TSMC(US:TSM)2025-10-16 07:02Financial 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]