Financial Data and Key Metrics Changes - Fourth quarter revenue increased by 5.7% sequentially in NT$ and by 1.9% in U.S. dollar terms to $33.7 billion, slightly exceeding guidance [3] - Gross margin rose by 2.8 percentage points sequentially to 62.3%, driven by cost improvements and favorable foreign exchange rates [3] - Operating margin increased by 3.4 percentage points sequentially to 54% due to lower operating expenses [3] - Full year 2025 revenue increased by 35.9% in U.S. dollar terms to $1 billion, with gross margin up 3.8 percentage points to 59.9% [6][7] - Full year EPS increased by 46.4% to TWD 66.25 and ROE increased by 5.1 percentage points to 35.4% [7] Business Line Data and Key Metrics Changes - 3 nm process technology contributed 28% of wafer revenue in Q4, while 5 nm and 7 nm accounted for 35% and 14% respectively [4] - Advanced technologies (7 nm and below) accounted for 77% of wafer revenue for the full year, up from 69% in 2024 [4] - High-Performance Computing (HPC) revenue increased by 48% year over year, accounting for 58% of total revenue in 2025 [5] Market Data and Key Metrics Changes - HPC revenue increased by 4% quarter over quarter to account for 55% of Q4 revenue, while smartphone revenue increased by 11% to account for 32% [5] - Automotive revenue decreased by 1% to account for 5%, and Data Center Equipment (DCE) revenue decreased by 22% to account for 1% [5] - Overall, smartphone, IoT, and automotive segments saw year-over-year increases of 11%, 15%, and 34% respectively in 2025 [5] Company Strategy and Development Direction - TSMC plans to invest between $52 billion and $56 billion in capital expenditures for 2026, focusing on advanced process technologies [13] - The company aims to leverage manufacturing excellence to drive productivity and optimize capacity across nodes [10][16] - TSMC is committed to supporting customer growth while maintaining a disciplined approach to capacity planning [22][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the AI megatrend, forecasting a 14% growth in the Foundry 2.0 industry for 2026, supported by robust AI-related demand [19] - Concerns about potential tariff policies and rising component prices were acknowledged, with a focus on prudent business planning [18] - Management expects 2026 to be another strong growth year, with full-year revenue projected to increase by close to 30% in U.S. dollar terms [19] Other Important Information - TSMC's cash and marketable securities totaled TWD 3.1 trillion or $98 billion at the end of Q4 [5] - The company plans to pay a cash dividend of TWD 23 per share in 2026, up from TWD 18 in 2025 [8] Q&A Session Summary Question: Insights on customer demand and AI-related growth - Management confirmed strong customer demand for AI, with evidence of growth in their businesses, indicating that AI is a real and growing trend [36][37] Question: U.S. expansion plans and capacity commitments - Management is accelerating fab expansion in Arizona due to strong demand from AI customers, with plans for additional fabs [41][42] Question: Evaluation of power supply for data centers - Management is actively assessing power supply needs for AI infrastructure, ensuring that silicon supply remains the primary bottleneck [46][47] Question: Advanced packaging revenue contribution and focus areas - Advanced packaging contributed about 8% of revenue in 2025, with expectations for growth in the next five years [50][51] Question: Non-AI market outlook and competition - Management expects strong demand in non-AI segments, particularly in high-end smartphones, despite rising memory costs [55][66] Question: Engineering talent and capacity planning - Management acknowledged challenges in developing engineering talent but emphasized productivity improvements as a focus for 2026-2027 [71][72]

Financial Highlights - Third quarter revenue increased 10.1% sequentially to $33.1 billion, slightly above guidance, driven by strong demand for leading-edge process technologies [3][11] - Gross margin rose 0.9 percentage points sequentially to 59.5%, primarily due to cost improvements and higher capacity utilization [3][7] - Operating margin increased 1.0 percentage point sequentially to 50.6% [3] - EPS was TWD 17.44, up 39% year-over-year, with ROE at 37.8% [3] - Cash and marketable securities totaled TWD 2.8 trillion ($90 billion) at the end of the quarter [4] Business Line Performance - 3 nm process technology contributed 23% of wafer revenue, while 5 nm and 7 nm accounted for 37% and 14% respectively [4] - Revenue from the smartphone segment increased 19% to account for 30% of total revenue, while IoT and automotive segments grew by 20% and 18% respectively [4] - Data Center Equipment (DCE) revenue decreased by 20% to account for 1% of total revenue [4] Market Data - The company expects fourth quarter revenue to be between $32.2 billion and $33.4 billion, representing a 1% sequential decrease or a 22% year-over-year increase at the midpoint [6][7] - Full-year 2025 revenue is expected to increase by close to mid-30% year-over-year in U.S. dollar terms [11] Company Strategy and Industry Competition - TSMC is focusing on maintaining technology leadership and manufacturing excellence while investing in advanced process technologies to support AI-related demand [9][12] - The company is narrowing its 2025 CapEx range to $40 billion to $42 billion, with 70% allocated for advanced process technologies [10] - TSMC is expanding its global manufacturing footprint, including capacity expansion in Arizona and Japan, to meet strong multi-year AI-related demand [17][18] Management Commentary on Operating Environment and Future Outlook - Management remains optimistic about AI-related demand, expecting it to continue driving growth [11][13] - There are uncertainties regarding tariff policies that could impact consumer-related markets, but management is focused on technology leadership and customer trust [12] - The company is preparing for a structural increase in long-term market demand, particularly in AI applications [15] Other Important Information - TSMC's advanced packaging revenue is approaching 10% of total revenue, highlighting its importance in the competitive landscape [102] - The company is working closely with customers to ensure capacity meets demand, particularly in the AI sector [15][16] Q&A Session Summary Question: AI Demand Growth - Management confirmed that AI demand continues to be strong, with expectations for growth rates potentially exceeding previous mid-40% CAGR forecasts [26][27] Question: CapEx Outlook - Management indicated that CapEx will correlate with business opportunities, and they expect to continue investing to support growth [29][30] Question: CoWoS Capacity - Management is working to narrow the gap between demand and supply for CoWoS capacity, with updates expected next year [32] Question: Advanced Packaging Expansion - TSMC is building two advanced packaging fabs in Arizona and collaborating with partners to meet customer needs [75] Question: Revenue Growth Drivers - Growth is expected to be driven by technology migration, ASP increases, and volume growth [76][78] Question: AI Data Center Capacity - Management noted that 1 GW of AI data center capacity could require significant investment, but specific wafer demand figures are not yet available [89] Question: Competition and Strategic Initiatives - TSMC is focusing on system performance and advanced packaging to strengthen its competitive position in the Foundry 2.0 landscape [102] Question: Concerns about Prebuilt Inventory - Management expressed no concerns about prebuilt inventory levels, indicating they are at healthy seasonal levels [105]