Core Viewpoint - TSMC is shifting its focus towards advanced processes and packaging, gradually outsourcing some 40-90nm orders to its subsidiary, World Advanced, while discontinuing low-margin businesses like GaN foundry services [2][3]. Group 1: Strategic Shifts - TSMC's strategy reflects a clear move away from low-margin process nodes, concentrating resources on high-value processes, particularly in response to strong AI demand [3]. - The company aims to maintain a long-term gross margin target of 53%, indicating a commitment to enhancing profitability through advanced process price increases [2][3]. - TSMC has announced the shutdown of its 6-inch wafer fab in Hsinchu and plans to exit GaN foundry services within two years, reallocating resources to higher-margin businesses [2]. Group 2: Financial Implications - TSMC's gross margin is expected to be diluted by 2-3 percentage points annually due to the ramp-up of overseas fabs, potentially increasing to 3-4 percentage points in the coming years [3][4]. - Despite a reported gross margin of 59.5% in Q3, future margins are likely to be impacted by the shift to overseas production, necessitating a focus on higher-margin advanced processes [3]. Group 3: Revenue Composition - The revenue share from advanced processes (7nm and below) increased from 65% in Q1 2024 to 73% in Q1 2025, indicating a significant shift towards advanced technology [3]. Group 4: Pricing Strategies - TSMC plans to raise prices for chips using processes below 5nm starting January 2026, with expected increases of 3-4%, and potentially up to 10% for the most advanced nodes [7]. - The price for 2nm process nodes is projected to rise annually for four years, with cumulative increases potentially reaching double digits by 2030 [7]. Group 5: Operational Adjustments - TSMC is reallocating manpower and equipment from older process nodes to advanced ones, which may lead to bottlenecks in 6nm and 7nm processes, affecting customers who do not require cutting-edge technology [8]. - The company is also encouraging clients to transfer some mature process orders to World Advanced, ensuring minimal disruption while meeting specific customer demands [5].