Benign competitive landscape & industry short supply underpin growth trajectory

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Benign competitive landscape & industry short supply underpin growth trajectory

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Taiwan Semiconductor Manufacturing Co.

Benign competitive landscape & industry

short supply underpin growth trajectory

Reiterate Rating: BUY | PO: 3,100 TWD | Price: 2,470 TWD

Solid sales navigate through GM dip in 2H26 on 2nm ramp 17 July 2026

TSMC reported strong 2Q26 results, guided 2Q26 sales at +12-15% QoQ and further Equity

lifted sales to 40%+ YoY in US$, suggesting 11%+ QoQ in 4Q26 (vs. +8% seasonality)

for steep 2nm ramp for Apple and AMD and 3nm strength from GPUs/ASICs refreshes.

Key ChangesDespite dilution from overseas fabs and 2nm ramp and +28% HoH depreciation balanced

favorable utilization/pricing, GMs is guided to stay resilient at 66% +/-1% in 3Q26. (NT$) Previous Current

Tech/scale leadership & undersupply lift ’27-28 outlook 2026E2027E EPSEPS 106.78153.00 110.20153.17

With its leadership in technology roadmap, manufacturing execution and customer trust, 2028E EPS 178.13 181.96

TSMC should keep its dominant share in front-end process and stay as major advanced 2026E EBITDA (m) 3,989,367.9 4,083,248.5

packaging provider even with alternative solutions from its competitors fulfilling the 2027E EBITDA (m) 5,662,101.1 5,658,939.3

supply/demand gap. To support diversifying AI drivers, we estimate it will grow front- 2028E EBITDA (m) 6,495,806.6 6,603,232.3

end capacity on 3nm and below nodes 47% CAGR from ’25-28 and expand its 2.5D/3D

packaging offerings, requiring TSMC to meaningfully step up its capex in ‘27/’28 after Haas Liu >>

raising ’26 capex from US$56bn to US$60-64bn (vs. US$41bn in ’25). Even considering Research Analyst

Merrill Lynch (Taiwan)

depreciation hike from aggressive investment, TSMC’s sales could outgrow its CAGR +886 2 2376 3727