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Investment bank Morgan Stanley has issued a fresh investment note for TSMC’s Taiwan shares. TSMC’s shares dipped by 5.7% in Taiwan today as markets reacted to the prospect of tariffs against the firm’s products imported into the US. In its note, Morgan Stanley kept a NT$1,388 share price target for TSMC and stressed that while the tariffs will impact the firm’s short-term performance, TSMC’s competitive advantages will ensure that it attracts most of the world’s chip orders.
TSMC’s Competitive Advantages Can Help It Counter Impact Of Tariffs Over Long Term, Says Morgan Stanley
As per a report in the Taiwanese press, Morgan Stanley believes that the tariffs can impact TSMC’s long-term profits and its gross margins. The Taiwanese firm’s stock closed down 5.7% in the Taiwanese exchange earlier today, and the bank adds that until further clarity on the measures is available from the US and Taiwanese governments, TSMC’s short term performance can take a hit.
Over the long term, the investment bank believes that TSMC’s manufacturing process advantages can help it sustain against most of the impact. TSMC’s 3-nanometer manufacturing technology is among the most advanced chip manufacturing technologies in the world, and the firm also benefits from stable production yields when compared to others, such as Samsung.
Yields refer to the number of usable chips per wafer, and the cost of any defective items is borne by the manufacturer, which contributes to lower margins.

TSMC’s competitive advantages mean that despite the tariffs, the firm will continue to hold a high market share in the advanced chip manufacturing market, believes Morgan Stanley. The bank shares that alongside the advanced manufacturing processes, the long term growth driven by AI demand and low valuation mean that investors will focus on TSMC’s profit margins instead.
Setting up mega foundries and developing the latest chip manufacturing technologies takes decades of investment. This lends firms such as TSMC considerable advantages that translate into high barriers to entry for any rivals seeking to set up shop.
The Morgan Stanley analyst adds that TSMC’s US customers will account for 60% to 70% of its revenue this year. He also notes that previous statements by TSMC’s management have indicated that customers will bear any burden of tariffs instead of chip manufacturers. Therefore, any higher prices from the tariffs could change the pricing and, by effect, the demand dynamics in the technology industry.
Another hot-button topic has been the potential cancelation of subsidies to TSMC to set up advanced chip manufacturing facilities in the US. On this front, Morgan Stanley shares that the subsidies account for only 10% of TSMC”s US capital expenditure. As a result, the impact on TSMC’s profit margin will be less than 0.5% as TSMC’s depreciation expense accounts for 40% to 50% of the firm’s sales costs.