TSMC Says Overseas Expansion Will Squeeze Profit Margins, Trump Pushes for Chip Manufacturing to Return to the U.S.

Taiwan Semiconductor Manufacturing Company (TSMC) stated that the expansion of overseas production capacity, driven by the Trump administration's push for advanced chip manufacturing to return to the U.S., is raising production costs and will continue to drag down the company's profit margins in the coming years. Since Trump returned to the White House in 2025, TSMC has announced a $200 billion investment in the U.S., including $100 billion for advanced semiconductor manufacturing and packaging projects. TSMC's net profit in the second quarter increased by 77.4% year-on-year, with a gross margin of 67.7%. However, Chief Financial Officer Huang Ren-chao indicated that the production of overseas fabs will continue to dilute the gross margin, with an expected gross margin pressure of about 2% to 3% in the coming years, potentially expanding to 3% to 4% later on. Morningstar analysts estimate that the cost of producing chips in the U.S. is 20% to 50% higher than in Taiwan. The market generally expects TSMC to pass some of these costs onto customers through price increases, planning to raise foundry prices by up to 10% by 2027. Analysts point out that despite the higher costs of building factories in the U.S., TSMC will continue to expand its production capacity in the U.S. due to growing AI demand, supply chain diversification, and U.S. industrial policy support, demonstrating a strong ability to pass on costs.

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