Apple Books TSMC’s Entire 5nm Production Capability

> Apple does not want to run it's own manufacturing lines, however they have long been known for buying the manufacturing equipment needed for their manufacturing partners to make exactly the parts they want in the volume they need.

I vaguely recall a story about them buying a controlling stake and the entire production output of the only company capable of making the machine tools to make the aluminium unibody Macbook cases (and maybe also the laser tooling that punches the holes in them for the status LED t shine through)...

If Apple makes other company to be their sole provider, isn't that effectively a way of tax avoidance? For example in a smaller scale, if you hire a company that needs to do a project for you under your direction, you have to pay that company as if they were your own employees. In the UK this is called "IR35". Seems like for all intents and purposes TSMC is an Apple Fab?

Jobs also did similar investing in equipment for Corning to make the glass for the iPhone.

I can't remember the exact details but I remember a story at some point that they'd bought up basically all the world's manufacturing capacity of sapphires - I think for TouchID. Their manufacturing scale is just insane.

Is there a resource online that breaks down the types of equipment and facilities needed for this sort of production?

Apple will never be an existential threat unless they make a drastic change to their strategy. They're a premium manufacturer that produces desktops and laptops that only run MacOS. Apple has chosen high profits and a locked down platform. They have one or two options to meet customer needs.. That lack of choice will always mean a substantial number of people will choose something else. If you get a PC, you get literally thousands of choices.

It's a very similar situation with the iPhone. Apple makes a great phone in many respects, but they're one company and they can't meet the wide variety customers demand. That's reflected in their market share.

It's also too early to say that Apple Silicon is a threat to anyone. Apple Silicon in the iPhone and iPad is a low power & low performance chip compared to AMD/Intel. They have a huge challenge scaling that up to compete on desktop. Their first chips are going into their lower performance products. I'm sure it'll be decent in that role, but Apple likely NEEDS 5nm just so that it makes a respectable showing compared to AMD/Intel.

As mentioned in other comments, Apple works out deals with some of their suppliers where they will purchase or help purchase the equipment and book its future production. If it’s the same type of deal here, then this is Apple putting their money where their mouth is.

If it makes sense for other companies to adopt these kinds of financial arrangements, they will eventually, and while it works out best for Apple here, at this particular point in time, this is just one point in time. It does benefit others in the long run as TSMC is able to refine their process fabbing chips for Apple and will be able to open new production lines in the future with the profits from manufacturing for Apple and offer those to their other customers.

AMD is still doing really well in the market, and their customers are different and their more direct competition is Intel and NVIDIA. Could they make better products on a 5nm process size? We assume they can and will, maybe that will happen a little later than they would like, or maybe they’re working behind the scenes and making their own deals with other manufacturers that we don’t know about yet. This isn’t the bad old days where Intel was completely dominant, competition actually is good here. Apple is ahead right now, but that’s a temporary situation much like anything else.

It's just a fud article that's simping to glorify Apple as an almighty company. AMD already has 5nm capacity booked with TSMC but for this year. The reality is AMD isn't ready to go 5nm just yet. They have yet to even launch the 7nm Zen 3 Ryzens and have at least a year until they would want to even start phasing in initial 5nm products.

Most companies wait until a node matures / a second gen version is offered. Defect rate for example can be high which makes it too expensive to use for larger processors.

Everyone will have access to that node in the near future, once more infrastructure is built and that processes become more efficient. Apple is not in competition with any CPU maker; I think "existential threat" is a bit overblown. Unless there is a revolution at Apple leadership, ARM Macs will remain a slice of the PC market. There will still be lots of room for others.

The "node" or lambda is not all that important. It is a multiplication factor - you get sizes of parts in integer scales of node size.

It allows for some parts of chip parts to be smaller. Most transistors stay about the same, because you cannot make them much smaller, otherwise they will leak or will not be as fast as needed.

If you look for transition of the same company from lambda1 to smaller lambda2 you will see that gate or transistor density rises not as theoretical square of lambda1/lambda2, but as about lambda1/lambda2 or less.

It is also quite possible to screw things at smaller lambdas. For example, NVidia get their process right for same lambda only after several years, they were fighting steady state leaks, power issues and the like. And NVidia, just like AMD and Apple, was using TSMC.

So if you are pissed about AMD lagging behind a node, don't be. Being at forefront of node size does not mean instant success, lagging a node size step behind does not mean you will get much inferior product.

I suspect Apple's chips have a much smaller overall die size, so the economics of the early 5nm defect rate might just make more sense for apple than amd.

It's interesting the ways we qualify 'fairness' when talking about capitalism.

In practice, I suspect these sorts of situation arise far more frequently than we think. One party overpays for a supply of an ingredient and then controls demand by leveraging it. In the first act, they convince people that they need things made with this ingredient. In the second, they bank on the cachet, the exclusivity, driving demand even higher.

But at the end of the day, someone is playing a chess match where in theory the customer could have had more options and now they don't. Or they could have had no options at all. We don't have a time machine so who can say?

Apple went farther in a number of situations by investing in suppliers in order to guarantee that they could produce an ingredient in the first place, either at all, or in a timely fashion. We are going to enable you to make a product, and then we are going to ask for special treatment for having done so.

Which means, for instance, that Intel may be able to field an equivalent ultralight notebook using the same supplier, but Apple made higher profit margins on the same product (although the manufacturer makes higher profits on the Intel version).

I don't have any illusions that they will continue with this level of benevolence in the future, especially after Tim (or indeed even as Tim's memory of Steve fades). I don't even know if they are still working that way now. Probably not, or not for long.

At any rate, R&D frequently is paid for by luxury goods of one form or another. Like it or not, Apple is nearly the only luxury computing maker out there, though Samsung, Sony and LG dabble. I've expressed my confusion on a number of occasions as to why things are this way, given that it's not the case with cars or a number of other goods. I like Apple products and am an investor, but I'd also like to have more opportunities to compare them to a competitor. Hyundai has figured out they need a separate luxury brand, as have a number of car makers before them. Maybe Sony, Samsung and LG need their own 'Genesis', 'Audi', "Acura".

My last example was not a case of 'poor Intel, can't sell because of a licensing agreement'. They were probably wiping their tears away with 100 dollar bills. TSMC is probably pretty happy with this arrangement too. The way they 'get out' of this exclusivity is to produce more chips than Apple cares to buy, since it's probably Right of First Refusal, not 'you can make no more than N million chips per month or else'.

This is huge. Why pretend it isn’t??

The A100 is on TSCM 7nm.

It's called Title Case. It's been popular in the US for decades. In the UK we often just use sentence case for titles.

Title casing?

That's probably better explained by TSMC 7nm capacity rather 5nm capacity. I'm sure Nvidia would have preferred even TSMC 7nm over Samsung 8nm.

Isn't the rumour that they went to TSMC and "balked" at the price - dangling how much cheaper Samsung would offer their fab capacity, demanded a discount and were told to go whistle since TSMC already has enough customers to run their foundries at 100%?

1. It isn't for sale.

2. TSMC is much larger than Apple's manufacturing requirements. To keep it running, they would have to commit to doing a lot of contract work for other companies, which really isn't Apple's style. Moreover, many of TSMC's current clients (like AMD, Intel, Nvidia, and Qualcomm) might be uncomfortable with Apple controlling the company, as that would introduce conflicts of interest.

3. Owning TSMC would put Apple in charge of the company's technology development, and would expose them to significant financial risk if TSMC suffered a failure, much like Intel has been harmed by their failures to develop a 7nm process. Contracting out their semiconductor manufacturing allows Apple to switch foundries if needed.

Risk/reward? What if TSMC invests billions into the next process and never gets good yields? It's happened to other fab owners. (Remember when Intel had competitive products?) Then Apple is out billions of dollars for nothing. But if they are just TSMC's customer, then they don't take on that risk. Their risk is that TSMC raises prices, or other people can make CPUs as good as theirs. But that is not a huge risk for Apple; if they can't buy capacity, neither can their competitors.

I also have to imagine that if people are making a big antitrust stink to the government about how Apple takes 30% of Fortnite loot boxes, there will be an equally big problem when AMD, Nvidia, Broadcom, Qualcomm, Marvell, etc. can't have chips produced anymore.

On the other hand, Samsung owns a fab and makes phones, so it's not unheard of. Samsung has other big semiconductor businesses, though, and it's not clear that Apple really wants to enter into those. You don't need to manufacture your own flash memory to make good laptops; Samsung's SSD business does well on its own.

I really like vertical integration in general, but sometimes things work great even when they're completely decoupled. Two small projects is a lot easier to run than one big project, so you have to show some benefit for integrating things. In Apple's case, it was clear that Intel's CPUs weren't getting them where they wanted to go with thin laptops, so they made their own. They had to in order to sell competitive laptops. This whole thing is in its early days, though, and we don't even know if they're going to beat Intel or AMD. So the summary is, being TSMC's customer is working out great for Apple; they specify a CPU and they get a good one at a cost that the market seems OK with. They want to make a big bet and dramatically change the computing landscape, but that might not work out. What if Intel totally leapfrogs Apple Silicon? It is so uncertain that it is hard to say "they should just buy TSMC". Rather, they should sit and wait and see how they do, and then decide if more integration will let them make better phones, tablets, and laptops.

The simple answer is that TSMC is a national strategic asset of Taiwan, and as such, is not for sale to anyone at any price.

Could be a couple reasons, but one I see is that they too expensive for Apple to do so.

Apple also isn't the type to manufacture chips for other companies which is a lot of TSMC's revenue (this article is only for one size). So they would be taking a huge loss in value just to have control.

Much more likely for Apple is to try and create their own manufacturing lines.

I can imagine that Apple is fairly happy at the moment as a customer of TSMC; they do the heavy lifting on the lithography front and Apple just provide the designs.

Purchasing TSMC would lead to it having to deal with maintaining relationships to people it actively competes on several levels with. This would almost certainly lead to accusations of anti-competitive behaviour.

FWIW, Horace on Critical Path says that large M&A is just something Apple doesn't do. It's a recurring topic and he goes over the rationale in this episode.

#249: A Sane Amount of Cash http://5by5.tv/criticalpath/249

I barely understand what Horace is talking about (square hole, round peg) and would only butcher his thesis. Sorry.

These podcasts are in the "think out loud" format, vs finally crafted presentations. So I listen at high speed and rewind to replay the key points.

Edit: Gonna risk it.

Large M&As are notoriously bad moves. Beats was Apple's largest acquisition, which Horace thinks was ok because it probably broke even. (I have a different take: it was an acqui-hire and they got some head phones as bonus.)

Reinvesting cash surplus is also bad, because it's shareholder's cash for them to invest themselves. Also, to do so would make Apple a hedge fund, which is a huge distraction.

Horace doesn't touch on Apple style partnerships, the deep investments into their suppliers. Not quite keiretsu. Not quite monopsony. Definitely not WalMart style partnerships, which is very abusive. Maybe more like defense or auto manufacturer partnerships, where it's more mutually beneficial. Like Toyota does. I would love to read case studies about Apple's partnerships.

It's not for sale, you can't buy 5% of Taiwans GDP.

It can, but it is a bad idea:

1. TSMC has very low margins. Buying the company means lowering Apple margins, that are the highest on the world.

2. Lots of companies depend on TSMC, if Apple did that they will be sued for monopolistic behavior.

3. Apple benefits enormously from the cheap devices that TSMC makes for other companies, that is volume, improvement of technology that Apple can use(ARM). It is over 5x the volume in sales of Apple products.

4. It is a strategic interest company of Taiwan,Europe, China and US.Buying it is not economics,it is geopolitics.

They might not be allowed to. Taiwan would forbid it.

Also, tsmc has loads of clients. Apple doesn’t want to sell to them. So they shut them down?? It’s a mess.

Apple generally doesn’t own its direct manufacturing. They use TSMC, Foxconn, etc.

Taiwan would never allow that to happen.

Probably because of taxes.

Because TSMC might not be top of the game in a couple of years.

>Apple is thought to have accounted for about 20 percent of TSMC’s monthly revenue, making it one of TSMC’s largest customers.

Well, top 5 atleast.

Well I mean all it takes is a better offer, and all you need for that is more money. Wouldn't necessarily call it influence but yeah, it's still crazy either way.

Selling products made with that technology is what drives the technology further.

Until Intel has real products talking about their 10nm is pointless. Intel for the first time has nothing. So tsmc’s 7/5nm is superior is every way.