Trump-Driven U.S. Expansion Squeezes TSMC Margins Amid AI Boom

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s leading contract chipmaker, is facing significant margin pressure as it accelerates its expansion into the United States. Under pressure from President Donald Trump to bolster domestic manufacturing, TSMC has committed over $200 billion to U.S.-based facilities. This includes a recent $100 billion investment aimed at advanced packaging and semiconductor manufacturing in Arizona.

While the company reported a record-breaking 77.4% jump in second-quarter profit driven by the AI boom, the costs associated with overseas production are beginning to bite. TSMC’s gross margin for the second quarter stood at 67.7%. To offset the higher costs of operating outside of Taiwan, the company reportedly plans to raise prices for both advanced and mature chip production by up to 10% starting in 2027.

The geopolitical pressure to 'onshore' chip production is not limited to TSMC. South Korea’s SK Hynix is also developing U.S. facilities, and even Israel is entering the fray. Israel's AI czar, Erez Askal, is reportedly lobbying TSMC, Samsung, and Intel to establish a manufacturing hub in the country capable of producing state-of-the-art chips at the 2-nanometer node or below.

In response to the shifting landscape, Nvidia is moving faster with its next generation of architecture. The company announced that its new 'Vera Rubin' chip designs have already been delivered to major AI companies. CEO Jensen Huang emphasized that the industry is being fundamentally reshaped as computing moves toward serving AI agents and autonomous robots, necessitating a more geographically diverse and technologically advanced supply chain.