The foundry industry hit a record $54.5B in 2Q26 (+28% y/y, 10th straight growth quarter) with almost none of it coming from new capacity. Supply rose just 6% y/y, so pricing and mix did the work, N2 and advanced packaging at the leading edge, and the first broad mature-node price increases since the COVID cycle at the trailing edge. Demand keeps tilting toward AI. HPC hit a record 66% of TSMC revenue while smartphone dropped to 22%. Utilization jumped to 90% from 85% as the recovery finally reached non-China mature fabs. TSMC still took 90% of the $30.1B gross profit pool at 73.8% revenue share, but the story underneath is ex-TSMC growth doubling to +14% in 2026 from +3% in 2025 on the pricing turn. 3Q26E accelerates to $61.4B (+34% y/y), the fastest of this cycle. (1/6)🧵

TSMC posted all-time highs in revenue ($40.2B), gross margin (67.7%), and operating margin (first quarter ever above 60%) because it is the only fab monetizing AI at scale. N3 remains the supply bottleneck of the AI cycle (three new N3 fabs coming in Taiwan, Arizona, and Japan, plus N5 conversions), and N2 entered the mix at premium pricing, lifting blended ASP by +14% y/y. Agentic AI is adding a CPU leg on top of accelerators, with x86, Arm, and RISC-V server designs all headed to N2. That demand picture is why capex is going vertical. (2/6)

Arizona rises to a $265B commitment, and the driver is simple. US customers want leading edge on US soil and are paying for it. Phase 1 is already profitable, and TSMC added $100B for probably four more fabs across 2nm-and-below logic and advanced packaging, plus 13 more leading-edge and packaging fabs in Taiwan. A14 stays on schedule (pre-production 2027, volume 2028). Samsung Foundry's 2nm order book is doubling because the market needs a second source with TSMC sold out. HBM4 base die gives SF4 a volume anchor, US CSPs are signing, 2nm project wins (Tesla AI5) should more than double y/y in 2026, and Broadcom is in talks on a $200B MoU running through 2030. Taylor Fab 1 starts operations this year, and Fab 2 breaks ground by year-end for 2030 production. (3/6)

The mature node inflection we called in May is confirmed, and it is a supply story. Samsung and TSMC exit 8-inch wafer capacity, while AI pulls PMIC, BCD power, and silicon capacitor demand into the same specialty fabs. Three years of price erosion ended. DB HiTek's operating margin jumped 6pp on its first post-COVID hikes, PSMC rides a 45% DRAM wafer price adjustment, UMC notified customers of roughly 10% increases from July, and Hua Hong and TSMC keep raising through 2027. Non-TSMC gross profit rose 30% q/q on those hikes. Silicon photonics is the other driver, with co-packaged optics pulling the optical path into the package. Tower raised its 2028 model to $3.6B revenue and $1.2B net profit with SiPh at a $680M annualized run rate (2x q/q), and UMC's board put nearly $5B into SiPh and advanced packaging. (4/6)