Taiwan Strait geopolitical concentration: With approximately 90% of manufacturing capacity in Taiwan, any military escalation, naval blockade, or forced reunification scenario represents an existential disruption risk — not just to TSMC, but to global semiconductor supply chains. This risk is partially mitigated by the Arizona, Japan, and Germany expansion but cannot be fully diversified away within any plausible five-year horizon. The Arizona program, even fully built out, will represent approximately 20–30% of TSMC's leading-edge N2 capacity at most.⁹
Trade policy and tariff uncertainty: The Trump administration's tariff actions and semiconductor export control frameworks create uncertainty for TSMC's customer revenue mix. Restrictions on chip exports to China (China represented 11.5% of FY2024 revenue) could suppress demand from Chinese design customers. Conversely, broad semiconductor tariffs on imported chips could raise customer costs and suppress end demand in price-sensitive markets.⁹¹³
AI demand cyclicality: Despite management's conviction, the AI infrastructure buildout is not immune to inventory cycles. If hyperscalers over-order relative to actual inference demand, a correction could emerge similar to the post-pandemic inventory correction of 2022–2023. CEO C.C. Wei openly acknowledged this risk: "I'm also very nervous about it. You bet because we have to invest about USD 52 billion to USD 56 billion for the CapEx, right? If we didn't do it carefully, that would be a big disaster for TSMC."⁹
Overseas fab margin dilution: The combined dilutive effect of Arizona, Japan, and Germany fabs is expected to widen from approximately 1–2% in FY2025 to 3–4% in the "latter stages" of the ramp, potentially compressing gross margins toward the lower end of the 56%+ long-term target even as volumes grow.⁹¹⁰
Customer and technology concentration: A handful of customers (Apple, NVIDIA, AMD, Qualcomm) account for a disproportionate share of revenue. Any shift in a major customer's chip architecture (such as migration to in-house silicon or a competitor's node), or any competitive technology leap by Samsung or Intel Foundry at an advanced node, could affect TSMC's utilization rate and pricing power. Intel's continued foundry investment, even from a deeply challenged starting point, is a medium-term watch item.
Foreign exchange exposure: TSMC reports in TWD and earns much of its revenue in USD. Every 1% appreciation in the TWD against the USD reduces gross margin by approximately 40 basis points. Exchange rate assumptions are embedded in every quarterly guidance, making reported margins sensitive to currency movements outside management's control.⁹

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