President Donald Trump’s pressure to manufacture advanced semiconductors in the U.S. is driving up costs and cutting into margins at TSMCthe world’s leading chip manufacturer.
After Trump’s return to power in 2025, the president has repeatedly threatened tariffs on companies that don’t make their products in America.
Since then, TSMC has announced a total of $200 billion in commitments to the country, including last week’s announcement of a $100 billion investment in advanced semiconductor manufacturing and packaging facilities in the United States
Although TSMC has been buoyed by the AI boom – TSMC’s market cap has risen more than 100% in the past 12 months – blockbuster earnings this quarter were hurt by overseas expansion, the company said.
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TSMC stock.
Gross margin rose above forecasts, but was offset by dilution from foreign factories, CFO Wendell Huang said on an earnings call. Margins will be further diluted over the next “several years” as fab projects overseas “ramp up,” he added.
“President Trump’s leadership is pushing companies to invest in American manufacturing,” Commerce Secretary Howard Lutnick said in a statement.
“TSMC’s announcement of an additional $100 billion investment following our historic trade and investment agreement with Taiwan will create tens of thousands of American jobs and bring advanced semiconductor manufacturing back to America.”
While other Asian chipmakers, including SK Hynix, are developing U.S. facilities, TSMC has made by far the largest commitment. Aggressive expansion in the US exposes the company to higher production costs, potentially creating headwinds for margins.
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Political pressure
TSMC reported a 77.4% year-over-year rise in second-quarter profit on Thursday, beating estimates and marking another record quarter for the world’s largest contract chipmaker.
The company is also aggressively expanding in the U.S. as it continues to see a “multi-year demand megatrend” among its customers, TSMC’s Huang told CNBC.
Political pressure is another important driver of this expansion abroad.
“Trillions of dollars in investments by TSMC and other semiconductor companies are a result of President Trump’s trade and economic policies, from a historic trade agreement with Taiwan to renegotiated CHIPS program investments,” a White House spokesperson told CNBC.
Building in the USA is significantly more expensive.
“Broadly speaking, we estimate that TSMC’s U.S. chips cost 20-50% more than those produced in Taiwan, depending on the timing of the subsidy, recognition of tax credits and other cost fluctuations,” Phelix Lee, senior equity analyst at Morningstar, told CNBC. Lee added that he expected customers to absorb a larger portion of the higher production costs.
TSMC will increase prices for both advanced and mature chip production by up to 10% in 2027, Nikkei reported on Tuesday. TSMC told CNBC that it does not provide any pricing details.
“What helps TSMC is the absence of any material competition,” Gaurav Gupta, VP analyst at Gartner, told CNBC.
Because of TSMC’s dominance in the top node market, “a large portion of the increased costs would have to be borne by its customers who are looking to diversify or have received orders from the U.S. government to buy local chips,” Gupta said.
Margins
The company forecasts gross margin dilution from the ramp-up of foreign factories in the next few years will be 2 to 3 percent in the initial stages and expand to 3 to 4 percent in the later stages, Huang said.
“This is a margin difference that TSMC can afford given its very high overall margins,” said Gil Luria, head of technology research at DA Davidson. TSMC’s gross margin was 67.7% in the second quarter, up slightly from 66.2% in the first quarter.
While Trump has increased his calls for domestic manufacturing, “customers increasingly sought geographic diversification after Covid disrupted the global supply chain,” Morningstar’s Lee said.
“Customers are bracing for geopolitical, logistical and other supply chain disruptions,” he added. “We expect the pressure generated in the US to persist beyond Trump, although it is less clear how the carrot and stick will be distributed.”
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https://www.cnbc.com/2026/07/22/trump-pressure-ai-chips-us-tsmc-margins.html
