US-made chips will cost Apple more, despite govt subsidies – 9to5Mac
Apple has pledged to buy US-made chips once TSMC’s Arizona plants come online, but the company may have to pay more for them.
TSMC’s chief exec has said that it plans to charge customers more for chips made outside of Taiwan, due to the higher production costs …
Currently, Apple’s A-series and M-series chips are made by TSMC in its home territory of Taiwan. However, the company has pledged to buy at least some of its chips from TSMC’s upcoming plants in Arizona.
There had initially been doubts about whether this was much more of a PR move, since the chip elements seemed likely to have to be sent back to Taiwan for what’s known as ‘packaging’ – or final assembly. One analyst said this made the Arizona plant “a paperweight.”
Packaging is the name given to the process of placing the various circuit boards as close together as possible before encapsulating them into a single chip. For example, in the iPhone, the memory is placed directly on top of the processor to improve performance and reliability.
Packaging is a highly advanced process, where TSMC has a massive lead over its competitors, but the process can only be done in the sophisticated facilities which only exist in Taiwan.
However, Apple later said it would use another US company, Amkor, to do the chip packaging.
Producing chips in the US carries higher costs than doing it in Taiwan, in part due to unionisation of US workers creating higher salaries. This was the basis for TSMC demanding subsidies for opening the Arizona plants.
Those subsidies were recently confirmed as totalling $6.6B in grants across three plants, and a further $5B in loans.
Despite this, there was a suggestion last year that US-made chips might be more expensive than those produced in Taiwan, and the company’s chief exec has now confirmed this. The Financial Times says TSMC has already started discussing this with its customers.
Taiwan Semiconductor Manufacturing Company plans to charge customers more for making their chips outside of Taiwan, as global capacity expansion, power costs and increasingly complex cutting-edge technologies weigh on its profitability.
“If a customer requests to be in a certain geographical area, the customer needs to share the incremental cost, said CC Wei, chief executive of the world’s largest chip manufacturer, to investors on Thursday during the company’s first-quarter earnings call.
“In today’s fragmented globalisation environment, cost will be higher for everyone, including TSMC, our customers and our competitors,” Wei said, adding that discussions with customers about price increases had started.
Apple is used to being the dominant partner when it comes to negotiating with suppliers. Everyone wants Apple’s business, and it likes to have two or more suppliers for each element in its supply-chain, so that it can play them off against each other to strike favorable deals.
However, TSMC’s lead in chipmaking processes means that it has long been Apple’s sole supplier of A-series and M-series chips. That naturally weakens the iPhone maker’s hand when it comes to price negotiations.
While the company will of course strike the best deal it can, it seems likely that it won’t be immune to paying a premium on US-made chips.
Photo by Marek Studzinski on Unsplash
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Ben Lovejoy is a British technology writer and EU Editor for 9to5Mac. He’s known for his op-eds and diary pieces, exploring his experience of Apple products over time, for a more rounded review. He also writes fiction, with two technothriller novels, a couple of SF shorts and a rom-com!
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