The boom in AI processors and the demand for NVIDIA's high-end chips and the GPU designer's rise to become the most valuable company in the world have forced consumer electronics giant Apple to reshape its semiconductor procurement strategy, according to analyst Ming-Chi Kuo. Apple's purported deal with Intel to procure chips for its products has been reported several times in the media, and Kuo believes that it is a bid by the firm to create leverage over TSMC before the highly profitable high-performance computing (HPC) chips become the contract chip manufacturer's mainstay for revenue.
Apple's Intel Orders Spread Across The Breadth Of Latter's 18A-P Technology, Says Analyst
Apple's Intel deal, which reports suggest came amidst pressure by the Trump administration, is to diversify its supply chain. The Cupertino consumer electronics giant is known for its cutthroat supply chain strategy, as the value and volume of its orders often mean that suppliers are unable to maintain a diverse customer base. Consequently, suppliers are often left out in the open if they fail to meet the firm's demands, such as investing in equipment capable of only making products for Apple, or if Apple finds another, better supplier.
Now, according to Kuo, the firm is acting fast to ensure it isn't at the receiving end this time around. Apple's primary manufacturing partner for its advanced semiconductors is Taiwan's TSMC due to its technological prowess and the ability to ship chips in large volumes.
Apple Among Others That Are Rushing To Diversify From TSMC Due To AI Boom, Says Analyst
In an article on X, the analyst explains that Apple has ordered 18A-P chips from Intel in ratios that match the consumer electronics firm's end product mix. According to Kuo, the orders are designed to test Intel's potential as a full supplier and enable Apple to optimize its working relationship with Intel.
As to the reasons behind this drastic interest in a former supply chain partner, the analyst writes:
Beyond the usual considerations of reducing single-source risk and strengthening bargaining power, the key to Apple's approach lies in its recognition that the gap in revenue contribution to TSMC between AI/HPC and smartphones will continue to widen. Apple, therefore, needs to cultivate a new supplier while it still holds bargaining power, leveraging its design capabilities to maintain its relationship with TSMC while advancing its partnership with Intel.
In other words, Kuo believes that as TSMC shifts more focus to advanced AI GPUs, Apple is seeking to develop its partnership with Intel to use as a bargaining chip in future negotiations with the Taiwanese firm. He adds that the constraints faced by TSMC's high end chip manufacturing capacity due to AI orders have also led to others diversifying away from the firm. The examples cited by the analyst include Samsung's aggressive investments into leading-edge chip manufacturing processes and the US government's introduction of new semiconductor policies.
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
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