TSMC's CFO Warns of Profit Margin Challenges Amid Currency Fluctuations

TSMC's CFO, Huang Ren-zhao, highlighted the impact of currency fluctuations on the company's profit margins, despite maintaining profitability through hedging strategies. TSMC reported better-than-expected Q2 earnings growth and raised its 2025 revenue growth outlook, but faces challenges from the appreciation of the New Taiwan Dollar. The company plans to inject $10 billion into its overseas subsidiaries to bolster its currency risk hedging operations.

Title: TSMC's CFO Highlights Currency Fluctuations' Impact on Profit Margins

Taiwan Semiconductor Manufacturing Co. (TSMC), the world's leading contract chipmaker, continues to face challenges from currency fluctuations, despite maintaining profitability through hedging strategies. Chief Financial Officer (CFO) Wendell Huang recently highlighted the impact of these fluctuations on the company's profit margins during the second-quarter earnings call.

TSMC reported better-than-expected Q2 earnings growth and raised its 2025 revenue growth outlook, but faces significant headwinds from the appreciation of the New Taiwan Dollar. The local currency has surged more than 11% this year, making it Asia's best performer. This strong currency negatively impacted TSMC's revenue in the April-June period by 4.4% and is expected to hurt third-quarter sales by 6.6% [1]. Huang stated that every 1% appreciation of the Taiwanese dollar against the greenback will reduce the firm's revenue by 1%.

To manage this uncertainty, TSMC plans to inject $10 billion into its overseas subsidiaries to bolster its currency risk hedging operations. The company is also considering various hedging strategies, including selling US dollars in the market spot, using forwards contracts, and moving part of its US dollar cash to an offshore holding company whose financial statements are denominated in US dollars [3]. Despite these challenges, TSMC remains confident in its long-term gross margin of 53% and higher [1].

HSBC Research has forecasted that TSMC will meet its second-quarter performance expectations, despite the unavoidable impact of currency fluctuations expected in the third quarter. The research firm anticipates TSMC's second-quarter revenue to increase by 39% year-on-year to NT$934 billion, with USD revenue reaching approximately $30.2 billion [2]. Looking ahead to the third quarter, HSBC expects TSMC's revenue in USD to grow by 4-5% sequentially, while a 2% decline is anticipated when calculated in New Taiwan dollars. The appreciation of the New Taiwan dollar is likely to pressure gross margins, forecasted to decrease to 56.5%, below the market expectation of 57.2% [2].

In conclusion, TSMC's CFO has underscored the impact of currency fluctuations on the company's profit margins. Despite these challenges, TSMC remains committed to maintaining its profitability through strategic hedging and expansion. Investors should closely monitor TSMC's ability to navigate these currency risks and its ongoing efforts to bolster its competitive advantage in the semiconductor industry.

References:
[1] https://www.bloomberg.com/news/articles/2025-07-17/tsmc-warns-of-bigger-currency-hit-to-revenue-in-third-quarter
[2] https://www.gurufocus.com/news/2979906/tsm-earnings-forecast-and-currency-impact-analysis
[3] https://www.bloomberg.com/news/articles/2025-07-18/tsmc-calls-fx-big-uncertainty-vows-constant-review-on-hedging