For the last few years, Apple has always been first in line to tap TSMC’s most advanced nodes. It was the first company to unveil an SoC using TSMC’s 5nm node way back in 2020, the A14 chip for the iPhone 12. That’s a process that AMD and Nvidia are just now starting to use, two years later. Apple will also likely be the first company to use TSMC’s 3nm process as well for the iPhone 15. The two companies have had a symbiotic relationship that has benefited both companies greatly, until now. According to reports, TSMC recently told Apple it was going to raise its prices, and Apple allegedly told TSMC to pound sand. Not long after, Apple allegedly changed its mind and has now agreed to the terms. The dustup highlights the immense power TSMC has in the semiconductor industry currently. Apple uses TSMC for all of its advanced designs, so it also shows the risks associated with putting all of your silicon eggs in one basket.
The whole saga started recently via a report from Taiwan’s Economic Daily News. It stated that TSMC told Apple it was planning on raising its wafer prices by six to nine percent. According to Macrumors, TSMC’s prices were already around 20 percent higher than those charged by its competitors. The reason for the increase was inflation, essentially. Everything has gotten more expensive, including supplies, materials, and labor. Apple allegedly rejected that “offer” from TSMC, though neither company would officially comment on the disagreement. It was reported previously that TSMC was planning on raising prices in 2022 due to supply chain issues, but apparently, the situation has improved enough that Apple felt it could take a hardline stance. However, Apple has reportedly acquiesced to TSMC’s demands according to TechSpot.
Apple is TSMC’s biggest customer. It reportedly contributes more than 25 percent of TSMC’s annual revenue, so it has a bit of leverage. However, TSMC arguably has even more, as it’s the undisputed king of advanced nodes. Plus, it’s doubtful Apple would tap Samsung or, gasp, Intel to make its future chips. Although Samsung’s 3nm process is currently in production, Intel is still on 10nm (Intel 7) and beginning to ramp 7nm (Intel 4) for Meteor Lake in 2023. However, Intel has stated it hopes to regain Apple’s business in the future. It hopes to achieve “unquestioned supremacy” by 2025 when it theoretically might catch up to TSMC in advanced nodes. Situations like this might someday propel Apple into the virtual arms of a different foundry—maybe even Intel’s.
Still, it’s a situation that caught the whole industry’s attention. TSMC has the business of some of tech’s biggest companies. That includes Nvidia and AMD currently, as well as Apple and Intel. The thinking was if Apple could get it to back down, maybe another company could do the same. That obviously didn’t pan out, however. TSMC has also been playing hardball as of late, so this conclusion is not a surprise. AMD, Intel, and Nvidia had asked to reduce wafer orders in the wake of the great GPU dump of mid-2022. TSMC reportedly told Nvidia no on that one, as once again, what was Nvidia going to do about it? Go back to Samsung?
For now, it’s a rare situation for a company as powerful and wealthy as Apple to be forced to capitulate to another company’s demands. But it’s obvious to everyone why it allegedly did so: it had no choice. The same can be said for AMD and Nvidia. The situation will probably be exacerbated by TSMC’s 3nm process too, as everyone seemingly wants a piece of it. It’s one of the reasons the US Commerce Secretary recently warned about the US’s reliance on TSMC in general. She stated that if that supply of chips were suddenly cut off, the US would plummet into an immediate recession. “Right now, the US does not produce any leading-edge chips in our country,” she said.
Back then she was promoting the CHIPS Act back then, which was recently signed into law. It’s possible that once those funds begin to flow to companies like Intel, the US can begin to compete more effectively with TSMC. Although, that won’t come to fruition for several years, at least.