TSMC(US:TSM)2025-07-17 07:00Financial Data and Key Metrics Changes - In Q2 2025, revenue increased by 11.3% sequentially, supported by strong demand for 3nm and 5nm technologies, with a 17.8% increase in USD terms to $30.1 billion, exceeding guidance [6][12] - Gross margin decreased by 0.2 percentage points to 58.6%, primarily due to unfavorable foreign exchange rates and margin dilution from overseas fabs [6][14] - Operating margin increased by 1.1 percentage points to 49.6%, with EPS up 60.7% year-over-year and ROE at 34.8% [7][12] Business Line Data and Key Metrics Changes - Revenue contribution by technology: 3nm accounted for 24% of wafer revenue, while 5nm and 7nm accounted for 36% and 14% respectively; advanced technologies (7nm and below) made up 74% of wafer revenue [7] - Revenue by platform: HPC increased by 14% quarter-over-quarter to 60% of revenue; smartphone revenue increased by 7% to 27%; IoT increased by 14% to 5%; automotive remained flat at 5%; DCE increased by 30% to 1% [8] Market Data and Key Metrics Changes - The company ended Q2 with cash and marketable securities of NT$2.6 trillion (approximately $90 billion) [9] - Current liabilities decreased by $1 billion quarter-over-quarter, mainly due to a reduction in accrued liabilities [9] - Days of inventory decreased by 7 days to 76 days, attributed to higher shipments of N3 and N5 wafers [10] Company Strategy and Development Direction - TSMC plans to invest $165 billion in advanced semiconductor manufacturing in the U.S., including six advanced wafer manufacturing fabs in Arizona [24][25] - The company aims to maintain its technology leadership and manufacturing excellence while expanding its global footprint, including plans for new fabs in Japan and Europe [28][29][30] - TSMC expects gross margin dilution from overseas fabs to be between 2% to 3% annually in the early stages, widening to 3% to 4% in later stages [14] Management's Comments on Operating Environment and Future Outlook - Management noted strong demand for AI and HPC-related products, with expectations for a 30% increase in full-year 2025 revenue in USD terms [21][22] - There are uncertainties regarding tariff policies and their impact on consumer-related markets, but overall semiconductor demand remains robust [21] - Management remains cautious about the future, considering macroeconomic uncertainties while focusing on technology leadership and customer trust [22] Other Important Information - The company generated approximately $497 billion in cash from operations in Q2 and spent NT$297 billion on CapEx [10] - TSMC's capital expenditures for 2025 are expected to remain between $38 billion and $42 billion [12] Q&A Session Summary Question: Demand outlook for data center AI - Management confirmed that demand for AI is stronger than three months ago and is working to narrow the supply-demand gap [37][40] Question: Gross margin sustainability - Management expressed confidence in maintaining a gross margin of 53% or higher despite structural headwinds from FX and overseas fab dilution [46][49] Question: AI accelerator demand and growth - Management noted that while the H20 chip can now ship to China, it is too early to revise long-term growth targets for AI accelerators [50][52] Question: N2 ramp and revenue contribution - Management indicated that N2 profitability is expected to be better than N3, with revenue contributions anticipated to be significant in 2026 [55][82] Question: CapEx guidance and future expansion - Management acknowledged macro uncertainties but indicated that CapEx spending is unlikely to drop significantly in any given year [86][87]