A：The financial highlights for the first quarter of 2026 include a 8.4% sequential revenue increase in N.T. supported by strong demand for leading edge process technologies, a gross margin of 66.2%, an operating margin of 58.1%, and an earnings per share (EPS) of 22.0 T and a return on equity (ROE) of 40.5%.

A：For the first quarter, the revenue breakdown by process technology is as follows: 3 nanometer contributed 25% of wafer revenue, 5 nanometer contributed 36%, and 7 nanometer contributed 13%. Advanced technologies, defined as 7 nanometers and below, accounted for 74% of wafer revenue.

A：Revenue distribution across different platforms is as follows: HPC (High Performance Computing) increased 20% to account for 61% of first quarter revenue, Smartphones decreased 11% to account for 26%, IOT (Internet of Things) increased 12% to account for 6%, automotive decreased 7% to account for 4%, and DC/EM (Data Center/Enterprise) increased 28% to account for 1%.

A：At the end of the first quarter, the company had cash and marketable securities of 3.4 trillion NT (New Taiwan Dollars) or $106 billion US dollars, and current liabilities increased by 256 billion NT over the quarter.

A：The projected financial guidance for the second quarter is a revenue between $39.0 billion and $40.2 billion, a gross margin between 65.5% and 67.5%, an operating margin between 56.5% and 58.5%, and a tax rate of around 20%. The company also expects to distribute a second quarter cash dividend of $13.0 billion.

A：Profitability in the second half of the year may be impacted by the initial ramp up of the two nanometer technology, expected to dilute the growth margin by 2 to 3%, and the forecasted gross margin dilution from the ramp up of overseas fabs in the next several years, which may widen to 3 to 4% in the latter stages. Additionally, the potential impact from increased prices of certain chemicals and gases due to the recent situation in the middle east is also a risk.

A：TSMC's strategy for materials and energy supply involves continuously developing multi-source supply solutions, building a diversified global supplier base, improving the local supply chain for specialty chemicals and gases, maintaining safety stock inventory, and working closely with suppliers to strengthen the resilience and sustainability of the supply chain. In terms of energy, TSMC is working with local power providers and the government to ensure a stable and sufficient energy supply, including securing LNG supply through at least May and working on further diversifying energy sources and implementing backup plans.

A：The expectation for the 2026 capital budget is towards the high end of the range of between $52 and $56 billion US dollars, indicating a higher level of investment to support customers' growth and future growth opportunities.

A：The demand outlook for the near term is supported by continued strong demand for leading edge process technologies. While the company is mindful of the impact of rising component prices and macroeconomic uncertainties, particularly in consumer and price-sensitive markets, the robust demand for semiconductors, especially in AI-related applications, continues to provide a strong signal for future demand. Cloud service providers remain a key customer group with a very strong outlook, and the company is confident in the multi-year growth trend in AI and the fundamental demand for semiconductors.

A：The expectation is for full year 2026 revenue to grow by above thirty percent in US dollar terms.

A：The plan is to prioritize land in Taiwan for the fast ramp of the newest node, due to the need for tight integration with R&D operations.

A：High volume manufacturing is scheduled to begin in the fourth quarter of 2025 with good yield, and the demand is driven by smartphone and HPCAI applications.

A：The TSMC is executing a global capacity plan to support the robust multi-year pipeline of demand for chips, focusing on expanding capacity for advanced technologies.

A：A new three nanometer node is being added to the gigabyte cluster in Taiwan Science Park, with production scheduled for the first half of 2027.

A：The second flag in Arizona will utilize 3 nanometer technologies with structure already complete and volume production beginning in the second half of 2022. In Japan, the plan is to utilize 3 nanometer technology in their second flag with an evolving production schedule in 2028.

A：The five nanometer tool is being converted to support the capacity expansion for the 3 nanometer node and to drive greater productivity across all manufacturing locations.

A：TSMC's strategy is to prioritize providing customers with advanced technologies and necessary capacity to unleash their innovations without picking or choosing among customers, even with tight capacity.

A：The mature node strategy will focus on high yield capacity for specialized technologies. TSMC is increasing capacity in JASM 5 in Japan for simultaneous sensor application and ESSMC Germany for automotive and industrial use. The factory that is 6 inches 5 and 55 will focus on guarding line choice and using the available space to optimize support for leading edge applications.

A：TSMC's second-generation 14nm node transistor structure, called 41, will deliver another node step form with performance and power benefits, targeting high-performance and energy-efficient computing. Production is scheduled for 2028, and the technology will further extend TSMC's technology leadership and capture growth opportunities.

A：The robust demand for TSMC's chips is driven by HPC and AI applications.

A：The m3 gross margin is expected to reach and cross the corporate gross margin level in the second half of this year. After the fully depreciation of the equipment, the margins are expected to be very high.

A：The revision to the capex guidance is due to very robust demand, especially from HPC and AI applications. TSMC has gained incremental confidence through robust demand and efforts to speed up equipment delivery. The capex is revised to the high end of the guidance range of 52 to 56 billion US dollars for the year.

A：The strategy is to speed up the build-up of clean room and purchasing tools, working with construction and equipment suppliers to pull forward their forecasters schedule due to robust demand.

A：It will take two to three years to build a new fabrication facility, and even with the current schedule, it is believed that the supply will not meet the demand until 2027. However, due to the time it takes to build and ramp up a new fabrication facility, the supply is expected to remain tight, hence the plan to open three new fabs.

A：The company views competitors as formidable and does not believe there are any shortcuts. The fundamental rules of the industry remain unchanged, requiring technology leadership, manufacturing excellence, and customer trust. They are working on how to capture every piece of the business that they can.

A：The capacity ramp-up is seen as a crucial factor in winning back customers who have been lost due to supply constraints. The company is working hard to ensure they can meet customer demands as they build a new fabrication facility.

A：The company acknowledges the competitive threat from larger radical sizes but is confident in their ability to supply large wafer sizes and work with customers on co-pass solutions. They are developing large vertical size packaging technologies and are committed to ensuring they can support customers with a reasonable capacity. They do not anticipate concerns from competition and are working to meet all customer demands.

A：The company does not provide specific numbers for long-term capital expenditure but emphasizes the strong conviction in the AI trend and indicates that the capital expenditure in the next few years will be significantly higher than in the past three years, which had a total of $111 billion with a capex of $56 billion already this year.

A：The expected revenue growth will outpace the capex growth in the coming few years, and there is no expectation for a sudden surge in capital intensity.

A：The company will not accelerate spending merely due to competitive threats or tight supply conditions; capacity planning and capital expenditure are based on customer demand.

A：The exact upside potential for the top line in 2025 is not provided, but it is mentioned that the memory price hike has impacted the sensitive end market, particularly in PC and smartphone markets. However, the company continues to see strength in the smartphone segment, which is beneficial for TSMC.

A：The company has revised up its long-term margin targets and ROE targets, with an expectation of gross margins being higher than 56% through the cycle and ROE of high twenties through the cycle from 2024 to 2029. The strong demand and growth margins have led to these optimistic forecasts for the business.

A：The Arizona site is strategically important for the company's capacity expansion, and a large second piece of land has been acquired to build more fabs to meet multi-year demand from D, D, HUS customers. The company is confident in its ability to make significant progress in Arizona, improve cost structures, and match the economics of Taiwanese production wafers in the mid to long term.

A：Investors should not expect TSMC to raise profitability targets significantly as it aims to maintain its partnership with customers, ensuring their success in the market while also growing its own capacity. TSMC does not adjust pricing dramatically and prefers to ensure a successful partnership with customers, which may result in higher profitability over time if customers succeed.

A：TSMC forecasts AI-related revenue growth and incorporates metrics such as total consumption growth into its assumptions. The strong performance in the first quarter has led to accelerated consumption expectations. While the exact impact of AI on future revenue growth is not quantified, the company acknowledges the fast-paced development and incorporates it into their planning and forecasting processes.

A：The updated long-term guidance on AI revenue is not explicitly provided in the transcript; however, it is mentioned that there has been strong demand for AI accelerators and that the guidance is towards the higher end of the previously stated range.

A：TSMC plans to work with customers to plan front-end wafer capacity and collaborate on advanced packaging needs. TSMC aims to support customer demand for advanced packaging, including working with all set partners to potentially increase capacity. The company has a priority to support customers and is trying hard to increase its own capacity.

A：TSMC faces technical challenges such as warping in advanced packaging, but has accumulated experience and continues to increase the die size while meeting all challenges. TSMC has confidence in its technical engineering capabilities and is working with customers to solve issues. However, specific mention of introducing SOIC or similar technologies is not directly addressed in the transcript.

A：TSMC currently does not include CPUs in its AI revenue definition as it is unable to identify which CPUs are used in AI data centers. The company is not providing historical data with CPUs included nor giving an updated AI revenue growth capital projection to 2029, as it might consider including CPU in the future but does not have a clear position at the moment.

A：TSMC does not typically comment on specific customer products or business wins. However, it is mentioned that TSMC is working with its customer for the next generations of LPU products and is confident in its technology position. There is an indication that TSMC is striving to capture every piece of business, including LPU business that might have moved to competitors.