Why Apple just made a huge mistake by signing with TSMC

“What began as a rumor is now news: Apple plans to sever its last tie to Samsung and have its line of ARM processors manufactured by the Taiwan Semiconductor Manufacturing Corp., otherwise known as TSMC,” Andy Patrizio writes for ITworld.

“It will be a while before TSMC actually gets anything from this deal, since Samsung will still be supplying chips to Apple for at least another year,” Patrizio writes. “It’s a windfall for TSMC and a painful hit for Samsung, no doubt about it. Mark Newman, an analyst at Sanford Bernstein in Hong Kong, estimates that Apple’s component orders from Samsung were set to hit around $10 billion last year. Who would want to give that kind of money to their mortal enemy?”

Patrizio writes, “Still, Tim, you couldn’t make a worse decision.”

Read more in the full article here.

17 Comments

  1. apple can afford to buy up everything TSMC needs to produce their chips. and apple’s capital expenses have been huge lately.

    nvidia and others have to share the same machinery

    1. The only reason Apple didn’t go Intel is because Intel refused them, they have the best fabs and yields in the industry. Not a huge Intel Fan, but Intel has their shit together, hell they’re ever rapidly catching ARM in power usage, while having better performance. ( an iPad 4 can hardly catch a 2005 Desktop in number crunching ).

      I wish Apple would have done something to get Intel on their side for Fabbing.

      TSMC had trouble meeting Nividas qoutas and orders, how the hell can they handle Apples?

      1. Intel is woefully behind in 20nm technology. TSMC has it pretty well ironed out. Apple would be buying into obsolescence if they went with Intel.

        TSMC can now expand production facilities using Apple’s capital. Didn’t you see that they are hiring an additional 40,000 workers?

      2. Apple wants to own exclusively equipment and/or facility that would manufacture chips for them.

        Also, Intel can not provide its best technology, which if fully used by their big chips. Intel can not even make some of their own chips on 22 nm, let alone offer manufacturing outsourcing for Apple.

      3. Full of bullshit you are.

        Intel is dying, or they will be dead in the next 15 years, they use an inferior fab process, apple having intel make chips is a bad idea.

        I’m personally hoping TSMC really pulls this off, it would be a step towards Apple being the only brand On the shelf in tablets and laptops abs most phones.

  2. Blah blah blah. Could they repeat Samsung propaganda any more times per paragraph?

    Apple won’t get chips for a year. Apple won’t get chips for a year.

    Nvidia and Qualcomm don’t get enough supply (x4)

    Apple shoulda gone with intel (x3)

    This rubbish was actually written by a Samsung publicist and my family is being held hostage. (Should be in the article, if anything was honest)

  3. TSMC can not meet demand and then states two large buyers, Nvidia and Qualcomm, will jump ship.

    That actually frees resources to supply Apple.

    Kinda supports Apple decision and Intel did not want to produce ARM processors. They wanted to use their tech is is a few generation behind ARM. Decisions, decisions!

  4. Obviously this writer is smarter than Tim Cook. I bet Tim never considered any of this.

    Now, back in the real world, the writer never even mentioned the absurdly large capex Apple is making this year. It is entirely possible Apple has financed a fab that will be dedicated to Apple’s A series processors, run by TSMC.

    1. Although we’ve heard nothing about an Apple capital investment in TSMC, it would be consistent with past practice on Apple’s part. If they own the equipment then that equipment will be 100% dedicated to Apple’s chip production and no other TSMC customer can squeeze them out. Apple can also negotiate a better price for each chip delivered because TSMC will not have nearly the same capital expenditures on plant and equipment that they made for their other chip fab operations. With overhead costs significantly lower Apple will demand and get a very good price thereby lowering their unit production cost and increasing margin. And to top it all off they can write off the capital expenditures.

  5. As Apple’s global supply chain architect for many years before becoming CEO, I’m sure Tim Cook knows something that Andy Patrizio doesn’t. Just hunching.

  6. Apple cannot buy key components from a competitor. That’s stupid. Apple is not stupid. When Sammy moved into Apples space, they had no choice but to move elsewhere. I cannot imagine having a competitor manufacture key components for me. They will know my plans, my products capabilities, my projected demand etc. Apple made a wise move to cut out samsung. Always thought it was just bad bad bad that apple continued to be in bed with their key competitor.

  7. So, is ITworld owned – openly or silently, by Samsung ?? OR, does Patrizio just get paid by them under the table ?? Him speculating that HE knows better than Cook how to run the Apple supply chain is sheer idiocy !! He’s clueless.. IF he believes Cook is going to delegate to him, $ 10 BILLION of Apple’s money, he’s goofy…

    1. I think he might be worried that TMSC can’t meet apples needs, as TMSC has a long history of inferior production, bad yields and problems meeting orders. There’s a reason nivdia and Qualcomm dumped TMSC, they were sick of bad yields, missed orders and cost over runs.

      Apple needs to start its own fab program or give intel some leeway

  8. As long as Apple doesn’t put all its eggs in one basket…
    Remember PPC advancements all but neglected by Motorola, then IBM. I bet the switch to Intel was expensive, but it served those two companies well, especially Motorola.

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