ntd surge threatens tsmc's q2 projections

2025-05-06 tsmc

Taipei, Tuesday, 6 May 2025.
the rapid appreciation of the new taiwan dollar is raising concerns about tsmc’s profitability. tsmc’s q2 revenue forecast assumed an exchange rate of 32.5 ntd to 1 usd. the ntd has surged to 29.6710 against the dollar, a 7% increase in just three days. analysts predict that every 1% ntd appreciation could cut tsmc’s operating margin by 0.4 percentage points. tsmc faces potential foreign exchange losses, impacting earnings and stock value. the central bank intervened as the ntd saw its largest single-day gain in nearly 40 years, with citizens rushing to exchange currency.

revenue impact and financial forecasts

If the ntd remains strong, tsmc’s dollar-denominated revenue could face significant reductions when converted to ntd [7]. A hypothetical 9% drop from the assumed exchange rate could decrease revenue by ntd 700.000 billion to 864.000 billion [7]. Despite these pressures, tsmc has stated it will not revise its q2 or full-year outlook, but will monitor the situation [2]. The company uses foreign currency derivatives, including forward contracts, to hedge against exchange rate risks, but these measures may not completely eliminate the impact [2].

broader economic and political context

The ntd appreciation reflects broader economic concerns, including a potential us debt crisis and trade negotiations between taiwan and the us [4]. Political figures have weighed in, with president lai ching-te defending the central bank’s position and accusing the opposition of manipulating the issue [4]. However, critics argue that the rapid ntd appreciation could harm taiwan’s export-oriented economy, potentially increasing export costs to the us by 25% [5]. The central bank has intervened in the currency market, citing speculative ‘vulture’ activity [4].

expert opinions and market reactions

Experts are divided on the long-term implications. some suggest that the ntd appreciation is due to a weakening dollar and that taiwan’s strong economic fundamentals should support the currency [4]. Others warn of potential business closures and job losses, particularly among small and medium-sized enterprises with limited hedging capabilities [7]. the taiwan stock exchange experienced a significant intraday drop, led by tsmc and other tech stocks, reflecting market anxiety over the currency’s impact [4]. However, the market partially recovered by the end of the day [4].

tsmc’s strategic positioning

Despite the currency headwinds, tsmc’s robust gross margins and dominant market share provide some buffer [2]. The company may adjust pricing or procurement strategies to mitigate the impact [2]. However, analysts anticipate recalculations of tsmc’s revenue and earnings forecasts, considering the stronger ntd [7]. While a stronger ntd benefits taiwanese consumers, it creates challenges for export-driven industries like semiconductors [7]. Tsmc’s ability to navigate these currency fluctuations will be critical for maintaining its financial performance and market leadership [2].

Bronnen

currency exchange profit margins