TSMC will prioritize Apple 'iPhone 13,' car builder chip orders

AppleInsider · June 22, 2021 11:09AM

In a challenging chip manufacturing environment, Apple partner TSMC is reportedly de-prioritizing orders destined for PCs and servers orders, and is instead focusing on car manufacturers, and Apple's needs.

TSMC

Following TSMC's previous estimates that the impact of the current global chip shortage would last a "a couple of years," it is now said to be concentrating on supplying the the car industry and Apple.

According to Digitimes Asia, unnamed sources at the chip maker say that the prioritization is for the third quarter of 2021. It's claimed that TSMC will first give supply priority to car firms and Apple, then secondly to manufacturers of PCs, servers, and networking devices.

Although Apple initially appeared to weather the shortage better than its rivals, because of its high-volume purchasing power, it has more recently begun to see problems.

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blastdoor · June 22, 2021 1:00PM

Meanwhile, in another market segment, GloFo is building new fabs, which should help address the shortage.

Hopefully balance will be returned by 2023 or so

lkrupp · June 22, 2021 1:27PM

Is Apple TSMC’s biggest customer? Most profitable for them? Why prioritize Apple over other PC manufacturers?

ppietra · June 22, 2021 1:38PM

lkrupp said:

Is Apple TSMC’s biggest customer? Most profitable for them? Why prioritize Apple over other PC manufacturers?

Apple is the biggest costumer and probably is the only one who is willing to pay more for access to the latest technology from TSMC.

imat · June 22, 2021 2:42PM

ppietra said:

lkrupp said:

Is Apple TSMC’s biggest customer? Most profitable for them? Why prioritize Apple over other PC manufacturers?

Apple is the biggest costumer and probably is the only one who is willing to pay more for access to the latest technology from TSMC.

Probably also helped TSMC with the equipment investment (as Apple does sometimes).

Marvin · June 22, 2021 3:39PM

lkrupp said:

Is Apple TSMC’s biggest customer? Most profitable for them? Why prioritize Apple over other PC manufacturers?

Seems to be the case:

https://www.taipeitimes.com/News/biz/archives/2021/03/09/2003753477

"Taiwan Semiconductor Manufacturing Co’s largest customer accounted for 25 percent of its total revenue last year. Analysts believe the unnamed company to be Apple Inc.
TSMC said that revenue generated from its largest customer rose 36.22 percent from a year earlier, meaning its sales to the customer rose from 23 percent to 25 percent of its total sales.
TSMC said it last year generated consolidated sales of NT$167.39 billion from its second-largest customer, up 9.49 percent from a year earlier.

While TSMC again did not identify the customer, which accounted for 12 percent of total sales, down from 14 percent in 2019, analysts said that the company is likely Huawei Technologies Co."

That data gives some insight into Apple's chip costs. Assuming Apple is responsible for the $11.9b revenue in that article, this would be for around 250 million chips (iPhone + iPad), which is roughly $50 per chip. This is a big reason for Apple to switch from Intel and AMD.

Previously Apple would be paying AMD to make chips with TSMC on an older node and then pay them some profit and they'd pay Intel to make chips on a much older node and pay even more profit. Now they can build the most advanced chips on the most advanced node at minimal cost and increase margins. Even for chips like the highest-end Macs, the costs will be miniscule compared to the $7k+ Intel was asking for and $2k+ AMD gets per GPU. 3nm chips in 2022 will have a density of 300 million transistors per mm^2, over 2x what the M1 has.

melgross · June 22, 2021 4:38PM

blastdoor said:

Meanwhile, in another market segment, GloFo is building new fabs, which should help address the shortage.

Hopefully balance will be returned by 2023 or so

For car chips more likely than for anything else. Remember they’re concentrating on 14nm and larger. They gave up work on smaller nodes several years ago.

melgross · June 22, 2021 4:41PM

lkrupp said:

Is Apple TSMC’s biggest customer? Most profitable for them? Why prioritize Apple over other PC manufacturers?

Not only is Apple their biggest customer, estimated to be almost 30% of sales, but they also finance much of leading edge node R&D. They also supply machinery. The deal is that Apple get new technology first, and then, after their needs are satisfied, other manufacturers are supplied.

melgross · June 22, 2021 4:45PM

Marvin said:

lkrupp said:

Is Apple TSMC’s biggest customer? Most profitable for them? Why prioritize Apple over other PC manufacturers?

Seems to be the case:

https://www.taipeitimes.com/News/biz/archives/2021/03/09/2003753477

"Taiwan Semiconductor Manufacturing Co’s largest customer accounted for 25 percent of its total revenue last year. Analysts believe the unnamed company to be Apple Inc.
TSMC said that revenue generated from its largest customer rose 36.22 percent from a year earlier, meaning its sales to the customer rose from 23 percent to 25 percent of its total sales.
TSMC said it last year generated consolidated sales of NT$167.39 billion from its second-largest customer, up 9.49 percent from a year earlier.
While TSMC again did not identify the customer, which accounted for 12 percent of total sales, down from 14 percent in 2019, analysts said that the company is likely Huawei Technologies Co."

That data gives some insight into Apple's chip costs. Assuming Apple is responsible for the $11.9b revenue in that article, this would be for around 250 million chips (iPhone + iPad), which is roughly $50 per chip. This is a big reason for Apple to switch from Intel and AMD.

Previously Apple would be paying AMD to make chips with TSMC on an older node and then pay them some profit and they'd pay Intel to make chips on a much older node and pay even more profit. Now they can build the most advanced chips on the most advanced node at minimal cost and increase margins. Even for chips like the highest-end Macs, the costs will be miniscule compared to the $7k+ Intel was asking for and $2k+ AMD gets per GPU. 3nm chips in 2022 will have a density of 300 million transistors per mm^2, over 2x what the M1 has.

I don’t get some of the numbers you’re using. $50 per chip, except for the new m1 is over the $34-38 per chip Microprocessor Reports has estimated the cost at. Where do you get $7k+ for the chips Intel supplied Apple with. That makes no sense as the Mac Pro itself costs considerably less than that.

OutdoorAppDeveloper · June 22, 2021 5:07PM

There are a lot of stories recently about how TSMC chip production is at great risk if China decides to get more aggressive with Taiwan. This is as good of a reason as any why the US should try every diplomatic avenue it can to smooth the waters with China.

waveparticle · June 22, 2021 5:59PM

lkrupp said:

Is Apple TSMC’s biggest customer? Most profitable for them? Why prioritize Apple over other PC manufacturers?

Because Apple orders amount according to preplan. If Apple cannot get the full order it will hurt Apple sales and thus profits and thus market share and thus stock price. Given Apple is the largest high tech company in the world the effect will be multiplied.

Marvin · June 22, 2021 7:10PM

melgross said:

Marvin said:

lkrupp said:

Is Apple TSMC’s biggest customer? Most profitable for them? Why prioritize Apple over other PC manufacturers?

Seems to be the case:

https://www.taipeitimes.com/News/biz/archives/2021/03/09/2003753477

"Taiwan Semiconductor Manufacturing Co’s largest customer accounted for 25 percent of its total revenue last year. Analysts believe the unnamed company to be Apple Inc.
TSMC said that revenue generated from its largest customer rose 36.22 percent from a year earlier, meaning its sales to the customer rose from 23 percent to 25 percent of its total sales.
TSMC said it last year generated consolidated sales of NT$167.39 billion from its second-largest customer, up 9.49 percent from a year earlier.
While TSMC again did not identify the customer, which accounted for 12 percent of total sales, down from 14 percent in 2019, analysts said that the company is likely Huawei Technologies Co."

That data gives some insight into Apple's chip costs. Assuming Apple is responsible for the $11.9b revenue in that article, this would be for around 250 million chips (iPhone + iPad), which is roughly $50 per chip. This is a big reason for Apple to switch from Intel and AMD.

Previously Apple would be paying AMD to make chips with TSMC on an older node and then pay them some profit and they'd pay Intel to make chips on a much older node and pay even more profit. Now they can build the most advanced chips on the most advanced node at minimal cost and increase margins. Even for chips like the highest-end Macs, the costs will be miniscule compared to the $7k+ Intel was asking for and $2k+ AMD gets per GPU. 3nm chips in 2022 will have a density of 300 million transistors per mm^2, over 2x what the M1 has.

I don’t get some of the numbers you’re using. $50 per chip, except for the new m1 is over the $34-38 per chip Microprocessor Reports has estimated the cost at. Where do you get $7k+ for the chips Intel supplied Apple with. That makes no sense as the Mac Pro itself costs considerably less than that.

The revenue is listed at the link above:

"The world’s largest contract chipmaker generated NT$336.78 billion (US$11.9 billion) in consolidated sales from its largest customer last year, accounting for about 25 percent of the total, financial data provided by TSMC showed."

Assuming Apple paid TSMC $11.9b for the 250m chips they shipped, this is $47.60. Maybe Microprocessor Reports is using an industry cost estimate, this estimate is using reported revenue. Apple could have ordered more units in 2020 than they shipped. If they ordered 300m+ chips for $11.9b then it's closer to the $34-38 estimate.

Intel Xeon priced at over $7k:
https://ark.intel.com/content/www/us/en/ark/products/193754/intel-xeon-w-3275m-processor-38-5m-cache-2-50-ghz.html

Apple charges $7k for this upgrade so they'll be paying Intel less but it's a huge difference between a <$50 chip and any of Intel's multiple thousand dollar chips. Currently the highest Mac Pro performance spec costs around $24k (around $8k Intel parts marked up, $10k AMD parts marked up). With Apple ditching Intel and AMD, that high-spec machine can drop to a fraction of the price. Even if Apple charges $2k for a high-end Apple Silicon chip, they can make the same or more profit while cutting the price by $16k.

tmay · June 22, 2021 7:25PM

OutdoorAppDeveloper said:

There are a lot of stories recently about how TSMC chip production is at great risk if China decides to get more aggressive with Taiwan. This is as good of a reason as any why the US should try every diplomatic avenue it can to smooth the waters with China.

China deciding to "be more aggressive" with Taiwan isn't going to work without invasion, and so far, China doesn't have the amphibious assault capability for success. Sure, the PRC could blow the shit out of Taiwan, but I'm under the impression that they want the technical and economic wealth of Taiwan, not a burned out husk of an island.

So, let's actually get back to building supply chain resilience within the many democracies of the world, and halt any more capitulation to the PRC.

waveparticle · June 22, 2021 7:31PM

tmay said:

OutdoorAppDeveloper said:

There are a lot of stories recently about how TSMC chip production is at great risk if China decides to get more aggressive with Taiwan. This is as good of a reason as any why the US should try every diplomatic avenue it can to smooth the waters with China.

China deciding to "be more aggressive" with Taiwan isn't going to work without invasion, and so far, China doesn't have the amphibious assault capability for success. Sure, the PRC could blow the shit out of Taiwan, but I'm under the impression that they want the technical and economic wealth of Taiwan, not a burned out husk of an island.

So, let's actually get back to building supply chain resilience within the many democracies of the world, and halt any more capitulation to the PRC.

Taiwan is making over 100 billions a year trading with mainland China. TSMC and Foxconn and Mediatech are the largest sources.

sflocal · June 22, 2021 7:39PM

OutdoorAppDeveloper said:

There are a lot of stories recently about how TSMC chip production is at great risk if China decides to get more aggressive with Taiwan. This is as good of a reason as any why the US should try every diplomatic avenue it can to smooth the waters with China.

It goes both ways. China is now pissing off everyone else with what it's doing with Taiwan. It would not surprise me if in addition to the U.S., other nations like Japan, South Korea, and EU countries start sending warships over there to keep the peace. What China is doing right now with the constant violating of Taiwan's airspace will only end badly with China.

The absolute worst thing that could happen is China doing something really stupid like firing at a Taiwanese ship or aircraft, and the rest of the world does nothing. The best thing that can happen is blowing China's craft out of the air/sea immediately thereafter and showing China the status quo is no more.

Personally, I think China will blink once it realizes that it will be China vs. everyone else (except maybe Russia).

tmay · June 23, 2021 1:18AM

sflocal said:

OutdoorAppDeveloper said:

There are a lot of stories recently about how TSMC chip production is at great risk if China decides to get more aggressive with Taiwan. This is as good of a reason as any why the US should try every diplomatic avenue it can to smooth the waters with China.

It goes both ways. China is now pissing off everyone else with what it's doing with Taiwan. It would not surprise me if in addition to the U.S., other nations like Japan, South Korea, and EU countries start sending warships over there to keep the peace. What China is doing right now with the constant violating of Taiwan's airspace will only end badly with China.

The absolute worst thing that could happen is China doing something really stupid like firing at a Taiwanese ship or aircraft, and the rest of the world does nothing. The best thing that can happen is blowing China's craft out of the air/sea immediately thereafter and showing China the status quo is no more.

Personally, I think China will blink once it realizes that it will be China vs. everyone else (except maybe Russia).

This isn't going to help China's "vaccine diplomacy";

https://www.nytimes.com/2021/06/22/business/economy/china-vaccines-covid-outbreak.html?smid=tw-share

melgross · June 23, 2021 7:18PM

Marvin said:

melgross said:

Marvin said:

lkrupp said:

Is Apple TSMC’s biggest customer? Most profitable for them? Why prioritize Apple over other PC manufacturers?

Seems to be the case:

https://www.taipeitimes.com/News/biz/archives/2021/03/09/2003753477

"Taiwan Semiconductor Manufacturing Co’s largest customer accounted for 25 percent of its total revenue last year. Analysts believe the unnamed company to be Apple Inc.
TSMC said that revenue generated from its largest customer rose 36.22 percent from a year earlier, meaning its sales to the customer rose from 23 percent to 25 percent of its total sales.
TSMC said it last year generated consolidated sales of NT$167.39 billion from its second-largest customer, up 9.49 percent from a year earlier.
While TSMC again did not identify the customer, which accounted for 12 percent of total sales, down from 14 percent in 2019, analysts said that the company is likely Huawei Technologies Co."

That data gives some insight into Apple's chip costs. Assuming Apple is responsible for the $11.9b revenue in that article, this would be for around 250 million chips (iPhone + iPad), which is roughly $50 per chip. This is a big reason for Apple to switch from Intel and AMD.

Previously Apple would be paying AMD to make chips with TSMC on an older node and then pay them some profit and they'd pay Intel to make chips on a much older node and pay even more profit. Now they can build the most advanced chips on the most advanced node at minimal cost and increase margins. Even for chips like the highest-end Macs, the costs will be miniscule compared to the $7k+ Intel was asking for and $2k+ AMD gets per GPU. 3nm chips in 2022 will have a density of 300 million transistors per mm^2, over 2x what the M1 has.

I don’t get some of the numbers you’re using. $50 per chip, except for the new m1 is over the $34-38 per chip Microprocessor Reports has estimated the cost at. Where do you get $7k+ for the chips Intel supplied Apple with. That makes no sense as the Mac Pro itself costs considerably less than that.

The revenue is listed at the link above:

"The world’s largest contract chipmaker generated NT$336.78 billion (US$11.9 billion) in consolidated sales from its largest customer last year, accounting for about 25 percent of the total, financial data provided by TSMC showed."

Assuming Apple paid TSMC $11.9b for the 250m chips they shipped, this is $47.60. Maybe Microprocessor Reports is using an industry cost estimate, this estimate is using reported revenue. Apple could have ordered more units in 2020 than they shipped. If they ordered 300m+ chips for $11.9b then it's closer to the $34-38 estimate.

Intel Xeon priced at over $7k:
https://ark.intel.com/content/www/us/en/ark/products/193754/intel-xeon-w-3275m-processor-38-5m-cache-2-50-ghz.html

Apple charges $7k for this upgrade so they'll be paying Intel less but it's a huge difference between a <$50 chip and any of Intel's multiple thousand dollar chips. Currently the highest Mac Pro performance spec costs around $24k (around $8k Intel parts marked up, $10k AMD parts marked up). With Apple ditching Intel and AMD, that high-spec machine can drop to a fraction of the price. Even if Apple charges $2k for a high-end Apple Silicon chip, they can make the same or more profit while cutting the price by $16k.

A problem is that we no longer have numbers for products shipped from Apple, making this difficult. Going by revenue numbers isn’t too helpful either, because we don’t know the distribution of products, just estimates from outside organizations, which don’t agree with other, and often, in the past when Apple did release numbers, with Apple.

I see where you went with the Mac Pro. Yes, Intel’s top chip Apple bought is considerably more expensive than the entry level version. But likely Apple is following fairly standard pricing methodologies, and is charging the customer twice what they paid, maybe more. Remember that product prices are almost always between 2.5 - 3.5 the price of the parts. That’s pretty much standard pricing practice.

melgross · June 23, 2021 7:19PM

tmay said:

sflocal said:

OutdoorAppDeveloper said:

There are a lot of stories recently about how TSMC chip production is at great risk if China decides to get more aggressive with Taiwan. This is as good of a reason as any why the US should try every diplomatic avenue it can to smooth the waters with China.

It goes both ways. China is now pissing off everyone else with what it's doing with Taiwan. It would not surprise me if in addition to the U.S., other nations like Japan, South Korea, and EU countries start sending warships over there to keep the peace. What China is doing right now with the constant violating of Taiwan's airspace will only end badly with China.

The absolute worst thing that could happen is China doing something really stupid like firing at a Taiwanese ship or aircraft, and the rest of the world does nothing. The best thing that can happen is blowing China's craft out of the air/sea immediately thereafter and showing China the status quo is no more.

Personally, I think China will blink once it realizes that it will be China vs. everyone else (except maybe Russia).

This isn't going to help China's "vaccine diplomacy";

https://www.nytimes.com/2021/06/22/business/economy/china-vaccines-covid-outbreak.html?smid=tw-share

The fact that both of their vaccines hardly work isn’t helping either. The countries using them are finding that out.

TSMC will prioritize Apple 'iPhone 13,' car builder chip orders

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