TSMC finally has the lifeline Apple needs

TSMC is pole in the shade If we take the microphone outside and ask about her, few people know what she does, but the key companies of modern society, such as Apple, Nvidia, AMD and even Intel, depend a lot on her good work.

This Taiwanese company is responsible, simplifying a lot, for the production of chips developed by other companies. A charming Apple M1 Ultra running the latest Macs? He leaves the TSMC factories. Snapdragon 8+ Gen 1 that supports dozens smartphones high end? Also. Nvidia GeForce RTX 4090? Indeed, this is the work of TSMC.

This does not mean that the high performance of these components is achieved at the expense of TSMC. But, no doubt, his good work contributes to this. This explains why, according to the data Study of counterpoint, TSMC owns over 50% market share As for the production of semiconductors.

Apple is heavily dependent on TSMC

Part of that high market share is thanks to Apple. The Cupertino company is very dependent on TSMC. All the processors they develop in California later materialize in the factories of the Taiwanese company.

We are talking about fundamental components such as the A16 Bionic, Apple M2 or SiP that we find in the Apple Watch. Chips, which are necessary not only for the operation of brand products; They are also a key element that, in many cases, makes the difference between the teams of a North American company and its competitors.

Apple, historically he did his best to control his own destiny. We try to design as much as possible en casa, carefully controlling its suppliers, etc. However, in such a complex sector, there are tasks that can hardly be left under one's own umbrella, especially in the economic part. Therefore, Apple makes some exceptions to this philosophy. And one of them is TSMC.

But for Apple to rely heavily on TSMC does not mean that the situation is out of control. The Taiwanese company is also heavily dependent on Apple. 26% of sales in 2021 came from the Cupertino-based company. Account weight that gives Tim Cook a lot of influence on TSMC.

Apple has the situation under control... except for emergencies

which Apple cannot control the geopolitical scenario that we are going through. More specifically, two threats that could have a significant negative impact on its future: the trade war between the US and China and the threat of war between Taiwan (TSMC headquarters) and China.

The Cupertino company, faced with these two potential events, is in a difficult position. relative vulnerability. The production of its products takes place mainly in China, the chips under development are manufactured at TSMC factories in Taiwan, etc.

To mitigate the impact of these potential events, the company is working on further diversification of production. Specifically, transferring some of these tasks to India and Vietnam, where a small percentage of their products are already produced. The process will take several years - mainly, according to some experts, due to the lack of a sufficiently skilled workforce in these countries - but it is underway.

What will happen to TSMC if China decides to go to war with Taiwan? This is a scenario that is troubling the entire tech industry and Apple in particular. If TSMC fails, no other company in the sector would have the capacity to meet his demand.. In addition, in many cases they could not match the technological level.

Faced with this almost catastrophic situation for the industry and, in part, for society, various stakeholders began to create lifelines. In particular, TSMC has almost ready to use: Chip factory in Arizona (USA).

TSMC's new factory is a salvation (at least in part)

The project was announced in 2020, but The first chips will leave the plant only in 2024.. However, the US industry did not want to wait until then to reveal the benefits of the plant, so this week in Phoenix, figures such as Joe Biden or Tim Cook took part in an event organized by TSMC for this purpose. The first public character to be produced in the new factory.

TSMC also took the opportunity to announce the construction of a second plant next to the originally planned one. It will produce 3nm chips, even more advanced than the 4nm chips that will be produced at the first plant. Work will begin in 2023, with production at the second plant expected in 2026.

According to the White House, both factories will be able to meet local demand for advanced chips. Both Apple and AMD and Nvidia will be among the first buyers.

Total TSMC invests $40,000 million at factories in the US, well above the 12 billion originally announced in 2020.

Establishment of this factory in the USA This will not mean the complete independence of Apple or other American companies., but represents a significant step in this direction. One that will be followed by many others from Samsung, Micron and Intel, who are also planning significant investments in local factories.

If the geopolitical situation becomes even more tense, Apple will find a lifeline in this plant to at least partially meet demand. And, in case it doesn’t, its creation will no doubt help mitigate the post-pandemic supply chain challenges.