Q1 FY2025 Earnings Call
TSM · Preprocessing Report
2025-04-17
Quality
100%
114
Turns
12
Speakers
4
Sections
8
Exchanges
654
Claims

Entities by group 45

chip foundry 1
TSMCcompany
sell-side analysts 8
Jeff SupersonGokul HariharanpersonBrett SimpsonpersonCharlie ChanpersonLaura ChenpersonBruce LupersonCharles ShipersonKrish Sankarperson
company executives 1
C. C. Weiperson
semiconductor process technology 5
N2technologyN2PtechnologyN3EtechnologyN3technologyN4technology
advanced packaging 2
CoWoStechnologyCoWoS-Stechnology
process node 3
A16technology3-nanometertechnology2-nanometertechnology
AI accelerators 1
H20product
artificial intelligence 1
AItechnology
high performance computing 1
HPCtechnology
chip packaging technology 2
SoICtechnologyPLPtechnology
foundry services 1
Foundry 2.0technology
customers 2
NVIDIAcompanyQualcommcompany
chip designers 2
AMDcompanyBroadcomcompany
connected devices 1
IoTtechnology
custom design services 1
DCEtechnology
market research firms 1
IDCcompany
ai models 1
DeepSeektechnology
wireless connectivity 1
5Gtechnology
government agencies 1
European Commissioncompany
power delivery technology 1
SPRtechnology
consumer electronics 1
Applecompany
semiconductor manufacturing 1
JASMcompany
Ungrouped 6
Wendell HuangpersonUnited StatesotherSunny LinpersonTWDotherDresdenotherKaohsiung Science Parksother
REPORTING 72PROJECTING 81POSITIONING 166EXPLANATORY 40ANALYST 101

Topics 100

fab×47capacity×33revenue×25tariff×25gross margin×23cowos×23process node×15expansion×14ai×13demand×12packaging×12customer×10r&d×10pricing×10research×8dividend×7wafer×7guidance×6foundry×6investment×6

Themes 270

arizona expansion×24u.s.×21overseas×16demand×14advanced×9capacity expansion×9second quarter×7ai×7semiconductor×7quarterly×5full-year guidance×4gross×4industry growth×4customer demand×4second-half×4production timing×4capital allocation×4capital return×4growth outlook×3construction×3volume production×3expansion×3dilution×3widening×3geographic flexibility×3fair treatment×3non-china demand×3sequential change×2first quarter×2technology leadership×22025×2cash payout policy×23-nanometer and 5-nanometer×2policy×2tariff impact×2planning×2government support×2japan expansion×22-nanometer demand×2n2 process node×2news clarification×2capacity planning×22026 outlook×2supply-demand balance×2question×2geopolitical×2long-term planning×2behavior×2negotiations×2consumer demand×2tariff pull-in×2growth guidance×2unchanged×2manufacturing support×2node development×2customer value×2tariff-related×2follow-up×2japan contribution×2sequential decline×1smartphone seasonality×1earthquake recovery×1expense ratio×13-nanometer revenue mix×15-nanometer revenue mix×17-nanometer revenue mix×1platform mix×1hpc mix×1smartphone mix×1iot mix×1automotive mix×1dce×1details×1marketable securities×1current liabilities increase×1accrued liabilities and income tax payables×1turnover days×1days outstanding×1capex details×1from operations×1spending×1cash dividend×1bond issuance×1quarter-end balance×1completed×1current quarter×1sequential and year-over-year growth×1retained earnings accrual×1third and fourth quarter outlook×1financial presentation concluded×1arizona scale×1manufacturing leadership and scale×1long-term gross×1historical growth correlation×1allocation to advanced process technologies×1specialty technologies×1profitability and shareholder returns×1near-term outlook×1lunar new year discussion×1taiwan magnitude 6.4×1scrap after earthquake×1recovery and resilience×1holiday recognition×1earthquake disruption×1first-quarter results×1seasonality×1ai-related×1recent issue×1tariff uncertainty×1competitive positioning×1revenue growth×1efficiency and development×1leading-edge adoption×15g ai hpc tailwind×1customer collaboration×1market demand planning×1shareholder value×1high-volume production×1yield×1process technology×1new advanced facilities in arizona×1arizona ai supply chain×1supporting smartphone ai and hpc demand×1joint venture talks×1arizona allocation×1success enablement×1kumamoto yield×1germany support×1dresden buildout×12-nanometer expansion×1capacity provider×1global footprint×1n2 status and a16 introduction×1energy-efficient computing×12-nanometer adoption×1application mix×1performance improvement×1power efficiency×1process node improvement×1process node introduction×1n2p process node×1performance and power benefits×1separate offering×1speed improvement versus n2p×1power improvement versus n2p×1density gain versus n2p×1hpc suitability×1volume ramp×1future growth×1capacity outlook×1order cuts×1supply demand×1rumors×1fully loaded×1earnings call follow-up×1supply constraint×1customer pass-through×1profitability guidance×1duration×1permit approval×12-nanometer production in arizona×1arizona manufacturing×1capital-intensive business×1sustainable return×1pricing strategy×1china h20×1h20 ban concerns×1business impact×1full-year outlook×1h20 impact×1utilization buffer×1market speculation×1monitoring×1non-u.s. expansion×1mature-node underutilization×1relocation from taiwan to japan or europe×1mature-node expansion in oversupply×1mature-node expansion in europe and japan×17-nanometer underutilization×1slower expansion in europe and japan×1no slowdown×1scheduled execution×1specialty demand×1free-form market×1japan and germany plans×1tariff influence×1taiwan and semiconductor exposure×1u.s.-taiwan trade talks×1private ownership×1negotiation stance×1exemptions×1government policy responsibility×1government policy involvement×1strong qoq×1underlying outlook×1consumer tech impact×1outlook×1customer pull-in×1pooling and tariff-related behavior×1assumption rationale×1risk×1real×1leading-edge technology in the u.s.×1context×1equal incentives×1zero or equal support×1resilience×1r&d focus×1arizona center purpose×1technology ramp×1stability×1operations improvement×1center evolution×1arizona independence×1test funding and cooperation×1arizona r&d center×1arizona center scale×1future expansion×1arizona phase 4 construction×1arizona phase 4 ramp timing×1customer strength×1arizona second fab timing×1arizona third fab constraints×1arizona timeline×1price assumption×1arizona pricing impact×1margin dilution×1wafer pricing×1margin linkage×1major customer progress×1value discussions×1annual outlook×1accelerated ai×190-day pause×1customer pull-ins ahead of september quarter×1conditions×1supply constraints×1growth driven by advanced-node and hpc demand×1valuation discount×1connection check×1n3 migration×1new technologies start in taiwan×1arizona investment×1broad×1design shift×1n3 adoption×1co-packaged optics and panel-level×1volume mix×1panel-level development×1feasibility stage×1ramp in taiwan first×1taiwan-arizona allocation×1arizona n2 mix×1arizona fab outlook×1geographic allocation×1arizona advanced nodes×1leading-node mix×1process mix in arizona fabs×1future arizona plans×1facing strong conditions amid uncertainty×1n2 expansion plans×1n2 wafer progression×1uncertainty and risk×1next earnings call×1customer count×1process node comparison×1japan update×1japan capacity×1japan installed×1capacity and revenue contribution×1

Key Metrics 71

capacity×33gross margin×25revenue×24demand×15capital expenditure×5revenue growth×5growth×4investment×4volume production×4revenue guidance×4headcount×4wafer demand×4production×3dividend×3tax rate×3capital budget×3orders×3price×3capacity utilization×3production start date×3operating margin×2capex×2yield×2tapeout×2speed×2power×2supply×2dilution×2wafer price×2customer pull-ins×2tape-out count×2operating expenses×1eps×1roe×1cash and marketable securities×1current liabilities×1accrued liabilities×1accounts receivable turnover days×1inventory×1cash from operations×1debt issuance×1cash balance×1capital expenditures×1tax×1costs×1cash dividend per share×1magnitude×1wafers×1cagr×1production schedule×1chip density×1ramp profile×1density×1pricing×1revenue growth outlook×1utilization×1equipment×1tariff×1margin×1shipment volume×1guidance×1wafer supply×1shareholder returns×1cash position×1cash dividend×1share buyback×1volume×1fab count×1process node×1capacity plans×1revenue visibility×1

Entities 878

TSMC×409C. C. Wei×109Wendell Huang×72Jeff Su×44Gokul Hariharan×27CoWoS×24United States×19N2×17Brett Simpson×15Charlie Chan×14Laura Chen×14Bruce Lu×13Sunny Lin×13A16×11H20×9AI×8N2P×8HPC×5Charles Shi×5Krish Sankar×5Foundry 2.0×4TWD×3N3E×3N3×3SoIC×3PLP×2IoT×1DCE×1IDC×1DeepSeek×15G×1N4×13-nanometer×1European Commission×1Dresden×1Kaohsiung Science Parks×1SPR×1Apple×1NVIDIA×1AMD×1Qualcomm×1Broadcom×12-nanometer×1CoWoS-S×1JASM×1

Business Segments 26

Wafer Fabrication×17Foundry×4Advanced Packaging×2Packaging, Testing And Other×2High Performance Computing×1

Sectors 31

artificial intelligence×14semiconductor foundry×5smartphone×3high performance computing×3semiconductor manufacturing×2advanced packaging×1semiconductor testing×1data center×1cloud computing×1

Regions 161

Arizona×66U.S.×35Taiwan×18Japan×13China×9United States×5Kumamoto×4Europe×4Germany×3January 21×1global×1Hsinchu×1Kaohsiung×1

Metadata Distributions

Sentiment
positive 109negative 43neutral 308
Temporality
backward 64forward 137current 259
Certainty
definitive 90confident 119moderate 122tentative 127speculative 2
Magnitude
major 72moderate 268minor 120
Direction
improvement 29decline 13mixed 5none 413
Time Horizon
immediate 59near_term 177medium_term 72long_term 29unspecified 123
Verifiability
quantitative 114event 42qualitative 304
Analyst Intent
probing 39challenging 5confirming 12seeking_detail 42seeking_guidance 3

Speakers

Executives
CWC. C. WeiCEOWHWendell HuangCFO
Analysts
BSBrett SimpsonanalystBLBruce LuanalystCSCharles ShianalystCCCharlie ChananalystGHGokul HariharananalystLCLaura ChenanalystKSKrish SankaranalystSLSunny Linanalyst
Other
JSJeff SuirOPOperatoroperator

Sections

TypeLabelSpeaker
preamblePreambleJeff Su
prepared_remarksPrepared RemarksC. C. Wei, Wendell Huang, Jeff Su
qa_sessionQ&A Session—
closing_remarksClosing RemarksJeff Su

Q&A Exchanges 8

#AnalystFirmTurns
1
GHGokul Hariharan
JPMorgan16
2
BLBruce Lu
Goldman Sachs12
3
CCCharlie Chan
Morgan Stanley18
4
CSCharles Shi
Needham12
5
SLSunny Lin
UBS16
6
BSBrett Simpson
Arete12
7
LCLaura Chen
Citi11
8
KSKrish Sankar
Cowen12

Claim Taxonomy 460

REPORTING72
resultFinancial outcome for a completed period43
metricNon-financial quantitative fact10
operationalDiscrete completed event19
PROJECTING81
guidanceQuantitative expectation with number + time36
commitmentPromise with binary verifiable outcome37
targetLong-term aspirational quantitative goal8
POSITIONING166
strategyPriority, direction, or initiative132
competitiveCompany's position or advantages5
opportunityMarket condition framed as growth driver11
riskHeadwind, constraint, or uncertainty18
EXPLANATORY40
attributionWhy a specific outcome happened3
contextNon-company macro/industry fact37
FRAMING0
thesisFalsifiable belief about how the world works0
ANALYST101
questionInterrogative seeking information63
observationRestates a fact or data point30
concernFlags a risk or challenge3
estimateAnalyst's own projection or calculation2
sentimentOpinion, praise, or critique3

Transcript

Preamble
JS
Jeff SuirTSMC
Good afternoon, everyone, and welcome to TSMC's First Quarter 2025 Earnings Conference Call. This is Jeff Su, TSMC's Director of Investor Relations and your host for today. TSMC is holding our earnings conference call via live audio webcast through the Company's website at www.tsmc.com, where you can also download the earnings release materials. If you are joining us through the conference call, your dial-in lines are in listen-only mode.
The format for today's event will be as follows: First, TSMC's Senior Vice President and CFO, Mr. Wendell Huang, will summarize our operations in the fist quarter 2025, followed by our guidance for the second quarter 2025. Afterwards, Mr. Huang and TSMC's Chairman and CEO, Dr. C.C. Wei, will jointly provide the Company's key messages.
Then we will open the line for questions and answers. As usual, I would like to remind everybody that today's discussions may contain forward-looking statements that are subject to significant risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements. Please refer to the safe harbor notice that appears in our press release. And now, I would like to turn the call over to TSMC's CFO, Mr. Wendell Huang for the summary of operations and the current quarter guidance.
Prepared Remarks
WH
Wendell HuangCFOTSMC
Thank you, Jeff. Good afternoon, everyone. Thank you for joining us today.
My presentation will start with financial highlights for the first quarter 2025. After that, I will provide the guidance for the second quarter of 2025. First quarter revenue decreased 3.4% sequentially in NT dollar or 5.1% in U.S. dollars as our business was impacted by smartphone seasonality, partially offset by continued growth in AI-related demand. In spite of the January 21 earthquake and several aftershocks, we work diligently to recover much of the lost production. Thus, our revenue in the first quarter was slightly above the midpoint of our guidance. Gross margin decreased 0.2 percentage points sequentially to 58.8%, primarily due to the earthquake impact as well as the start of overseas dilution, partially offset by the cost improvement efforts. Total operating expenses accounted for 10.2% of net revenue. Operating margin decreased 0.5 percentage points sequentially to 48.5%. Overall, our first quarter EPS was TWD13.94 and ROE was 32.7%.
Now let's move on to revenue by technology. 3-nanometer process technology contributed 22% of wafer revenue in the first quarter, while 5-nanometer and 7-nanometer accounted for 36% and 15%, respectively. Advanced technologies, defined as 7-nanometer and below, accounted for 73% of wafer revenue. Moving on to revenue contribution by platform.
HPC increased 7% quarter-over-quarter to account for 59% of our first quarter revenue. Smartphone decreased 22% to account for 28%. IoT decreased 9% to account for 5%. Automotive increased 14% and accounted for 5% and DCE increased 8% to account for 1%. Moving on to the balance sheet.
We ended the first quarter with cash and marketable securities of TWD2.7 trillion or US$81 billion. On the liability side, current liabilities increased by TWD135 billion quarter-over-quarter, mainly due to the increase of TWD111 billion in accrued liabilities and others. The increase in accrued liabilities and others was mainly due to the accrual of income tax payables. On financial ratios, accounts receivable turnover days increased one day to 28 days. Days of inventory increased three days to 83 days, primarily due to the ramping of new overseas fabs. Regarding cash flow and CapEx.
During the first quarter, we generated about TWD626 billion in cash from operations, spent TWD331 billion in CapEx and distributed TWD104 billion for second quarter 2024 cash dividend. In addition, we raised TWD16 billion in cash from bond issuances. Overall, our cash balance increased TWD267 billion to TWD2.4 trillion at the end of the quarter. In U.S. dollar terms, our first quarter capital expenditures totaled 10.06 billion. I finished my financial summary.
Now let's turn to our current quarter guidance. Based on the current business outlook, we expect our second quarter revenue to be between US$28.4 billion and US$29.2 billion, which represents a 13% sequential increase or a 38% year-over-year increase at the midpoint. Based on the exchange rate assumption of US$1 to TWD32.5, gross margin is expected to be between 57% and 59%, operating margin between 47% and 49%. Also, in the second quarter, we will need to accrue the tax on the undistributed retained earnings. As a result, our second quarter tax rate will be around 20%. The tax rate will then fall back to 14% to 15% level in the third and fourth quarter, and the full-year tax rate will be between 16% and 17%. This concludes my financial presentation. Now let me turn to our key messages.
I will start by talking about our first quarter 2025 and second quarter of 2025 profitability. Compared to fourth quarter, our first quarter gross margin slightly decreased by 20 basis points sequentially to 58.8%. This was primarily due to 60 basis points impact from the January 21 earthquake and its aftershocks as well as the start of dilution from our Kumamoto fab partially offset by cost improvement efforts. We have just guided our second quarter gross margin to decrease by 80 basis points to 58% at the midpoint, primarily as the margin dilution impact from our Arizona fab starts to kick in. We expect the impact from overseas fab to grow more pronounced throughout the year as we ramp up further in Kumamoto and Arizona and forecast 2% to 3% margin dilution impact for the full-year 2025. As we have said before, under today's fragmented globalization environment, overseas fab costs are higher for everyone, including TSMC and all other semiconductor manufacturers. With our additional $100 billion investment plan in Arizona, we forecast the gross margin dilution from the ramp up of our overseas fabs in the next five years to start from 2% to 3% every year in the early stages and widened to 3% to 4% in the latter stages. We will leverage our increasing size in Arizona and work on our operations to improve the cost structure. We will also continue to work closely with our customers and suppliers to manage the impact. Overall, with our fundamental competitive advantages of manufacturing technology leadership and large-scale production base, we expect TSMC to be the most efficient and cost-effective manufacture in the region that we operate.
Thus, even considering our global manufacturing expansion plans, we believe a long-term gross margin of 53% and higher is achievable. Next, let me talk about our 2025 capital budget. At TSMC, higher level of capital expenditures is always correlated with higher growth opportunities in the following years. We reiterate our 2025 capital budget is expected to be between US$38 billion and US$42 billion as we continue to invest to support customers' growth. About 70% of the capital budget will be allocated for advanced process technologies. About 10% to 20% will be spent for specialty technologies and about 10% to 20% will be spent for advanced packaging, testing, mass-making and others. Our 2025 CapEx also includes a small amount related to our recently announced additional $100 billion investment plan to expand our capacity in Arizona. Even as we invest for the future growth with this level of CapEx spending in 2025, we remain committed to delivering profitable growth to our shareholders. We also remain committed to a sustainable and steadily increasing cash dividend per share on both an annual and quarterly basis. Now let me turn the microphone over to C.C.
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CW
C. C. WeiCEOTSMC
Thank you, Wendell. Good afternoon, everyone. First, let me start with our near-term demand outlook. But before that, I would like to mention the earthquake during Lunar New Year. On January 21, Taiwan experienced a 6.4 magnitude earthquake under Richter scale, followed by several significant aftershocks. Although a certain number of wafers in process were impacted and have to be scrapped, we worked tirelessly and were able to recover much of the lost production, demonstrating the resilience of our operation in Taiwan. I want to recognize and deeply [sense] all of our employees and our suppliers for their dedication and hard effort over the Lunar New Year holiday.
I would also like to extend our great appreciation to our customers for their understanding and support during this time. Now let me talk about the first quarters result. We concluded our first quarter with revenue of US$25.5 billion. Our business in the first quarter was impacted by smartphone seasonality, partially offset by continued growth in AI-related demand.
Moving to second quarter 2025, we expect our business to be supported by strong growth of our 3-nanometer and 5-nanometer technologies. Looking at the full-year of 2025, we expect Foundry 2.0 industry growth to be supported by robust AI-related demand and a mild recovery in other end market segments. In January, we had forecast a Foundry 2.0 industry to grow 10 points year-over-year in 2025, which is consistent with IDC's forecast of 11% year-over-year growth for Foundry 2.0. Now let me talk about the recent tariff. We understand there are uncertainties and risk from the potential impact of tariff policies. However, we have not seen any change in our customers behavior so far. Therefore, we continue to expect our full-year 2025 revenue to increase by close to mid-20s percent in U.S. dollar term. We might get a better picture in the next few months, and we will continue to closely monitor the potential impact to the end market demand and manage our business prudently. Amidst that uncertainties, we continue to focus on fundamentals of our business with our technology leadership, manufacturing excellence and customer trust to further strengthen our competitive position. As such, we are confident TSMC can continue to outperform the Foundry 2.0 industry growth in 2025. Now I'll talk about our AI demand outlook. We continue to observe robust AI-related demand from our customers throughout 2025.
We reaffirm our revenue from AI accelerators to double in 2025. The AI accelerators will define as AI GPU, AI ASIC and HBM controllers for AI training and inference in the data center. Based on our customers' strong demand, we are also working hard to double our CoWoS capacity in 2025 to support journeys. Recent developments are also positive to AI's long-term demand outlook. In our assessment, the impact from AI recent models, including DeepSeek, will drive greater efficiency and help lower the barrier to future AI development. This will lead to wider usage and greater adoption of AI models, which all require use of leading-edge silicon. Thus, these developments only serve to strengthen our conviction in the long-term growth opportunities from the industry megatrend of 5G, AI and HPC.
To address the structural increase in the long-term market demand profile, TSMC employed a disciplined and revolved capacity planning system. This is especially important when we have such high forecasted demand from AI-related business. Externally, we work closely with our customers and our customers are customers to [pan out] capacity. Internally, our planning system involves multiple teams across several functions to assess and evaluate the market demand from both a top-down and bottom-up approach to determine the appropriate capacity build.
Based on our planning framework, we are confident that our revenue growth from AI accelerators will approach a mid-40s percentage CAGR for the next five years period starting from 2024. Next, let me talk about TSMC's additional US$100 billion investment plan to expand in Arizona. All our overseas decisions are based on our customers' need, they value some geographic flexibility and necessary level of government support. This is also to maximize the value for our shareholders. With a strong collaboration and support from our leading U.S. customers and the U.S. Federal state and city government, recently announced our intention to invest an additional US$100 billion in advanced semiconductor manufacturing in the United States. This expansion includes plans for three additional wafer manufacturing fabs to advice packaging fabs and a major R&D center. Combined with our previously announced plan to build three advanced semiconductor manufacturing fab in Arizona, this brings our total investment in the U.S. to US$165 billion to support the strong multiyear demand from our customers.
Our first fab in Arizona has already successfully entered high-volume production in 4Q 2024, utilizing N4 process technology with a yield comparable to our fab in Taiwan. The construction of our second fab, which will utilize the 3-nanometer process technology is already complete, and we are working on speeding up the volume production schedule based on the strong AI-related demand from our customers. Our third and fourth fab will utilize N2 and A16 process technologies and with the expectation of receiving all the necessary permits, are scheduled to begin construction later this year. Our fifth and sixth fab will use even more advanced technologies. The construction and ramp schedule for this fab will be based on our customers' demand.
We also plan to build two new advanced packaging facilities and establish an R&D center in Arizona to compete the AI supply chain. Our expansion plan will enable TSMC to scale up to a giga-fab cluster to support the needs of our leading-edge customers in smartphone, AI and HPC applications. With this additional US$100 billion investment plan to expand our leading-edge capacity in Arizona, I would also like to mention that TSMC is not engaged in any discussion with other companies regarding any joint venture technology licensing or technology transfer and sharing. After completion, around 30% of our 2-nanometer and more advanced capacity will be located in Arizona creating an independent leading edge semiconductor manufacturing cluster in the U.S. It will also create greater economies of scale and help foster a more complete semiconductor supply chain ecosystem in the U.S. Thus, TSMC will continue to play a critical and integral role in enabling our customers' success, while remaining a key partner in enabling all the strength and leadership of the U.S. semiconductor industry.
Next, in Japan, thanks to the strong support from the Japan Central, Prefecture and local government, our first specialty technology fab in Kumamoto has already started volume production in late 2024 with a very good yield. The construction of our second specialty fab is scheduled to start later this year, subject to the readiness of the local infrastructure. In Europe, we have received strong commitment from the European Commission and the German Federal state and city government. We are on track with our plan to build a specialty technology fab in Dresden, Germany. In Taiwan, with support from the Taiwan government, we plan to build 11 wafer manufacturing fab and four advanced packaging facility over the next several years. Volume production of N2 is expected to start in second half 2025, and we are preparing for multiple phases of 2-nanometer fabs in both Hsinchu and Kaohsiung Science Parks to support the strong structural demand from our customers. By expanding our global footprint for continuing investment in Taiwan, TSMC, can continue to be the trusted technology and capacity provider of the global logic IC industry for years to come, while delivering profitable growth for our shareholders. Finally, I'll talk about our N2 status and A16 introduction. Our 2-nanometer and A16 technology is the industry in addressing the insatiable need for energy-efficient computing and almost the innovators — almost all the innovators are working with us. We expect the number of new tapeout for 2-nanometer technology in the first two years to be higher than both 3-nanometer and 5-nanometer in their first two years, fueled by both smartphone and HPC applications. N2 will deliver full-node performance and power benefits with 10% to 15% speed improvement at the same power or 20% to 30% power improvement at the same speed and more than 15% chip density increase as compared with N3E.
N2 is well on track for volume production in the second half of 2025 are scheduled with a ramp profile similar to N3. With our strategy of continuous enhancement, we also introduced N2P as an extension of N2 family, N2P featured further performance and power benefits on top of N2 and volume production is scheduled for second half 2026. We also introduced a 16 feature in super power rail or SPR as a separate offering. Compared with the N2P, A16 provides a further 8% to 10% speed improvement at the same power of 15% to 20% power improvement at the same speed and additional 7% to 10% chip density gain. A16 is best suited for specific HPC products with complex signal route and dense power delivery network.
Volume production is scheduled for second half 2026. We believe N2, N2P, A16, and its derivatives will further extend our technology leadership position enable TSMC to capture the growth opportunities well into the future. This concludes our key message, and thank you for your attention.
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JS
Jeff SuirTSMC
Thank you, C.C. This concludes our prepared statements.
Before we begin the Q&A session, I would like to remind everybody to please limit your questions to two at a time to allow all the participants an opportunity to ask their questions. Should you wish to raise your question in Chinese, I will translate it to English before our management answers your question. [Operator Instructions] Now let's begin the Q&A session. Operator, can we please proceed with the first caller on the line?
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Q&A Session
Q&A 1/8
OP
Operatoroperator
The first one to ask question Gokul Hariharan from JPMorgan.
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Gokul HariharananalystJPMorgan
Thank you very much. Good afternoon. And first of all, thanks for clearing the air on all those JV-related news reports. I think a lot of people needed that. Thank you.
My first question is on AI demand. So C.C., there has been a lot of talks about CoWoS order adjustment and some concerns about AI demand. You did talk about CoWoS capacity doubling. Could you talk a little bit about how you see demand versus supply? I think last time we talked about this, you did indicate CoWoS demand is still well above supply. Could you talk a little bit about how the situation is looking for CoWoS demand versus supply this year? And maybe a little bit of early color on 2026 also as you plan for the capacity?
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Jeff SuirTSMC
All right. Thank you, Gokul. For everyone's benefit, let me try to summarize your first question. So again, Gokul's first question is on the AI-related demand.
He notes there's been a lot of noise around CoWoS and order cuts and such. So he would like to ask C.C. what is the thinking or strategy for TSMC CoWoS still doubling this year? Is the demand still exceeding the supply? And how is the CoWoS capacity and supply or supply and demand, I should say, look like going into 2026, if C.C. is able to provide any color?
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C. C. WeiCEOTSMC
Okay.
Gokul, I know there's a lot of rumors about the CoWoS. The last time when we talk about the CoWoS, the demand is almost insane and much, much higher than we can prepare. And now it's a little bit better. I think still we need to build a lot of capacity to meet the demand. As I said, we have to double our CoWoS capacity. Still fully loaded. And for 2026, I cannot say the number, but it's still a [inaudible] momentum while we continue. Okay. Did that answer your question?
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Gokul HariharananalystJPMorgan
So do you still think 2026 is going to be supply limited still, but demand is still going to be much more than supply even in 2026? Is that your current expectation C.C.?
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Jeff SuirTSMC
So Gokul was asking, then do we still see demand exceeding supply for CoWoS in 2026?
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C. C. WeiCEOTSMC
Well, we will work very hard to make sure that we don't have this kind of a demand is much, much higher than the capacity. We're working very hard, and I believe that you will be more balanced next year.
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Gokul HariharananalystJPMorgan
Thank you. My second question is on the U.S. investment and all this like persistent rumors about involvement in your competitors, operations, et cetera.
You have interacted with the U.S. government, the new administration for the last several months and C.C. made a big announcement at the White House as well. Just wanted to understand what does TSMC kind of impression in terms of what is required? Now that there is also the semiconductor tariffication going on. What is TSMC's impression of what is required over the next two, three years in terms of reassuring of capacity both from a U.S. administration productive also from your U.S. customers perspective. And I also — I think Wendell also indicated that the margin dilution maybe slightly bigger as we go along. So could you talk a little bit about how much of the value can you pass on to the customers as the expansion becomes a little bit more accelerated? Thank you.
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Jeff SuirTSMC
Okay. So Gokul's second question is a bit involved, but he's asking about again, a lot of talk about our recent announcement for an additional 100 billion expansion in the U.S. again, talk about this involving a competitor. C.C. has been speaking to the U.S. government. There's still potential semiconductor tariff. So his question is really from TSMC's point of view, what do we think is required for more onshoring in the U.S.? Can we share the perspective from the U.S. government? Or more directly what our customers are asking us to do in terms of reshoring?
That's the first part. And the second part will — maybe Wendell can address on the margin?
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C. C. WeiCEOTSMC
Really. Okay. I thought that's a very long, long question. Let me answer that. Yes, we — indeed, we have talked with U.S. government officials. And the reason we are expanding in Arizona actually, let me say again, it's all because of our customers' request, and that because of the very high, high demand. I announced in other occasions say that very strong AI demand from U.S. customers such as Apple, NVIDIA, AMD, Qualcomm and Broadcom. And so that we need to expand our capacity in the U.S. and to support them. We talked with the U.S. government and to ask for their help in getting the necessary permits so we can start the fab. And as a result, I would expect our 2-nanometer capacity around 30% will be in Arizona. And that will be also independent leading-edge semiconductor manufacturing cluster. Okay.
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Jeff SuirTSMC
And then, Gokul, the second part of your question is related to the — sorry, Wendell had mentioned that the margin may widen. So Gokul's second part of the question, I think was related to pricing and what is our strategy or approach here as we expand overseas. Is that correct?
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Gokul HariharananalystJPMorgan
Yes, that's right. Yes.
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Wendell HuangCFOTSMC
Hey, Gokul, you're asking about the pricing. As we always said, reflecting our value is a continuous and ongoing process for TSMC as we're in a very capital-intensive business. So we need to have a very high gross margin to earn the sustainable and healthy return. And that is why we set up our pricing strategy.
Geographic manufacturing flexibility is an important part of our value proposition to the customers. We are already discussing this with our major customers, and the progress is so far so good.
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Jeff SuirTSMC
Okay. Gokul?
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Gokul HariharananalystJPMorgan
Okay. Understood. Thank you.
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Jeff SuirTSMC
All right. Thank you. Operator, can we move on to the next participant, please?
Q&A 2/8
OP
Operatoroperator
The next to ask question, Bruce Lu from Goldman Sachs. Please ask your question.
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Bruce LuanalystGoldman Sachs
Okay. Thank you for taking my question. I think the geopolitical risk [inaudible] is one of the major uncertainty nowadays. Last two days, we have like H20 being banned in China. So how does that impact to TSMC focus and production planning, right? Do we have enough other customer and demand to keep our advanced node capacity fully utilized? Or how does that change our long-term production planning moving forward?
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Jeff SuirTSMC
Okay. Bruce, thank you.
Your first question is related. He's talking about geopolitical risk or I guess some of the recent rules and announcements, specifically the ban on H20. So his question is how does this impact TSMC's business? How does this impact our capacity planning and our strategies?
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C. C. WeiCEOTSMC
Bruce, let me answer this question. Of course, we do not comment on specific customer product, but let me assure you that we have taken this into consideration when providing our full-year growth outlook. Did I answer the question?
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Bruce LuanalystGoldman Sachs
Yes, but I want a little bit more about like — I'm sure you guys did a lot of sensitivity analysis, like what kind of impact is going to be? Or can you show us like how much buffer we got, like you've assume, like how comfortable we have to maintain our current capacity planning moving forward or current utilization right now?
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Jeff SuirTSMC
Okay. So Bruce is asking for some more color in terms of what type of buffer or what type of room we have in making our decisions for the long-term capacity planning?
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C. C. WeiCEOTSMC
Well, actually, we know a lot of people right now speculate a lot of things. But again, certainly, we are mindful of the potential impact from all the recent tariff announcements, especially the potential impact to the end market demand. We'll continue to watch it carefully. Having said that, we have not seen any change in our customers' behavior so far. And so we stick on our forecast.
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Bruce LuanalystGoldman Sachs
I see. Thank you.
Let me switch gears to a little bit for the non-U.S. capacity expansion. I think yes, as we understand that the current capacity [utility for] mature node is under utilized, right? Do we consider to slowdown the capacity expansion in Japan or Europe? Or just relocate the current equipment from Taiwan to Japan or Europe instead of building the new one? We don't want — why do we want to expand the capacity for the mature node, which management already mentioned that it's a oversupply industry though. If we relocate them, we can squeeze more space, clean room in Taiwan for more advanced nodes?
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Jeff SuirTSMC
Okay.
So Bruce's second question is around mature node and our expansion into Europe and Japan. His question really is given that the capacity of mature node 7-nanometer underutilized. Number one, are we concerning to slowdown our expansions in these places? And then number two, would we consider using current relocate equipment from Taiwan to overseas rather than just the pure new expansion or greenfield expansion?
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C. C. WeiCEOTSMC
Bruce, let me answer the first part of the question. Are we considering slowing down, the answer is no. We executed our plan are scheduled. The reason is very simple because of this kind of mature node is a specialty technologies demand, which my competitors did not have capacity or capability to support. So it is kind of a free form. You mentioned the underloading of the mature node, and so again I would emphasize no, we are not going to slowdown our plan in Japan or in Germany. The second question is how to do it. We have a good idea, but it's TSMC's the confidential information, I'll let you know later.
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Bruce LuanalystGoldman Sachs
Okay. Thank you.
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Jeff SuirTSMC
All right. Thanks, Bruce. Operator, can we move on to the next participant, please.
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Q&A 3/8
OP
Operatoroperator
Now the line is open to Charlie Chan, Morgan Stanley.
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Charlie ChananalystMorgan Stanley
Hi. Good afternoon, gentlemen. Thanks for taking my question. So my first question is really very specific on the semiconductor tariffs on either Taiwan or TSMC's leading-edge. So I'm wondering, first of all, does the TSMC get involved in all those tariff negotiations between Taiwan government and the U.S. government? And secondly, do you believe that your commitment of US$165 billion investments can get us bear on these semiconductor tariff? Because in your previous comment, it seems to only concerned about the tariff impact on consumer tech demand. But I think global investors are also very concerned about additional tariffs on this semiconductor category. Can you give us some color? Thank you.
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Jeff SuirTSMC
Okay.
Let me summarize your question. First question, Charlie. So Charlie's first question is on semiconductor tariffs. He wants to know what is our comment or view on potential tariffs on Taiwan, reciprocal tariffs or semiconductor-specific tariffs. His question specifically, is TSMC get involved in the negotiations between the Taiwan government and the U.S. government?
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C. C. WeiCEOTSMC
Charlie, this kind of tariff discussion is between countries. We are a private company. Certainly, no, we are not getting involved. What is the second question?
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Charlie ChananalystMorgan Stanley
Okay. Yes. So actually, do you have any visibility that the semiconductor specific tariffs can be exempt?
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Jeff SuirTSMC
Sorry, Charlie, I think your question was with our total investment of US$165 billion in Arizona. Do we believe does TSMC believe semiconductors will be exempt from these tariffs?
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Charlie ChananalystMorgan Stanley
Yes.
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C. C. WeiCEOTSMC
Charlie, all policy especially this tariff decision are government's responsibility to decide. And as a private company, we are fully respect of this, but we are not getting involved.
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Charlie ChananalystMorgan Stanley
Okay. Got you.
I think you were to moderate, but let's move on to my second question. So based on your second quarter guidance, which is very strong, up 13% quarter-on-quarter. I can't help to think whether there are [customers pooling] given the tariffs? Or is it kind of real demand? And also based on your full-year guidance, so called the mid-20%, it seems like second half recovery will be very, very gradual or flattish. So I'm wondering if you're already bake in kind of consumer tech demand impact. And if a tariff have some kind of turnaround, right, meaning, for example, major smartphone brands whether there's a chance for you to revise your full-year revenue guidance? Thank you.
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Jeff SuirTSMC
Okay.
So Charlie, second question is on the revenue outlook. His first part is on the second quarter. He noted second quarter, 13% at the midpoint in U.S. dollar terms, Q-on-Q is very strong. So he wonders, is this — are we seeing already some tariffs pull-in impact? Or is this part of that guidance? I'll stop here first.
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Wendell HuangCFOTSMC
Yes, Charlie, we have — as we said in the prepared remarks, we haven't seen any changes in customers' behavior so far. Our second quarter growth was driven mainly by strong demand for the 3-nanometer and 5-nanometer technologies underpinned by the growth in our HPC platform. As I said, we haven't seen any — observed any changes in customer behavior in terms of pooling or due to tariffs, you're probably better to ask them directly.
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Jeff SuirTSMC
And the second part then Charlie is asking about what the second quarter guidance implies limited half-on-half growth. So is that also because we are assuming something from tariff impact to consumer demand? Or why is that?
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Wendell HuangCFOTSMC
Charlie, as we also said in the prepared remarks, there are uncertainties and potential risk from tariffs exist. So far, that's what we are able to share with you is we stick to the mid-20% or close to mid-20% year-over-year growth. No different from the previous quarter.
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Charlie ChananalystMorgan Stanley
I see.
Yes, so I think that's real. But I think your answer to focus the previous question on long-term margin dilution was a little bit unclear because we thought that a 2% to 3% margin dilution from overseas should remain to be the case, but it seems like is widening. So I'm not sure if you use because you are further accelerating your U.S. fab expansion or some cost item or pricing item not in your stations versus maybe one or two months ago?
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Jeff SuirTSMC
Okay. I think — so Charlie is asking basically how come the dilution in the latter period widens to 3% to 4%? What are the drivers or reasons behind it?
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Wendell HuangCFOTSMC
Yes, Charlie, the widening of dilution on the gross margin in the later part of the five-year period is mainly from inflation in cost and also potential tariff-related cost increases. Those are the reasons.
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Charlie ChananalystMorgan Stanley
I see. Okay. Thank you.
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Jeff SuirTSMC
Okay. Thank you, Charlie. Okay, operator, let's move on to the next participant, please.
Q&A 4/8
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Operatoroperator
Next one Charles Shi from Needham. Go ahead, please.
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Charles ShianalystNeedham
Thanks for taking my questions. Maybe I'll ask a relatively higher level question. It's a two-part question.
Both are regarding your expansion plan in the United States. I think management — another occasion that what TSMC wants the most is really fairness. Nothing monetary, nothing about tariffs, but fairness and management kind of elaborate a little bit what fairness means, give us a little bit more specifics.
But the other part of the question regarding the U.S. expansion, it's about the R&D team center you announced, so we understand, yes, the TSMC's R&D in the U.S. does need to start from somewhere, right, you said it's more about the production improvements related to R&D on derivative nodes. But since this seems to be something U.S. really cares about that the R&D capability on the U.S. soil on the leading-edge, is there any longer-term plan to have the U.S. R&D center to be involved, let's say, in the primary R&D, let's say, brand new processes, that the major nodes divestment. That's my two-part question. Thank you.
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Jeff SuirTSMC
All right. Thank you, Charles. So again, to summarize, both questions are related to the expansion in the U.S. So first part of the question is we — C.C. has mentioned, all we want is fair treatment. So what do we mean by fair or fairness?
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C. C. WeiCEOTSMC
Well, let me answer this question. What we mean the fair treatment it's very simple. If anybody gets a subsidy or get the incentive, it should be everybody should get the same.
Either we got all or we got zero, all right? So that's what we call it fair. So again, I would like to assure you that we are — will be very competitive in either conditions.
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Jeff SuirTSMC
Okay. And then the second part of the question is regarding the R&D. Charles is saying he understands the R&D needs to start from somewhere, but with our major R&D center in Arizona, what will be the purpose or the focus? And will it be involved at some point in ramping new technologies?
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C. C. WeiCEOTSMC
As I said before, TSMC is a fab, never be stagnant. We always continue to improve it. And we need to establish a major R&D center in Arizona with about 1,000 engineers. That's a big amount. But the focus will be support our manufacturing cluster improve its technology and allow it to operate independently. Okay. Did I answer the question?
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Charles ShianalystNeedham
Maybe let me just really follow-up because there has been a good amount of chatters about the U.S. R&D center more supporting manufacturing rather than doing a brand — major R&D, the brand new nodes, but it looks like that's not the plan, but over the longer term, is there any thoughts of our management, maybe they will get involved in brand-new nodes development one way or the other. I think that's the question people have been discussed about over the last quarter.
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Jeff SuirTSMC
Okay. So Charles is asking, will the R&D center over the mid to long-term. Can you also focus on things like new node development or path finding opportunities, long-term research, these type of things?
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C. C. WeiCEOTSMC
Okay.
Actually, the first purpose is to that Arizona fab can operate independently. But of course, we have done and we are doing it right now to some kind of test funding, exploratory work and cooperate with university, blah, blah, blah. It's actually a lot of activities. 1,000 engineers is not a small amount. Of course, it's not comparable to TSMC right now, it's a 10,000 R&D people, but it's a beginning, okay? So we do a lot more.
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Jeff SuirTSMC
Okay. Charles, do you have a second question?
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Charles ShianalystNeedham
No, I don't. Thank you.
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Jeff SuirTSMC
Okay. Great. Thank you. Operator, the next participant, please?
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Q&A 5/8
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Operatoroperator
Next one to ask question Sunny Lin from UBS.
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Sunny LinanalystUBS
Good afternoon. Thank you very much for taking my questions. So my first question is to follow-up on the Arizona expansions. So first part is on the timeline or the pace of your expansion now given the stronger demand for your U.S. capacities.
To what extent could you pull in the wrap of the original second and third phase? And for your fourth phase, you earlier mentioned that you will be constructing the [inaudible] there this year. So would that will be possible that you start to ramp the fourth phase at the same time as the third phase?
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Jeff SuirTSMC
Okay.
So Sunny's first question is regarding our Giga fab cluster in Arizona. She wants to understand the timeline of expansion, particularly given the strong AI-related demand. Can we pull in the timing for both the second fab and the third fab? And also, can we, at the same time, start the production of the third and fourth fab simultaneously?
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C. C. WeiCEOTSMC
Well, Sunny, we are working very hard to speed it up of our production in the second fab and the construction of the third fab.
All I can say around is customers demand is strong. We have to — ready to speed it up. And the following all the fab definitely will depend on our customers' demand, of course.
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Jeff SuirTSMC
Okay. Sunny?
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Sunny LinanalystUBS
Well, so sorry, just to clarify.
So the second phase originally is planning for production in 2028. So now should we assume it to be from maybe mid-2027 or even first half 2027? And for the third phase since you are building the [inaudible] this year, so will the production stop maybe one year ahead versus the original timeline of 2030?
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Jeff SuirTSMC
Okay. So Sunny, specifically, so the second one, we said we're speeding up. Can we give some context of the timeframe? And then for the third fab, will we also speed it up, could that also be moved forward?
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C. C. WeiCEOTSMC
Okay. Yes, we are speeding up. How fast? The second fab, as you said, it should be pulled in. And this one, we are working hard to pull in at least a couple of quarters that's at least. On the third fab, actually, I did not speak the whole thing is also being constrained by the labor shortage of Arizona, and we need to get all the permits everything, et cetera. So I cannot give you a very definite date yet, but we are going to update you probably in the next quarter or one quarter after that.
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Sunny LinanalystUBS
Got it. No problem.
My second question is on the pricing and margin of the overseas expansions. And so now with the — especially stronger demand for the U.S. capacities, would you be able to sell more value given the stronger onshoring requirements? And then for margin, earlier, you mentioned the 2% to 3% margin dilution for the coming two, three years and then expanding to 3% to 4% maybe into 2029 to 2030. I just wonder what the underlying whether price assumption for that gross margin dilution estimate? If you are able to raise the AZ pricing a bit, will the gross margin dilution could be less?
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Jeff SuirTSMC
Okay. So Sunny's question is on the overseas expansion in both pricing and margin, given the strong demand in terms of pricing, can we reflect even greater value to our customers? And therefore — and also her question is given that the dilution from overseas will widen to 3% to 4% in the latter stages of the five-year period. She wants to know what is our underlying wafer price assumption behind us.
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Wendell HuangCFOTSMC
Sunny, let me answer that. These two things are actually go together. As we said, reflecting our value is a continuous and ongoing process. And we — because of our business nature, we need very high gross margin to earn a sustainable healthy return. Now geographic manufacturing flexibility is an important part of our value proposition to the customers.
Therefore, we are already discussing this with our major customers. And the progress is so far so good, okay? Now at the same time, the margin dilution from the overseas fabs, the additional dilutions come from the cost inflation as well as potential cost increases from the tariff policies. Of course, with that, we also want to reflect the value and therefore, the discussion with the customers are continuous.
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Jeff SuirTSMC
Okay. Sunny?
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Sunny LinanalystUBS
Got it.
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Jeff SuirTSMC
All right. Thank you.
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Sunny LinanalystUBS
All right. Very clear. Thank you very much.
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Jeff SuirTSMC
Thank you. Operator, can we move on to the next participant, please.
Q&A 6/8
OP
Operatoroperator
Next one to ask question Brett Simpson from Arete.
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Brett SimpsonanalystArete
Yes. Thanks very much. I have a two-part question on this year's guidance for C.C. First. C.C., you mentioned that AI is still expected to double this year despite the U.S. ban on AI GPUs into China. And I guess, China was a meaningful portion of accelerated shipments well over 10% of volumes. So factoring this in, it would imply your AI outlook this year, still doubling would mean that the AI orders have improved meaningfully outside of China in the last sort of three months? Is that how we should interpret your comment about you still expect the business to double?
And then second, we're in the June quarter where tariffs have been paused for 90 days. So to what extent due to above seasonal June quarter guidance reflect customer pull-ins ahead of potential tariffs being applied in the September quarter? Thank you.
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Jeff SuirTSMC
Okay. So Brett, this question is on, again, the one part is on the AI demand that although there is a ban in China, on certain AI chips or products that we reiterated our AI accelerated growth will double this year. So his assumption is that implies a strong non-China AI-related demand. I'm wondering what is the mechanics or can we comment behind that?
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C. C. WeiCEOTSMC
Brett, three months ago. Now I can tell you that three months ago, we are barely — we just cannot supply enough wafer to our customer.
And now it's a little bit balanced, but still the demand is very strong. And you are right. Other than China, the demand is still very strong, especially in U.S. And so we are confident that we are going to double our AI revenue this year.
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Jeff SuirTSMC
Yes. And then very quickly, he was asking about the second quarter revenue guidance. And do we see any tariff-related pull-in? I think Wendell answered this earlier.
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Wendell HuangCFOTSMC
Yes. I think that we have — as C.C. said in his prepared remarks, we haven't seen any changes in customer behavior. The growth in second quarter was primarily due to the demand from our 3-nanometer and 5-nanometer technologies underpinned by the demand from the HPC platform.
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Jeff SuirTSMC
Okay. Do you have a second question, Brett? Sorry.
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Brett SimpsonanalystArete
Yes. Thanks, Jeff. My second question was for Wendell, and thanks for clarifying that Wendell.
Follow-up is on shareholder returns. And TSMC traditionally has always favored growing the dividends as the main policy. But many shareholders would argue that the dividend payouts are not having that much of an impact on the discounted multiple that TSMC traded versus some of your U.S. big tech peers. So my question is why does TSMC management not adopt a buyback framework particularly with the strength of the cash position on your balance sheet at the moment? Thank you.
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Jeff SuirTSMC
Okay. Thank you, Brett. So Brett's second question is circulated on shareholder return. He noted TSMC's policy has always been stable and steadily increasing cash dividend and focused on cash dividend payout. His question is why — would we consider why do we not consider adopting more of a share buyback policy?
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Wendell HuangCFOTSMC
Okay, Brett. We've done studies a long time ago, and we continue to revisit that. We also talk to investors, our conclusion stays the same. The sustainable and steadily increasing dividend is a better way of returning cash to the shareholders. So we're maintaining the policy.
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Brett SimpsonanalystArete
Okay. Thanks.
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Jeff SuirTSMC
All right. Operator, in the interest of time, can we take the questions from the last two participants, please?
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Q&A 7/8
OP
Operatoroperator
Yes. Now the line is open to Laura Chen of Citi.
LC
Laura ChenanalystCiti
Hello. Hi. Thank you very much for taking my question. Can you hear me clearly?
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JS
Jeff SuirTSMC
Yes.
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LC
Laura ChenanalystCiti
Yes. Thank you. My question is also about the AI and also the U.S. expansion. Since you just mentioned that CoWoS supply demand will be more balanced into 2026.
Do you see any structural change in the future AI chip design when moving to N3 such as like a triplet that kind of a design? And also in that kind of new trend what TSMC's view on the new technologies, such as CPO or PLP panel base. Will that still start from Taiwan first? Or you would also consider to further invest the new like back-end technology in Arizona since C.C. just mentioned that you would also start to build-up the fab in advanced packaging in Arizona. That's my first question. Thank you.
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JS
Jeff SuirTSMC
Okay. Laura's first question is a very broad question. But basically, if I just try to distill. She wants to know do we see any changes in the chip design, particularly moving to chiplets? With N3, do we see this more and more?
What about the role of things like co-packaged optics and panel level packaging. And I think the essence of her question, will we continue to use our leading — sorry, advanced packaging technologies like CoWoS or SoIC in Taiwan first? Or is this also part of the plan for the expansion in Arizona?
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CW
C. C. WeiCEOTSMC
That's a long question. But Laura, yes, our customers, they continue to using that TSMC's the leading-edge technology and they also adopt the advanced packaging technologies more and more. And also, we are more advanced, right? This year is probably most of CoWoS-S and then next years CoWoS [inaudible] et cetera. And we can see that customers start to picking up the SoIC and more advanced packaging technologies. As for the — what we call is panel level packaging, we are aggressively developing it. And today, still the feasibility study stage. Too early to say, Europe, in Taiwan or in U.S, but most likely, it will be in Taiwan first, we ramp it up and then bring to U.S.
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LC
Laura ChenanalystCiti
Okay. Thank you very much guys. That's very clear. And also my second question is also about the capacity allocation between Taiwan and also Arizona. I think you just shared with us that for about like 30% of N2 capacity will be in Arizona, we know it will be starting from when or what kind of timeframe you are looking for? Can we also assume that the same scale like 30% of your Arizona fab for the advanced node in the longer term?
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JS
Jeff SuirTSMC
Okay. So Laura's second question is about the capacity allocation between how do we allocate between Taiwan and the U.S. maybe is it duplicative or extra capacity. And then very specific, C.C. had mentioned that N2 and more advanced capacity, 30% — around 30% will be in Arizona once we scale up to the cluster. Will that be kind of the percentage for the leading node in the future?
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CW
C. C. WeiCEOTSMC
Well, we have — right now, we plan a six fab in Arizona. And in that six fab, the 2-nanometer will be a major node, and that's what I say, 30% will be there. As time goes by, after the 2-nanometer will be 1.4 and 1.0, that has not been discussed yet.
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LC
Laura ChenanalystCiti
Okay. Thank you. Thank you very much. That's very clear.
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JS
Jeff SuirTSMC
All right. Thanks, Laura. Operator, can we take the last question from the last participant, please?
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Q&A 8/8
OP
Operatoroperator
The last one to ask questions, Krish Sankar, Cowen. Go ahead, please.
KS
Krish SankaranalystCowen
Yes. Hi. Thanks for taking the question. My first one is very impressive given uncertainty. You're still maintaining full-year revenue guidance and also your N2 capacity planned for this year and next year. Kind of curious, what is your visibility on second half revenues and also N2 demand for wafers into next year? And then I have a follow-up?
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JS
Jeff SuirTSMC
Okay. So Krish's first question is sort of in the near-term, what is our visibility into the second half business outlook? And then also, how do we see the demand for N2 progressing this year and also next year?
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WH
Wendell HuangCFOTSMC
Okay. Let me talk about the first one. We're only at second quarter. So I think it's too early to talk about the second half.
We did mention that the uncertainties and risks from tariffs exist, and we might get a better picture in the next few months. So we can probably update you in the next earnings call.
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JS
Jeff SuirTSMC
And then the second part of it is on the demand visibility of our 2-nanometer.
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CW
C. C. WeiCEOTSMC
So far actually — so far, it's very strong. As we said, all the new tape-out customers — the number of the tape-out is exceeding what we expected. And as we said, the number of the new tape-out is much higher than the 3-nanometer and 5-nanometer in the same period of time.
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JS
Jeff SuirTSMC
Okay. And did you have a second question, Krish?
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KS
Krish SankaranalystCowen
Got it. Very helpful. Yes, Jeff. Yes. Just one quick follow-up.
You spoke about the Japan fab. I'm curious what is the capacity installed in Japan today? And how do you think about the revenue contribution this year from Japan?
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JS
Jeff SuirTSMC
Okay. Krish's second question is related to our first specialty technology fab in Japan. He wants to know what is the capacity installed for this specialty technology fab and also the revenue contribution from JASM?
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Wendell HuangCFOTSMC
Yes. The capacity for the fab will be 40,000 when its ramp up. The revenue for this year compared to the whole company is really not significant at this moment.
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JS
Jeff SuirTSMC
Okay, Krish?
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KS
Krish SankaranalystCowen
Got it.
Thank you, Wendell. Thank you, Jeff. Thank you very much.
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Closing Remarks
JS
Jeff SuirTSMC
No problem. Okay. Thank you, everyone. This concludes our question-and-answer session. Before we conclude today's conference, please be advised that the replay of the conference call will be accessible within 30 minutes from now. The transcript will become available 24 hours from now, and both will be available through TSMC's website at www.tsmc.com. So thank you again for joining us today.
We hope everyone continues to stay well and hope to join — you will join us again next quarter. Goodbye, and have a good day. Take care. Thank you.
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