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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

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. For instance, this deal from early in the Tim Cook era: >Apple today announced that it has reached long-term supply agreements with Hynix, Intel, Micron, Samsung Electronics and Toshiba to secure the supply of NAND flash memory through 2010. As part of these agreements, Apple intends to prepay a total of $1.25 billion for flash memory components during the next three months. https://www.apple.com/newsroom/2005/11/21Apple-Announces-Long-Term-Supply-Agreements-for-Flash-Memory/ https://www.apple.com/newsroom/2005/11/21Apple-Announces-Lon... If you go back to the time when Apple was looking at single sourcing their SOC production at TSMC you'll find some interesting comments in the press. >The world's leading foundry chip maker Taiwan Semiconductor Manufacturing Co. Ltd. is considering operating single-customer wafer fabs, according to chairman and CEO Morris Chang. Chang, speaking to analysts on a conference call to discuss the company's second quarter financial results, said that the market is tending to produce fewer higher volume customers and some are so large they need their own dedicated fabs. https://web.archive.org/web/20120728040723/https://www.eetimes.com/electronics-news/4391104/TSMC-says-single-customer-fabs-make-sense https://web.archive.org/web/20120728040723/https://www.eetim...

bigiain 6y ago
> 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)...
- raihansaputra 6y ago
  I'm not sure it's the entire output, but AFAIK Apple is the buyer/owner of the largest fleet of high-precision CNC machines (Haas?), solely for the purpose of manufacturing unibody MacBook cases. One time I found the operator's website, a nondescript Taiwanese company that's responsible for all Apple cases. Again this is off the top of my head.
  - hop 6y ago
    Brother and Fanuc CNC machines.
- Someone 6y ago
  http://atomicdelights.com/blog/why-your-next-iphone-wont-be-ceramic http://atomicdelights.com/blog/why-your-next-iphone-wont-be-...: “Apple is the world's largest owner of CNC milling machines and swiss style lathes. Rumors are that the number is around 40,000 with about half dedicated to iPhone production. I've seen pictures of one shop with acres of Fanuc Robodrills making iPhones, and that was only one of about a dozen such facilities. Apple is such a huge buyer of a particular kind of mill (BT30 spindle drill-tap centers) that Fanuc, Brother and DMG Mori each have factories dedicated to building machines exclusively for Apple.”
JiNCMG 6y ago
Jobs also did similar investing in equipment for Corning to make the glass for the iPhone.
andrewjl 6y ago
Is there a resource online that breaks down the types of equipment and facilities needed for this sort of production?
intricatedetail 6y ago
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?
- TheNorthman 6y ago
  In no way is TSMC a Apple Fab. TSMC supply AMD, Broadcom, Qualcomm and Nvidia, among others.
- thu2111 6y ago
  Only for this process node. TSMC make a lot of chips for other customers too.
  - gsnedders 6y ago
    And per the article only the first year of production or so. There's also the question of whether Apple actually got any actual exclusive deal for the first year, or whether they simply outbid other companies for the production slots.
  - intricatedetail 6y ago
    People can also work for multiple companies. If the product is made to order to exact Apple specs, then that sounds like avoidance. Situation would be different if Apple were buying TSMC designs.
- pasiaj 6y ago
  Which tax do you feel is being avoided?
- redis_mlc 6y ago
  No for 2 reasons: 1) It's a company-to-company transaction. Individuals are not involved. 2) It's a company in one country to another country. Employment law doesn't cross national boundaries.
mcintyre1994 6y ago
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.
- redis_mlc 6y ago
  Actually Apple does that to prevent competitors from being able to sell similar competing products. They also do that for classes of RAM, SSD, etc. Less important, they do that to avoid the need for a supplier to build another facility. Often suppliers will raise prices after a step threshold requires more capacity (a new factory) because of the hassle, risk and setup cost. One of the reasons that China took over the world's mfg. is that often they had pre-built factories already built. One engineer/entrepreneur in China financed and pre-built an entire chemical facility for a certain process. Talk about planning and faith. An example of how wrong things are in the USA is that it took 20 years to extend BART 10 miles with above-ground track (Milpitas and Berryessa/North San Jose stations.) https://abc7news.com/bart-south-bay-stations-silicon-valley-station-milpitas/6244949/ https://abc7news.com/bart-south-bay-stations-silicon-valley-...
- GeekyBear 6y ago
  There was a company that believed they had the tech to produce synthetic sapphire at the scale necessary for Apple to replace the Gorilla Glass on iPhones with synthetic sapphire. In that deal, Apple loaned the manufacturer the money needed to buy the necessary production equipment, however the manufacturer was unable to get the process to work at scale. >Apple announced a new factory in Arizona where its supplier, GT Advanced Technologies, would be loaned $578 million to produce huge synthetic sapphire crystals https://www.theverge.com/2019/5/3/18528920/sec-charges-apple-iphone-sapphire-supplier-gt-advanced-fraud https://www.theverge.com/2019/5/3/18528920/sec-charges-apple...

bigiain 6y ago

> 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)...

raihansaputra 6y ago
I'm not sure it's the entire output, but AFAIK Apple is the buyer/owner of the largest fleet of high-precision CNC machines (Haas?), solely for the purpose of manufacturing unibody MacBook cases. One time I found the operator's website, a nondescript Taiwanese company that's responsible for all Apple cases. Again this is off the top of my head.
- hop 6y ago
  Brother and Fanuc CNC machines.
Someone 6y ago
http://atomicdelights.com/blog/why-your-next-iphone-wont-be-ceramic http://atomicdelights.com/blog/why-your-next-iphone-wont-be-...: “Apple is the world's largest owner of CNC milling machines and swiss style lathes. Rumors are that the number is around 40,000 with about half dedicated to iPhone production. I've seen pictures of one shop with acres of Fanuc Robodrills making iPhones, and that was only one of about a dozen such facilities. Apple is such a huge buyer of a particular kind of mill (BT30 spindle drill-tap centers) that Fanuc, Brother and DMG Mori each have factories dedicated to building machines exclusively for Apple.”

JiNCMG 6y ago

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

andrewjl 6y ago

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

intricatedetail 6y ago

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?

TheNorthman 6y ago
In no way is TSMC a Apple Fab. TSMC supply AMD, Broadcom, Qualcomm and Nvidia, among others.
thu2111 6y ago
Only for this process node. TSMC make a lot of chips for other customers too.
- gsnedders 6y ago
  And per the article only the first year of production or so. There's also the question of whether Apple actually got any actual exclusive deal for the first year, or whether they simply outbid other companies for the production slots.
- intricatedetail 6y ago
  People can also work for multiple companies. If the product is made to order to exact Apple specs, then that sounds like avoidance. Situation would be different if Apple were buying TSMC designs.
pasiaj 6y ago
Which tax do you feel is being avoided?
redis_mlc 6y ago
No for 2 reasons: 1) It's a company-to-company transaction. Individuals are not involved. 2) It's a company in one country to another country. Employment law doesn't cross national boundaries.

mcintyre1994 6y ago

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.

redis_mlc 6y ago
Actually Apple does that to prevent competitors from being able to sell similar competing products. They also do that for classes of RAM, SSD, etc. Less important, they do that to avoid the need for a supplier to build another facility. Often suppliers will raise prices after a step threshold requires more capacity (a new factory) because of the hassle, risk and setup cost. One of the reasons that China took over the world's mfg. is that often they had pre-built factories already built. One engineer/entrepreneur in China financed and pre-built an entire chemical facility for a certain process. Talk about planning and faith. An example of how wrong things are in the USA is that it took 20 years to extend BART 10 miles with above-ground track (Milpitas and Berryessa/North San Jose stations.) https://abc7news.com/bart-south-bay-stations-silicon-valley-station-milpitas/6244949/ https://abc7news.com/bart-south-bay-stations-silicon-valley-...
GeekyBear 6y ago
There was a company that believed they had the tech to produce synthetic sapphire at the scale necessary for Apple to replace the Gorilla Glass on iPhones with synthetic sapphire. In that deal, Apple loaned the manufacturer the money needed to buy the necessary production equipment, however the manufacturer was unable to get the process to work at scale. >Apple announced a new factory in Arizona where its supplier, GT Advanced Technologies, would be loaned $578 million to produce huge synthetic sapphire crystals https://www.theverge.com/2019/5/3/18528920/sec-charges-apple-iphone-sapphire-supplier-gt-advanced-fraud https://www.theverge.com/2019/5/3/18528920/sec-charges-apple...