Core Insights - The report from Morgan Stanley highlights a shortage in TSMC's 3nm capacity due to increased demand from major AI companies like Nvidia, AMD, and Tesla, prompting TSMC to urgently expand its production capacity [1][2] - TSMC is expected to increase its 3nm capacity by an additional 20,000 wafers per month by the end of this year, raising the total monthly capacity to 110,000-120,000 wafers, with further expansions planned for 2026 [1][2] - The anticipated capital expenditure for TSMC is projected to rise from the original $43 billion to between $48 billion and $50 billion for the upcoming year due to these expansions [1][2] TSMC Capacity Expansion - TSMC's 3nm capacity is set to increase to 140,000-150,000 wafers per month by 2026, primarily from the second phase of the Arizona facility and the conversion of existing 4nm and 5nm lines in Taiwan [2] - There are challenges related to cleanroom space, as some facilities are being repurposed for 2nm processes, limiting the expansion of 3nm capacity to existing sites [2] Impact on Semiconductor Industry - The expansion of TSMC's 3nm capacity and increased capital expenditure is expected to positively impact semiconductor equipment manufacturers [2] - Tesla's future AI6 chip, which will utilize 2nm technology, is projected to generate approximately $2 billion annually in foundry opportunities for TSMC [2] Analyst Outlook - The semiconductor sector remains optimistic about TSMC, Creative Technology, and other related companies, with TSMC maintaining an "outperform" rating and a target price of NT$1,688 [2]

Core Viewpoint - TSMC is set to implement a four-year price increase plan starting in 2026 for advanced processes below 5nm, 4nm, 3nm, and 2nm, in response to strong global AI demand and tight production capacity [2][3]. Group 1: Price Increase Plan - TSMC has begun notifying clients about the price increase plan, which is expected to raise advanced process prices by approximately 5% to 10% starting in 2026 [2][3]. - The price adjustments will vary based on client purchase volumes and relationships, reflecting rising production costs [3][4]. - This marks TSMC's fourth consecutive year of price increases, with previous adjustments being relatively moderate, only in single-digit percentages [4]. Group 2: Revenue and Market Position - In Q3 2024, TSMC's advanced process revenue accounted for 74% of total revenue, with 5nm contributing 37% and 3nm 23%, up from 69% the previous year [3]. - The proportion of advanced processes is projected to rise to around 75% by 2025, indicating strong demand and market position [3]. - TSMC's growth is primarily driven by advanced processes, with significant revenue expected from AI applications, potentially reaching 35% of total revenue by 2028, possibly sooner [4]. Group 3: Client Relationships and Strategy - TSMC emphasizes long-term strategic pricing rather than short-term opportunism, maintaining strong relationships with clients even during challenging market conditions [3][4]. - The company has historically avoided arbitrary price increases, focusing on collaboration with clients to plan capacity and investment in advanced technologies [4].

Group 1 - TSMC is capitalizing on the AI market opportunities, with a strong demand for its advanced 3nm process as smartphone market inventories recover [1][3] - The iPhone 17 series has shown better-than-expected sales, leading Apple to increase orders, which boosts TSMC's 3nm family order momentum [1][2] - Research firm Counterpoint Research predicts TSMC's market share in smartphone SoCs at 87% by 2025 for 5nm and below processes, increasing to 89% by 2028 [2] Group 2 - TSMC anticipates strong AI-related demand through 2025, while non-AI terminal markets are showing signs of recovery [3] - The recovery in high-end smartphone sales is expected to drive TSMC's order momentum, with a potential increase in utilization rates for previously weak 6/7nm capacities [3] - Demand for automotive semiconductors remains weak, pending inventory adjustments from suppliers [3]

Investment Rating - The report maintains a "Buy" rating for the company, anticipating significant benefits from the high growth in AI demand and moderate growth in non-AI semiconductor demand [5]. Core Insights - The company reported Q3 2025 revenue of $33.1 billion, a year-on-year increase of 40.8%, with a gross margin of 59.5%, reflecting a 1.7 percentage point increase year-on-year [2]. - The company has raised its full-year revenue growth guidance to approximately 35% and expects Q4 2025 revenue to be between $32.2 billion and $33.4 billion [2]. - The company is optimistic about AI demand, projecting a CAGR of around 45% for AI revenue from 2024 to 2029, with expectations that future AI revenue growth will exceed this guidance [4]. Revenue and Profitability Analysis - In Q3 2025, the company's wafer revenue from advanced processes showed significant contributions from 3nm (23%), 5nm (37%), and 7nm (14%) processes [3]. - The revenue from downstream applications in Q3 2025 was stable for HPC, with increases of 19% for smartphones, 20% for IoT, and 18% for automotive [3]. - The company expects a full-year capital expenditure (CAPEX) of $40 billion to $42 billion [2]. Financial Projections - The company is projected to achieve net profits of $53.2 billion, $65.9 billion, and $83.2 billion for the years 2025, 2026, and 2027, respectively [5]. - Revenue forecasts for the company are $122.6 billion in 2025, $144.4 billion in 2026, and $172.8 billion in 2027, with growth rates of 36.6%, 17.8%, and 19.6% respectively [9]. - The projected EBITDA for 2025 is $61.8 billion, with a net profit margin expected to improve over the forecast period [10].

Core Viewpoint - TSMC reported significant growth in revenue and net profit for Q3 2025, driven by strong demand for advanced processes, particularly in AI applications [1][3][5]. Financial Performance - TSMC's consolidated revenue for Q3 reached NT$989.92 billion, a year-on-year increase of 30.3%. In USD, the revenue was $33.1 billion [3]. - The net profit for the quarter was NT$452.3 billion, marking a 39.1% year-on-year growth and setting a historical record [3]. - The gross margin was 59.5%, reflecting a 0.9 percentage point increase from the previous quarter [3]. Product Composition - In terms of product composition, the revenue from the 3nm process accounted for 23% of total wafer revenue, while the 5nm process contributed 37%, and the 7nm process made up 14%. Advanced processes (7nm and below) collectively represented 74% of total wafer revenue [3]. Platform Revenue Breakdown - High-Performance Computing (HPC) accounted for 57% of revenue, surpassing smartphones at 30%, IoT at 5%, automotive at 5%, and digital consumer electronics at 1% [4]. - The fastest-growing platform was IoT, which saw a year-on-year growth of 20%. Revenue growth for HPC, smartphones, and automotive platforms was recorded at 0%, 19%, and 18%, respectively [4]. Future Outlook - TSMC forecasts Q4 sales between $32.2 billion and $33.4 billion, exceeding market expectations of $31.23 billion. The gross margin is expected to be between 59% and 61% [4]. - For 2025, TSMC anticipates a revenue growth of approximately 30% [4]. Management Insights - TSMC's CEO emphasized the strong and increasing demand for AI, which is expected to drive future growth. The company plans to continue investing to support this demand [5]. - The management highlighted the need to address the supply-demand gap in advanced packaging and is working to enhance capacity for 2026 [5]. - TSMC is accelerating capacity expansion at its Arizona facility and is preparing to upgrade technology for more advanced processes. A second plot of land near the existing factory will be acquired to support expansion plans [5].

Group 1 - TSMC's stock price increased by 3.49% on October 6, marking a total rise of 4.96% over two days, reflecting optimistic market sentiment towards the company's future, particularly due to its advanced process technology [1] - TSMC, as the world's largest foundry, is at the forefront of AI technology, with its 3nm and upcoming 2nm processes being favored by major clients like Apple, Qualcomm, and MediaTek, driving demand and price increases for its services [1] - The price of TSMC's advanced N3P process has risen by approximately 20%, significantly impacting the cost of new flagship smartphone chips, which will lead to higher prices for consumers [1] Group 2 - TSMC is expected to report better-than-expected revenue for Q3, with projections indicating a revenue of $32.4 billion, representing a year-on-year increase of around 40%, driven by the growing demand for AI applications and increased silicon content in new Apple and NVIDIA chips [2] - The demand for high-end processes is continuously increasing, with TSMC's advanced processes expected to contribute significantly to revenue growth, particularly with the upcoming 2nm process set to drive performance in 2026 [2] - TSMC's market environment and strategic positioning suggest strong growth potential in the coming years, with predictions that revenue contributions from 7nm and below processes will exceed 80% when 2nm volume production begins [2]

Core Viewpoint - TSMC is expected to report strong financial results for Q3 and optimistic projections for Q4, driven by high demand for advanced process technologies, particularly in AI applications [1][2] Group 1: Financial Performance - TSMC's Q3 revenue is anticipated to be around $32.4 billion, maintaining above the $30 billion mark, with a sequential increase expected in the second half of the year [1] - For Q4, TSMC's revenue is projected to be approximately $29.1 billion, reflecting a 10.2% decrease quarter-over-quarter but an 8.2% increase year-over-year [2] - The company aims for a 30% year-over-year increase in total revenue for the year, with projections indicating that 2025 revenue could exceed $117.1 billion [1][2] Group 2: Market Drivers - The demand for advanced process technologies is being driven by AI applications, with TSMC's chairman noting that all AI innovators are collaborating with the company [1] - The 3nm and 5nm process families are key contributors to TSMC's revenue growth, with 3nm shipments accounting for 24% and 5nm for 36% of total shipments in Q2 [2] - TSMC's advanced process technologies (including 7nm and below) contributed to 74% of total wafer sales in the last quarter, marking a record high [2] Group 3: Future Outlook - TSMC's revenue growth for 2025 is expected to significantly exceed previous targets, with estimates suggesting nearly a 40% increase [2] - The ramp-up of 2nm production is anticipated to be a major growth driver for 2026, with 7nm and below processes expected to contribute over 80% of overall revenue [2]

Core Viewpoint - TSMC's stock price has surged over 3%, reaching a historic high of $281.70, driven by news of significant price increases for its 2nm process compared to the 3nm process [1] Group 1: TSMC's Pricing Strategy - TSMC's 2nm process pricing is expected to rise at least 50% compared to the 3nm process, while the last generation 3nm CPU prices have increased by approximately 20% [1] - The latest 2nm process is set to begin mass production this quarter, but TSMC currently has no discounting or negotiation strategies due to high capital expenditures for advanced processes [1] Group 2: Market Implications - The flagship chips utilizing the 2nm process may have a unit price reaching $280 [1] - Major memory chip manufacturers like Samsung and SK Hynix have already raised their product prices, contributing to an acceleration in semiconductor price increases [1]

Core Viewpoint - TSMC's stock price has surged over 3%, reaching a historical high of $281.70, driven by the announcement of significant price increases for its 2nm process technology compared to the 3nm process [1] Group 1: TSMC's Pricing Strategy - TSMC's 2nm process pricing is expected to increase by at least 50% compared to the 3nm process, while the last generation 3nm CPU prices have risen approximately 20% compared to the previous generation [1] - The company plans to start mass production of the 2nm process in the current quarter, but due to high capital expenditures for advanced processes, TSMC currently has no discounting or negotiation strategies in place [1] Group 2: Market Impact - The flagship chips utilizing the 2nm process are projected to have a unit price potentially reaching $280 [1] - Major memory chip manufacturers like Samsung and SK Hynix have already begun raising their product prices, contributing to an accelerated increase in semiconductor prices [1]

Core Viewpoint - Samsung's 3nm process yield remains low at 50% after three years of production, leading major tech companies like Google to shift to TSMC for chip production, impacting Samsung's market position [2]. Group 1: Samsung's 3nm Process Challenges - Samsung's 3nm yield is reported to be at 50%, making it difficult to gain trust from large tech companies [2]. - Google is transitioning its Tensor G5 chip production to TSMC, securing a contract for the next 3 to 5 years, which includes future Pixel models [2]. - Other companies like Qualcomm and AMD are also relying on TSMC due to its over 90% yield rate, which attracts more orders [2]. Group 2: Financial Implications and Cost Control - Samsung's mobile application processor (AP) costs surged by 37% in Q1 2025, reaching 4.79 trillion KRW, primarily due to reliance on Qualcomm chips for the Galaxy S25 series [3]. - Utilizing its own chips could help Samsung manage rising expenses more effectively [3]. Group 3: Competitive Landscape - In the 5nm and 7nm segments, China's SMIC is making progress and securing key orders, increasing competitive pressure on Samsung [3].