TSMC, the world's leading chipmaker, is experiencing margin pressures as it responds to political pressure from President Donald Trump to manufacture advanced semiconductors in the U.S.
Following Trump's return to power in 2025, he has threatened tariffs on companies that do not produce in America, prompting TSMC to announce a significant $200 billion investment in U.S. facilities, including a recent $100 billion commitment.
Despite a remarkable 77.4% year-on-year profit increase in the second quarter, TSMC's margins are being squeezed by the higher costs associated with U.S. manufacturing. Analysts estimate that chips produced in the U.S. could cost 20-50% more than those made in Taiwan, which may lead to price increases for customers.
TSMC plans to raise prices for both advanced and mature chip production by up to 10% by 2027. The company's CFO, Wendell Huang, indicated that gross margin dilution from overseas expansion could reach 3% to 4% in the later stages of ramping up these projects. While TSMC's overall gross margin remains high at 67.7%, the increased costs could impact its competitive position.
The ongoing push for U.S. manufacturing is expected to persist beyond Trump's administration, as customers seek to diversify their supply chains in response to geopolitical risks