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TSMC structural gross margin floor rises to 56 percent as 2025 cycle projections emerge
Wednesday, January 28, 2026 at 12:40 PM
Analysis of structural gross margins indicates that TSMC has raised its margin floor to 56% or higher. Projections for the 2025 cycle suggest SK Hynix may exceed TSMC in gross margin for only the third time since 2002, driven by current market cycles.
Context
TSMC has successfully raised its long-term structural gross margin floor to 56%, a significant increase that reflects its dominant pricing power and leadership in advanced nodes like 3nm and 2nm. While the company previously targeted a 53% floor, the relentless demand for AI accelerators and high-performance computing has allowed it to maintain actual margins well above 60% throughout the 2025 cycle, even as it navigates the higher operational costs of overseas fab expansion in the U.S. and Japan.
Despite this heightened floor, SK Hynix is projected to surpass TSMC in gross margin during the current cycle, a rare industry event occurring only for the third time since 2002. Driven by the AI-fueled "mega-cycle," SK Hynix is benefiting from extreme pricing power in High Bandwidth Memory (HBM), with its gross margins expected to reach between 63% and 67% in late 2025. This shift underscores a temporary but historic period where the scarcity of specialized AI memory is yielding higher profitability than the manufacturing of the logic chips themselves.
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TSMC
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SK Hynix
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