Tariff uncertainty and US expansion
Taiwan Semiconductor Manufacturing Co (ADR) (NYSE:TSM), the world’s largest contract chipmaker and a critical link in the global semiconductor supply chain, continues to face a mix of regulatory and geopolitical challenges.
At its latest shareholder meeting, the company confirmed that US trade tariffs were having an indirect impact on operations, particularly as it proceeds with a $165 billion investment in new manufacturing capacity in the United States.
Although the company itself is not directly subject to import tariffs, the added costs from sourcing US-bound equipment made in Asia could dampen demand.
Chief Executive C.C. Wei said the company is in active dialogue with the US Department of Commerce to mitigate this risk.
AI momentum drives outlook
Despite these pressures, TSMC remains buoyed by surging demand for chips used in artificial intelligence. “AI demand has always been very strong and it’s consistently outpacing supply,” said Wei.
This supply-demand imbalance continues to underpin strong pricing power and long-term growth potential, particularly given the company’s strategic relationships with key customers such as Apple and Nvidia.
In April, TSMC upgraded its full-year guidance, citing robust demand for AI-related applications. That outlook remains unchanged, according to the latest update.
Currency headwinds and political risk
Closer to home, TSMC is contending with pressure on margins as the Taiwan dollar strengthens. Wei noted that currency movements have already reduced gross margins by more than three percentage points.
The broader risk, however, stems from rising tensions across the Taiwan Strait. While TSMC has no control over the geopolitical situation, Wei said any crisis would be a matter for governments, not the company.
Nevertheless, the firm’s central role in global technology supply chains and industrial policy provides a significant layer of resilience. For investors looking for exposure to structural trends in AI and advanced computing, TSMC remains a strategically important name.