Taiwan Semiconductor Manufacturing Co. posted its most profitable quarter on record in the second quarter of 2026, then used the same earnings call to warn that overseas expansion will chip away at margins over the next several years.
According to CNBC, the cost pressure comes as the Trump administration pushes advanced chip production back to the United States. TSMC CFO and spokesperson Wendell Huang said overseas fabs coming online will dilute gross margin by about 2 to 3 percentage points in the early years, with the drag later widening to 3 to 4 percentage points.
Record quarter, lower margin outlook ahead
TSMC reported second-quarter 2026 consolidated revenue of about NT$1.2704 trillion, up 36% year over year. Net profit reached about NT$706.6 billion, while earnings per share came in at NT$27.25. Both net profit and EPS rose 77.4% from a year earlier and set new company records.
Gross margin climbed to 67.7%, up 1.5 percentage points from 66.2% in the first quarter. The company also said its 2-nanometer process started contributing revenue during the quarter.
The outlook turned more cautious on profitability. TSMC lowered its third-quarter gross margin guidance to a range of 65% to 67%.
U.S. investment commitments reach $265 billion
Since Donald Trump returned to the White House in 2025, TSMC’s pledged investment in the United States has reached $200 billion. That figure includes a $100 billion plan for advanced semiconductor manufacturing and advanced packaging announced alongside last week’s earnings call.
Including the $65 billion tied to the CHIPS Act period, TSMC’s total U.S. investment now stands at $265 billion. The plan calls for 10 wafer fabs and two advanced packaging plants. The White House has presented the spending as a result of Trump’s trade and industrial policy agenda.
TSMC also raised its 2026 capital expenditure target to $60 billion to $64 billion and lifted its full-year revenue growth forecast to more than 40%.
Morningstar sees a 20% to 50% cost premium in the U.S.
Morningstar senior equity analyst Phelix Lee estimated that chips produced by TSMC in the United States cost 20% to 50% more than chips made in Taiwan. He said the actual gap depends on the timing of subsidy disbursements, how tax credits are recognized, and other cost fluctuations.
That estimate points to the central problem facing TSMC’s overseas buildout: the company is expanding where production is more expensive, even as demand remains strong and customers want more geographic diversification in supply chains.
Report points to a 2027 foundry price increase
Nikkei Asia previously reported that TSMC plans to raise foundry prices from early 2027. Base increases for both advanced and mature process nodes are expected to range from 5% to 10%.
If customers place additional high-performance computing, or HPC, orders above earlier demand forecasts, TSMC may charge another 10% to 15% premium. For some advanced-node orders, the effective price increase could exceed 10%.
The report said the timing gives customers about a year and a half to adjust budgets and supply-chain plans.
Taiwan analysts focus on local capacity and the technology gap
Liu Pei-chen, director of the Taiwan Industry Economics Database at the Taiwan Institute of Economic Research, told United Daily News that the bigger U.S. commitment was not surprising. She said TSMC was already facing limited capacity, while also needing to meet U.S. local manufacturing requirements and defend against rivals competing for orders. In her view, expanding investment in the United States aligns with TSMC’s interests.
Liu also said Taiwan’s water and power supply is nearing its limit, making global capacity allocation unavoidable. At the same time, she warned that TSMC’s employment creation and investment scale in Taiwan could be affected. She added that TSMC must keep its roots in Taiwan and maintain at least a two-year lead between advanced processes in Taiwan and those in the United States to preserve Taiwan’s advantage and interests.
Wu Chin-jung, general manager of WeDrive Technology, told Business Weekly that the margin sacrificed through overseas expansion buys TSMC deeper ties with customers. He said TSMC’s integrated offering from wafer manufacturing to CoWoS packaging is not something others can replicate in the short term.
Wu also said yields on the 3-nanometer process are stabilizing and depreciation pressure is easing. That could allow gross margin at the node to move above the company average in the second half, offsetting part of the drag from overseas plants.
After the earnings call, multiple brokerages raised their target prices on TSMC, with the highest reaching NT$4,200. The report said the more important metric for Taiwan is whether TSMC can keep at least a two-year technology lead between its home operations and future U.S. facilities.
Two questions the report highlighted
Why is TSMC building in the United States if costs are higher?
The report cited two main reasons: the Trump administration’s push to bring advanced chip manufacturing back to the U.S., and customer demand for more diversified supply chains. Even with Morningstar estimating a 20% to 50% cost premium versus Taiwan, TSMC’s cumulative U.S. investment has reached $265 billion, covering 10 wafer fabs and two advanced packaging plants.
How much could prices rise in 2027?
Based on Nikkei Asia’s report, base price increases for advanced and mature process nodes are expected to be 5% to 10% from early 2027. Additional HPC orders above earlier forecasts may face another 10% to 15% premium, pushing effective increases on some advanced-node orders above 10%.