TSMC Will Continue to Dominate Market Despite Possible U.S. Tariffs, Says Morgan Stanley
Investment bank Morgan Stanley has published a new investor note on TSMC, predicting the Taiwanese semiconductor giant will remain a global leader in advanced chip fabrication despite short-term setbacks from potential U.S. tariffs. In response to rising concerns about increased levies on TSMC’s imports into the U.S., the firm’s share price in Taiwan fell by 5.7%—yet Morgan Stanley reaffirmed its NT$1,388 share price target, citing TSMC’s unmatched technological lead, significant R&D investments, and extensive manufacturing expertise as key reasons the company should endure any policy shifts that might curb short-term profitability.
According to coverage in Taiwanese media, Morgan Stanley acknowledges that TSMC’s gross margins and long-term profit growth could be affected by new duties—particularly if tensions between the U.S. and Taiwan escalate. However, the investment bank believes TSMC’s strength in cutting-edge manufacturing nodes, specifically its 3-nanometer and upcoming 2-nanometer processes, uniquely position the company to handle many of the costs associated with higher tariffs. TSMC continues to show leading yields in mass production, where the cost of defective chips is borne by the manufacturer. By keeping yields consistently higher than those of competitors such as Samsung, TSMC can better absorb financial disruptions.
Morgan Stanley also points to TSMC’s robust AI-related demand as a key tailwind. High-performance computing, data center processors, and other AI-centric components require advanced nodes like 3 nm or smaller. Thanks to decades of investment and world-class expertise, TSMC benefits from elevated barriers to entry, leaving few viable alternatives for clients designing cutting-edge chips.
Furthermore, Morgan Stanley’s analyst highlighted that TSMC’s American customers could comprise 60–70% of the firm’s 2025 revenue. Previously, TSMC management suggested that any tariff burden would likely shift onto customers rather than be absorbed solely by the foundry. The potential withdrawal of U.S. subsidies for TSMC’s upcoming American fabs may slightly cut into margins, but Morgan Stanley estimates that the subsidies represent only around 10% of TSMC’s planned capital expenditure in the U.S., leading to a negligible 0.5% margin impact if the subsidies were lost. Meanwhile, TSMC continues its second phase of 2 nm trial production and remains at the forefront of advanced packaging, further consolidating its technological stronghold.
Do you believe TSMC can maintain its lead even under rising geopolitical and financial pressures? Share your thoughts on how advanced node yields might offset tariff-related costs in the long run.
