Taiwan Semiconductor's overseas subsidiary plans to issue $10 billion in stock to cope with foreign exchange fluctuations
Taiwan Semiconductor's overseas subsidiary plans to issue $10 billion in new shares to enhance its foreign exchange hedging capabilities and mitigate the risks posed by the appreciation of the New Taiwan Dollar. This is the third such transaction since 2024 and the largest in scale. The appreciation of the New Taiwan Dollar has raised concerns about the economy's excessive reliance on exports, which has affected Taiwan Semiconductor's operating profit margin
According to Zhitong Finance APP, TSMC (TSM.US) overseas subsidiary plans to issue new shares worth $10 billion to strengthen its foreign exchange hedging business, marking the company's largest move to cope with currency fluctuations. TSMC Global Ltd. stated in a statement that the company will issue shares to help mitigate foreign exchange volatility. This is the third such transaction since 2024 and the largest to date. These transactions occur during a period of appreciation of the New Taiwan Dollar. These initiatives provide TSMC Global (responsible for managing overseas investments and hedging) with greater financial flexibility in managing exchange rate risks.
The recent appreciation of the New Taiwan Dollar has raised concerns in Taiwan about the economy's excessive reliance on exports. In May, the currency recorded its largest single-day increase since the 1980s, prompting officials to call for curbing speculative activities.
Philip McNicholas, an Asian sovereign debt strategist at Robeco in Singapore, stated: "Overall, increased volatility in the foreign exchange market means that banks may adjust their margin requirements. Issuing new shares and immediately injecting a large amount of cash may help companies meet margin requirements for existing and new hedging activities."
TSMC is a major chip manufacturer for Apple (AAPL.US) and Nvidia (NVDA.US), and it is currently the largest company and exporter in Taiwan, as most of its products are produced locally. The appreciation of the New Taiwan Dollar can harm exporters' interests, as the dollars earned from overseas sales will convert to fewer New Taiwan Dollars, or they may need to raise overseas prices, potentially reducing demand.
In June, TSMC CEO C.C. Wei informed shareholders that the company's operating profit margin had declined by several percentage points due to the appreciation of the local currency
