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That's a partial accounting. The customer can sustainably afford to pay in proportion to the value it delivers to them, not TSMC. Apple has a finely tuned mac
by ethbr0 4y ago
That's a partial accounting.
The customer can sustainably afford to pay in proportion to the value it delivers to them, not TSMC.
Apple has a finely tuned machine for turning performance into profits, and so can afford to pay more than others... and still have it make sense for Apple.
If TSMC instead had a collection of automotive OEMs as their top-tier customers, this math wouldn't work.
The point being... be in a business where your profit margins are a rounding error in comparison to your customers' bill of materials, and you won't ever go hungry.
- dis-sys 4y agoApple's gross margin is significantly lower than that of TSMC. everything else is just cheap talk.
- lotsofpulp 4y agoA combination of profit margin, profit, and volatility are relevant. Apple’s lower profit margin is offset by the consistency of its profit margin and sheer size of the profit. https://www.macrotrends.net/stocks/charts/AAPL/apple/net-profit-margin https://www.macrotrends.net/stocks/charts/AAPL/apple/net-pro... https://www.macrotrends.net/stocks/charts/TSM/taiwan-semiconductor-manufacturing/net-profit-margin https://www.macrotrends.net/stocks/charts/TSM/taiwan-semicon...
- ethbr0 4y agoIf Apple pays TSMC $40 for an M1, and sells a MBA for $1000, Apple's gross margin can be much smaller and still easily support a larger TSMC margin.