TSMC Margin Dilution Forecast Raises Longer-Term Caution

4 days ago

Parkev Tatevosian, CFA

"So here's the comments that I'm talking about from Taiwan Semiconductors management team in the company's earnings call with Wall Street analysts late last week. They now expect the gross margin dilution from the ramp up of our overseas fabs to be closer to 2% in the second half of 2025 and 1 to 2% for the full year, compared to the previous estimate of 2 to 3%. But then, just as quickly as Taiwan Semiconductor gets your hopes up, they then put your hopes down by forecasting a 2 to 3% hit in the early stages and 3 to 4% in the later stages as more production moves overseas."

The speaker highlights TSMC's earnings call where management forecast a lower-than-expected margin dilution for 2025, but warned that as more production shifts overseas, the gross margin dilution will climb to between 2% and 4% over the coming years. This commentary cautions investors to temper short-term optimism with longer-term margin pressures.