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TSMC charging 6% more for the 3nm process seems reasonable. Article notes Apple accounts for 25% of their revenue and says this gives them leverage over TSMC bu

TSMC charging 6% more for the 3nm process seems reasonable. Article notes Apple accounts for 25% of their revenue and says this gives them leverage over TSMC but aren't they the only 3nm player in town?

jimnotgym 4y ago
That was my thought. Can't they just threaten to sell the space to someone else?
- jeswin 4y ago
  Apple probably pays a premium on the 200 million pieces they buy. Since no one else apart from Samsung is making signficant money from Android, it'd be somewhat hard to cover the loss. PC volumes are lower, a lot of them are low-end, and Intel uses their own fab for most of their CPUs.
- phkahler 4y ago
  >> Can't they just threaten to sell the space to someone else? You mean TSMC threaten? The only other huge players willing to pay a premium for state of the art node like that are GPUs, and they just got the whole crypto mining rug pulled out from under them so they may not be interested in paying top dollar any more.
  - ClumsyPilot 4y ago
    There are always people who spend tip dollar on latest GPU to play rayteacing doom in 8K 120 HZ. Or run stable diffusion Quantity varies though.
- gpapilion 4y ago
  My thought is margin is low on apple but volume is high. They also are a good partner helping to push the process forward. AMD and NVIDIA are probably more profitable than apple for tsmc but volumes are much lower. I also think the ability to improve tier prices as fast as they have is directly related to apple’s volumes.
- ThrowawayR2 4y ago
  My guess would be AMD; they'd love to have server processors even farther ahead than what Intel is able to fab themselves and the large margins for server processors are able to absorb TSMC's asking price.
robin_reala 4y ago
Yep, but TSMC don’t manufacture the main lithography machines: that’s typically solely or at least collaboratively from ASML in the Netherlands. So if Apple really wanted to, they could move gradually away. And given their volumes, this is leverage.
- sofixa 4y ago
  That would probably take years to set up, and considering Apple outsource manufacturing in general (Foxconn for assembly, Samsung for screens, TSMC for chips) it wouldn't necessarily fit their modus operandi. On the other hand they have more money than they could possibly spend, so insourcing everything for vertical integration isn't out of reach.
  - jhickok 4y ago
    I also just think Apple has planned for these contingencies which prevents them from having no way out of TSMC. Tim Cook is a supply chain genius and no way do they sabre rattle without a realistic, even if slightly painful, second option.
    - deleted 4y ago
      [deleted]
  - JumpCrisscross 4y ago
    > would probably take years to set up Even posturing to begin that process would knock tens of billions off TSMC's market cap and spike its funding costs, to say nothing about complicating its contract negotiations with every other customer. They did it, after all, to Intel.
- rjzzleep 4y ago
  Uh it's not that easy at all? This is a decade worth of work right there. European manufacturers also don't really have big quantity manufacturing. SMIC has been moving gradually towards lower nm fabs. It's odd that people here nowadays think, oh you just get better lithography and we're done. This a multistep process to begin with. Do you think Intels only problem is that they can't buy ASML components? Not to mention that all European manufacturing "giants"(in demand and importance not in volume) like ASML have quite limited capacity. During Covid there was a shortage of machines that produce fibres needed to create N95 masks for example.
hotpotamus 4y ago
So I assume Moore's law has always meant that you get more transistors per dollar in spite of all the cost increases that come along with smaller nodes, but now I wonder, how long would that continue if Moore's law is breaking down?
JumpCrisscross 4y ago
> charging 6% more for the 3nm process seems reasonable I imagine the negotiations largely centre around timeline and quantity guarantees, as well as capability. Apple is cutting back iPhone Pro production [1]. If 3nm won't enable features that sell more iPhones, or if the market is shifting from a feature focus to one on costs, 6% more for 3nm may make sticking with five more profitable. [1] https://www.bloomberg.com/news/articles/2022-09-28/apple-iphone-14-sales-not-strong-enough-to-trigger-production-boost https://www.bloomberg.com/news/articles/2022-09-28/apple-iph...
- Scoundreller 4y ago
  Any decrease in the photolithographic process size decreases power consumption (and reliability, electromigration for the win!)
  - deleted 4y ago
    [deleted]
- matwood 4y ago
  > Apple is cutting back iPhone Pro production [1] No, iPhone Pro demand is very strong. The regular iPhone demand appears soft or didn't ramp up. None is this is a surprise since early adopters would likely be the same who buy the Pros.
  - jaywalk 4y ago
    I think the iPhone 14 Plus was a huge miss for them. Anyone who wants a bigger phone probably also wants the Pro. Wouldn't be surprised if there is no iPhone 15 Plus.
    - Hamuko 4y ago
      I think this is way premature. The non-Pro iPhone is for the people who don't watch Apple keynotes and don't wait for the Apple Store to open up for pre-orders. It's for my mom, who will buy a new iPhone when she breaks her old one.
2OEH8eoCRo0 4y ago
> Apple accounts for 25% of their revenue Isn't this misleading? If Apple doesn't take the fab capacity then somebody else will.
- Joeri 4y ago
  But will they keep taking that fab capacity over many years and fund the R&D of the next process nodes by buying up guaranteed capacity ahead of time? Apple has been a good partner to TSMC and it would not be wise to replace them for short term gain.
  - sangnoir 4y ago
    TSMC is not hurting for cash and can easily shoulder the risks - or sell bonds if they'd like prefer to keep the warchest full. There is a long list of customers who'd kill for a chance to get (additional) capacity of the leading edge node process for years at a time (AMD, Nvidia, Google, Amazon, and the rest of the companies giving TSMC the other 75% of revenue)
    - moonchrome 4y ago
      > There is a long list of customers who'd kill for a chance to get (additional) capacity of the leading edge node process for years at a time Is there? Seems like we're heading for a recession and reduced demand - at higher prices I wouldn't be surprised existing customers cut back on existing capacity.
      - sangnoir 4y ago
        > Is there? Seems like we're heading for a recession and reduced demand Perhaps lower demand for consumer devices[1], but at Google and Amazon's scale, getting more efficient Tensor cores, ARM processors, and AI accelerators for their respective clouds will save them some OpEx by requiring less power (and cooling). It may also save CapEx as well, by reducing the need to build additional datacenters by getting +10% more compute[2] with the existing DC footprint, power and cooling budgets. Server costs are amortized over long periods - longer than whatever recession may or may not happen. Also, if they can lock-in TSMC for years, they'll continue to reap benefits long after the recession is over and shift capacity to Kindles or Pixel devices when consumer demand recovers. 1. Which may explain Apple developing cold feet. 2. Back of envelope calculations. I do not know what node mixes Google and Amazon have in their data centers, but I'm guessing it averages-out between 10 to 15nm. How much can they benefit by replacing their oldest processors with 3nm parts?
j_walter 4y ago
TSMC is charging 6% more across the board...all they way from 3nm to the 350nm stuff.

jimnotgym 4y ago

That was my thought. Can't they just threaten to sell the space to someone else?

jeswin 4y ago
Apple probably pays a premium on the 200 million pieces they buy. Since no one else apart from Samsung is making signficant money from Android, it'd be somewhat hard to cover the loss. PC volumes are lower, a lot of them are low-end, and Intel uses their own fab for most of their CPUs.
phkahler 4y ago
>> Can't they just threaten to sell the space to someone else? You mean TSMC threaten? The only other huge players willing to pay a premium for state of the art node like that are GPUs, and they just got the whole crypto mining rug pulled out from under them so they may not be interested in paying top dollar any more.
- ClumsyPilot 4y ago
  There are always people who spend tip dollar on latest GPU to play rayteacing doom in 8K 120 HZ. Or run stable diffusion Quantity varies though.
gpapilion 4y ago
My thought is margin is low on apple but volume is high. They also are a good partner helping to push the process forward. AMD and NVIDIA are probably more profitable than apple for tsmc but volumes are much lower. I also think the ability to improve tier prices as fast as they have is directly related to apple’s volumes.
ThrowawayR2 4y ago
My guess would be AMD; they'd love to have server processors even farther ahead than what Intel is able to fab themselves and the large margins for server processors are able to absorb TSMC's asking price.

robin_reala 4y ago

Yep, but TSMC don’t manufacture the main lithography machines: that’s typically solely or at least collaboratively from ASML in the Netherlands. So if Apple really wanted to, they could move gradually away. And given their volumes, this is leverage.

sofixa 4y ago
That would probably take years to set up, and considering Apple outsource manufacturing in general (Foxconn for assembly, Samsung for screens, TSMC for chips) it wouldn't necessarily fit their modus operandi. On the other hand they have more money than they could possibly spend, so insourcing everything for vertical integration isn't out of reach.
- jhickok 4y ago
  I also just think Apple has planned for these contingencies which prevents them from having no way out of TSMC. Tim Cook is a supply chain genius and no way do they sabre rattle without a realistic, even if slightly painful, second option.
  - deleted 4y ago
    [deleted]
- JumpCrisscross 4y ago
  > would probably take years to set up Even posturing to begin that process would knock tens of billions off TSMC's market cap and spike its funding costs, to say nothing about complicating its contract negotiations with every other customer. They did it, after all, to Intel.
rjzzleep 4y ago
Uh it's not that easy at all? This is a decade worth of work right there. European manufacturers also don't really have big quantity manufacturing. SMIC has been moving gradually towards lower nm fabs. It's odd that people here nowadays think, oh you just get better lithography and we're done. This a multistep process to begin with. Do you think Intels only problem is that they can't buy ASML components? Not to mention that all European manufacturing "giants"(in demand and importance not in volume) like ASML have quite limited capacity. During Covid there was a shortage of machines that produce fibres needed to create N95 masks for example.

hotpotamus 4y ago

So I assume Moore's law has always meant that you get more transistors per dollar in spite of all the cost increases that come along with smaller nodes, but now I wonder, how long would that continue if Moore's law is breaking down?

JumpCrisscross 4y ago

> charging 6% more for the 3nm process seems reasonable I imagine the negotiations largely centre around timeline and quantity guarantees, as well as capability. Apple is cutting back iPhone Pro production [1]. If 3nm won't enable features that sell more iPhones, or if the market is shifting from a feature focus to one on costs, 6% more for 3nm may make sticking with five more profitable. [1] https://www.bloomberg.com/news/articles/2022-09-28/apple-iphone-14-sales-not-strong-enough-to-trigger-production-boost https://www.bloomberg.com/news/articles/2022-09-28/apple-iph...

Scoundreller 4y ago
Any decrease in the photolithographic process size decreases power consumption (and reliability, electromigration for the win!)
- deleted 4y ago
  [deleted]
matwood 4y ago
> Apple is cutting back iPhone Pro production [1] No, iPhone Pro demand is very strong. The regular iPhone demand appears soft or didn't ramp up. None is this is a surprise since early adopters would likely be the same who buy the Pros.
- jaywalk 4y ago
  I think the iPhone 14 Plus was a huge miss for them. Anyone who wants a bigger phone probably also wants the Pro. Wouldn't be surprised if there is no iPhone 15 Plus.
  - Hamuko 4y ago
    I think this is way premature. The non-Pro iPhone is for the people who don't watch Apple keynotes and don't wait for the Apple Store to open up for pre-orders. It's for my mom, who will buy a new iPhone when she breaks her old one.

2OEH8eoCRo0 4y ago

> Apple accounts for 25% of their revenue Isn't this misleading? If Apple doesn't take the fab capacity then somebody else will.

Joeri 4y ago
But will they keep taking that fab capacity over many years and fund the R&D of the next process nodes by buying up guaranteed capacity ahead of time? Apple has been a good partner to TSMC and it would not be wise to replace them for short term gain.
- sangnoir 4y ago
  TSMC is not hurting for cash and can easily shoulder the risks - or sell bonds if they'd like prefer to keep the warchest full. There is a long list of customers who'd kill for a chance to get (additional) capacity of the leading edge node process for years at a time (AMD, Nvidia, Google, Amazon, and the rest of the companies giving TSMC the other 75% of revenue)
  - moonchrome 4y ago
    > There is a long list of customers who'd kill for a chance to get (additional) capacity of the leading edge node process for years at a time Is there? Seems like we're heading for a recession and reduced demand - at higher prices I wouldn't be surprised existing customers cut back on existing capacity.
    - sangnoir 4y ago
      > Is there? Seems like we're heading for a recession and reduced demand Perhaps lower demand for consumer devices[1], but at Google and Amazon's scale, getting more efficient Tensor cores, ARM processors, and AI accelerators for their respective clouds will save them some OpEx by requiring less power (and cooling). It may also save CapEx as well, by reducing the need to build additional datacenters by getting +10% more compute[2] with the existing DC footprint, power and cooling budgets. Server costs are amortized over long periods - longer than whatever recession may or may not happen. Also, if they can lock-in TSMC for years, they'll continue to reap benefits long after the recession is over and shift capacity to Kindles or Pixel devices when consumer demand recovers. 1. Which may explain Apple developing cold feet. 2. Back of envelope calculations. I do not know what node mixes Google and Amazon have in their data centers, but I'm guessing it averages-out between 10 to 15nm. How much can they benefit by replacing their oldest processors with 3nm parts?

j_walter 4y ago

TSMC is charging 6% more across the board...all they way from 3nm to the 350nm stuff.