just answered, the AI is stronger, that's a mega trend. All my customers, the AI customers in the US, so they ask a lot of support from the US fab. So because of that, we have to speed up our fab expansion in Arizona. In Taiwan also, actually, we increased most of the capacity in Taiwan. No doubt about it because this is the most advanced one we can progress very well. In the US, we try to speed it up, and the progress is very good. We got help from the government. Still, we have to meet all the requirements for the permits or for those kinds of things. So both in Taiwan and in Arizona, we speeded up our capacity expansion to meet the AI demand. I can always say one word. The capacity is very tight.
We work hard. So today, everything—even the yield or defect density—is almost equal to Taiwan.
And due to the strong demand, as I just answered the form, the AI—
um,
Strung them, that's a mega trend. Uh, all my customer.
In the AI, customer is in the US.
So, uh, they ask a lot of support from the US, uh, uh, fab.
So because of that, we have to speed up our—
web expansion in Arizona.
Uh, in Taiwan also, actually, we increase most of the capacity in Taiwan, no doubt about it, because this is, uh, the most, uh, adjacent one. We can, uh, progress. We will, um—in US, we try to speed it up, and progress is very good. We got the help from the government. Still, we have to meet all the, uh, requirements for the permits or for those kind of things.
And so, both in Taiwan and in, uh,
Arizona.
Rachel Smith: We work very hard to narrow the gap so far. Probably this year, next year, we have to work extremely hard to narrow the gap. Okay. We just bought a second land in Arizona. That gives you a hint that's what we plan to do because we need it. We are going to expand the manufacturing over there. This gigafab cluster can help us to improve the productivity, to lower down the cost, and to serve our customers in the US better. Okay. Okay, thank you, Gokul. Let's move over here next to Laura Chen from Citibank, please. Thank you. Thank you, C.C. and Wendell, for a very comprehensive outlook briefing. Also congratulate for the great results. Of course, we see that the AI semiconductor growth has seen very strong growth.
We work very hard to narrow the gap so far. Probably this year, next year, we have to work extremely hard to narrow the gap. Okay. We just bought a second land in Arizona. That gives you a hint that's what we plan to do because we need it. We are going to expand the manufacturing over there. This gigafab cluster can help us to improve the productivity, to lower down the cost, and to serve our customers in the US better. Okay.
Uh, I, I can always say one, one word. The capacity is very tight.
Uh, we work very hard to narrow the gap.
So far.
uh,
Probably this year. Next year, we have to work extremely hard to narrow the gap.
Okay. Uh, we just bought a second land.
Operator: Okay, thank you, Gokul. Let's move over here next to Laura Chen from Citibank, please. Thank you.
In Arizona, let's give you a hint. That's what we plan to do because we need it. We are going to expand the many files over there. And, uh, this, uh, gig-off cluster can help us to improve the productivity, to lower down the cost, and to serve our customers in the US better.
Okay.
Okay, thank you. Go. Cool. Uh, let's move over here next to a lower 10 from Citi Bank, please.
Laura Chen: Thank you, C.C. and Wendell, for a very comprehensive outlook briefing. Also congratulate for the great results. Of course, we see that the AI semiconductor growth has seen very strong growth.
Rachel Smith: I believe all of your customers and customers' customers are very desperate to ask for more capacity support from TSMC. But I'm just wondering, how does TSMC evaluate the potential power electricity supply for data centers? So, other than that, the chips we can discuss with our customers, I think for the overall infrastructure buildup for data centers, a lot of factors are also very important. I just want to understand more how does TSMC evaluate those key factors for the AI infrastructure buildup? That's my first question. Okay, so Laura's first question is around the AI demand. She notes, again, as we said, AI mega trend and the growth is very strong. And customers, customers, customers, and ourselves are strong believers. But when we do our planning, how do we balance this against the other considerations?
I believe all of your customers and customers' customers are very desperate to ask for more capacity support from TSMC. But I'm just wondering, how does TSMC evaluate the potential power electricity supply for data centers? So, other than that, the chips we can discuss with our customers, I think for the overall infrastructure buildup for data centers, a lot of factors are also very important. I just want to understand more how does TSMC evaluate those key factors for the AI infrastructure buildup? That's my first question.
Thank you. Um, thank you, Cece, and the window for various comprehensive, uh, outlook briefing, and also, uh, congratulate for the great resolve. Um, of course, we see that the AI sim conductor grows, seen very strong growth. And I believe all of your customer and customers' customers very desperate to ask more capacity support from TSMC, but I'm just wondering how does TSMC evaluate the potential, uh, power electricity's, uh, supply for data centers? So other than that, the chips we can.
Jeff Su: Okay, so Laura's first question is around the AI demand. She notes, again, as we said, AI mega trend and the growth is very strong. And customers, customers, customers, and ourselves are strong believers. But when we do our planning, how do we balance this against the other considerations?
Rachel Smith: Do we look at things, for example? I think Laura's question is power and electricity grid availability to basically assess, is this included as part of our planning process? Do we factor such things in? Well, Nora, let me tell you first. I worry about the electricity in Taiwan first. I need to have a lot of enough electricity so I can start to expand the capacity without any limitation. But talking about building a lot of AI data centers all over the world, I use one of my customers' customers' answers because I asked the same question. They told me that they planned this one five, six years ago already. So as I said, those cloud service providers are smart, very smart. If I knew that, I would anyway. So they say that they worked on the power supply five, six years ago.
Do we look at things, for example? I think Laura's question is power and electricity grid availability to basically assess, is this included as part of our planning process? Do we factor such things in?
C.C. Wei: Well, Nora, let me tell you first. I worry about the electricity in Taiwan first. I need to have a lot of enough electricity so I can start to expand the capacity without any limitation. But talking about building a lot of AI data centers all over the world, I use one of my customers' customers' answers because I asked the same question. They told me that they planned this one five, six years ago already. So as I said, those cloud service providers are smart, very smart. If I knew that, I would anyway. So they say that they worked on the power supply five, six years ago.
Because with our customers, I think for the overall uh uh infrastructure build up for data center, a lot of uh uh Factor. Also, very important, just want want to understand more how the csmc evaluate those, uh, uh, key factors for the AI infrastructure, build up at my first question, okay, so Laura's first question is around, uh, the AI demand, she notes again, as we said, uh, AI maker Trend in the growth is very strong and customers customers, customers and ourselves are strong Believers, but when we do our planning, uh, how do we, you know, balance this against the other considerations do we look at things for example, I think Lord's question is power electricity grid, availability to basically, uh, uh, assess. Is this part of our included, as part of our planning process? Do we Factor such things in
Well.
Nora.
Let me tell you, first, I worry about the electricity in Taiwan first.
I need to have a lot of, in now, electricity, so I can, uh, start to expand the capacity, uh, without, uh, any limitation.
But talking about the, uh, building a lot of AI data centers all over the world.
I use one of my customers, or customers I answer, because I asked the same question.
Uh, they told me that they planned this one, five, six years ago already.
So, as I said, those are cloud, service providers are smart, very smart. If I knew that I—
Would. Uh, anyway.
So they say that they work on the, uh, power supply.
Rachel Smith: So today, their message to me is silicon from TSMC is a bottleneck and asked me not to pay attention to all others because they have to solve the silicon bottleneck first. But indeed, we look at the power supply all over the world, especially in the US. Not only that, we also look at who supports those kinds of power supply, like a turbine, like nuclear power plant, the plan, all those kinds of things. We also look at the supply of the rack. We also look at the supply of the cooling system. Everything so far, so good. So we have to work hard to narrow the gap between the demand and supply from TSMC. Did that answer your question? That's great to know that it will not be the current trends for the further AI developments. Yeah, thank you.
So today, their message to me is silicon from TSMC is a bottleneck and asked me not to pay attention to all others because they have to solve the silicon bottleneck first. But indeed, we look at the power supply all over the world, especially in the US. Not only that, we also look at who supports those kinds of power supply, like a turbine, like nuclear power plant, the plan, all those kinds of things. We also look at the supply of the rack. We also look at the supply of the cooling system. Everything so far, so good. So we have to work hard to narrow the gap between the demand and supply from TSMC. Did that answer your question?
5, 6 years ago.
So today, uh, their message to me is, uh,
Silicon from TSMC is a bottleneck, and they asked me not to pay attention to all others because they have to solve the silicon bottleneck first.
But indeed, we look at the power supply, uh,
You know, all over the world, especially in the U.S.
Not only that, we also look at the full support—those kinds of power supply, like a turbine, like a, uh, what, um,
Nuclear power plant, uh, the plan or those kind of thing. We also look at the supply of the rack. We also look at the supply of the cooling system. Everything, uh, so far
So, good. Uh, so we have to work hard.
Laura Chen: That's great to know that it will not be the current trends for the further AI developments. Yeah, thank you.
To narrow the gap between the demand and supply from TSMC.
Rachel Smith: My second question is on the leading-edge advanced packaging. When can you remind us that what would be the revenue contribution last year for the advanced packagings overall? First of all, we see that I recall that in the past, the CapEx for leading-edge advanced packaging was roughly about 10%. Yeah. But now it could be up to like 20%. So I'm just wondering that for the expansion, can you give us more detail about what kind of plans you are looking for? Will you focus more on 3DIC, SOIC, or are you also starting to work on more advanced panel-based in the longer term? I also think that before we talk about that, we will work more closely with OSAT's partner on the leading-edge advanced packaging. So just wondering what kind of process will be the key expansion plan in the space? Thank you.
My second question is on the leading-edge advanced packaging. When can you remind us that what would be the revenue contribution last year for the advanced packagings overall? First of all, we see that I recall that in the past, the CapEx for leading-edge advanced packaging was roughly about 10%. Yeah. But now it could be up to like 20%. So I'm just wondering that for the expansion, can you give us more detail about what kind of plans you are looking for? Will you focus more on 3DIC, SOIC, or are you also starting to work on more advanced panel-based in the longer term? I also think that before we talk about that, we will work more closely with OSAT's partner on the leading-edge advanced packaging. So just wondering what kind of process will be the key expansion plan in the space? Thank you.
Rachel Smith: Okay, so Laura's second question is more related to advanced packaging. What was the revenue contribution of what we call the backend, which is advanced packaging testing as a whole in 2025? And then she notes the CapEx. Actually, this year, I believe, Wendell, we guided 10% to 20% of CapEx, which is the same as last year. But anyways, she wants to know what is the focus of this CapEx. Is it on 3DIC? Is it on SOIC packaging solutions? Is it on panel level? Sort of what are the key areas we're focusing on relative to the CapEx? Okay, Laura, the revenue contribution last year from advanced packaging is close to 10%. It's about 8%. For this year, we expect it to be slightly over 10%. Okay. We expect it to grow in the next five years higher or faster than the corporate.
Jeff Su: Okay, so Laura's second question is more related to advanced packaging. What was the revenue contribution of what we call the backend, which is advanced packaging testing as a whole in 2025? And then she notes the CapEx. Actually, this year, I believe, Wendell, we guided 10% to 20% of CapEx, which is the same as last year. But anyways, she wants to know what is the focus of this CapEx. Is it on 3DIC? Is it on SOIC packaging solutions? Is it on panel level? Sort of what are the key areas we're focusing on relative to the CapEx?
Be up to like a 20% so I'm just wondering that for the expansion. Uh, can you give us more uh detail about what kind of the, um, the plans you are looking for, uh, will you focus more on like, uh, uh, 3D ICS OIC or are you also start to work on more advanced like, uh, panel base, um, in the longer term? Um, I also, uh, think before we, we talked about that, we'll work more closely with uh, all sets, uh, partner on the Leading Edge, Advanced packaging. So just wondering what kind of the process will be uh, the key expansion plan in the space. Thank you. Okay. So Laura's second question is more related to Advanced packaging. What was the uh Revenue contribution of what we call the back end which is the bench package in testing as a whole in 2025. And then she notes the capex actually this year I believe window regarded 10 to 20% of capex which is the same as last year. But anyways uh she wants to know what is the focus?
Wendell Huang: Okay, Laura, the revenue contribution last year from advanced packaging is close to 10%. It's about 8%. For this year, we expect it to be slightly over 10%. Okay. We expect it to grow in the next five years higher or faster than the corporate.
Of this capex, is it on 3D IC? Is it on SOIC? Packaging solution is on panel level. So the board is the key area we're focusing on, relative to the capex.
Okay, Laura, the revenue contribution last year from advanced packaging is close to 10%. It's about 8%.
Uh, for this year, we expect to be slightly over 10%.
Rachel Smith: The CapEx, yes, you're right, in the past is about 10%, lower than 10%. Now we're saying advanced packaging together with mask making and others accounted for between 10% and 20%. So you can see that the investment amount is higher. We're investing in areas in advanced packaging where our customers need. So the areas that you mentioned, basically, we continue to invest. Thank you, Wendell. Okay, let's move on to Charlie Chan from Morgan Stanley here. Thanks, Jeff. Happy New Year, CC and Wendell. So first of all, amazing results and guidance. Congratulations to the management team. So my first question is about outside of AI, what do you see for those AI markets? You talked about the memory cost, etc. So can you give us some kind of your underlying assumption for PC shipments, smartphone shipments, etc.?
The CapEx, yes, you're right, in the past is about 10%, lower than 10%. Now we're saying advanced packaging together with mask making and others accounted for between 10% and 20%. So you can see that the investment amount is higher. We're investing in areas in advanced packaging where our customers need. So the areas that you mentioned, basically, we continue to invest.
Okay, uh, we expected to grow, uh, in the next five years, uh, higher or faster than the corporate.
Jeff Su: Thank you, Wendell. Okay, let's move on to Charlie Chan from Morgan Stanley here.
And the capex, uh yes, you're right, in the past it was about 10%, lower than 10%. Now we're saying advanced packaging together with mask making and others, uh, accounted for between 10 to 20%. So you can see that, uh, the investment, uh, amount is higher and we're investing in areas in advanced packaging where our customers need. So these are the areas that you mentioned. Basically, uh, we continue to invest.
Charlie Chan: Thanks, Jeff. Happy New Year, CC and Wendell. So first of all, amazing results and guidance. Congratulations to the management team. So my first question is about outside of AI, what do you see for those AI markets? You talked about the memory cost, etc. So can you give us some kind of your underlying assumption for PC shipments, smartphone shipments, etc.?
Thank you, Wendell. Um, okay, let's move on to Charlie Chan from Morgan Stanley here.
Uh, thanks Chief, happy New Year CC and window. Uh, so first of all, amazing results and guidance. Uh, congratulations to the management team. Uh, so my, uh, first question is, uh, about other AI. Uh, what do you see? Uh, for those a markets, right? We you talked about the memory costs, Etc. So can you give us some uh, kind of, uh, your underlying assumption
Rachel Smith: And also in your HPC, there are some other businesses like networking and general servers. Can you comment about the growth potential for those segments? Thank you. Okay, Charlie's first question is very specific. Well, generally, he wants to know about how do we see the non-AI demand, especially in the context where certain component costs, such as memory costs, are rising. So he wants to know what do we see the impact on the PC and smartphone markets in terms of shipments. He's also asking very specifically, what about networking? What about general servers? Each of these different segments. Charlie, those also we say is called non-AI, but actually they're related to AI. You know that, right? Because of networking processors, you still need to have AI data to scale up or scale out. Those are the networking switches or those kinds of things.
And also in your HPC, there are some other businesses like networking and general servers. Can you comment about the growth potential for those segments? Thank you.
Jeff Su: Okay, Charlie's first question is very specific. Well, generally, he wants to know about how do we see the non-AI demand, especially in the context where certain component costs, such as memory costs, are rising. So he wants to know what do we see the impact on the PC and smartphone markets in terms of shipments. He's also asking very specifically, what about networking? What about general servers? Each of these different segments.
Option for a PC shipments. Uh, smartphone shipments, Etc. And also uh in your HPC. There are some uh other pieces like a networking and a general service. Uh, can you comment about the growth uh potential for those segments? Thank you.
C.C. Wei: Charlie, those also we say is called non-AI, but actually they're related to AI. You know that, right? Because of networking processors, you still need to have AI data to scale up or scale out. Those are the networking switches or those kinds of things.
Okay. Uh, Charlie's first question is very, uh, specific. Well, generally, he wants to know about how do we see the non-AI demand, especially in the context where certain component costs, such as memory costs, are rising. So he wants to know, what do we see as the impact on the PC and smartphone markets in terms of shipments? Uh, he's also asking very specifically, what about networking, what about general server, uh, each of these different segments?
Uh, Charlie.
uh,
Rachel Smith: It still grows very strong. As for PC or the smartphone, to tell the truth, we expect higher memory supplies. So we expect the unit growth will be very minimal. But for TSMC, we did not feel our customers changed their behavior. And we looked at it, and then we found out that we supply most of the high-end smartphones. The high-end smartphone is less sensitive to the memory supplies. So the demand is still strong. Using one sentence, I'd like to say we still try very hard to narrow the gap. We have to supply a lot of wafers to them also. Thanks, C.C. I think that's very consistent with your five-year CAGR outlook for all the four segments. And my second question is about Intel's foundry competition.
It still grows very strong. As for PC or the smartphone, to tell the truth, we expect higher memory supplies. So we expect the unit growth will be very minimal. But for TSMC, we did not feel our customers changed their behavior. And we looked at it, and then we found out that we supply most of the high-end smartphones. The high-end smartphone is less sensitive to the memory supplies. So the demand is still strong. Using one sentence, I'd like to say we still try very hard to narrow the gap. We have to supply a lot of wafers to them also.
Those also, we say, are called AI, but actually, they're related to AI, you know that, right? Because of the networking process, you still need to have AI data to scale up or scale out there. Those are the networking switches, or those kind of teams, it still grows very strong.
As for PC or the smartphone.
Uh, to share the truth, we expect a higher memory surprise. So we expect the unit growth will be very minimum, but for TSMC.
We did not feel our customer changed their behavior.
When we, uh, we look at it, and then we find out that, um, we supply most of the high-end...
Smartphones.
The high-end smartphone is less sensitive to the memories of price.
So, the demand is still strong.
uh,
I like to say we still try very hard to narrow the gap.
Charlie Chan: Thanks, C.C. I think that's very consistent with your five-year CAGR outlook for all the four segments. And my second question is about Intel's foundry competition.
Uh, we have to supply a lot of wafers to them. Also,
Rachel Smith: I think the US President seems to be very happy with Intel's recent progress and even mentioned two of your key customers, right? NVIDIA, Apple may have some partnership with Intel foundry. Should we concern about this so-called competition and what TSMC can really do to mitigate or avoid potential market share loss at those key US customers, not limited to the two customers I just mentioned? Thank you. Okay, so Charlie's second question is on the foundry competition and competition from a US IDM. He knows US presidents are very happy with the progress. A couple, two of our key customers, he also was mentioned. So his question is fundamentally, is there a concern or risk going forward of market share loss for TSMC to our foundry competition? Well, kind of a simple question, I should say no.
I think the US President seems to be very happy with Intel's recent progress and even mentioned two of your key customers, right? NVIDIA, Apple may have some partnership with Intel foundry. Should we concern about this so-called competition and what TSMC can really do to mitigate or avoid potential market share loss at those key US customers, not limited to the two customers I just mentioned? Thank you.
Details are found to be competition. I think, uh, US President, uh, seems to be very happy with Intel's recent progress.
Jeff Su: Okay, so Charlie's second question is on the foundry competition and competition from a US IDM. He knows US presidents are very happy with the progress. A couple, two of our key customers, he also was mentioned. So his question is fundamentally, is there a concern or risk going forward of market share loss for TSMC to our foundry competition?
And, uh, you even mentioned, uh, two of your key customers, right? Nvidia. Apple may have some partnership with Intel Foundry. Uh, should we, uh, be concerned about this so-called competition, and what TSMC can really do to mitigate or avoid a potential market share loss at those key US customers, not limited to the two customers that I just mentioned?
C.C. Wei: Well, kind of a simple question, I should say no.
Okay. So Charlie's second question is on the Foundry competition and, um, you know, competition from a US IDM. Uh, he knows US presidents, uh, is very happy, uh, with the progress — a couple, two, of our key customers. Uh, he also was mentioned. So, his question is fundamentally, uh, is there a concern or risk, uh, going forward of market share loss, uh, for TSMC to our Foundry competition?
Rachel Smith: Let me explain a little bit because in these days, it's not money to help you to compete, right? I also like whoever you just mentioned to invest on Intel. I like them to invest on TSMC also. But the most fundamental thing is, let me share with you, today's technology is so complicated. So once you want to design a very complete or advanced technology, it takes two, two, three years to fully utilize that technology. That's today's situation. And so after two, two, three years of preparation, you can design your product. Once you get your product being approved, it takes another one to two years to ramp it up. So we have a competitor, no doubt about it. That's a formidable competitor. But first, it takes time. Two, we don't underestimate their progress. But are we afraid of it?
Let me explain a little bit because in these days, it's not money to help you to compete, right? I also like whoever you just mentioned to invest on Intel. I like them to invest on TSMC also. But the most fundamental thing is, let me share with you, today's technology is so complicated. So once you want to design a very complete or advanced technology, it takes two, two, three years to fully utilize that technology. That's today's situation. And so after two, two, three years of preparation, you can design your product. Once you get your product being approved, it takes another one to two years to ramp it up. So we have a competitor, no doubt about it. That's a formidable competitor. But first, it takes time. Two, we don't underestimate their progress. But are we afraid of it?
Kind of a simple question, I should say. No.
Uh, let me explain a little bit because, in these days, um,
You know, it’s not money to help you to compete.
Right. I also, like, uh, know whoever you just mentioned—to invest some in Intel. I'd like them to invest some in TSMC also.
uh,
But the most fundamental thing is, let me share with you.
Today, technology is so complicated.
So once you want to design a very, uh,
Complete or advanced technology. It takes 2 to 3 years.
To fully utilize that technology.
That's today's situation.
And so, after two to three years of preparation, you can, uh, design your product.
Once you get your product being approved, it takes another one to two years to ramp it up.
So, uh, we have a competitor, no doubt about it. Uh, that's for me to go, competitor.
Um, but
First. Um, it takes time.
To, uh, we don’t underestimate their progress.
but,
Rachel Smith: For 30-some years, we're always in a competition with our competitor. So no, we have confidence that to keep our business grow as we estimated. Thank you, CC. All right. Let's take the next two questions online in the interest of time. Operator, can we take the first call from the line, please? Of course. First question on the line, Macquarie. Go ahead, please. Hi. First, congrats. Very strong performance. Thank you, CC, Wendell, and Jeff for taking my question. My first question is about the global capacity plan. The recent Taiwan local news reported that TSMC could exit the 8-inch business and mature node 12-inch to convert into the advanced packaging. And investors want to know if this is true. And the decision is based on what kinds of key factors, i.e., CC just mentioned about the power tightness or it's ROI concern. Thank you.
For 30-some years, we're always in a competition with our competitor. So no, we have confidence that to keep our business grow as we estimated.
Are we afraid of?
It, uh, for 30-some years, we always in a competition with our competitor.
Jeff Su: Thank you, CC. All right. Let's take the next two questions online in the interest of time. Operator, can we take the first call from the line, please?
Uh, so no, we have confidence that, to keep our business growing as we estimate.
Thank you, CeCe. All right, uh, let's take the next two questions online in the interest of time.
Operator.
Operator: Of course. First question on the line, Macquarie. Go ahead, please.
Can we take the first call from the line, please?
[Analyst]: Hi. First, congrats. Very strong performance. Thank you, CC, Wendell, and Jeff for taking my question. My first question is about the global capacity plan. The recent Taiwan local news reported that TSMC could exit the 8-inch business and mature node 12-inch to convert into the advanced packaging. And investors want to know if this is true. And the decision is based on what kinds of key factors, i.e., CC just mentioned about the power tightness or it's ROI concern. Thank you.
Of course. First question on the line, Mari, that we have. Please go ahead.
Rachel Smith: Okay, so Arthur's first question is about basically mature node. Our strategy on mature node, he knows a lot of local news has been reporting that TSMC is exiting 8-inch and 12-inch businesses and converting the capacity to advanced packaging. So he wants to know if this is true. And if so, what are the reasons behind it? Power constraints, ROI, etc., etc.? Good question. Indeed, we reduce our 8-inch wafers capacity and 6-inch. But let me assure you that we support all our customers. We discuss with our customers and to do this kind of resources more flexibly and more, what is the wording we say? Optimize, I should. Optimize resources to support our customers. But let me assure you also to my customers that we continue to support them. We will not let them down. If they have a good business, we continue to support.
Jeff Su: Okay, so Arthur's first question is about basically mature node. Our strategy on mature node, he knows a lot of local news has been reporting that TSMC is exiting 8-inch and 12-inch businesses and converting the capacity to advanced packaging. So he wants to know if this is true. And if so, what are the reasons behind it? Power constraints, ROI, etc., etc.?
Uh, hi. Uh, first, uh, congrats, uh, uh, very strong performance. Uh, thank you, C.C., window, and Jeff for taking my question. Uh, my first question is, uh, about the global capacity plan. Um, the reason is that the, uh, Taiwan local news reports that, uh, TSMC could exit the, uh, 8-inch business and mature, you know, uh, 12-inch, uh, to convert into the advanced packaging. Uh, and the investors are keen to know if this is true, and that the decision, uh, is based on what kinds of key factors, uh, i.e., uh, C.C. just mentioned about the power tightness, or it's, uh, you know, other concerns. Thank you.
Okay, so uh, Arthur's first question is about, uh, basically mature node, uh, our strategy on mature node. He knows a lot of, uh, local news has been reporting that TSMC is exiting 8-inch and 12-inch base, uh, businesses and converting the capacity to advanced packaging. So he wants to know if this is true, and if so, what are the reasons behind that—power constraints, ROI, etc., etc.
C.C. Wei: Good question. Indeed, we reduce our 8-inch wafers capacity and 6-inch. But let me assure you that we support all our customers. We discuss with our customers and to do this kind of resources more flexibly and more, what is the wording we say? Optimize, I should. Optimize resources to support our customers. But let me assure you also to my customers that we continue to support them. We will not let them down. If they have a good business, we continue to support.
Uh, good question indeed. We are
Uh, reduced.
Uh, our 8 inch waivers.
The capacity and 6 inch.
Rachel Smith: That even in the 8-inch wafers business. Thank you. Thank you. You have a second question? Yes, thank you. My second question is regarding the consumer and demand outlook. So CC also mentioned that the main price actually inflation and you're also pushing up the cost of the consumer electronics. So investors actually concerned about the further demand softness in this year and next year, or particularly next year. So can management comment about what your client or your client's client, how to resolve this memory tightness or we call a memory urgency issue? Thank you. Okay, so Arthur's second question is on the impact from the memory price increase and the demand softness. I believe his question really, because CC already shared the impact this year, he wants to know what is the impact for 2027. For TSMC, no impact.
That even in the 8-inch wafers business. .
That we continue to support them, we will not let them down. If they have a good business, we continue to support that, even in the 8-inch in the wafers of business.
[Analyst]: Thank you.
C.C. Wei: Thank you. You have a second question?
[Analyst]: Yes, thank you. My second question is regarding the consumer and demand outlook. So CC also mentioned that the main price actually inflation and you're also pushing up the cost of the consumer electronics. So investors actually concerned about the further demand softness in this year and next year, or particularly next year. So can management comment about what your client or your client's client, how to resolve this memory tightness or we call a memory urgency issue? Thank you.
Okay. Do you have a second question?
Jeff Su: Okay, so Arthur's second question is on the impact from the memory price increase and the demand softness. I believe his question really, because CC already shared the impact this year, he wants to know what is the impact for 2027.
Uh, yes, thank you. Uh, my second question is, uh, regarding the consumer and demand Outlook. Uh, so so, uh, C also mentioned that um, the main price actually inflation. And uh, you also pushing up the cost of the Consumer Electronics. So, uh, invest actually, uh, concern about the further demand, uh, softness in the this year, and the next year, or a particular next year. So, uh can management comment about uh, what your client or your client's client, uh how to uh resolve this uh memory tightness, or we call a memory urgency issue. Thank you.
Jeff Su: For TSMC, no impact.
Uh, okay. So, Arthur's second question is on the impact from the memory price increase, uh, and the demand softness, I believe, is his question really. Because CC already, uh, shared the impact this year, he wants to know what is the impact for 2027?
Rachel Smith: As I just mentioned, most of my customers now focus on high-end smartphone or PC. So those kinds of demand has less sensitive to the components of price. So they continue to give us a very healthy forecast this year and next year. Okay, thank you, CC. All right, let's operator, let's move on to the next participant from the line, please. Yes. Next one, Brett Simpson, Arete. Go ahead, please. Yes, thanks very much. My question is really on AI. I mean, TSMC has been supply constrained for your AI customers, I think, since 2024. And it sounds like 2026 is another year where we're going to see challenges. Do you think the CapEx you've laid out for this year, $52 to 56 billion, could that mean that we start to see supply and demand more in balance in 2027?
As I just mentioned, most of my customers now focus on high-end smartphone or PC. So those kinds of demand has less sensitive to the components of price. So they continue to give us a very healthy forecast this year and next year.
For thmc. No impact.
As I just mentioned, most of my customers now focus on high-end smartphones or PCs.
So, those kinds of demand are less sensitive.
To the components of price.
Jeff Su: Okay, thank you, CC. All right, let's operator, let's move on to the next participant from the line, please.
So they continue to give us a very healthy forecast, this year and next year,
Operator: Yes. Next one, Brett Simpson, Arete. Go ahead, please.
Okay, thank you, CeCe. All right, let's operate. A, let's move on to the next, uh, participant from the line, please.
Brett Simpson: Yes, thanks very much. My question is really on AI. I mean, TSMC has been supply constrained for your AI customers, I think, since 2024. And it sounds like 2026 is another year where we're going to see challenges. Do you think the CapEx you've laid out for this year, $52 to 56 billion, could that mean that we start to see supply and demand more in balance in 2027?
Yes. Next, Brett Simpson—every day. Go ahead, please.
Yes, thanks very much. Um, my question is really on AI. I mean, TSMC has been supply constrained.
Rachel Smith: Any thoughts there just in terms of how you're thinking about that capacity plan and does it alleviate the supply bottlenecks that we see today? And as part of this, from a supply perspective, we hear TSMC is finding it quite challenging to develop enough engineering talent quick enough, both in the US and in Taiwan. Can you talk more about this trend and what's the scale of the labor shortage of foundry engineers at the moment? Thank you. Okay, so Brett's first question is related around AI and our capacity. So he notes the supply looks to continue to be tight in 2026, but with this significant step up in our CapEx to support the customers, $52 to 56 billion, do we expect the supply demand or the gap, so to speak, to be more balanced in 2027?
Any thoughts there just in terms of how you're thinking about that capacity plan and does it alleviate the supply bottlenecks that we see today? And as part of this, from a supply perspective, we hear TSMC is finding it quite challenging to develop enough engineering talent quick enough, both in the US and in Taiwan. Can you talk more about this trend and what's the scale of the labor shortage of foundry engineers at the moment? Thank you.
For your AI customers, I think since 2024. Um, and it sounds like 2026 is another year where we're going to see challenges? Do do you think the capex you've laid out for this year 52 to 56 billion? Um could that mean that we start to see supply and demand more imbalance in 2027 any? Any thoughts there just in terms of how you're thinking about that that capacity plan and does it? Uh, does it alleviate this Supply bottlenecks that we see today? And as, as part of this, from a supply perspective, we hear tsmc is finding it quite challenging to develop enough, engineering Talent, um, quick enough both in the US and in, in Taiwan,
Jeff Su: Okay, so Brett's first question is related around AI and our capacity. So he notes the supply looks to continue to be tight in 2026, but with this significant step up in our CapEx to support the customers, $52 to 56 billion, do we expect the supply demand or the gap, so to speak, to be more balanced in 2027?
Can you talk more about this trend, and what's the scale of the labor shortage of, uh, foundry engineers at the moment? Thank you.
Rachel Smith: Is engineering resources, fab engineers, a constraint or a bottleneck for us in making these expansions, whether in Taiwan or the US? Okay, let me answer this question first. If you build a new fab, it takes two and three years, two to three years to build a new fab. So even if we start to spend the $52 to 56 billion, the contribution to this year is almost none. To 2027, a little bit. So we actually are looking for 2028, 2029 supply. And we hope at that time that the gap will be narrowed. For 2026 and 2027, we are focused on the short-term more output. Actually, our productivity continues to increase. Our people have an incentive because of one of the TSMC's incentives is to satisfy customers.
Is engineering resources, fab engineers, a constraint or a bottleneck for us in making these expansions, whether in Taiwan or the US?
C.C. Wei: Okay, let me answer this question first. If you build a new fab, it takes two and three years, two to three years to build a new fab. So even if we start to spend the $52 to 56 billion, the contribution to this year is almost none. To 2027, a little bit. So we actually are looking for 2028, 2029 supply. And we hope at that time that the gap will be narrowed. For 2026 and 2027, we are focused on the short-term more output. Actually, our productivity continues to increase. Our people have an incentive because of one of the TSMC's incentives is to satisfy customers.
Okay. So Brett's first question is related around Ai and our uh, capacity. So he notes uh the supply looks to continue to be tight uh in 2026 but with these, you know, significant step up in our capex to support the customers, 52 to 56 billion. Do we expect to supply demand or the Gap? So to speak uh to be more balanced in 2027 and then is engineering resources Fab Engineers, a constraint or a bottleneck for us in making these extensions. Uh, whether in Taiwan or the US
Okay. Uh, let me answer this question first. Um,
You know, if you build a new fee,
It takes 2 to 3 years to build a new fab.
So even if we start to spend the $52 to $56 billion.
um,
The contribution to this year—almost none.
And uh, to
2027 a little bit. So we actually were looking for 2028, 2029.
The supply, and we hope it's a time that the gap will be narrow.
Uh, for 2026 and 2027, we are focused on the short-term, more output. Uh, actually our productivity continued to increase. Um
Rachel Smith: It's not because of our financial results that are good, but we want to let customers feel that TSMC is trusted, that whenever they have a good opportunity to grow, we will support it. So in 2026, 2027, for the short term, we focus on the productivity improvement, which we've done quite a good result because, as Wendell just mentioned, that we can have a good financial result is because of that. But that's not our incentive. That's our incentive, but that's not our purpose. Our purpose is to support our customers. So 2026, 2027, for the short term, we are looking to improve our productivity. 2028, 2029, yes, we start to increase our CapEx significantly. And it will continue this way if the AI demand mega trend as we expected. Okay, Brett, thank you, CC. Brett, do you have a second question? Yeah, I do. And thanks.
It's not because of our financial results that are good, but we want to let customers feel that TSMC is trusted, that whenever they have a good opportunity to grow, we will support it. So in 2026, 2027, for the short term, we focus on the productivity improvement, which we've done quite a good result because, as Wendell just mentioned, that we can have a good financial result is because of that. But that's not our incentive. That's our incentive, but that's not our purpose. Our purpose is to support our customers. So 2026, 2027, for the short term, we are looking to improve our productivity. 2028, 2029, yes, we start to increase our CapEx significantly. And it will continue this way if the AI demand mega trend as we expected.
Our people have an incentive because of one of the TSMC's. The incentive is to satisfy the customer.
It's not because our financial results are good, but we want to let customers feel that TSMC is trusted—that whenever they have a good opportunity to grow, we are supportive.
Because as we just mentioned, we can have a good financial result because of that, but that's not our incentive. That's our incentive, but that's not our purpose. Our purpose is to support our customer.
So, 2026 and 2027 for the short term.
We are looking to, uh, improve our—
Productivity 2028 to 2029. Yes, we start to increase our, uh, capex.
Jeff Su: Okay, Brett, thank you, CC. Brett, do you have a second question?
Significantly, and uh, Iraq continues to wait. If the AI demand megatrend is as we expected,
Yeah, I do. And thanks.
Hey, Brad. Thank you, Susie. Brad, do you have a second question?
Rachel Smith: That was very clear. I guess my second question is about pricing. If I look at 2025, this was the second consecutive year where TSMC's wafer ASPs were up around 20% as leading edge becomes a bigger portion of the mix, and also you feed through price increases. When we factor in the ramp of more expensive overseas fabs, is 20% wafer ASP increases the new normal for TSMC? Typically, you have an annual price negotiation about this time of the year. So I'm trying to understand how you project ASPs in 2026. Is your March quarter guidance factoring in price increases at leading edge? Thank you. Okay, so Brett's question is on pricing. He notes that, which he's looking at, the blended wafer price is increasing at close to 20% according to his estimates.
That was very clear. I guess my second question is about pricing. If I look at 2025, this was the second consecutive year where TSMC's wafer ASPs were up around 20% as leading edge becomes a bigger portion of the mix, and also you feed through price increases. When we factor in the ramp of more expensive overseas fabs, is 20% wafer ASP increases the new normal for TSMC? Typically, you have an annual price negotiation about this time of the year. So I'm trying to understand how you project ASPs in 2026. Is your March quarter guidance factoring in price increases at leading edge? Thank you.
Yeah, I do. Um, and thanks, that was very clear. I, I guess. Um, my second question is about pricing and if I look at 2025, this was the second consecutive year where tsmc is wait for the asps were, were up around 20%, um, um, um, as Leading Edge becomes a bigger portion of the mix and also you feed through price increases
When we started in, um, the ramp, post more expensive overseas side, overseas fabs is 20%. ASP wafer. ASP increases the new normal for TSMC. Uh, typically, um, you have an annual price negotiation about this time of the year, and so I'm trying to understand how you project ASPs in '26, and is your March quarter guidance factoring in...
Jeff Su: Okay, so Brett's question is on pricing. He notes that, which he's looking at, the blended wafer price is increasing at close to 20% according to his estimates.
Price increases at Leading Edge, thank you.
Rachel Smith: Of course, that's blended both on price and mix, but it's a leading edge, and also we have mentioned earning our value. So he wants to know, is this the new normal going forward? This is a tough question. There's a CFO to answer. Okay, every new node, we have a price. The price will increase. The blended ASP will increase. I think they continue this way in the past and will continue the way going forward. But Brett, I think you're asking about the contribution from pricing to the profitability. Now, as we mentioned before, the profitability. There are six factors affecting the profitability. Price is just one of them. Of course, we continue trying to earn our value. But in fact, in the last few years, the pricing benefits to the profitability was just enough to cover the inflation cost from tools, equipment, materials, labor, etc.
Of course, that's blended both on price and mix, but it's a leading edge, and also we have mentioned earning our value. So he wants to know, is this the new normal going forward?
Okay, so Brad's question, uh, is on pricing. Um, he notes that, you know, our our which he's looking at the Blended wafer price. Uh is increasing at close to 20% according to his estimates. Uh of course that's Blended both on price and mix but you know it's a leaning Edge and also we have mentioned uh earning our value. So he wants to know is this the new normal uh going forward?
C.C. Wei: This is a tough question. There's a CFO to answer.
Wendell Huang: Okay, every new node, we have a price. The price will increase. The blended ASP will increase. I think they continue this way in the past and will continue the way going forward. But Brett, I think you're asking about the contribution from pricing to the profitability. Now, as we mentioned before, the profitability. There are six factors affecting the profitability. Price is just one of them. Of course, we continue trying to earn our value. But in fact, in the last few years, the pricing benefits to the profitability was just enough to cover the inflation cost from tools, equipment, materials, labor, etc.
And this is a tough question, and there's a CFO to answer.
Okay, every new note, we have a price. The price will increase; the blended ASP will increase.
Uh, I think they continued this way in the past and will continue with the way in, uh, going forward. But bro, I think you're asking about, uh, the, uh, contribution from pricing, uh, to the profitability.
Now, as we mentioned before, the profitability—there are six factors affecting the profitability, and price is just one of them. And of course, we continue trying to earn our value.
Uh, but in fact, in the last few years, the pricing, uh, benefits to the, uh, profitability was just enough.
Rachel Smith: There are other factors contributing to the higher profitability. The first one will be a high utilization rate. As the demand is so high and as our disciplined approach to capacity planning, the utilization rate supports our high profitability. The other one will be manufacturing excellence. As CC said, we continue to drive increasing productivity to generate more wafer output. Also, we continue to drive optimization capacity among nodes, which includes converting part of the N5 to N3. It also involves cross supports from different nodes, from the mature nodes to the more advanced nodes. That is a very important advantage of TSMC. So with all these efforts, we're able to maintain a good, healthy, sustainable return profitability so that we can continue to invest to support our customers' growth. Okay, thank you, Wendell.
There are other factors contributing to the higher profitability. The first one will be a high utilization rate. As the demand is so high and as our disciplined approach to capacity planning, the utilization rate supports our high profitability. The other one will be manufacturing excellence. As CC said, we continue to drive increasing productivity to generate more wafer output. Also, we continue to drive optimization capacity among nodes, which includes converting part of the N5 to N3. It also involves cross supports from different nodes, from the mature nodes to the more advanced nodes. That is a very important advantage of TSMC. So with all these efforts, we're able to maintain a good, healthy, sustainable return profitability so that we can continue to invest to support our customers' growth.
To cover the inflation cost from tools, equipment, materials, labor, etc.
There are other factors.
Contributing to the higher profitability, the first one will be a high utilization rate, as the demand is so high. And, as our disciplined approach to capacity planning, the utilization rate supports our high profitability.
The other 1 uh will be uh uh manufacturing Excellence. Uh and CeCe said we continue to drive uh increasing productivity, to generate more wafer output.
Also, uh, we continue to drive optimization capacity among nodes, which includes converting part of the N5 to N3. It also involved, uh, cross supports from different nodes, from the mature nodes to the more advanced nodes. That is a very important advantage of TSMC.
Jeff Su: Okay, thank you, Wendell.
So, with all these efforts, we're able to maintain a good, healthy, sustainable return profitability so that we can continue to invest to support our customers' growth.
Rachel Smith: In the interest of time, we'll take two more questions from the floor and one more from the line. So we'll go here. Sunny Lin, UBS, and then. Thank you. Good afternoon. Very strong results. Congratulations. So number one, if we look at the company, very different versus in the past from many angles. But if we look at the ramp from N3 node, now you can generate actually higher revenue from N3 node in year four, even year five of mass production versus in the past, N3 node take revenue in the second or even third year of mass production. And so could you help us understand with this new trend, what's the financial implications? And then what does that imply for you to operate or even compete differently versus in the past?
In the interest of time, we'll take two more questions from the floor and one more from the line. So we'll go here. Sunny Lin, UBS, and then.
Okay, thank you. Well, in the interest of time, we'll take two more questions from the floor and one more from the line. So, we'll go here, Sonny Lubs, and then—
Sunny Lin: Thank you. Good afternoon. Very strong results. Congratulations. So number one, if we look at the company, very different versus in the past from many angles. But if we look at the ramp from N3 node, now you can generate actually higher revenue from N3 node in year four, even year five of mass production versus in the past, N3 node take revenue in the second or even third year of mass production. And so could you help us understand with this new trend, what's the financial implications? And then what does that imply for you to operate or even compete differently versus in the past?
Rachel Smith: So Sunny's first question, I think maybe is related well to our technology differentiation, but she notes that when we ramp a new, in the past, when we have a new node, after a few years, sort of the revenue comes down a bit, but she notes that nowadays, we can still enjoy very high revenue from a node even after in its fourth or fifth year. So her question is, what are the financial implications from this and also from a, I believe, competitive dynamics? I can answer, say we are lucky. Actually, yeah. If you look at the semiconductors product, right now, the trend is you need to have a lower power consumption always and then high-speed performance. And for TSMC, our technology differentiation becomes more and more clear. We have both benefits. We have a high speed and we have a low power consumption.
Jeff Su: So Sunny's first question, I think maybe is related well to our technology differentiation, but she notes that when we ramp a new, in the past, when we have a new node, after a few years, sort of the revenue comes down a bit, but she notes that nowadays, we can still enjoy very high revenue from a node even after in its fourth or fifth year. So her question is, what are the financial implications from this and also from a, I believe, competitive dynamics?
You know, like, pick revenue in the second or even third year of mass production. Uh, and so, could you help us understand, uh, what's this new, uh, trend? Uh, what are the financial implications, uh, and then, uh, uh, what, uh, does that imply, uh, for you to operate or even compete differently versus in the past?
So, Sunny, first question, uh, I think maybe is related, well, to our technology differentiation, but she knows that when we ran for a new, you know, in the past when we have a new node, after a few years, sort of, you know, the revenue or, you know, uh, comes down a bit. But she notes that nowadays, uh, we can still enjoy very high revenue from a node even after, in its fourth or fifth year. So her question is, what are the financial implications from this, uh, and also from a, I believe, competitive dynamics?
C.C. Wei: I can answer, say we are lucky. Actually, yeah. If you look at the semiconductors product, right now, the trend is you need to have a lower power consumption always and then high-speed performance. And for TSMC, our technology differentiation becomes more and more clear. We have both benefits. We have a high speed and we have a low power consumption.
I can say we are lucky.
Actually, yeah, if you look at the semiconductors, uh, product—
Right now, the trend is you need to have lower power consumption.
Always, and then high-speed performance.
Rachel Smith: So our leading-edge customer, the first wave, the second wave, the third wave continue to come, and so that sustain the demand for a long, long time. That's a difference. Of course, this one, you need to have technology leadership, and with the technology leadership, much easier to say, but every year you have to improve. As we said, we have an N2, N2P, and then you won't be surprised, the third one will be N2 something and continuously. So that one gives us the benefit and to support our customers' continuous innovation. So they continue to stay with TSMC, and so their product can be very competitive in the market. So that answers the question, say that once we got the peak revenue and did not decrease, it's continuous because second wave, third wave, customer continue to join. Thank you very much, CC.
So our leading-edge customer, the first wave, the second wave, the third wave continue to come, and so that sustain the demand for a long, long time. That's a difference. Of course, this one, you need to have technology leadership, and with the technology leadership, much easier to say, but every year you have to improve. As we said, we have an N2, N2P, and then you won't be surprised, the third one will be N2 something and continuously. So that one gives us the benefit and to support our customers' continuous innovation. So they continue to stay with TSMC, and so their product can be very competitive in the market. So that answers the question, say that once we got the peak revenue and did not decrease, it's continuous because second wave, third wave, customer continue to join.
And for TSMC, our technology depreciation becomes more and more clear. We have both benefits: we have high speed, and we have low power consumption.
And so our, uh, leading-edge customer—the first wave, the second wave, the third wave—continue to come, and so that sustains the demand for a long, long time.
Uh, that's a difference, of course, this one. Uh, you need to have, uh, technology leadership.
And which the technology receive much easier to say. But every year you have to improve as we said, we have a N2 n2p and then you won't be surprised on the third 1 will be end to something and continuously. And so that 1 give us uh uh the benefit and to support our customers that continuously innovation
And so they continue to stay with TSMC, and so their product can be very competitive in the market.
Sunny Lin: Thank you very much, CC.
So that answered the question. It says that, you know, once we got the peak revenue and it did not decrease, it's continuous because the second wave and third wave, customers continue to join.
Rachel Smith: Then maybe a question on two nanometer, which is, C.C., meaningful revenue coming through in 2026? So in the past, you guide how much a new node will contribute to sales for the year. So any expectations on the revenue contribution from two nanometer in 2026? Then I recall in terms of process migration, a few years ago, there were lots of concerns on increasing cost per transistor. And that obviously is not declining from five nanometer. But then now looking at two nanometer, I think process migration seems to be accelerating even for smartphone and PC, and then with larger demand coming from HPC. So maybe based on your feedback from clients, maybe for smartphone and PC clients, why are they accelerating process migration into two nanometer? Okay, so Sunny's second question very quickly in two parts.
Then maybe a question on two nanometer, which is, C.C., meaningful revenue coming through in 2026? So in the past, you guide how much a new node will contribute to sales for the year. So any expectations on the revenue contribution from two nanometer in 2026? Then I recall in terms of process migration, a few years ago, there were lots of concerns on increasing cost per transistor. And that obviously is not declining from five nanometer. But then now looking at two nanometer, I think process migration seems to be accelerating even for smartphone and PC, and then with larger demand coming from HPC. So maybe based on your feedback from clients, maybe for smartphone and PC clients, why are they accelerating process migration into two nanometer?
Jeff Su: Okay, so Sunny's second question very quickly in two parts.
Rachel Smith: 2-nanometer, as we said, is a fast ramp in 2026, very strong customer interest and demand. So do we have any revenue percentage to guide for in 2026? Yeah, Sunny, the 2-nanometer will be a bigger node than 3-nanometer from the start. Okay. But it's less meaningful nowadays to talk about the percentage of revenue contribution when the new node starts because the corporation as a whole, the revenue has become much bigger than before. So yeah, revenue dollars, it's a bigger node. But percentage-wise, less meaningful. Okay. And then the second part of Sunny's question from a technology perspective, as she noted, increasing cost per transistor, as we said, CapEx per K is going higher. So the question very simply, what's the value? What's driving smartphone, HPC customers actually to see we're seeing a widening out of the adoption of N2?
2-nanometer, as we said, is a fast ramp in 2026, very strong customer interest and demand. So do we have any revenue percentage to guide for in 2026?
Thank you very much CeCe. Uh, and then maybe a question on 2 nanometer, uh, which you see a meaningful Revenue coming through, uh, in 2026? Uh, and so in the past you got like how much a new know contribute to self uh for for the year. Uh and so any expectations on the revenue contribution from 2 nanometer uh in 2026, and then I recall uh in terms of process migration, few years ago, uh, there were lots of concerns that increasing cost per transistor and that obviously is not declining, uh, from 5 nanometer. Uh, but then now looking at 2 nanometer, uh, obvious. I think, uh, process migration seems to be re accelerating even for a smartphone and PC and then with larger demand coming from headphones compete. And so maybe based on your feedback, uh, from clients, uh, maybe for a smartphone or PC clients. Why are they re accelerating process migration into 2 nanometer? Okay, so Sunny second question, very quickly in 2 parts
C.C. Wei: Yeah, Sunny, the 2-nanometer will be a bigger node than 3-nanometer from the start. Okay. But it's less meaningful nowadays to talk about the percentage of revenue contribution when the new node starts because the corporation as a whole, the revenue has become much bigger than before. So yeah, revenue dollars, it's a bigger node. But percentage-wise, less meaningful.
Parts to nanometers—we've said it's a fast ramp in 2026, uh, very strong customer interest and demand. So, do we have any revenue percentage to guide for in 2026?
Yeah. Sunny uh, the
The 2-nanometer will be a bigger node than 3-nanometer from the start, okay? Uh, but it's less meaningful nowadays to talk about the percentage of revenue contribution when the new node starts, because the corporate, uh, as a whole, the revenue has become much bigger than before. So, uh, yeah, in revenue dollars, it's a bigger node.
Jeff Su: Okay. And then the second part of Sunny's question from a technology perspective, as she noted, increasing cost per transistor, as we said, CapEx per K is going higher. So the question very simply, what's the value? What's driving smartphone, HPC customers actually to see we're seeing a widening out of the adoption of N2?
But percentage wise less meaningful.
And then the second part of Sony's question, from a technology perspective—as you know, she noted increasing cost per transistor, as we said, capex per K is going higher—so a question, very simply: what?
Rachel Smith: So what is the value that it's providing that the customers are willing to adopt N2? I already answered the question, right? Because now the whole product is looking for lower power consumption and high-speed performance. Our technology can provide that value. I also say that every year we improve. So every year they adopt the same, even the same name of the same node, their product continues to improve. So that provides a value. If you say that the cost per transistor is increasing, I saw the cost per transistor, the performance compared, that called the CP value is increased. It's much better. So that customer stick with the TSMC. Our headache right now, if I can call it a headache, is a demand and a supply gap. We need to work hard to narrow the gap. Very clear. Thank you. Thank you.
So what is the value that it's providing that the customers are willing to adopt N2?
C.C. Wei: I already answered the question, right? Because now the whole product is looking for lower power consumption and high-speed performance. Our technology can provide that value. I also say that every year we improve. So every year they adopt the same, even the same name of the same node, their product continues to improve. So that provides a value. If you say that the cost per transistor is increasing, I saw the cost per transistor, the performance compared, that called the CP value is increased. It's much better. So that customer stick with the TSMC. Our headache right now, if I can call it a headache, is a demand and a supply gap. We need to work hard to narrow the gap.
The value behind what's driving, you know, smartphone and HPC customers—actually, we're seeing a widening out of the adoption of N2. So what is the value that is providing that the customers are willing to adopt into?
Is looking for door power consumption.
And high-speed performance.
And our technology can provide that value. I also say that every year we improve.
So, every year they adopt the same, even the same name of the same node.
Their products continue to improve, so that provides the value. It's, uh, if you say that the cost per transistor is increased...
I saw the cost per transistor, the performance, compared the record, the CP value is increased, it's much better, so that customers stick with TSMC.
Um,
Our, uh, headache right now—if I can call it a headache—
Sunny Lin: Very clear. Thank you.
There is a demand and supply gap. Uh, we need to work hard to narrow the gap.
Jeff Su: Thank you.
Rachel Smith: Operator, can we take the last call from the line, and we'll take one last one from the floor? Yes. Next one, Krish Sankar, TD Cowen. Go ahead, please. Hello? Okay. Krish, are you there? I guess not. Then let's just take the last call, sorry, the last question from Bruce Lu from Goldman Sachs. Thank you. Thank you for thanking me. Thank you for letting me ask the last question. Hopefully, it's not that difficult. So I think one of the key, I understand that TSMC is trying very hard to increase the capacity. AI revenue is growing like 15% a year, 15% plus a year. But token consumption for the last few quarters is 15% a quarter. So the gap is still there, right? I mean, that's why Elon Musk was talking about the chip war.
Operator, can we take the last call from the line, and we'll take one last one from the floor?
Operator: Yes. Next one, Krish Sankar, TD Cowen. Go ahead, please.
Very quick. Thank you. Thank you. Uh, operator, can we take the, uh, the last call from the line? And we’ll take one last one from the floor.
Yes.
Jeff Su: Hello? Okay. Krish, are you there? I guess not. Then let's just take the last call, sorry, the last question from Bruce Lu from Goldman Sachs. Thank you.
Next, one increase, Sankar. TD Cowen, go ahead, please.
Hello.
Okay. Um,
Chris, are you there?
Bruce Lu: Thank you for thanking me. Thank you for letting me ask the last question. Hopefully, it's not that difficult. So I think one of the key, I understand that TSMC is trying very hard to increase the capacity. AI revenue is growing like 15% a year, 15% plus a year. But token consumption for the last few quarters is 15% a quarter. So the gap is still there, right? I mean, that's why Elon Musk was talking about the chip war.
I guess not then. Let's just take the last—uh, not call, sorry—the last question from Bruce Lou from Goldman Sachs. Thank you.
Thank you. Thank you, thank you. Thank you for letting me ask the last question. Hopefully, it's not that difficult. Uh, so I think one of the key— I understand that TSMC is trying very hard to increase capacity. You know, AI weapon is growing like 50% a year, 15% profit a year, but token consumption for the last few quarters is 15% a quarter.
Rachel Smith: So can you share with us that in your assumption, when you provide 50% plus AI revenue growth, what kind of token consumption you can support and how many gigawatts power in terms of the chips you can support in your assumption when you provide this kind of five years revenue guidance for AI? Okay, so Bruce's first question is on our AI CAGR. Actually, to be correct, we have guided for the AI CAGR to grow mid to high 50s CAGR in the five-year period from 2024 to 2029. So that is the official guidance we have provided just today. Bruce's question is, in this guidance, what is our assumption, basically assuming about the token growth behind this type of CAGR? What is our assumption in terms of translating to how much gigawatts of data center can we support and other specific assumptions behind our guidance?
So can you share with us that in your assumption, when you provide 50% plus AI revenue growth, what kind of token consumption you can support and how many gigawatts power in terms of the chips you can support in your assumption when you provide this kind of five years revenue guidance for AI?
So the Gap is still there, right? I mean the the that's why Elon Musk was talking about the chipboard, so they can you share with us that in your assumption when you provide 50% plus AI Revenue growth
Jeff Su: Okay, so Bruce's first question is on our AI CAGR. Actually, to be correct, we have guided for the AI CAGR to grow mid to high 50s CAGR in the five-year period from 2024 to 2029. So that is the official guidance we have provided just today. Bruce's question is, in this guidance, what is our assumption, basically assuming about the token growth behind this type of CAGR? What is our assumption in terms of translating to how much gigawatts of data center can we support and other specific assumptions behind our guidance?
What kind of token consumption, you can support, and how many gigawatts, uh, Power in terms of the, uh, chips, you can support in in your, uh, in your assumption when you provide this kind of, uh, uh, 5 years Revenue, guidance for AI.
Rachel Smith: Bruce, you got me. I mean, I also try to understand what is the token's growth, but my customers, their product's improvement continues to increase. So it's well known from Hopper to Blackwell to Rubin that almost double, triple their performance. So the one they can support the token's growth or the one they can continue to support the compute power is enormous. And so I lost track to be frank with you. And for gigawatt, I want to see how much of TSMC can make the money from the gigawatt rather than say that how much we can support. Today, from my point of view, still the bottleneck is TSMC's wafer supply, not the power consumption, not yet. So we also look at carefully. To answer your question, say that TSMC's wafer can support how much of the gigawatt, still not enough.
C.C. Wei: Bruce, you got me. I mean, I also try to understand what is the token's growth, but my customers, their product's improvement continues to increase. So it's well known from Hopper to Blackwell to Rubin that almost double, triple their performance. So the one they can support the token's growth or the one they can continue to support the compute power is enormous. And so I lost track to be frank with you. And for gigawatt, I want to see how much of TSMC can make the money from the gigawatt rather than say that how much we can support. Today, from my point of view, still the bottleneck is TSMC's wafer supply, not the power consumption, not yet. So we also look at carefully. To answer your question, say that TSMC's wafer can support how much of the gigawatt, still not enough.
Okay, so Bruce's first question is on our AI cake or actually, to be uh, correct. Uh, we have guided for the aiker to grow mid to high 50s kegger in the 5-year period from 2024 to 2029. So that is the official guidance. We have, uh, uh, provided just today. Uh, Bruce's question is in this guidance. What is our assumption, basically, assuming about the token growth, um, behind this type of kicker. Uh, what is our assumption in terms of translating to how much gigawatts of, uh, data center, can we support and other specific assumptions behind our, um, guidance?
Bruce, Yukari. I mean, that's—I also try to understand.
What is the tokens of growth? Uh, but my customers are there, is a product, is improvement continued to increase.
So, from uh, uh, it's well known—from Harper to Blackwell to Reuben—that almost double, triple their performance. So, the one, they can support the, uh, tokens of growth, or the one, they can continue to support. Uh, the computer power is enormous.
And so I lose a track to to be friend with you and for gigawatt, um, I want to see that. How much of tsmc can make the money from the gigawatt, uh, rather than say that you know how much we can support?
Today, from my point of view, still, the bottleneck is TSMC as a wafer supply.
Not the power consumption.
Not yet.
So, uh, we also look at, carefully, uh, to answer your question, say that the TSMC is a wafer can support. How much of the gigawatt?
uh,
Rachel Smith: They still have an abundant power supply in the US. Okay, my next question is for the CapEx, right? I want to double-check with what I just heard that CC was talking about like 2027, the CapEx will be more for the productivity improvement. 2028, 2029 may be meaningfully higher. So I do recall that in 2021, TSMC provided three years for $100 billion CapEx to support structural growth. Now the demand is even stronger. Based on that, can we do three years, $200 billion CapEx for next three years? The math sounds doable. Okay, so well, first, a slight clarification because CC was talking about this year, we have substantially stepping up our CapEx investment, but CC also mentioned it takes two to three years to build capacity. So in terms of Bruce's question, did we say 2027, so then the step-up in CapEx?
They still have an abundant power supply in the US.
Still not enough. Uh, they still have abundant power supply in the US.
Bruce Lu: Okay, my next question is for the CapEx, right? I want to double-check with what I just heard that CC was talking about like 2027, the CapEx will be more for the productivity improvement. 2028, 2029 may be meaningfully higher. So I do recall that in 2021, TSMC provided three years for $100 billion CapEx to support structural growth. Now the demand is even stronger. Based on that, can we do three years, $200 billion CapEx for next three years? The math sounds doable.
Provided that, over 3 years, there was $100 billion in cash to support structural growth. Now, the demand is even stronger.
Based on that, can we do 3 years, $200 billion capex for the next?
Jeff Su: Okay, so well, first, a slight clarification because CC was talking about this year, we have substantially stepping up our CapEx investment, but CC also mentioned it takes two to three years to build capacity. So in terms of Bruce's question, did we say 2027, so then the step-up in CapEx?
Three years, you know, the math sounds...
doable.
Rachel Smith: I think we're saying it takes time for that capacity to come out. So that's the first part. Yeah, I think Bruce, what CC said was the productivity was our main focus in 2026 and 2027 because when we start to invest, the volume production will not come out until 2028 and 2029. So the dollar amount invested today is for two years or even in the future. And CapEx dollar amount, as I said, in the last three years, $101 billion. In the next three years, significantly higher. I'm not going to share with you the number, but significantly higher. Yeah. So I think Wendell has addressed at least both parts of Bruce's question. Okay? So again, thank you. So again, thank you, everyone. This does conclude our Q&A session.
I think we're saying it takes time for that capacity to come out. So that's the first part.
Wendell Huang: Yeah, I think Bruce, what CC said was the productivity was our main focus in 2026 and 2027 because when we start to invest, the volume production will not come out until 2028 and 2029. So the dollar amount invested today is for two years or even in the future. And CapEx dollar amount, as I said, in the last three years, $101 billion. In the next three years, significantly higher. I'm not going to share with you the number, but significantly higher.
Okay, so, well, first a slight clarification because, uh, CC was talking about this year, we have substantially, you know, stepped up our capex investment. But CC also mentioned it takes 2 to 3 years to build capacity. So, in terms of Bruce's question, do we say 2027 significant step up in cable? I think we're saying it takes time for that capacity to come out. So that's the first part.
Yeah, I think both. Uh, what this is, was the productivity was our main focus in '26 and '27 because when we start to invest, uh, the fab, the volume production will not come out until '28 and '29. So the dollar amount invested today is for two years or even, uh, in the future.
Jeff Su: Yeah. So I think Wendell has addressed at least both parts of Bruce's question. Okay? So again, thank you. So again, thank you, everyone. This does conclude our Q&A session.
Uh, and, and, capex dollar amount. As I said, the last 3 years, $101 billion. In the next 3 years, significantly higher. Uh, I'm not going to share with you the number, but significantly higher.
Rachel Smith: 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, and both are available or will be available through our TSMC's website at www.tsmc.com. So again, thank you, everyone, for taking the time to join us today. We certainly would like to wish everyone a happy New Year. We hope everyone continues to stay well, and you will join us again next quarter. Thank you. Goodbye, and have a good day.
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, and both are available or will be available through our TSMC's website at www.tsmc.com. So again, thank you, everyone, for taking the time to join us today. We certainly would like to wish everyone a happy New Year. We hope everyone continues to stay well, and you will join us again next quarter. Thank you. Goodbye, and have a good day.
Yeah, so I think Wendell has addressed at least both parts of Bruce's question. Okay. So, again, thank you. So again, thank you everyone. This does conclude 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, and both are available or will be available through our TSMC website at www.tsmc.com. So again, thank you everyone for taking the time to join us today. We certainly would like to wish everyone a Happy New Year. We hope everyone continues to stay well and that you will join us again next quarter. Thank you, goodbye, and have a good day.
