tsmc faces tariff headwinds despite strong ai demand

2025-04-22 tsmc

Taipei, Tuesday, 22 April 2025.
morningstar analysts have reduced tsmc’s fair value estimate by 6% amid concerns that trump’s tariffs could impact non-ai revenue. tsmc’s q1 2025 earnings showcased a 35.3% year-over-year increase in revenue, reaching $25.5 billion. the company anticipates q2 revenue to rise further, estimating between $28.4 billion and $29.2 billion. despite these positive figures, the potential for tariffs to shift customer behavior remains a key worry, especially as tsmc invests $100 billion in us manufacturing, aiming for 30% of its 2-nanometer chip production in arizona.

tariff impact on tsmc’s outlook

Despite strong first-quarter earnings, TSMC acknowledges potential pressure from recent tariffs [1][2]. While no immediate changes in customer behavior have been observed, uncertainties and risks associated with tariff policies remain a concern [2]. TSMC plans to closely monitor the potential impact on end-market demand and manage its business accordingly [1][2]. CEO C.C. Wei stated that the company’s full-year revenue forecast already accounts for geopolitical factors [2]. This careful approach reflects the broader anxieties within the global tech industry regarding the impact of tariffs on trade and supply chains [3].

manufacturing capacity and expansion

TSMC is actively expanding its manufacturing footprint, particularly in the United States [1][2]. The company plans to produce 30% of its 2-nanometer chip capacity in Arizona, establishing a significant semiconductor manufacturing hub [1][2]. This expansion is driven by strong AI demand from major clients like Apple, Nvidia, AMD, Qualcomm, and Broadcom [2]. TSMC’s CFO, Wendell Huang, highlighted geographic manufacturing flexibility as a key value proposition for customers [1]. However, the timeline for the second factory in the U.S. has been delayed to 2027 or 2028 due to labor shortages [1].

market leadership and competitive landscape

TSMC’s confidence in achieving over 20% revenue growth this year, with AI revenue doubling, may be optimistic considering global trade concerns [3][1]. Some analysts believe TSMC might be underestimating the impact of tariffs on its business [3]. Despite these concerns, TSMC’s strong position in advanced chip manufacturing provides it with considerable leverage [3]. The company has reportedly increased prices at its U.S. factories, and major clients like Apple and Nvidia may have little choice but to pay these higher prices due to tariff uncertainties [3]. TSMC denies considering joint ventures or technology transfers with other companies [2].

potential shifts in customer behavior

Morningstar analysts suggest TSMC’s clients might be accelerating chip shipments to avoid potential tariffs [5][6]. The projected 12% sequential increase in TSMC’s second-quarter sales guidance could indicate customers are stocking up before tariffs take effect [5][6]. However, the Trump administration’s trade policies are rapidly evolving, with average US tariff rates already climbing from 2.5% to an estimated 27% between January and April 2025 [7]. These tariffs include a minimum 10% tariff on all US imports and higher rates on specific countries and goods, creating a complex and unpredictable trade environment [7].

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tariff impact fair value