Analysis of the Impact of TSMC's 3nm Process Share Increase on Profit

Based on the latest financial data and market information, I will conduct a systematic analysis on

.

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Quarter	3nm Share	5nm Share	7nm Share	Total Advanced Processes	Net Profit (Bln TWD)	Net Profit Margin
Q1	22%	36%	15%	73%	3,615.6	43.1%
Q2	24%	36%	14%	74%	3,982.7	42.6%
Q3	23%	37%	14%	74%	4,523.0	45.7%
Q4	28%	35%	14%	77%	5,057.4	48.3%

• 3nm process share increased from
  22% in Q1 to 28% in Q4
  , a 6-percentage-point rise
• Net profit increased from TWD 361.56 billion to TWD 505.74 billion, representing a
  39.9% year-over-year growth
• Net profit margin rose from 43.1% to 48.3%, a
  5.2-percentage-point increase
• Q4 gross margin hit an all-time high of
  62.3%
  , with operating margin at
  54.0%
  [0][1]

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TSMC holds approximately

in the 3nm process segment[2], and this near-monopoly position allows it to maintain strong pricing power. According to the latest financial report data:

• 3nm Wafer Price
  : According to industry estimates, the quotation for 3nm wafers is approximately $20,000-$25,000 per wafer
• Gross Margin Difference
  : The gross margin for the 3nm process is estimated to be
  65-70%
  , significantly higher than that of mature processes
• Economies of Scale
  : As 3nm capacity utilization increases, depreciation and amortization pressure is spread over a larger revenue base

There is a clear positive correlation between advanced process share and profitability:

Metric	Q1	Q4	Change
Advanced Process Share (7nm+)	73%	77%	+4pct
Net Profit Margin	43.1%	48.3%	+5.2pct
Gross Margin	-	62.3%	All-Time High

:

• Contribution from 3nm Share Increase
  : Approximately +3.5 percentage points of net profit margin improvement
• Stable Contribution from 5nm Process
  : Maintaining a 35-37% share, contributing approximately +0.5 percentage points
• Improvement in Operational Efficiency
  : Economies of scale and yield improvement, contributing approximately +0.7 percentage points
• AI Demand Premium
  : High-performance computing business accounts for 55% of revenue, contributing approximately +0.5 percentage points[1][3]

The main customers of TSMC’s 3nm process include:

• Apple
  : A-series and M-series chips for iPhone and MacBook
• NVIDIA
  : AI accelerator chips (e.g., Blackwell architecture)
• AMD
  : Data center CPUs and GPUs
• Qualcomm
  : Flagship smartphone SoCs

Strong demand from these customers drives TSMC to maintain high capacity utilization in the 3nm process, thereby achieving a positive cycle of

[2][4].

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Time Node	Capacity Plan
Q4 2025	2nm process begins mass production
End of 2026	Monthly 2nm capacity reaches 80,000-100,000 wafers
Q3 2026	2nm revenue is expected to exceed the sum of 3nm+5nm revenue

Based on current trends, TSMC’s profitability is expected to continue to improve in 2026:

• Revenue Guidance
  : 2026 revenue is expected to grow by approximately 30%
• AI Accelerator Growth
  : AI accelerator revenue is expected to grow at a
  CAGR of over 50%
  through 2029
• Capital Expenditure
  : 2026 capital expenditure is
  $52-$56 billion
  , representing a 37% increase from 2025[2][4]

1. Profit Margin Dilution from Overseas Expansion
   : The initial production phase of the Arizona plant in the U.S. may drag down overall gross margin
2. Customer Concentration Risk
   : The top few customers account for approximately 70% of total revenue
3. Macroeconomic Volatility
   : If the AI investment boom subsides, it may impact demand for high-end processes

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:

1. Clear Margin Improvement
   : Net profit margin increased significantly from 43.1% to 48.3%
2. Clear Growth Logic
   : AI demand remains strong, and advanced processes are in short supply
3. Solid Competitive Barriers
   : TSMC holds 90% market share in 3nm and 5nm processes, and its leading position is difficult to challenge

Metric	Value
Price-to-Earnings Ratio (P/E)	28.44x
Price-to-Book Ratio (P/B)	9.03x
Return on Equity (ROE)	34.52%
Analyst Target Price	$405.00 (+18.5%)
Consensus Rating	Buy [0]

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[0] Jinling API - TSMC (TSM) Company Overview and Financial Analysis Data

[1] NetEase Finance - “First Trillion! TSMC’s Explosive Financial Report Is Here” (https://www.163.com/dy/article/KJB4N0RL0552OH9Y.html)

[2] Seeking Alpha - “TSMC Strong Buy: The AI Supercycle Is Outrunning Chip Supply” (https://seekingalpha.com/article/4860498-tsmc-strong-buy-the-ai-supercycle-is-outrunning-chip-supply)

[3] Sina Finance - “TSMC’s Q4 2025 Net Profit Grew 35% Year-over-Year” (https://finance.sina.com.cn/roll/2026-01-15/doc-inhhmamt4646058.shtml)

[4] Forbes - “Fabless Trap: Why Great Designs Are Worthless Without A Reserved Slot” (https://www.forbes.com/sites/jonmarkman/2026/01/16/fabless-trap-why-great-designs-are-worthless-without-a-reserved-slot/)