Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, said yesterday that TSMC Global Ltd, its financial investment arm, has decided to increase its capital, in an effort to cut foreign exchange hedging costs as the New Taiwan dollar appreciates against the US dollar.
TSMC said a board meeting of TSMC Global, registered in the British Virgin Islands to manage the chipmaker’s financial investments, approved a plan earlier in the day to make a rights issue to increase its capital by US$10 billion and lower foreign exchange hedging costs.
The meeting was held after TSMC’s board of directors agreed in February to inject up to US$10 billion into TSMC Global.
Photo: Ann Wang, Reuters
Taiwanese exporters have come under pressure as the NT dollar rapidly appreciated against the greenback recently. A stronger local currency is expected to lead to foreign exchange losses, which will erode the profitability of Taiwanese exporters.
So far this year, the NT dollar has risen against the US dollar by more than 11.5 percent.
Last month alone, the local currency soared NT$2.088, or nearly 7 percent, against the US dollar amid market speculation that the US had pressured Taiwan to allow currency appreciation as part of ongoing trade and tariff negotiations between the two sides. However, the central bank denied it came under pressure from Washington.
This month, the appreciation of the NT dollar has continued, initially amid escalating tensions in the Middle East.
Yesterday, the local currency appreciated 0.49 percent to close at NT$29.391 against the greenback, its strongest in more than three years, as the US Federal Reserve signaled a dovish tone on monetary policy, despite hopes that a ceasefire between Israel and Iran will hold.
TSMC chairman C.C. Wei (魏哲家) said at an annual general meeting earlier this month that every 1 percent appreciation in the local currency reduces the company’s operating margin by 0.4 percentage points.
The impact resulting from a higher NT dollar has been large, Wei admitted, but added that TSMC will work to maintain its lead over its peers in technology development and sell products at reasonable prices.
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