Apple's Exclusive Deal with TSMC
Apple has secured exclusive use of Taiwan Semiconductor Manufacturing Company's (TSMC) 3nm chipmaking for a year, benefiting its Macs and upcoming iPhone as it pushes the envelope in what has become one of the most important areas of technology.
The deal is worth billions and depletes TSMC's 3nm capacity, leaving other companies without a supplier.
The exclusive arrangement is outlined in a TSMC earnings report, and follows previous reports that Apple was in talks to use the foundry exclusively for 3nm chipmaking. Apple's order is so massive that it only pays for functional chips, saving billions.
"The Company is pleased to have won back the loyalty of a major customer for one year at the cost of losing flexibility for all other customers for one year," analysts at Macquarie Securities summarise. "This is a good trade-off for TSMC."
TSMC will also bear the cost of defective chips, but the rate is expected to decline in the future. Apple's orders accounted for 23% of TSMC's $72 billion revenue in 2023, making it the company's largest customer.
Other companies that rely on TSMC for 3nm chips will need alternative sources during the exclusivity period, and the foundry has alternative customers it can turn to. Samsung offers competition with its decent yields on its 3nm processes.
The report also touches on the ongoing chip war between Intel and AMD, which has seen the former build its most expensive processor yet in an attempt to retake the crown of best gaming CPU. Intel is also investing billions in building its own chip fabrication facilities.
Despite the rise of TSMC and Samsung, Apple has relied exclusively on TSMC for chips across almost all of its product lineup for almost a decade. That includes the A12, the first 7nm chip available on the iPhone.
