TSMC(US:TSM)2026-01-15 07:00Financial Highlights - In Q4 2025, revenue increased by 5.7% sequentially in NT$ and by 1.9% in U.S. dollars 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][9] - Operating margin increased by 3.4 percentage points to 54% due to operating leverage [3] - Full year 2025 revenue increased by 35.9% in U.S. dollars to $1 billion, and by 31.6% in NT dollars to TWD 3.8 trillion [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 Performance - In Q4 2025, 3 nm process technology contributed 28% of wafer revenue, 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 Performance - 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, HPC accounted for 58% of 2025 revenue, with smartphone at 29%, IoT at 5%, automotive at 5%, and DCE at 1% [5] Company Strategy and Industry Competition - TSMC plans to increase capital expenditures to $52 billion-$56 billion in 2026 to support growth in advanced process technologies [12] - The company aims to maintain a long-term gross margin of 56% and higher through the cycle, despite challenges from overseas expansion and rising manufacturing costs [15] - TSMC is focused on leveraging manufacturing excellence and optimizing capacity across nodes to support profitability [15] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the AI megatrend, forecasting a 14% growth in the Foundry 2.0 industry in 2026, supported by robust AI-related demand [18] - TSMC expects full-year revenue to increase by close to 30% in U.S. dollar terms in 2026 [18] - The company is committed to supporting customer growth and addressing the structural increase in long-term market demand [19] Other Important Information - TSMC's cash and marketable securities reached TWD 3.1 trillion ($98 billion) at the end of Q4 2025 [5] - The company generated TWD 726 billion in cash from operations and spent TWD 357 billion on capital expenditures in Q4 2025 [6] - TSMC 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: Customer Demand and AI Bubble Concerns - Management reassured that customer demand for AI is real, with evidence of growth and financial returns from cloud service providers [33][34] - Concerns about a potential AI bubble were acknowledged, but management remains confident in the long-term growth driven by AI [35] Question: U.S. Expansion Plans - TSMC is accelerating its fab expansion in Arizona to meet strong AI demand, with plans for multiple fabs and a Gigafab cluster [39][40] Question: Power Supply for Data Centers - Management confirmed that power supply considerations are factored into planning, and customers have been proactive in addressing power needs for AI infrastructure [44][46] Question: Non-AI Market Outlook - Management expects strong demand in high-end smartphones and PCs, which are less sensitive to memory price increases [52][68] Question: Competition from Intel Foundry - Management expressed confidence in TSMC's competitive position, noting that technology complexity and time to market are significant barriers for new entrants [60]