我们强调台积电台湾技术研讨会的要点并重申买入评级

yield curve easing competition concernMaintainRating:BUYIPO:2,560TWD/Price:2,270TWD Strong5/3nmscale limiting risk ofmajorbusinessloss as we believe recent concerns are overdone (see our update post its US event). It targetsto expand its 5nm and 3nm capacity by 25% CAGR from'22-27 while high equipment Haas Liu > commonality, cross technology planning and Al productivity gains (e.g. tool idle time andchamber cleaning schedule optimization) allow efficient conversion. Based on ourestimate, its3nmcapacityshould reach190k/230kWPMby4Q26/27(vs.SamsungSF3or Intel 18A's 20-25k WPM at low yield prioritized for captive products), limiting theconcern Apple's M series chipsets will shift away requiring 15k+ WPM peak capacityN2/A16 strengthens technology and margins leadership Research AnalystMerrill Lynch (Taiwan) haas.liu@bofa.comMike Yang >>Research AnalystMerill Lynch (Taiwan)+886 2 2376 3729 mike.c.yang@bofa.comRobert Cheng >>Research AnalystMerill Lynch (Taiwan)+886 2 2376 3731 delivering 45% more capacity vs. 3nm as it rolls out 5 fabs at once while reduces 20% robert.cheng@bofa.comCathy Hsu >>Research AnalystMerrill Lynch (Taiwan) technology transfer time. Although N2 is the 1st node using nanosheet technology, it hasreached the targeted defect density levels 2 quarters ahead of 3nm. While it still takes afew years for N2 to reach corporate GMs which is trending higher (vs. ~11 quarters forN3), we expect N2/A16 to enjoy a better margin profile vs.3nm on better yield curveFaster packaging technology upgrademitigate competition +886223763726cathy.hsu3@bofa.com TSMC expects to grow its CoWoS and SolC capacity by 80% and 90% CAGR respectivelyfrom '22-27. Notably, it is reducing the technology upgrade time by 30% for CoWoS and75% for SolC by supply chain collaboration. Its strong capability in early stage defectdetection is supporting 5.5x reticle CoWoS yield already at 98%+and will have >14xreticlesolutions readyin'29.While CoPoS mass ramp is toward'29,the CoWoSupgradeat good yield should keep its position vs. Intel's EMIB-T currently at 80-85% pilot yieldseeing risk of losing business if it fails to deliver 95% mass production yield by mid-27Estimates (Dec) (NTS)2024A2025A2026E2027E2028E Price (Common / ADR) This research report provides general information only. No part of this report may be usedor reproduced or quoted in any manner whatsoever in Taiwan by the press or otherpersons without the express written consent of BofA Securities.>> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analyst under the FINRA rules.Refer to'Other Important Disclosuresfor information on certain BofA Securities entities that take responsibility for the information herein in particular jurisdictions.BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict ofinterest that could affect the objectivity of this report. Investors should consider thisreport as onlya single factorinmakingtheirinvestment decision.Refer to important disclosures on page 6 to 9. Analyst Certification on page 3.PriceObjective Basis/Risk on page 3. Key Income Statement Data (Dec)2024A2025A2026E2027E2028E Semiconductors TSMC was founded in 1987 and is listed in Taiwan (2330TT) and the US (TSM/NYS).TSMC is the largest andglobal leader in integrated circuit (IC) manufacturing. As abuild-to-order foundry, it provides a wide range of valueadd activities: IC manufacturing, mask-making, IC designservices, turnkey solutions, and process development. Weattribute its success to its proven, winning business model,unparalleled scale advantage, optimized execution, andtechnology scope and depth. 5 shares = 1 ADR. The ongoing semi content growth in mobile, rise of artificial intelligence (Al), and proliferation of Internet of Things (loT)should result in sustainable upside in aggregate computingpower globally. TSMC, as the leading contract manufacturerof semiconductor chips, is in a good position to capitalize.We are structurally positive on TSMC and expect it tosustain over 15% growth with rising FCF from 2026onwards. Stock Data Shares / ADR5.00Price to Book Valuex6'L TaiwanSemiconductorManufacturingCo.(TSMWF/TSM) Our PO for TSMC is NT$2,560 per share (USS490per ADR), based on 20x2027E P/E TSMC's valuation has traded in the range of 10-26x PE from 2017. 20x is in the mid tohigh end of the historical range, above the average P/E of 18x. We think a PE above theaverage is justified given TSMC's enhanced industry position and mid-40% 5-year CAGRin Al should underpin a rerating smartphone/consumer electronics demand, (2) Intel's potential insourcing strategy andambitions in foundry service, and (3) execution risks on advanced nodes. (4) Higher thanexpected tariffs Analyst CertificationI, Haas Liu, hereby certify that the views expressed in this research report accurately reflect my personal views about the