TSMC Invests $165B to Expand Globally, Faces Margin Squeeze

As of August 19th, 2025, Taiwan Semiconductor Manufacturing Company (TSMC) is forging ahead with a global manufacturing expansion to meet the growing demand for advanced chip technologies. The company has raised its planned investment in the U.S. to a staggering $165 billion, which includes the construction of six advanced wafer fabs, two packaging facilities, and a major R&D center in Arizona.

Alongside its U.S. expansion, TSMC is also expanding its presence in Japan. The company's first specialty fab in Kumamoto began production in late 2024 and is focused on complementary metal-oxide-semiconductor sensors and automotive chips. Moreover, a second fab in Kumamoto is set to commence construction later this year, pending infrastructure readiness. In Europe, TSMC is planning a specialty technology fab in Dresden, Germany.

This global push is aimed at securing TSMC's leadership in advanced chip manufacturing and addressing geopolitical concerns through supply chain diversification. However, this massive investment strategy is anticipated to hurt the company's profitability. TSMC expects its gross margins to shrink by 2-3% in 2025 as it ramps up new fabs in the U.S. and Japan, and the gross margin dilution is expected to widen to 3-4% annually in later years due to the ramp-up of its other overseas facilities.

The impact of this expansion has already begun, with TSMC's gross margin declining by 20 basis points sequentially in the second quarter of 2025 and forecasting a further contraction of 210 basis points in the third quarter. With a planned CapEx of $38-$42 billion for 2025, TSMC's execution and cost discipline will be critical for protecting its margins. Nonetheless, the company remains confident of sustaining a long-term gross margin above 53%.