New cutting-edge chip technologies introduced by TSMC require a hefty cost to mass-produce wafers for clients like Apple. The Taiwanese manufacturer is said to introduce its first 3nm products soon, but according to the latest report, its lucrative partner Apple will not be wanting any part of paying extra to its supplier.
Apple Accounts for 25 Percent of TSMC’s Annual Revenue, so It Has More Leverage to Keep the Same Price
TSMC’s original business plan was to increase prices next year in between the 6-9 percent hike range. Economic News Daily reports that later, there was some negotiation, starting with a 3 percent increment and gradually reaching the 6 percent threshold. We assume that the chip manufacturer would charge a higher percentage to clients for its more advanced chip process, which at this time, is its first-generation 3nm.
Unfortunately for TSMC, Apple has rejected these offers. As the latter accounts for 25 percent of its supplier’s annual revenue, there will be little opportunity to go back and forth for price negotiation. This may be one reason why we reported that the upcoming M2 Pro and the M2 Max for updated MacBook Pro models would be manufactured on the 5nm process instead of 3nm; both entities might not have reached a middle ground for price agreement.
We are contemplating how this rumored price rejection may affect the upcoming A17 Bionic’s launch schedule. According to a previous report, the upcoming SoC is said to take advantage of TSMC’s second-generation 3nm process, as is the M3 for future Macs. A second-generation 3nm wafer will be significantly more expensive to produce, and if Apple intends to price its iPhone 15 Pro and iPhone 15 Ultra at the same level as the iPhone 14 Pro and iPhone 14 Pro Max, it may force TSMC to absorb those higher manufacturing costs or take a hit in profit margins for each high-end iPhone sold.
At this stage, the report does not state when both parties could reach an agreement, but we hope that this unnecessary stalemate does not hinder the progress of Apple’s next-generation custom silicon.
News Source: Economic News Daily