Apple keeping TSMC processors in iPhone and iPad at least through 2020, but risk remains

Posted:
in General Discussion edited August 23
While Apple's relationship with TSMC relationship is expected to continue, analysts find the pair are heavily dependent on one another, in a way that holds risk for both companies.

TSMC


Apple is expected to keep TSMC as its sole provider of application processors for the iPhone and iPad for the next two years, according to industry analysts cited by EE Times in Taiwan.

Apple has used TSMC as a chipmaker since 2014. Reports in January had TSMC reaching a deal to provide all of the "A12" chips for the 2018 iPhone lineup, and production began in May.

The Apple/TSMC relationship, while it's been lucrative for both parties, remains risky for them as well. Apple does not have a backup supplier for the chips, nor has it moved to diversify its supply chain for them, the way it's begun to for screen panels and other components.

As for TSMC, it is heavily dependent on Apple, which provides about 75 percent of its business. And, while Apple is in a position where it could conceivably move on to a different supplier at some point, TSMC would likely find themselves in huge trouble if Apple ever walked away.

This is not without precedent. Imagination, a British firm that formerly designed the GPU in the iPhone, iPad and Apple Watch, put itself up for sale last year after Apple dropped them, ultimately selling to Canyon Bridge Capital Partners. Another supplier, Dialog Semiconductor, has seen its stock drop based on rumors that Apple may change how it handles power management chips.

However, according to EE Times' sources, there aren't many rivals out there likely to take away TSMC's Apple business, as neither Samsung or Intel is seen as having much chance to replace them.

TSMC, back in July, trimmed its outlook for the year. While this was attributed at the time to a decline in demand for chips used in cryptocurrency mining, the 2018 iPhone cycle is seen as crucial in helping them recover from a bad quarter.

Comments

  • Reply 1 of 20
    lkrupplkrupp Posts: 6,398member
    While Apple’s relationship with TSMC relationship is expected to continue, analysts find the pair are heavily dependent on one another, in a way that holds risk for both companies.
    With recent events, including the “failed” iPhone X and Apple rising to $1 Trillion in market capitalization should we take any analyst’s opinion or research with more than a grain of salt anymore? Just asking.
    edited August 23 racerhomie3viclauyycjbdragonwatto_cobrajony0
  • Reply 2 of 20
    blastdoorblastdoor Posts: 1,875member
    If Apple were to switch from TSMC to somebody else it wouldn't be as devastating for TSMC as the Imagination example. When Apple moved to TSMC, some of TSMCs customers went to GloFo or Samsung. If Apple left TSMC, some of those second-tier customers would return. It's just a game of musical chairs. Apple is the best customer, but they aren't the only customer. 
    muthuk_vanalingampalomine
  • Reply 3 of 20
    wizard69wizard69 Posts: 12,567member
    blastdoor said:
    If Apple were to switch from TSMC to somebody else it wouldn't be as devastating for TSMC as the Imagination example. When Apple moved to TSMC, some of TSMCs customers went to GloFo or Samsung. If Apple left TSMC, some of those second-tier customers would return. It's just a game of musical chairs. Apple is the best customer, but they aren't the only customer. 
    Some of the numbers in this article dont make sense anyways.  The 75% number for example might have made sense when Apple first transitioned to TSMC.  However it looks like they partnered on the build of new advanced plants much in the same way Apple partnered with Samsung years ago to build a plant.    The point here is that the old plants and their processes dont disappear, so in effect capacity expands.  So i really doubt that Apple is 75% of TSMC business today.  

    I look at it this way loosing a customer is never good!   In TSMC case though they have plenty of potential customers.  This article has the flavor of an analyst that is off the rails.  
    watto_cobra
  • Reply 4 of 20
    wizard69wizard69 Posts: 12,567member

    lkrupp said:
    While Apple’s relationship with TSMC relationship is expected to continue, analysts find the pair are heavily dependent on one another, in a way that holds risk for both companies.
    With recent events, including the “failed” iPhone X and Apple rising to $1 Trillion in market capitalization should we take any analyst’s opinion or research with more than a grain of salt anymore? Just asking.
    IPhone X has failed in many markets.  To put it bluntly the cost of the device is just way too high for most people sensibilities.  

    As for Apples market capitalization you do realize that they make more than just the iPhone right?   By the way as used in these discussions a failed device might not have the meaning you suspect.   A device fails if it doesn't meet sales expectations, not your expectations.   Everything ive seen indicates that iPhone X failed in many markets with perhaps China being the only real success story.  
  • Reply 5 of 20
    Rayz2016Rayz2016 Posts: 4,201member
    lkrupp said:
    While Apple’s relationship with TSMC relationship is expected to continue, analysts find the pair are heavily dependent on one another, in a way that holds risk for both companies.
    With recent events, including the “failed” iPhone X and Apple rising to $1 Trillion in market capitalization should we take any analyst’s opinion or research with more than a grain of salt anymore? Just asking.
    Apple has alternative suppliers
    TSMC has other customers. 

    So to answer your question: anyone with an internet connection can do better than these so-called analysts. 
    watto_cobra
  • Reply 6 of 20
    GeorgeBMacGeorgeBMac Posts: 2,888member
    Some view a supplier/client relationship as adversarial.
    Some view a supplier/client relationship as a partnership.

    If it is a partnership, then it is no more risky than taking production in-house.   TSMC is a single corporation, not a single point of failure factory.

    Further, even if TSMC became unreliable partner, since Apple designs the chips, they could easily just buy the firm, use a different firm or take production in-house.

    Their dependence on Intel for Macs is no less shaky than their reliance on TSMC.  And, their reliance on Qualcomm is (was?) far more risky than either.

    watto_cobra
  • Reply 7 of 20
    wizard69 said:

    lkrupp said:
    While Apple’s relationship with TSMC relationship is expected to continue, analysts find the pair are heavily dependent on one another, in a way that holds risk for both companies.
    With recent events, including the “failed” iPhone X and Apple rising to $1 Trillion in market capitalization should we take any analyst’s opinion or research with more than a grain of salt anymore? Just asking.
    IPhone X has failed in many markets.  To put it bluntly the cost of the device is just way too high for most people sensibilities.  

    As for Apples market capitalization you do realize that they make more than just the iPhone right?   By the way as used in these discussions a failed device might not have the meaning you suspect.   A device fails if it doesn't meet sales expectations, not your expectations.   Everything ive seen indicates that iPhone X failed in many markets with perhaps China being the only real success story.  
    At first I disagreed with this.  But then I looked at the story comparing Samsung's Galaxy Note 9 to the iPhone X.  It costs about the same, and it's a failure too!  When you look at the "buy one get one free" promo, and the "get a second iPhone X for $700 off" offer from T-Mobile and AT&T, this apparently ridiculous argument starts to make sense.  They have made too many of these phones, and (in Apple's case anyway) have to start clearing the channel to get ready for the next, much better phone.  Still, "failure" doesn't really seem like the right word.
  • Reply 8 of 20
    melgrossmelgross Posts: 31,046member
    According to Barclays, Apple is about 20% of TSMC’s business. TSMC is the worlds largest independent chip manufacturer. Their revenue last year was $33 billion, and their market cap is $213 billion.
    GeorgeBMacksecwatto_cobrajony0
  • Reply 9 of 20
    melgrossmelgross Posts: 31,046member
    wizard69 said:

    lkrupp said:
    While Apple’s relationship with TSMC relationship is expected to continue, analysts find the pair are heavily dependent on one another, in a way that holds risk for both companies.
    With recent events, including the “failed” iPhone X and Apple rising to $1 Trillion in market capitalization should we take any analyst’s opinion or research with more than a grain of salt anymore? Just asking.
    IPhone X has failed in many markets.  To put it bluntly the cost of the device is just way too high for most people sensibilities.  

    As for Apples market capitalization you do realize that they make more than just the iPhone right?   By the way as used in these discussions a failed device might not have the meaning you suspect.   A device fails if it doesn't meet sales expectations, not your expectations.   Everything ive seen indicates that iPhone X failed in many markets with perhaps China being the only real success story.  
    The iPhone X has been the number one phone in most every market since it first came out. I don’t know where you’re getting your info from.
    tmayGeorgeBMacpalominejbdragonwatto_cobrajony0
  • Reply 10 of 20
    melgrossmelgross Posts: 31,046member

    Some view a supplier/client relationship as adversarial.
    Some view a supplier/client relationship as a partnership.

    If it is a partnership, then it is no more risky than taking production in-house.   TSMC is a single corporation, not a single point of failure factory.

    Further, even if TSMC became unreliable partner, since Apple designs the chips, they could easily just buy the firm, use a different firm or take production in-house.

    Their dependence on Intel for Macs is no less shaky than their reliance on TSMC.  And, their reliance on Qualcomm is (was?) far more risky than either.

    They could invest in the company, but they’re not going to spend 30% over the current market valuation of $213 billion that TSMC currently has.
    watto_cobra
  • Reply 11 of 20
    melgrossmelgross Posts: 31,046member

    wizard69 said:

    lkrupp said:
    While Apple’s relationship with TSMC relationship is expected to continue, analysts find the pair are heavily dependent on one another, in a way that holds risk for both companies.
    With recent events, including the “failed” iPhone X and Apple rising to $1 Trillion in market capitalization should we take any analyst’s opinion or research with more than a grain of salt anymore? Just asking.
    IPhone X has failed in many markets.  To put it bluntly the cost of the device is just way too high for most people sensibilities.  

    As for Apples market capitalization you do realize that they make more than just the iPhone right?   By the way as used in these discussions a failed device might not have the meaning you suspect.   A device fails if it doesn't meet sales expectations, not your expectations.   Everything ive seen indicates that iPhone X failed in many markets with perhaps China being the only real success story.  
    At first I disagreed with this.  But then I looked at the story comparing Samsung's Galaxy Note 9 to the iPhone X.  It costs about the same, and it's a failure too!  When you look at the "buy one get one free" promo, and the "get a second iPhone X for $700 off" offer from T-Mobile and AT&T, this apparently ridiculous argument starts to make sense.  They have made too many of these phones, and (in Apple's case anyway) have to start clearing the channel to get ready for the next, much better phone.  Still, "failure" doesn't really seem like the right word.
    Yes, we see offers like that from cell companies trying to get contracts. But with Samsung’s phones, these sales come from phone stores as well. We don’t see those huge sales on Apple’s phones other than from these cell companies. That’s a major difference.
    watto_cobrajony0
  • Reply 12 of 20
    GeorgeBMacGeorgeBMac Posts: 2,888member
    melgross said:

    Some view a supplier/client relationship as adversarial.
    Some view a supplier/client relationship as a partnership.

    If it is a partnership, then it is no more risky than taking production in-house.   TSMC is a single corporation, not a single point of failure factory.

    Further, even if TSMC became unreliable partner, since Apple designs the chips, they could easily just buy the firm, use a different firm or take production in-house.

    Their dependence on Intel for Macs is no less shaky than their reliance on TSMC.  And, their reliance on Qualcomm is (was?) far more risky than either.

    They could invest in the company, but they’re not going to spend 30% over the current market valuation of $213 billion that TSMC currently has.
    I wasn't suggesting that they do.   I said:
    "Further, even if TSMC became unreliable partner...." and then provided 3 alternatives.  Buying the company was one of them.
  • Reply 13 of 20
    backstabbackstab Posts: 109member
    Is it just me, or does this article have a distinct FUDsey bent to it?
    I honestly just don't see the concerns described, concerning. (?)
    watto_cobra
  • Reply 14 of 20
    melgrossmelgross Posts: 31,046member
    melgross said:

    Some view a supplier/client relationship as adversarial.
    Some view a supplier/client relationship as a partnership.

    If it is a partnership, then it is no more risky than taking production in-house.   TSMC is a single corporation, not a single point of failure factory.

    Further, even if TSMC became unreliable partner, since Apple designs the chips, they could easily just buy the firm, use a different firm or take production in-house.

    Their dependence on Intel for Macs is no less shaky than their reliance on TSMC.  And, their reliance on Qualcomm is (was?) far more risky than either.

    They could invest in the company, but they’re not going to spend 30% over the current market valuation of $213 billion that TSMC currently has.
    I wasn't suggesting that they do.   I said:
    "Further, even if TSMC became unreliable partner...." and then provided 3 alternatives.  Buying the company was one of them.
    So, why the protest? I’m responding to your alternative of buying it. A perfectly appropriate response to a statement you made. You gave buying the company, I said why it wouldn’t work. You want to argue about that?
    edited August 23
  • Reply 15 of 20
    wizard69 said:

    lkrupp said:
    While Apple’s relationship with TSMC relationship is expected to continue, analysts find the pair are heavily dependent on one another, in a way that holds risk for both companies.
    With recent events, including the “failed” iPhone X and Apple rising to $1 Trillion in market capitalization should we take any analyst’s opinion or research with more than a grain of salt anymore? Just asking.
    IPhone X has failed in many markets.  To put it bluntly the cost of the device is just way too high for most people sensibilities.  

    As for Apples market capitalization you do realize that they make more than just the iPhone right?   By the way as used in these discussions a failed device might not have the meaning you suspect.   A device fails if it doesn't meet sales expectations, not your expectations.   Everything ive seen indicates that iPhone X failed in many markets with perhaps China being the only real success story.  
    The X has sold in equal amounts to the 8.
    I would call that a definite success.
    watto_cobra
  • Reply 16 of 20
    GeorgeBMacGeorgeBMac Posts: 2,888member
    melgross said:
    melgross said:

    Some view a supplier/client relationship as adversarial.
    Some view a supplier/client relationship as a partnership.

    If it is a partnership, then it is no more risky than taking production in-house.   TSMC is a single corporation, not a single point of failure factory.

    Further, even if TSMC became unreliable partner, since Apple designs the chips, they could easily just buy the firm, use a different firm or take production in-house.

    Their dependence on Intel for Macs is no less shaky than their reliance on TSMC.  And, their reliance on Qualcomm is (was?) far more risky than either.

    They could invest in the company, but they’re not going to spend 30% over the current market valuation of $213 billion that TSMC currently has.
    I wasn't suggesting that they do.   I said:
    "Further, even if TSMC became unreliable partner...." and then provided 3 alternatives.  Buying the company was one of them.
    So, why the protest? I’m responding to your alternative of buying it. A perfectly appropriate response to a statement you made. You gave buying the company, I said why it wouldn’t work. You want to argue about that?
    LOL... Yeh, OK....  I'll argue that.
    Once again, I said:   "if TSMC became unreliable partner...."
    In which case, Apple would have to insure its supply.  So yes, buying them would be an option.  Maybe the best one.  Maybe the worst one.   Maybe a so-so one.   In any case, it is an option any responsible company with funds available would consider if they could no longer depend on a sole supplier providing a critical component.  The only non-viable action would be no action.

  • Reply 17 of 20
    ksecksec Posts: 1,497member
    As for TSMC, it is heavily dependent on Apple, which provides about 75 percent of its business. And, while Apple is in a position where it could conceivably move on to a different supplier at some point, TSMC would likely find themselves in huge trouble if Apple ever walked away. 

    sigh.
    watto_cobra
  • Reply 18 of 20
    Cesar Battistini MazieroCesar Battistini Maziero Posts: 135unconfirmed, member
    wizard69 said:

    lkrupp said:
    While Apple’s relationship with TSMC relationship is expected to continue, analysts find the pair are heavily dependent on one another, in a way that holds risk for both companies.
    With recent events, including the “failed” iPhone X and Apple rising to $1 Trillion in market capitalization should we take any analyst’s opinion or research with more than a grain of salt anymore? Just asking.
    IPhone X has failed in many markets.  To put it bluntly the cost of the device is just way too high for most people sensibilities.  

    As for Apples market capitalization you do realize that they make more than just the iPhone right?   By the way as used in these discussions a failed device might not have the meaning you suspect.   A device fails if it doesn't meet sales expectations, not your expectations.   Everything ive seen indicates that iPhone X failed in many markets with perhaps China being the only real success story.  
    It failed so much that it was the best selling iPhone since it's launch.

    Get out of here!
    GeorgeBMacwatto_cobrajony0
  • Reply 19 of 20
    melgrossmelgross Posts: 31,046member
    wizard69 said:

    lkrupp said:
    While Apple’s relationship with TSMC relationship is expected to continue, analysts find the pair are heavily dependent on one another, in a way that holds risk for both companies.
    With recent events, including the “failed” iPhone X and Apple rising to $1 Trillion in market capitalization should we take any analyst’s opinion or research with more than a grain of salt anymore? Just asking.
    IPhone X has failed in many markets.  To put it bluntly the cost of the device is just way too high for most people sensibilities.  

    As for Apples market capitalization you do realize that they make more than just the iPhone right?   By the way as used in these discussions a failed device might not have the meaning you suspect.   A device fails if it doesn't meet sales expectations, not your expectations.   Everything ive seen indicates that iPhone X failed in many markets with perhaps China being the only real success story.  
    The X has sold in equal amounts to the 8.
    I would call that a definite success.
    We don’t know how many smartphones, or tablets Samsung sells. They haven’t given that information out, in a quarterly report since the first quarter of 2011, when they were caught lying about the sales of their 7” tablet, when they stated they sold a million in the US. Lenovo, I think it was, called them out on that and said that Samsung didn’t sell more than 20,000. The next quarter, Samsung g announced they would no longer report on quarterly sales for those two devices.

    everything you read about Samsung’s sales are just guesses by analysts, who have no way of verifying their guesses since the real numbers are never released. Estimates for Galaxy sales for the 8 series was between 30-35 million for the year, and estimates for Note 8 sales were between 5-7 million. For the 9 series, the estimates are somewhat lower, particularly since Samsung said that sales for the 9 was “disappointing”. In addition, sales for the Galaxy series reached its peak with the 4. 5 sales were about the same, and has declined each year since then. Apple sold almost 160 million 8, 8+ and X models last year, as a comparison. About a third of those sales were for the X. So sales were not about equal, but about 2-3 times that of the entire S8 series phone sales, and about 7 times that of the Note, going, of course by those guesses as to the sales of Samsung’s products.
    edited August 23 watto_cobra
  • Reply 20 of 20
    This is more an opportunity (for both parties) rather than a risk. It is an opportunity to further strengthen long term relationships. TSMC whose core values consist of Integrity, Commitments, Innovation, Customer Trust, is no doubt the best long term partner for Apple. It goes beyond just looking at the cooperation from just process technology leadership viewing angle.
    watto_cobra
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