July 16, 2026

TSMC 2Q26 Transcript.pdf

TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD · Q2 2026

LSEG STREETEVENTS

EDITED TRANSCRIPT

2330.TW - Q2 2026 Taiwan Semiconductor Manufacturing Co

Ltd Earnings Call (Chinese, English)

EVENT DATE/TIME: JULY 16, 2026 / 6:00AM GMT

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JULY16,2026/6:00AM,2330.TW-Q22026TaiwanSemiconductorManufacturingCoLtdEarnings

Call(Chinese,English)

CORPORATE PARTICIPANTS

JeffSuTaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

WendellHuangTaiwanSemiconductorManufacturingCoLtd-SeniorVicePresidentandChiefFinancialOfficer/Spokesperson

C.C.WeiTaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

CONFERENCE CALL PARTICIPANTS

SunnyLinUBSAG-Analyst

CharlieChanMorganStanley-Analyst

ArthurLaiMacquarieResearchLtd-Analyst

GokulHariharanJPMorganChase&Co-Analyst

JimFontanelliAreteResearchLLC-Analyst

MehdiHosseiniSusquehannaFinancialGroupLLLP-EquityAnalyst

LauraChenCitigroup-Analyst

HaasLiuBofaSecurities-Analyst

RobertSandersDeutscheBankAG-Analyst

EvelynYuGoldmanSachsGroupInc-Analyst

FelixPanKGISecuritiesCoLtd-Analyst

PRESENTATION

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

(SpokeninForeignLanguage)

Goodafternoon,everyone,andwelcometoTSMC'ssecond-quarter2026earningsconferenceandconferencecall.ThisisJeffSu,

TSMC'sDirectorofInvestorRelationsandyourhostfortoday.

Today'seventisbeingwebcastlivethroughTSMC'swebsiteatwww.tsmc.com,whereyoucanalsodownloadtheearningsrelease materials.Ifyouarejoiningusthroughtheconferencecall,yourdial-inlinesareinlisten-onlymode.

Theformatfortoday'seventwillbeasfollows.First,TSMC'sSeniorVicePresidentandCFO,Mr.WendellHuang,willsummarizeour operationsinthesecondquarter2026,followedbyourguidanceforthethirdquarter2026.Afterwards,Mr.HuangandTSMC's

ChairmanandCEO,Dr.C.C.Wei,willjointlyprovidethecompany'skeymessages.Thenwewillopenboththefloorandthelinefor thequestion-and-answersession.

Asusual,I'dliketoremindeverybodythattoday'sdiscussionsmaycontainforward-lookingstatementsthataresubjecttosignificant risksanduncertainties,whichcouldcauseactualresultstodiffermaturityfromthosecontainedintheforward-lookingstatements.

PleaserefertotheSafeHarbornoticethatappearsinourpressrelease.

Andnow,IwouldliketoturnthemicrophoneovertoTSMCCFO,Mr.WendellHuang,forthesummaryofoperationsandthecurrent quarterguidance.

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JULY16,2026/6:00AM,2330.TW-Q22026TaiwanSemiconductorManufacturingCoLtdEarnings

Call(Chinese,English)

WendellHuang-TaiwanSemiconductorManufacturingCoLtd-SeniorVicePresidentandChiefFinancialOfficer/Spokesperson

Thankyou,Jeff.Goodafternoon,everyone.Thankyouforjoiningustoday.

Mypresentationwillstartwithfinancialhighlightsforthesecondquarterof2026.Afterthat,Iwillprovidetheguidanceforthethird quarterof2026.

[Second quarter revenue increased 12.0 percent sequentially in NT dollars, supported by strong demand for our leading-edge processtechnologies.InUSdollarterms,revenuealsoincreased12.0percentsequentiallyto40.2billion,atthehigh-endofour secondquarterguidance.Grossmarginincreasedby1.5percentagepointssequentiallyto67.7%,primarilyduetocostimprovement effortsandahighercapacityutilizationrate,partiallyoffsetbymargindilutionfromoverseasfabs].

[Totaloperatingexpensesaccountedfor7.8%ofnetrevenue,ascomparedto8.3%in1Q26,mainlyduetooperatingleverage.Thus, operatingmarginincreasedby2.2percentagepointssequentiallyto60.3%.Totalnon-operatingitemswereagainof96billionNT dollars,anincreaseof67billionsequentially.Theincreasewasmainlyduetodisposalandmark-to-marketgainsof63billionon

Vanguardshares,whichcontributed2.24NTdollarstosecond-quarterEPS.Overall,oursecondquarterEPSwas27.25NTdollars, andROEwas45.9%].(addedbycompanyafterthecall)

Nowlet'smoveontorevenuebytechnology.

2-nanometerprocesstechnologycontributed3%ofwaferrevenueinthesecondquarter.3-nanometer,5-nanometer,and7-nanometer accountedfor30%,33%,and11%,respectively.Advancedtechnology,definedas7-nanometerandbelow,accountedfor77%of waferrevenue.

Movingontorevenuecontributionbyplatform.

HPCincreased20%quarteroverquartertoaccountfor66%ofoursecond-quarterrevenue.Smartphonedecreased4%toaccount for22%.IoTincreased4%toaccountfor5%.Automotiveincreased15%toaccountfor4%.DCEincreased5%toaccountfor1%.

Movingontothebalancesheet,weendedthesecondquarterwithcashandmarketablesecuritiesofTWD3.5trillionorUSD110 billion.Ontheliabilityside,currentliabilitiesincreasedbyTWD144billionquarteroverquarter,mainlyduetotheincreaseofTWD58 billioninaccountspayableandtheincreaseofTWD48billioninaccruedliabilitiesandothers.

Intermsoffinancialratios,accountsreceivabledaysincreasedby3daysto29days.Inventorydaysincreased7daysto87days, primarilyduetotherampofN2technology.

RegardingcashflowandCapEx.Duringthesecondquarter,wegeneratedaboutTWD783billionincashfromoperations,spent

TWD496billioninCapEx,anddistributedTWD156billionforthirdquarter2025cashdividend.Overall,ourcashbalanceincreased

TWD99billiontoTWD3.1trillionattheendofthequarter.

InUSdollarterms,oursecondquartercapitalexpenditurestotaledUSD15.7billion.

Ifinishedmyfinancialsummary.Nowlet'sturntothecurrentquarterguidance.

Basedonthecurrentbusinessoutlook,weexpectourthird-quarterrevenuetobebetweenUSD44.6billionandUSD45.8billion, whichrepresentsa12%sequentialincreaseora37%year-over-yearincreaseatthemidpoint.Basedontheexchangerateassumption ofUSD1toTWD32,grossmarginisexpectedtobebetween65%and67%,operatingmarginbetween56%and58%.

Thisconcludesmyfinancialpresentation.

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JULY16,2026/6:00AM,2330.TW-Q22026TaiwanSemiconductorManufacturingCoLtdEarnings

Call(Chinese,English)

Nowletmeturntoourkeymessages.

Iwillstartbytalkingaboutoursecond-quarter'26andthird-quarter'26profitability.

Comparedtothefirstquarter,oursecondquartergrossmarginincreasedby150basispointssequentiallyto67.7%,slightlyahead ofourguidance,primarilyduetocostimprovementeffortsandaslightlyhigheroverallcapacityutilizationrate,partiallyoffsetby dilutionfromouroverseasfabs.Wehavejustguidedourthirdquartergrossmargintodecreaseby1.7percentagepointto66%at themidpoint,primarilyasweexpectthesteepramp-upofour2-nanometertechnologytodiluteourgrossmarginbyabout3to4 percentagepoints.Thisdilutionisexpectedtobepartiallyoffsetbyverystrongdemandforourleading-edgetechnologiesand continuedcostimprovementefforts,includingproductivitygainsandacross-nodecapacityoptimization.

Lookingatthesecond-halfoftheyear,giventhesixfactorsthatdetermineourprofitability,thereareafewputsandtakesthatI wouldliketoshare.

First,weexpectasteepramp-upofour2-nanometertodiluteourgrossmarginbyabout3to4percentagepointsinthesecond halfoftheyear.Furthermore,asthescaleofouroverseasexpansiongrows,wecontinuetoforecastthegrossmargindilutionfrom theramp-upofoverseasfabsinthenextseveralyearstobe2%to3%intheearlystagesandwidento3%to4%inthelatterstages.

Ontheotherhand,demandforourleading-edgetechnologiesisverystrong.

Inaddition,wecontinuetoleverageourmanufacturingexcellencetogeneratemorewaferoutputanddrivegreateracross-node capacityoptimizationinourfaboperationstosupportourprofitability.Finally,wehavenocontrolovertheforeignexchangerate, butthatmaybeanotherfactor.

Next,letmetalkaboutour2026capitalbudget.

AtTSMC,ahigherlevelofcapitalexpendituresisalwayscorrelatedtohighergrowthopportunitiesinfollowingyears.Withour strongtechnologyleadershipanddifferentiation,wearewellpositionedtocapturethemulti-yearstructuraldemandfromthe industrymegatrendsof5G,AI,andHPC.

Given the continued strong structural demand from our customers, including the newly emerging agentic AI market, we have decidedtoraiseourfull-year2026capitalbudgettobebetweenUSD60billionandUSD64billionaswecontinuetoinvestheavily tosupportourcustomers'growth.

Wealwayscollaboratecloselywiththetoolsupplierswellinadvancetopreparethecapacity,whetheritisastrongupcycleor downcycle,justlikeourcustomerscollaboratewithuswellinadvancetoplanourcapacity.Thus,wedonotforeseeanybottlenecks toourcapacityexpansionplans.

About70%to80%ofthe2026capitalbudgetwillbeallocatedforadvancedprocesstechnologies,about10%willbespentfor specialtytechnologies,andabout10%to20%willbespentforadvancedpackaging,testing,maskmakingandothers.

EvenasweinvestforthefuturegrowthwiththislevelofCapExspendingin2026,weremaincommittedtodeliveringprofitable growthtoourshareholders.Wealsoremaincommittedtoasustainableandsteadilyincreasingcashdividendpershareonboth anannualandquarterlybasis.

In2025,wepaidTWD467billionincashdividends,up28.6%yearoveryearasTSMCshareholdersreceiveatotalofTWD18cash dividendpershare.In2026,theywillreceiveTWD24pershare,upanother33%yearoveryear,andweexpectacontinuedand increasingcashdividendspersharein2027aswell.

NowletmeturnthemicrophoneovertoC.C.

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JULY16,2026/6:00AM,2330.TW-Q22026TaiwanSemiconductorManufacturingCoLtdEarnings

Call(Chinese,English)

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Thankyou,Wendell.Goodafternoon,everyone.

First,letmestartwithournear-termdemandoutlook.WeconcludedoursecondquarterwithrevenueofUSD40.2billion,atthe highendofourguidanceinUSdollarterms,drivenbystrongdemandforourleading-edgeprocesstechnologies.

Movingintothirdquarter,weexpectourbusinesstobesupportedbycontinuousstrongdemandforourleading-edgeprocess technologies, including the steep ramp up of our 2-nanometer technology. Looking ahead, we observe consumer and the price-sensitive end-market segment are being challenged due to the impact of rising component prices and macroeconomics uncertainties.Assuch,wearebeingprudentinourbusinessplanningwhilefocusingonourfundamentalsofourbusinesstofurther strengthenourcompetitiveposition.

Havingsaidthat,AI-relateddemandcontinuestobeextremelyrobust.TheAImegatrendcontinuestodrivetheneedformoreand morecomputation,whichsupportstherobustdemandforleading-edgesilicon.Ourcustomersandcustomers'customers,who aremainlythecloudserviceprovider,continuetoprovideuswiththeirverystrongsignalandpositiveoutlook.Thus,ourconviction inthemulti-yearAImegatrendremainveryhigh.Supportedbyourrobusttechnologydifferentiationandthebroadcustomerbase, wenowexpectourfull-year2026revenuegrowthtobeslightlyabove40%yearoveryearinUSdollarterms.

NowletmetalkabouttheaccelerationofagenticAI.

TheAImarketcontinuestobeverydynamic.TheemergenceofagenticAIisleadingtoaresurgenceintheroleofCPUsinAIdata centers,whichdrivesmoresilicondemandinadditiontoAIaccelerators.WebelievethisispositiveforTSMC,asnomatterwhat

CPUapproachistaken,whetherit'sx86,ARM-based,orRISC-Varchitecture,theyarealmostallTSMC'scustomers.Wearealready collaboratingcloselywithourCPUcustomersandworkingtosupportthemwiththemostadvancedtechnologiesandnecessary capacity,sotheycancaptureagenticAImarketopportunities.

Next,letmetalkaboutTSMC'scapacityexpansionstrategies.

Toaddressthestructuralincreaseinoveralllong-termsemiconductormarketdemandprofile,TSMCcollaboratescloselywithour customersandourcustomers'customerstoplanourcapacity.Giventhefundamentalcomplexityofleading-edgetechnologies andthedesign-inandleadtimeinvolved,wealsohaveaverygoodideaoftheirmulti-yearproductroadmapandproductionplans.

Thisisimportantbecauseittakesmorethanfiveyearstodevelopthetechnologyandproduct,preparethecapacity,andrampit uptohigh-volumeproduction.Internally,TSMCemploysadisciplinedcapacityplanningsystemtoassessthemarketdemandfrom bothatop-downandbottom-upapproach.Thisisacontinuousandongoingprocess.Basedonourassessment,wearestepping upourCapExinvestmenttoincreaseourcapacitytosupportourcustomers'futuregrowth.

Now,withastrongcollaborationandsupportfromourleadingUScustomersandtheUSfederal,state,andcitygovernments,we wouldliketoannounceanadditionalUSD100billioninvestmentinArizona.Thisistobuildseveralmoresemiconductorlogicwafer fabsfor2-nanometerandbelowtechnologies,aswellasadvancedpackagingfabs,tosupportstrongmulti-yeardemandfromour leadingUSCustomers.WebelievethisinvestmentwillhelptofurtherfosterthedevelopmentoftheUSsemiconductorecosystem, strengthenthesupplychain,andsupportanincreasingnumberofhigh-tech,high-payingjobsintheUnitedStates.

Atthesametime,wearebuilding13leading-edgeandadvancedpackagingfabsinTaiwanoverthenextseveralyears,andwewill continuetofurtherinvestinTaiwan.Therefore,TSMC'ssemiconductortechnologyandmanufacturingwillcontinuetoplayapivotal roleinsupportingtheglobalsemiconductorindustry,whileunleashingourcustomers'innovation.

NowletmetalkaboutthecurrentN3capacityexpansion.

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JULY16,2026/6:00AM,2330.TW-Q22026TaiwanSemiconductorManufacturingCoLtdEarnings

Call(Chinese,English)

Weareexecutingwellonourglobalplantoaddthreeadditional3-nanometerfabs,oneinTaiwan,oneinArizona,andoneinJapan, tosupporttherobustmulti-yearpipelineofdemandfor3-nanometertechnologies.Inadditiontoallthenewfabs,wecontinueto convert5-nanometertoolstosupport3-nanometercapacityinTaiwan.Wearealsoleveragingourmanufacturingexcellenceto drivegreaterproductivityacrossourfabinalllocationstogeneratemorewaferoutput.Wearealsofocusingoncapacityoptimization acrossnodes,whichincludesflexiblecapacitysupportamongN7,N5,andN3nodes.Insummary,weareusingmultipleleversto doeverythingwecan,whereverwecan,howeverwecan,tomaximizethesupporttoallourcustomers.

Now,letmetalkaboutourmaturenodestrategies.

TSMC'sstrategyatmaturenodehasnotchanged.Ourfirstpriorityistofullysupportourcustomers,andnowwecontinueto increase,notdecrease,ourmaturenodecapacityinthehighervalue-addedsegment.Forexample,weareincreasingourmature nodecapacitythroughJASMFab1inJapan,forCMOSImageSensorapplication,andESMCinGermanyforautomotiveandindustrial applications.Intoday'smarket,outsideofspecificareassuchaspowermanagementICandCMOSimagesensor,thematurenode demandinothercommodityareasisnotthatstrong.Thus,TSMCwillcontinuetofocusonthehighervalue-addedandstrategic segments,whileensuringwehavethenecessarycapacitytosupportourcustomers'growth.

Finally,letmetalkaboutourA14status.

AsImentionedafewminutesago,thecomplexityofleading-edgetechnologycontinuestoincrease.Theleadtimetodevelopa newtechnologysuchasA14,buildingthecapacity,andthenrampitupnowtakesfivetosevenyears.Therearenoshortcuts.Our

A14technologyrepresentsthesecondgenerationofnanosheettransistorsanddeliversanotherfull-nodestridefromN2,with insatiable performanceandpowerbenefitstoaddresstheinsensibleneedforhigh-performanceandenergy-efficientcomputing.Compared withN2,A14willprovidea10to15%speedimprovementatthesamepoweror25to30%powerimprovementatthesamespeed, andcloseto20%chipdensitygain.A14technologydevelopmentisontrackandprogressingwell.Internalproduct-likevehicle demonstratedcloseto90%deviceperformanceandcloseto90%256megabitsSRAMyield.Weareobservingastronglevelof customerinterestandengagementonbothsmartphoneandHPC/AIapplications,andcustomernewtap-outactivityisongoing andaheadofschedule.Riskproductionwillstartin2027andvolumeproductionisscheduledfor2028.Withourstrategyofcontinuous enhancement,wealsointroducedA13andA12asextensionoftheA14family.A13representsafurtheradvancementofourA14, achieving an over 6% die area saving through an innovative 97% optical shrink. Through continuous design-technology co-optimization,A13alsodeliversfurtherperformanceandpowerefficiencyimprovement.A13designrulesarebackwardcompatible withA14toensuresmoothIPmigration.

WealsointroducedA12,whichwillbringourinnovativeSuperPowerRailtechnologytotheA14platformforsuperiorperformance, power, and area benefits. Both A13 and A12 are scheduled for volume production in 2029. We believe A14 and its derivative technologies will propel our A14 firmly to be an even larger and long-lasting node for TSMC than N2, just like a 2-nanometer technologyisalargerandlonger-lastingnodethan3-nanometer,andhelpfurtherextendourtechnologyleadershippositionwell intothefuture.

Thisconcludesourkeymessages,andthankyouforyourattention.

QUESTIONS AND ANSWERS

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Thankyou,C.C.Sothisdoesconcludeourpreparedstatements.

(EventInstructions)

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JULY16,2026/6:00AM,2330.TW-Q22026TaiwanSemiconductorManufacturingCoLtdEarnings

Call(Chinese,English)

SunnyLin,UBS.

SunnyLin-UBSAG-Analyst

Congratsontheverystrongperformanceandoutlook.

Sonumberone,I'lldoadouble-clickontheCapEx.SoveryencouragingCapExoutlook,andIdothinkit'sessentialthatTSMC showcaseastrongerdeterminationincapacityexpansion,giventhestrongerdemandandtheverytightsupply.Andsobeyond

2026,IthinkeverylargeclientalsowonderhowaggressiveTSMCisplanningforCapEx.AndsobackintheCOVIDsupercycle,TSMC didprovideathree-yearCapExoutlookbythen.AndsoIwonderatthispoint,woulditbepossibleforyoutoshareanycolor,maybe forthecomingthreeyearsCapEx?

Thankyou.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Okay.SoSunny'sfirstquestionisregardingCapEx.Shedoesbelieveit'simportant/essentialtoshowourdeterminationtosupport ourcustomerswiththeselargeCapExinvestments.Soshewantstoknow,dowehaveathree-yearCapExguidance,'26,'27,'28, similartowhatwedidbackin2021?

WendellHuang-TaiwanSemiconductorManufacturingCoLtd-SeniorVicePresidentandChiefFinancialOfficer/Spokesperson

Hey,Sunny,wedonothaveanumbertosharewithyou.Butasyouknow,weinvestCapExthisyearforthefuturebusinessopportunity andaslongastherearebusinessopportunities,wewillnothesitatetoinvest.Asyoucanhearfromourpreparedremarksthatour convictioninthemegatrend,AImegatrendmulti-yearisverystrong,andwearesteppinguptheCapEx,includingincreasingthis year'sCapEx.

Lasttime,wesaidourCapExinthenextthreeyearswillbesignificantlyhigherthantheCapExinthepastthreeyears.Nowthe

CapExinthenextthreeyearswillbeevenmoresignificantlyhigherthanthepastthreeyears.

SunnyLin-UBSAG-Analyst

Yeah,maybeletmefollow-uponCapExfromanother--yeah,sure.SoyoujustannouncedadditionalUSD100billionCapExinthe

US,andIthinkthat'sprettyimportantforyoutosecurethebusinessintheUSaswell.AndsonowwithtotalUSD265billionCapEx inArizona,what'syourcurrentplantobringonthecapacitiesinArizonainthecomingfewyears?

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Okay,soSunny'ssecondquestionisontoC.C.saidinvestinganadditionalUSD100billioninArizonabasedonthestrongdemand fromourcustomers.SothetotalinvestmentnowisUSD265billion.Whatistheschedule,timeframe,ortheplanfortheseinvestment?

Isthatcorrect,Sunny?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Sunny,theschedulewilldependonthemarketsituation,youknowthat.Sotoday'ssituation.Themakeuptrendissostrongso thatweannounceadditionalUSD100billioninvestmentinArizona.

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JULY16,2026/6:00AM,2330.TW-Q22026TaiwanSemiconductorManufacturingCoLtdEarnings

Call(Chinese,English)

Howmanyfabs?Many.

Soactually,letmesaythatthere'sprobablyadditionalfourormorefabswillbebuilt.

SunnyLin-UBSAG-Analyst

Andthat'scombiningfrontendbackend.

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Yes.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

CharlieChan,MorganStanley.

CharlieChan-MorganStanley-Analyst

Sofirstofall,socongratsforaverystrongoutlook.

Myfirstquestionisreallyaboutthefoundrycompetition.Iunderstandthatthere'snoshortcutforanewcomerlikeTeraFab,but howaboutlikeSamsungFoundry,right?Theygotahugeprofitfrommemorybusiness.IntelgotaUSpolicysupport.SoI'mnot surehowTSMCisgoingtoaddressthosecompetitionbecauseapparentlyseveralUScompaniesareengagingwiththoseindustry peers.

Andrecently,actuallyyesterday,ASMLjustannouncedtoexpandtheEUVcapacityfor2028.WouldTSMCworrythatyourcompetitors totakemoreslotsandbuildalargecapacityinthefuturetocompetewithyourleadingedgebusiness?

Thankyou.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Okay,soCharlie'squestioniscompetitionfromtwoangles.One,hedoesnote,C.C.said,foundrycompetition,noshortcuts,but hesays,accordingtothenews,manyofourcustomersareengagingwithourfoundrycompetitors.OneoftheminKoreaismaking hugeamountsofmoneythesedays.AnotheronemayhavetheUSGovernmentpolicysupport.Sothefirstpartofthisquestion, howdoweseethecompetitionandthreatofcustomersmovingtoourcompetitors,numberone?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Well,letmesaythat.Yes,oneofmycompetitorsinSouthKorea,theymakeahugeamountofmoney.AndI'mjealousaboutit.And thentheotheroneintheUS,theygottheverystrongUSGovernmentsupport.Wealsogotthegovernmentsupport,bytheway, althoughwedon'tannounceit.However,letmesharewithyou,aswesaid,thereisnoshortcut.

Whatdoesthatmean?Meaningthatinthissemiconductorindustry,youhavetogobacktofundamental.Governmentsarehereis welcome.Really,wealsoappreciatethat.Alotofmoney,ofcourse,that'snicetohave.Butthemostimportantthing,aswecontinue

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JULY16,2026/6:00AM,2330.TW-Q22026TaiwanSemiconductorManufacturingCoLtdEarnings

Call(Chinese,English) tosay,isthetechnology,manufacturing,andcustomertrust.Thesethreefundamentalsneverchangedformy30-some,40-years career.It'salwaysthemostimportantthing.Andthat’salwaysTSMC'ssecretrecipetowinthebusiness.

Sofromthecompetitionpointofview,choosingatechnology,rampingitup,it'snotbuyingmilkfrom7-Eleven.Well,I'musing that,I'mquotingthesentencefrommycustomeranyway.Itsaysthatyou'rechoosingakindoftechnologypartner,it'snoshortcut.

Youneedtounderstandthetechnology.Youneedtoreallyutilizeitusingthetestchipandthensomethingandworktogetherand thenpreparethecapacityandrampitup.That'swhatIsay,ittakesaboutfiveyears.

It'snotthattoday,youthinkthismilkisbetter,yougotothenextstore,it'sa7-Eleven.Youdon'tlikeit,yougotoanotherstore, no.Sothat'smyanswer.

Charlie,isagree.

CharlieChan-MorganStanley-Analyst

Yeah,sohopeyoucanbuymoremilksootherpeoplecannotgetit.

Thankyou.Yeah,soletmeswitchgearstoamoreexcitingside.Justsaid,youseeverystrongsignalsfromcustomers.Youalso reviseofthefull-yearrevenueguide.Areyoureadytorevisethefive-yearrevenueCAGR,especiallytheAIsemiCAGR?Iremember itwaslikehigh50%.Butherecomesthequestion,right,thatagenticAIdemandissostrong.CPUisagreatopportunityforTSMC.

Buthowaboutakindofmemorycostincrease,right?It'skindofabigchunkofthiskindofAICapEx.Sowhat'stheupdateofthe

AIsemiCAGRandhowshouldwelookatthecontentsoftheAIsemirelatedtoTSMC'sgrowth.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

So,Charlie,secondquestionisregardingtheAI-relateddemand.

Wedocontinuetoseeverystrongandpositivesignalsfromourcustomers,customers'customers.We'verevisedupourfullyear.

SohisquestionisaroundourAICAGRguidancethatwegaveinJanuaryonafive-yearperiodmid-tohigh-50sCAGRgrowth.He's wonderingifthere'sanyupdatetothat.

AgenticAI,anewopportunity,whatisourdefinitionofAIaccelerator,doweincludethat?AndwhatistheCAGR?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Charlie,ifyoureadourmessagethatwecontinuetoinvestmore,weincreasetheCapEx,withagoodreason.Soifyou'reasking abouttheAI'sCAGR,letmegiveyounotanumber,butit'sstrongerandstrongerandstronger.Sowedon'tgiveyouthenumber todaybecauseitcontinuestoincrease,sowedon'tknowhowtoanswerthisquestion.Butstrongerthanwhatwesaidbefore.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

ArthurLai,Macquarie.

ArthurLai-MacquarieResearchLtd-Analyst

First,congratsonthestrongexecutionandperformance.

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Call(Chinese,English)

Myquestionisregardingthenewadvancedpackagingtechnology.WenoticedthatespeciallytheEMIB-Tisgainingtraction,so howwouldTSMCreacttothisrequest?

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

SoArthur'sfirstquestionisonadvancedpackagingandcompetition,Iguessverysimplyput.EMIB-T,inhisview,isgainingtraction.

Sohowdoweseethecompetitivethreatfromthis?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Well,letmesaythatourpackagingcapacityissotightthatnowitlimitsmycustomers'growth.Sowewelcomethatadditional flexibilityinthemarketandsothatwillhelpTSMC'sfrontendwaferbusinessgrowth,whichisamajoritypartofTSMC'sbusiness.

Thetechnologylooksgood,accordingtothenewspaper,andwehopetheywillbesuccessfulandsothatsharesomeoftheloading fromTSMC.

Today,we'reworkingveryhardtoshortenthegapbetweenthedemandandthecapacity.Andso,asIsaid,wewelcome,havethese additionalalternativesandsotheflexibilityformycustomer.

ArthurLai-MacquarieResearchLtd-Analyst

Thankyou.Thatmakesalotofsense.

Soafollow-up.Sothisisanewtechnology,right?Soifyourclients,theyaskyoursupportandourvalueissupportourcustomer success,right,howTSMCwillhandlethisspecialrequest?

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Sorry,yourquestionis(multiplespeakers)--

ArthurLai-MacquarieResearchLtd-Analyst

Ifthesetechnologieshavesomesmallproblemandthenaskourcompanytosupport,sohowisourcompanyaccommodateit?

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

SoArthurquestion'sis,ifthereissomeissueswiththistechnology,dowehavea--orIdon'tknowhowtosayit,isthereanalternative plan?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Letmeanswerthequestion.

Ournumberoneistosupportourcustomers'success.Sowhateverthatwecanhelpourcustomers,thebusiness,wewilldoit.Does thatansweryourquestion?Okay.

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JULY16,2026/6:00AM,2330.TW-Q22026TaiwanSemiconductorManufacturingCoLtdEarnings

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JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Let'scomeback.We'lltakeonemorehereandthenwe'llgoonlineandthenbacktotheroom.

Yeah,Gokul.

GokulHariharan-JPMorganChase&Co-Analyst

Firstquestionon,maybesinceyou'renotwantingtogivealonger-termnumericalguidance,couldyoutalktousalittlebitabout thephilosophyofhowyouareexpandingcapacity?Obviously,customerfeedback,customers'customers'feedbackisimportant.

Doyoualsoconsidercompetitivepressure?Becauseasanoutrightmarketleader,havinglikeundersupplyforaverylongperiod oftimeisnotreallydesirableforTSMC,right?Youprobablywantamarketwhichismorebalanced.Sowhenyouthinkaboutyour capacityexpansion,likehowlongdoyouthinkittakestofulfillthedemandasyouseerightnow?That'sone.

Andsecond,chipsobviouslyisthecurrentshortage,butthereisalsoalotofdiscussionaboutdatacenterdelay,powercapacity beingavailable.Socouldyoualsosharesomethoughtsonhowyouarelayeringinthatkindofconcerns?Becauseyoudon'twant yourchipstobeavailable,buthavingtowaitforthatdatacenterdeploymenttohappen.Sojusttounderstandhowthatgoesinto yourplanningframeworkaswell.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Thankyou.SoGokul'sfirstquestionis,again,howdoweplanourcapacityanddeterminethecapacityexpansionplan.Certainly, wetakeintoconsiderationthedemand,multi-yeardemandfromourcustomersandcustomers'customers,butdowealsoconsider thecompetitivepressuresfromcompetitors'buildingcapacity?Isthatpartofourcalculustoexpandthecapacity,one?

Andthenalso,whataboutthingsoutsideofchipslikedatacenterdelaysorpower,thesetypeofdeals?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Gokul,that'sagoodquestion.

Definitely,everytimewhenwethinkaboutbusiness,weconsiderthecompetition.That'snumberone.Andthenwelookatwhere weareandthenwedecideabottom-upandthentop-downassessmentofthosedemand.Thosearethetypicalthings,Imean,in ourdailylife.Sowemakealotofjudgmentandthenwebemorecareful.Wetalktocustomersandcustomers'customers.Those aretheCSPs.Andthenwegetalltheirinputforthedemandandthenwemakeajudgment.NowrememberthatIbelieveevery customertellmethetruth,everyone.Youputallthetruthtogether,it'snotatruth.Sowehavetomakesomeofthejudgment.You knowwhatImean?Sinceyouarelaughing.Becauseallthecustomersareveryaggressive,right?That'stheCEO'sjob.CEOgotto beaggressive.SotheygivemethenumberoftheirdemandandIbelievetheytrytheirbesttotellmethetruth.SoIputalltogether, allthetruthtogetherisnotatruth.Markdownthatword.

Soyes,wedoaverycarefuljudgment.Mightnotbecorrect,butwedidcarefullyandbecausethisisabigmoney,right?Thisyear, wesayweincreasedthecapexfromUSD52billiontoUSD56billion,nowUSD60billiontoUSD64billion.Andyoubetthatwill continuetoincrease.It'sabigmoney,sowedoitcarefully.

Sowedidalltheassessmentandthatleadtoyoursecondquestion.Arewesurethatwedeliverthechipstoourcustomerandthey werenotputintoinventory?Soactually,wearecheckingtheAIdatacenters’progress,thebuilding,thelocation,thedemand,the racks.WecheckingallthattomakesurethatTSMC'schipswillnotbeputininventory.

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Thatansweryourquestion.

GokulHariharan-JPMorganChase&Co-Analyst

Yeah,that'sclear.SoC.C.Sodoyoustillbelieveevenendofnextyear,wearestillgoingtoberunningshortofsupplyevenwith thiselevatedcapacitybuild-outplans?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Youwantmetogiveyouaguarantee,right?Letmesaythat.

Ibelievefromthisdayonallthewaytoprobably2029,2030,thedemandisverystrong.Whetherinbetweenthere'sadipornot,

I'mnotverysure.ButthetrendissorobustthatIbelievewearewitnessingakindofanewindustry.Iwouldliketosaythenew industrycalledAIindustry,whichissocommoninourdailylifebecauseitisgoingtoaffectourautomotive,affectthehumanoid robot,andalsoimpacttoalltheindustry.Sobytheamountofmoneyweputin,Imean,includingalltheCSPs,thisisaloneisa veryimportantnewindustrytotheworld.Andsothedemandwillbethere.Andthefundamentalthingissemiconductorchipsand mostoftheminTSMC.

GokulHariharan-JPMorganChase&Co-Analyst

Mysecondquestionisonyourprofitability.SoCCyoujokedthatyouaredefinitelyjealousofmemorycompetitors’margins.Butit definitelyfeelslikeprofitability-wise,longer-termfoundry,especiallyleadingedgefoundry,shouldbehigherthanmemory,looking atnumberofcompetitorsoutthere.

Soasyouareinvestingforalotofyourcustomers,howisthatdiscussiongoing?Becauseyouarenolongerthemostprofitable semiconductormanufacturingcompanyatthispointintime.Soyouprobablyhavelesspressureintermsofpassingonyourvalue andcapturingyourvaluerightnow,comparedtomaybeoneyearback.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Okay,soGokul'ssecondquestionisonprofitabilityandpricingtoacertainextent.Ofcourse,someofthememorymakersare makingverygoodprofitabilityandmarginstoday,buthenotestheroleoffoundrycouldbeevenmorevalueinTSMC'sroleaswell.

Sowhatshouldbetherightwaytothinkaboutthelong-termprofitabilityforafoundry?Shoulditbebetter?AndthenIguessreally pricingintothis?Whattypeofpricingapproachdowewanttotake?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Yeah,Gokul,yourquestionisactuallysimple.WhatisthewaferpricingstrategyforTSMCandwhatkindofgrossmarginweshould have?Thehigher,thebetter,ofcourse.Butweareapartner,apartnermeaningthatIsaymanytimes,ourcustomergottobe successful.Idon'twanttosqueezethemoutfromthemarket.Andbesides,weareaverytrustablecompanywithourcustomers.

Sowedon'tsuddenlyincreaseourpricebywhichIliketohave4xor5x.Youcannotsurviveforthatkindoffor--foryourcustomer tosurviveforthatkindofpriceincrease.Soweearnourvalueandwemakesurethatourprofit,ourgrossmarginisenoughforour long-termsustainingexpansion,that'stothebenefitofmycustomersandTSMCalso,that'sourphilosophy.

Soyes,I'mreallyjealousaboutmemorycompany's86%grossmargin.86--68,I'llbehappyaboutthat.Allright.Anyway,soI answeredthequestion.Weareverytrustable.

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JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Operator,canwetakethenexttwoquestionsfromparticipantsontheline,please?

Operator

JimFontanelli,Arete.

JimFontanelli-AreteResearchLLC-Analyst

CouldIaskabouttheriskthatyouseearoundcustomerconcentration,asAIdemandcontinuestosignificantlyoutgrowotherend markets?Ithinkyourexposuretoyourtopfivecustomersisbecomingmeaningfullylargerthanatanypointinyourhistory.SoI'd justliketounderstandhowyouseethatrisk.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

SoJim'sfirstquestionisriskaroundcustomerconcentration.Wehavelargecustomersthataregettinglarger.Areweworriedthat wehavetoomanybigcustomersorthecustomerconcentration?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

No,that'snotourconcern.Besideswhatyousay,thecustomersaregrowingbiggerandbigger,weareveryhappyaboutit.And someofthecustomersaregrowingveryfast.Soit'snot,Jim,it'snotwhatyousaythatthebiggercustomerisgoingbiggerand bigger.No,Imean,there'salotofnewplayersintheAIindustry.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Doyouhaveasecondquestion?

JimFontanelli-AreteResearchLLC-Analyst

Yes.Sowe'reseeingyourdirectcustomersputcapitalintobothfinancing,investingandinvestinginAIdemand.Isthatsomething thatTSMCisconsidering?

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

So,Jim'ssecondquestion,heknowssomeofourcustomersarehelpingtoinvestintheircustomers.

Jim,ifIunderstandyourightcorrectly,you'reaskingifTSMC,ifthisisanapproachwewouldtaketoinvestinourcustomers.Is thatcorrect?Orfinancingandinvesting?

JimFontanelli-AreteResearchLLC-Analyst

Yeah,intheend-endcustomers,notyourdirectcustomers.

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JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Right,soincustomers'customersaswell.

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Toanswer,Jim,toansweryourquestiondirectly,everycompanyhasadifferentconsiderationandeverycompanyhasadifferent strategy.Sofar,no,TSMCdon'tdothiskindoffinancialarrangement,becauseofwethinkweareworkingwithcurrentcustomer, withthecurrentmodelsmoothlyandalsosuccessfully.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

(EventInstructions)

Operator

MehdiHosseini,SIG.

MehdiHosseini-SusquehannaFinancialGroupLLLP-EquityAnalyst

Twofrommyend.IwanttogobacktotheUSD100billioninvestmentintheUS.Isthereanywayyoucangiveussometimeline?Is itoverthenextthreeyears,fiveyears?HowshouldwethinkabouttheprogressionoftheseUSD100billioninvestmentintheUS?

AndIhaveafollow-up.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

SoMehdi'sfirstquestionisaroundtheannouncementtoday,additionalUSD100billioninvestmentintheUS.IntermsoftheCapEx, atimeframe,isitinthenextthreeyears,inthefiveyears,dowehaveanyscheduleortimeframetoshareaboutthisadditional

USD100billion?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Wedohaveaplan,butletmesharewithyouactuallytheprogressortheschedule,mostofthetimedependingonthemarket situationandourcustomers'demand.Soifyouaskmetogiveyouafirmschedule,no,wedon'thaveittoday,butwedohavea plan.Andwespeeditup,wetrytospeeditupasfastaspossible.

MehdiHosseini-SusquehannaFinancialGroupLLLP-EquityAnalyst

Okay,sothemessageisyou'reflexiblebutalsoyou'reexpeditingtheinvestmentinUS.Isthatcorrect?

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Well,IthinkC.C.said,we'retryingtomoveasfastaswecanbuteverythingisbasedonourcustomerneeds.

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C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Yeah,we'realsomovingthenewfabsandfacilitiesinTaiwanasfastaspossible.Andthesamething,wetrytobringupanewfab intheJapanasfastaspossiblebecause--thesituationtodayisthedemandandthesupply,thegapissobig,soweareworking veryhardtonarrowthegap.

MehdiHosseini-SusquehannaFinancialGroupLLLP-EquityAnalyst

AndIhaveafollow-up.Actually,IwanttodiveintothecomputepartofHPC.AndIwanttoaskyouaboutthenetworkingswitches.

Andinthatcontext,whenshouldweexpecttheCOUPEplatformtohaveamaterialcontributiontoyourtop-line?

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

SoMahdi’ssecondquestion,veryspecific.HewantstoknowforourCOUPEplatform.Whenwillithaveaverymeaningfulcontribution tothebusiness.

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Westartedtheproductionrightnow,anditwillberampedup.Astimegoesby,IthinktheAIdatacenterneedtolowerdownthe powerconsumptionandincreasethebandwidthofthecommunicationchannel.SoIbelievetheCOUPEwillcontinuetoincrease thedemandandthenwillbecomeafairlyimportanttechnologyinthenextfewyears.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

LauraChen,Citi.

LauraChen-Citigroup-Analyst

AndmyfirstquestionisalsoaboutverypromisingoutlookasTSMCraisedtheCapExandalsothegrowthoutlookforthisyear.And particularly,Ithink,C.C.,youmentionedabouttheagenticAIandtheCPUgrowthpotential.Butcanyougiveussomemoreupdate amongthatAI,differentkindofchipsbetweenGPUs,accelerators,orCPU,whatyouseethegrowthpotentialandyourvisibility?

Thankyou.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

SoLaura'sfirstquestionisaroundsortoftheoutlook.WeobviouslyraisedtheCapExandgrowthoutlookforthisyear.Shewants toknowwithintheAI,theoutlookforagenticAIandCPUsversusAIaccelerators,GPUs,etcetera.Howdoweseethesesegments.

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Laura,Idon'tthinkIcangiveyouaveryspecificnumber,butletmesharewithyou,allofthemareinTSMC,andthey'realsousing thesamekindofleading-edgetechnologies.We'reworkingwithourcustomerstoallocatethewafer,thesupplytobalancethe

CPU,GPU,XPU'sratio.

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LauraChen-Citigroup-Analyst

Okay,thankyou.Yeah,thatmakessense.

Andthenmysecondquestionisalsoabouttheadvancedpackaging.WeknowthatduringtheSymposium,TSMCpreviouslyalready announced14timesreticleCoWoSroadmaptoenablelargerAIpackaging.Butatthesametime,wealsonotedthatTSMC,maybe last month in Japan, you showed the substrate developments for CoWoS to enable some of the glass technology. So I'm just wonderingifyoucangiveusmoreliketechnologiesprogressupdateonthedifferentkindoftechnologyforglass-coreorglass substrateoraglasscarrier,what'stheprogressatTSMCrightnow?

Thankyou.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

SoLaura'ssecondquestionisonadvancedpackaging.Shenotes,aswesaid,weroadmaptoevenlargerthan14xreticlesizewith

CoWoS,butshealsowantstoknowthetechnologyprocessinnewerareaslikeglasssubstrates,glass-cores,whatistheprogress andstatus.

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Letmesaythattoday,themajorityisstillCoWoS,right?Andwearedevelopingthatalternative,trytolowerdownthecost.Andwe alsoworkwithsubstratevendorsothatourcustomercanhavetheirproductbeinthemarket.Theprogress,we'rebuildinga pipelinethatIannouncedafewquartersago,andittakesaboutanotheroneyeartobemature,sowecanputintotheproduction withourcustomer.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

BankofAmerica,HaasLiu.

HaasLiu-BofaSecurities-Analyst

Congratsongreatresults.

MyfirstquestionisregardingyourCapExandsales.YougaveprettysolidCapExoutlookforthisyearandalsosaidtheCapExoutlook inthenextcoupleofyearswillcontinuetobeprettysignificant.Andyoualsoraisedthisyearat40%-plus.Sowouldyoubeableto provideyournextcoupleofyearssalesgrowthoutlook,trytoquantifyit?

Andrelatedly,Ithinkalsoonthattopiciswhetheryoucanjusttrytobreakdownwhichpartofthedemandyouareseeingasthe keydriverforyoutoraiseyourCapExandalsoforthisyear'sdemand?Isitstillmostlydrivenbycloudcomputingoritisproliferating toedgecomputing?Ortosomeextent,isitalsorelatedtoyourequipmentsupplychainisraisingtheirpriceaswell?

Thankyou.

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JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Okay,that'sseveralquestionsinone.SoI'mgoingtotakethatasoneandahalfquestionsatleast.Butbasically,Haasisasking withtheCapExincreaseandtherevenueincreasethisyear,Ithinkhe'stryingtolookatintensity,buthewantstoknowwhatabout therevenueguidanceforthenextseveralyears.

Yes,I'llstop.

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Okay,letmeanswerthatquestion.Becauseoftherevenuecorrespondingtoourinvestment,right,becauseweknowweforecast ourdemandandthenwemakeanassessmentandthenwedotheCapEx.Nextfewyearsisgoingtobeaverygoodbusinessfor

TSMC.That'sallIcansay.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Andthentheotherpart,sowhat'sthekeydriver?IsitcloudAI?IsitedgeAI?Isitbecausetoolvendorsareincreasingtheprice?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

It'sallAIrelated,everything.

HaasLiu-BofaSecurities-Analyst

Yes,Ithinkitismoreonyourlong-termstrategybecause.AlotofpeoplehaveactuallybeenaskingaboutyourCapExandalso competitiononthefrontend.ButIwouldactuallysaythatifonthebackendcompetitionisrising,especiallycomingfromIntel

EMIB-T.Areyouworriedthatyourvalue-addforoverallfoundrybusinessacrossfrontendmanufacturingtothebackendpackaging business,thevalue-addcouldactuallybecannibalizedwithgrowingcompetition?

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Okay,thankyou.SoHaas'ssecondquestionisaroundthecompetitioninadvancedpackaging.Ifourcompetitorsareabletogain tractionorbusinesswiththingslikeEMIB-T,wouldthatbethegatewayoranentrywayintomorecompetitivethreatonthefrontend logicwaferside?Sodoesadvancedpackagingleadtofrontendwafer?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Letmeanswerthat.Thefrontendwaferbusinessandthebackendbusinessaretwodifferentthings,right?Iftheyarethesame, thenyoucanexpectASEbecomethefrontendcompetitoralso.It’stwodifferentthings.AndIalsosaythatsinceourcapacityin thebackendisstillinshortagemode,thegapisbigger.AndsoIwelcomethatthecompetitoroffersomeoftheflexibilitytomy customersothattheirfrontendwafercanbeputintothepackageandthathelpTSMC'sfrontendwaferbusiness.That'sourattitude.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Operator,let'stakeonemorefromtheonlineandthenwe'llwrapupwithbackinperson.

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Operator

RobertSanders,DeutscheBank.

RobertSanders-DeutscheBankAG-Analyst

Yourecentlystatedthathigh-NAtoolsaretooexpensive,butcouldyoupleasediscusshowyourcustomersareconsideringthe impactofdiestitchingchallengesfromasmallerfieldsizewithhigh-NA?Couldthatactuallyslowtheadoptionofhigh-NAevenif thetechimprovesorthetechgetsmoreproductive?

AndIhaveafollow-up,thanks.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Well,Rob'sfirstquestionisveryspecifictechnology.Aroundhigh-NAadoption,hewantstoknowthecustomer'sfeedbackonthe challengeswithdiestitching.Isthisanimpedimentorbarriertohigh-NAadoptioninourview?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

You've got a very detailed understanding of the high-NA. Today, the field size is only one-half and we put that one into our considerationofthemanufacturingcostandsomething.Again,letmeanswerthisquestionquickly.Whetherweuseahigh-NAor not,actually,one,high-NAisaverygoodtool.Let'sassumethat,allright.Weunderstandit'sveryhighperformance.ButthenTSMC makeitclearthatweworkwithASMLandtrytomakeitmoresuitableformanufacturingintermsofthecostandintermsofthe maturity.Sowealwaysconsiderthattechnology,maturity,andthecostinwhetherweuseitornot.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Thankyou,C.C.Doyouhaveasecondquestion,Rob?

RobertSanders-DeutscheBankAG-Analyst

Yeah,justaquickfollow-up.

Ithinkallofusonthiscallareassumingthattheunconstraineddemandfor3nanometerandbelowissortof30%to50%above yourabilitytosupply.Isitinfactmuchlargerthan30%to50%above?Becauseitfeelslikeitmightbebasedonwhatyou'resaying, becauseIthinkallofusareassumingit'ssortofsolvableoverthenextthree,fouryears,butitsoundslikethenumbercouldbe muchlarger.

Thanks.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Well,thoseareyournumbers,butRobertisaskingthedemandinexcessofsupply,isit30%to50%?Isitsomethingevenlarger?

Dowehaveanumbertoshare?

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C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

No,wedon'thaveanumbertosharebecauseof--letmesaythatthegapisverybig.Biggerthan…Sorry,Idon'twanttomakea commentonthememory,butaverybiggap.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

EvelynYu,Goldman.

EvelynYu-GoldmanSachsGroupInc-Analyst

Wementionedalotonthatwe'regoingtostepupourcapacitygrowth.I'mjusttryingtoquantifyherebecauseInoticedthatduring yourSymposiumthatyouactuallymentionedabout2-nanometerfamilycapacitygrowthwillbegrowingataround70%CAGRfrom

'26to'28andN3+N5togrowby25%CAGRfrom2022to'27.SoIwasjustwondering,arethosenumbersstillrightassumptions today?Areweseeingactuallyanychangesoverthepastquarterandhowshouldwecomparewiththenon-supportingdemand outthere?

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Okay.SoEvelyn'sfirstquestionisaroundcapacitygrowth.Sheknowsduringthesymposiumwedidsharesomefive-yearCAGR growthnumbersfor2nanometer,around70%CAGR,andthen3nanometeraround,Iguess,Ican'tremembertheexact,but25%.

Soarethosenumbersstillthesame,orhasitchangednowthatourCapExandstuff?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

DidwesaythatinTechnologySymposium?Oh,weshowthechart.Okay,nowisbigger.That'sallIsay.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Doyouhaveasecondquestion.

EvelynYu-GoldmanSachsGroupInc-Analyst

Okay,thankyou.Verygooddirection.

Allright,myotherquestiontouchedbasedontheadvancedpackagingside.Becauseyoualwaysbundletheadvancedpackaging

CapExtogetherwithtesting,mask-making,andothers,that'saround10%to20%oftotalCapEx.AndsoonethingI'mtryingto figureouthereisthathowmuchofthatactuallygoesthroughadvancedpackagingalone?

Andbecausegiventhatadvancedpackagingiscapitalintensive,lesscapitalintensiveversusfrontend,sohowshouldwethink aboutagapbetweenitspricingrevenueshareanditsCapExshareoverthenextfewyears?Andwell,Ithinkfinallyisthatasit becomes more important, how should we think of maybe you should consider bringing it out as a separate CapEx item going forward?

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JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Okay,soEvelyn'squestionisaroundadvancedpackaging.ShewantstoknowwhenweguidefortheCapEx?Ofcourse,weguide itinabucketofpackaging,testing,mask-makingandotherstogether.Whydowenotseparateoutjustintopackagingspecifically?

Hersuggestionisweshould,butIthinkmoresothat'spartofit,numberone,theCapExbreakdown.

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Evelyn,letmesaythatwetryveryhardtomakesurethatourCapExnumberiscorrect,butwiththeflexibilitybetweenthefrontend andthebackend.Sometimeswehaveabottleneck,soweputmoremoneytobuythebottlenecktools.Andsometimesit'sinthe frontend, sometimes it's in the backend. But in the ballpark, the percentage is just like a window shared with everybody. For long-term,Imean,that'sabackendisabout10to20%,that'sabigrange.

Anyway,sothatwe--allIcansayisthatstill10to20%.BecauseasIsaid,actually,I'mveryhonesttotellyouthatastimegoesby, someofthecustomers'productsneedmoretester.Youcannotbelievethat.Imean,sothetesterinshortage,sowehavetoput moreCapExinthetesterorinthepackagingorinotherareas.Sothat'swhywecannotbeveryspecificallysaywhichareaweput howmuchoftheCapEx.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

That'stoospecific.

FelixPan,KGI.

FelixPan-KGISecuritiesCoLtd-Analyst

SomyfirstquestionisregardingtotheCapExrevision.Sofromyeartodate,soTSMCraisedtheCapExguidancebyalmostUSD10 billion.Socanyougivemesomecolor,whereistheupsidefrom,howyouguysseethedifferencefromsixmonthsago.Isthatfrom likeCPUaccelerator,ormemorycompanionchip,orbackendCoWoSexpansion.Justtheupside,howweseethingsdifferently fromsixmonthsago?

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

SoFelixisnoting,inJanuary,weguidedforUSD52billiontoUSD56billion.InApril,wesaidclosertoUSD56billion,nowUSD60 billiontoUSD64billion.SowehaveincreasedtheCapExguidance.Whatisdrivingthis?IsitagenticAIonly?Isitpackaging?IsitAI accelerator?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Well,simplyput,themostimportantreasonisbecausethatdemandcontinuestoincrease.Andwefeelthepressurefromthe customertodriveTSMC,notdrive,actuallytocooperatewithTSMCforthecapacityincrease.That'soneofthemajorreasons.

Thesecondreasonisinflation.Nowwebuythetoolswithinflationprice,okay?YouunderstandwhatIsay.

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FelixPan-KGISecuritiesCoLtd-Analyst

Somysecondquestionisaboutthematurenode.SopeoplealwaysfocusonAIleadingnodes,butitseemslikematurenodesalso seeingaverystrongdemandrecoveryandalsosomesupplyissueaswell.Sohowdoyouguysseethedemand-supplydynamic andpricingforthematurenode?

Becauseapparently,there'ssomeimpactfromtheAIcrowding-outeffect,butmaturenodestilllargelydependsontheconsumer demand.Soconsumerdemandisstillweak.Sohowyouguysseethedemand-supplydynamicforthematurenode?

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Thankyou.SoFelix'ssecondquestionisonmaturenode.

Henotesthere'slotsoftalkthatmaturenodesareseeingastrongdemandrecoveryandthesupplyisverytight.Somaturenode pricingisveryfavorableorstrong.Sohewantstoknowhowdoweseethematurenodesupply-demandsituation?

C.C.Wei-TaiwanSemiconductorManufacturingCoLtd-ChairmanandChiefExecutiveOfficer

Actually,thematurenodecoveralotofdifferentsegments.OnlytheonewithrelatedtoAIisinshortage,whichisthemostimportant oneisthenumberoneispowermanagementIC,becausealltheAIdatacenterneedalotofpowermanagement.Andthosearethe maturenodetechnology,like0.18micron,90nanometer,orsomethinglikethat.Thoseareinshortage,definitely.Andalso,the sensorportion,becauseyouneedalotofsensorstodetecttheenvironmentalinformationandputitintotheAIdatacenterto analyzeit.

Otherthanthat,otherarea,justlikeyoupointedout,theconsumerproductisnotinahighdemand,andsoothersegmentisnot insostrongdemand.AndasIpointedoutinmystatement,otherarea,no,it'snotsomuchof,say,inalotofshortage,notatall.

JeffSu-TaiwanSemiconductorManufacturingCoLtd-DirectorofInvestorRelations

Thankyou.Thankyou,C.C.Thankyou,Wendell.Thankyou,everyone.

ThisdoesconcludeourQ&Asession.Beforeweconcludetoday'sconference,pleasebeadvisedthatthereplayoftheconference willbeaccessiblewithin30minutesfromnow.Thetranscriptwillbecomeavailable24hoursfromnow,andbotharegoingtobe availablethroughourwebsite,again,atwww.tsmc.com.

Ifsomeofyouarenotabletoaskyourquestion,pleasefeelfreetoreachouttoTSMCIR,andwewillfollow-upwithyou.Sothank you,everyoneforjoiningustoday.Wehopeeveryonecontinuestostaywell.Haveagoodsummer,andwehopeyou'lljoinusagain nextquarter.

Thankyou,andhaveagoodday.

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