Advanced Process Node Adoption and Next-Generation Technology

In Q3 2024 and Q2 2024, TSMC discussed multiple nodes (2nm, 3nm, 5nm, and emerging extensions such as A16/N2P) with an emphasis on capacity build‐up, performance gains, and customer demand for cutting‐edge process technologies. " " " "

Q1 2025 provided granular details on 2nm performance improvements, robust tape-out demand, and production timelines (with volume production planned for later 2025 and significant allocation in Arizona). " " " "

Consistent focus with more aggressive production timelines and improved performance projections in Q1 2025.

Robust AI Demand and HPC Growth

Q3 2024 and Q2 2024 emphasized extremely robust AI-related demand along with growing HPC contributions, including forecasted tripling of server AI processor revenue and capacity pressures for advanced nodes. " " "

Q1 2025 highlighted robust AI demand with expectations to double AI revenue and a notable 7% QoQ growth in HPC revenue, now contributing 59% of total revenue, reinforcing the shift towards AI/HPC-driven business. " " "

Steady and expanding emphasis on AI/HPC, with Q1 2025 confirming stronger revenue contributions and capacity expansion plans.

Capacity Constraints and Expansion Strategies in Advanced Nodes and Packaging

In Q3 2024 and Q2 2024, TSMC acknowledged tight capacity in advanced nodes (especially for CoWoS and leading-edge nodes like 2nm and A16) and described plans for global expansion including fabs in Arizona and Japan, while noting capacity constraints were an ongoing challenge. " " " "

Q1 2025 outlined aggressive global expansion, noting the Arizona expansion with multiple fabs (using N4, 3nm, N2, and A16 technologies), and a multi-fab plan in Taiwan, Japan, and Europe. It also stressed that strong AI demand is driving accelerated packaging capacity growth. " " "

Persistent capacity constraints but with a more aggressive and detailed expansion strategy to meet surging AI and HPC demand.

Advanced Packaging Technologies: Investment, Capacity Limitations, and Deployment Challenges

Q3 2024 and Q2 2024 discussions centered on significant capital investments (around 10% CapEx), capacity limitations for CoWoS, and challenges with deployment of emerging packaging technologies, including chiplet strategies and early-stage PLP efforts. " " " " "

In Q1 2025, TSMC emphasized heavy investments in panel-level packaging (PLP), expansion of advanced packaging facilities in Arizona, and noted capacity imbalances in CoWoS with ongoing margin dilution impacts from overseas fabs. " " " "

A consistent high-investment strategy with added focus on new technologies like PLP, while deployment challenges and capacity limitations remain critical.

Margin Dilution and Rising Operational Costs

Q3 2024 and Q2 2024 detailed margin dilution arising from the ramp-up of advanced nodes like 3nm and overseas fabs, along with rising energy costs in Taiwan and cost inflation affecting profit margins. " " " " " "

Q1 2025 elaborated on a forecasted gross margin dip (e.g., 80 bps lower in Q2 2025) due to overseas fab ramp-ups (Arizona, Kumamoto) and highlighted a 2%-3% dilution impact for 2025 with further potential widening over the next five years, while reaffirming long-term margin confidence. " " "

Continued concerns over margin dilution and operational costs, with Q1 2025 offering more detailed forecasts and reinforcing caution despite long-term optimism.

Strategic Global and U.S. Manufacturing Expansion and Investment Plans

In Q3 2024 and Q2 2024, TSMC outlined multiple overseas expansion initiatives – three fabs in Arizona, specialty fabs in Japan, and a forthcoming facility in Europe – emphasizing customer-driven geographic diversification without altering investment strategies. " " "

Q1 2025 provided an expanded view of U.S. investments, detailing an additional USD 100 billion injection (totaling USD 165 billion) for fabs and advanced packaging (including an R&D center) in Arizona, alongside further expansion in Japan, Europe, and Taiwan. " "

An evolving but consistent global expansion strategy, with Q1 2025 presenting a more aggressive investment profile and clearer timelines to support emerging demand.

Tariff, Geopolitical, and Regulatory/Antitrust Risks

Q3 2024 and Q2 2024 touched on antitrust issues (with minimal concerns in Q3) and acknowledged geopolitical risks—in Q2 2024, concerns over Taiwan/U.S. dependencies and potential tariffs—but without major strategic changes or joint venture plans. " " "

Q1 2025 expanded the discussion on tariff risks and geopolitical uncertainties by noting potential tariff impacts, citing government-led policy discussions, and incorporating these risks into revenue forecasts, while still not reporting changes in customer behavior. " " " " "

While the core risks remain constant, Q1 2025 shows a slightly heightened alert on tariff and geopolitical impacts with detailed risk incorporation in forecasts.

Evolving Dynamics in PC and Smartphone Segments

In Q3 2024, TSMC described modest unit growth with increasing silicon content driven by AI integration, and in Q2 2024, they noted a 5%-10% die size increase per device and a slight decline in smartphone revenue due to seasonality. " " " "

Q1 2025 reported a pronounced shift with a 22% decline in smartphone revenue (28% of total) against robust HPC growth (7% QoQ increase and 59% of revenue), reflecting a clear movement away from traditional smartphone demand toward AI/HPC applications. " "

A marked evolution from a gradual shift towards increased AI integration (as seen in earlier periods) to a more significant reallocation of revenue emphasis from smartphones to HPC and AI-driven PC segments.