For TSMC, at comparable revenue shares, N3 diluted corporate gross margin nearly twice as much as N5 and took a third longer to get to corporate avg. TSMC's N3 peaked at 3-4 percentage points of dilution when revenue share was 15-26%, quarters 3 through 6. Materially higher revenue share at peak dilution than N5, which means more total margin dollars were lost during the convergence period.
Added to that, the dilution stayed above 2 percentage points even at Q8 when revenue share was 23%, a point where N5 had already fully reached corp avg. The N5 to N3 tool conversion added another 1-2 percentage points on top, bringing the effective peak to nearly 5 percentage points of combined dilution at some point.N2, in contrast, will start with better profitability than N3 and will hit corporate average sooner even with much higher corporate avg margin (around 65%).Source: Sravan Kundojjala
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