How Apple Changed TSMC

Asianometry

23 Sept 202012:05

Summary

TLDRThis video explores the intricate relationship between Apple and TSMC, focusing on how TSMC became Apple's exclusive semiconductor supplier. It traces the history of Apple’s shift from Samsung to TSMC, driven by competition and intellectual property disputes, and highlights TSMC's strategic innovations to meet Apple's demanding product cycles. The video also discusses the financial investments and R&D efforts required to sustain this partnership, as well as TSMC's vital role in Apple's success, while dispelling rumors about Apple potentially acquiring TSMC.

Takeaways

🍎 Apple's supply chain is heavily reliant on Taiwan, with five of its top ten electronic equipment suppliers based there, including Foxconn and TSMC.
🔒 TSMC is Apple's exclusive supplier for semiconductors, a critical component of Apple's strategy, and has been since the iPhone 6's A8 processor.
💼 Apple's relationship with TSMC is based on a business principle of TSMC to never compete with its customers, which contrasts with Samsung's dual role.
💡 Apple's acquisition of PA Semi in 2008 for $276 million was a strategic move to design system-on-chips for their devices, leading to the A4 chip.
📉 The competition between Apple and Samsung in the mobile phone industry led Apple to diversify its supply chain, resulting in a partnership with TSMC.
💰 TSMC has made significant financial investments to meet Apple's demands, including spending $9 billion on a single fab for Apple.
🛠 TSMC's R&D and technology rollout strategies are tailored to align with Apple's annual product cycles, ensuring a consistent supply of advanced chips.
📈 TSMC's half-step process strategy allows for incremental improvements in chip technology annually, reducing the risk associated with more ambitious biennial jumps.
💲 Apple's significant orders have made it TSMC's largest customer, contributing to a substantial portion of TSMC's revenue and profitability.
❌ The idea of Apple buying TSMC is unlikely due to financial constraints, the potential destruction of TSMC's business model, and geopolitical considerations involving Taiwan.

Q & A

What is the significance of Taiwan in Apple's supply chain?
-Taiwan is central to Apple's supply chain because five of its top ten electronic equipment suppliers are based there, including Foxconn and TSMC, which are arguably Apple's closest partners.
Why did Apple shift its semiconductor manufacturing from Samsung to TSMC?
-Apple moved to TSMC because Samsung's entry into the mobile phone industry and a lawsuit over intellectual property theft led to a strained relationship. TSMC's business principle of not competing with its customers was also appealing.
What was the first custom semiconductor chip designed by Apple and who manufactured it?
-The first custom semiconductor chip designed by Apple was the A4, which was manufactured at Samsung Foundry.
Why did Apple decide to acquire PA Semi?
-Apple acquired PA Semi to design system-on-chips for their devices, which led to the creation of the Apple A4 chip.
How has TSMC accommodated Apple's demands for chip production?
-TSMC has accommodated Apple by making significant upfront financial and resource investments, and by tailoring its R&D and technology rollout strategy to align with Apple's annual product cycles.
What is TSMC's half step process strategy and how does it benefit Apple?
-TSMC's half step process strategy involves incremental improvements in performance or power each year, allowing for refinement and reliability without large risks, which is crucial for meeting Apple's annual iPhone chip requirements.
What is the financial relationship between Apple and TSMC?
-Apple is TSMC's largest customer, representing a significant portion of TSMC's annual revenue. In 2019, Apple accounted for 23% of TSMC's revenue, which amounted to $8.2 billion.
Why did TSMC decide not to use the GAA technique in its N3 node?
-TSMC opted not to use the GAA technique in its N3 node to avoid the risk of failure that could disrupt Apple's annual iPhone cycle, emphasizing reliability over revolutionary but risky technologies.
Why is Apple unlikely to buy TSMC despite its significant reliance on the foundry?
-Apple is unlikely to buy TSMC due to financial constraints, the potential destruction of TSMC's value proposition as a neutral third party, and political barriers.