Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s premier contract chipmaker, is on track to post a massive first-quarter profit jump. But behind the numbers lies an undercurrent of uncertainty as U.S. President Donald Trump’s evolving trade policy casts a long shadow over the company’s global operations.
AI Demand Fuels Profits, but Risks Grow
TSMC, the go-to supplier for tech giants like Apple and Nvidia, has benefited immensely from the booming demand for AI-integrated technology. According to a SmartEstimate by LSEG based on predictions from 17 top analysts, TSMC’s Q1 net profit is projected at T$347.8 billion ($10.74 billion), marking a 54% leap compared to T$225.5 billion a year earlier.
However, while the company enjoys the tailwind of AI innovation, it’s simultaneously grappling with trade risks amplified by Trump’s administration.
Tariffs and Political Pressure from the U.S.
Trump’s trade policy has been erratic. While he publicly praised Taiwan’s chip industry, he also issued stark warnings. “Last week, he said he had told TSMC it would have to pay a tax of up to 100% if it did not build factories in the U.S.,” noted one report. His statements raise concerns that Taiwan’s dominance in chipmaking could become a geopolitical bargaining chip.
The former president has also pushed for a national security review into the semiconductor sector and warned that tariffs excluding smartphones and computers may only be temporary.
Strategic Expansion Despite Margin Pressure
To address these risks, TSMC has committed to expanding its global footprint. The firm recently confirmed a $100 billion investment in U.S. operations, on top of the $65 billion previously announced for three Arizona plants. Despite this massive outlay, the company has stated that the bulk of its production will remain in Taiwan.
“This will likely ensure TSMC gets favourable treatment from the U.S. government and minimise the tariff burden,” said Sravan Kundojjala, analyst at SemiAnalysis. However, he warned that overseas expansion could shave off “two to three percentage points of gross margin” over the next five years.
Dependence on Apple a Double-Edged Sword
TSMC’s close ties with Apple represent both a strength and a vulnerability. Cathay Futures analyst Venson Tsai explained, “If the iPhone can’t be sold, then TSMC’s chips can’t either,” pointing to the risks associated with Apple’s manufacturing base in China, which may be targeted by U.S. tariffs.
Looking Ahead to Updated Guidance
TSMC recently posted a strong revenue report for the first quarter, beating market expectations. The company will provide updated guidance during its April 18 earnings call, scheduled for 0600 GMT. Investors will be watching closely for insight into its capital spending plans and forecasts for the remainder of the year.
In January, TSMC projected capital expenditures between $38 billion and $42 billion for 2025—an increase of up to 41% from the previous year. These figures underscore the company’s aggressive growth strategy amid intensifying geopolitical and economic pressures.