[News] TSMC Q2 Margins Reportedly Under Pressure as U.S. Eyes Waiver Revocation, NTD Surge

According to Economic Daily News, as the second quarter enters its final stretch, TSMC is reportedly facing two major challenges: the White House is said to be considering revoking the exemption that allows its China-based facilities to access U.S. technology, and the New Taiwan dollar has surged by 12% this quarter.

U.S. May Revoke Tech Waivers for Chipmakers’ China Operations, Including TSMC

As noted by the Wall Street Journal, sources reveal that Jeffrey Kessler, who heads the Commerce Department unit overseeing export controls, informed top global chipmakers—Samsung, SK hynix, and TSMC—that the U.S. plans to revoke waivers that have allowed them to use American technology in China. If implemented, the companies would likely need to apply for individual licenses from the U.S. government to continue supplying their Chinese facilities, the report says, citing sources.

New Taiwan Dollar Surge Puts Pressure on TSMC Margins

In addition, exchange rate fluctuations are having a significant impact on TSMC’s gross margin, which is heavily tied to U.S. dollar–denominated exports, as highlighted by Economic Daily News.

At its annual shareholders’ meeting on June 3, TSMC Chairman and CEO C.C. Wei noted that every 1% appreciation of the NT dollar reduces TSMC’s gross margin by 0.4 percentage points, directly affecting revenue, according to Economic Daily News.

Economic Daily News also points out that during its April earnings call, TSMC projected second-quarter revenue between USD 28.4 billion and USD 29.2 billion, with the midpoint representing a nearly 13% quarter-over-quarter increase—significantly above institutional forecasts at the time, which averaged around 6%. However, that guidance was based on an assumed exchange rate of NTD 32.5 to the U.S. dollar.

With the New Taiwan dollar appreciating over 2% in the past month—and 12% over the course of the quarter—closing at NTD 29.529 last Friday (June 20), the actual average exchange rate now diverges sharply from TSMC’s earlier assumption, as Economic Daily News highlights.

Given these factors, institutional investors still expect TSMC to meet its U.S. dollar–denominated revenue target for the quarter. However, they warn that gross and operating margins may fall to the lower end of guidance, making it difficult for the company to exceed its profitability targets, the report indicates.

TSMC is set to hold its earnings call in July to release Q2 results and outlook, with recent headwinds drawing heightened market attention, the report adds.

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(Photo credit: TSMC)