Trump’s U.S. chip push squeezes TSMC margins despite record AI-driven profits
- TSMC’s record profits are being squeezed by the high cost of expanding chip production in the U.S.
- The company has pledged more than $200 billion to build and expand chip factories in the United States.
- TSMC could raise chip prices by 2027 to offset rising manufacturing costs.
U.S. President Donald Trump has been urging semiconductor companies to expand manufacturing in the United States, using the threat of tariffs to encourage firms to relocate production.
His push, however, is now driving up operational expenses and cutting down profit margins at Taiwan Semiconductor Manufacturing Company (NYSE: TSM).
The Taiwanese chip giant posted stellar quarterly profits, and its valuation has more than doubled over the past 12 months; however, executives noted that aggressive overseas expansion diluted its massive earnings.
Responding to U.S. manufacturing incentives, the fabricator has pledged over $200 billion to U.S. expansion since 2025. That figure includes its $100 billion commitment to high-tech infrastructure in its Arizona mega-site announced last week.
Is TSMC considering raising chip prices?
TSMC’s Chief Financial Officer, Wendell Huang, acknowledged that the company’s quarterly profit margins beat expectations. Q2’s profit climbed more than 77% from a year earlier to a record high of $22 billion. However, he noted that those net profits were diluted by its foreign factory spending. He even expects these margins to decline further over the next few years as they expand overseas.
So far, the chipmaker has argued that its continued investment in the U.S. is fundamentally driven by a multi-year surge in customer demand. However, there is no denying that political heat is also a major force behind its move abroad.
A White House spokesperson even confirmed, “Trillions of dollars in investments by TSMC and other semiconductor companies are a result of President Trump’s trade and economic policy, from a historic trade deal with Taiwan to renegotiated CHIPS program investments.”
Ideally, chip manufacturing in the U.S. comes with a much higher price tag. Because of this, market analysts say TSMC’s U.S.-made chips could cost 20% to 50% more than chips produced in Taiwan.
According to sources, the firm is already planning to raise its chip prices by 10% by 2027 to counter the escalating costs of raw materials, factory equipment, and foreign expansion. They claimed the higher pricing will likely target advanced chips of 12-nm, 16-nm, and 28-nm, as well as those under 6-nm.
In response to the claims, TSMC asserted, “Our pricing strategy is strategic, not opportunistic. We will continue to work closely with customers and sell our value to them.”
TSMC intends to build four plants in its Arizona site
Last week, TSMC promised another $100 billion in investments in the U.S. The expansion aligns with President Trump’s push to bring advanced semiconductor production back to the United States and reduce reliance on overseas manufacturing. The allocation will primarily go towards its site development in Arizona.
According to internal projections, the allocated funding is sufficient to establish at least 4 advanced foundries, focusing specifically on the commercial scaling of 2-nanometer and other smaller chips.
The firm has yet to specify exactly when it will build the new factories. It only said that the construction schedule remains contingent upon market conditions. Nonetheless, these additions will supplement the eight facilities currently under development or in planning phases.
Chief Executive CC Wei remarked, “We believe this investment will help to further foster the development of the U.S. semiconductor ecosystem, strengthen the supply chain, and support an increasing number of high-tech, high-paying jobs in the United States.”
Also speaking on the added investment, U.S. Commerce Secretary Howard Lutnick, asserted that it would create more jobs for Americans and restore a resilient semiconductor supply chain within the U.S. market.
Moreover, he commended the president’s push to localize chip-making facilities. He stated, “President Trump’s leadership is driving companies to invest in American manufacturing.”
Other chipmakers, like SK Hynix, are also working to build more U.S. plants, but none have matched TSMC’s scale of commitment.
Even so, TSMC expects the higher costs of building advanced fabs overseas, combined with the launch of its 2nm process technology, to continue putting pressure on gross margins, despite strong AI-driven demand.
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FAQs
Why is TSMC's U.S. expansion hurting its profits?
Building chip factories in the U.S. is much more expensive than in Taiwan due to higher labor, construction, and operating costs. These higher expenses are reducing TSMC's profit margins.
Will TSMC raise chip prices?
TSMC has not confirmed any price increases, but reports say it may raise chip prices by about 10% by 2027 to cover rising production costs.
Why is TSMC investing so much in the U.S.?
TSMC is expanding in the U.S. to meet growing demand for AI chips and support the Trump administration's push to bring semiconductor manufacturing back to America.
Nellius Irene
Nellius is a Business Management and IT graduate with five years of experience in the cryptocurrency industry. She is also a graduate of Bitcoin Dada. Nellius has contributed to leading media publications, including BanklessTimes, Cryptobasic, and Riseup Media.
