Apple makes 'last-minute decision' to use TSMC for 30% of 'A9' chip orders for next iPhone

Posted:
in iPhone edited April 2015
Facing poor yield rates from chipmaker GlobalFoundries, Apple has apparently made an eleventh-hour call as it solidifies its supply chain for the next-generation iPhone, opting to award nearly a third of "A9" chip orders to Taiwan Semiconductor Manufacturing Co.




Well-connected analyst Ming-Chi Kuo of KGI Securities issued a note to investors on Wednesday, a copy of which was obtained by AppleInsider, revealing that Apple has apparently made what he called a "last-minute decision to recruit TSMC." Apple is said to have called an audible after partner GlobalFoundries continued to experience poor yield rates on production of the next-generation CPU.

Specifically, GlobalFoundries' "A9" chip yield rate is said to currently be at about 30 percent yield rate, which is well below what Kuo said is a mass-production "basic requirement" of 50 percent.
Apple is said to have turned to TSMC after partner GlobalFoundries showed exceptionally poor "A9" chip yield rates of around 30%.
"Recruiting TSMC reduces supply uncertainties for Apple," the analyst said.

Another factor in the decision, according to Kuo, are concerns from Apple that Samsung's chipmaking business may not be able to supply enough of its 14-nanometer design. That's because initial sales of the Galaxy S6 and S6 Edge have apparently been greater than expected, and may pull 14-nanometer orders away from Apple.

Finally, Kuo also indicated that TSMC's competing 16-nanometer FinFET Turbo design has exceeded Apple's expectations in both yield rate and performance.

Another industry analyst said much the same in a report last month. Citing a recent trip to Asia, Timothy Arcuri from Cowen and Company said strong yields and attractive pricing led him to believe that TSMC had secured a large portion of Apple's A9 order.

Apple's 2015 iPhone update is widely expected to sport a next-generation processor based on a smaller and more efficient design. Multiple reports have indicated that Samsung will build the majority of "A9" processors for Apple's next-generation iPhone.

Samsung had a stranglehold on Apple's mobile processor business, building all units for the iPhone until last year. That's when TSMC began contributing chips for the iPhone 6 and iPhone 6 Plus, using a 20-nanometer process for the A8 processor that powers Apple's flagship handsets.
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Comments

  • Reply 1 of 49

    I really doubt Apple would ship some A9's at 16nm and some at 14nm. So Ming-Chi is probably wrong. Again.

  • Reply 2 of 49
    ecatsecats Posts: 272member
    "Last Minute"... is ignorant of production planning and ramping. One doesn't just pick up a whole other chip foundry off the cuff.

    It's more likely that it was this way all along and the information, if true, was leaked only now.
  • Reply 3 of 49
    Apple is said to have called an audible after partner GlobalFoundries continued to experience poor yield rates on production of the next-generation CPU.

    Not sure what that means.
  • Reply 4 of 49

    That approximately correlates to the 25% allocated to Global Foundries in this leaked document published by semiwiki.

     

    Or he could have taken that information and made an assumption it would be thrown to TSMC.

     

    Yet we can still wonder how TSMA will manufacture SoCs designed for Samsung's 14nm FinFET process using their 16nm FinFET process which they have struggled to get up to production yield and is 1 year behind schedule.

     

    So does AppleInsider have some special explanation of that?

  • Reply 5 of 49
    prolineproline Posts: 202member
    Also, very unlikely this has anything to do with the S6. Even if the S6 is doing better than expected, S6 sales will still be far, far, less than iPhone 6S and 6S Plus sales (this is just basic logic since the iPhone sells nearly as well as ALL of Samsung's phones put together, whereas the S6 will only ever be a minority of Samsung's phones as they sell many lower cost products).

    Put another way, if Samsung is on deck to make ~50 million of the ~80 million Apple needs for the Christmas quarter, whether the S6 is selling 5 million units a quarter or 10 million isn't a big deal.
  • Reply 6 of 49
    ksecksec Posts: 1,568member
    Quote:


     Specifically, GlobalFoundries' "A9" chip yield rate is said to currently be at about 30 percent yield rate, which is well below what Kuo said is a mass-production "basic requirement" of 50 percent.


     

    This is BS.

     

    Although you cant switch Fab from one to another without redesigning. I suspect Apple have enough resources to have their team working on design with TSMC just for backup.

  • Reply 7 of 49
    can someone explain to me with a yield rate is? So if factory A is producing a 30% yield opposed to 50%, does that mean that it's producing only 30% of what apple needs? Or that 30% of the product is usable, and the rest is garbage? Thanks
  • Reply 8 of 49
    Quote:

    Originally Posted by josephwinters View Post



    can someone explain to me with a yield rate is? So if factory A is producing a 30% yield opposed to 50%, does that mean that it's producing only 30% of what apple needs? Or that 30% of the product is usable, and the rest is garbage? Thanks



    It means thirty percent of what's coming off the line is usable, and the rest has to be tossed/recycled.

  • Reply 9 of 49
    Quote:

    Originally Posted by TheWhiteFalcon View Post

     



    It means thirty percent of what's coming off the line is usable, and the rest has to be tossed/recycled.


     

    That's insane. What a huge waste. Is that because quality control measures renders them unusable? Seems like such a huge waste of money to me if that much is being rendered unusable. I wonder if apple has to pay for the unused chips 

  • Reply 10 of 49
    mike1mike1 Posts: 2,984member
    That's insane. What a huge waste. Is that because quality control measures renders them unusable?

    Seems like such a huge waste of money to me if that much is being rendered unusable. I wonder if apple has to pay for the unused chips 

    You're kidding right. That'd be like asking you to pay for the steak that the restaurant overcooked before bringing you what you ordered.
  • Reply 11 of 49
    Quote:

    Originally Posted by josephwinters View Post

     

     

    That's insane. What a huge waste. Is that because quality control measures renders them unusable? Seems like such a huge waste of money to me if that much is being rendered unusable. I wonder if apple has to pay for the unused chips 




    It's a little higher than average, that's for sure.

     

    Most chip fabs have this issue, so they take steps to alleviate it. Often times Intel will sell an i5 at 1.4GHz, which may be the same as an i5 1.8GHz but it couldn't run at the proper clock speed reliably, so they underclock it and it will work fine.

     

    When the PS3 was being put into production, IBM was having yield issues with the Cell processor, so Sony had the system disable one of the eight SPE's on every chip, which meant that more of the chips could be used.

     

    That being said, I'm pretty sure they just melt them down and run the silicon through again, so you just lose the manufacturing cost. I don't think Apple pays that cost upfront, it'd just be built into the per-chip price.

     

    This is also why Intel's initial runs of a chip on a new process take a long time to fully be released, because initial yields are terrible.

  • Reply 12 of 49
    tmaytmay Posts: 5,722member
    Quote:

    Originally Posted by Xiao-zhi View Post

     

    That approximately correlates to the 25% allocated to Global Foundries in this leaked document published by semiwiki.

     

    Or he could have taken that information and made an assumption it would be thrown to TSMC.

     

    Yet we can still wonder how TSMA will manufacture SoCs designed for Samsung's 14nm FinFET process using their 16nm FinFET process which they have struggled to get up to production yield and is 1 year behind schedule.

     

    So does AppleInsider have some special explanation of that?


    Apple would have designs produced for both processes, and I believe that both TMSC and Samsung would have had to at least have a tapeout (preproduction) as part of the competition. I do think that Apple was always going to spilt the production anyway.

  • Reply 13 of 49
    Quote:

    Originally Posted by tmay View Post

     

    Apple would have designs produced for both processes, and I believe that both TMSC and Samsung would have had to at least have a tapeout (preproduction) as part of the competition. I do think that Apple was always going to spilt the production anyway.




    It's also possible that TSMC gets A9X production and Sammy gets A9 production.

  • Reply 14 of 49
    Do those yield rate numbers mean that 50% of all chips produced are non working chips? Failed chips?
    It seems to be such a large number.
  • Reply 15 of 49
    Quote:

    Originally Posted by mike1 View Post





    You're kidding right. That'd be like asking you to pay for the steak that the restaurant overcooked before bringing you what you ordered.



    No free lunch. The fab charges their cost plus a profit. If not, they're out of business. And guess who pays the final bill?

  • Reply 16 of 49
    Thirty percent means they're lying. The capacity is going to another customer. Hard to credit, but could it be ... Sam-kaching-sung? Alternative interpretation: Apple thinks they will sell far more than 75 metric buttloads of the new iPhone Fall 2015, and wants enough processors to fill them up.
  • Reply 17 of 49
    wood1208wood1208 Posts: 2,739member
    Come-on. Apple or any company will never ever make eleventh hour decision for their bread-butter product's main component. This news makes me feel insult to my intelligence. I understand the low yield rate of a complex processor fab. Than again, Apple would not make some processor on 14nm and rest on 16nm circuits. This screws up their performance benchmarks and nightmare of how to market same iphone 6x but based on different processor.
  • Reply 18 of 49
    wood1208wood1208 Posts: 2,739member
    Quote:

    Originally Posted by josephwinters View Post

     

     

    That's insane. What a huge waste. Is that because quality control measures renders them unusable? Seems like such a huge waste of money to me if that much is being rendered unusable. I wonder if apple has to pay for the unused chips 




    Apple pays for working processors they receive. If chip foundry can increase their yield than that is more profit for them and able to meet committed quota in timely manner.

  • Reply 19 of 49
    mdriftmeyermdriftmeyer Posts: 7,503member
    I really doubt Apple would ship some A9's at 16nm and some at 14nm. So Ming-Chi is probably wrong. Again.

    I was just about to point out the same problem. More to the point, Samsung and Global Foundries are on the same system. You don't split it up. Yields are high at GF.
  • Reply 20 of 49
    can someone explain to me with a yield rate is? So if factory A is producing a 30% yield opposed to 50%, does that mean that it's producing only 30% of what apple needs? Or that 30% of the product is usable, and the rest is garbage? Thanks


    It means thirty percent of what's coming off the line is usable, and the rest has to be tossed/recycled.

    Not, necessarily true ... You can build something, say, to an A8X spec -- and get 30% yield (70% rejects).

    But, you can retest the rejects at, say, a lesser A8 spec -- and get an additional 50% yield ...

    So, the premier devices like the next iPhone have a low yield, but secondary devices like AppleTV, iPad Mini. etc. are much higher yields ...


    This is the way bleeding-edge semiconductor manufacturing works -- and those who can, plan for and take advantage of retesting at a lower spec.
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