Apple will buy US-made chips from TSMC, confirms Tim Cook

AppleInsider · November 15, 2022 10:33PM

Apple CEO Tim Cook has made it clear that the company will source at least some of its chip supply from the still-unfinished TSMC plant in Arizona.

TSMC

Cook made the remarks at an "internal meeting" in Germany with Apple employees ranging from engineering to retail employees. And, the chip orders may expand to plants in Europe as well.

"We've already made a decision to be buying out of a plant in Arizona, and this plant in Arizona starts up in '24, so we've got about two years ahead of us on that one, maybe a little less," Cook reportedly said at the meeting, according to Bloomberg. "In Europe, I'm sure that we will also source from Europe as those plans become more apparent."

Also present at the meeting were Apple Services chief Eddy Cue and Head of People Deirdre O'Brien.

Construction for the TSMC chip fabrication plant in Arizona began in June 2021. The company had initially projected to fire up production in September 2022, but the timeline has been pushed back by about six months.

The TSMC plant is expected to go on-line in March 2023. TSMC expects it will reach its production start in early 2024.

The labor pool in Arizona is also creating a challenge for TSMC. Intel already employs 12,000 people and seeks 3,000 more for its expanded facilities. TSMC will have to compete in an already low-unemployment region when seeking talent for its new plant.

TSMC, however, is skeptical about the level of success that can be achieved in the United States. When US House Speaker Nancy Pelosi visited Taiwan in August, she met with Morris Chang and Mark Liu, chair of TSMC. Chang reportedly told Pelosi that Washington's efforts to rebuild its chip manufacturing were doomed to fail.

It's not clear exactly what Apple will buy from TSMC, nor what specifically will be manufactured there. Apple still has demand for A-series chips first launched up to four years ago.

And, chips purchased from TSMC Arizona will still have to be shipped to China or India for iPhone production, if the status quo is maintained.

Warren Buffett is a believer in TSMC. Over the summer, Berkshire Hathaway increased its holdings in TSMC. The buy was revealed in a SEC filing, but not the date of the buy beyond a timeframe between July and September.

In July, TSMC stock was down 35% in the year. On September 30, it was down 41%. it hit its 2022 low on November 3, down 49% on the year.

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tht · November 15, 2022 10:47PM

Won't be the first time Apple buys iPhone SoC chips that are made in the USA.

stevenoz · November 15, 2022 10:49PM

I can certainly understand why companies like the computer chip manufacturer, TSMC, are moving away from Taiwan...
because of China who wants to grab its neighbor by the ...

So, like Tim Cook, I welcome them to our country. May they be successful, innovative, and technologically important for all of us.

waveparticle · November 15, 2022 11:05PM

TSMC will be charging more for the chips made in US than in Taiwan. Apple will pass the cost to iPhones sold in US. The truth that insiders are reluctant to say.

baconstang · November 15, 2022 11:10PM

waveparticle said:

TSMC will be charging more for the chips made in US than in Taiwan. Apple will pass the cost to iPhones sold in US. The truth that insiders are reluctant to say.

The cost of doing business is higher here. Why wouldn't they charge more?

mfryd · November 15, 2022 11:21PM

Taiwan doesn't want factories outside of Taiwan to succeed.

Right now, a major factor in why the US protects Taiwan, is that much of our electronics infrastructure depends on chips made in Taiwan. If mainland China takes over Taiwan, China gains the ability to easily disrupt the US economy. Furthermore, China gains the ability to build backdoors into various chips, bypassing security.

If the US gains the ability to meet our own chip demand, a threat to Taiwan is no longer a threat to our economy. Therefore we have less incentive to protect Taiwan.

blastdoor · November 15, 2022 11:43PM

if the status quo is maintained.

Which status quo is that? The pre-war status quo is gone. The new status quo is changing every week.

And why assume chips bought from AZ must go in iPhones? Maybe the AZ chips end up in “Macs” we never see, because they are just AWS (or iCloud) instances.

roundaboutnow · November 16, 2022 12:28AM

blastdoor said:

if the status quo is maintained.

Which status quo is that? The pre-war status quo is gone. The new status quo is changing every week.

And why assume chips bought from AZ must go in iPhones? Maybe the AZ chips end up in “Macs” we never see, because they are just AWS (or iCloud) instances.

...or maybe Macs we do see--perhaps a new Mac Pro made in the Texas facility.

waveparticle · November 16, 2022 12:32AM

mfryd said:

Taiwan doesn't want factories outside of Taiwan to succeed.

Right now, a major factor in why the US protects Taiwan, is that much of our electronics infrastructure depends on chips made in Taiwan. If mainland China takes over Taiwan, China gains the ability to easily disrupt the US economy. Furthermore, China gains the ability to build backdoors into various chips, bypassing security.

If the US gains the ability to meet our own chip demand, a threat to Taiwan is no longer a threat to our economy. Therefore we have less incentive to protect Taiwan.

China gains the ability to build backdoors into various chips, bypassing security.
Very stupid statement.

Why does US has to depend a Taiwanese company for chips manufacturing? That is also stupid. Chips manufacturing is not highly complicated technology. Apple originally contracted TSMC to fabricate chips primarily because it is cheap.

jdw · November 16, 2022 1:36AM

This is one of those times I wish AppleInsider would do a bit more detailed reporting.

Please tell us why Chang of TSMC Taiwan said the plans were "doomed to fail." I want to know all the reasons he cited, but I can read the original article because its locked behind a paywall.

cpsro · November 16, 2022 1:58AM

Has ground been broken in Arizona yet? It takes years to build the most advanced manufacturing facilities.

tht · November 16, 2022 2:56AM

cpsro said:

Has ground been broken in Arizona yet? It takes years to build the most advanced manufacturing facilities.

The facility broke ground in 2021. It is slated to start production in 2024, if this is the facility Cook is referring to. If TSMC is selling chips out of the facility in 2024, you should see news of validation and pilot production by 2023.

The second TSMC facility has not broke ground yet.

mfryd · November 16, 2022 3:02AM

waveparticle said:

mfryd said:

Taiwan doesn't want factories outside of Taiwan to succeed.

Right now, a major factor in why the US protects Taiwan, is that much of our electronics infrastructure depends on chips made in Taiwan. If mainland China takes over Taiwan, China gains the ability to easily disrupt the US economy. Furthermore, China gains the ability to build backdoors into various chips, bypassing security.

If the US gains the ability to meet our own chip demand, a threat to Taiwan is no longer a threat to our economy. Therefore we have less incentive to protect Taiwan.

China gains the ability to build backdoors into various chips, bypassing security.
Very stupid statement.

Why does US has to depend a Taiwanese company for chips manufacturing? That is also stupid. Chips manufacturing is not highly complicated technology. Apple originally contracted TSMC to fabricate chips primarily because it is cheap.

It takes time and money to build a chip fabrication plant. If Taiwan made chips become unavailable today, it would take years to replace that capacity with US based plants.

TSMC also has unique expertise. They are able to reliably make chips using smaller geometry than their competitors.

9secondkox2 · November 16, 2022 4:16AM

jdw said:

This is one of those times I wish AppleInsider would do a bit more detailed reporting.

Please tell us why Chang of TSMC Taiwan said the plans were "doomed to fail." I want to know all the reasons he cited, but I can read the original article because it’s locked behind a paywall.

I’m sure the response had to do with the parameters set forth by Pelosi. But thst perspective may change with new folks in charge.

Of course it could fail if the status quo is not improved.

On the other hand, Taiwan doesn’t want to sound like they aren’t necessary.

But the labor wages here and expenses are likely the biggest reason for that outlook.

9secondkox2 · November 16, 2022 4:20AM

waveparticle said:

mfryd said:

Taiwan doesn't want factories outside of Taiwan to succeed.

Right now, a major factor in why the US protects Taiwan, is that much of our electronics infrastructure depends on chips made in Taiwan. If mainland China takes over Taiwan, China gains the ability to easily disrupt the US economy. Furthermore, China gains the ability to build backdoors into various chips, bypassing security.

If the US gains the ability to meet our own chip demand, a threat to Taiwan is no longer a threat to our economy. Therefore we have less incentive to protect Taiwan.

China gains the ability to build backdoors into various chips, bypassing security.
Very stupid statement.

Why does US has to depend a Taiwanese company for chips manufacturing? That is also stupid. Chips manufacturing is not highly complicated technology. Apple originally contracted TSMC to fabricate chips primarily because it is cheap.

That’s not accurate. TSMC has the best manufacturing tech going right now snd they’ve been leading for a while. It’s the cost of business, the expertise, the technology, and the experience stack that makes them indispensable. So much so, thst Intel wants to utilize them. That says a ton.

Sure, Intel can make chips. But they aren’t on the same level in producing them either in quantity or quality.

And the tech absolutely IS highly complicated. Not so much after it’s developed and things are set. But the creation of the tools and foundries is rocket science.

jdw · November 16, 2022 5:14AM

9secondkox2 said:
But the labor wages here and expenses are likely the biggest reason for that outlook.

True, but that can be used as an excuse for any US company to halt all domestic US operations, export its "rocket science," and seek a cheaper source of labor overseas. America badly needs domestic US production to increase. The US builds nearly everything in a country quite hostile to its own interests and wonders why it has such a big problem. COVID and lockdowns in China only made that bad situation worse. Taiwan isn't hostile to the US, but a lot of production remains in mainland China, not Taiwan. And the only thing being done on the US side is to push companies to increase wages to compensate for inflation, which makes it even more unlikely the root problem of inadequate domestic US manufacturing will ever get fixed. The current status quo cannot last forever.

blastdoor · November 16, 2022 9:06AM

jdw said:

This is one of those times I wish AppleInsider would do a bit more detailed reporting.

Please tell us why Chang of TSMC Taiwan said the plans were "doomed to fail." I want to know all the reasons he cited, but I can read the original article because its locked behind a paywall.

I have seen stories reference TSMC’s “ecosystem” as a (non)answer to your question. I’m not sure what that means though.

With enough time, money, and management attention, any reasonably well run company can do anything. With Gelsinger, Intel appears to have fixed their management issues (maybe), so the question is “just” whether they have the time and money. If we were living in ‘normal’ times, Intel might not have the time or money. The chip fab biz is all about economies of scale. When the smartphone passed the PC in scale, Intel’s infamous decisions to not seriously compete in the smartphone biz most likely would have doomed them, unless TSMC were to match Intel in making a long string of unforced errors.

But I think the geopolitical situation gives Intel the time and money — ie, the US government is now implicitly backing Intel for very valid national security reasons. So I would say Intel is no more ‘doomed’ today than GM was in 2009. Actually, Intel is far better positioned than GM was.

If the T in TSMC stood for Texas, Trinidad, or any other place not under threat of Chinese invasion, though, Intel likely would be doomed.

So maybe Intel has an “ecosystem” advantage of its own.

citpeks · November 16, 2022 9:22AM

tht said:

Won't be the first time Apple buys iPhone SoC chips that are made in the USA.

People seem to have forgotten that Samsung was Apple's primary supplier, via its plant in Texas, before TSMC started to take more of Apple's business.

waveparticle said:

mfryd said:

Taiwan doesn't want factories outside of Taiwan to succeed.

Right now, a major factor in why the US protects Taiwan, is that much of our electronics infrastructure depends on chips made in Taiwan. If mainland China takes over Taiwan, China gains the ability to easily disrupt the US economy. Furthermore, China gains the ability to build backdoors into various chips, bypassing security.

If the US gains the ability to meet our own chip demand, a threat to Taiwan is no longer a threat to our economy. Therefore we have less incentive to protect Taiwan.

China gains the ability to build backdoors into various chips, bypassing security.
Very stupid statement.

Why does US has to depend a Taiwanese company for chips manufacturing? That is also stupid. Chips manufacturing is not highly complicated technology. Apple originally contracted TSMC to fabricate chips primarily because it is cheap.

Wow, such an ignorant statement. If chip manufacturing is so simple, then why is the U.S. government scrambling to impose export controls, and pressuring companies like ASML (ever heard or them?) to cancel the deals they have with China? Or Congress passing massive incentive packages to entice companies like TSMC to build fabs in the U.S.?

Chip fabs are capital intensive to build, the most advanced processes are very high tech, and a hard business, which is why companies like AMD and IBM spun off their foundries, or went entirely fabless, years ago.

It's the one large strategic advantage that China does not possess, and is scrambling to build up internally, by propping up its domestic chip industry, and poaching personnel from TSMC. The ball bearing factories of any WW III, if you will.

Mike Wuerthele · November 16, 2022 12:19PM

cpsro said:

Has ground been broken in Arizona yet? It takes years to build the most advanced manufacturing facilities.

Yes. June 2021.

danox · November 16, 2022 1:11PM

blastdoor said:

jdw said:

This is one of those times I wish AppleInsider would do a bit more detailed reporting.

Please tell us why Chang of TSMC Taiwan said the plans were "doomed to fail." I want to know all the reasons he cited, but I can read the original article because its locked behind a paywall.

I have seen stories reference TSMC’s “ecosystem” as a (non)answer to your question. I’m not sure what that means though.

With enough time, money, and management attention, any reasonably well run company can do anything. With Gelsinger, Intel appears to have fixed their management issues (maybe), so the question is “just” whether they have the time and money. If we were living in ‘normal’ times, Intel might not have the time or money. The chip fab biz is all about economies of scale. When the smartphone passed the PC in scale, Intel’s infamous decisions to not seriously compete in the smartphone biz most likely would have doomed them, unless TSMC were to match Intel in making a long string of unforced errors.

But I think the geopolitical situation gives Intel the time and money — ie, the US government is now implicitly backing Intel for very valid national security reasons. So I would say Intel is no more ‘doomed’ today than GM was in 2009. Actually, Intel is far better positioned than GM was.

If the T in TSMC stood for Texas, Trinidad, or any other place not under threat of Chinese invasion, though, Intel likely would be doomed.

So maybe Intel has an “ecosystem” advantage of its own.

Intel and Samsung is shit for Apple chip wise, Apple has been there done that, building sourcing chips from outside Taiwan is a 3 to 6 year process no matter what, the only thing bad about Arizona is the lack water and world class schools. But Arizona’s political climate appears to be changing from crazy red.

blastdoor · November 16, 2022 2:18PM

danox said:

blastdoor said:

jdw said:

This is one of those times I wish AppleInsider would do a bit more detailed reporting.

Please tell us why Chang of TSMC Taiwan said the plans were "doomed to fail." I want to know all the reasons he cited, but I can read the original article because its locked behind a paywall.

I have seen stories reference TSMC’s “ecosystem” as a (non)answer to your question. I’m not sure what that means though.

With enough time, money, and management attention, any reasonably well run company can do anything. With Gelsinger, Intel appears to have fixed their management issues (maybe), so the question is “just” whether they have the time and money. If we were living in ‘normal’ times, Intel might not have the time or money. The chip fab biz is all about economies of scale. When the smartphone passed the PC in scale, Intel’s infamous decisions to not seriously compete in the smartphone biz most likely would have doomed them, unless TSMC were to match Intel in making a long string of unforced errors.

But I think the geopolitical situation gives Intel the time and money — ie, the US government is now implicitly backing Intel for very valid national security reasons. So I would say Intel is no more ‘doomed’ today than GM was in 2009. Actually, Intel is far better positioned than GM was.

If the T in TSMC stood for Texas, Trinidad, or any other place not under threat of Chinese invasion, though, Intel likely would be doomed.

So maybe Intel has an “ecosystem” advantage of its own.

Intel and Samsung is shit for Apple chip wise, Apple has been there done that, building sourcing chips from outside Taiwan is a 3 to 6 year process no matter what, the only thing bad about Arizona is the lack water and world class schools. But Arizona’s political climate appears to be changing from crazy red.

Yeah, today both Intel and Samsung are not good enough for Apple, that is definitely true.

Thanks to better management and US government support, I think Intel has a shot at becoming an acceptable option. Samsung probably doesn't, but that's mostly because Samsung competes with the iPhone directly, which I think is likely the reason Apple dumped them in the first place. I can't prove it, but I suspect the causal arrow goes like this: Apple dumped Samsung -> Samsung fell behind TSMC (not the other way around). It's nearly impossible to be a manufacturing leader in semiconductors if you don't have a constant flow of massive investment which requires a constant flow of massive demand for your products (ie, economies of scale).

Actually, the more I think about it, the more likely I think it is that Intel will be fabbing at least some chips for Apple between now and 2030 (Mac might be more likely than iPhone). It's darned near a national security imperative that it happen.

Apple will buy US-made chips from TSMC, confirms Tim Cook

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