Dive Brief:
- Taiwan Semiconductor Manufacturing Co. announced $35.9 billion in revenue in the first quarter of 2026, slightly higher than its guidance of $34.6-$35.8 billion. This represented a 6.4% increase from the previous quarter and a 40.6% increase year-over-year.
- Gross profit margin for Q1 was 66.2%, operating profit margin was 58.1%, and net profit margin was 50.5%.
- Looking ahead, the company expects Q2 revenue to be between $39 billion and $40.2 billion, supported by continued strong demand for the company’s chip process technologies, SVP and CFO Jen-Chua Huang said on an earnings call Thursday.
Dive Insight:
TSMC’s Q1 increase in gross profit margin was primarily due to cost improvement efforts, a higher overall capacity utilization rate and a more favorable foreign exchange rate, Huang said on the call.
He added that the company expects some dilution in gross margin in the second half of the year, due in part to implementation of its 2-nanometer technology and overseas expansion efforts. He also cited geopolitical uncertainty in the Middle East, which is driving up prices for chemicals and gasses used in semiconductor manufacturing.
“On the other hand, we will continue to leverage our manufacturing excellence to generate more wafer output and drive greater cross node capacity optimization in our fab operations to support our profitability,” he said. Huang added that TSMC will also continue to diversify its sources of essential materials from different regions.
In addition, he said the company has “worked closely with Taipower and the Taiwan government to ensure a stable and sufficient energy supply.” For example, according to Huang, the Taiwan government has announced that it has secured enough liquid natural gas to last through at least May of this year.
In addition to its Q2 revenue guidance, TSMC is expecting its gross profit margin to be between 65.5% and 67.5%, and operating profit margin to be between 56.5% and 58.5%.
“Looking ahead, we are very mindful of the impact of rising component prices, especially in consumer and price-sensitive end market segment,” Chairman and CEO C.C. Wei said. “We are being prudent in our business planning while focusing on the fundamentals of our business to further strengthen our competitive position.”
Despite economic headwinds and geopolitical uncertainties, he said artificial intelligence-related demand continues to be strong, particularly due to the shift from “generative AI and the query mode to agentic AI and command and action mode.”
“This is driving the need for more and more computation, which supports the robust demand for leading-edge silicon,” Wei said.
Regarding expansion plans, Wei said the company will prioritize land in Taiwan to support implementation of its N2 node, a manufacturing process. He added that to meet the needs of its customers’ AI applications, TSMC is also stepping up investment in its N3 capacity.
In Taiwan, the company is adding a new 3-nanometer fab to its Gigafab cluster in Tainan Science Park, where volume production is scheduled for the first half of 2027. In Japan, it plans to use 3-nanometer technology at its second fab, with volume production scheduled in 2028.
The company’s second fab in Arizona has been built and will also use 3-nanometer technologies. Volume production will begin in the second half of 2027. Construction on the third Arizona fab has begun, and TSMC is in the process of applying for permits to begin building its fourth fab and first advanced packaging fab.
In March of last year, TSMC announced plans to invest an additional $100 billion in the United States, bringing its total investment to $165 billion. The expansion includes plans for six advanced wafer manufacturing fabs in Arizona.
