Summary of TSMC Conference Call Company and Industry - **Company**: TSMC (Taiwan Semiconductor Manufacturing Company) - **Industry**: Semiconductors, specifically focusing on automotive semiconductors and AI technologies Key Points and Arguments Tesla Foundry Orders - TSMC's key customer, Tesla, has signed a **US$16.5 billion** chip contract with Samsung Electronics, which is expected to have limited impact on TSMC's earnings per share (EPS) assumptions for 2027 [2][4] - The new AI5 chip, set to launch in January 2026, will be manufactured using TSMC's **3nm process node** and is projected to deliver **4-5 times** higher performance than its predecessor, AI4 [2] - Future manufacturing of Dojo 3 ASIC chips may be challenging for Samsung due to the complexity of TSMC's system on wafer technology [2] China Smart/AI Car Development - TSMC is positioned to benefit from the growth of smart and AI cars in China, with Alchip being a key design service partner for Li Auto, designing a **5nm autonomous chip** [3][10] - The contribution of auto semiconductors to TSMC's revenue was **5%** in Q2 2025, with an estimated **2-3%** of total revenue linked to China’s smart/AI car market [12] Business Impact and Revenue Projections - The shift of some Tesla orders to Samsung is expected to result in a **1% loss** of TSMC's projected revenue for 2027, assuming a **US$2 billion** foundry opportunity per year [6] - TSMC will continue to produce cloud AI semi chips for Tesla and x.AI, which may contribute an additional **0.5%** to TSMC's 2027 revenue [6] Strategic Insights - TSMC does not aim to capture **100% market share** in leading-edge foundry services, as customers typically require a second source for better pricing and support [5] - TSMC's pricing flexibility is limited compared to its peers due to its technology leadership, and it is cautious about entering captive foundry relationships [5] Valuation and Market Outlook - TSMC is rated as **Overweight** with a target price of **NT$1,388**, representing a **20% upside** from the closing price of **NT$1,160** on July 31, 2025 [8] - The company is expected to maintain a strong EPS growth trajectory, with projected EPS of **NT$84.20** for 2027 [8] Risks and Considerations - Potential risks include increased competition leading to pricing pressures, slower-than-expected demand for AI semiconductors, and challenges in maintaining high gross margins [17][21] - Upside risks involve stronger-than-expected demand for AI chips and successful project wins in the hyperscaler market [18] Other Important Content - TSMC remains a top pick in the semiconductor sector, with a favorable industry outlook driven by advancements in AI and automotive technologies [12] - The conference call highlighted the importance of strategic partnerships and technological advancements in maintaining TSMC's competitive edge in the semiconductor market [10][12]