New report says Apple has accepted TSMC’s proposed price hike

During the waning days of September, we told you that the world’s largest foundry, Taiwan Semiconductor Manufacturing Company Limited (TSMC), had told its largest customer to expect a 3% price hike. You might have heard of this customer. It is a little company, headquartered in California, named Apple. TSMC wanted to raise the price it charges to manufacture the A17 Bionic chip and Apple originally rejected the higher price.

Even though Apple is responsible for 25% of TSMC’s revenue, the truth is that the foundry holds all of the cards here really. Apple is fabless (which means that it does not own chip production facilities) and it would take years and tons of money to build a fabrication factory. Apple no doubt has the money, what it doesn’t have is the time or expertise. Therefore, you would expect Apple to acquiesce to TSMC’s demand.

And who else is Apple going to trust to produce the brains of its devices? The only other foundry capable of producing cutting-edge chips is Samsung Foundry and it has had problems with its yield (which means that it had a large number of chips cut from each wafer fail quality control). TSMC plans on building the A17 Bionic using its second-generation 3nm process node. The A16 Bionic used this year on the iPhone 14 Pro units is produced using TSMC’s 4nm process node.

Time to buy the Apple iPhone 14 Pro and iPhone 14 Pro Max

The lower the process node number, the smaller the size of the transistors used which means that more of them can fit inside the small, dense space. And this is important because the higher a chip’s transistor count, the more powerful and energy-efficient that chip is.

The bottom line is that according to the Economic Daily News, Apple has given in and has agreed to TSMC’s 3% price hike. This could force Apple to make a tough decision next year; will it eat the higher prices for the A17 Bionic SoCs, or will it raise prices on the iPhone 15 Pro and iPhone 15 Ultra? We won’t know the answer to that until next year.

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