TSMC's Q1 2025 Earnings Call: Unpacking Contradictions in AI Demand, U.S. Investments, and Technology Strategy

These are the key contradictions discussed in Taiwan Semiconductor Manufacturing Company Limited's latest 2025Q1 earnings call, specifically including: AI demand and supply balance, U.S. investment rationale, and technology leadership and capacity planning:



Revenue and Profitability Trends:
- TSMC reported first-quarter 2025 revenue of $25.5 billion, with a 3.4% sequential decrease in NT dollars and 5.1% in U.S. dollars.
- The decline was attributed to the impact of smartphone seasonality and the January 21 earthquake, despite AI-related demand contributing positively.

Gross Margin and Cost Dynamics:
- TSMC's gross margin decreased by 0.2 percentage points sequentially to 58.8%, primarily due to impacts from the earthquake and overseas fab dilution.
- The earthquake contributed a 60 basis points impact, while the start of overseas fab dilution primarily affected the March quarter finances, with further dilution expected to reach 2% to 3% margin dilution impact annually.

Advanced Process Technology and Platform Performance:
- 3-nanometer process technology contributed 22% of wafer revenue, with 5-nanometer and 7-nanometer accounting for 36% and 15% respectively.
- The revenue from the HPC segment increased 7% to account for 59% of the first-quarter revenue, driven by strong AI-related demand.

Capital Expenditure and Capacity Expansion:
- TSMC's capital expenditures totaled $331 billion in the first quarter, with a planned budget for 2025 between $38 billion and $42 billion, with 70% allocated for advanced process technologies.
- The company is investing in expanding its global footprint, including an additional $100 billion investment in Arizona, citing strong demand from customers like Apple, NVIDIA, and AMD.