Taiwan's Tech Titans Sound Alarm: Strong Taiwan Dollar Threatens Profits

TSMC and UMC Warn of Profit Margin Squeeze as Taiwan Dollar Surges to Historic Highs.

Taipei, Taiwan - Leading semiconductor manufacturers in Taiwan, including Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics Corp. (UMC), have voiced concerns over the recent dramatic appreciation of the Taiwan dollar, warning of potential negative impacts on their financial performance.

The Taiwan dollar experienced a significant surge on Friday, gaining NT$0.953 against the U.S. dollar, closing at NT$31.064. This 3.07 percent increase marked the largest single-day gain since 2002, fueled by substantial foreign capital inflows into the country.

TSMC, a global leader in the semiconductor industry, stated that for every 1 percent appreciation of the Taiwan dollar, its operating margin is projected to decline by 0.4 percentage points. Despite this, TSMC is maintaining its second-quarter revenue forecast, anticipating between US$28.4 and US$29.2 billion. The company's forecast is based on an assumed exchange rate of NT$32.5 to US$1, expecting gross margins in the 57-59 percent range and operating margins between 47-49 percent.

UMC, another prominent player in the Taiwanese semiconductor market, also acknowledged the potential impact of the strengthening Taiwan dollar on its profitability, though the effect is seen as relatively contained. UMC estimates that a 1 percent appreciation reduces its gross margin by 0.4 percentage points. To mitigate exchange rate risks, UMC employs natural hedging strategies, promptly converting U.S. dollar payments into Taiwan dollars.