The long, happy relationship between Apple and chipmaker TSMC is going through a rough patch. It seems Nvidia has come between them.
As a result, Apple reportedly must pay significantly more for the processors it gets from the South Korean foundry, and might have to fight to get access to the latest chips.
It’s yet another example of how AI causes problems for Apple.
Apple and TSMC’s long and fruitful relationship
The partnership between Apple and TSMC has been critical for both companies, and it drove them to the top of their respective markets. The Korean chipmaker became Apple’s exclusive manufacturer of CPUs in the mid-2010s, and together the two companies have steadily pushed technology forward, from early A-series iPhone processors to today’s super-powerful Apple silicon for Macs, iPads and even data centers.
Apple’s enormous scale and willingness to commit billions of dollars in long-term chip orders helped justify TSMC’s massive investments in cutting-edge fabrication plants. Meanwhile, TSMC’s manufacturing expertise gave Apple early access to the most advanced processors, delivering performance and efficiency advantages over rivals.
Apple loses its seat at the front of TSMC’s production line
But now the AI boom is shaking up their partnership, according to a report from analyst Tim Culpan on his blog, Culpium. Most notably, Nvidia is replacing Apple as TSMC’s largest customer.
“Nvidia likely took the top spot in at least one or two quarters of last year,” said Culpan.
Despite occasionally being described as a chipmaker, Nvidia does not manufacture its own GPUs and AI accelerators. Nvidia is a fabless semiconductor company — it designs products but relies on other companies to manufacture them. In fact, TSMC is Nvidia’s primary foundry for its most advanced chips.
With the huge growth in AI data centers, Nvidia is selling chips as fast as TSMC can make them. And that gives Nvidia plenty of pull with the Korean company. Maybe more than Apple has.
“Apple, which once held a dominant position on TSMC’s customer list, now needs to fight for production capacity,” said Culpan. “With the continuing AI boom, and each GPU from clients like Nvidia and AMD taking up a larger footprint per wafer, the iPhone maker’s chip designs are no longer guaranteed a place among TSMC’s almost two dozen fabs.”
A-series and M-series chips cost Apple more
Along with more competition comes higher prices. Culpan claims that TSMC hit Apple with “the largest price rise in years” last fall. The analyst wasn’t able to reveal how much the cost of iPhone, Mac, etc., chips are going up, though.
In the past, being the foundry’s largest customer really helped Apple in negotiations over the cost of processors. But now that Nvidia took on that role, Apple is in a weaker bargaining position.
It never rains but it pours
Paying significantly more for processors is only one of the challenges facing Apple thanks to AI. The massive expansion in servers going into data centers being built by OpenAI, Google, Microsoft and more is straining supplies of RAM and other memory, also driving up the cost of these vital components.
With the cost of processors, RAM and SSD costs all on the rise, Apple will be under pressure to raise prices on its products.
Ed Hardy has been writing full-time about tech for 25 years, and using it for much longer than that. His intro to Apple was a Macintosh Classic II (which he still has), but now he uses a 13-inch iPad Pro as his primary computer. He’s written for NotebookReview, TabletPCReview, and Brighthand, as well as other sites.
