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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

• 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.
  • agumonkey 5y ago
    It was a difficult seat to be in and they managed to use what they had extremely well. Let's see how they fare now.
  • to11mtm 5y ago
    Yeah this one is hard to look at, especially because for a while it looked like it was a very bad move for AMD. In retrospect it was still a kinda bad contract for them for a while (IIRC, GloFo couldn't deliver on process for Bulldozer, which led to poor yields/heat/etc, killing demand, but AMD had contracts with GloFo stipulating penalties for not hitting certain order numbers.) But at the same time, they were then unshackled as you said; As time went on and they could move more volume to TSMC it wound up helping them out immensely. It's kinda worth remembering too though, that even at their 'peak' in the early 2000s AMD was 6-12 months behind Intel on process tech if you go by releases. Given the trouble Intel has had keeping up one could only imagine where AMD would be now.
  • totalZero 5y ago
    The reason AMD went fabless had nothing to do with edge. It was a move to prevent bankruptcy. Intel fell behind because of its process woes and managerial issues. They weren't outworked, they played themselves.
    • mjevans 5y ago
      Only half the story. AMD also needed to do that due to antitrust shenanigans that harmed AMD. In my recollection of history, this was litigated in court and (I think?) eventually settled before a verdict. https://en.wikipedia.org/wiki/Advanced_Micro_Devices#Litigation_with_Intel https://en.wikipedia.org/wiki/Advanced_Micro_Devices#Litigat... "n 2005, following an investigation, the Japan Federal Trade Commission found Intel guilty of a number of violations. On June 27, 2005, AMD won an antitrust suit against Intel in Japan, and on the same day, AMD filed a broad antitrust complaint against Intel in the U.S. Federal District Court in Delaware. The complaint alleges systematic use of secret rebates, special discounts, threats, and other means used by Intel to lock AMD processors out of the global market. Since the start of this action, the court has issued subpoenas to major computer manufacturers including Acer, Dell, Lenovo, HP and Toshiba. In November 2009, Intel agreed to pay AMD $1.25bn and renew a five-year patent cross-licensing agreement as part of a deal to settle all outstanding legal disputes between them." Unfortunately by that point the damage had been done. Fabs are an extremely expensive, normally lower margin, business. Risk averse companies probably can't get into that game. Even with Apple they appear to have focused on something of a partnership with TSMC rather than their own fab.
• toast0 5y ago
  > 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... The consequences being if you don't like what your fab is up to, you can switch fabs. Doesn't sound too bad. GlobalFoundries, the former AMD fab, has all but given up on smaller nodes at this point, but AMD switched to TSMC for CPUs and a mix of TSMC and Samsung for GPUs. On the other hand, Intel had problems with their fab for several years, and is only now starting to consider using other fabs, when their process seems to be starting to work. Yes, designing chips to fabricate on different lines is more work, but it's something AMD has intentionally done and it has benefits over running your own fab, especially when your own fab has trouble with node shrinks.
  • deleted 5y ago
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• GeekyBear 5y ago
  > They don't have to buy TSMC a fab They don't have to, but buying production equipment for their manufacturing partners (in return for guaranteed pricing and production levels) is the norm at Tim Cook's Apple.
  • ksec 5y ago
    Is the norm for Tim Cook's Operation ( both before and after Steve Jobs ) at Foxconn. Or more specifically industrial design and manufacturing. Apple dont buy production equipment for TSMC, or Samsung Foundry. Zero.
    • mcphage 5y ago
      They also did it for the company in Arizona they hoped would produce sapphire boules for iPhone screens.
      • qeternity 5y ago
        And another company that laser bored small holes in the unibody aluminum cases for LEDs to shine through.
    • JiNCMG 5y ago
      They did for the glass manufacturer who built the large panels for the Apple Flagship Store in NYC. They also invested in Corning for building the glass for the iPhone (Tech that Corning shelved for decades).
    • simonh 5y ago
      We can’t know for sure, but it’s highly likely they provided heavy capital investmeny to TSMC, and you can bet that came with strings attached. To add to the other examples given here, Apple actually owned the manufacturing equipment for the first generation retina panels, even though it was housed in factories owned and operated by Sharp.
    • dkjaudyeqooe 5y ago
      Maybe not literally, but effectively. If Apple's willing to place a cast-iron multi-year order worth tens of billions of dollars with TSMC, the latter is going to go out and build more fabs. Any bank would lend them the money to do so on that basis. Undoubtably that's why Apple gets such preferential treatment from TSMC and other suppliers.
• gameswithgo 5y ago
  AMD would be dead if they had not done that.
• gpapilion 5y ago
  AMD has a real issue in that there feature set is 2+ Years behind Intel. They are counting on access to better process to remain competitive.
• masklinn 5y ago
  > They don't have to buy TSMC a fab, they simply have to pay (slightly) more than other TSMC customers Also large minimum orders, and probably a bunch of the payment upfront or somesuch.
• myohmy 5y ago
  Eh, the business world isn't as simple as Econ 101. Personal and business relationships matter. Risk matters quite a bit too. Which is why strategic partnerships happen between large businesses.
• Klinky 5y ago
  I don't think they would only need to pay slightly more. It is a bad move to be entirely dependent on a single customer to the detriment of your other customer relations. To gain exclusivity there would likely need to be a significant premium paid and minimum order commitments.
  • desiarnezjr 5y ago
    They're not though. There are still many fabs available, just not the premium ones. It's up to every other company that wants those seats to pony up and do what they need to do to get that capacity. It's like a restaurant reservation for a very regular "VIP" customer. They may get really special treatment, because they're probably spent enough to earn it. And everyone else schleps in line. Really there's nothing wrong with that. It may be annoying, but someone is paying way more and consistently for that table.
    • testrun 5y ago
      Hopefully that VIP customer do not slip up. If it does, you are going to have a bad time.
    • Klinky 5y ago
      I think that restaurant analogy is pretty bad. Driving customers to a competitor is a risk you take when locking them out of your restaurant, and those customers could also be lucrative VIP customers as well, not just schleps from the street. If that mega VIP ever stops coming to your restaurant, and you've lost your other VIP/customer base, you'll be hurting big time. This can lead to leverage the mega VIP has over you, as they know you've overcommited to them, and can tighten the screws.
      • desiarnezjr 5y ago
        Yet this is what practically all non fast-food restaurants do. And kind of how general strategy goes for many businesses. I know the few places I frequent often, I get a table mostly right away if anything is available, regular staff knows what I want, more or less, and I get what I expect, mostly because I have a relationship with the vendor. I tip well. Chat everyone up, etc. You don't think Apple or TSMC does this? I've been in that type of relationship in that industry. That's really how it kind of works. It's not even the most $$$$, but relationship and longer term leverage.
• mdasen 5y ago
  > they simply have to pay (slightly) more than other TSMC customers I'd argue that they need to pay significantly more than other customer in order to get such preferential treatment. In a short-sighted view of things, you only need to pay slightly more. If AMD is willing to pay $1 and Apple is willing to pay $1.01, you make more profit selling to Apple. However, as this article shows, you might end up losing the other business if you offer Apple such preferential treatment. If Apple isn't going to use all of your capacity year-round, you don't want to alienate the other companies whose orders you rely on. I think Apple likely has to pay a significant premium for getting access to the latest and greatest to the detriment of competitors. It's not in TSMC's interests to become too dependent on Apple. If AMD and Qualcomm mutiny and their orders start boosting Samsung's foundries with more money for R&D, TSMC could find itself 1) competing against a better-funded Samsung foundry; 2) with one customer that now has leverage over TSMC and getting paid less. If AMD and Qualcomm move all their orders to Samsung, it provides Samsung with the money to reinvest in its chip business. If they're able to make long-term commitments to Samsung, that's bad for TSMC since it will allow Samsung to invest knowing it will make a profit (just as TSMC has been able to do that with Apple's commitments). Likewise, if the two other giant chip design companies move to Samsung exclusively, that leaves TSMC in a tough negotiating position with Apple. Before, Apple would have to compete against AMD and Qualcomm for capacity. Now if AMD and Qualcomm have made long-term commitments to Samsung, TSMC becomes really reliant on Apple and Apple will know that TSMC has capacity they can't sell elsewhere. Sure, MediaTek and others exist, but it swings the power away from TSMC and toward Apple. Let's say that Apple was using 40% of TSMC's capacity, AMD 25%, Qualcomm 25%, and MediaTek 10%. Now AMD and Qualcomm make long-term commitments to Samsung. Apple knows that TSMC's orders have dropped 50% and that gives Apple a lot of power. Giving Apple the best to the detriment of AMD, Qualcomm, and others is a risky play for TSMC. They'll definitely want to be getting very well compensated for it, not merely slightly more. They'll want to make sure that what Apple is offering is enough to offset the substantial risk of angering competing chip design companies who might look for fabs elsewhere.
  • TrainedMonkey 5y ago
    Not sure I totally buy your point, but it does sound interesting/intriguing enough for an Asianometry video: https://www.youtube.com/c/Asianometry/videos https://www.youtube.com/c/Asianometry/videos
• AtlasBarfed 5y ago
  I agree. ALl AMD / Qualcomm have to do is guarantee a sufficiently sized order, and that's equivalent to the "Apple buys a production line". And uh yeah: AMD and Qualcomm do have the order sizes to do that.
• JeremyNT 5y ago
  Indeed, this is the obvious risk of allowing a TSMC monopoly, and its "fabless" customers have little justification for complaining. AMD is not the savior here, nor any other TSMC customer. Intel completely squandered its lead, and now we really need to hope they can catch up and remain competitive. We shouldn't allow TSMC to take total control of the market.
• acdha 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. It's not as simple as high margins but controlling most of the stack. If all Apple was doing was charging more, we'd see comparable quality devices at lower cost but we don't and it's not uncommon for e.g. a Samsung flagship to cost more despite being slower (or narrowly beating the previous generation, depending on launch timing). What we're seeing instead is that Apple has both consistent goals on their execution (e.g. not Google and Qualcomm working at cross-purposes which make sense for their individual businesses) and captures more of the revenue. That's a lot harder to catch up with and gives Apple consistent enough revenue that they can do things like effectively floating TSMC a great loan or pay more per unit since they don't need to justify it based on the profits from a single layer. Dell can't pay for their processor R&D using the money you spend on Spotify or Steam.
• ngcc_hk 5y ago
  Can Tsmc has 2 fab …Or amd and Qualcomm is free rider