---
endpoint: analytics
pattern: 04 · Peer · valuation compare
status: done
latency_ms: 174469
conversation_id: 13362a2a-ee5b-4527-9fed-46ba18766c96
citations: 8
created: 2026-05-31 17:06:30Z
---

# Pull TSMC vs SMIC last quarter — and run our DCF with overrides.

# TSMC vs SMIC — Q1 2026 Side-by-Side

Both companies have reported their March-quarter (Q1 2026) results. TSMC reported 16-April-2026; SMIC reported in early May. The gap between the two foundries widened further on every axis that matters — scale, technology mix, profitability, and growth runway.

## Headline P&L Comparison (Q1 2026)

| Metric | TSMC (2330) | SMIC (981) | TSMC / SMIC |
|---|---:|---:|---:|
| Revenue (USD) | **$35.9B** [1] | **$2,505M** [6] | ~14.3x |
| Sequential growth | +6.4% QoQ [1] | +0.7% QoQ [6] | — |
| Gross margin | **66.2%** (+390 bps QoQ) [1] | **20.1%** (+90 bps QoQ) [6] | ~46 pp gap |
| Operating margin | 58.1% [1] | ~9.9% (op profit $248M) [6] | — |
| Net profit | EPS TWD 22.08; ROE 40.5% [1] | $197M [6] | — |
| GM beat vs prior guide | +120 bps above high end [2] | Within prior 19–21% range [6] | — |

TSMC's Q1 GM beat was driven by "a higher-than-expected overall capacity utilization rate and better cost improvement efforts" [2]. SMIC attributed its modest GM lift "mainly due to an increase in pricing and improved product mix" [8].

## Q2 2026 Guidance

| | TSMC | SMIC |
|---|---|---|
| Revenue | $39.0–40.2B (+10% QoQ / +32% YoY at midpoint) [3] | +14–16% QoQ [8] |
| Gross margin | 65.5–67.5% (midpoint 66.5%, +30 bps QoQ) [3] | 20–22% [8] |

SMIC's Q2 revenue jump is being driven by "increased blended ASP" as the company "negotiated price increase with customers for product categories that are in short supply" — a NOR flash / SLC NAND / BCD-driven mix story, not a leading-edge story [8].

## Technology & End-Market Mix

**TSMC (Q1 2026)** [1]:
- N3 = 25% of wafer revenue, N5 = 36%, N7 = 13% → **74% from ≤7nm advanced nodes**
- HPC = **61%** of revenue, +20% QoQ
- Smartphone = 26%, -11% QoQ
- IoT 6%, Auto 4%, DCE 1%

**SMIC (Q1 2026)** [7]:
- 12-inch 76% / 8-inch 24% of wafer revenue
- By geography: **China 89%**, Americas 9%, Eurasia 2%
- By application: Consumer **46%**, Smartphone 19%, Industrial/Auto 14%, Computer/Tablet 14%, IoT/Connectivity 7%
- 8-inch revenue +6% QoQ driven by "strong demand for AI supporting chips and capacity supply squeeze in other application sectors" [7]

The mix divergence is the story: TSMC's growth is HPC/AI accelerator wafers at leading-edge; SMIC's growth is mature-node BCD, NOR flash, and AI-adjacent power/analog chips, mostly sold into a domestic Chinese supply chain.

## Capex / Capital Intensity

- **TSMC** spent **TWD 351B (~$11.1B) on capex in Q1 alone** and revised the full-year 2026 capex envelope to **the high end of the $52–56B range** [4][3]. CapEx-to-revenue ~31% at Q1 run-rate.
- **SMIC** Q1 investing cash outflow was **$1,697M** [6] — roughly 68% of revenue. The board also formally announced no 2025 cash dividend, citing FCF still negative after capex and the need to "prioritize capacity construction and R&D" (per the same earnings call).

Capital intensity is similar in % terms, but absolute scale isn't comparable — TSMC's quarterly capex alone (~$11.1B) is more than 4× SMIC's annualized revenue base.

## Long-Term Margin Framework (TSMC only)

TSMC explicitly revised up its through-cycle targets: **"gross margins will be 56% and higher through the cycle. And we are looking at ROE of high 20% through the cycle"** [5] — both higher than the prior framework. The 2nm ramp dilutes GM 2–3% for full-year 2026, with overseas fab dilution 2–3% near-term widening to 3–4% later [2]. N3 GM is expected to cross corporate average in 2H26 [2]. SMIC did not provide a comparable through-cycle framework.

## So-What

1. **The moat is widening, not narrowing.** TSMC printed a +6.4% QoQ revenue beat on already-record scale while expanding GM by 390 bps — and is guiding Q2 to +32% YoY. SMIC printed +0.7% QoQ with a 20.1% GM. The ROE gap (40.5% vs sub-10% operating margin on a heavily depreciated mature-node base) is structural.
2. **SMIC's Q2 acceleration is a mix/pricing event, not a node migration.** The +14–16% QoQ guide is driven by ASP increases on NOR/SLC NAND/BCD where supply is constrained — that's a cyclical pricing window, not a leading-edge ramp [8].
3. **AI HPC concentration risk at TSMC works both ways.** HPC at 61% of mix and growing 20% QoQ is the bull case; it is also the entire bear case if hyperscaler capex normalizes.

---

## On the DCF With Overrides

I don't have a DCF builder with override capability in my current toolset — the available skills include `wacc-v1` (bottom-up beta + cost of capital), `deep-dive`, `peer-comp`, and `earnings-review`, but no DCF model with user-supplied overrides. The closest match would be running `/wacc-v1` for each name to get a clean discount rate, then layering it into a manual DCF.

**To run the DCF you're asking for, I need:**
1. Which ticker — TSMC, SMIC, or both?
2. Override values you want to set: revenue CAGR, terminal GM/op margin, terminal growth, WACC, capex-to-revenue, working-capital assumptions, and any explicit-period FCF inputs you want to pin.
3. Reporting currency (USD vs TWD vs HKD) and DCF horizon (5y, 10y explicit + terminal?).

If you have a template/sheet you normally use ("our DCF"), paste the assumption rows or the prior model output and I'll mirror that structure with the Q1 2026 actuals already plugged in. Or just give me the override deltas vs base case and I'll walk through the impact.

---
**Sources**

[1] Taiwan Semiconductor Manufacturing Co., Ltd. — Q1 2026 Earnings Call (16-Apr-2026) — financial summary
[2] Taiwan Semiconductor Manufacturing Co., Ltd. — Q1 2026 Earnings Call — gross margin commentary, long-term dilution
[3] Taiwan Semiconductor Manufacturing Co., Ltd. — Q1 2026 Earnings Call — Q2 2026 guidance
[4] Taiwan Semiconductor Manufacturing Co., Ltd. — Q1 2026 Earnings Call — capex Q&A (Haas Liu, BofA)
[5] Taiwan Semiconductor Manufacturing Co., Ltd. — Q1 2026 Earnings Call — long-term margin framework
[6] Semiconductor Manufacturing International Corporation — Q1 2026 Earnings Call — financial summary
[7] Semiconductor Manufacturing International Corporation — Q1 2026 Earnings Call — revenue mix by region/app
[8] Semiconductor Manufacturing International Corporation — Q1 2026 Earnings Call — Q2 guidance & ASP commentary

## Citations

- [1] **Taiwan Semiconductor Manufacturing Co., Ltd., Q1 2026 Earnings Call, 16-April-2026 2** · external
- [2] **Taiwan Semiconductor Manufacturing Co., Ltd., Q1 2026 Earnings Call, 16-April-2026 2** · external
- [3] **Taiwan Semiconductor Manufacturing Co., Ltd., Q1 2026 Earnings Call, 16-April-2026 2** · external
- [4] **Taiwan Semiconductor Manufacturing Co., Ltd., Q1 2026 Earnings Call, 16-April-2026 2** · external
- [5] **Taiwan Semiconductor Manufacturing Co., Ltd., Q1 2026 Earnings Call, 16-April-2026 2** · external
- [6] **Semiconductor Manufacturing International Corporation, Q1 2026** · external
- [7] **Semiconductor Manufacturing International Corporation, Q1 2026** · external
- [8] **Semiconductor Manufacturing International Corporation, Q1 2026** · external

