【Q&A Highlights】

Q1: What is the current status of AI-related demand and supply, particularly for CoWoS?

A:
- AI demand remains strong, with TSMC still working to meet the high demand.
- CoWoS demand is expected to be more balanced with supply by 2026.
- TSMC is aggressively expanding capacity to support AI-related demand.
- The company expects demand to still exceed supply in 2026, but the gap will be narrower.

Q2: Regarding the $100 billion US investment plan, what are the government and customer expectations for reshoring?

A:
- The expansion in Arizona is primarily driven by strong customer demand, particularly for AI-related products from companies like Apple, NVIDIA, AMD, and Qualcomm.
- About 30% of TSMC's 2nm and more advanced capacity will be located in Arizona after completion.
- TSMC is working with the US government to secure necessary permits for fab construction and operation.
- The company is not involved in tariff negotiations between governments but respects their decisions.

Q3: How does TSMC plan to manage the margin dilution from overseas expansion?

A:
- TSMC expects 2-3% margin dilution in the early stages, widening to 3-4% in the latter stages of the five-year expansion plan.
- The company is discussing pricing strategies with major customers to reflect the value of geographic manufacturing flexibility.
- Cost inflation and potential tariff-related cost increases contribute to the expected margin dilution.

Q4: What are TSMC's plans for R&D centers in the US?

A:
- TSMC plans to establish a major R&D center in Arizona with about 1,000 engineers.
- The initial focus will be on supporting the manufacturing cluster and improving its technology.
- While the primary purpose is to ensure independent operation of the Arizona fabs, the R&D center will also conduct some pathfinding and exploratory work.
- Collaboration with universities for research is also planned.

Q5: Can TSMC accelerate the timeline for its Arizona fab expansions?

A:
- TSMC is working to speed up production in the second fab and construction of the third fab.
- The company is responding to strong customer demand but did not provide specific timeline changes.
- Construction and ramp schedules for the fifth and sixth fabs will be based on customer demand.

Q6: How is TSMC approaching advanced packaging technologies in its global expansion?

A:
- Customers are increasingly adopting TSMC's advanced packaging technologies.
- CoWoS remains the primary focus this year, with CoWoS-R and other advanced technologies gaining traction next year.
- TSMC is aggressively developing panel-level packaging, which will likely be ramped up in Taiwan first before being brought to the US.

These responses highlight TSMC's commitment to meeting growing AI demand, expanding its global manufacturing footprint, and maintaining technological leadership while managing the challenges of overseas expansion and potential geopolitical risks.

Disclaimer: This earnings call summary is generated by AI and is for informational purposes only. Due to technical limitations, inaccuracies may exist. It does not constitute investment advice or commitments.