Jeff Su --
Director of Investor Relations
Thank you, C.C. This concludes our prepared statements. Before we begin the Q&A session, I would like to remind everybody to please limit your questions to two at a time to allow all the participants an opportunity to ask their questions. Questions will be taken from both the floor and from the call.
Should you wish to raise your question in Chinese, I will translate it to English before our management answers your question. [Operator instructions] Now we will begin the Q&A session. We'll take the first few questions here from the floor and then go to online. I think maybe left, middle, right.
So, why don't we start? I think the first question, Gokul Hariharan from J.P. Morgan.
Gokul Hariharan --
Analyst
Thanks, Jeff. Happy New Year, management team. My first question is on the TSMC's U.S. future strategy.
There have been a lot of changes recently. Taiwan relaxed the N-1 restriction. There was a news about that a week back. C.
C., you met Elon Musk as well recently. So, you said there are a lot of developments that you've discussed. Your key IDM competitor seems to be struggling as well, while your Arizona fab seems to be ramping up quite well. So, in light of all these, I just wanted to understand the longer-term strategy.
Would you start -- would you consider investing in latest node in the U.S.? Because so far, it has been N-1. Now you don't have the restriction from the Taiwan government to go and invest in the latest node. What has been your feedback in whatever discussions you have had with the incoming President Trump administration because they have talked a lot about CHIPS Act and everything, but they're also supportive. Your original investment was during President Trump's first term.
And lastly, I think, Wendell, I think last time you had mentioned you're not very keen on taking over any IDM fabs. Has that thinking changed, especially given TSMC has the potential to become even more stronger partner for the U.S. in terms of bringing up U.S. local manufacturing? Sorry, long question.
Jeff Su --
Director of Investor Relations
Yes. OK. Thank you, Gokul. Indeed, a very long question.
I think Gokul's question is looking at TSMC and our strategies in terms of global expansion, particularly in the U.S. He notes that Taiwan has recently relaxed or said they relaxed the N-1 rule. And C. C.
has met several -- many of our large customers in the U.S. And our Arizona fab is ramping quite well. So, his question really is on the longer-term strategy, I believe, three parts. Number one, what is the feedback or sort of discussions ongoing with the next administration in the U.S.? Secondly, would we consider taking over IDM's fabs? Has that thinking changed? And last on the new node.
Maybe we'll go one by one.
C.C. Wei --
Chief Executive Officer
I almost forgot your question already. OK. First one, the technology node. Actually, it's not that we don't want to ramp up the same technology as in Taiwan.
But if you look at the -- when we're ramping up, introduce a new technology into manufacturing, the fab is -- the process is so complicated. So, it should be very close to the R&D people. So, the initial phase of the ramping up always comes from the fab close to R&D. So, in that sense, we want to ramp up the same kind of technology in the U.S., but that practically is a little bit deep card.
So, Taiwan will always be forced. Did that answer your question? It's not because of N-1 certification. No. It's practically, we just have to ramp up a new node in Taiwan.
And the second, do we change our strategy to expand faster or something? Again, this is -- we always say that we build the capacity overseas is due to customers' needs. If my customer has a very high demand, what should I do? I build more fab, right, with the necessary government support, by the way, OK? Talking about the government. Let me assure you that we have a very frank and open communication with the current government and with the future one also. I cannot say anything more than that.
OK. What --
Gokul Hariharan --
Analyst
IDM fab.
C.C. Wei --
Chief Executive Officer
That's my customer. And now, we -- again, our strategy is not based on my IDM competitors' status. They are our very good customers. I like them, and they are very important to TSMC's business also.
That's all I can say. Thank you.
Gokul Hariharan --
Analyst
OK. Maybe my next question, going to gross margins. So, Wendell, we are almost approaching 60% gross margin. Last cycle, we peaked at about 60% toward the peak of the cycle.
You are expecting the cycle to even strengthen based on guidance that C. C. provided for both AI, as well as some improvement in non-AI. So, how should we think about gross margins in this cycle? Is it realistic that we can get to more than 60% gross margin in this cycle? And related to that, could you help us understand specifically the U.S.
fab, overseas fabs, but especially U.S. fab dilution? What are the key factors there? Because as you mentioned, yield is already approaching or almost close to Taiwan yield. So, is it basically cycle time is longer? Or is it that some other costs are much higher in the U.S. fab because new fab depreciation is probably fairly similar compared to the Taiwan fab?
Jeff Su --
Director of Investor Relations
OK. So, Gokul's second question is on gross margin. Again, two parts. He noted gross margin is almost approaching 60%.
In 2022, the last cycle, it was also around this type of level. We have said that this year is another very strong growth year for TSMC. So, this question is how should we think about gross margins in this current cycle? Can we approach or get to 60% or low 60s type of again? And then the second part is more specific to the U.S. in terms of the cost gap.
What are the U.S. cost factors leading to the dilution impact?
Wendell Huang --
Vice President, Chief Financial Officer
Gokul, first question on the gross margin. As we said, there are six factors affecting the profitability. Every year, different factors play different roles. But for example, if the utilization is extremely high, like last cycle, it is not impossible for us to reach what you just said.
And secondly, the U.S. fab cost, it is more expensive in the U.S., mainly because of several reasons. Number one, the smaller scale, right? Now number two, the higher price in the supply chain; and number three, the very early stage of the ecosystem. So, if you add all these up, as we said, 2% to 3% dilution from our overseas fabs every year in the next five years.
Gokul Hariharan --
Analyst
If I use the 2% to 3% and do some math, it feels like the overseas fab is starting at, I don't know, 10% gross margin or 5% gross margin. Just adding factors, obviously, it's not how it works, but I'm just doing outside in. Is that right? Is that the right kind of ballpark in terms of thinking about margin?
Wendell Huang --
Vice President, Chief Financial Officer
All we can share is the 2% to 3%. Yeah.
Gokul Hariharan --
Analyst
I don't think TSMC has ever started a fab at 10% gross margin.
C.C. Wei --
Chief Executive Officer
Thank you. Gokul, we are working hard to improve it.
Jeff Su --
Director of Investor Relations
OK. Thank you, Gokul. We'll go to the middle, Laura Chen from Citigroup, Citibank.
Laura Chen --
Citi -- Analyst
Thank you and congratulations for the good results. I just want to have more details about your review. I mean I think people are kind of looking for your updated long-term CAGR growth. So, I believe that 20% starting from a very -- already very high base in 2024 is a really good long-term objective.
But just wondering that aside from the strong AI demand, what's your view on the traditional applications like PC and the smartphone growth particularly for this year?
Jeff Su --
Director of Investor Relations
OK. So, Laura's first question is looking -- she notes that we have updated our long-term CAGR to be approaching 20%, revenue growth in U.S. dollars, starting off even the high base of 24%. So, her question is, of course, AI demand is part of that, but what about smartphone and PC.
And I think your question is specific to this year, C. C., 2025.
C.C. Wei --
Chief Executive Officer
This year is still mild growth for PC and smartphone. But everything is AI related. So, you can start to see why we have the confidence to give you close to 20% CAGR in the next five years. AI, you look at a smartphone, they will put the AI functionality inside.
And not only that, so the silicon content will be increased. In addition to that, actually, the replacement cycle will be shortened. And also they need to go into the very advanced technology because if you want to put a lot of functionality inside a small chip, you need a much more advanced technology to put those -- put it all together that even smartphone, the unit growth is almost low single digit, but then the silicon and the replacement cycle and the technology migration that give us more growth than just the unit growth, similar reason for PC.
Laura Chen --
Citi -- Analyst
So, we can kind of expect those AI-capable edge devices, they will be all based on 2-nanometer next year, perhaps second half?
C.C. Wei --
Chief Executive Officer
Leading edge technology, that's why I say.
Laura Chen --
Citi -- Analyst
OK. Thank you. And also my next question is about AI. I noticed that this time, you include the HBM controller into your AI business revenues definition.
So, can you provide us more update about what the HBI-based business opportunities could be? And previously, TSMC kind of announced cooperation with the key memories suppliers globally. Can you give us more details or updates on the progress of this business engagement?
Jeff Su --
Director of Investor Relations
OK. Thank you, Laura. So, Laura's second question is on HBM controllers. She notes that our definition of AI accelerators includes memory controllers or HBM controllers.
So, her question is, well, how do we see this opportunity? Or what is the opportunity for TSMC? And what is the progress of this working with our memory partners?
C.C. Wei --
Chief Executive Officer
We are working with all the memory suppliers, all of them. And that's because TSMC is a large chip or logical technology, more advanced, and that means our customers' requirement. So, all of them are working with TSMC. Now we start to see some of the product coming out.
But the high volume, probably you need to wait for another half of one year to see the high volume and big contribution to TSMC's revenue.
Jeff Su --
Director of Investor Relations
OK. Thank you. We'll move to this side of the room. I guess we have Charlie Chan from Morgan Stanley
Charlie Chan --
Analyst
C. C., Wendell, and Jeff, first of all, Happy New Year. I think it's going to be a very exciting year, given your bullish outlook and also lots of news going on, right? So, let me start with overnight that U.S. seems to put a new framework on restricting China's AI business, right? So, I'm wondering whether that will create some business impact to your China business and how are you going to manage that.
And also, for some chips in the middle, high performers like crypto mining, autonomous driving chip, do you think that count as a cloud AI? And would TSMC be able to continue to service your China customers?
Jeff Su --
Director of Investor Relations
OK. Thank you, Charlie. So, Charlie's first question, if I may, sort of extrapolate or summarize is about the announcements of different types of U.S. export restrictions this week pertaining to China and AI-related chips.
So, his question is, what is the impact to TSMC? How does it impact our business?
C.C. Wei --
Chief Executive Officer
So, far, we look at -- we don't have at all analysis yet, but the first look is not significant, it's manageable. So, that meaning that my customers, who are being restricted or something, we are applying for a special permit for them. And we believe that we have confidence that they will get some permission so long as it's not in the AI area, OK, especially automotive, industry or even you talk about the crypto mining, yes.
Charlie Chan --
Analyst
Thank you. This is super helpful. And my second question is actually a very hot topic recently as well, the CPO. I think your main partner, Jensen came to Taiwan, this time probably besides meeting you, right, probably also want to enable this supply chain.
So, based on your recent technology symposium, right, you already get ready for your COUPE or COUPE optical engine, but do you think the talent supply chain can really facilitate this CPO because without these key components, the next-generation ruling schedule could have some issues? So, I think this is the first part of the question is about how you're going to facilitate the CPO supply chain. And secondly, to TSMC, your foundry service, right, do you see significant upside with the optical networking migration to CPO because -- I ask this because there are some conventional products like optical transceiver DSP that could be replaced. Thank you.
Jeff Su --
Director of Investor Relations
Well, Charlie's second question is a very specific topic. He wants to know, well, if I can generalize because we certainly don't comment on customers or their products. But in terms of our progress on silicon photonics and CPO, how are we working with customers, how we're preparing as part of our advanced packaging solutions, and what are the opportunities for TSMC as optical moves to silicon photonics and other type of solutions on a general basis.
C.C. Wei --
Chief Executive Officer
Charlie, that's a very technical question. Silicon photonics, we are working on it, as you said, and we got a good result also. However, a big volume, I don't think it will be in this year, or probably we'll wait for one or one and a half years till you can see the contribution of the volume production. The initial results are quite good, no doubt about it.
And so, my customers are quite happy.
Jeff Su --
Director of Investor Relations
OK. Thank you, C. C. Operator, we'll now move to the questions online. We'll take the first call from the online participant, please.
Operator
Yes. First question, Brett Simpson, Arete Research.
Brett Simpson --
Arete Research -- Analyst
Yeah, thanks very much. And can I just say, congratulations on reaching 100 billion in annual sales in Q4? It's quite a milestone. So, my first question is in Arizona. I think, Wendell, you mentioned that we're going to see some higher scale.
So, can you update us on the status of Phase 2? It looks like the construction of this shell is nearly complete, but it would be great to understand more about how you see P2 developing over the course of 2025. And in terms of pricing U.S. wafers, how are you planning to do this? Will you have a U.S. price and a Taiwan price? Or are you more likely to have a global price regardless of where you make the wafers? Thank you.
Jeff Su --
Director of Investor Relations
OK. So, Brett's first question is on Arizona, maybe split into two parts. First is in terms of -- we have already started the volume production of the first fab. So, Brett would like an update on the progress of the second fab in terms of the construction of the buildings and the shelves, etc.
And then the second part would be on the pricing of overseas. As we say there's value to our customers. He wants to know do we charge a separate price. Or is it part of the overall pricing, etc., etc.
C.C. Wei --
Chief Executive Officer
Let me answer the second question first. Do we charge a little bit higher? Yes, we did because we have a value of geographics of flexibility, right? And you guys know Made in U.S.A is a premium product. Yes, we discussed with our customers, and they are all agreed and happy to work with TSMC so that we can -- because of the cost structure over there, so it's a little bit higher price over there. The progress of the first fab is right now in volume production.
Second fab we almost finished all the building and start to put the facility, etc. etc. And we expect that we move the tools this year also. And we have a plan that our third fab probably will start very soon, and we will announce it in the later days, OK?
Jeff Su --
Director of Investor Relations
OK. Thank you, C.C. Brett, does that answer your first question? And do you have a second one?
Brett Simpson --
Arete Research -- Analyst
Yeah, very clear. And the second question, I wanted to get your perspective. Broadcom's CEO recently laid out a large SAM for AI hyperscalers building out custom silicon. I think he was talking about a million accelerated clusters from each of the customers he has in the next two or three years.
What's TSMC's perspective on all this? I'm sure you've spent a lot of time verifying what hyperscalers are playing over the years to come. And how comfortable are you with the scale of what's being implied here? Thanks.
Jeff Su --
Director of Investor Relations
OK. So, Brett's second question is looking at AI, I guess, specifically AI custom chips or ASICs. He notes that one of our customers recently laid out a very strong or large addressable SAM market for AI hyperscalers using custom silicon. Lots of them talking about clusters of 1 million chips.
So, he wants to know what is TSMC's view, how do we see this trend in terms of AI ASICs as part of the AI demand megatrend.
C.C. Wei --
Chief Executive Officer
Brett, I'm not going to answer the question of the specific number, but let me assure you that whether it's an ASIC or it's a graphic, they all need the very leading-edge technology, and they're all working with TSMC, OK? And the second one is, is the demand real was a number that my customers said. I will say that the demand is very strong. Is that enough to answer your question, Brett?
Brett Simpson --
Arete Research -- Analyst
That's great. Thank you.
Jeff Su --
Director of Investor Relations
OK. Thank you, Brett. Operator, do we have anyone else on the line? It seems not.
Operator
We don't.
Jeff Su --
Director of Investor Relations
OK, we don't. Then let's go back to the floor. I think on the left side, Bruce Lu from Goldman Sachs.
Bruce Lu --
Goldman Sachs -- Analyst
Hi, thank you for taking my question. To be honest, I'm a bit surprised that the long-term gross margin target doesn't really change it. I believe TSMC's value is definitely more than selling the pass on the cost. I believe that TSMC needs to invest a lot more in R&D to maintain the leadership.
TSMC suggested a raise the gross margin target in 2022 with higher R&D requirement, with higher profitability target, right? So, I asked the same question two quarters ago, which is in the process of pricing negotiation, which is understandable. But I think the price negotiation is pretty much done. What's the discrepancy here? Why TSMC cannot raise the profitability target?
Jeff Su --
Director of Investor Relations
OK. So, Bruce's first question, he wants to know, again, our long-term gross margin. Why are we not changing the target of 53% and higher, OK? He correctly notes that certainly, TSMC's value is increasing. And certainly, TSMC would need to invest a lot of money in R&D and capacity to support our customers' growth.
So, we have always had a focus on earning the right return. He also notes in 2022, while our gross margin used to be about 50%, then we raised it to 53% and higher. So, the question is, why is it not any higher, I guess?
Wendell Huang --
Vice President, Chief Financial Officer
Bruce, as we said, six factors affecting the profitability. Every year, different factors have different weight. Now two things to note. Number one, starting from this year, overseas fab expansion, 2 to 3 percentage point impact every year for the next five years.
The other thing to note: Macro environment uncertainty, which may lead to impacting the global economy, which may lead to end market demand. Now having said that, we are in a capital-intensive industry. So, we will need to have to earn a healthy return to continue to invest to support our customers, support their growth, and also deliver a profitable growth to our shareholders. And you mentioned about the raising of long-term gross margins back in 2022 to 53% and higher.
And we have been able to deliver that in higher parts since then. So, given all the above, we continue to think that 53% and higher gross margin is achievable, and we work very hard to achieve on the higher part.
Bruce Lu --
Goldman Sachs -- Analyst
OK. I'll try next two quarters. For the CoWoS capacity, TSMC has been very aggressive in expanding the capacity. However, the application is highly concentrated in AI at the current stage, which there are certain noise around it.
When can we see non-AI application such as servers, smartphones or anything else can be -- can start to adopt CoWoS capacity in case there is any fluctuation in the AI demand?
Jeff Su --
Director of Investor Relations
OK. Thank you, Bruce. So, Bruce's second question is on CoWoS capacity. In his words, we have been very aggressive to expand the capacity, but his concern is highly concentrated with AI-related demand.
So, his question is, when do we expect or -- to see more non-AI application adoption of CoWoS solutions?
C.C. Wei --
Chief Executive Officer
Well, yeah, today is all AI-focused, and we have very tight capacity and cannot even meet customers' need. But with the other products we adopt this kind of CoWoS approach, they will, it's coming, and we know that it's coming. So, that's all I can say.
Bruce Lu --
Goldman Sachs -- Analyst
When?
C.C. Wei --
Chief Executive Officer
It's coming.
Bruce Lu --
Goldman Sachs -- Analyst
OK. I will try next quarter.
C.C. Wei --
Chief Executive Officer
On the CPU and on the server chip, let me give you a hint.
Jeff Su --
Director of Investor Relations
OK. Thank you, Bruce. We'll go to the middle, Arthur Lai from Macquarie.
Arthur Lai --
Macquarie Group -- Analyst
Hi, Wendell and Jeff. I'm Arthur Lai from Macquarie. So, first of all, congrats on the strong gross margin. I just have a very quick follow-up on the U.S.
and JP expansion as this is important. My client keeps chasing me. So, do you have operational strategy to mitigate the cost gap between the overseas fab and Taiwan fab? Yeah, I think, C. C., you hint that you will work on it and then improve the gross margin.
But during the Chinese New Year, I read Morris Chang, his autobiography, and he mentioned that the strategy is copied exactly from the Taiwan model. So, I want to understand how we maintain the high yield and also drive the cost down. Thank you.
Jeff Su --
Director of Investor Relations
OK. So, Arthur's question is about our overseas expansion. His question is related to the cost gap and what is our operational strategies to mitigate the cost gap. How are we doing this internally in our fab operations and what strategies to do so?
C.C. Wei --
Chief Executive Officer
Mention my boss' book, that's -- meaning that you really read it. What he said is a copy exactly is whatever Taiwan's improvement, the U.S. will copy over there. It doesn't mean that this year, next year and the following year will be the same.
We continue to improve. That improved the cost structure, both in Taiwan and in the U.S. And we also try very hard to find out new methodology or whatever that I cannot share with you right now. But it will give Arizona fab some benefit.
And so, we will improve -- what minimize the gap between the cost structure between U.S. and Taiwan. And we are working on that. But no matter what I said, who would be the best fab over there.
Arthur Lai --
Macquarie Group -- Analyst
Second follow-up question probably is on Wendell. You just mentioned that there's 200 bps or 300 bps margin dilution, right? So, can you give us one level down? Sounds like the variable cost and the fixed cost. Maybe half? Or maybe which one is higher?
Jeff Su --
Director of Investor Relations
OK. So, Arthur's second question is on the overseas dilution of 2% to 3%. He is asking if we can provide a further breakdown in terms of how much of that is composed of variable costs, how much of that is from the fixed cost, etc.
Wendell Huang --
Vice President, Chief Financial Officer
Arthur, we really don't give a breakdown on these numbers, but both of them are higher. That's all I can share with you.
Jeff Su --
Director of Investor Relations
OK. Thank you. We'll move to the right side of the room. I think Rick Hsu from Daiwa Securities.
Rick Hsu --
Analyst
So, the first one, C. C., can you share with us your view on this year's global semiconductor revenue forecast as memory? Or any driver-by applications in priority across the main application? Thank you.
Jeff Su --
Director of Investor Relations
OK. So, Rick's first question, he's asking for our forecast of the semiconductor industry, what we used to provide as semi-XMIM. But of course, we have already given Foundry 2.0. Then he would like the outlook by end market application in terms of ranking.
Maybe just a comment on the overall end markets as a whole.
C.C. Wei --
Chief Executive Officer
Rick, I think the memory business will grow this year also. But all I can say is that we are growing very fast. And I don't comment on other memories because it's not logic yet. And we have already provided Foundry 2.0 to grow 10% year over year.
That's our industry forecast for 2025.
Rick Hsu --
Analyst
Just a quick follow-up. Can I use your Foundry 2.0 market growth as a proxy of the global semi ex memory?
Jeff Su --
Director of Investor Relations
So, his question is, can we use Foundry 2.0 as a proxy for semiconductor ex memory?
C.C. Wei --
Chief Executive Officer
Yes.
Rick Hsu --
Analyst
And the second one is very quick. About your CoWoS and SOI capacity ramp, can you give us more color this year? Because recently, there seems to be a lot of market noise some add orders, some cut orders. So, I would like to see your view on the CoWoS ramp.
Jeff Su --
Director of Investor Relations
OK. So, the second question is lots of market rumors here. So, he would like to know any comment we can provide on CoWoS ramp in 2025.
C.C. Wei --
Chief Executive Officer
Rick, as you said, there's a lot of rumor. That's a rumor. I assure you. We are working very hard to meet the requirement of my customers' demand.
So, cut the order, that won't happen. I actually continue to increase. So, we are -- again, I will say that we are working very hard to increase the capacity.
Jeff Su --
Director of Investor Relations
OK. Thank you.
Rick Hsu --
Analyst
Thank you.
Jeff Su --
Director of Investor Relations
OK. Let's move back to the operator. Is there anyone online?
Operator
Yes. We have next one, Robert Sanders, Deutsche Bank. Go ahead, please.
Robert Sanders --
Deutsche Bank -- Analyst
Yeah. Hi, there. I just had a question on AI demand. Is there a scenario where HBM is more of a constraint on the demand rather than CoWoS, which seems to be the biggest constraint at the moment? And I have a follow-up. Thanks.
Jeff Su --
Director of Investor Relations
OK. So, Rob is asking us to comment on AI demand in HBM status constraint. Or what is the bigger constraint in AI demand?
C.C. Wei --
Chief Executive Officer
I don't have other suppliers, but I know that we have a very tight capacity to support the AI demand. I don't want to say I'm the bottleneck. TSMC always working very hard with customers to meet their requirements. That's all I can say.
Jeff Su --
Director of Investor Relations
You have a second question?
Robert Sanders --
Deutsche Bank -- Analyst
Yeah. Just on SoIC, there's been more discussion in the market around your smartphone customers adopting SoIC. Can you just discuss if there's any kind of inflection point here, whether it's in the PC domain or the smartphone domain? Or is this still more of a data center story? Thanks.
Jeff Su --
Director of Investor Relations
OK. Well, Rob's second question is on SoIC adoption. His question basically in a nutshell is when do we see an inflection point for smartphone applications to adopt SoIC?
C.C. Wei --
Chief Executive Officer
Today, SoIC's defense is still focused on AI applications, OK. For PC or for other areas, it's coming, but not right now.
Jeff Su --
Director of Investor Relations
OK. Thank you, Rob. Thank you, CC. I think in the interest of the time, we'll take the last two questions, please. OK. I guess we will go to Sunny Lin from UBS.
Sunny Lin --
UBS -- Analyst
Good afternoon. Thank you for taking my questions. And so, my first question is to try to get a bit more clarity on the cloud growth for 2025. I think longer term, without a doubt, the technology definitely has lots of potential for demand opportunities.
But I think if we look at 2025 and 2026, I think there could be increasing uncertainties coming from maybe CSP spending macro or even some of the supply chain challenges. And so, I understand the management just provided pretty good guidance for this year for sales to double. And so, if you look at that number, do you think there is still more upside than downside as we go through 2025? Or how should we think about the demand profile for this year and next year?
Jeff Su --
Director of Investor Relations
OK. Well, Sunny's question is about the AI-related demand. We have said that even after tripling -- more than tripling last year, it will double again in 2025. She wants to know if there is an upside or downside to this. And also for us to provide an outlook on the 2026 AI growth.
C.C. Wei --
Chief Executive Officer
Sunny, I certainly hope there is an upside, but I hope I get -- my team can supply enough capacity to support it. Does that give you enough hints? OK? And we also forecast based on the 2024 high number. We also forecast of mid-40s is bigger for the next five years. That gives you some kind of estimate that you can calculate.
Sunny Lin --
UBS -- Analyst
Yeah. Also, mid-40 % is the long-term expectation in terms of growth by the next few years. But how should we think about the trajectory of the growth? For sure, this year, it's still pretty strong growth, but do you think at some point maybe we see a moderation of growth temporarily and then followed by another ramp?
Jeff Su --
Director of Investor Relations
Well, I think Sunny's question, again, is asking us to comment on the 2026 outlook, which is a little bit early. Or is that -- how do we see the trajectory of the growth?
C.C. Wei --
Chief Executive Officer
I already said it's a little bit too early.
Sunny Lin --
UBS -- Analyst
Sure. No problem. So, I will follow up maybe next quarter as well. And so, my second question is on edge AI. And so, last year, management thought mid-2025 to be the inflection point for it to see more content-related edge AI. So, based on your current visibility, are you seeing clients ramping for this year for the edge AI products maybe into the second half? And before, you also mentioned edge AI could potentially drive a 5% to 10% die size increase. Will that be a one-time increase? Or do you think beyond the 5% to 10% increase for the maybe first-gen product, there should be a sustainable increase going forward?
Jeff Su --
Director of Investor Relations
OK. So, Sunny, second question is related to edge AI. She'd like some more detail or color. Do we see customers ramping edge or what we call on-device AI products in the second half of this year? And the second part, in terms of the content increase, 5% to 10% increase is a one-time thing? Is this an ongoing thing? How do we estimate the content benefit from on-device AI?
C.C. Wei --
Chief Executive Officer
OK. On the edge AI, in our observation, we found out that our customers started to put more neural processing inside. And so, we estimate a 5% to 10% more silicon being used. Keep every year 5% to 10%, definitely is no, right? So, they will move to the next node, the technology migration.
That's also to TSMC's advantage. Not only that, I also say that the replacement cycle, I think it will be shortened because of when you have a new toy that with AI functionality inside, everybody wants to replace their smartphone, replace their PCs, and I count that one much more than a mere 5% increase. Did I answer your question?
Sunny Lin --
UBS -- Analyst
Yeah, thank you very much.
Jeff Su --
Director of Investor Relations
OK. Thank you. Operator, I think there's one more participant online. So, we'll take the last question from online participants, please.
Operator
I think the last caller just dropped the line. Thank you.
Jeff Su --
Director of Investor Relations
OK. Then we'll take the last question from Brad Lin from Bank of America.
Brad Lin --
Bank of America Merrill Lynch -- Analyst
Thank you for squeezing me in. So, Happy New Year, and taking my questions. I would like to ask two questions. First question would be on the CoWoS as well.
So, we have observed an increasing margin of advanced packaging. Could you remind us the CoWoS contribution of last year? And do you expect the margin to kind of approach the corporate average even exceed after the so-called value reflection this year? That would be my first question. Thank you.
Jeff Su --
Director of Investor Relations
OK. So, Brad's first question is very specific to CoWoS. Basically, he wants to know what is the revenue contribution from CoWoS last year. And what is the margin profile? Maybe we can talk about advanced packaging.
Wendell Huang --
Vice President, Chief Financial Officer
Brad, we don't break it down into different segments of the advanced packaging. But overall speaking, advanced packaging accounted for over 8% of revenue last year, and it will account for over 10% this year. In terms of gross margins, it is better. It is better than before, but still below the corporate average. Thank you.
Brad Lin --
Bank of America Merrill Lynch -- Analyst
Thank you, Wendell. That's very helpful. And then my second question will be on the IDM. So, we have seen IDMs increasingly rely on TSMC. And then do we still expect the IDM to support our long-term growth?
Jeff Su --
Director of Investor Relations
OK. So, Brad's second question, I think, is on IDM and IDM outsourcing. He does know that we do see more IDM outsourcing business. So, is this part of our long-term growth outlook CAGR?
C.C. Wei --
Chief Executive Officer
Again, let me repeat again. They are our very good customers. And we work together. I don't say they rely on TSMC. We are partners. And I really hope that a long-term relationship will be there for sure.
Jeff Su --
Director of Investor Relations
OK. Thank you, C.C. Thank you, Brad. Thank you, everyone. This concludes our Q&A session. Before we conclude today's conference, please be advised that the replay of the conference will be accessible within 30 minutes from now. The transcript will become available 24 hours from now, and certainly, both will be available through TSMC's website at
www.tsmc.com. So, thank you, everyone, for joining us today online and in person.
We'd like to wish everyone a Happy New Year and hope everyone continues to stay well, and I hope you'll join us again next quarter. [Operator instructions]
TSM earnings call for the period ending December 31, 2024.
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