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This seems to me a replay of when Apple bought out all the capacity of Toshiba hard drives to that effectively blocked other MP3 players from emerging: https:/

This seems to me a replay of when Apple bought out all the capacity of Toshiba hard drives to that effectively blocked other MP3 players from emerging: https://en.wikipedia.org/wiki/IPod https://en.wikipedia.org/wiki/IPod https://9to5mac.com/2021/10/23/20-years-ago-today-ipod-changed-the-world-heres-what-it-means-to-us/ https://9to5mac.com/2021/10/23/20-years-ago-today-ipod-chang...

rkangel 5y ago
Not saying you're wrong, but an alternate interpretation was that Apple was just leveraging their large order size to get to the front of the line because they want to make products to sell. If you're TSMC, who are you going to favour - the large single customer who's guaranteeing order size over a period of time, or several smaller customers?
- q-big 5y ago
  > If you're TSMC, who are you going to favour - the large single customer who's guaranteeing order size over a period of time, or several smaller customers? This depends on your business strategy: having a single or few customers makes you much more dependent on their whims and their negotiation power. If you have more customers you are in a better position for pricing negotiations.
  - melony 5y ago
    When you have a monopoly on a single component, it doesn't matter.
  - bigdubs 5y ago
    Big point of strength for TSMC in negotiations is they're the only fab that can make 3nm chips in volume, which gives them a ton of leverage to push back against Apple.
    - JiNCMG 5y ago
      Nothing to negotiation. Apple invested (pre-ordered) before 3nm was built.
- rzwitserloot 5y ago
  Several smaller customers; anything else would be myopic. General business intelligence: You do NOT want one of your 'verticals' (companies that you need to buy supplies from, or companies that you sell your product to) to turn monopolistic; after all, once they are a monopoly they can really squeeze you out. This holds even if you are also nearing a monopoly or are an effective monopoly (in that you're the only one that can supply it at the quantity and quality required). There are mitigating circumstances, but most of them don't look good for apple: * TSMC is stupid. Don't knock it - I've seen companies go for the quick buck, then get killed by the monopolistic monolith they enabled and be surprised. * TSMC laughs in the face of this and simply isn't taking an apple near monopoly on chips particularly seriously. I can definitely see that - the risk is presumably that apple gains massive increases in marketshare of PCs/laptops and smartphones, but TSMC presumably doesn't think it'll be so high as to risk the situation that TSMC can produce more chips than non-apple buyers could buy. In other words, that apple's total 'TSMC fab capacity' needs won't go anywhere near 50% of what TSMC is likely to ever be able to manufacture. * Apple is putting pressure on TSMC. TSMC knows this is a risk and doesn't want to, but apple does want this to happen and is making some shady deals so that TSMC does the math and decided that the gains in dealing with apple exceed the losses*odds-it-will-happen of the squeeze if apple is a monopoly buyer for TSMC (as in, of dubious legality and certainly of questionable morality, but then, it's apple, a company. Waiting for companies to act morally is silly, you write laws and set up societal systems to incentivize them to do so instead, companies are amoral (not immoral - they just don't really know what it is, by design). Your comment seems to suggest it's a smart move for TSMC to just sign one giant deal with apple and be done with it: You can send the lawyers and salesfolk to early retirement, get some money upfront, guarantee 100% sales of all your fab capacity with a party that is unlikely to renege or declare bankruptcy. It's not. It's a dumb move. Either the C-level execs at TSMC are missing something pretty fundamental or more likely we don't know enough to realize that there's sufficient weights on the other side of the balance to counteract the downside of enabling the monopoly on verticals.
  - ascar 5y ago
    > the risk is presumably that apple gains massive increases in marketshare of PCs/laptops and smartphones Apple is very far from monopolistic market share of smartphones and even much further away with Laptops. Apple with their intentionally overpriced products caters to a branded premium segment. They are not even aiming to take the mass market of low to mid level smartphones that makes up most of the market outside the US I would also not be afraid if I were TSMC, especially as this is just about the new 3nm process that is catering to the highend market and doesn't eliminate the existing business. Your comment reads a bit like there could be a distopian world where a shortage of 3nm results in Apple becomeing the only option for phones and laptops
- pfortuny 5y ago
  “My app depended on google and I have been banned”…
- intricatedetail 5y ago
  I wonder if they had the same competitive advantage if they were not allowed to use tax avoidance schemes. Smaller corporations cannot afford to build such structures so they have more difficulties to compete.
  - fundad 5y ago
    Making motherboards high volume that are faster than your competitors is something small businesses could not afford to do. We’re talking about one process that makes the same chips but more valuable. And AMD and Qualcomm want more access to it than they have so they complain to the press. This is the supply chain folks.
    - intricatedetail 5y ago
      Tax avoidance benefits build up through years. Basically smaller companies have less money to work with which is compounded by excessive taxes. Big corporations don't have such burden.
- bryanlarsen 5y ago
  This is HN, the audience should know that VC's have a very strong preference for a large number of small customers over a small number of large customers, and why. Obviously TSMC doesn't care about VC's, but the same reason why VC's prefer a large number of small customers still applies.
  - InGoodFaith 5y ago
    > VC's have a very strong preference for a large number of small customers over a small number of large customers, and why. This is intriguing and I would appreciate if possible to get any sources to read up on this?
    - thrashh 5y ago
      “too many eggs in one basket”? Especially for a new untested company no customer is sure they actually need yet
    - chevman 5y ago
      Makes your public metrics look better (ie "we have over 500+ customers!!!!") and also demonstrates (in theory) a more durable product. When people see small number of large customers, the implication is you are basically just running an outsourced dev/consultant/staff aug shop. Less product vision and ability to "scale".
    - JumpCrisscross 5y ago
      Anyone should prefer lots of customers to a few key ones. The latter have more leverage. They also make one’s metrics risky, as a single defection can swing the firm from profitable to barely eking by.
      - sosborn 5y ago
        > Anyone should prefer lots of customers to a few key ones. I think the caveat/variable is "all else being equal or close to equal." If having 10 customers will net you $10 total per month, and having one large customer will net you $100 per month, it is really hard to justify going with the $10 customers. But if those 10 customers will net you $10 EACH per month, then the 10customers is a better situation.
- hinkley 5y ago
  Everyone has forgotten that when Apple moved to Intel, part of the deal was that Apple had the fastest laptop CPU for about 6 months. To me this says as much about Intel as about Apple. When Intel has a new chip or a bin that has small yields, they can’t supply a large customer. But MacBook had maybe a third of the market share it has now, so that’s a relatively small niche you can supply while you boost your yields.
jeromegv 5y ago
Was it to block competitors, or was it because they were selling millions of iPod and needed all the capacity they can get? The iPod was not first to market and that Toshiba HD was available before but nobody was ordering it in any kind of significant quantity.
- yareally 5y ago
  Probably a little bit of both.
  - megablast 5y ago
    How can it be both. They either needed that many because they were selling that many. Or bought way more to stop others from buying.
    - m12k 5y ago
      I think they bought what they needed, but that was enough to block others from getting produced.
      - yareally 5y ago
        Yes, unintentional side effect. I'm sure it crossed the minds of some the executives that they might be screwing their competition by buying out all the chips. Apple is obviously not going to buy less so their competition can have more when Apple needed the supply.
        Brian_K_White 5y ago
        Intentional effect. The fact that it's one of severel effects and one of several motivations does not make it unintentional, or even necessarily just a side effect. It could just as well be simply one of multiple fully considered effects, and surely was.
    - Arnt 5y ago
hvgk 5y ago
I don’t think so. This is the failure of having a choke point in semiconductor manufacturing and centralisation of all manufacturing infrastructure. No business is going to turn down the largest pile of cash being thrown at them. AMD and Qualcomm could of course have invested heavily in reducing this risk but no, they didn’t.
- tentacleuno 5y ago
  > AMD and Qualcomm could of course have invested heavily in reducing this risk but no, they didn’t. We're in the middle of a chip shortage, though.
  - cormacrelf 5y ago
    If, having seen the risk turn into reality, they want to buy some of Apple's capacity, they are free to make an offer.
    - sudosysgen 5y ago
      Why would Apple allow that? They clearly have the money to outbid AMD and Qualcomm just to prevent them from competing, and the leverage to threaten moving their phones to a competitor and drop the prices for TSMC in the opposite case.
      - cormacrelf 5y ago
        The only way to analyse this as something bad Apple has done is to make out a case under competition or antitrust law in some jurisdiction. In Australia we have the concept of exclusive dealing, which the US (I think) doesn't have an equivalent to, but even then, it's extremely difficult to violate this law as a purchaser of goods/services, using money to buy them. This is because ANYBODY can acquire money and compete with you by offering more money. You could hold a monopoly on your own products (and then if you imposed exclusivity arrangements on purchasers of your products you would be abusing your market power to lessen competition), but it's essentially impossible to hold a monopoly on money itself. In all, you're characterising Apple, competing fiercely in an open market, as preventing other people competing by being too good at it. That is a bit ridiculous. If AMD and Qualcomm die out as a result, it will be because they couldn't keep up, which is capitalism functioning correctly. Even under those very broad laws, the only party you can remotely fault is TSMC, and even then, they are literally just taking from the highest bidder, which is again capitalism functioning correctly.
nojito 5y ago
They also pre-bought all airfrieght that year so that they won't have any supply chain issues for the holiday season.

rkangel 5y ago

Not saying you're wrong, but an alternate interpretation was that Apple was just leveraging their large order size to get to the front of the line because they want to make products to sell. If you're TSMC, who are you going to favour - the large single customer who's guaranteeing order size over a period of time, or several smaller customers?

q-big 5y ago
> If you're TSMC, who are you going to favour - the large single customer who's guaranteeing order size over a period of time, or several smaller customers? This depends on your business strategy: having a single or few customers makes you much more dependent on their whims and their negotiation power. If you have more customers you are in a better position for pricing negotiations.
- melony 5y ago
  When you have a monopoly on a single component, it doesn't matter.
- bigdubs 5y ago
  Big point of strength for TSMC in negotiations is they're the only fab that can make 3nm chips in volume, which gives them a ton of leverage to push back against Apple.
  - JiNCMG 5y ago
    Nothing to negotiation. Apple invested (pre-ordered) before 3nm was built.
rzwitserloot 5y ago
Several smaller customers; anything else would be myopic. General business intelligence: You do NOT want one of your 'verticals' (companies that you need to buy supplies from, or companies that you sell your product to) to turn monopolistic; after all, once they are a monopoly they can really squeeze you out. This holds even if you are also nearing a monopoly or are an effective monopoly (in that you're the only one that can supply it at the quantity and quality required). There are mitigating circumstances, but most of them don't look good for apple: * TSMC is stupid. Don't knock it - I've seen companies go for the quick buck, then get killed by the monopolistic monolith they enabled and be surprised. * TSMC laughs in the face of this and simply isn't taking an apple near monopoly on chips particularly seriously. I can definitely see that - the risk is presumably that apple gains massive increases in marketshare of PCs/laptops and smartphones, but TSMC presumably doesn't think it'll be so high as to risk the situation that TSMC can produce more chips than non-apple buyers could buy. In other words, that apple's total 'TSMC fab capacity' needs won't go anywhere near 50% of what TSMC is likely to ever be able to manufacture. * Apple is putting pressure on TSMC. TSMC knows this is a risk and doesn't want to, but apple does want this to happen and is making some shady deals so that TSMC does the math and decided that the gains in dealing with apple exceed the losses*odds-it-will-happen of the squeeze if apple is a monopoly buyer for TSMC (as in, of dubious legality and certainly of questionable morality, but then, it's apple, a company. Waiting for companies to act morally is silly, you write laws and set up societal systems to incentivize them to do so instead, companies are amoral (not immoral - they just don't really know what it is, by design). Your comment seems to suggest it's a smart move for TSMC to just sign one giant deal with apple and be done with it: You can send the lawyers and salesfolk to early retirement, get some money upfront, guarantee 100% sales of all your fab capacity with a party that is unlikely to renege or declare bankruptcy. It's not. It's a dumb move. Either the C-level execs at TSMC are missing something pretty fundamental or more likely we don't know enough to realize that there's sufficient weights on the other side of the balance to counteract the downside of enabling the monopoly on verticals.
- ascar 5y ago
  > the risk is presumably that apple gains massive increases in marketshare of PCs/laptops and smartphones Apple is very far from monopolistic market share of smartphones and even much further away with Laptops. Apple with their intentionally overpriced products caters to a branded premium segment. They are not even aiming to take the mass market of low to mid level smartphones that makes up most of the market outside the US I would also not be afraid if I were TSMC, especially as this is just about the new 3nm process that is catering to the highend market and doesn't eliminate the existing business. Your comment reads a bit like there could be a distopian world where a shortage of 3nm results in Apple becomeing the only option for phones and laptops
pfortuny 5y ago
“My app depended on google and I have been banned”…
intricatedetail 5y ago
I wonder if they had the same competitive advantage if they were not allowed to use tax avoidance schemes. Smaller corporations cannot afford to build such structures so they have more difficulties to compete.
- fundad 5y ago
  Making motherboards high volume that are faster than your competitors is something small businesses could not afford to do. We’re talking about one process that makes the same chips but more valuable. And AMD and Qualcomm want more access to it than they have so they complain to the press. This is the supply chain folks.
  - intricatedetail 5y ago
    Tax avoidance benefits build up through years. Basically smaller companies have less money to work with which is compounded by excessive taxes. Big corporations don't have such burden.
bryanlarsen 5y ago
This is HN, the audience should know that VC's have a very strong preference for a large number of small customers over a small number of large customers, and why. Obviously TSMC doesn't care about VC's, but the same reason why VC's prefer a large number of small customers still applies.
- InGoodFaith 5y ago
  > VC's have a very strong preference for a large number of small customers over a small number of large customers, and why. This is intriguing and I would appreciate if possible to get any sources to read up on this?
  - thrashh 5y ago
    “too many eggs in one basket”? Especially for a new untested company no customer is sure they actually need yet
  - chevman 5y ago
    Makes your public metrics look better (ie "we have over 500+ customers!!!!") and also demonstrates (in theory) a more durable product. When people see small number of large customers, the implication is you are basically just running an outsourced dev/consultant/staff aug shop. Less product vision and ability to "scale".
  - JumpCrisscross 5y ago
    Anyone should prefer lots of customers to a few key ones. The latter have more leverage. They also make one’s metrics risky, as a single defection can swing the firm from profitable to barely eking by.
    - sosborn 5y ago
      > Anyone should prefer lots of customers to a few key ones. I think the caveat/variable is "all else being equal or close to equal." If having 10 customers will net you $10 total per month, and having one large customer will net you $100 per month, it is really hard to justify going with the $10 customers. But if those 10 customers will net you $10 EACH per month, then the 10customers is a better situation.
hinkley 5y ago
Everyone has forgotten that when Apple moved to Intel, part of the deal was that Apple had the fastest laptop CPU for about 6 months. To me this says as much about Intel as about Apple. When Intel has a new chip or a bin that has small yields, they can’t supply a large customer. But MacBook had maybe a third of the market share it has now, so that’s a relatively small niche you can supply while you boost your yields.

jeromegv 5y ago

Was it to block competitors, or was it because they were selling millions of iPod and needed all the capacity they can get? The iPod was not first to market and that Toshiba HD was available before but nobody was ordering it in any kind of significant quantity.

yareally 5y ago
Probably a little bit of both.
- megablast 5y ago
  How can it be both. They either needed that many because they were selling that many. Or bought way more to stop others from buying.
  - m12k 5y ago
    I think they bought what they needed, but that was enough to block others from getting produced.
    - yareally 5y ago
      Yes, unintentional side effect. I'm sure it crossed the minds of some the executives that they might be screwing their competition by buying out all the chips. Apple is obviously not going to buy less so their competition can have more when Apple needed the supply.
      - Brian_K_White 5y ago
        Intentional effect. The fact that it's one of severel effects and one of several motivations does not make it unintentional, or even necessarily just a side effect. It could just as well be simply one of multiple fully considered effects, and surely was.
  - Arnt 5y ago

hvgk 5y ago

I don’t think so. This is the failure of having a choke point in semiconductor manufacturing and centralisation of all manufacturing infrastructure. No business is going to turn down the largest pile of cash being thrown at them. AMD and Qualcomm could of course have invested heavily in reducing this risk but no, they didn’t.

tentacleuno 5y ago
> AMD and Qualcomm could of course have invested heavily in reducing this risk but no, they didn’t. We're in the middle of a chip shortage, though.
- cormacrelf 5y ago
  If, having seen the risk turn into reality, they want to buy some of Apple's capacity, they are free to make an offer.
  - sudosysgen 5y ago
    Why would Apple allow that? They clearly have the money to outbid AMD and Qualcomm just to prevent them from competing, and the leverage to threaten moving their phones to a competitor and drop the prices for TSMC in the opposite case.
    - cormacrelf 5y ago
      The only way to analyse this as something bad Apple has done is to make out a case under competition or antitrust law in some jurisdiction. In Australia we have the concept of exclusive dealing, which the US (I think) doesn't have an equivalent to, but even then, it's extremely difficult to violate this law as a purchaser of goods/services, using money to buy them. This is because ANYBODY can acquire money and compete with you by offering more money. You could hold a monopoly on your own products (and then if you imposed exclusivity arrangements on purchasers of your products you would be abusing your market power to lessen competition), but it's essentially impossible to hold a monopoly on money itself. In all, you're characterising Apple, competing fiercely in an open market, as preventing other people competing by being too good at it. That is a bit ridiculous. If AMD and Qualcomm die out as a result, it will be because they couldn't keep up, which is capitalism functioning correctly. Even under those very broad laws, the only party you can remotely fault is TSMC, and even then, they are literally just taking from the highest bidder, which is again capitalism functioning correctly.

nojito 5y ago

They also pre-bought all airfrieght that year so that they won't have any supply chain issues for the holiday season.