TSMC finally has the lifeline that Apple so badly needs
TSMC is a pillar in the shadow If we take a microphone out into the streets and ask about her, few know what she does, but key companies in modern society such as Apple, Nvidia, AMD and even Intel depend to a large extent on her good work.
This Taiwanese company is in charge, simplifying a lot, of manufacturing the chips that other companies design. The fascinating Apple M1 Ultra that mounts the most recent Macs? It leaves the TSMC factories. The Snapdragon 8+ Gen 1 that dozens of smartphones high end? Also. The Nvidia GeForce RTX 4090? Indeed, it is the work of TSMC.
This is not to say that the great performance of those components is thanks to TSMC. But, without a doubt, his good work does contribute to it. This explains why, as reflected in the data from Counterpoint Research, TSMC has more than 50% of the market share as far as semiconductor manufacturing is concerned.
Apple relies heavily on TSMC
Part of that high market share is thanks to Apple. The Cupertino company has a very high dependence on TSMC. All the processors that they design internally in California are later materialized in the factories of the Taiwanese company.
We are talking about fundamental components such as the A16 Bionic, the Apple M2 or the SiP that we find in the Apple Watch. Chips that are not only necessary for the operation of the brand's products; They are also the key piece that, on many occasions, makes the difference between the teams of the North American company and its competition.
Apple, historically, he has done everything possible to be in control of his own destiny. Trying to design as much as possible en casa, closely controlling their suppliers, etc. However, in such a complex sector, there are tasks that can hardly be left under its own umbrella –especially for the economic part–. Apple therefore makes some exceptions to that philosophy. And one of them is TSMC.
But for Apple to rely heavily on TSMC does not mean that the situation is not under control. The Taiwanese company also relies heavily on Apple. 26% of its sales during 2021 came from the Cupertino company. A weight in the accounts that gives Tim Cook great influence over TSMC.
What Apple cannot control the geopolitical scenario that we are going through. And, more specifically, two threats that could have a significant negative effect on its future: the trade war between the United States and China and the threat of war between Taiwan (TSMC's headquarters) and China.
The Cupertino company, faced with these two potential events, is in a relative position of vulnerability. The manufacturing of its products occurs mostly in China, the chips it designs are manufactured in the TSMC factories in Taiwan, etc.
To lessen the impact of these potential events, the company has been working on further diversification of production. Specifically, taking part of these tasks to India and Vietnam, where a small percentage of their products are already manufactured. The process will take a few years to complete –mainly, according to some experts, due to the lack of sufficiently qualified labor in the indicated countries–, but it is underway.
And what would happen to TSMC if China decides to go to war with Taiwan? This is a scenario that worries the entire technology industry and, in particular, Apple. If TSMC goes down, no other company in the sector would have sufficient capacity to absorb its demand. In many cases, in addition, they could not be up to the technological level either.
Faced with this almost catastrophic situation for the industry and, in part, for society, the different actors involved have begun to create life preservers. And TSMC in particular has one practically ready for use: a chip factory in Arizona (United States).
TSMC's new factory is a lifesaver (at least partially)
The project was announced in 2020, but It will not be until 2024 when the first chips leave said factory. However, the US industry has not wanted to wait until then to expose the benefits of the factory, so this week, in Phoenix, figures such as Joe Biden or Tim Cook have participated in an event organized by TSMC for this purpose. The first of a public nature that is produced in the new factory.
TSMC also has taken advantage of the occasion to announce the construction of a second plant next to the one initially planned. It will manufacture 3-nanometer chips, even more advanced than the 4-nanometer ones that will be released in the first factory. The works will start in 2023 and production is expected to start in that second factory in 2026.
According to the White House, both factories will be able to meet local demand for advanced chips. And both Apple and AMD and Nvidia will be among the first customers.
In total, TSMC will invest 40,000 million dollars in US factories, a number significantly higher than the 12 billion it originally announced in 2020.
The creation of this factory in the United States It will not mean total independence for Apple or the rest of the American companies, but it does represent a notable step in that direction. One that will be accompanied by many others from Samsung, Micron and Intel, who also plan significant investments in local factories.
If the geopolitical situation becomes even more tense, Apple will find in this plant a lifeline with which to supply, at least partially, the demand. And, in case that does not happen, the creation of it will undoubtedly help to alleviate the difficulties that the supply chain has been facing since the pandemic.