MAPS Portfolio Note: TSMC and SK Hynix just made the case for Asia semiconductors

• TSMC delivered 1Q26 revenue of USD 35.9 billion, up 40.6% year-on-year, with an operating margin of 58.1% — its highest ever. Management raised full-year 2026 revenue growth guidance to above 30%.

• SK Hynix posted record quarterly revenue of KRW 52.6 trillion in 1Q26, up 198% year-on-year as DRAM prices rose more than 60% quarter-on-quarter. Capacity is effectively sold out for the next few years. 

• AI demand is the engine behind both results. TSMC reported that High Performance Computing (its AI-driven segment) now accounts for 61% of revenue. SK Hynix continues to dominate the high-bandwidth memory market, the critical memory layer in every AI accelerator.

• These results reinforce our overweight stance on Asia ex-Japan and the digital economy. The structural case for semiconductors —driven by AI infrastructure buildouts that continue to show no signs of slowing —remains firmly intact. 

• We remain confident in the long-term growth trajectory of the digital economy and our strategic exposure to it through MAPS. Markets may be noisy right now, but the earnings tell the real story.

Markets have been volatile. Geopolitical headlines have rattled sentiment, and many investors are sitting with more questions than answers. We understand that. But we want to share something with you that the short-term noise often obscures: corporate earnings are still doing the heavy lifting, and in Asia’s semiconductor industry right now, they are doing it in spectacular fashion.

That is why we recently increased our Asia ex-Japan allocation from neutral to overweight, and initiated a position in the Global X Asia Semiconductor ETF (HKEX: 3119) within our MAPS portfolios. The 1Q26 earnings from two of the ETF’s largest constituents, TSMC and SK Hynix have since come in. Both were exceptional. We will break down what these results signal for your portfolio.

Table 1: Top five holdings of the Global X Asia Semiconductor ETF

TSMC: AI demand is stronger than anyone expected

TSMC is the world’s largest semiconductor foundry. It is the company that manufactures the most advanced chips for virtually every major tech firm on the planet, from Apple to NVIDIA. Widely regarded as the bellwether of the semiconductor industry, when TSMC speaks, the rest of the market pays attention. And what it communicated this quarter was unambiguous: AI demand is not slowing—it is accelerating.

In the first quarter of 2026, TSMC reported revenue of USD 35.9 billion, a 40.6% increase from a year ago and slightly ahead of its own guidance. Gross margin reached 66.2% and operating margin hit 58.1%, both record highs. Management raised its full-year 2026 revenue growth guidance to above 30%, citing strong demand for their leading-edge process technologies. These are not the kind of numbers you would see from a company feeling demand headwinds.

The most important detail is in the revenue mix. High performance computing (HPC) — the AI-driven segment — now accounts for 61% of TSMC’s revenue, up from 55% a quarter ago. This is the category where TSMC manufactures chips for AI training and inference, the engines running every large language model and agentic AI system being deployed today. HPC revenue grew 20% quarter-on-quarter alone. Advanced technologies (defined as 7nm and below), a segment which TSMC excels at, accounted for 74% of total wafer revenue.

TSMC’s CEO also noted that the shift from generative AI to agentic AI (where systems take actions, not just answer queries) is driving another step up in computing demand, which in turn supports greater demand for advanced chips. 

On top of this, cloud service providers continue to express a positive outlook and are providing very strong demand signals. TSMC is now guiding its 2026 capex to the high end of USD 52–56 billion, a significant increase from prior years as it races to build new fabs to meet demand that continues to outpace supply (Figure 1).

Figure 1: TSMC’s capex has risen significantly over the past few years thanks to the AI boom

SK Hynix's record profits signal memory cycle still in full swing

If TSMC is the brain of the AI hardware ecosystem, SK Hynix is its memory. The South Korean company is the world’s leading supplier of high-bandwidth memory (HBM) — the specialised DRAM that sits inside every AI accelerator chip, including NVIDIA’s flagship GPUs. Without this type of memory, today’s big AI systems simply wouldn’t work. That structural reality is showing up directly in SK Hynix’s financial results.

The company reported 1Q26 revenue of KRW 52.6 trillion, a staggering 198% increase from one year ago, and a new all-time quarterly record. Operating profit came in at KRW 37.6 trillion, up 405% year-on-year, with an operating margin of 72%. This was the company’s fourth consecutive record-high quarterly operating profit. 

The catalyst is straightforward. DRAM, which accounted for nearly 80% of SK Hynix’s 1Q26 revenue, saw prices surge by more than 60% quarter-on-quarter, as AI-driven demand for server memory continued to outpace supply. Over the past two to three years, SK Hynix has meaningfully reallocated traditional DRAM capacity toward HBM. Even so capacity is effectively sold out through the next few years.   

Looking ahead, SK Hynix guided for continued volume growth in 2Q26 and expects the favourable pricing environment for high-performance memory to persist, supported by constrained supply and broadening AI demand. To meet this demand, the company intends to raise its capex significantly from last year. SK Hynix is also actively developing next generation HBM4 chips in close collaboration with customers, with volume production set to begin as early as 2026. 

What this means for your MAPS portfolio

We want to be clear about something. The headlines right now surrounding geopolitical tensions, oil price volatility and trade policy uncertainty are real, and we do not dismiss them. But we have always believed that it is earnings, not headlines, that determine where share prices go in the long run. TSMC and SK Hynix just delivered two of the strongest quarterly earnings prints in the history of the semiconductor industry. That is the signal that matters most to us.

Our decision to increase Asia ex-Japan exposure and add a position in the Global X Asia Semiconductor ETF was grounded in a straightforward thesis. Asia is home to the most critical nodes in the global semiconductor supply chain, and AI is structurally increasing the demand for what those companies produce. Both TSMC and SK Hynix sit among the top constituents of this ETF, and their first quarter results have confirmed exactly what we expected to see. The fundamentals of this industry are not just intact — they are strengthening. 

This also means your portfolios now have more complete exposure across the semiconductor value chain, spanning not only US companies but also Asian chipmakers. More broadly, these results reinforce our long-standing conviction in the digital economy as a core pillar of the MAPS portfolios, a conviction we have held at overweight since September 2025, and one that the earnings momentum continues to justify.

AI adoption is no longer a story about future potential. It is happening now, and the companies that sit at the infrastructure layer of AI are capturing extraordinary value as a result. With high barriers to entry and concentrated leadership among the strongest players, semiconductors remain, in our view, one of the most compelling structural growth opportunities available to long-term investors.

Short-term volatility can test investor conviction. If you are already invested in MAPS, our view remains unchanged: stay the course. Earnings emerging from Asia’s technology sector continue to point to a fundamentally stronger backdrop than near-term market sentiment suggests, and we believe patient investors are likely to be rewarded over time. For those not yet invested in MAPS, consider starting your regular savings plan (RSP) today.

Declaration:

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a NIL position in the abovementioned securities. The analyst who produced this report hold a NIL position in the abovementioned securities.

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report — including all investment theses, ratings, price targets and conclusions — has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.