Apple & TSMC partnership is a double-edged sword

Posted:
in General Discussion edited November 2021
Apple's work with TSMC is a symbiotic relationship, a report claims, with the closeness of the two companies being not only beneficial to each other, but also making it extremely difficult for either to break relations off.




TSMC is a long-time chip partner to Apple, handling production duties for Apple's self-designed system-on-chips used in iPhones and Apple Silicon Macs. The two firms work extremely closely together, which has resulted in many gains for Apple's products, including power savings and performance improvements.

To do so, a report by The Information claims that the decade-long relationship has led to a situation where the two companies are very interdependent. Furthermore, the corporate cultures of each appear to be very similar in some respects.

Apple is, by far, TSMC's biggest client, accounting for a quarter of the chip foundry's $48.08 billion in revenue for 2020, according to analysts and former employees.

The partnership has allowed TSMC to assist Apple during the global semiconductor crisis, at least in relation to newer chips. Apple CEO Tim Cook said during the fall financial results conference call that chip scarcity caused some $6 billion in reduced sales for the quarter from product shortages, and that it would get worse during the holiday sales period, this largely dealt with the supply of older chips.

Newer chips that TSMC produces for Apple aren't affected as badly, the report states, with Needham & Co analyst Charles Shi claiming "For the leading-edge process, Apple will be well supplied for the rest of the year given that TSMC keeps adding capacity."

Apple also gains preferential treatment when it comes to research and chip designs, former TSMC engineers say, with TSMC providing at least 100 engineers to Apple to help with the physical design of custom chips it produces on Apple's behalf. This also allows Apple to help nudge TSMC's research and development, by asking for a greater focus on areas it wants to see improvements in, like power consumption.

"Normally chip designers are limited by the manufacturing process, but by working closely with TSMC earlier, the manufacturing process can be optimized for the chip's design," said Bain and Co partner Velu Sinha.

This assistance also extends to the year-long period when TSMC works to perfect its processes to reliably manufacture the chips, with issues for Apple's designs prioritized for assistance over other clients. At the time of testing with Apple's assembly partners, such as Foxconn, TSMC engineers can also be sent to the facilities for further assistance, an uncommon arrangement for TSMC.

The two companies are also said to be highly secretive, with TSMC employees prevented from bringing smartphones to work without authorization, employees have been fired for leaking information, and emails are coded for secrecy and monitored closely. The secrecy restrictions also forced TSMC engineers and workers into working at TSMC's campus, due to secrecy restrictions.

TSMC's handling of Apple as a client further assists in keeping Apple from moving work to other chip producers, but there are other reasons also at play. While Samsung may have the same knowledge in chip production as TSMC, Apple is reluctant to become a customer due to the direct competition in the smartphone industry and previous legal troubles.

Intel, which is becoming more of a foundry service provider, has said it wants to bring Apple aboard as a client, but the fear of Intel prioritizing the production of its own chips during a shortage may prevent Apple from jumping ship.

While the prospect of Apple jumping ship to another chip foundry may not necessarily happen in the short term, there are still elements that could harm the relationship.

According to sources of the report, TSMC is having trouble perfecting its 3-nanometer production process, which would allow Apple to use more energy-efficient chip designs in the iPhone and other products. The difficulty will mean that Apple will be trapped on the same 5-nanometer process for three consecutive years, a first for the company.

There is the fear that the lack of chip progress could rob Apple of further energy savings and performance improvements, which may impact future iPhone releases.

Read on AppleInsider
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Comments

  • Reply 1 of 21
    lkrupplkrupp Posts: 9,991member

    Apple gets preferential treatment in close TSMC partnership

    isn't this anti-competitive, monopolistic behavior? Break them both up! Force Apple to allow Intel to fabricate and supply the M1 no matter the die size. Just put in bigger fans. /s
    edited November 2021 FileMakerFeller
  • Reply 2 of 21
    lkrupplkrupp Posts: 9,991member
    So who is fabbing 3nm chips right now?
    chadbag
  • Reply 3 of 21
    lkrupp said:

    Apple gets preferential treatment in close TSMC partnership

    isn't this anti-competitive, monopolistic behavior? Break them both up! Force Apple to allow Intel to fabricate and supply the M1 no matter the die size. Just put in bigger fans. /s
    It's just after 11:00 am and you may have already locked up today's award for the internet's most baseless, uniformed comment of the day.

    No wonder your avatar is one of the three stooges.
    edited November 2021 williamlondon
  • Reply 4 of 21
    bageljoeybageljoey Posts: 1,968member
    tommikele said:
    lkrupp said:

    Apple gets preferential treatment in close TSMC partnership

    isn't this anti-competitive, monopolistic behavior? Break them both up! Force Apple to allow Intel to fabricate and supply the M1 no matter the die size. Just put in bigger fans. /s
    It's just after 11:00 am and you may have already locked up today's award for the internet's most baseless, uniformed comment of the day.

    No wonder your avatar is one of the three stooges.
    Goodness!  Did you miss the “/s”
    chadbagwilliamlondonStrangeDaysFileMakerFeller
  • Reply 5 of 21
    tommikele said:
    lkrupp said:

    Apple gets preferential treatment in close TSMC partnership

    isn't this anti-competitive, monopolistic behavior? Break them both up! Force Apple to allow Intel to fabricate and supply the M1 no matter the die size. Just put in bigger fans. /s
    It's just after 11:00 am and you may have already locked up today's award for the internet's most baseless, uniformed comment of the day.

    No wonder your avatar is one of the three stooges.
    Don’t ever rip on the Three Stooges. That’s as bad as ripping on Bogey.
  • Reply 6 of 21
    lkrupp said:

    Apple gets preferential treatment in close TSMC partnership

    isn't this anti-competitive, monopolistic behavior? Break them both up! Force Apple to allow Intel to fabricate and supply the M1 no matter the die size. Just put in bigger fans. /s
    Not to be dense but what the heck does /s mean?
  • Reply 7 of 21
    I assume TSMC has a PDK that it provides to all customers but Apple has its own custom one as well.
  • Reply 8 of 21
    normmnormm Posts: 653member
    verne arase said:
    Not to be dense but what the heck does /s mean?
    sarcasm
    edited November 2021
  • Reply 9 of 21
    Apple should be encouraging TSMC to develop fabs and subdivisions in the US (and possibly other western countries).

    Currently any facilities within close proximity to mainland China are in jeopardy.
    blastdoortmay
  • Reply 10 of 21
    I have nothing but praise for Apple's relationship with TSMC. It clearly worked and is extremely beneficial to both companies and consumers alike. That being said, I can't understand why Apple and TSMC are not building fabs all around the planet. It is clear that Apple, the tech industry and the entire world is now dependent on chip fabs. There is already a massive shortage of all kinds of chips. Apple just revealed that they are reducing iPad chip production so that they have enough chips to supply iPhone production. Most other companies are in a much worse situation (NVIDIA, AMD, SONY and Microsoft for example). Your article did not mention either China or Taiwan but the current military tension between those two nations could cause TSMC and the entire tech industry to shut down. This is not just dangerous to Apple's business. It will affect every single person on the planet. Apple should be talking about building fabs right now not just the new features of their devices.
  • Reply 11 of 21
    blastdoorblastdoor Posts: 2,681member
    Better to be stuck at 5nm for three years than 14nm for 5!
    muthuk_vanalingamwilliamlondonGG1bageljoeyFileMakerFellerbadmonk
  • Reply 12 of 21
    crowleycrowley Posts: 10,150member
    lkrupp said:

    Apple gets preferential treatment in close TSMC partnership

    isn't this anti-competitive, monopolistic behavior? Break them both up! Force Apple to allow Intel to fabricate and supply the M1 no matter the die size. Just put in bigger fans. /s
    Not to be dense but what the heck does /s mean?
    It means you'd do well to ignore the entire post.
    edited November 2021 muthuk_vanalingamFileMakerFeller
  • Reply 13 of 21
    sbdudesbdude Posts: 147member
    Interesting take, but where would apple go even if TSMC couldn't crack the 3 nm code? Intel is still on 10 nm, and probably for the foreseeable future since 7 is barely coming online.
  • Reply 14 of 21
    sbdude said:
    Interesting take, but where would apple go even if TSMC couldn't crack the 3 nm code? Intel is still on 10 nm, and probably for the foreseeable future since 7 is barely coming online.
    Apple will introduce new features in the SoC in the same 3nm node and continue to use TSMC 3nm node for one more year without any trouble. They are already way ahead of competition, this will not be an issue at all for Apple. @blastdoor nailed it already with his comment - It is better to be stuck at 3nm for 3 years than 14nm for 5 years like Intel.
    williamlondontmayFileMakerFeller
  • Reply 15 of 21
    robabarobaba Posts: 226member
    Huh.  Having trouble with a bleeding edge technology that nobody else is even close to achieving?  Who would have thought it!  /s

    But seriously, dev times have been creating up industry wide for years now—this sh’t is ridiculously difficult to figure out.  The best technical minds in the world working with the most exacting technicians are cracking it one issue at a time, even thought there are multiple unsolved variables and no clear cut answers.  Give TSMC and those who work there-in some respect hey?  If it were easy, everyone would have already done it.
    bageljoey
  • Reply 16 of 21
    lkrupplkrupp Posts: 9,991member
    tommikele said:
    lkrupp said:

    Apple gets preferential treatment in close TSMC partnership

    isn't this anti-competitive, monopolistic behavior? Break them both up! Force Apple to allow Intel to fabricate and supply the M1 no matter the die size. Just put in bigger fans. /s
    It's just after 11:00 am and you may have already locked up today's award for the internet's most baseless, uniformed comment of the day.

    No wonder your avatar is one of the three stooges.
    Since there is no official symbol or emoji for sarcasm the AppleInsider regulars came up with /s to indicate a post was sarcastic. Also agreed upon because negative or thumbs down icons/emoji are not permitted was that the ‘Informative’ button be used to disagree with a poster’s comment. That one does confuse the issue, though.
  • Reply 17 of 21
    sflocalsflocal Posts: 5,961member
    tommikele said:
    lkrupp said:

    Apple gets preferential treatment in close TSMC partnership

    isn't this anti-competitive, monopolistic behavior? Break them both up! Force Apple to allow Intel to fabricate and supply the M1 no matter the die size. Just put in bigger fans. /s
    It's just after 11:00 am and you may have already locked up today's award for the internet's most baseless, uniformed comment of the day.

    No wonder your avatar is one of the three stooges.
    And you win the today's award for not understanding what "/s" means.
    williamlondonStrangeDays
  • Reply 18 of 21
    mjtomlinmjtomlin Posts: 2,571member
    Apple should be encouraging TSMC to develop fabs and subdivisions in the US (and possibly other western countries).

    Currently any facilities within close proximity to mainland China are in jeopardy.

    They are. Both TSMC and Intel are building fabs in Arizona. Samsung has a few in Austin. More will come.
  • Reply 19 of 21
    thttht Posts: 4,388member
    sbdude said:
    Interesting take, but where would apple go even if TSMC couldn't crack the 3 nm code? Intel is still on 10 nm, and probably for the foreseeable future since 7 is barely coming online.
    My bet is Apple+TSMC will use a half node improvement, "4nm", in 2022 and 2023. Hopefully the 3nm issues are worked out for mass production in 2023. They are just going to inch their way to it.
  • Reply 20 of 21
    tht said:
    sbdude said:
    Interesting take, but where would apple go even if TSMC couldn't crack the 3 nm code? Intel is still on 10 nm, and probably for the foreseeable future since 7 is barely coming online.
    My bet is Apple+TSMC will use a half node improvement, "4nm", in 2022 and 2023. Hopefully the 3nm issues are worked out for mass production in 2023. They are just going to inch their way to it.
    So, turn the nm dial from 3 to 4?
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