Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Booming AI demand helped Taiwan Semiconductor Manufacturing Company to its highest quarterly net profit, but the world’s largest chip manufacturer gave a more cautious outlook, citing risks from US tariffs and foreign exchange volatility.
TSMC reported NT$398.3bn (US$13.5bn) in net earnings on Thursday for the second quarter, a 60.7 per cent jump year-on-year, along with a 39 per cent jump in revenues to NT$933.8bn. Chief executive CC Wei attributed the record results to “continued robust demand” for AI and high-performance computing applications.
The company said it expected revenues to increase by another 38 per cent year-on-year in the current quarter and raised its growth forecast for the full year to 30 per cent. But that outlook implies a revenue contraction in the final quarter of 2025.
“We become more conservative,” Wei said. TSMC said it was not seeing any change in customer demand so far, but pointed to the risk that US tariff policies could affect consumers and that the weakening US dollar could undermine growth and profitability.
The cautious outlook comes after ASML, the world’s sole supplier of the lithography machines needed for making cutting-edge chips, said on Wednesday that the impact of US President Donald Trump’s tariff policies was less negative than expected. It also issued guidance more cautious than analysts had expected.
The rapid appreciation of the New Taiwan dollar, which has gained 12 per cent against the US dollar this year, is already eating into TSMC’s profitability. Nearly all of the company’s revenues are in US dollars, while 75 per cent of its cost of goods sold is incurred in its home country’s currency.
TSMC forecast its gross margin would decrease to a level between 55.5 and 57.5 per cent from 58.6 per cent in the second quarter, as costs from the expansion of new plants in the US and the less favourable exchange rate took their toll.
Earlier this year, TSMC raised its US investment plans from a previous commitment of $65bn to a total $165bn. TSMC expects the cost of successively bringing the new capacity online would dilute its gross margin by 2 to 4 percentage points annually for five years, beginning with this year’s profit margins.
But the near-term effect of currency fluctuations weighs at least as heavily. Compared with the exchange rate of NT$32.5 to the dollar expected by the company for the second quarter in April, the NT dollar had appreciated by another 4.4 percentage points, diluting the gross margin by 180 basis points. This was partially offset by higher utilisation of its fabrication plants, or fabs, TSMC said.
For the third quarter, Taiwan’s currency was expected to appreciate by another 6.6 percentage points sequentially, said chief financial officer Wendell Huang. This “will negatively impact our third-quarter revenue and reduce our gross margin by about 260 basis points”, he added.
Your guide to what Trump’s second term means for Washington, business and the world
Apple is preparing to add a further $100bn to its US investment plans as chief executive Tim Cook strives to insulate the iPhone maker from Donald Trump’s trade war.
White House officials said that the Silicon Valley giant’s expanded $600bn spending commitment would be announced later on Wednesday, including a new “American manufacturing programme” to produce more of its devices and components in the US.
The pledge comes as a new wave of the US president’s planned tariffs is set to come into force on Thursday.
“President Trump’s America First economic agenda has secured trillions of dollars in investments that support American jobs and bolster American businesses,” said Taylor Rogers, the White House press secretary. “Today’s announcement with Apple is another win for our manufacturing industry that will simultaneously help reshore the production of critical components to protect America’s economic and national security.”
On the company’s earnings call last week, Cook said that the “vast majority” of Apple’s products were covered by the US administration’s ongoing Section 232 investigation into potential tariffs on chips and the products that contain them. The results of that investigation are expected soon.
Apple did not immediately respond to a request for comment. Its shares were up nearly 4 per cent on Wednesday morning following the news.
In February, Apple said it planned to hire an additional 20,000 staff in the US over the next four years, as part of a $500bn investment in the country during Trump’s second term in office.
That figure included Apple’s day-to-day spending on US suppliers, data centres and corporate facilities, as well as new initiatives such as a manufacturing facility in Houston to build servers for artificial intelligence. In 2018, during Trump’s first term, Apple had pledged to make a $350bn “direct contribution” to the US economy.
In July it further announced a $500mn commitment to building US rare earth magnets with MP Materials, as part of the same investment plan.
Among US Big Tech companies, Apple is especially exposed to the Trump administration’s trade policies. Its efforts to diversify its production away from China to India have angered Trump, who has threatened Apple with extra tariffs unless it moves iPhone manufacturing to the US.
But supply chain experts have said the US, which hasn’t produced smartphones in any meaningful volumes for more than a decade, lacks the manufacturing expertise to assemble a device as sophisticated as an iPhone.
Moving production of its products to the US will eat into Apple’s margins, which are kept high thanks to its deeply rooted supply chains in Asia.
Apple has warned of $1.1bn in tariff-related costs in the quarter to September, assuming the current tariff rates do not change. At the same time, Apple’s sales in its most recent quarter were boosted by US consumers trying to get ahead of the new levies, which could lead to price increases for Apple’s products.
Hundreds of billions of dollars have been wiped from Apple’s market capitalisation since Trump’s “liberation day” announcements in April, amid wider concerns that the iPhone maker is falling behind in AI.
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Linda Yaccarino has been appointed as chief executive of a telehealth start-up that offers weight loss medication, weeks after her shock departure from the helm of Elon Musk’s X.
Yaccarino stepped down unexpectedly from her chief executive role at X in July, after two years attempting to claw back advertising dollars while also contending with Musk’s testy relationship with marketers.
In a statement on Tuesday, Miami-based eMed Population Health said Yaccarino was joining the company’s mission to “make safe, effective, and sustainable chronic care accessible directly through an all-in-one, digital-first experience”.
The little-known digital group is focused on health management for GLP-1 and GIP users, at a time when demand for anti-obesity and diabetes drugs such as Ozempic has skyrocketed.
The company said that Yaccarino was a “sought-after leader” with a “powerful presence and the undeniable ability to negotiate new partnerships [and] lead and drive transformational change”.
Yaccarino’s departure from X came several months after the social media company was acquired by the billionaire entrepreneur’s artificial intelligence start-up xAI, in a move that insiders say sidelined her internally.
A Madison Avenue veteran, Yaccarino risked many of her relationships in the advertising industry when she publicly backed X’s crusade to sue multiple brands and a marketing trade body on antitrust grounds, arguing that they had colluded to boycott the platform.
While some brands returned to the platform as a result, helping to boost X’s sales numbers, others in the industry complained privately that they felt pressured to return. Yaccarino repeatedly denied the characterisation that she strong-armed marketers to spend on the platform while in the role.
Meanwhile, relations between Musk and Yaccarino soured over time, according to four people familiar with the tensions.
Musk felt Yaccarino had failed to be transparent about the company’s status with advertisers and put a gloss on reality, the people said. About a year into her time at X, he pressured her to more quickly restore the platform to financial health, giving her ultimatums, the people said.
Once Musk returned his focus to X after his work at US President Donald Trump’s so-called Department of Government Efficiency came to an end, he also started making unilateral decisions that blindsided her, some of the people said.
Nevertheless, Yaccarino, a self-proclaimed advocate of “free speech”, remained publicly loyal to her former boss throughout her X tenure.
“The healthcare industry has been disrupted by technology, but not yet completely transformed by it,” Yaccarino said in a statement on Tuesday. “There is an opportunity to combine technology, lifestyle, and data in a new powerful way through the digital channels that impact consumers directly in ways that have never been done before.”
She added that eMed was “well-positioned” to be a “tenacious leader” that would reshape the space.
Hi everyone, this is Lauly, waving hello from drizzly Tokyo, where I am on a short business trip.
It’s been a while since I last visited this vibrant city. That was in spring 2023, shortly after the lifting of Covid quarantine controls. We had a company team-building event that almost every overseas correspondent attended. We took a dinner cruise on a traditional boat in Tokyo Bay and later sang karaoke. Touching down in Haneda Airport yesterday reminded me how joyful it is to see colleagues that you work closely with despite living far away.
I am hosting this week’s #TechAsia from Tokyo just as our special visual project about extreme ultraviolet lithography machines, the world’s most complicated chipmaking equipment, goes online.
The idea for the story actually emerged roughly two years ago from discussion with my colleague Annie Cheng Ting-Fang. We decided we should dissect China’s efforts to build its own ASML, the Dutch company that is the exclusive maker of EUV machines. However, we were sidetracked by other big projects and major news developments, such as the great nanometre chip race, China’s subsea cable drive, Huawei’s mission to boost China’s tech prowess, not to mention the industry-wide earthquake set off by Trump’s tariff war since April.
Looking back, however, all these projects are linked to one another, and together they build a sweeping tale about China’s tech capabilities under the pressure of US restrictions. Our years of accumulated industry knowledge and the latest scoopy details about little-known Chinese players all became part of this latest story.
I am very happy that we finally told this story, with massive help from our industry sources and analyst friends, as well as our editors and designers. This is a very good read that I’m sure you will enjoy.
Separately, the tech supply chain has been waiting anxiously for the final results of the Trump administration’s tariff policy. Without further details, it is impossible for companies to make their next moves.
“The clients have not yet told us what to do or made any order adjustments, as there are so many details not yet disclosed,” Jeff Lin, CEO of Wistron, a maker of Nvidia servers and HP and Dell notebooks, told reporters this week. “The market for AI servers would be less impacted due to the continued robust demand, but it is hard to say for consumer electronics products like personal computers and notebooks.”
The last, greatest challenge
Ever since Chinese tech champion Huawei was blacklisted by the US, China has stepped up efforts to boost its self-sufficiency in tech, particularly in chipmaking equipment, a segment dominated by suppliers from the US, the Netherlands and Japan.
Semiconductor Manufacturing International Corp, China’s top contract chipmaker, is aggressively expanding the output of 14-nanometer and even 7-nm chips in Beijing, with a mission to even build them entirely with Chinese chipmaking equipment, according to this special project by Nikkei Asia’s Cheng Ting-Fang and Lauly Li.
But while China has made progress in almost every chipmaking machine over the past few years, one daunting challenge remains: lithography. This essential step in the manufacturing process determines the ultimate performance of the chip.
The Chinese central government, local governments and top national research institutes are supporting the creation of the country’s own supply chain ecosystem for lithography machines, including the development of critical components, optical parts and light sources. Huawei-linked chipmaking equipment supplier SiCarrier, as well as Shanghai Yuliangsheng and Shanghai Micro Electronics Equipment, are among the most eager to see the effort succeed, with the trio’s ultimate goal being to build the extreme ultraviolet (EUV) lithography machines.
“It could be in five years, it could be in 10 years, it could be in 15 years. We don’t really know,” said Didier Scemama, head of Emea IT hardware research at BofA Global Research. “Is that going to be competitive with what ASML does? [That is] highly unlikely. But it’s good enough for China.”
Nvidia’s aims for China
Nvidia chief Jensen Huang said it would “accelerate the recovery” of its China sales, after a détente between Beijing and Washington allowed the AI chipmaker to resume shipments of a key processor specifically designed for the Chinese market, writes the Financial Times’ Eleanor Olcott.
Huang told a press conference in the Chinese capital on Wednesday the company had not yet received export licenses from Washington to restart shipments of its H20 product, but he expected them “to come through very shortly”.
Nvidia had reported a $4.5bn write-down in its April quarter, as the Trump administration tightened export restrictions on advanced chips and it was left with a huge H20 inventory it could no longer ship.
“Some of what we wrote off is hard to recover, but what we put on reserve will not be scrapped permanently,” said Huang. The company would make a final decision about whether it needed to restart production of its previous Hopper generation, of which the H20 was part, once customer orders came through, he said.
Huang has met President Donald Trump and policymakers this month, as part of intense lobbying in the US and Chinese capitals by the $4tn company. He has warned that America risks forfeiting its leadership in AI to Chinese companies, including Huawei, if it cuts off exports of critical technology.
Beyond tech ties
India, the world’s most populous country, is looking to forge deeper economic ties with Taiwan on top of the tech-oriented island’s growing manufacturing presence in the South Asian subcontinent, Nikkei Asia’s Cheng Ting-Fang and Lauly Li write.
The country sent a ministerial-level delegation to Taipei this week to promote the building of an international financial services hub, the Gujarat International Finance Tech-City. Also nown as GIFT City, the project would, among other things, enable flexibility in financing domestic tech projects.
“We are here to expand the India-Taiwan business relationship, which is very important in this new world order,” said K Rajaraman, the head of the delegation and chair of the International Financial Services Centers Authority (IFSCA), the body that is overseeing the hub’s development and regulation.
“In the Prime Minister [Narendra Modi]’s vision of 2047, one of the most important pillars is technology, and I think Taiwan is the place to be . . . This partnership is completely complementary,” Rajaraman said.
There are already more than 250 Taiwanese tech suppliers invested in India, and “all” of them are expanding their footprints, making India one of the key beneficiaries of the supply chain diversification amid the US-China tensions.
China’s food fight
China’s price war in the food delivery industry continues to spiral out of control, with the three main platforms — Alibaba Group, Meituan and JD.com — competing head-to-head to become the ultimate gateway for consumer spending in the world’s second-largest market, writes Nikkei Asia’s Cissy Zhou.
The battle, ignited by JD, intensified further over the weekend as platforms announced heavier subsidies to woo users, with Alibaba’s Taobao pledging to distribute a limited number of coupons worth up to Rmb188 and Meituan trying to match Taobao’s offer. JD offered 100,000 servings of premium crayfish for Rmb16.18, around $2, each to users across the country.
But with the subsidy war lasting longer than expected, it is set to hamper platforms’ profits for the second quarter as well as the full fiscal year, analysts warn.
Morgan Stanley, for instance, last week lowered its target price for Alibaba’s American depositary receipts (ADR) to $150 from $180. The bank noted that Alibaba invested approximately Rmb10bn ($1.4bn) in food delivery and instant retail services in the April-June quarter, saying the move has put its short-term profitability under pressure.
