Arthur Lai

Arthur Lai asked about TSMC's strategic initiatives to strengthen its competitive landscape and broader ecosystem within the 'Foundry 2.0' market, especially in light of U.S. investors noting TSMC clients investing in Intel. He followed up on previous concerns about 'prebuilt' inventory in consumer electronics, specifically smartphones. Given the 19% sequential growth in smartphone revenue in Q3 2025, he asked if TSMC still worries about prebuilt inventory.

Answer

CEO Che-Chia Wei explained that 'Foundry 2.0' emphasizes system performance, including front-end, back-end, and advanced packaging, which now accounts for nearly 10% of TSMC's revenue. Regarding competition, he noted that the U.S. competitor is also a good customer for TSMC's most advanced products, and he declined further comment. Che-Chia Wei stated that TSMC no longer worries about prebuilt inventory because current inventory levels are very seasonal and healthy, indicating no excess stock.

Arthur Lai inquired about the return on investment for the N2 node, asking for a comparison to the N3 node, especially considering N2's higher capital expenditure but reportedly good yield performance.

Answer

SVP & CFO Mr. Wendell Huang stated that N2's profitability is structurally better than N3's. He explained that comparing the time to reach corporate average margin is less meaningful now that the target is 53%+, but confirmed N2 is on track for a ramp in H2 2025 with revenue contribution starting in H1 2026.