TSMC Absorbs Apple’s Defective 3nm Chip Costs
In a surprising turn of events, Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading chip manufacturer, has reportedly taken an unprecedented step to support Apple’s upcoming iPhone 15 Pro series. Ahead of the launch of the highly anticipated A17 Bionic chip, TSMC has reportedly not to charge Apple for the costs associated with defective 3nm chips—a move that could save Apple billions of dollars.
The introduction of cutting-edge chip technologies, such as the 3nm process, often entails a period of trial and error, resulting in a certain number of defective chips during the manufacturing process. Typically, chip manufacturers require customers to cover the costs of all chips, including defective ones. However, TSMC has chosen to make a unique concession to Apple, its longtime partner.
The scale of Apple’s order for the A17 Bionic chip is rumored to have provided TSMC with a valuable opportunity to expedite its learning curve and enhance the production process. As TSMC refines its 3nm chip manufacturing, it is expected that other customers seeking this advanced technology will emerge. This could enable TSMC to eventually demand higher prices from these customers and revert to charging for defective chips, once the production and yield issues are resolved.
Renowned analyst Ming-Chi Kuo, however, offers a different perspective on the situation. Kuo points out that Apple’s relationship with TSMC is distinct. Apple consistently seeks TSMC’s latest and most advanced node production services, recognizing that early-stage production of such cutting-edge chips tends to yield a higher number of defective units. Unlike most customers who purchase wafer lots and overlook the cost of defective chips due to TSMC’s reliable yields, Apple opts for a finished goods purchase. TSMC incorporates the cost of defective chips into the selling price of each finished chip, leading to an incremental increase in the cost of new processors used in iPhones over the years.
As the launch of the iPhone 15 Pro series approaches, the collaboration between TSMC and Apple showcases the lengths to which industry leaders are willing to go to deliver innovative technology to consumers. TSMC’s unconventional decision to forgo charging Apple for defective chips not only underscores the unique nature of their partnership but also highlights the ever-evolving landscape of advanced chip manufacturing. But there is a different point of view too.
In the fast-paced world of technology, this unorthodox move by TSMC raises intriguing questions about the dynamics between chip manufacturers and their high-profile clients. As both companies continue to navigate the challenges of producing cutting-edge components at any cost, consumers eagerly await the unveiling of the iPhone 15 Pro series and the performance prowess of the A17 Bionic chip.