Apple’s chip US move is as much about marketing as it is about technology

By on November 16, 2022 0


You can just imagine it now. It’s the year 2025 and Apple Inc. CEO Tim Cook has just taken the stage to announce the company’s latest gadget. It’s faster, more powerful, and in every way better than the previous iteration. And, one last thing: it contains chips made in the United States of America. The crowd applauds.

Apple, its main component supplier Taiwan Semiconductor Manufacturing Co., the US Congress and the Arizona state government have been working so far since the start of 2020. Dozens of press releases have been written, billions dollars spent and many speeches praising America. return to flea supremacy. After being a world leader in semiconductor manufacturing, the world’s great superpower has ceded control to Taiwan, which hosts more than 90% of the planet’s peak capacity.

During a meeting with employees in Germany recently, Cook revealed what the world knew: “We have already made the decision to buy a factory in Arizona, and this factory in Arizona is starting up in 24,” he said. stated in comments. reviewed by Mark Gurman of Bloomberg News. Apple is the world’s most valuable company, the top smartphone maker by revenue, and accounts for 26% of TSMC’s sales. And it’s American. So of course the company was going to get its supplies from this new factory. (To be fair, Cook didn’t name TSMC, but it’s highly unlikely he was referring to Intel Corp., which also operates factories in the state.)

Likewise, TSMC works closely with customers that also include Nvidia Inc., Qualcomm Inc., and Advanced Micro Devices Inc. — all American — and doesn’t make major decisions without consulting them. This year’s record $36 billion investment figure didn’t come out of nowhere, it was carefully planned after detailed discussions with the very customers who would buy capacity from the Hsinchu-based company.

While it’s a big step for Apple to buy US-made components, it barely moves the needle on global sourcing. On the one hand, the new TSMC factory will manufacture chips at the technological node of 5 nanometers. It was cutting edge last year, but the chipmaker has already moved to 3nm (smaller is better) and will be even further ahead by the time the factory opens in 2024 thanks to the dizzying speed of technical development. Apple is extremely unlikely to use Arizona-made processors to power its newest iPhones anytime soon.

Either way, TSMC won’t have the capacity. The new site will produce 20,000 silicon chip wafers per month. That’s less than 1.6% of the 1.3 million it currently produces each month. And even if it adds another factory in Arizona, as planned, the US factory will be far from being able to fulfill Apple’s total orders. More likely, it will get orders for a few key chips used in lesser devices like the AirPods, TV, HomePod, or Watch.

Then there is Europe. During his recent tour, Cook hinted that the continent would be another source of tokens. TSMC has no factories and has not announced any plans. Financially, it makes no sense. The chipmaker’s strength lies in its focus on one island with its facilities and engineers all a high-speed train ride from each other. This irritates customers, however, as Taiwan also faces greater risks as tensions with China escalate.

A new plant in Japan and the project in Arizona will already stretch its human resources, and another site on the other side of the world will make operations even more difficult. That said, chances are Germany will spend enough money and offer enough incentive to snag a factory, and the bragging rights that come with luring TSMC to its shores. Such a European factory would also not be state-of-the-art, and therefore unable to produce Apple’s most advanced processors used in iPhones, iPads and Macs. And it doesn’t matter.

What these factories are likely to offer are fewer components made using legacy manufacturing processes. And while older technology isn’t quite as cool, it’s essential to the global semiconductor supply chain. More chips are made today using techniques available in 2010 than those that debuted in the past two years. The recent shortage, which has affected products ranging from cars to computers, was largely due to capacity constraints for technology released a dozen years ago.

You won’t hear politicians bragging about spending billions of dollars (or euros) to attract a factory that makes “old” chips. But that’s the reality, and that’s perfectly acceptable because those are precisely the components the world needs most. Of course, Apple, Nvidia, Qualcomm, and AMD will be eager to announce their US-made chips, but the actual supply will be meager and tokenistic.

The goal of TSMC’s global expansion is not to distribute the world’s best chipmaking technology around the world. This is to allay concerns, increasingly voiced by business and political leaders, about having too much capacity concentrated in one place.

More from Bloomberg Opinion:

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• Big Tech should help us with our phone addiction: Parmy Olson

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News.

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