TSMC increased its chip prices by 3% for Apple while others faced 20% rises

[midian182]

In context: We recently heard that TSMC was making the most of the stratospheric demand for chips by notifying clients it will increase contract prices by up to 20%. That’s unwelcome news for the likes of AMD, but it seems Apple has less to worry about: Cupertino’s status as the company’s biggest customer has earned it preferential treatment, so its prices are going up by just 3%.

Last month brought reports that TSMC had already informed its clients of the 20% hike, which likely means the current shortage of GPUs, CPUs, consoles, phones, etc., is unlikely to alleviate soon. What’s worse is the potential for their retail prices to increase as a result.

But it appears that TSCM doesn’t want to hit its main client, Apple, with a bigger bill. According to semiconductor analyst Lu Xingzhi (via ITHome), the Cupertino firm’s orders account for more than a fifth of TSMC’s revenue, explaining why its prices have gone up by just 3% while other customers are paying 20% more.

TSMC favoring Apple isn’t too surprising. The US firm is reported to have ordered more than 100 million A15 Bionic chips from its supplier to (hopefully) ensure the iPhone 13 doesn’t face the same kind of availability problems plaguing so many products these days, from graphics cards to PlayStation 5 consoles.

We’ve also heard that Intel and Apple will be the first to adopt TSMC’s 3nm (N3) process node once mass production begins, likely sometime in the second half of 2022. Though, we’ve also heard that Intel has secured the majority of this node’s production capacity.

It will be interesting to see if the iPhone 13 and the latest M1X MacBook Pros prove more expensive than anticipated due to the 3% increase. We’ll find out if this is the case when they’re unveiled sometime in the next few weeks.

Masthead image credit: Laura Ockel

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https://www.techspot.com/news/91121-tsmc-increased-chip-prices-3-apple-while-others.html

 

[winjer]

That's not a problem. Companies will just increase retail prices by 100%, to compensate.

 

[George Keech]

Ah Capitalism at work

 

[Kosmoz]

That's not a problem. Companies will just increase retail prices by 100%, to compensate.

For those that suffer a 20% increase in costs, they will go for 100% in prices, but Apple for that 3% will take an extra Apple tax, so that means a 133% increase in price... because Apple LOGIC.

 

[punctualturn]

As much as we hate apple, maybe Tim “dont be poor” Cooks foresaw this and signed some crazy and strict contract with tsmc.

Hate the dude, but apparently, his forte is properly planning their supply chains.

 

[Dimitriid]

Only play here is for AMD to take over most of the 5nm capacity and force Apple to go all in with 3nm capacity.

I know it's not ideal but since AMD is not actually making phones or tablets they probably could stay relevant on 5nm for the next couple years.

Of course a better solution would be for obvious favoritism and unfair business practices to be brought up in what by almost any measure seems to be a transparent attempt at price fixing but I doubt the rest of the companies have the political juice to kick in such an effort to bend chip foundries into submission: they're smart enough to keep the elephant in the room happy.

 

[Puiu]

Surprised that AMD is making both GPUs and CPUs with less than 10%.

 

[emmzo]

Ah Capitalism at work

And globalism. In the pursuit of maximum gains, the most semiconductor industry moved to China/ Taiwan. Nobody cared of their own countries/ citizens. Why should they? But oops, now the Chinese have a monopoly and they will play their cards well. Even if this crisis goes away, be sure it will be another. And now, you`re thinking, are these guys going to pay? All these big companies, that made trillions have suddenly become slaves to the Chinese? No, no, no, nooo. You have become their slave, the average guy, because all price increases will only hit you.

 

[ScottSoapbox]

This is an example of buyers and suppliers power in Porter's five force model (see Harvard Business Review). #Business!

 

[seeprime]

Only play here is for AMD to take over most of the 5nm capacity and force Apple to go all in with 3nm capacity.

I know it's not ideal but since AMD is not actually making phones or tablets they probably could stay relevant on 5nm for the next couple years.

Of course a better solution would be for obvious favoritism and unfair business practices to be brought up in what by almost any measure seems to be a transparent attempt at price fixing but I doubt the rest of the companies have the political juice to kick in such an effort to bend chip foundries into submission: they're smart enough to keep the elephant in the room happy.

Existing contracts steer what happens in pricing. The original WSJ story states "up to 20%", not 20% for everyone but Apple.

 

[winjer]

As much as we hate apple, maybe Tim “dont be poor” Cooks foresaw this and signed some crazy and strict contract with tsmc.

Hate the dude, but apparently, his forte is properly planning their supply chains.

He didn't plan anything like that. No one foresaw the pandemic, the massive increase in demand and the crypto surge.
The thing is that Apple invests billions in TSMC, and because of that each new process node is tailor made for Apple. Pissing of your biggest partner and client, would be a very stupid move.
So TSMC made a lower rate with Apple. They sacrifice some earnings now, but will maintain it's most important client.

 

[pelopidas]

Ah Capitalism at work

When you simplify incredibly complex environments into a single explanation bumper-sticker, you do yourself and the discussion a disservice.
You could, for instance mention the water supply issues that TSMC is experiencing, or you could wonder about the devaluing dollar in foreign exchange, and then it would seem like you are thinking about a complex problem. But blurting “Capitalism” makes one wonder if multifaceted analysis of complex problems is always reduced to “Capitalism”.

 

[Reehahs]

Meanwhile, the TSMC workers will hardly see their wages increase.

 

[Rayneofpayne]

I thought and swore they stated that
2-3% for Phones
10% for Computer GPU and CPU
20% for Auto industry and other industrial chips........

Mainly it had to do with how much was being charged per chip and yield as well as fab line tooling and full amount of the orders....

 

[George Keech]

When you simplify incredibly complex environments into a single explanation bumper-sticker, you do yourself and the discussion a disservice.
You could, for instance mention the water supply issues that TSMC is experiencing, or you could wonder about the devaluing dollar in foreign exchange, and then it would seem like you are thinking about a complex problem. But blurting “Capitalism” makes one wonder if multifaceted analysis of complex problems is always reduced to “Capitalism”.

I would say my main point is at the overall lack of suppliers firstly but that secondly. Apple are getting away with lower charges what's that got to do with water. Everything in life is multifaceted however it's surprising how many things come down to generalisation for issues.

And honestly most things that happen in life come down to money and power

 

[kiwigraeme]

Just from reading this article- seems all to simplistic .

My take - Apple is known for very strict supplier contracts - so maybe TSMC can only pass on certain costs .
TSMC is in the drivers seat - Apple has no loyalty -never ever - so make hay while sun shines .
Remember Apple Vs Samsung - Apple stilled use Samsung tech etc

So nothing to do with loyalty - Apples loyalty is just to shareholders and directors and no one else .

Plus TSMC is probably getting underwritten by Apple for R&D - ie providing a lot of feedback on 3nm etc - This would not be a one way flow- so other customers are picking up more mature tech

 

[pelopidas]

I would say my main point is at the overall lack of suppliers firstly but that secondly. Apple are getting away with lower charges what's that got to do with water. Everything in life is multifaceted however it's surprising how many things come down to generalisation for issues.

And honestly most things that happen in life come down to money and power

Most things do not come down to money and power. Those people who are obsessed with obtaining either tend to make a mess of the world but most things come down to family and community and the free market is primarily based on service. If you forget service your model is reduced to merely money and power. That is the Chinese model.

 

[Watzupken]

The news is not surprising actually. TSMC and Apple had been together as a strategic partner for quite a long time. When there is a new node, Apple tends to be the guinea pig, and also the main buyer. We've seen this quite often when the risk production of a new node always starts with Apple's SOC. While at this point, there is a supply shortage, but it will do TSMC more harm by annoying Apple off when things normalise since they contribute materially to TSMC's profit in good or bad times. While AMD is also quite a big user of TSMC's node, unfortunately they don't contribute anywhere near Apple because they tend to go with the second best available node, I.e. when Apple is on N7+, AMD is on N7, etc...

 

[George Keech]

Most things do not come down to money and power. Those people who are obsessed with obtaining either tend to make a mess of the world but most things come down to family and community and the free market is primarily based on service. If you forget service your model is reduced to merely money and power. That is the Chinese model.

I mean in reality Money and power is everything - it should be family and community but it isnt

 

[Ludak021]

"the Cupertino firm’s orders account for more than a fifth of TSMC’s revenue, explaining why its prices have gone up by just 3% while other customers are paying 20% more."

The way I read this is: if others leave, TSMC will only have 1/5th of their business left.

 

[Tantor]

"According to semiconductor analyst Lu Xingzhi (via ITHome), the Cupertino firm’s orders account for more than a fifth of TSMC’s revenue, explaining why its prices have gone up by just 3% while other customers are paying 20% more."

I doubt that it explains anything.

Apple is at the mercy of TSMC, not the other way around. Apple has nowhere to go, whereas TSMC's production capacity is in big demand.

 

[Avro Arrow]

If only GlobalFoundries could sort itself out...