Taiwan announced its second quarter financial report for 2025, with a consolidated acquisition of approximately NT$933.79 billion, a pure profit of approximately NT$39.827 billion and an earnings per share of RMB15.36, setting a record quarterly high. At the French Session on the 17th, Chairman Wei Zhejia also explained several major aspects such as recent demand, profitability, impact on exchange rate, technical updates, and global footprint manufacturing. The following is a compilation of relevant content.
Outlook In the second half of 2025, no changes in customer behavior have been seen. However, it is understood that tax-related policies have potential impacts such as indetermination and risks, especially in consumer-related and price-sensitive end markets.
It was observed that rebate programs in China are stimulating some "short-term" demand to rise, and NTU still expects the overall non-artificial intelligence (AI) end market to recover gently in 2025. I believe that the demand for semiconductors is fundamental, and this demand situation will remain strong.
Recent development is also conducive to the long-term demand outlook for AI. (Large Language Models Process Text) Explosive growth in the number of tokens shows that the use and introduction of artificial intelligence models is increasing, which means that more computing needs will drive the rise in demand for advanced semiconductors. We have also seen the market's continued strong demand for AI, including increasing demand for autonomy AI (Sovereign AI).
Therefore, it is expected that in US dollars, the expected growth of Telco's annual revenue outlook for 2025 will be approximately 30%, which will be supported by the strong market demand for 3-nanometer and 5-nanometer technologies in the leading NTD industry, and will benefit from the growth of Telco's high-efficiency computing platform.
In the absence of clear circumstances, NTU will be cautious about potential tax-related impacts, and carefully plan our business in the second half of 2025 and 2026. At the same time, NTU will continue to invest in the future trend. We will also focus on business fundamentals, namely technology leading, excellent manufacturing and customer trust, to further strengthen our competitive position.
Profitability
Compared with the first quarter of 2025, NTU's gross profit margin fell slightly by 20 basis points to 58.6%. The main reasons are the adverse foreign exchange rate and the dilution of profits from overseas crystal plants. However, these effects are partially offset by higher-than-expected overall energy utilization and cost optimization measures.
Compared with the first quarter of 2025, the exchange rate was NT$32.88, and the actual exchange rate in the second quarter was NT$31.05. This put pressure on the actual gross margin in the second quarter at about 220 base points. In addition, it is also affected by the improvement of overseas crystal plants' capacity, which is slightly higher than 100 base points, mainly because the profits of the Arizona crystal plants are beginning to appear.
Taiwan's gross profit margin outlook for the third quarter will decline by 210 base points to a median of 56.5%, mainly due to the continued unfavorable foreign exchange rate and the further increase in crystal plants in Kumamoto and Arizona, the profit from overseas crystal plants will be more significant. Taiwan Power maintained its previous forecast. In the next five years starting in 2025, the gross profit margin caused by overseas crystalline factories will have an initial impact of about 2~3% per year, and will expand to 3~4% in the later period. Despite the high cost of overseas wafer factories, it will continue to expand its scale in Arizona and work hard to improve its cost structure, and will continue to work closely with customers and supplier partners to control related impacts.
Overall, under the fundamental competitive advantages of Telco's leading manufacturing technology and large-scale manufacturing bases, Telco is expected to become the most efficient and cost-effective manufacturing service provider in each of our operations.
The impact of exchange rateNew Taiwan Coin is a reporting currency for all financial reports of Taiwan Electric Power. However, Taiwan Electric's operating revenue is almost in US dollars, and about 75% of the sales cost is in New Taiwan Coin. Therefore, the change in the exchange rate of NT$ on the US dollar has a significant impact on the revenue and gross profit margin reported by us.
The change in the exchange rate of NT$ to the US dollar is close to 100% sensitivity to revenue. In other words, for every 1% appreciation of NT$ to the US dollar, the reporting revenue at the NT$ price will be reduced by 1%; and under the same 1% exchange rate change, the sensitivity of gross profit margin is about 40 base points, that is, if every 1% appreciation of NT$ to the US dollar, the gross profit margin of NT$ will drop by about 40 base points.
Compared with the outlook for the exchange rate provided on April 17 for the second quarter (i.e., NT$32.50) of NT$1, the average appreciation of NT$ is about 4.4%. Therefore, if NT$ is used, this negative impact on NT$2's second quarter acquisition and reduced gross profit margin by about 180 base points.
For the third quarter of 2025, based on the current exchange rate (USD NT$29, NT$1), the NT$ will appreciate by an average of 6.6%. Therefore, if the NT$ is used, this will have a negative impact on the NT$3 investment of NT$ and reduce gross profit margin by about 260 base points.
Taiwan Power's profitability includes six major factors: leading technical development and capacity improvement, pricing, energy utilization, cost optimization, technical combination and exchange rate, among which the exchange rate cannot be controlled by the motor and electricity.. When the exchange rate is unfavorable, as is the case now, we will focus on the core foundation of our business and rely on the other five factors to be right, as we have done successfully in the past. Therefore, even if we consider the exchange rate that is unfavorable to us so far, the long-term gross profit margin of more than 53% is still real.
Telectronics' 2nm and A16 technologies are leading the industry in terms of the ever-ending demand for the energy-saving operation, and almost all relevant innovators are working with NTEC.
It is expected that with the promotion of smart phones and HPC applications, the number of 2-nanometer tape outs of TECHNOLOGY's product design decisions will be higher than the same period of 3-nanometer and 5-nanometer performance in the first two years. Telco's N2 process technology provides the best performance and power consumption across the generation. Compared with N3E, the speed increases by 10-15% at the same power consumption; or the power consumption decreases by 25-30% at the same speed, and the chip density increases by more than 15%.
N2 will enter mass production as scheduled in the second half of 2025, and its mass production curve is similar to N3. Under the continuous strengthening strategy of Telco, N2P processing technology has also been launched as an extension of the N2 family. N2P has better performance and power consumption advantages on the basis of N2. N2P will power smart phones and HPC applications and will be produced in the second half of 2026.
A16 will also be launched in the future with Super Power Rail (SPR). Compared with N2P, the A16 speed increases by 8~10% at the same power consumption, or the power consumption decreases by 15~20% at the same speed; the wafer density increases by 7~10%. The A16 is the best solution for high-performance computing (HPC) products with complex messaging cables and dense power supply networks. A16 will enter volume production in the second half of 2026 by plan. The A14 will adopt the second generation of nanochip transistor structure of tyrene and realize another generation of process technology improvements on the N2 basis. Its performance and power consumption are excellent, and can meet the increasingly high-performance and energy-saving structural needs.
Compared with N2, A14 will increase its speed by 10~15% at the same power consumption, or reduce its power by 25~30% at the same speed; the wafer density will increase by about 20%. A14 technology development is carried out according to the plan and is progressing well, and its device performance and yield optimization are as expected, or even exceeding expectations. A14 is expected to start production in 2028.
Taiwan will continue to strengthen its strategy for the A14, including the plan to launch a solution that uses super-powered devices in 2029. We believe that A14 and its derivative technologies will further expand the technical advantages of TEU and allow TEU to have a good grasp of growth opportunities in the future.
All overseas decisions of NTU are based on customers' needs, because customers value certain regional activity; in addition, they also include the necessary degree of government support. This is to maximize the value of Taiwan Electric Stock Exchange.
With the strong cooperation and support of advanced American customers and the federal, state and municipal governments of the United States, Taiwan Electric recently announced that it intends to invest a total of US$165 billion in advanced semiconductor manufacturing in the United States. This investment includes the construction of six wafer round factories, two advanced packaging factories, and a major R&D center. The first wafer factory in Arizona has successfully entered mass production using N4 process technology in the fourth quarter of 2024, with a yield comparable to Taiwan's wafer factory. The second wafer factory that will adopt 3-nanometer process technology has been completed and has seen a strong interest from advanced American customers and is committed to accelerating production progress for several quarters to support customer demand.
The third wafer factory that will adopt N2 and A16 processing technology has begun to operate. Due to the strong demand for AI, Taiwan Electric will also consider accelerating production progress. The fourth wafer factory will use N2 and A16 processing technology, while the fifth and sixth wafer factory will use more advanced technology. The construction and production plans of these crystalline factories will be determined by customer needs. Telco's expansion plan will make Telco enough to expand into a huge crystalline factory (GIGAFAB®) settlement in Arizona to support the needs of leading customers in areas such as smart phones, AI and HPC applications.
We are also planning to build two new advanced packaging facilities and set up a research and development center to improve the AI supply chain. After the project is completed, about 30% of our advanced process capacity of 2 nanometers and more will come from the Arizona crystal factory, becoming an independent advanced semiconductor manufacturing settlement in the United States. Therefore, NTU will continue to play a key and indispensable role in supporting customers' success, and will continue to serve as key partners and promoters who strengthen the US semiconductor industry and its leading position.
In Japan, thanks to the strong support of the Japanese central government, prefectural government and local governments, our first special process technology wafer factory in Kumamoto started mass production at the end of 2024 with very good yields. The construction project of the second special-process crystal factory will be scheduled to be launched later this year, depending on the situation of local foundation facilities. The volumetric production plan of the crystal factory will be determined by customer needs and market conditions.
In Europe, we have received a commitment from the European Commission, the German Federal Government, the state and municipal governments. We are planning to build a special process technology wafer factory in Delesten, Germany and are progressing well. The volumetric production plan of the crystal factory will be determined by customer needs and market conditions.
With the support of the Taiwan government, we plan to build 11 wafer factories and four advanced packaging facilities in China in the next few years. We are planning a 2-nano crystalline plant in Hsinchu and Kaohsiung Science Park to support customers' strong structural needs. By expanding our global manufacturing footprint and continuing to invest in Taiwan, NTU will continue to be a trusted technology and capacity provider for the global logical IC industry in the coming years, while bringing profit and growth to our shareholders.