Taiwan Semiconductor Manufacturing Company has cut its profitability target despite roaring demand for artificial intelligence chips, as the cost burden of diversifying global chip supply chains starts to bite.
The world’s largest chip manufacturer said gross margin was expected to drop by a percentage point in the current quarter from 59 per cent in the three months to December 31, due to higher costs at its new fabrication plants, or fabs, in the US and Japan.
The contract chipmaker has committed to building three fabs in Arizona, at least two in Kumamoto and one in Dresden, Germany, in response to pressure from customers and foreign governments to rebuild some chip manufacturing capacity in those countries following decades of outsourcing to Asia. More than 90 per cent of the world’s most advanced chips are currently built in TSMC’s fabs in Taiwan.