Taiwan Semiconductor Manufacturing "Quantifying the server CPU opportunity"

Research evidence excerpt

Taiwan Semiconductor Manufacturing "Quantifying the server CPU opportunity"

To % ch Cons.

US$3.7bn in 2025 or 3% of sales. See Figure 1UBSserverCPUTAMestimatessugestaUS$170bnmarketby2030E to Figure 10 RMserverCPUdiesizeestimates-computediearea.Weexpectdieareatoincreasefor our detailed analysis. 12/26E 97.98 98.86 1 95.15

12/27E 126.05 130.54 4 123.65

We expect much larger leading edge TAM 12/28E 160.68 169.97 6 152.50

Historically, a good leading edge node (e.g. N16/12, N7) for TSMC generally peaked at

Sunny Lin120-130kwpm capacity, but we think scale will expand to c200kwpm for N3 based on

Analyst

Cloud AI upside potential. We expect TAM of new nodes such as N2 and A14 to reach sunny.lin@ubs.com

300-350kwpm, based on the strong contribution from server CPU and accelerators and +886-2-8722 7346

re-accelerating process migration for smartphones and PCs given edge AI applications.

Randy AbramsWe forecast TSMC to maintain robust sales and earnings growth in the next several

years, based on the larger TAM (which offsets any mild share loss to Intel and Samsung randy.abrams@ubs.com

Foundry), higher blended ASP through increasing exposure to HPC and stronger +886-2-8722 7338

operating leverage.

Nicolas Gaudois

Valuation: reiterate Buy; raise price target from NT$2,650 to NT$3,000 nicolas.gaudois@ubs.com

We raise TSMC’s sales 3-7% and EPS 4-9% in 2027-30E to factor in larger server CPU +65-6495 5148

demand outlook. Based on a faster long-term earnings CAGR of 23% (21% previously),

our higher PT is based on 23x 2027E PE (21x previously). Due to the undemanding

valuation and the stronger growth and margin outlook, we expect TSMC to outperform

the broader tech supply chain in the next 12 months. Competition appears manageable