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TSMC’s earnings call today was packed with information. In my earlier estimates, I calculated that the company’s U.S. fabs would lower TSMC’s overall gross margin by about 1.5 to 2 percentage points, based on its U.S. capacity allocation and gross margin (see details in the original post below). But what TSMC said today went further: factoring in gross margin dilution from its U.S. fabs, it’s now guiding for long-term gross margins to stay above 53% (vs. 1Q25 58.8%). That’s a bigger hit than I had anticipated, mainly because TSMC is also accounting for inflation and tariff-related costs. What does this mean? TSMC just gave the market a clear example of how inflation and tariffs can impact gross margins—and how to factor those effects in. But before applying this logic to other companies, it’s worth noting: TSMC actually has the bargaining power to pass costs on to customers. Jokingly (but with serious implications), TSMC may have—once again—said more than it should, setting a bar that makes life harder for everyone else.