tsmc's $10 billion move: currency risk or strategic play?

2025-06-26 tsmc

Taipei, Thursday, 26 June 2025.
tsmc is investing $10 billion into its overseas subsidiaries. The goal is to mitigate foreign exchange risks from the rising New Taiwan dollar. Analysts suggest this move will slash hedging costs and boost capital flexibility. The company aims to match dollar revenues with dollar liabilities, creating a natural hedge. This shields financial performance from currency conversion risks. This is tsmc’s largest capital operation ever for exchange rate volatility. The ceo revealed that the strengthening New Taiwan dollar has already cut into the company’s operating profit margin.

addressing currency volatility

The capital injection will occur via TSMC Global Ltd., a wholly-owned subsidiary, issuing new shares to its parent company [1][2]. This is the third such deal since 2024, but the largest by far, with previous increases timed to coincide with periods of New Taiwan dollar appreciation [2]. TSMC Global manages overseas investments and hedging activities. The cash infusion enhances its flexibility in handling exchange rate risks [1][2].

analyst perspectives

Philip McNicholas, a strategist at Robeco, notes that increased foreign exchange volatility often leads banks to adjust margin requirements [1]. He suggests that injecting cash helps manage margin calls for both existing and new hedging positions [1]. Christopher Wong, a senior strategist at OCBC, points out that natural hedging, matching dollar revenues with dollar liabilities, is a typical strategy. It also funds US assets and expansion plans, cutting down on foreign exchange conversion risks [1].

impact on export economy

The strengthening New Taiwan dollar raises concerns for Taiwan’s export-driven economy [1]. In May, the currency saw its largest single-day gain since the 1980s [1][7]. This prompted officials to consider measures to curb speculation [7]. A strong local currency hurts exporters as they receive less local currency when converting US dollars from overseas sales [1]. Alternatively, they might need to raise prices, which could reduce demand [1].

profit margin implications

TSMC CEO Wei哲家 stated in June that the stronger New Taiwan dollar had already lowered the company’s operating profit margin by several percentage points [1]. He estimated that an 8% rise in the New Taiwan dollar could reduce TSMC’s gross profit margin by over 3 percentage points [7]. Wei哲家 emphasized TSMC’s commitment to maintaining its technological leadership and selling its value accordingly [7].

stock market outlook

The move is seen as a positive signal, potentially boosting related technology stocks [5]. Market observers suggest that this capital increase will bolster TSMC’s competitiveness [5]. It is expected to drive investments in technological innovation and production capacity expansion [5]. Investors are advised to monitor TSMC’s developments and global semiconductor industry trends to identify potential investment opportunities [5].

Bronnen

currency hedging capital investment