Taiwan Semiconductor Manufacturing Company (TSMC) is reporting another quarter of impressive growth, but the world’s largest chipmaker says expanding production in the United States is beginning to impact its profit margins.
The company posted a 77.4% increase in second-quarter profit, driven by soaring demand for artificial intelligence chips. However, executives acknowledged that building and operating new manufacturing facilities outside Taiwan comes with significantly higher costs.
TSMC has committed $200 billion to U.S. investments since President Donald Trump returned to office, including a recently announced $100 billion expansion focused on advanced semiconductor manufacturing and packaging. The move aligns with the administration’s push to bring more high-tech manufacturing back to America.
Company executives said overseas factories will continue to reduce profit margins over the next several years as production ramps up. Industry analysts estimate that manufacturing advanced chips in the U.S. can cost 20% to 50% more than producing them in Taiwan.
Despite those higher costs, experts believe TSMC remains in a strong position because of its dominance in advanced chip manufacturing. Many of its customers have few alternatives, allowing the company to pass some of the increased production costs on through future price increases.
The expansion is being driven by more than politics. Companies around the world are also seeking to diversify their supply chains after the disruptions caused by the COVID-19 pandemic, making additional manufacturing locations an increasingly important part of the semiconductor industry.
