Trump calls for chips back to the US! Will TSMC’s gross margin be eroded by 4 percentage points, and will prices rise again in 2027?

TSMC has just turned in its most profitable quarter in history, with a gross margin of 67.7% and after-tax net profit up 77.4% year over year. Yet at the same earnings call, CFO Huang Renxhao warned that the gradual ramp-up of overseas wafer fabs will continue to dilute the company’s gross margin over the coming years—initially by about 2 to 3 percentage points, and later possibly expanding to 3 to 4 percentage points. Morningstar estimates that the cost of production in the United States is 20% to 50% higher than in Taiwan.
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Table of contents

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• Political bills worth $200 billion
• Who ultimately pays for the extra costs
• Views from Taiwanese experts

Key takeaways

• TSMC Q2 gross margin 67.7% sets a high; after-tax net profit up 77.4% to NT$706.6 billion
• CFO Huang Renxhao says overseas fabs will dilute gross margin by 2–3 percentage points initially, then widen to 3–4 percentage points later
• Morningstar estimates U.S. production costs are 20–50% higher than Taiwan; TSMC plans to raise foundry prices by 5–10% in 2027

TSMC has posted what is its most profitable quarter ever. At the earnings call, CFO and spokesperson Huang Renxhao also laid out the cost statements for the next few years. As reported by CNBC, the Trump administration’s push to bring advanced chip manufacturing back to the U.S. is boosting production costs at TSMC as overseas capacity expands, and will continue to weigh on the company’s gross margin over the next several years.

First, look at the profitable side: In 2026’s second quarter, TSMC’s consolidated revenue was about NT$1.2704 trillion, up 36% year over year; after-tax net profit was about NT$706.6 billion. Earnings per share were NT$27.25. Both growth rates were 77.4%, rewriting historical records again. Gross margin was 67.7%, 1.5 percentage points higher than 66.2% in the first quarter. The 2-nanometer process also began contributing revenue in this quarter.

Now for what will need to be paid later: At the earnings call, Huang Renxhao explained that as overseas wafer fabs come online one after another, in the initial stage over the coming years they will dilute gross margin by about 2 to 3 percentage points, and later this could expand to 3 to 4 percentage points. TSMC has already lowered its guidance for Q3 gross margin to the 65% to 67% range.

Political bills worth $200 billion

Since Trump returned to the White House in 2025, TSMC’s cumulative investment commitments in the U.S. have reached $200 billion. This includes the $100 billion advanced semiconductor manufacturing and advanced packaging plan that was released in tandem with last week’s earnings call. Add in the $65 billion during the CHIPS Act era, and TSMC’s total investment in the U.S. now reaches $265 billion, with plans for 10 wafer fabs and 2 advanced packaging fabs. The White House lists this money directly as an outcome of Trump’s trade and industrial policy push.

TSMC also raised its 2026 capital expenditure to $60 billion to $64 billion, and upgraded its full-year revenue growth estimate to more than 40%. The money is still being spent—only, the location for this round of spending is getting farther from Taiwan.

Who ultimately pays for the extra costs

Morningstar (Morningstar) senior equity analyst Phelix Lee estimates that chips produced by TSMC in the U.S. will cost 20% to 50% more than manufacturing in Taiwan. The exact numbers depend on when subsidies are disbursed, how tax credits are recognized, and other cost fluctuations.

The cost of chips produced in the U.S. by TSMC will be 20% to 50% higher than manufacturing in Taiwan, depending on the timing of subsidies, recognition of tax credits, and other cost fluctuations. (Morningstar senior equity analyst Phelix Lee)

The market widely expects that TSMC will pass part of the costs onto customers. As Nikkei Asia previously reported, TSMC plans to raise wafer foundry prices starting at the beginning of 2027. The base increase for advanced process and mature process is expected to be in the range of 5% to 10%. If customers add incremental high-performance computing (HPC) orders beyond originally estimated demand, TSMC would also charge an additional premium of 10% to 15%. As a result, the actual price increase for some advanced process orders may exceed 10%.

Adjusting customers’ budgets and supply chains over a 18-month cycle—this is something only a party with bargaining power can afford to do.

Views from Taiwanese experts

Liu Peizhen, director of the Industrial and Economic Database at the Taiwan Institute of Economic Research, said in an interview with United Daily News that this latest round of additional investment is “not unexpected.” “TSMC originally lacked capacity. Since it must meet the requirements for onshore manufacturing in the U.S., and also needs to guard against competitors stealing orders, increasing investment in the U.S. aligns with TSMC’s interests.” She also noted that Taiwan’s supply of water and electricity is nearing its limit, so TSMC will inevitably use production capacity leverage globally.

Liu Peizhen cautioned that the “scale of jobs and investment created in Taiwan may be affected,” and emphasized that “TSMC must keep key operations in Taiwan. With Taiwan’s advantages and interests, advanced processes in Taiwan need at least a two-year time gap relative to the U.S.”

Meanwhile, Wu Jinrong, general manager of Maverick Technology, analyzed in Business Weekly that the gross margin absorbed by overseas expansion is exchanged for deeper bonding with customers. TSMC’s end-to-end service—from wafer to CoWoS packaging—means “no one can replicate this integration capability in the short term.” He also pointed out that at this stage, the 3-nanometer process yields are stabilizing and depreciation pressure is decreasing. In the second half, gross margin is expected to surpass the company’s average level, which should offset the portion taken away by overseas fabs.

Foreign institutional investors’ pricing is also tilted in this direction. After the earnings call, multiple brokerages raised their target prices for TSMC, with the highest reaching NT$4,200. As for what Taiwan should truly watch, it is that “two-year time gap” mentioned by Liu Peizhen. Finishing construction of 10 U.S. fabs is a matter of 10 years from now. How much is left of TSMC’s lead in advanced processes staying in Taiwan? Next year’s price increase is only a transition.

Frequently asked questions

Why does TSMC build fabs in the U.S.? Isn’t the cost higher?

The main reason is that the Trump administration is pushing for advanced chip manufacturing to return to the U.S., along with customer demands to diversify supply-chain risk. Morningstar estimates that U.S. production costs are 20% to 50% higher than Taiwan, but TSMC’s cumulative investment in the U.S. has already reached $265 billion, with plans for 10 wafer fabs and 2 advanced packaging fabs.

How much will TSMC raise prices in 2027?

According to Nikkei Asia, the base price increase for advanced and mature processes is 5% to 10%, effective at the beginning of 2027. If customers add incremental HPC orders beyond original demand estimates, TSMC would also charge an additional 10% to 15% premium. In some cases, the actual price increase for advanced process orders may exceed 10%.