On July 21, the Financial Times reported that China’s Ministry of Commerce is considering implementing export controls that would bar Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and QUALCOMM Incorporated (NASDAQ:QCOM) from manufacturing chips based on designs from Huawei, Alibaba, and ByteDance. Such headlines are likely to hit a foundry stock hard. In the case of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), however, the Bull case remains strong as always. Here’s the how and why.
The Bull Case
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s Q2 net profit went up 77% year-over-year, reaching a record high of T$706.6 billion ($22 billion). Beating the consensus estimates, the increase marks the ninth straight quarter of double-digit growth. Revenue climbed 36% to NT$1.27 trillion. The company has also raised its full-year 2026 revenue growth guidance above 40% in U.S. dollar terms in addition to lifting the 2026 capex toward $62 billion. With another $100 billion onto its U.S. build-out, the company pushes its total American commitments to $265 billion.
Days later, Reuters and Bloomberg confirmed that Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has finalized hikes in base prices between 5%-10% across advanced and mature nodes starting in 2027. The company has been the primary chipmaker for two of the largest players in the global tech market: Apple and Nvidia. Such a foundry can’t freely raise prices unless it has leverage that can’t be replaced.
That leverage is technical as well as contractual. Taiwan Semiconductor Manufacturing Company Limited’s (NYSE:TSM) N2 (2nm-class) process uses gate-all-around (GAA) nanosheet transistors, and they are roughly two to three generations ahead of China’s largest semiconductor foundry, SMIC’s 7nm ceiling. While achieving this feat, the company actively phased out Chinese-made equipment from its 2nm production lines to comply with U.S. regulations and relied on suppliers from the U.S., Europe, and Japan for its leading-edge manufacturing.
The Bear Case
At the moment, the Beijing proposal is not finalized. Neither Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), QUALCOMM Incorporated (NASDAQ:QCOM), nor Beijing has confirmed the scope of this proposal, but the signal still matters. In addition to the existing Taiwan Strait risk, where potential military conflict threatens global commerce, China is willing to weaponize the foreign foundries’ access to its AI and semiconductor technologies. On the other hand, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has a trailing P/E in the range of 27x to 36x that sits above the company’s own ten-year average. Such a decade-high multiple leaves less room for error if the Beijing proposal translates to a policy.
