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What happens when the world’s most ambitious mobile chip designer is constrained by the production capacity of its sole chip-making partner? Thanks to Apple’s unveiling of the M1 chips for Mac this week, we may find out soon, but major chipmaker TSMC won’t be to blame.
It is not an exaggeration to say that Apple has boosted the entire mobile chip industry and is now poised to do the same for PC chips. In 2013, Apple released the world’s first 64-bit mobile CPU, A7, which surprised rival chip designers by bringing iPhones closer to processing parity with lower-end PCs. Five years later, the A12X Bionic allowed iPad tablets to match the performance of the more expensive Intel Core i7 MacBooks, heralding the end of Apple’s need for Intel chips. Now the M1 is here, and thanks to an innovative 5 nanometer manufacturing process, the tiny chip contains enough transistors to power both desktop and laptop PCs.
In the past, Apple has blamed its CPU manufacturing partners for not keeping up with or exceeding industry trends, suggesting that it could only evolve its Mac computers with newer, more energy-efficient parts made by someone else. Now Apple is in full control of the Mac’s fate, relying on its long-term partner TSMC to make chips based on Apple designs. And while the companies have collectively bet on cutting-edge 5-nanometer manufacturing technology to differentiate Macs from rival PCs, it is highly unlikely that Apple will blame its Taiwanese manufacturer for any of the evolutionary failures of the Mac going forward. For better or for worse, Apple is making all the decisions now.
Apple’s stormy relationships with previous chipmakers were legendary: The company publicly ended its PowerPC CPU relationship with IBM in 2005, removed Samsung from its mobile processor supply chain in the mid-2010s, and started to get away from Intel, first for modems, then for CPUs: over the past year. When it comes to IBM and Intel, Apple went for greener chip pastures, but with Samsung, Apple wanted to stop buying parts from a company that was actively competing in its core mobile and PC businesses. Piece by piece, TSMC won the chip business that others lost.
There is no doubt that TSMC has been a strong partner for Apple. Backed by huge Cupertino budgets, TSMC has enhanced its manufacturing capabilities countless times to keep Apple’s latest chips at the forefront of processor technologies. It is now responsible for supplying literally hundreds of millions of A-series processors each year and is widely recognized as the world’s leading chipmaker, even recently offering support to Intel.
But a South Korean business report this week suggested that TSMC may not have enough 5-nanometer chip production capacity to meet Apple’s growing needs. As rivals like Qualcomm began moving its chips to 5-nanometer technology, Apple reportedly shut down all of TSMC’s 5-nanometer production facilities for its latest A and M series processors. The Korean report suggests that Apple will turn to the The world’s only other 5-nanometer chip maker, Samsung, to supply 5-nanometer Mac chips if TSMC’s capacity is insufficient. That could happen, but it could be an illusion: There seemed to be a lot of that in South Korea as the Apple-Samsung relationship deteriorated.
If TSMC is legitimately restricted, that could threaten the short-term supply of iPhones, iPads, and / or Macs that rely on 5-nanometer chips. Still, Apple has many alternatives. Offering Samsung a supply contract is one of the most important solutions; Paying TSMC to quickly bring more production capacity online is another. To deal with short-term problems, Apple could prioritize iPhone chip orders over other devices over a period of time and let possibly less important sales of the M1 Mac or iPad Air temporarily drop due to “overwhelming demand.” Or you could adjust iPhone, Mac, or iPad prices to move demand for specific models closer or closer.
The biggest concern is that TSMC’s limited 5-nanometer capacity could push Apple to lower its ambitions, with future Macs, iPads, Apple Watch, and Apple TV being stuck with chips based on older production technologies. . Although the first M1-based Macs use 5-nanometer lithography, Apple could be forced to step back from a 7-nanometer process to make chips for the next iMacs or Mac Pros – exactly the same “fall back on what is. available “that Apple enraged. in its dealings with IBM and Intel.
However, when you consider the scale of Apple’s various product lines, Macs are unlikely to stifle TSMC’s production capacity. Annual unit sales of Macs (~ 20 million) are roughly one-tenth of those of iPhones (~ 200 million). So during the M1 surge, TSMC could add another 10 million Mac chips to perhaps 100 million 5-nanometer iPad Air and iPhone 12 chips. Additionally, Apple is controlling the pace of acceleration and has given itself two years to fully transition from Macs to chips made by TSMC. Assuming TSMC later supplies all of Apple’s demand for Mac chips and demand grows dramatically, the total number of chips would still be in the range of just 20 million to 30 million chips per year. That’s dwarfed by the number of iPhones, iPads, Apple TVs, and Apple Watches that use the A- and S-series processors made by TSMC annually.
Despite the South Korean report, TSMC might not have a problem. Backed by Apple, TSMC has historically done a solid job of scaling its manufacturing capabilities to meet growing demand. And this is not a static situation: chip manufacturing is constantly evolving and TSMC is already working on several generations of even smaller chip manufacturing technology. As cutting-edge as the 5-nanometer process may seem today, it will be firmly established and improved next year, allowing TSMC and Apple to begin selling 3-nanometer chips in 2022. Therefore, Apple and TSMC are likely to continue balancing chips and devices across multiple manufacturing processes, bringing in new as old fade away.
In any case, Apple has invested too much in TSMC’s success to create problems with its main chip-making partner in the short term, if it ever has. Their collaboration has already yielded countless dividends on iPhone and iPad chips and is poised to raise the threshold of performance for entry-level Macs. And there are many reasons to expect them to do the same for high-end computers by this time next year. So don’t bet TSMC has the same kinds of problems with Apple that eventually happened to Intel and IBM; this was a different kind of relationship from the beginning, and one that could actually last.
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