(Bloomberg) — Taiwan Semiconductor Manufacturing Co. shares dropped the most in two months after its gross margins disappointed investors who had banked on the chipmaker to benefit from the ongoing chip shortage.

The stock fell as much as 3.9% in Taipei trading Friday, snapping four days of gains. Gross margin for the second quarter was 50%, below the roughly 51% average predicted by analysts, in part because of the appreciation in the Taiwan dollar during the period. For the September quarter, TSMC forecast gross margin of 49.5% to 51.5%. Analysts from Morgan Stanley called the third-quarter guidance a “disappointment,” warning that gross margins could fall below 50% as early as next year.

TSMC, the world’s largest contract manufacturer, has faced increasing pressure to boost capacity to help alleviate a supply crunch that has plagued the automobile and other industries. The Taiwanese company earlier this year pledged to spend $100 billion over three years to build new fabs and invest in more advanced nodes, as rivals like Intel Corp. and Samsung Electronics Co. seek to catch up. TSMC executives on Thursday also revealed for the first time that the chipmaker was weighing plans for a fabrication plant in Japan.

“We still believe at some point in 2022 and 2023, TSMC’s gross margin will fall below 50% given the steep increasein depreciation cost, while the company doesn’t seem to be demonstrating pricing power,” Morgan Stanley analysts led by Charlie Chan wrote in a note after the earnings. “Or, simply as indicated, Moore’s Law is just getting too expensive while TSMC will have to suffer margin erosion to keep the chip scaling trend going.”

The disappointing margins overshadowed a raised sales projection based on its central role in alleviating a global chip crunch that’s plaguing automakers and device manufacturers. TSMC said sales this year will rise more than 20%, a slight increase from a previous forecast for 20% growth in full-year sales. Revenue in the current quarter may rise to between $14.6 billion and $14.9 billion, in line with the $14.7 billion average of analyst estimates.

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Some analysts said TSMC had failed to meet outsized expectations. The results “beat our conservative estimates but missed consensus” due to “excessive” expectations for gross margins, Needham wrote in a note Thursday.

Read more: TSMC Raises Sales Outlook, Affirming Global Chip Kingpin Role

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