TSM sees foreign exchange as ‘big uncertainty,’ vows prudence in capex amid US expansion – report

Taiwan Semiconductor Manufacturing’s (NYSE:TSM) CFO Wendell Huang said the company sees currency volatility as a “big uncertainty” to its margins and will continuously review hedging strategies to manage the impact, Bloomberg News reported.

“Foreign-exchange rate is something that we cannot control, but there were instances before where it was not in our favor, but we managed to lean on other factors so that we are able to keep our profitability, and that’s what we are planning to do,” said Huang in an interview to Bloomberg on Friday, the report added.

TSM did not immediately respond to a request for comment from Seeking Alpha.

“We use different hedging alternatives. The first one is to just simply sell the US dollar in the market spot,” said Huang, according to the report. “We also use forwards contracts, and we also move part of the cash, the US dollar cash, to an offshore holding company whose financial statements are denominated in the US dollar.”

Huang’s remarks came a day after the global foundry reported record profit in the second quarter with growth of 60% and raised its 2025 revenue growth outlook.

During TSM’s earnings call Thursday, Huang warned that TSM’s third-quarter performance would likely face a bigger hit from a strong Taiwan dollar. Huang had noted that with every 1% appreciation of Taiwanese dollar against U.S. dollar will reduce the company’s reported NT$ revenue by 1%.

Last month, TSM said it is set to pour $10B in capital into an overseas unit to shore up currency hedging operations, another Bloomberg News report added, citing the interview.

In addition, TSM intends to be prudent about spending this year while expanding globally to meet surging AI chip demand.

TSM — which produces chips for some of the world’s largest tech companies, including Apple (AAPL), Nvidia (NVDA) and AMD (AMD) — is sitting tight for now on plans to set aside a maximum of $42B for capital expenditure this year, Huang told the news agency.

On Thursday, TSM noted that it will maintain its 2025 capital expenditure budget to be between $38B and $42B.

TSMC plans to spend about $165B to build capacity in Arizona, as part of a global expansion aimed at helping meet future demand for the components used for AI.

During a congressional hearing this year, Commerce Secretary Howard Lutnick said the Trump administration intends to bring the full chip supply-chain back to the U.S. from Asia.

Huang said it will take years for the U.S. to achieve that. TSM relies on hundreds of partners in Taiwan to supply the raw materials and services needed in chipmaking. TSM has told U.S. officials they need to work on incentivizing and helping smaller suppliers on several issues, including permits and talent, Huang noted according to the report.

“It takes Taiwan a few decades to build up this whole ecosystem. It will take a long time to build that kind of ecosystem in the US,” said Huang, the report added.

Huang said the company’s second facility in Arizona could begin volume production by 2027, advancing its schedule in by several quarters. TSM could also speed up construction of a third facility due to customer demand. The company thinks that about 30% of its 2-nanometer or more advanced capacity would be located in Arizona eventually, the report noted.

“We are mindful about macro uncertainties these days, primarily related to tariff policies, so we are being prudent about planning our capex,” said Huang.