Apple To Save Billions in Chip Deal With TSMC
TSMC absorbs the cost of defective chips and bills Apple for only good dies as a part of the deal.
- Apple is set to use TSMC’s next-gen manufacturing process for its 3nm semiconductor chips.
- Apple is reportedly placing chip orders worth billions of dollars to keep the cost of its deal with TSMC down. In exchange, the chip manufacturer does not charge for defective dies.
Taiwan Semiconductor Manufacturing Co. (TSMC) manufactures Apple’s custom chips. The company is using a new, cutting-edge process to produce 3-nanometer chips, which will be available to Apple a whole year before anyone else. These chips are expected to play a key role in Apple’s iPhone 15 Pro through the A17 Bionic chip.
However, this is not the only advantage Apple gets from TSMC. In addition to the 3nm chips, TSMC is also taking a highly unconventional step of not charging Apple for any defective 3nm chips. Usually, in the chip business, upgrades such as 3nm chips result in a large number of defective pieces until the production process is perfected. In such cases, the buyer usually pays for the entire consignment, including defective chips. This change by TSMC is likely to save Apple billions in the long term.
However, as Apple’s chip orders from TSMC are huge, TSMC has decided to take up the costs of defective chips. Apple being the first customer of the new products helps pay TSMCs costs of associated R&D and facilities. This essentially allows TSMC to scale up faster for mass production.
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TSMC’s Struggles To Meet Demands
While TSMC makes key strides in setting up chip production in the U.S., it also faces challenges, with protests against workers being brought over from Taiwan for the project. The company’s Arizona plant has been delayed until 2025, as TSMC claims it does not have enough skilled workers in the U.S.
The campaign against visas for Taiwanese workers has been brought about by Stand with American Workers and Arizona Pipe Trades 469, which are pushing for the employment of Arizona residents, accusing TSMC of putting profits over safety.
TSMC is also looking toward Germany to build a chip production facility. However, the proposed facility in Saxony is facing the same problem of skilled labor shortage. TSMC is also attempting to relocate employees from Taiwan to Germany, in a similar attempt to that of the U.S. The success of the endeavor is yet to be seen.
What do you think will be Apple’s next move in the semiconductor challenge? Let us know your thoughts on LinkedIn, Twitter, or Facebook. We’d love to hear from you!
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