Taiwan Semiconductor hits the jackpot! Q3 net profit reaches a new high.
台積電2025Q3業績直播（即時傳譯）
Key Takeaways (AI-Generated)
财务表现
- 第三季度营收331亿美元，环比增长10.1%，略高于指引
- 毛利率59.5%，环比增长0.9个百分点，主要受成本改善和产能利用率提升推动
- 营业利润率50.6%，环比增长1.0个百分点
- 每股收益17.44新台币，同比增长39%，ROE为37.8%
业务进展
- N2技术按计划在本季度末开始量产，良率表现良好
- 推出N2P作为N2系列的延伸，在N2基础上进一步提升性能和功耗
- 推出A16技术，采用业界领先的GAA架构，适用于HPC产品
- 日本熊本第一座特殊制程晶圆厂已于2024年底开始量产
下一季度业绩指引
- 第四季度营收指引322-334亿美元，中位数环比下降1%，同比增长22%
- 毛利率指引59-61%，中位数60%，环比增长50个基点
- 2025年全年营收预计同比增长接近35%
- 2025年资本支出指引收窄至400-420亿美元
机会
- AI相关需求持续强劲，代币数量呈指数级增长
- 全球制造足迹扩展，在亚利桑那、日本、德国建设新产能
- N2预计2026年在智能手机和HPC AI应用推动下实现更快爬坡
- 海外晶圆厂毛利率稀释预期从2-3%改善至1-2%
风险
- 关税政策的潜在影响，特别是在消费相关和价格敏感的市场细分
- 海外晶圆厂持续的毛利率稀释影响，预计未来几年为2-4%
- CoWoS和先进封装产能仍然紧张，需要努力缩小供需差距
- 经济波动和市场不确定性可能影响客户行为
Full Transcript (AI-Generated)
Operator
大家午安，我是台积电法人关系处的苏志凯，欢迎您参加台积公司2025年第三季的法人说明会。由於本法说会是向全球投投资人同时连线转播，所以我们会全程使用英文，请您见谅。
Jeff Su
Good afternoon everyone and welcome to TSMC's third quarter 2025 earnings conference call. This is Jeff SU, TSMC's Director of Investor Relations and your host for today. TSMC is hosting our earnings conference call via live audio webcast through the company's website at triplew.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 third quarter 2025, followed by our guidance for the fourth quarter 2025.
Afterwards, Mr. Huang and TSMC's Chairman and CEO, Doctor CC Wei will jointly provide the company's key messages. Then we will open the line for Q&A. 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 CFO, Mr. Wendell Huang for the summary of operations and the current quarter guidance.
Wendell Huang
Thank you, Jeff. Good afternoon, everyone. Thank you for joining us today. My presentation will start with financial highlights for the third quarter 2025. After that, I will provide the guidance for the fourth quarter 2025.
Third quarter revenue increased 6% sequentially in NT as our business was supported by strong demand for our leading edge process technologies. In U.S. dollar terms, revenue increased 10.1% sequentially to 33.1 billion, slightly ahead of our third quarter guidance.
Gross margin increased 0.9 percentage point sequentially to 59.5%, primarily due to cost improvement efforts and a higher capacity utilization rate, partially offset by an unfavorable foreign exchange rate and dilution from our overseas fabs. Accordingly, operating margin increased 1.0 percentage points sequentially to 50.6%.
Overall, our third quarter EPS was 17.44 NT up 39% year over year and ROE was 37.8%. Now let's move on to revenue by technology. 3 nanometer process technology contributed 23% of wafer revenue in the third quarter, while five nanometer and seven nanometer accounted for 37% and 14% respectively.
Advanced technologies, defined as 7 nanometer and below, accounted for 74% of wafer revenue. Moving on to revenue contribution by platform, HPC remained flat quarter over quarter to account for 57% of our third quarter revenue. Smartphone increased 19% to account for 30%.
IoT increased 20% to account for 5%, Automotive increased 18% to account for 5%, and DCE decreased 20% to account for 1%. Moving on to the balance sheet, we ended the third quarter with cash and marketable securities of 2.8 trillion NT or 90 billion U.S. dollars.
On the liability side, current liability decreased by 101 billion NT quarter over quarter, mainly due to the decrease of 112 billion NT in accrued liabilities and others as we paid out 2025 provisional tax of 136 billion NT.
In terms of financial ratios, accounts receivable turnover days increased 2 days to 25 days. Days of inventory decreased 2 days to 74 days due to strong shipment in N3 and N5. Regarding cash flow and CapEx, during the third quarter we generated about 427 billion NT in cash from operations, spent 287 billion in CapEx and distributed 117 billion for fourth quarter 24 cash dividend.
Overall, our cash balance increased 106 billion NT to 2.5 trillion at the end of the quarter. In U.S. dollar terms, our third quarter capital expenditures totaled 9.7 billion. I have finished my financial summary. Now let's turn to our current quarter guidance.
Based on the current business outlook, we expect our fourth quarter revenue to be between 32.2 and 33.4 billion U.S. dollars, which represents a 1% sequential decrease or a 22% year over year increase at the midpoint. Based on the exchange rate assumption of one U.S. dollars to 30.6 NT, gross margin is expected to be between 59 and 61%, operating margin between 49 and 51%.
This concludes my financial presentation. Now let me turn to our key messages. I will start by talking about our third quarter 25 and fourth quarter 25 profitability. Compared to second quarter, our third quarter gross margin increased by 90 basis points sequentially to 59.5%, primarily due to cost improvement efforts and a higher overall capacity utilization rate, partially offset by margin dilution from our overseas fabs and an unfavorable foreign exchange rate.
Compared to our third quarter guidance, our actual gross margin exceeded the high end of the range provided 3 months ago by 200 basis points, mainly as the actual third quarter exchange rate was $1.00 to 29.91 NT compared to our guidance of $1.00 to 29 NT. In addition, we also delivered better than expected cost improvement efforts.
We have just guided our fourth quarter gross margin to increase by 50 basis points to 60% at the midpoint, primarily driven by a more favorable foreign exchange rate, partially offset by continued dilution from our overseas. While the cost of overseas fabs remain higher thanks to the company's overall larger scale, we now expect the gross margin dilution from the ramp up of our overseas fabs to be closer to 2% in the second-half of 2025.
For the full year 2025, we now expect it to be between 1 to 2% as compared to 2 to 3% previously. Looking ahead, we continue to forecast the gross margin dilution from the ramp up of our overseas fabs in the next several years to be 2 to 3% in the early stages and widen 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 manufacturer in every region that we operate.
Now let me make some comments on our 2025 CapEx. As the structural AI related demand continues to be very strong, we continue to invest to support our customers growth. We are narrowing the range of our 2025 CapEx to be between 40 and 42 billion U.S. dollars as compared to 38 to 42 billion U.S. dollars previously.
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, mask making and others at TSMC. A higher level of capital expenditures is always correlated with higher growth opportunities in the following years.
Even as we invest for the future growth with this higher 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 CC.
CC Wei
Thank you Wendell. Good afternoon everyone. First let me start with our near term demand outlook. We concluded our third quarter with revenue of US 33.1 billion, slightly above our guidance in U.S. dollar terms, mainly due to the strong demand for our leading edge process technologies.
Moving into fourth quarter 2025, we expect our business to be supported by continuous strong demand for our leading edge process technologies. We continue to observe robust AI related demands throughout 2025, while non-AI market segment have bottomed out and are seeing a mild recovery supported by our strong technology differentiation and broad customer base.
We now expect our full year 2025 revenue to increase by close to mid 30% year over year in U.S. dollar term. While we have not observed any change in our customers behavior so far, we understand there are uncertainties and risks from the potential impact of tariff policies especially in consumer related and price sensitive market segment as such.
We will remain mindful of the potential impact and be prudent in our business planning going into 2026 while continuing to invest for the future mega trend. Amidst the uncertainty, we will also continue to focus on the fundamentals of our business that is technology leadership, manufacturing excellence and customer trust to further strengthen our competitive position.
Next, let me talk about the AI demand outlook and TSMC's capacity planning process. Recent developments in AI market continue to be very positive. The explosive growth in token volume demonstrated increasing consumer AI model adoption, which means more and more computation is needed, leading to more leading silicon demand.
Companies such as TSMC, we are leveraging AI internally to drive greater productivity and efficiency to create more value. As such, enterprise AI is another source of demand. In addition, we continue to observe the rising emergence of sovereign AI. We are also happy to see continuous strong outlook from our customers.
In addition, we directly receive very strong signals from our customers. Customers question the capacity to support your business. Thus, our conviction in the AI megatrend is strengthening. We believe the demand for semiconductor will continue to be very fundamental as a key enabler of AI applications.
TSMC's biggest responsibility is to prepare the most advanced technologies and necessary capacity to support our customers growth. To address the structural increase in the long term market demand profile, TSMC employs a disciplined and robust capacity planning system.
Externally, we work closely with our customer and our customer's customer. To plan our capacity, we have more than 500 different customers across all the market segment. In addition, as process technology complexity increases the engagement time with customer is now added two to three years in advance.
Therefore, we probably get the deepest and widest look possible in the industry internally with our planning system involve multiple teams across several functions. And evaluate the market demand from both top down and bottom up approach to determine the appropriate capacity to build.
This is especially important when we have such high forecasted demand from AI related business. As a world most reliable and effective capacity provider, we will continue to work closely with our customer to invest in leading edge specialty and advanced packaging technologies to support their growth.
We will also remain disciplined and prudent in our capacity planning approach to ensure we deliver profitable growth for our shareholder. Now let me talk about TSMC's global manufacturing footprint update. All our overseas decisions are based on our customers need as they value some geographic flexibility.
And the necessary level of government support this is also to maximize the value for our shareholders with a strong collaboration and support from our leading US customers and the US federal, state and city governments, we continue to speed up our capacity expansion in Arizona.
We are making tangible progress and executing well to our plan. In addition, we are preparing to upgrade our technologies faster to more advanced process technologies in Arizona giving the strong AI related demand from our customers.
First of all, we are close to securing a second large piece of land nearby to support our current expansion plans and provide flexibility in response to the very strong multi year AI related demand. Our plan will enable TSMC to scale up to an independent Gigafab cluster in Arizona to support the needs of our leading edge customers in smartphone, AI and HPC applications.
Next, in Japan, thanks to the strong support from the Japan Central Prefectural and local Government, our first specialty fab in Kumamoto has already started volume production in late 2024 with very good yield. The construction of our 2nd fab has begun and the ramp schedule will be based on our customers need and market conditions.
In Europe, we have received strong commitment from European Commission and the German federal, state and city government. Construction of our specialty fab in Dresden, Germany has also started and we are progressing smoothly with our plans. The ramp schedule will be based on our customers need and market conditions.
In Taiwan, we support from the Taiwan government, we are preparing for multiple phases of two nano interfab in both Hsinchu and Kaohsiung science parks. TSMC will continue to invest in leading edge and advanced packaging facilities in Taiwan over the next several years by expanding our global footprint while continuing to invest in Taiwan.
TSMC can continue to be the trusted technology and capacity provider of the global logic IC industry for years to come. Finally, let me talk about our N2 and A16. Our two nanometer and A16 technologies is industry leading and addressing accessible demand for energy efficient computing and almost all innovators are working with TSMC.
N2 is on track for volume production later this quarter. With good yield, we expect a faster ramp in 2026 fueled by both smartphone and HPC AI applications. With our strategy of continuous enhancement, we also introduce N2P as an extension of our N 2 family.
N2P feature further performance and power benefits on top of N2 and volume production schedule for second-half 26. We also introduce A16 featuring our best in class gate-all-around or GAA. A16 is best suited for a specific HPC product with complex signal routes and dense power delivery networks.
Volume production is on track for second-half 26. We believe N2, N2P, A16 and its derivatives were prepared our N2 family to be another large and long lasting node for TSMC. This conclude our key message and thank you for your attention.
Jeff Su
Thank you, thank you CC. 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 management answers your question. For those of you on the call, if you would like to ask a question, please press the star, then one on the telephone keypad.
Now, if at any time you'd like to remove yourself from the questioning queue, please press *, then two. Now let's begin the Q&A session. Operator, can we please proceed with the first caller on the line?
Operator
Thank you. Yes, first one, Gokul Hari Holland, JP Morgan, go ahead, please.
Gokul Hari
Yeah, thanks. Good afternoon CC, Wendell and Jeff. Great result again. So on the AI front, CC I think you have met with pretty much everybody who is driving the Gen AI revolution over the last couple of months. And as you said, everybody seems to be a lot more positive.
I think we gave a guidance of mid 40s data center AI growth CAGR earlier this year until 2029. Anything that you see which should kind of change that number definitely feels like the growth today seems to be much stronger. And related to that, you did talk about the very detailed capacity expansion planning the TSMC does.
In past technology cycle TSMC CapEx has gone up significantly to prepare for the next upgrade or next leading edge node, but in this cycle, TSMC revenues have grown 50% from the previous peak in 22, CapEx has only grown about 10%.
So how should we think about the CapEx over the next couple of years? I know that you're not giving numerical guidance yet, but just want to understand like will be looking at much higher CapEx in the next couple of years given all these conversations you've had and I had like pull over for that. Thank you.
Jeff Su
OK, so Gokul, first question, sorry Gokul, let me summarize for everyone's benefits. So again he wants to know firstly related to the AI related demand that CC works with many if not you know everyone who is doing AI and many of the customers seem to be even more positive today.
So I guess he would like to ask CC sort of what are we seeing or hearing from our customers. And then we had previously said that the next five years from 24 to 29, we expect AI accelerator to grow at a mid 40s CAGR. You know, is there any update to this? I think this is the first part, then I'll get to the second part on CapEx.
CC Wei
Wow, that's a long question isn't it? But Gokul, the AI demand actually continue to be very strong is a more stronger than we saw the three months ago. Okay, so in today's situation we have talked to customer and then we talked to customers customer.
So the CAGR we are previously we announced is about the mid 40s, but it should it be better than that? We will update you probably in beginning of next year. So we have more clear picture today. The number are in CNN.
Jeff Su
And then the second part of Gokul's question related to CapEx. He notes that in the past when TSMC sees opportunities for higher growth past cycles or past instances, we would step up the CapEx significantly to prepare to drive the future growth.
But he notes this cycle actually though, while CapEx is increasing, the revenue is increasing even faster. So his question really, I think how do we see this in playing out over the next few years both in terms of the CapEx spend and the growth relative to the revenue growth?
CC Wei
OK Gokul, every year we spend the CapEx based on the business opportunity in the following few years, as long as we believe there are business opportunities, we will not hesitate to invest. And if we do our job right, the growth of our business, of our revenue should outpace the growth of the CapEx and that's what we have been delivering in the past few years.
Now going forward, assuming we're doing still doing a very good job, then we will continue to see that happening again. So a company of our size, the CapEx number, we it's unlikely to suddenly drop significantly in any given year that when we continue to invest and our growth is outpacing CapEx growth, then you see the growth like what we have done in the past few years.
Gokul Hari
Understood. And I, I know that it is unlikely to drop, but it is also likely to grow quite a bit given what CC mentioned in terms of every customer asking you and every customer, customer requesting you for capacity addition, right.
Wendell Huang
Yeah, As I said at higher level of CapEx is always going to be correlated with a higher growth opportunity. So as CC said, next year looks to be a healthy year and we are confident on the megatrend that we'll continue to invest.
Gokul Hari
OK, got it. Yeah, Maybe one more follow up question from me. I think last year also you give us an indication of how much CoWoS capacity you would be building. I think you talked about two acts of doubling the CoWoS capacity.
It clearly feels like given that is not enough, could you give us some idea about how much capacity would you be building next year? Just to get some idea about what you are seeing in terms of AI demand and also just to get some understanding of TSMC's data centre AI exposure.
I think last year, last year we talked about about mid teen revenues, where, where do we end up this year? Do we end up close to like 30% of revenues coming from AI?
Jeff Su
So, OK. So Gokul, your second question really he wants to understand, can we provide any detail or colors on the CoWoS capacity plan for 2026 in terms of year on year increase? And also in terms of our definition of AI accelerator revenue, the narrow definition, how much will it contribute for 2025 revenue? Is it 30%?
CC Wei
Talking about the CoWoS capacity, all I can say is continue the three months ago. We are working very hard to narrow the gap between the demand and supply. We are still working to to increase the capacity in 2026. The real number, we probably update you next year today, all I want to say.
About an AI everything related by CoWoS and advanced packaging capacity is very tight. We are working very very hard to make sure that the gap will be narrow, but you know, all I can say is we are working very hard.
Jeff Su
OK. Thank you, Gokul. I think we need to move on in the interest of time. So operator, can we move to the next participant please?
Operator
Yes, next one, Charlie Chan, Morgan Stanley, go ahead please.
Charlie Chan
Thanks for taking my question and again, congratulations for a very strong result CC, Wendell and Jeff, so my first question is really about your N2 demand as a CC just mentioned your front end demand is also very strong into next year.
But one of your major customer has said that Moore's Law is dead. So instead I think his point is that by doing maybe a system level innovation in the thermal etcetera can boost up more kind of performers. So just a kind of dumb question, how do we reconcile you're very, very strong N2 demand and their customer continue to migrate to your most advanced nodes and also you continue to reflect the value, whereas the customer continue to think that Moore's Law is dead can we get some clarification from TSMC?
Jeff Su
So Charlie's question is very specific, although he wants us to comment on a customer saying Moore's Law is dead, but how do we reconcile this with a very strong leading edge demand into 2026 and also with system level innovations?
CC Wei
Okay, Charlie, this is CC Wei. Yeah, one of my customer, very important customers say Moore's Law is dead, but what it means is it's not only rely on the chip technology anymore. Now we have to focus on the whole systems of performance.
So he wanted to he want to emphasize the whole systems of performance rather than just talking about the Moore's Law, which is not enough to meet his requirement. So again, we work very closely with his people and to design our technology both in front end and back end and also in all the packagings to meet his requirement. That's all I can say.
Jeff Su
Okay, thank you. Do you have a second question, Charlie?
Charlie Chan
Yes, I I do answer Jeff. Yeah. So anyway, I would interpreted that as circled Moore's Law 2.0 that you you're Co CEO Mr. Griffo also can share during the semicon Taiwan. But anyway, I think since it's easy for your, your, your your commentary.
But my second question is actually a follow up from last quarter's same question back then. I I consult you about a China AI GPU demand, right, whether you can seize the market opportunity because China says video so is sending their AI infrastructure very rapidly.
But given the recent kind of back and forth between US and China, whether China can really impose NVIDIA, the GPU with that kind of discount, your potential long term growth of the AI CAGR, is that something that TSMC would worry about?
Jeff Su
OK. So Charlie's second question is related around AI demand and specific to China with the sort of the export control and restriction. His question is, does that impact our ability to address the market opportunity and will this impact our AI CAGR growth if we are not allowed to fully reserve China?
I think there will be both sides meaning restriction from the US, but also China government's kind of discouragement procure US chip. Sorry for interruption.
CC Wei
Well, Charlie, those big tools, I have a confidence on my customers. Both are in graphic or in ASIC. They are all performed very well. And so if the China market is not available, but I still think the AI growth will be very dramatical and as I said very positive and I have confidence that our customers performance and they will continue to grow and we will support them.
Charlie Chan
Thank you. Opportunity from China for the time being. You are still confident that a 40% CAGR or even higher can be achieved in coming years?
CC Wei
You are right.
Charlie Chan
OK, great. Thank you.
Jeff Su
Thanks, gentlemen. Yep, thank you, Charlie. Operator, can we move on to the next participant please?
Operator
Next one, Sunny Lin, UBS. Go ahead please.
Sunny Lin
Thank you very much. Good afternoon. Congrats on the very strong gross margin. So my first question is how should we think about 2026? I understand we should get better color maybe into January, but just want to get some directional major puts and takes for gross margin trending going to 2026.
Especially, how should we think about the gross margin impact from 2 nanometer ramp for 2026?
Jeff Su
OK. So Sunny's first question is regarding gross margin. She would like to know directionally how do we see the gross margin for next year 2026 in terms of certain puts and takes? And also if Wendell's able to comment specifically? Sunny, sorry if I heard you right on the N2 dilution impact, correct?
Sunny Lin
Yeah, that's right. Thank you. That's her first question.
Wendell Huang
OK, Sunny, yeah, it's, it's too early to talk about 2026, but you already mentioned about the N2 dilution and as all the new node when they just come out the N 2 will have dilution in our gross margin in 2020, in 2026, but at the same time the N3 dilution.
And it's gradually coming down and we expect the N3 to catch up to the the corporate average sometimes in 2026. The other factors includes like overseas fabs dilution, which will continue and which we said that it will be about 2 to 3% dilution in the early stage of the next several years.
That will also be there. And also we also saw the dramatic foreign exchange rate movement in the earlier part of this year. There's no control, We don't know where that will be, but every percentage move of dollar against NT will affect our gross margin by 50 to 40 basis point. So that just give you some rough idea.
Sunny Lin
OK. Thank you. Sorry if I may. Yeah, a very quick follow up And so on 2 nanometer and the typical 2 to 3% dilution by new node for the 1st 7 to 8 quarters of mass production being a good reference for two nanometer as well for 2026.
Jeff Su
OK. So Sunny, quick follow up, she wants to know for the two nanometer dilution if we're able to provide any detail and should you know, can she still think about it in terms of 7 to 8 quarters or 6 to 8 quarters dilution to reach the time, sorry to reach the corporate average?
Wendell Huang
Yeah. Sunny, let me share with you N2 structural profitability is better than N3, OK. Now the secondly, it's less meaningful nowadays to talk about how long it will take for a new node to reach the corporate average in terms of profitability.
And that's because the corporate, the corporate profitability, the corporate gross margin moves and generally it has been moving upwards. So less meaningful to talk about that.
Sunny Lin
OK, got it. No problem. Not very helpful. My second question is maybe for CC. Thanks a lot for sharing with us the details on how you think about the capacity expansions and planning. And so my question is now call AI is granting a lot faster than the prior opportunities like smartphones and PCs.
Yes, I think the demand for call AI is also maybe harder to forecast. So just want to maybe get the more color from you that now to the prior rounds of capacity expansions. What is TSMC doing differently versus before? And how do you ensure that while you are ramping up the capacities more quickly while you're having a good risk control? Thank you.
Jeff Su
OK, thank you, Sunny. So, Sunny, second question is regarding capacity planning and expansion in a capital intensive business. She knows this is very important, but in the past, smartphone and PC megatrends, today it's AI and cloud AI.
She's wondering, does that make this planning process more difficult to forecast and what are we doing differently or how do we forecast this to make sure that we are, you know, investing appropriately?
CC Wei
Sunny. Indeed, right now because of I believe we are just in the early stage of the AI application, so very hard to make the right forecast. At this moment, what we do differently, we. There's a big difference because right now we pay a lot of attention to our customers customer we talk too and then discuss with them and and do get their applications be in the search engine or in social media's application.
We we talk with them and see how they view the AI to those functions and then we make a judgment about what the AI going to grow and so this is what the different as compared with before we only talk to our customers and have an internal study this is a different did I answer your question
Sunny Lin
Thank you very much Yeah, yeah, yeah and looking forward to the CapEx guidance in January Thank you you're welcome
Jeff Su
All right, thank you Sunny. Operator, can we move on to the next participant please?
Operator
Next one, Bruce Lu, Goldman Sachs. Go ahead please.
Bruce Lu
Hello, thank you for taking my question. I think Jensen talk about like 3 to 4 trillion, you know AI infrastructure opportunity by 2030, right? This compared to like 600 billion CapEx reason of this year implies for about 40% CAGR users. This is similar to TSMC guidance for the AI growth, right?
But you know, for me, you know, first of all, what I want to know is what's the TSMC deal for the AI infrastructure growth for the next 5 years? And what's TSMC forecast for the token growth rate in the next few years?
TSMC used to provide the same industry growth, foundry growth and how much TSMC can outperform the industry, right? Given the context that you know, can we assume like you know, TSMC AI related revenue can track or well we'll track with the CapEx source of AI or the major quality service provider or should we expect even higher growth rate for TSMC considering you're potentially getting more value out of it?
Jeff Su
OK. Let me try to summarize your question, Bruce. He notes that one of our customers has highlighted a three to four trillion infrastructure opportunity over the next few years compared to you know 600 billion current CapEx implying a 40 something percent CAGR growth rate, which is similar to ours.
Bruce's question is, he wants to know what is TSMC's forecast or view for AI infrastructure growth. He would also like to know what is TSMC's forecast review for the token growth And then what is TSMC's AI related revenue growth? Can it track that of the cloud service providers? And his question is, should it be even higher? Shouldn't it be even higher given the value that we capture? That's actually several questions, but is that correct, Bruce?
Bruce Lu
That's right. Thank you.
CC Wei
Well, Bruce, essentially just want to know that how accurate that we can predict the AI's demand. We give you a number roughly 40 in the mid 40s is a CAGR that including all the infrastructures build up and also align with our major customers as forecast for. Their view more than that, I think, if we are talking.
About the tokens, the number of tokens I increase is exponential and I believe that almost every three months. Iraqi. Exponentially increased and that's why we are still very. Comfortable that the demand on leading edge semiconductor is real and as I continue to say that we we look at all the demand and look at our.
Capacity expansion we need TSMC need to work. Very hard to narrow the gap. That's what we are doing right now exact number that we, we probably would share with you in next year so that when we have a very better clear picture.
Bruce Lu
I think the I just had a quick follow up. I used to ask my second question anyway. I think the question is that the token growth seems to be substantially higher than the AI related revenue guidance on TSMC, right. So the gap is actually enlarging if you compound in the outer years, right.
That's why you know, that's, that's the differences between the what we see for the current outlook and the potential token, token consumptions, right. So the gap is continued to see the enlarging, you know how do we solve this and do do we really see that as a major issue?
Jeff Su
So, OK, so Bruce's second question which is the follow on for numbers first is that the token growth is growing at a much higher rate or exponentially than TSMC's AI revenue growth. And this gap will only enlarge in or widen in the next few years. So he wants to know, sorry Bruce, you basically what's the implication to TSMC or how do we see this? Is that correct?
CC Wei
OK, Bruce, you are right. You are right, The tokens and the number of tokens are increased exponentially is much, much higher than TSMC's CAGR as we forecasted. But let me tell you that first, our technology continue to improve and so our customer moving from one node to the next node so that they can handle much more tokens number in their basic fundamental calculation.
So that's one thing, you know, we, we progress very well from one node to the other node and our customer working. To continuously to improve their performance and that's why when we say that we have about 40. 45CAGR but then the token number are exponentially increased because of our customer and TSMC technology combined that can handle much more or much efficient than before. Did I answer your question?
Bruce Lu
I see. So you believe your node migration plus your customer design change can fulfill or can meet the explain your growth for the token consumption exactly. Is that the conclusion?
CC Wei
Yes, I understand.
Bruce Lu
OK. OK, quick follow up. Sorry Bruce, that was your second question.
Jeff Su
Operator, we need to move on. Thank you, Bruce.
Operator
Yes, next one. Laura Chang, Citi, go ahead please.
Laura Chang
Yeah, thank you very much for taking my questions. I appreciate CC sharing your view on TSMC strategy on the AI capacity planning. I think along with a very strong advanced node demand, I believe that the advanced packaging like CoWoS is also one of the focus for your AI clients they are now looking for.
I recall that TSMC previously also planned to expand. Packaging in Arizona, so can you give us updates? And also I mean for the time being, the very stretch demands at the moment, so with TSMC will work more closely with your OSAT partner to fulfill the strong demand at the same time. That's my first question. Thank you.
Jeff Su
OK, thank you, Laura. So her first question is on capacity planning. We have talked earlier on the call about the planning for leading nodes. She wants to understand also on the CoWoS capacity and specifically I guess advanced in Arizona and how do we work with our OSAT partners.
CC Wei
OK, we have announced our plan to build 2 advanced packaging in Arizona and to support our customers. But at the same time they actually right now we are working with the one OSAT big company and our good partner and they are going to build their, they are fab in Arizona and we are working with them because they they already breaking ground and the schedule is earlier than TSMC's two advanced packaging and we are working with them and our main purpose is to support our customer and so we can marry in the US.
Jeff Su
Laura, do you have a second question?
Laura Chang
Yeah. Yes, yes, certainly. I mean, obviously we see. The advanced, no advanced packaging are quite strong and also at the same time we are also seeing that the migration is also happening. For N2 and N3, so just wondering that from the revenue growth perspective, I know it's still early to predict next year based on your.
Guidance, but I'm just wondering will be more driven by the ASP increase because of the technology migration TSMC will be able to selling your. Value or more that would be driven by the capacity or volume growth on both end to run up and also CC. You mentioned some of the mild silicon.
So that may also drive some of the volume growth into. So just wondering like if you look at the growth outlook, there would be more driven by the technology with upgrade ASP increase or also more like a volume? That's my second question. Thank you.
Jeff Su
OK. So Laura's again second question is looking at 2026, she would like to understand what will be the key drivers of the growth. Is it more from the technology mixed migration things like N 2, is it more from ASP upgrade or is it more from just pure wafer volume growth?
CC Wei
Well, Laura or the above all right, OK, OK. You knew it right. I mean that's
Laura Chang
may I also follow up that because we see that actually N3 is very tight and at the same time. We are also kind of expanding into and CC you previous mentioned that you will migrate some of the even in seven and six and also in five to like specifically on three. So we also need to.
Add more capacity into next year from our newly added capacity. Sorry, Laura is saying that will next year will we continue? Sorry Laura, if I understand quickly, will we need to add new capacity? Will we continue to do conversion? What will we do to support the very strong demand we see at Leading Edge next year?
Jeff Su
Yes, thank you.
CC Wei
Well, let me answer that question. We continue to optimize the N 5, N 3 capacity to support our customer for the new building for the for the N3 capacity to expand. We put the new building for the N 2 technology. That's today's our plan. So OK, OK.
Laura Chang
Yeah. Thank you. Thank you. Very clear.
Jeff Su
Thank you, Laura. Operator, in the interest of time, will take the questions from the last two participants please.
Operator
Thank you. Is next one Krish Sankar TD Cohen. Go ahead, please.
Krish Sankar
Yeah, hi. Thanks for taking my question. My first one is CC. About 10 years ago back in the smartphone days, TSMC would talk about the revenue opportunity for TSMC per phone. I was wondering in today's world, can you talk about how much one GW of AI data centre capacity could transfer in terms of wafer demand or revenue for TSMC? And then I had a follow up.
Jeff Su
OK, so Krish's first question you notes in the past in the smartphone megatrend we talked about the content per phone opportunity for TSMC. So now with AI, is there a way to frame or quantify one GW of data center capacity? What is the revenue opportunity for TSMC?
CC Wei
We you know recently as I said, the AI is a demand continue to increase and then my customers say that one GW they need about invest about 50 billion. How how much of TSMC is a waiver inside? We are not ready to share with you yet because of a different from from different approaches, OK. Follow up.
Krish Sankar
Yeah, Excuse me. I just want to say that. But you know, right now it's not the only white ship actually it's a many chip together to form a system, right, got it, got it. Very helpful for that.
A little quick follow up. You know, I obviously you, you, you first forecast long term trends and then. Build capacity to towards that I'm going to show you when you look at the AI demand over the next. Several years from a TSMC angle. Doesn't matter whether it's. That demand is coming through a GPU or a ASIC. Does it have an impact on your revenue? Gross margin mix.
Jeff Su
OK, thank you, Krish. So his second question is again with our business outlook Again we forecast the long term trends. We plan our capacity as he said in a thorough and disciplined manner. His question is what are the implications for example of, I believe you said GPU versus ASIC in terms of the AI market, you know, do we have a preference or what is there a difference for TSMC? Is that correct, Krish?
Krish Sankar
That's right. The impact to revenue and gross margin whether it's a GPU or ASIC, right
CC Wei
so. No matter with GPU or is that ASIC is all using that our leading edge technologies and from our perspective we are, we are working with our customer and we all know that they are going to grow strongly in the next several years. So no depreciation in front of TSMC. We support all kinds of types.
Krish Sankar
Thank you very much.
Jeff Su
Operator, can we take? Thank you, Krish. So we'll take the question from the final participant, please.
Operator
It's last one of the line. Macquarie, go ahead, please.
Arthur Lai
Hi CC, Wendell and Congrats on Strong outlook as live from Macquarie. So my question is about competition. So CC you define the Foundry 2.0 market and I wonder what's the strategic initiative the TSMC undertaking to further strengthening your competitive landscape and also in the this border ecosystem?
So some context, I got the question from the US investor as your your clients announced they invest in the Intel. Thank you.
Jeff Su
OK. So Arthur's question is around competition in the Foundry 2.0 landscape, what strategic initiatives, what things are TSMC focusing on to further strengthen our competitive advantage? I think the last part author you're asking in the in the environment where one of our competitors in the US, how, how do we focus on the competition? Is that correct?
Arthur Lai
Yes, yes, yes. Thank you, chief.
CC Wei
OK, let me answer that one while we introduce our foundry 2.0 we set the purpose that as I said, one of my customers say that the system performance is very important in these days, not only a single chip and also. Let me share with you that our advanced packaging revenue is approaching. Close to 10% and it's significant in our revenue and it's important for our customer.
So that's why we introduce foundry to Taro to capitalize is a foundry business. Not as usual. Previously we only look at the front end portion. Now is the horse, the whole thing, the front end, the back end and also important for our customer. That's why we introduce to that all talking about our competition.
Well that that competitor is happen to be our customer, very good customer. So in fact we are working with them to for their most advanced product. Other than that I don't want to make any more comment.
Arthur Lai
Yeah, thank you. Can I ask the one more question these you have two, so your second question, Sure, Yeah. My second question is very quick on the end demand. So recall CC you last time mentioned that we should also monitor and worry about the pre build especially in the consumer electronics.
And then this quarter our number suggests that there's a QOQ 19% growth in the smartphone. So my my question is, do you still worry about the prebuild? Thank you.
Jeff Su
All right. So Arthur, second question is on a smartphone, do we are we concerned about prebuild or sort of I guess pulling prebuild from customers in that regard?
CC Wei
No, we don't worry about the prebuild because of when you have a preview, you have a inventory in this days, the inventory already go to that very seasonal level and very healthy. So no preview.
Arthur Lai
Thank you very much.
Jeff Su
OK, thank you, CC Thank you, Arthur. Thank you everyone. So this concludes our Q&A session. Before we conclude today's conference, please be advised that the replay of the conference will be accessible within 30 minutes from now. The transcript will become available 24 hours from now and both are going to be available through TSMC website at triplew.tsmc.com.
So thank you everyone for joining us today. We hope you all continue to stay well and we hope you will join us again next quarter. And. Early 2026. Thank you and have a good day.
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