Five major profit-making keys are indestructible. Taiwan s long-term gross profit margin is stable

Listed counter company 2025 second quarter financial reports continue to appear, exporters are comprehensively facing pressure testing of exchange rate fluctuations. Among them, Taiwan Power's gross profit margin in the second quarter maintained 58.6%, which only declined slightly compared with the previous quarter. Faced with the challenges brought about by the increase in the cost of new overseas factories, Taiwan Power was confident and reiterated that the long-term gross profit margin of 53% and above will not change, fully demonstrating the profitability of Shenshan level.

Taiwan Power explained this that the company's profitability includes: advanced technology development and production capacity improvement, pricing, cost optimization, production capacity utilization, technical combination and exchange rate. Among them, exchange rate is the only uncontrollable. When exchange rate becomes an unfavorable condition, we must pay attention to the other five factors. After all, what does these five factors represent? This article will be further analyzed.

Trade war in 2019 has become a turnover, gross profit margin has been rising

After observing past data, the gross profit margin of Taiwan's electricity supply quarter before 2019 was mostly in the 4-character quarter, and has remained above 50% since 2020, with the lowest drop in the first quarter of 2009, mainly affected by the financial crisis, and the gross profit margin once fell to 18.94%. At that time, due to the outbreak of the cuts, founder Zhang Zhongxie re-dressed in 2009. The company established a business development department, and determined that the business revenue was 8% for R&D costs, and significantly increased capital expenditures. After that, the gross profit margin quickly rose to a level of 4 to 50%.

Another turnover was the trade war that broke out in 2019. The US government has continuously issued a series of chip bans against China. Under equipment and technical controls, China's wafer manufacturing has been difficult to develop in advanced processes. Since then, the leading advanced process suppliers have no numbers except Taiwan Electric. In addition, the 2020 epidemic situation boosted the profit margin and increased the price benefits. NT$50.2% in the fourth quarter of 2019 and then rose all the way. Due to favorable exchange rate factors, the NT$62.22% high was reached in the fourth quarter of 2022.

2nm family has strong demand. 200,000 tablets in 2028

Among the six key factors that NTF makes profitability a reality, the first and most important is the development and production capacity improvement of advanced processes. Taiwan Electric continued to accelerate its pace in the advanced process, and the customers were unable to move forward because of other competitors. To spread the world, only Taiwan's energy supply has a high yield and abundant production capacity.

Because of this, NTU has a more foundation in the expansion. It is reported that NTU can reach a scale of more than 100,000 tablets as soon as possible by the end of 2026, and will reach about 200,000 tablets in 2028. If the future US factory part is added, it will not only be this. In terms of customers, in addition to the ultramicro (AMD), there are also Apple, Qualcomm, Intel, Technologies, Miweier, Broadcom, Bitmain and other first-line factories.

If we look at the product combination, NTU revealed information in 2019 showed that 7 nanometers accounted for more than 20% of the operating income, including advanced production processes with 16 nanometers and below, accounting for more than 50%; and now the advanced production process definition has become less than 7 nanometers. In the second quarter of 2025, NTU's 3 nanometer process revenue accounted for 24%, 5 nanometers and 7 nanometers were 36% and 14%, respectively, reaching 74%, showing the company's benefits in advanced technology promotion and production capacity expansion.

5/3 nanometer crop rate is full, 2 nanometer storage is waiting to be developed

The time lag was pulled back to 2019. At that time, foreign-invested legal entities were highly doubted about Taiwan's continued expansion of capital expenditures, worried that there would be a vacancies in production like after the large-scale expansion in 2010 (28 nanometers). If several years later, when customers walked towards 3 nanometers and 2 nanometers, who would come to fill these production capacity? At that time, Wei Zhejia replied that the company's 7 nanometers and 5 nanometers technology barriers were very high, and it would be inconvenient to comment on the opponent's status (implicitly that opponents such as Samsung were behind).

From this, it can be seen that for NTU, in addition to technological advancement and improvement in production capacity, another important key factor is the crop rate. It is necessary to ensure that the crop rate of all lines remains high. Therefore, customers must be encouraged to buy higher value products, which will help the gross profit margin reach the company's long-term goals. Currently, 5 nanometers and 3 nanometers are maintained at full capacity, and the 2 nanometer customers who have just launched the venue are also in the first place in terms of production capacity.

Recently, NTU announced that the company will gradually end its 6-inch crystal circular manufacturing business in the next two years and will continue to integrate 8-inch crystal circular production capacity to improve the organization's operating efficiency and enhance the overall operating efficiency, which is also in line with the company's profitability key principles. Industry insiders analyzed that TECHNO has focused on developing special processes in the mature process field in recent years. The 6-inch and 8-inch product lines are not in line with economic benefits, so they must be reintegrated for more effective use.

Reveal value to customers every year and reduce cost pressure

In addition, accurate price strategies are also a major boost to boost Taiwan's gross profit margin. In fact, NTD canceled the sales discount during the red-profit period of the epidemic, and then opened up the price. The company has started to adjust the price of the entire line in 2022, and then it will increase year by year. The company has increased the price of the US factory by 30%, and there will be room for price growth. According to the company's consolidated financial report in the first half of 2025, the Arizona factory has lost money and recognized investment income of 6.447 billion yuan for the first time.

Taiwan Electric has always adhered to its trust relationship with customers, and its price strategy has been considered in full. As Wei Zhejia said, "The company continues to develop and maintains technical advantages, and will reflect its value to customers." Therefore, in the face of uncertainty in tax wars,Taiwan Electric Power successfully transfers costs to customers and suppliers, and maintains continuous improvement in profitability.

It is worth mentioning that in the advanced packaging field, Taiwan Electric also fought against the world without any enemy. It is understood that before the CoWoS commercial machine exploded, Taiwan Electric's advanced packaging gross profit margin was about 30%, which was far higher than that of general packaging factories.. Since CoWoS is a relatively mature technology, it has learned curves and mainly purchased Taiwanese factory equipment, it can reduce costs under effective supply chain management. Basically, it is directly "printing". It is known that Taiwan's current gross profit margin of advanced packaging is more than 70%, which is higher than advanced processes, and it also makes the overall technical combination more optimized.

Although TECHNOOC will increase its discount costs after large investments at home and abroad, and brings pressure to gross profit margin, TECHNOOC expects that in the next five years, the gross profit margin caused by overseas crystalline production will affect about 2 to 3% per year in the initial stage and will expand to 3 to 4% in the later stage. However, the legal person believes that under the five major profit-making keys, the company's long-term gross profit margin will be more than 53%, and the overall profitability is still at the level of education and science books.