TSMC's quarterly net profit surged 77.4% to set another record, but the political bill for "Made in America" is becoming increasingly clear—overseas expansion will pressure gross margins by 2% to 4%, with chip-making costs in the US being 20% to 50% higher than in Taiwan. Facing pressure from Trump's $200 billion investment commitment, TSMC, holding an almost irreplaceable monopoly in advanced process technology, plans to raise prices by up to 10% in 2027, shifting cost pressures to clients like Apple and Nvidia.
Trump's "Made in America" pressure is translating into tangible profit costs for TSMC. As the world's largest foundry sets a quarterly profit record, it has for the first time explicitly quantified the extent to which overseas expansion erodes gross margins, a pressure that will intensify in the coming years.
TSMC's net profit this quarter soared 77.4% year-on-year, setting a new record again. However, behind the stellar performance, the expansion of overseas fabs has begun to drag on overall profit margins. TSMC CFO Wendell Huang stated in the earnings call that while gross margins were above previous guidance, they were offset by the dilution effect from overseas fabs, warning that margins would face further pressure as overseas projects come online over the next "several years."
Meanwhile, according to a Nikkei report, TSMC plans to raise prices for both advanced and mature process chips by up to 10% in 2027, potentially passing on some cost pressures to customers.
Since Trump returned to the White House in 2025, TSMC has cumulatively announced US investment commitments totaling $200 billion, including a $100 billion plan for advanced semiconductor manufacturing and packaging facilities disclosed just last week. A White House spokesperson told CNBC, "TSMC and other semiconductor companies' trillions of dollars in investments are precisely the results of Trump's trade and economic policies."
Political Pressure Drives Expansion, Cost Burden Becomes Clearer
Since Trump's return to office, he has consistently used tariff threats to pressure companies not producing in the US, accelerating TSMC's large-scale US investments.
US Commerce Secretary Howard Lutnick said in a statement, "President Trump's leadership is driving corporate investment in US manufacturing. TSMC's additional $100 billion investment will create tens of thousands of American jobs and bring advanced semiconductor manufacturing back to the United States."
However, building factories in the US significantly increases costs. Morningstar senior equity analyst Phelix Lee told CNBC, "Overall, we estimate TSMC's chip production costs in the US are 20% to 50% higher than in Taiwan, depending on subsidy timelines, tax credit recognition, and other cost fluctuations." He also expects clients to bear more of the additional costs due to rising production expenses.
Gross Margin Dilution Quantified, But Still Manageable
TSMC has for the first time provided specific forecasts on the impact of overseas expansion on gross margins: Huang stated that as overseas fab projects progress, initial gross margin dilution is expected to be 2% to 3%, widening to 3% to 4% later.
D.A. Davidson technology research head Gil Luria believes this dilution is manageable given TSMC's current profit levels. TSMC's Q2 gross margin was 67.7%, slightly up from 66.2% in Q1. "TSMC's overall margins are extremely high; this gap is something it can afford," Luria said.
Among other Asian chipmakers, companies like SK Hynix are also developing US facilities, but TSMC's investment commitment far exceeds its peers, making its cost exposure the most prominent.
Monopoly Provides a Buffer, Cost Pass-Through to Clients Expected
Despite margin pressures, TSMC's dominant position in the advanced process market provides it with significant bargaining power.
Gartner VP analyst Gaurav Gupta told CNBC, "What works in TSMC's favor is that it faces virtually no substantive competition." As a result, "most of the cost increases will have to be borne by its customers—those who either seek supply chain diversification or are bound by US government policies requiring domestic chip procurement."
Morningstar's Phelix Lee also expects the "Made in America" pressure to persist beyond Trump's term, but "how incentives and penalties will be allocated remains unclear." He noted that the pandemic's impact on global supply chains has prompted clients to proactively seek geographical diversification, stating, "Customers are preparing for geopolitical, logistical, and other supply chain disruption risks."
TSMC, for its part, stated that it continues to see "multi-year demand megatrends" from clients, with US expansion driven by strong customer demand. Over the past 12 months, boosted by the AI boom, TSMC's market cap has risen over 100%.
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