TAIPEI (Reuters) - TSMC, the main global producer of advanced chips used in artificial intelligence applications, is set to report a 54% leap in first-quarter profit on Thursday, though is also likely to flag risk from trade policies of U.S. President Donald Trump.

The world's largest contract chipmaker, whose customers include Apple and Nvidia, has benefited from a trend towards implementing AI features in online products. But the firm faces headwind not just from Trump's import tariffs but also his criticism of Taiwan's dominance of the chip industry.

Taiwan Semiconductor Manufacturing Co ( TSM ) is set to report net profit of T$347.8 billion ($10.74 billion) for the three months through March 31, according to a LSEG SmartEstimate drawn from 17 analysts. SmartEstimates give greater weighting to forecasts from analysts who are more consistently accurate.

That estimate compares to the 2024 first-quarter net profit of T$225.5 billion.

TSMC has been spending billions of dollars on new factories overseas, though it said most manufacturing will remain in Taiwan. It announced a $100 billion investment with Trump at the White House last month, on top of $65 billion pledged for three plants in the U.S. state of Arizona.

Trump has both praised Taiwan's chip industry and threatened it with tariffs.

Last week, he said he had told TSMC it would have to pay a tax of up to 100% if it did not build factories in the U.S. On Sunday, he said the exclusion of smartphones and computers from tariffs on China will be short-lived, pledging a national security trade investigation into the semiconductor sector.

"The company will likely double down on overseas fab investments to mitigate the geopolitical risk, despite two to three percentage points of gross margin dilution for the next five years," said SemiAnalysis analyst Sravan Kundojjala.

"This will likely ensure TSMC gets favourable treatment from the U.S. government and minimise the tariff burden."

Apple's iPhones, given they are mainly made in China, is another risk area for TSMC, said Cathay Futures analyst Venson Tsai.

"If the iPhone can't be sold, then TSMC's chips can't either," Tsai said.

TSMC last week reported a surge in first-quarter revenue in Taiwan dollars, slightly ahead of market expectations. The company gives its revenue outlook in U.S. dollars on its quarterly earnings call, scheduled for 0600 GMT on Thursday.

It will also update its outlook for the current quarter as well as for the full year, including planned capital expenditure for production increases.

On its last earnings call in January, TSMC said it expected capital spending this year to be $38 billion to $42 billion, an increase of as much as 41% from last year.

($1 = 32.3720 Taiwan dollars)

(Reporting by Ben Blanchard and Wen-Yee Lee; Additional reporting by Jeanny Kao; Editing by Christopher Cushing)