Taiwan Semis Semiconductor IP sensing different progress in advanced node achievement

Semiconductors - Taiwan Semiconductor IP: sensing different progress in advanced node achievement Price Objective Change

Reiterate Buy on eMemory and Underperform onM31 14 August 2026

Taiwan semiconductor IP (intellectual property) names including eMemory and M31 Equity hosted 2Q26 earnings call this week, and we update the estimates and PO accordingly in Taiwan this report. For eMemory, we reiterate Buy in view of its steadier growth path thanks to Semiconductors its solid industry position, coupled with benefits from penetration toward advanced Mike Yang >> nodes and foundry price hike, and our PO goes to NT$3,900 (was NT$4,500) on DCF Research Analyst Merrill Lynch (Taiwan) (discount cash flow) with unchanged assumptions. As for M31, we stay Underperform given higher level of uncertainty driven by higher portion of the business coming from

licensing, and our PO goes to NT$360 (was NT$435) based on an unchanged 50x P/E Haas Liu >> Research Analyst (with valuation period rolled over to 4Q26-3Q27E from 3Q26-2Q27E). Merrill Lynch (Taiwan) eMemory: wider use cases in advanced nodes & flash Cathy Hsu >> eMemory’s 2Q26 net income was 9% ahead of BofAe, and it was largely in-line with Research Analyst consensus. During the earnings call today, management highlighted accelerated revenue Merrill Lynch (Taiwan) growth ahead in royalty business, driven by customers’ new products, higher PUF (physically unclonable function) and MTP (multiple time programmable) revenue contributions, with applications including SSD (solid state drive), accelerators, ADAS (advanced driving assistance system) and networking chips. Longer-term, we also flag positives from 1) over 50% licensing revenue mix based on advanced nodes so far, with extended applications toward CXL (compute express link), FPGA (field programmable gate array), optical communication and interface chips; and 2) progress in 1T flash with Exhibit 1: Summary of PO change multiple foundry partners, which eMemory cites to enter production in 2027 at earliest. We trim POs on two stocks in this report On the estimates, we trim 2026-28E EPS by 13-14% to factor in an updated business PO (local outlook, including the release of July revenue in the near-term. currency) Company Ticker New Old M31: 2026 operational target looks challenging; cut PO eMemory 3529 TT 3900 4500 M31 remained loss-making in 2Q26 (same as 1Q26/2Q25) given a smaller revenue scale, M31 6643 TT 360 435 which was not enough to offset the elevated opex. Number of new licenses signed was Source: BofA Global Research 57 in 2Q26, representing ~22% QoQ drop vs 73 in 1Q26. Management still targeting BofA GLOBAL RESEARCH

10+% revenue YoY in 2026 (implying a 40%/60% revenue split in 1H26/2H26), which in our view remains challenging given the uncertainty from foundry licensing in advanced process. Yet on the royalty side, it shares the view of accelerated revenue contribution from more advanced nodes, as its customer finished the project tape-out with royalty revenue contribution expected to kick in from late-2026/early-2027. The company further expects revenue mix from royalty business to exceed 20% in 2027, and it shares a longer-term goal for the number to reach 30%. On the estimates, we lower 2026-28E EPS by 10-66% after baking in the 2Q26 results and updated business outlook.

This research report provides general information only. No part of this report may be used or reproduced or quoted in any manner whatsoever in Taiwan by the press or other persons without the express written consent of BofA Securities. >> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analyst under the FINRA rules. Refer to "Other Important Disclosures" for information on certain BofA Securities entities that take responsibility for the information herein in particular jurisdictions. BofA Securities does and seeks to do business with issuers covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to…