tsmc stock takes a hit: what's behind the dip?

2025-03-07 tsmc

Taipei, Friday, 7 March 2025.
taiwan semiconductor manufacturing company’s (tsmc) stock experienced a notable drop, closing at $175.85, a 4.57% decrease. the decline is attributed to investor apprehension and market instability. this dip comes as tsmc is increasing its investment in united states based manufacturing. tsmc recently announced plans to ramp up united states production with a total of six planned fabs. the expansion could dilute profits by as much as 3%. analysts are closely watching tsmc’s next moves as it balances global demand and profitability.

Morgan Stanley’s perspective

Morgan Stanley reaffirmed its overweight rating for tsmc, advising investors to capitalize on the recent stock dip [7][8]. The firm suggests that tsmc’s u.s. expansion could alleviate concerns about potential tariffs on taiwan and worries related to joint ventures with intel [7]. Morgan Stanley analysts recently engaged with tsmc’s cfo, wendell huang, to discuss capital expenditure, profit margins, ai demand, and potential partnerships [7].

u.s. expansion and financial implications

Tsmc is increasing its u.s. investment by $100 billion, adding to the three semiconductor manufacturing plants already planned [7]. This expansion includes plans for three additional fabs, two advanced packaging plants, and a research and development center [7]. Huang stated these investments are driven by customer demand and expects the u.s. fabs to gradually scale up production in the coming years, with the first phase 4nm fab in arizona already achieving high-volume manufacturing [7].

profit margin and pricing strategies

Tsmc anticipates a 2% to 3% reduction in profit margins over the next five years due to its overseas fabs, including the additional $100 billion u.s. investment [7]. The company believes that its u.s. clients should share the higher production costs associated with manufacturing in the united states [7]. Tsmc aims to reduce costs at its u.s. facilities and believes a long-term gross margin of 53% or higher is achievable [7].

ai demand and capacity

The demand for artificial intelligence continues to be strong, which supports tsmc’s plans to double its chip-on-wafer-on-substrate (cowos) capacity in 2025, following a doubling in 2024 [7]. Tsmc is closely monitoring customer needs and maintains flexibility in its projections [7]. The company forecasts a compound annual revenue growth rate of approximately 20% over the next five years, with cloud ai semiconductors expected to grow at nearly 40% during the same period [7].

advanced packaging and technology

Tsmc’s two u.s. based back-end packaging plants are likely to be located in arizona, near its large-scale wafer fabs [7]. Having cowos capacity in the u.s. is considered strategically important to meet future shipping demands [7]. For new process nodes, such as a16 and a14, tsmc plans to initially produce them in taiwanese fabs to ensure efficient scaling, which will also reduce the time needed to introduce these nodes to its u.s. fabs [7].

Bronnen

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