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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 rea

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.
- geodel 4y ago
  Out of those multistep process Apple has done very large part of designing Chip, designing OS to use chip optimally. Apple user market is not the one where they compare Mac with Wintel laptop. They find out M2 is crap in every way compare to Intel or AMD chip and then go on to buy a HP Pavilion or some such. Besides with Perf/watt gap Mac/Iphone and rest Apple can wait it out for at least a year or maybe even longer.
  - rjzzleep 4y ago
    They bought companies that have designed chips for a DECADE, and then that took another decade of experience. And even if Apple went out and bought an old fab or global foundries it will take a decade to build out the capacity with a worsening economic crisis I'm not sure how realistic that is. But sure, it is possible.
    - geodel 4y ago
      I guess you are just missing the point that Apple can wait out for a year or longer and keep using 5nm TSMC chip with more core, components or whatever. Once the supposedly "premium paying" clients buy the best 3nm chip, Apple can still be fine buying the rest. There is no personal ego hurt, if it still does not workout after 1-2 year of negotiation lawyers can go sign new contract for higher price. It is not like "Guys, TSMC asked for more money, so stop everything and work on setting up chip making factory in Tennessee however long it takes". Also worsening economic crisis will hit TSMC much sooner than Apple.
deleted 4y ago
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onlyrealcuzzo 4y ago
Yep, right after they hire about 30,000 people long-term to manufacture the chips, and spend $20B on plants, which would take 5+ years to complete. It's almost as if TSMC asking or an extra 6% when inflation is at an all-time high is reasonable, and Apple doesn't really have a viable alternative...
- mhb 4y ago
  Maybe Apple is looking for a way to get rid of some of its cash before inflation eats away more of it.
- Bud 4y ago
  Might want to double-check your inflation info, there. We're not close to an all-time high. We're not even at 50% of an all-time high. And also the concept of inflation not being the same everywhere. https://www.usinflationcalculator.com/inflation/historical-inflation-rates/ https://www.usinflationcalculator.com/inflation/historical-i...
cpuguy83 4y ago
I'm not sure I agree it's particularly good leverage since what happens is Apple ends up buying up all of TSMC's production capacity pushing out other customers. There is guaranteed business either way, just Apple is more of a guarantee since they are existing. The other bit is how much Apple invests in TSMC's R&D, which could be a huge loss if Apple moves. But all this is likely just negotiations and Apple won't be making a move (where to anyway?). Maybe instead of 6% per chip Apple invests a bit more elsewhere in the company to keep production costs as low as possible.
adamsmith143 4y ago
That's a massive undertaking. We're talking many years and many billions of dollars and puts Apple too deep into manufacturing I'd think. Not to mention I believe there is a massive wait list for ASML machines that I doubt even Apple could get in front of.

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.

geodel 4y ago
Out of those multistep process Apple has done very large part of designing Chip, designing OS to use chip optimally. Apple user market is not the one where they compare Mac with Wintel laptop. They find out M2 is crap in every way compare to Intel or AMD chip and then go on to buy a HP Pavilion or some such. Besides with Perf/watt gap Mac/Iphone and rest Apple can wait it out for at least a year or maybe even longer.
- rjzzleep 4y ago
  They bought companies that have designed chips for a DECADE, and then that took another decade of experience. And even if Apple went out and bought an old fab or global foundries it will take a decade to build out the capacity with a worsening economic crisis I'm not sure how realistic that is. But sure, it is possible.
  - geodel 4y ago
    I guess you are just missing the point that Apple can wait out for a year or longer and keep using 5nm TSMC chip with more core, components or whatever. Once the supposedly "premium paying" clients buy the best 3nm chip, Apple can still be fine buying the rest. There is no personal ego hurt, if it still does not workout after 1-2 year of negotiation lawyers can go sign new contract for higher price. It is not like "Guys, TSMC asked for more money, so stop everything and work on setting up chip making factory in Tennessee however long it takes". Also worsening economic crisis will hit TSMC much sooner than Apple.

deleted 4y ago

[deleted]

onlyrealcuzzo 4y ago

Yep, right after they hire about 30,000 people long-term to manufacture the chips, and spend $20B on plants, which would take 5+ years to complete. It's almost as if TSMC asking or an extra 6% when inflation is at an all-time high is reasonable, and Apple doesn't really have a viable alternative...

mhb 4y ago
Maybe Apple is looking for a way to get rid of some of its cash before inflation eats away more of it.
Bud 4y ago
Might want to double-check your inflation info, there. We're not close to an all-time high. We're not even at 50% of an all-time high. And also the concept of inflation not being the same everywhere. https://www.usinflationcalculator.com/inflation/historical-inflation-rates/ https://www.usinflationcalculator.com/inflation/historical-i...

cpuguy83 4y ago

I'm not sure I agree it's particularly good leverage since what happens is Apple ends up buying up all of TSMC's production capacity pushing out other customers. There is guaranteed business either way, just Apple is more of a guarantee since they are existing. The other bit is how much Apple invests in TSMC's R&D, which could be a huge loss if Apple moves. But all this is likely just negotiations and Apple won't be making a move (where to anyway?). Maybe instead of 6% per chip Apple invests a bit more elsewhere in the company to keep production costs as low as possible.

adamsmith143 4y ago

That's a massive undertaking. We're talking many years and many billions of dollars and puts Apple too deep into manufacturing I'd think. Not to mention I believe there is a massive wait list for ASML machines that I doubt even Apple could get in front of.