Core Viewpoint - UBS maintains a "Buy" rating for TSMC and raises the target price from NT$1,180 to NT$1,200, highlighting the company's growth potential driven by capacity expansion, financial forecasts, and industry trends [1][5] Group 1: Capacity Expansion and Strategic Positioning - TSMC's annual capacity is projected to reach 36 million 8-inch equivalent wafers by the end of 2023, with a production network spanning Taiwan and overseas [1] - The company operates four 12-inch and four 8-inch fabs in Taiwan, along with a 12-inch fab and two 8-inch fabs in the U.S. and China, ensuring supply chain stability and geopolitical risk mitigation [1] Group 2: Financial Performance and Projections - UBS raises TSMC's 2025 revenue growth forecast from 25% to 29%, with capital expenditure expectations adjusted to a range of $40 billion to $42 billion, driven by surging cloud AI demand and advanced process capacity [2] - The gross margin is expected to remain high at 57.0%, close to the historical peak of 58.8% in the previous quarter, with long-term EPS growth rate estimates increased from 16% to 18% [2] Group 3: AI Demand and Packaging Technology - Despite a downward revision in smartphone and PC shipment forecasts, optimism remains for cloud AI chip demand, with TSMC's CoWoS packaging capacity expected to reach 70,000 pieces per month by the end of 2025 and 100,000 pieces by the end of 2026, a 30% increase from previous plans [3] - This expansion is anticipated to alleviate supply concerns for high-end AI chips and boost the revenue share from packaging services [3] Group 4: Profitability and Cost Management - TSMC is expected to maintain a gross margin of 55.5% to 56.5% from Q3 2025 to 2026, significantly above market consensus of 53% to 55%, due to strategic price adjustments and supply chain management [3] - Price increases for N5 and N3 wafers are planned, with mobile products seeing a 3%-5% increase and HPC products up by 10% [3] Group 5: Capital Expenditure Strategy - TSMC plans to increase capital expenditure for N2 process and overseas expansion, with external capital expenditure expected to reach $40 billion in 2025, a 5% increase from previous plans [4] - This strategy aims to reinforce TSMC's technological leadership and prepare for the restructuring of the global semiconductor supply chain [4] Group 6: Valuation and Investment Recommendation - UBS maintains a "Buy" rating for TSMC, raising the 12-month target price to NT$1,200 based on stronger AI demand and cost management capabilities [5] - The current stock price of NT$1,055 corresponds to a 2025 P/E ratio of only 22 times, significantly lower than its long-term growth expectations, making TSMC a compelling choice for investors seeking core assets in the semiconductor industry [5]

Group 1 - The U.S. Department of Commerce plans to revoke the exemption licenses for SK Hynix, Samsung, and TSMC in China, which could disrupt the semiconductor supply chain and halt technological upgrades in their factories [1][2] - SK Hynix's factory in Wuxi accounts for nearly 50% of global DRAM chip production, while Samsung's Xi'an factory produces 42% of its global 3D NAND flash memory output [1][2] - The U.S. claims this action is a reciprocal measure against China's rare earth export restrictions, but the underlying intention is to prevent China from circumventing restrictions through foreign factories [1][2] Group 2 - Despite U.S. technology blockades, China's semiconductor industry is making significant advancements, with companies like SMIC achieving mass production of 14nm processes and Cambricon launching AI chips that rival NVIDIA's products [4][6] - Domestic companies are increasing their market share in semiconductor equipment, with domestic plasma etching equipment gaining certification from TSMC, raising market share from 5% to 15% [6][10] - The Chinese biotech sector is also breaking through, with the development of a new weight-loss fungus strain that has gained national patent recognition and is now being exported to Southeast Asia and Europe [8][10] Group 3 - The potential U.S. ban on semiconductor exports could lead to significant price fluctuations in global memory chip markets, affecting both Chinese and U.S. companies [11][13] - NVIDIA's CEO has warned that the short-sighted strategy of the U.S. could ultimately harm American interests [11][13] - The ongoing technological competition between the U.S. and China is seen as a critical moment for the global semiconductor industry, with the outcome uncertain [13]

Group 1 - The article discusses the potential escalation of U.S. semiconductor controls against China, specifically targeting major manufacturers like TSMC and Samsung by revoking their exemptions for operations in China [2] - Currently, TSMC, Samsung, and SK Hynix enjoy unlimited exemptions allowing them to transport U.S. chip manufacturing equipment to their factories in mainland China without needing to apply for licenses each time [2] - The U.S. Department of Commerce has indicated a desire to cancel these exemptions, which could impact the operations of these companies in China [2][3] Group 2 - In October 2023, as the exemptions are set to expire, South Korea announced that Samsung and SK Hynix received "Validated End-User" (VEU) authorization, granting them indefinite exemptions for procuring U.S. semiconductor equipment [3] - The VEU authorization typically comes with conditions, such as restrictions on certain equipment purchases and the requirement for regular reporting [3] - Concerns have been raised regarding the potential revocation of VEU authorization, with U.S. officials stating that chip manufacturers will still be able to operate in China under a new enforcement mechanism [3] Group 3 - South Korean trade representatives are set to express concerns during U.S.-Korea tariff negotiations about the impact of potential U.S. actions on Korean semiconductor manufacturers operating in China [4] - The ongoing trade negotiations are expected to address various tariffs, including a 10% minimum baseline tariff and significant tariffs on steel and automobiles [4] - The negotiations aim to create a stable and predictable environment for Korean companies investing in the U.S. [4]

Group 1 - The A-share market showed resilience despite escalating tensions in the Middle East, with over 80% of stocks rising and nearly 90% of equity ETFs also increasing, except for the food and beverage sector which saw a decline of over 0.5% [1][4] - The relationship between the Hang Seng Index and Brent crude oil prices was inverse, indicating that a drop in oil prices contributed to the rise in stock indices, reflecting limited risk aversion among investors [3][4] - The semiconductor sector experienced a significant uptick due to news from the US about the potential cancellation of export exemptions for chip manufacturing equipment, which is expected to benefit domestic alternatives in China [5][8] Group 2 - The first wave of market rebound was driven by the semiconductor sector, particularly the semiconductor equipment ETF, which surged following the announcement of the US's plan to revoke exemptions for certain companies [8][10] - Southbound capital saw a net inflow of nearly 8 billion, marking the highest net purchase since June, which contributed to the overall market rebound, particularly in the Hong Kong market [12][16] - The overall market sentiment was buoyed by the performance of the semiconductor sector, while related markets in South Korea and Taiwan faced declines due to the negative implications of the US policy change [10][15]

Core Viewpoint - TSMC is set to officially launch its 2nm process technology, with aggressive capacity planning indicating strong customer demand for advanced chips [1][2]. Group 1: Capacity Planning - TSMC's 2nm family (N2/N2P/A16) is projected to have a monthly capacity of approximately 5-6 million wafers at the Hsinchu Baoshan plant by Q4 2025, and the Kaohsiung plant aims to reach 145,000-150,000 wafers per month by the end of 2028, totaling around 200,000 wafers per month [1]. - The ramp-up of 2nm capacity is expected to exceed 100,000 wafers per month by the end of 2026, with a total capacity of about 200,000 wafers by 2028, potentially increasing further with future U.S. facilities [1][2]. Group 2: Technology and Performance - TSMC will utilize a Gate-All-Around (GAA) architecture for its 2nm chips, with the A16 architecture expected to enhance speed by 8-10% at the same voltage and reduce power consumption by 15-20%, while increasing chip density by 1.10 times [2]. - The initial monthly capacity for new processes has typically been around 50,000 wafers, but the 2nm process is set to directly target a capacity of approximately 200,000 wafers, reflecting careful strategic planning [2]. Group 3: Customer Demand - Major customers for TSMC's 2nm technology include AMD, which plans to use it in its EPYC processors, and Apple, which is expected to implement it in its A20 chip using advanced packaging technology [3]. - The new WMCM (Wafer-Level Multi-Chip Module) packaging technology is anticipated to enhance thermal performance for Apple's upcoming chips, representing an upgrade from existing packaging methods [3].

Core Viewpoint - The article discusses the potential implications of U.S. trade policies on foreign semiconductor manufacturers operating in China, particularly focusing on the concerns raised by South Korea regarding U.S. restrictions on Chinese chip manufacturers and the possible withdrawal of exemptions for companies like Samsung, SK Hynix, and TSMC [1][2][5]. Group 1: U.S. Trade Negotiations - South Korea's Trade Minister expressed concerns about U.S. policies that may hinder foreign chip manufacturers in China during upcoming trade negotiations in Washington [1]. - South Korea currently imposes a 10% tariff on goods imported from China and a 25% tariff on specific countries, with a 90-day suspension period [1]. - The South Korean government may not meet the July deadline for a trade agreement with the U.S., indicating ongoing negotiations beyond that date [1]. Group 2: Impact on Semiconductor Manufacturers - The U.S. Commerce Department is considering revoking exemptions granted to global chip manufacturers, making it more challenging for them to operate in China [2][5]. - If exemptions are revoked, it could significantly impact the ability of foreign chip manufacturers to conduct business in China, where their semiconductors are widely used across various industries [2][5]. - The stock prices of U.S. chip equipment manufacturers fell following reports of potential policy changes, indicating market sensitivity to these developments [2][3]. Group 3: Verification and Compliance - Companies like Samsung and SK Hynix have received "Verified End User" (VEU) status, allowing them to receive specified U.S. goods without multiple export licenses [4]. - The VEU status is conditional, including restrictions on certain equipment and reporting requirements [5]. - The U.S. Commerce Department stated that chip manufacturers can still operate in China under new enforcement mechanisms, which align with existing licensing requirements for other semiconductor companies exporting to China [5].

Core Viewpoint - TSMC faces significant challenges due to external factors, including potential revocation of exemptions for its mainland China operations and a strong appreciation of the New Taiwan Dollar, which is expected to impact its profit margins and earnings significantly [1][2][3] Group 1: Financial Impact - TSMC's gross margin and operating margin are projected to decline by nearly 5 percentage points due to the strong appreciation of the New Taiwan Dollar, which has risen 12% this quarter [1][2] - The market's previous expectation for TSMC's gross margin to challenge around 58% in the second half of the year has been revised down to approximately 55% due to currency fluctuations and initial yield adjustments for 2nm production [1][2] - TSMC's revenue target for the current quarter is set between $28.4 billion and $29.2 billion, with an expected quarter-on-quarter growth of nearly 13%, although the strong currency may hinder achieving higher profit growth compared to the previous quarter [2] Group 2: Market Expectations - Analysts predict that TSMC's earnings for the current quarter may only match or slightly decrease from the previous quarter, with an estimated earnings per share of NT$13, still surpassing the same period last year [2] - Historical data indicates that TSMC's second-quarter earnings have been better than the first quarter about 50% of the time over the past eight years, but there have been instances in recent years where second-quarter earnings declined compared to the first quarter [2] Group 3: Regulatory Environment - Reports suggest that the U.S. may revoke exemptions for TSMC, Samsung, and SK Hynix regarding the acquisition of U.S. technology for their mainland China operations, which could impact TSMC's order intake from China [3]

Group 1 - The U.S. Department of Commerce is considering revoking exemptions that allow major semiconductor manufacturers like TSMC and Samsung to use U.S. technology in their factories in mainland China, raising concerns in Taiwan and South Korea [1][3] - Currently, TSMC, Samsung, and SK Hynix enjoy full exemptions, allowing them to ship U.S. chip manufacturing equipment to their factories in China without needing individual licenses [1][3] - The proposed revocation is seen as part of the U.S. government's efforts to prevent critical technology from flowing to China, although it has not yet received support from other government departments like the Department of Defense [3][4] Group 2 - If implemented, the new measures could complicate operations for global chip manufacturers in mainland China and may strain U.S. relations with Taiwan and South Korea, which have made significant investments in the U.S. [3][4] - Samsung's factories in Xi'an and Suzhou are particularly vulnerable, with the Xi'an facility accounting for approximately 40% of Samsung's global NAND flash memory production [3][4] - The potential revocation of exemptions could lead to a shift in procurement strategies for South Korean companies, possibly forcing them to consider alternatives from Japan and Europe [3][4] Group 3 - The South Korean government is urged to actively coordinate efforts to minimize the impact on national strategic industries amid increasing tech competition between the U.S. and China [4] - Taiwanese media suggest that if the U.S. proceeds with the revocation, it could inadvertently benefit China's semiconductor equipment industry [4] - The cancellation of exemptions may force companies to adopt a case-by-case application system, significantly affecting the global chip supply chain [4]

Group 1: AI Investment Theme - Artificial intelligence (AI) investing remains a significant theme in the market, with companies like Nvidia and Taiwan Semiconductor positioned as key beneficiaries of AI spending [1] - Despite the success of some AI hyperscalers in rolling out AI models, they are not yet generating substantial profits, making it more favorable for investors to focus on companies that provide essential components [1] Group 2: Nvidia - Nvidia is likened to the "picks and shovels" of the AI gold rush, as it manufactures graphics processing units (GPUs) that excel in high-computing tasks, crucial for AI model training [3][4] - Nvidia holds a dominant position in the data center market, with an estimated market share of 90% or greater in the data center GPU space, contributing to significant revenue growth [5] - The company reported a 69% revenue growth in Q1 and projects a 50% growth in Q2, indicating strong demand and potential for further upside [7] Group 3: Taiwan Semiconductor - Taiwan Semiconductor manufactures the chips used in Nvidia's GPUs and serves various clients in the AI sector, as well as consumer electronics companies like Apple [8] - The company is expanding its manufacturing presence beyond Taiwan to the U.S., Japan, and Germany, mitigating risks associated with geopolitical tensions [9] - Taiwan Semiconductor's management projects a 45% compounded annual growth rate (CAGR) for AI-related revenue over the next five years, with total revenue expected to grow at nearly a 20% CAGR [10] - The stock trades at a valuation of 22.8 times forward earnings, comparable to the S&P 500's 22.9 times, making it an attractive investment opportunity with solid growth prospects [12]

Core Viewpoint - Taiwan Semiconductor Manufacturing Company (TSMC) is a leading semiconductor manufacturer with a market cap of $1.1 trillion, showcasing significant competitive advantages that position it favorably in the tech industry. Group 1: Market Position and Demand - TSMC holds a dominant market share of approximately 67% in semiconductor manufacturing, with around 90% in advanced chips, providing it with substantial pricing power and limited alternatives for customers [3] - The demand for semiconductors is expected to grow, driven by advancements in artificial intelligence and technology, contributing to a 42% revenue increase in the first quarter [4] - TSMC pioneered the contract foundry model, establishing itself as a leader in the chip foundry industry since its inception in 1987 [5] Group 2: Customer Base and Profitability - TSMC's top customers include major tech companies like Apple, Nvidia, AMD, and Broadcom, highlighting its strong position in the market [7] - The company reported an operating margin of 49% in the first quarter, indicating robust profit margins and economies of scale [8] Group 3: Government Support and Valuation - TSMC is receiving $6.6 billion in subsidies as part of the CHIPS Act, along with $2 billion from the Chinese and Japanese governments, reflecting its critical role in the global economy [9] - Historically, TSMC has been undervalued, currently trading at a price-to-earnings ratio of 25, comparable to the S&P 500 [10] Group 4: Technological Edge and Competition - TSMC leads the market for advanced chips (7 nanometers or under), which accounted for 73% of its revenue in the first quarter, particularly in high-performance computing for AI [11] - Competitors like Samsung and Intel are facing challenges, with Samsung acknowledging its lack of innovation and Intel undergoing a prolonged crisis [12] Group 5: Performance Track Record - TSMC has consistently outperformed the S&P 500, with stock prices increasing nearly 300% over the last five years and 800% over the last decade [13]