Taiwan Semiconductor Manufacturing Co. (TSMC) plans to issue US$10 billion in new stock through its overseas unit, TSMC Global Ltd., to address risks from foreign exchange fluctuations.

This issuance is the largest by the company to date.

TSMC Global manages the company’s overseas investments and hedging operations.

The funds from this issuance will be used to increase capital flexibility and manage exchange rate risks.

This marks the third equity issuance by the unit since 2024, with past issuances occurring during periods of Taiwan dollar appreciation.

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🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Currency appreciation creates measurable margin pressure in semiconductors

TSMC’s $10 billion forex hedging move illustrates the significant impact of currency fluctuations on semiconductor profitability.

For TSMC specifically, every 1% appreciation in the Taiwan dollar reduces operating margins by 0.4 percentage points, creating substantial financial pressure as the currency has risen over 11% against the US dollar this year 1.

This phenomenon has already materialized in TSMC’s financial results, with profits falling to NT$361.56 billion in Q1 2025, down from NT$489.2 billion previously 2.

Currency appreciation typically impacts export-oriented industries broadly, with research indicating a 5% currency appreciation can reduce average profit margins by approximately 0.5 percentage points across Taiwanese industries, hitting electronics manufacturers particularly hard 3.

The immediate bottom-line impact explains why TSMC and other semiconductor companies have been forced to prioritize currency risk management as a core financial function rather than just an ancillary activity.

2️⃣ Tech giants deploy increasingly sophisticated hedging strategies

TSMC’s approach of centralizing forex risk management through a dedicated subsidiary mirrors strategies employed by other major tech companies facing similar currency challenges.

Apple, for instance, increased its notional FX derivatives to $176.2 billion in 2021, representing an 83% increase year-over-year, to protect against anticipated dollar strength affecting overseas earnings 4.

By contrast, Microsoft reduced its hedges by 38% during the same period, resulting in a $273 million forex gain, demonstrating how different strategic approaches to currency management can directly impact financial performance 4.

Large Taiwanese exporters typically hedge between 50-80% of their foreign exchange exposure, though many reduced these ratios in 2024 due to escalating hedging costs in volatile markets 3.

These varying approaches highlight how currency risk management has evolved from a basic financial safeguard into a strategic capability that can significantly influence competitiveness in the increasingly global semiconductor industry.

3️⃣ Exporters balance currency challenges against strong sector demand

Despite the Taiwan dollar’s rapid appreciation, Taiwanese exporters have demonstrated resilience through improved competitiveness and product differentiation.

Taiwan’s exports surged 32.3% despite currency headwinds, driven primarily by robust global demand for AI applications and rush orders from international buyers 5.

This pattern suggests that in high-value sectors like advanced semiconductors, product leadership and technological differentiation can offset currency-driven pricing pressure, especially when global demand significantly outpaces available supply.

For smaller businesses with limited hedging capabilities, however, the NT dollar’s 8% appreciation has severely impacted profitability, particularly in traditional manufacturing sectors and machine tools 6.

The contrasting outcomes between industry leaders like TSMC and smaller players highlight how access to advanced financial risk management capabilities is becoming an increasingly important competitive differentiator in export-oriented industries.

Recent Taiwan Semiconductor Manufacturing Co. developments

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