Apple Has Reportedly Rejected TSMC's Chip Price Hike of 6%

I&#x27;d love to be a fly on the wall during these negotiations. Just to see what the heck they even talk about, what information each party comes armed with, and what kinds of concessions get offered.<p>I mean it isn&#x27;t just a &quot;we&#x27;ll lower this&quot; I bet there&#x27;s lots of juicy confidential future roadmap stuff, things like &quot;Ok we&#x27;ll help you invest in this _____ tech and machinery but you have to knock off half a cent&quot; or who knows what!

My reading of this is that Apple is happy to wait a bit on next-gen given the macro conditions. However if they just admitted that it would be a big hit to image. So instead they are looking to create scapegoats.<p>The most plausible scapegoat is the cutting-edge one with a price hike because there is maximum room for others to speculate on what isn’t right&#x2F;good enough, and there is minimum risk of giving up their spot in line.<p>By the time competition is up on it, Apple can return to their most familiar location: somewhat behind on the bleeding edge of tech, but ahead on integration and UX.<p>It’s also possible that Apple is going to take fab in-house but I’m not aware of any signs of preparation and something like that seems like it would be impossible to keep secret.

&gt; Apple has rejected these offers. [...] This may be one reason why we reported that the upcoming M2 Pro and the M2 Max for updated MacBook Pro models would be manufactured on the 5nm process instead of 3nm; both entities might not have reached a middle ground for price agreement.<p>This makes no sense?<p>M1 &#x2F; M1 Pro &#x2F; M1 Max &#x2F; M1 Ultra were <i>all</i> manufactured on TSMC N5, even though volume production for N5P (improved N5) was already available by the time M1 Pro &#x2F; Max were released. In fact, A15 (N5P) was released in September &#x27;21 whereas M1 Pro &#x2F; Max (N5) were released in October &#x27;21 and Ultra was released in March &#x27;22.<p>M2 is manufactured on N5P, so it makes total sense that M2 Pro &#x2F; Max &#x2F; Ultra will also be manufactured on N5P. They&#x27;re part of the same generation, so it makes sense to produce them on the same node.<p>This is also most logical from a financial standpoint: the base model M chips and the A chips are the smallest and therefore least expensive to produce on a new node with relatively poor yields and high prices. Once the node has matured a bit more (higher yields &#x2F; lower prices), you manufacture the bigger chips (Pro &#x2F; Max), and even later you print the big bois (Ultra)<p>M2 Pro &#x2F; Max &#x2F; Utra were never going to be N3.

TSMC charging 6% more for the 3nm process seems reasonable. Article notes Apple accounts for 25% of their revenue and says this gives them leverage over TSMC but aren&#x27;t they the only 3nm player in town?

It would be interesting to see what would happen if TSMC could fill the capacity with other orders. Quite possible, as it seems to be the most sought chipmaker.<p>What would Apple do in that case? Samsung doesn’t come close to TSMC just yet.

I would suspect the strong dollar is impacting these negotiations. TSMC is probably trying to maintain margins and Apple is bulking at the larger than normal price increase.<p>On one hand Apple doesn’t really have any other partner to go to that can deliver on 3nm or anything equivalent. On the other hand, at this point, does it even matter? Sure, it would be nice, but is it worth the cost?<p>TSMC also needs to look at it and say Apple accounts for 25% of our business and the most lucrative and prestigious 25% at that. Is it worth potentially harming the relationship?

What other options does Apple have? Intel doesn’t manufacture ARM chips (yet) and Samsung is 1+ process nodes behind the upcoming TSMC N3E

Apple has more to lose here as they&#x27;ve bet their future on Apple Silicons currently only manufactured at TSMC. So it is interesting to see them still trying to arm-twist TSMC - would love to see their playbook as this is something they are known to do with all their suppliers.

6% rate hike is pretty high especially as I&#x27;ve read recently a lot of the inflation costs have actually gone back into corporate profits instead of inflated products costs &#x2F; labor costs. Add in high cost of USD on global markets.<p>Interesting scenario with both parties squaring off.

Is there a special name for situations where you have only one or very buyers AND sellers at the same time? Like a combination of monopoly and monopsony power? I wonder how prices are discovered in situations like these?

Being almost completely uninformed on the details of Apple&#x2F;TSMC&#x27;s dealings, I&#x27;m curious, would Apple ever position themselves to get into chip fabrication? I&#x27;m sure there are big reasons this is unlikely but it seems like if anyone could do it, it&#x27;s Apple.

Apple blinked: <a href="https:&#x2F;&#x2F;www.macrumors.com&#x2F;2022&#x2F;10&#x2F;05&#x2F;apple-agrees-to-tsmc-chip-price-hike&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.macrumors.com&#x2F;2022&#x2F;10&#x2F;05&#x2F;apple-agrees-to-tsmc-ch...</a>

Looks like what this means is not that TSMC or Apple fold or even meet in the middle… the article implies that it’s sort of a stalemate that results in a short term lose-lose: products may get delayed or not be as good as they might otherwise be, investments get pushed out, etc.<p>Maybe Apple sees this (if we don’t pay, no one else will, so we don’t lose to another, but we don’t get the new fab) and thinks this is the optimal outcome. They are batting down the hatches prepared for a recession (and impacts of a super strong dollar), and cutting spending ahead of an expected demand drop.

Most of the comments seem to be reacting to the title rather than the content of the article.<p>Production of Apple chips by TSMC is not at stack. The price hike concerns the new 3nm process which is apparently costlier than usual. There apparently has been ongoing negotiation for a price hike for a bit which was rumoured to be 3% but seem to actually be 6%. Apple said they weren’t interested at this price point which means they probably won’t use 3nm for their next chips unless a different price agreement can be found.<p>This is not about Apple changing supplier.

Doesn&#x27;t Apple already pay TSMC literally billions to build new fab &amp; to get first access. This is outside the normal chip cost.<p>If so, seems like some hard bargaining happening on TSMC front.

I&#x27;m curious what sort of provision exists in the contract language if China invades Taiwan.

Will be interesting if Samsung buys TSMC 3nm capacity for their top-end :-)

Would be interesting to see if this opens up 3nm for AMD. Would love to see that in an AMD laptop

Apple tends to be overly concerned about every half cent in the bill of materials. This is why many of their accessories have substandard (weak) processors and flopped. HomePod used a 4 year old chip which wasn&#x27;t very responsive to voice commands.

&quot;Increase? But I&#x27;m getting 40% fewer nm&#x27;s!&quot;

1. Crazy to me to think apple can&#x27;t absorb 6% price hike on chips. their margins are usually so high.<p>2. But its awesome that apple can say no to price hikes. This is good economics for end users and its a reason why capitalism and markets are often good and produce lower prices

The only way to fight inflation is to refuse to pay inflated prices.