Can TSMC maintain its operating profit margin in 2025?

TSMC's ability to maintain its operating profit margin in 2025 is contingent upon several key factors:

1. Impact of Overseas Expansion: TSMC's investment in the U.S. is expected to lead to a 2%-3% reduction in profit margins over the next five years due to higher local expenses. This suggests that there could be pressure on margins from operational costs associated with expanding into new geographic locations.
2. Cost Management and Negotiations: TSMC is negotiating with U.S. clients to share production costs, which could mitigate the impact of higher local expenses. Effective cost management and the ability to pass on increased costs to customers could help maintain margins.
3. Economies of Scale and Technological Advancements: As production scales up and the ecosystem improves, costs are expected to decline, potentially maintaining a long-term gross margin of 53% or higher. The company's investments in advanced technologies and its position as a leader in semiconductor manufacturing suggest that it may be able to maintain or even improve its margins over time.
4. Market Demand and Product Mix: TSMC's strong position in the AI and HPC markets, with forecasts of doubling revenue from AI semiconductors driving growth at nearly 40% CAGR, indicates that it is well-positioned to capitalize on high-growth segments of the market. A favorable product mix can help maintain profitability.
5. Financial Commitments: TSMC's additional $100 billion investment in the U.S. is a significant commitment. The company's ability to manage this investment effectively, ensuring that it translates into profitable operations, will be crucial for maintaining margins.

In conclusion, while there are challenges to maintaining margins, particularly from the overseas expansion, TSMC's strategic cost management, technological advancements, and strong market demand for its products suggest that it is well-positioned to maintain or improve its operating profit margin in 2025.