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Apple has a long history of buying their suppliers a production line in return for guaranteed production levels, going back to the start of the Tim Cook era. A

Apple has a long history of buying their suppliers a production line in return for guaranteed production levels, going back to the start of the Tim Cook era. An early example. 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... A more recent example. https://www.reuters.com/article/us-apple-corning/apple-awards-iphone-supplier-corning-250-million-from-u-s-manufacturing-fund-idUSKBN1W217H https://www.reuters.com/article/us-apple-corning/apple-award... If you go back to the time when Apple was looking at single sourcing all their SOC production at TSMC, you'll see TSMC's CEO publicly saying it would make sense to dedicate a Fab to a single customer. >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. "I think that they are going to be larger customers, and now it makes complete sense to dedicate a whole fab to just one customer and hold that – to hold fabs in fact to just one customer." 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... I think the reason that Apple is always first in line at TSMC is that they bought TSMC a Fab.

Someone 5y ago
Yes, it is capitalism at work. Whomever pays more, decides. Apple says something along the lines of “we guarantee to buy x million chips this year, y million next year. We know it’s expensive to build that capacity, so here’s a few billion up front”. That’s an offer few can make and nobody else is willing to make.
- _ph_ 5y ago
  The big point indeed is, that Apple pays in advance to finance the buildup of the production facilities. Of course they get the first access at the output as a consequence.
  - donny2018 5y ago
    That’s reasonable, I guess. If that is “capitalism” (with negative connotation) then what is more fair alternative to this?
    - fundad 5y ago
      Samsung’s foundry, obviously. Choosing Apple meant letting go of old guard players
    - n8cpdx 5y ago
      Qualcomm and AMD could have chosen to be more vigorous in their competition. Android customers would have gotten better phones, Intel wouldn’t have waited until 2021 to start making decent parts again, and everyone would win. Maybe a more fair version would be for the federal government to socialize each of these players, and decide that they will pay a premium for slow, hot, American-made parts. If that sounds ridiculous, meditate on why you think capitalism/markets have a negative connotation when they are in fact producing great outcomes - amazing chips (M1 series) and competitive pressure on Intel, AMD, and Qualcomm to eventually deliver similarly competitive chips. Unbridled capitalism gets a bad rap, but that’s a relatively new innovation. You can have a well-regulated market produce even more fabulous outcomes; don’t blame corporations for those outcomes, blame politicians and the voting public. Edit: a theme I see repeated over and over, on hacker news of all places, is people making excuses for businesses operating in competitive markets. Making excuses is bad for consumers, it’s bad for competition, it’s bad for society. Stop making excuses and ask business to work harder. Android users deserve fast processors, and it is 100% Qualcomm’s fault that they don’t have them. Intel PC users deserve fast, low-power processors, and it is 100% Intel’s fault that users don’t get them, or have to go to AMD/Apple for them. Apple’s success is proof positive that AMD, Qualcomm, and Intel have been insufficiently vigorous and innovative in their competition, which in manufacturing products also involves the surrounding business practices needed to ensure access to fab capacity.
      - artificialLimbs 5y ago
        Upvoted, but: >> You can have a well-regulated market produce even more fabulous outcomes... Can you cite an example of this?
rob74 5y ago
They don't have to buy TSMC a fab, they simply have to pay (slightly) more than other TSMC customers - and Apple with its uniquely high margins can afford to do just that. Of course, depending on other details of the contract (such as guaranteeing certain volumes, which Apple can also do much more easily because they use the chips themselves), they don't even have to pay more to be TSMC's preferred customer. Actually I would put the blame squarely on AMD and Qualcomm for making themselves dependent on TSMC - especially AMD who have turned themselves into a "fabless manufacturer" and are now experiencing the consequences...
- adamlett 5y ago
  They don't have to buy TSMC a fab, they simply have to pay (slightly) more than other TSMC customers They don’t even have to do that. They just have to place orders that are sufficiently larger than any of TSMC’s other customers’.
- WithinReason 5y ago
  Arguably becoming fabless and manufacturing at TSMC is what brought AMD its edge over Intel and its recent success.
  - cptskippy 5y ago
    I don't think there's any debate. GloFo abandoned 7nm research 3 years after TSMC shipped. TSMC has since pushed out 6nm and 5nm while GloFo is just languishing in 12/14nm.
    - selectodude 5y ago
      They’re not languishing, they just stopped trying.
    - anfilt 5y ago
      GloFlo is still doing some pretty cutting edge stuff for specialized processes. There is more to semi-conductors than just the highest density.
fomine3 5y ago
What Apple did for Japan Display is interesting. They invest to build new JDI Hakusan factory for iPhone LCD but they were going to transitioned to OLED as a result. Then the factory become debt. https://www.strategyanalytics.com/strategy-analytics/blogs/components/handset-components/handset-components/2020/08/29/significance-of-the-japan-display-sharp-smartphone-lcd-plant-sale https://www.strategyanalytics.com/strategy-analytics/blogs/c...
inasio 5y ago
I had a chat with an engineer that was building apple stores (the big anchor ones). The stone for the walls came from a quarry that was fully bought by apple, apple people would go there to select the stones that had the quality they wanted and use those.
thamer 5y ago
I've always found the story of the webcam indicator shining through metal to be fascinating. On MacBook laptops from ~2011, a green light would indicate when the webcam was in use. But the magical part of this was that when it was off, you couldn't see the LED at all, so it looked like this light was shining through the metal bezel at the top. This was achieved by drilling extremely small holes in the frame above the LED, small enough that they're barely visible without magnification but having enough of them that light can easily pass through. It's a striking effect, if you notice it. To do this, they apparently bought so many high-precision lasers just for this feature that it created a shortage for other companies that needed them: https://www.bloomberg.com/news/articles/2011-11-03/apples-supply-chain-secret-hoard-lasers https://www.bloomberg.com/news/articles/2011-11-03/apples-su...
- danudey 5y ago
  Googling isn't finding the story, so take this with a grain of salt, but as I recall there have been incidents where Apple needed so many of a specific machine, made by one specific company, to set up their manufacturing, but when they couldn't get enough delivered on time they bought the company outright. (Presumably this would help by giving them access to the IP so they could contract other factories to manufacture them as well, since Apple has the up-front cash to do it) Again, I can't find the article so who knows if it's true, but it sounds very, very Apple to do that.
  - MBCook 5y ago
    That sounds very familiar. I think they might’ve done it to source the milling machines used when they switched to the unibody MacBook pros?
  - discordance 5y ago
    A bit dated now, but still a good analysis by Horace Dediu on Apple’s machinery expenditure here: http://www.asymco.com/2011/10/16/how-much-do-apples-factories-cost/ http://www.asymco.com/2011/10/16/how-much-do-apples-factorie...
  - throwawaymanbot 5y ago
ivoras 5y ago
Would that move make TSMC's CEO less like a CEO of an independant company and more like Apple's VP of chips?
thevagrant 5y ago
It goes back to the iPod days. Apple used to buy up the flash memory in advance. Leaving competitors to pay more for smaller yield or inferior quality. It doesn't always work. Apple once invested a huge amount in making sapphire glass for their watches. I can't remember the company name but they failed completely at delivering to Apples required spec and the deal was scrapped (leaving the supplier to face massive debts).
- reaperhulk 5y ago
  GT Advanced Technologies (https://www.sec.gov/news/press-release/2019-66 https://www.sec.gov/news/press-release/2019-66 SEC went after them in 2019)
rasz 5y ago
Its actually going back to at least Jobs return to Apple in 1997. Apple financed Wifi card production line for their modem supplier in Taiwan: https://www.youtube.com/watch?v=Tj5NNxVwNwQ https://www.youtube.com/watch?v=Tj5NNxVwNwQ Arthur W. Astrin, sort of father of WiFi, hired by Apple to develop and incorporate 802.11b into their products. Spend most of 1998/99 flying West Coast-Taiwan twice a week (coordinating iBooks/iMacs manufacturing). Made HP very happy: >so I called up HP and I said "I need a spectrum analyzer. It needs to be at least three gigahertz,", and it would be nice if it was programmable. So, they whipped up something and next day the salesman shows up with this.. they call it HP Basic Language Computer. So we built 1, 2, then we ordered 10 then 50. All of a sudden HP started coming. The salesman became my best friend. <Laughs> In fact, I think I was the largest order that year for the spectrum analyzer at HP We are talking small car unit prices here. Afaik they did the same for iPhone camera modules with Primax, who went from small time accessories and gadgets manufacturer to one of Taiwan titans.

Someone 5y ago

Yes, it is capitalism at work. Whomever pays more, decides. Apple says something along the lines of “we guarantee to buy x million chips this year, y million next year. We know it’s expensive to build that capacity, so here’s a few billion up front”. That’s an offer few can make and nobody else is willing to make.

_ph_ 5y ago
The big point indeed is, that Apple pays in advance to finance the buildup of the production facilities. Of course they get the first access at the output as a consequence.
- donny2018 5y ago
  That’s reasonable, I guess. If that is “capitalism” (with negative connotation) then what is more fair alternative to this?
  - fundad 5y ago
    Samsung’s foundry, obviously. Choosing Apple meant letting go of old guard players
  - n8cpdx 5y ago
    Qualcomm and AMD could have chosen to be more vigorous in their competition. Android customers would have gotten better phones, Intel wouldn’t have waited until 2021 to start making decent parts again, and everyone would win. Maybe a more fair version would be for the federal government to socialize each of these players, and decide that they will pay a premium for slow, hot, American-made parts. If that sounds ridiculous, meditate on why you think capitalism/markets have a negative connotation when they are in fact producing great outcomes - amazing chips (M1 series) and competitive pressure on Intel, AMD, and Qualcomm to eventually deliver similarly competitive chips. Unbridled capitalism gets a bad rap, but that’s a relatively new innovation. You can have a well-regulated market produce even more fabulous outcomes; don’t blame corporations for those outcomes, blame politicians and the voting public. Edit: a theme I see repeated over and over, on hacker news of all places, is people making excuses for businesses operating in competitive markets. Making excuses is bad for consumers, it’s bad for competition, it’s bad for society. Stop making excuses and ask business to work harder. Android users deserve fast processors, and it is 100% Qualcomm’s fault that they don’t have them. Intel PC users deserve fast, low-power processors, and it is 100% Intel’s fault that users don’t get them, or have to go to AMD/Apple for them. Apple’s success is proof positive that AMD, Qualcomm, and Intel have been insufficiently vigorous and innovative in their competition, which in manufacturing products also involves the surrounding business practices needed to ensure access to fab capacity.
    - artificialLimbs 5y ago
      Upvoted, but: >> You can have a well-regulated market produce even more fabulous outcomes... Can you cite an example of this?

rob74 5y ago

They don't have to buy TSMC a fab, they simply have to pay (slightly) more than other TSMC customers - and Apple with its uniquely high margins can afford to do just that. Of course, depending on other details of the contract (such as guaranteeing certain volumes, which Apple can also do much more easily because they use the chips themselves), they don't even have to pay more to be TSMC's preferred customer. Actually I would put the blame squarely on AMD and Qualcomm for making themselves dependent on TSMC - especially AMD who have turned themselves into a "fabless manufacturer" and are now experiencing the consequences...

adamlett 5y ago
They don't have to buy TSMC a fab, they simply have to pay (slightly) more than other TSMC customers They don’t even have to do that. They just have to place orders that are sufficiently larger than any of TSMC’s other customers’.
WithinReason 5y ago
Arguably becoming fabless and manufacturing at TSMC is what brought AMD its edge over Intel and its recent success.
- cptskippy 5y ago
  I don't think there's any debate. GloFo abandoned 7nm research 3 years after TSMC shipped. TSMC has since pushed out 6nm and 5nm while GloFo is just languishing in 12/14nm.
  - selectodude 5y ago
    They’re not languishing, they just stopped trying.
  - anfilt 5y ago
    GloFlo is still doing some pretty cutting edge stuff for specialized processes. There is more to semi-conductors than just the highest density.

fomine3 5y ago

What Apple did for Japan Display is interesting. They invest to build new JDI Hakusan factory for iPhone LCD but they were going to transitioned to OLED as a result. Then the factory become debt. https://www.strategyanalytics.com/strategy-analytics/blogs/components/handset-components/handset-components/2020/08/29/significance-of-the-japan-display-sharp-smartphone-lcd-plant-sale https://www.strategyanalytics.com/strategy-analytics/blogs/c...

inasio 5y ago

I had a chat with an engineer that was building apple stores (the big anchor ones). The stone for the walls came from a quarry that was fully bought by apple, apple people would go there to select the stones that had the quality they wanted and use those.

thamer 5y ago

I've always found the story of the webcam indicator shining through metal to be fascinating. On MacBook laptops from ~2011, a green light would indicate when the webcam was in use. But the magical part of this was that when it was off, you couldn't see the LED at all, so it looked like this light was shining through the metal bezel at the top. This was achieved by drilling extremely small holes in the frame above the LED, small enough that they're barely visible without magnification but having enough of them that light can easily pass through. It's a striking effect, if you notice it. To do this, they apparently bought so many high-precision lasers just for this feature that it created a shortage for other companies that needed them: https://www.bloomberg.com/news/articles/2011-11-03/apples-supply-chain-secret-hoard-lasers https://www.bloomberg.com/news/articles/2011-11-03/apples-su...

danudey 5y ago
Googling isn't finding the story, so take this with a grain of salt, but as I recall there have been incidents where Apple needed so many of a specific machine, made by one specific company, to set up their manufacturing, but when they couldn't get enough delivered on time they bought the company outright. (Presumably this would help by giving them access to the IP so they could contract other factories to manufacture them as well, since Apple has the up-front cash to do it) Again, I can't find the article so who knows if it's true, but it sounds very, very Apple to do that.
- MBCook 5y ago
  That sounds very familiar. I think they might’ve done it to source the milling machines used when they switched to the unibody MacBook pros?
- discordance 5y ago
  A bit dated now, but still a good analysis by Horace Dediu on Apple’s machinery expenditure here: http://www.asymco.com/2011/10/16/how-much-do-apples-factories-cost/ http://www.asymco.com/2011/10/16/how-much-do-apples-factorie...
- throwawaymanbot 5y ago

ivoras 5y ago

Would that move make TSMC's CEO less like a CEO of an independant company and more like Apple's VP of chips?

thevagrant 5y ago

It goes back to the iPod days. Apple used to buy up the flash memory in advance. Leaving competitors to pay more for smaller yield or inferior quality. It doesn't always work. Apple once invested a huge amount in making sapphire glass for their watches. I can't remember the company name but they failed completely at delivering to Apples required spec and the deal was scrapped (leaving the supplier to face massive debts).

reaperhulk 5y ago
GT Advanced Technologies (https://www.sec.gov/news/press-release/2019-66 https://www.sec.gov/news/press-release/2019-66 SEC went after them in 2019)

rasz 5y ago

Its actually going back to at least Jobs return to Apple in 1997. Apple financed Wifi card production line for their modem supplier in Taiwan: https://www.youtube.com/watch?v=Tj5NNxVwNwQ https://www.youtube.com/watch?v=Tj5NNxVwNwQ Arthur W. Astrin, sort of father of WiFi, hired by Apple to develop and incorporate 802.11b into their products. Spend most of 1998/99 flying West Coast-Taiwan twice a week (coordinating iBooks/iMacs manufacturing). Made HP very happy: >so I called up HP and I said "I need a spectrum analyzer. It needs to be at least three gigahertz,", and it would be nice if it was programmable. So, they whipped up something and next day the salesman shows up with this.. they call it HP Basic Language Computer. So we built 1, 2, then we ordered 10 then 50. All of a sudden HP started coming. The salesman became my best friend. <Laughs> In fact, I think I was the largest order that year for the spectrum analyzer at HP We are talking small car unit prices here. Afaik they did the same for iPhone camera modules with Primax, who went from small time accessories and gadgets manufacturer to one of Taiwan titans.