Taiwan Semiconductor’s quarterly net profit surged by 77.4%, setting a new record, but the political cost of "Made in America" is becoming increasingly evident—overseas expansion is expected to pressure gross margins by 2% to 4%, with chip manufacturing costs in the U.S. running 20% to 50% higher than in Taiwan.
Facing pressure from Trump’s pledge of USD 200 billion in investment, Taiwan Semiconductor, which holds an almost irreplaceable monopoly on advanced process technology, plans to raise prices by up to 10% in 2027, passing on cost pressures to clients such as Apple and NVIDIA.
Trump’s "Made in America" pressure is now translating into$Taiwan Semiconductor (TSM.US)$real profit costs. The world’s largest foundry, while achieving a record quarterly profit, has for the first time clearly quantified the erosion of its gross margin due to overseas expansion—a pressure that will intensify over the next several years.
Taiwan Semiconductor reported a 77.4% year-over-year surge in net profit this quarter, setting another record. However, behind these strong results, the expansion of its overseas wafer fabs has already begun to weigh on overall profitability. CFO Wendell Huang stated during the earnings call that although gross margins exceeded prior guidance, this gain was offset by dilution from overseas fabs, and he warned that margins would face further pressure as overseas projects come online over the next 'several years.'
Meanwhile, according to Nikkei, Taiwan Semiconductor plans to raise prices in 2027 for both advanced and mature-node chips by as much as 10%, potentially passing part of the cost burden onto customers.
Since Trump returned to the White House in 2025, Taiwan Semiconductor has announced cumulative U.S. investment commitments totaling $200 billion, including a $100 billion plan disclosed last week for advanced semiconductor manufacturing and packaging facilities. A White House spokesperson told CNBC, 'Trillion-dollar-scale investments by Taiwan Semiconductor and other semiconductor companies are a direct result of President Trump’s trade and economic policies.'
Expansion Driven by Political Pressure, Cost Burden Becomes Clearer
Since Trump returned to office, he has consistently used tariff threats to pressure companies that do not manufacture domestically,$Taiwan Semiconductor (TSM.US)$and large-scale investments in the U.S. are accelerating precisely under this backdrop.
U.S. Commerce Secretary Howard Lutnick said in a statement, 'President Trump’s leadership is driving corporate investment in American manufacturing. Taiwan Semiconductor’s additional $100 billion investment will create tens of thousands of U.S. jobs and bring advanced semiconductor manufacturing back to America.'
However, building fabs in the United States has significantly increased costs. Phelix Lee, senior equity analyst at Morningstar, told CNBC, 'Overall, we estimate that chips produced by Taiwan Semiconductor in the U.S. cost 20% to 50% more than those made in Taiwan, depending on the timing of subsidies, tax credit realization, and other cost fluctuations.' He also expects customers to absorb more of the additional expenses stemming from higher production costs.
The Impact on Gross Margins Is Now Quantified—but Still Within Manageable Range
$Taiwan Semiconductor (TSM.US)$It has provided, for the first time, a specific forecast on the impact of overseas expansion on gross margins: Huang stated that as overseas wafer fabrication projects progress, the initial gross margin dilution is expected to be 2% to 3%, widening to 3% to 4% in later stages.
Gil Luria, head of technology research at D.A. Davidson, believes this level of dilution remains manageable given Taiwan Semiconductor’s current profitability. The company reported a gross margin of 67.7% in the second quarter, a slight increase from 66.2% in the first quarter. "Taiwan Semiconductor has extremely high overall margins—this gap is one it can afford," Luria said.
Among other Asian chipmakers, companies such as SK Hynix are also developing U.S.-based facilities, but Taiwan Semiconductor’s investment commitment far exceeds that of its peers, resulting in the most significant cost exposure.
Monopoly position provides a buffer; cost pass-through to customers is expected
Despite margin pressures,$Taiwan Semiconductor (TSM.US)$its dominant position in the advanced process market provides it with significant pricing leverage.
Gaurav Gupta, vice president analyst at Gartner, told CNBC, "The advantage for Taiwan Semiconductor is that it faces virtually no meaningful competition." As a result, "most of the rising costs will have to be borne by its customers—either those seeking supply chain diversification or those constrained by U.S. government policies requiring domestically sourced chips."
Phelix Lee of Morningstar also expects the pressure to manufacture in the U.S. to persist beyond Trump’s term, though "it remains unclear how incentives and penalties will be allocated." He noted that the pandemic-induced disruptions to global supply chains have already prompted clients to actively pursue geographic diversification: "Clients are preparing for geopolitical, logistical, and other supply chain disruption risks."
Taiwan Semiconductor stated that it continues to observe a "multi-year demand megatrend" from its customers, and its U.S. expansion is driven by strong client demand. Over the past 12 months, buoyed by the artificial intelligence boom, Taiwan Semiconductor’s market capitalization has risen by more than 100%.