Taiwan Semiconductor Manufacturing Co (TSMC) (NYSE:TSM; TW:2330) delivered a blockbuster first quarter, posting a 60% jump in net profit and guiding higher for Q2 as AI-driven chip demand remains robust. However, management flagged potential risks from evolving tariff policies and rising fab costs.
Q1 2025 Financial Highlights
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Net Income: NT$361.56 billion ($11.12 billion), up 60% year‑on‑year (analyst median: NT$354.6 billion)
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Revenue: NT$839.25 billion ($25.81 billion), up 41.6% YoY (forecast: NT$835.17 billion)
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Gross Margin: 58.8%, down 0.2 ppt—impacted by earthquake disruptions and initial cost dilution at the new Japan fab
Q2 2025 Outlook
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Revenue Guidance: US $28.4 billion–$29.2 billion
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+13% sequential growth
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+38% YoY at midpoint
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Margin Forecast: Expected to ease by 80 bps to 58% as Arizona ramp‑up costs kick in
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2025 Margin Pressure: Projected 2–3% hit from overseas fab expansions (Arizona, Kumamoto); 3–4% annual dilution in later years
Strategic Drivers and Risks
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AI Chip Demand:
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TSMC reaffirms that AI accelerator revenue will double in 2025, underpinned by continued customer ramp‑ups.
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U.S. Investment:
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A $100 billion U.S. expansion—announced at the White House last month—furthers TSMC’s global capacity footprint.
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Tariff Uncertainty:
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“There are uncertainties and risks from the potential impact of tariff policies,” management noted, though customer ordering behavior remains unchanged so far.
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Operational Disruptions:
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A 6.4‑magnitude earthquake in Taiwan and initial cost dilution from the new Japan fab weighed slightly on margins this quarter.
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Monitor TSMC’s Valuation Metrics
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TSMC’s robust Q1 performance and confident Q2 guidance underscore its pivotal role in the AI semiconductor boom—even as it braces for margin dilution from new fab investments and potential tariff shocks.
