Investment Rating - The report maintains a "Buy" rating for the company, indicating a strong expectation for future growth [4]. Core Insights - The company reported Q2 2025 revenue of $30.07 billion, a year-on-year increase of 44.4% and a quarter-on-quarter increase of 17.8%. The gross margin was 58.6%, up 5.4 percentage points year-on-year but down 0.2 percentage points quarter-on-quarter. Net profit reached $12.8 billion, reflecting a year-on-year increase of 60.7% and a quarter-on-quarter increase of 10.2% [2]. - The company has raised its full-year revenue growth guidance to approximately 30%, driven primarily by demand for advanced processes. In Q2 2025, revenue from N3, N5, and N7 processes accounted for 24%, 36%, and 14% of total wafer revenue, respectively, totaling 74% [3]. - The company is expected to benefit significantly from the growing demand for AI chips, with projections for net profits of $49.686 billion, $60.379 billion, and $66.768 billion for the years 2025 to 2027, respectively [4]. Summary by Sections Performance Review - In Q2 2025, the company achieved revenue of $30.07 billion, with a gross margin of 58.6% and net profit of $12.8 billion [2]. Operational Analysis - The decline in gross margin is attributed to the appreciation of the New Taiwan Dollar (TWD), which impacts revenue when converted from USD. A 1% appreciation in TWD results in a 1% revenue loss and a 40 basis points loss in gross margin. In Q2 2025, TWD appreciated by 4.4%, leading to a 180 basis points decline in gross margin, with further expected appreciation causing an additional 260 basis points loss [3]. - The company anticipates the first-generation N2 process to enter mass production in H2 2025, with subsequent processes expected in 2026 and 2028 [3]. Profit Forecast, Valuation, and Rating - The company is positioned as a leader in the wafer foundry industry, with a competitive edge in advanced processes, expected to benefit from the rise in AI chip demand. The projected net profits for 2025, 2026, and 2027 are $49.686 billion, $60.379 billion, and $66.768 billion, respectively [4].

Core Viewpoint - TSMC's employee bonuses and dividends for 2024 have reached a record high, reflecting strong revenue and profit growth from the previous year, with an average payout of over NT$200 million per employee [1][2]. Group 1: Employee Compensation - TSMC will distribute a total of NT$140.59 billion in employee performance bonuses and dividends for 2024, marking a year-on-year increase of over 40% [1][2]. - The average annual bonus per employee is NT$200.84 million, which represents a year-on-year increase of NT$51.32 million, or approximately 34.32% [2]. - Employees with six years of service can expect bonuses as high as NT$1.8 million, while those with five years and top performance ratings can receive around NT$1.16 million [1]. Group 2: Financial Performance - TSMC's total revenue for 2024 is projected to reach NT$2.8943 trillion, with a net profit of NT$1.1732 trillion, both figures representing new highs [1]. - The earnings per share (EPS) is expected to be NT$45.25, showcasing TSMC's strong competitive position in the semiconductor industry [1]. Group 3: Industry Context - The global semiconductor industry is facing challenges, with competitors like Samsung and Intel experiencing delays and operational difficulties in their advanced process technologies [4][5]. - TSMC maintains its leadership in advanced process technology, with plans to mass-produce 2nm processes in the second half of this year and A16 processes by the second half of 2026 [5]. - The demand for high-end processes is expected to rise due to the growing need for AI servers, further solidifying TSMC's position as a leading foundry [5].

Core Viewpoint - TSMC's recent technology forum in Shanghai highlighted the company's advancements in semiconductor technology and its market outlook, particularly focusing on the growth of the semiconductor market driven by high-performance computing (HPC) and AI integration, despite limitations in advanced process offerings to Chinese clients [3][4][5]. Market Outlook - The global semiconductor market is projected to exceed $1 trillion by 2030, with HPC accounting for 45%, smartphones for 25%, automotive for 15%, and IoT for 10% [5][6]. Advanced Process Technology - TSMC's 3nm family continues to evolve, with N3P expected to enter mass production in Q4 2024, enhancing performance by 5% or reducing power consumption by 5-10% compared to N3E [6][9]. - N2P is anticipated to begin production in H2 2026, offering an 18% performance increase at the same power level and a 36% reduction in power at the same performance level [11][13]. - The A16 process, set for mass production in H2 2026, integrates three innovative technologies, promising an 8-10% performance boost or a 15-20% reduction in power consumption compared to N2P [14][19][22]. - The A14 process, based on second-generation GAA technology, is expected to start production in 2028, with significant improvements in speed and energy efficiency [20][22]. Advanced Packaging Technology - TSMC's 3DFabric® technology includes SoIC platforms for 3D silicon stacking, with N3-on-N4 stacking expected to enter mass production in 2025 [23][25]. - The SoW-X platform, set for 2027, aims to enhance computational capabilities significantly, integrating essential components for AI training [30]. Special Process Technologies - TSMC is advancing automotive technology with its latest logic technologies, which enhance performance by approximately 20% per generation while reducing power consumption by 30-40% [32]. - The company is also focusing on IoT applications, with developments in ultra-low leakage SRAM and logic circuits to extend battery life [38]. Manufacturing Excellence - TSMC anticipates a twelvefold increase in wafer shipments for AI-related products by 2025 compared to 2021 [44]. - The company plans to add nine new facilities by 2025 to expand capacity, including six wafer fabs in Taiwan and two overseas [45]. - TSMC is committed to sustainable manufacturing, aiming for net-zero emissions by 2050 and a 98% resource recovery rate by 2030 [46][48].