Apple Now Facing Unprecedented Competition for Chip Supply

[dypeterc]

Maybe time for Apple and the US to get into chip manufacturing so they are not dependent on Asia as the demand increases.

Biden got the ball rolling on this back in 2022 with the Chips and Science Act. Supposedly, it’s been a step forward but chip production is super capital intensive

Has the CHIPS Act created jobs? | Brookings

The CHIPS and Science Act of 2022 included funds for billions of dollars in federal investments in U.S.-based manufacturing, a major landmark in the history of America’s industrial policy. While the full impacts of such a large bill will take years to reveal themselves, new research shows that...

www.brookings.edu

Time for Apple to either acquire ASML (not sure how that’d work but it’s a pipe dream) or get into chip fab business. Even the news of this would pressure TSMC to reconsider their priorities

 

[Return Zero]

The AI bubble is screwing us all over in so many ways it's honestly astounding.

I mean this is true but it's also true that AI is a genuinely transformative technology that could change everything in the future, so it's not to say the growing pains won't be worth it in the end.

If you ask me, the last time we saw this kind of thing was the dot com bubble, which yes screwed everyone temporarily, but the baby minus the bathwater turned out to be pretty damn worth later on. Just think, now even kids can get into leverage trading partial shares of BRK.A on Robinhood and develop addictive/self-destructive behavior from a much earlier age than ever before possible.

 

[Unregistered 4U]

Didn’t Apple invest capital to expand these foundries? Surely they have a clause in their contract for minimum capacity allocation?

In those foundries that grew as a result, but anything new that TSMC has been able to build since then wouldn’t be a part of that. And, anyway, as we’ve seen with many stories that include the word “Apple” in the Jan slow news cycle, everyone’s eager to grow their subscriber base to keep revenue up during these slow times, so it doesn’t even matter if whatever’s posted comes to pass, just that people link, cross link, and subscribe to the author’s newsletter.

 

[dypeterc]

People who keep saying there's an "AI bubble" don't know what they're talking about.

Refer to Taiwan Semi's earnings report yesterday. They cannot meet all the demand they're seeing. There's so much demand that they're increasing their 2026 capital expenditures by up to 40% vs 2025's capex to meet all that demand.

Taiwan computer chip maker TSMC to expand investment as profit jumps 35%

Taiwan-based TSMC, the world's largest computer chip maker, says it plans to increase its capital spending by nearly 40% this year after it reported a 35% jump in its net profit for the latest quarter

abcnews.go.com

HONG KONG -- Taiwan-based TSMC, the world’s largest computer chip maker, plans to increase its capital spending by as much as nearly 40% this year after it reported a 35% jump in its net profit for the latest quarter thanks to the boom in artificial intelligence, the company said Thursday.

Taiwan Semiconductor Manufacturing Corp., a major supplier to companies including Nvidia and Apple, reported a net profit of 506 billion new Taiwan dollars ($16 billion) for the October-December quarter, a 35% surge from a year earlier, better than analysts’ estimates.

TSMC said it plans to boost its capital expenditure budget to $52 billion - $56 billion for 2026, up from about $40 billion last year.


They wouldn't be investing that much money to build out their manufacturing if there wasn't strong demand that will continue for years and years.

TSMC forecasts 2026 sales to grow almost 30%, capex to expand - Focus Taiwan

Taiwan Semiconductor Manufacturing Co. (TSMC) expects its sales to grow almost 30 percent in 2026 on robust AI demand and a recovery in non-AI applications, and will raise its capital expenditure by up to 37 percent to meet clients' needs.

focustaiwan.tw

Taipei, Jan. 15 -- Taiwan Semiconductor Manufacturing Co. expects its sales to grow almost 30 percent in 2026 on robust AI demand and a recovery in non-AI applications, and will raise its capital expenditure by up to 37 percent to meet clients' needs.

At a closely watched investor conference Thursday, TSMC Chairman and CEO C.C. Wei forecast sales growth of almost 30 percent in 2026 in U.S. dollar terms, far higher than the 14 percent growth projected for the entire global pure play wafer foundry market.

In the wake of robust demand for AI applications, 5G services and high performance computing devices, Huang said TSMC will raise its capex for 2026 to a range between US$52.0 billion and US$56.0 billion, up 27-37 percent from US$40.9 billion in 2025, when the figure was also 37.4 percent higher than in 2024.

This is THE definition of a bubble. Rapid expansion and commensurate values

 

[code-m]

The AI bubble is screwing us all over in so many ways it's honestly astounding.

Humans self-demise being accelerated by greed, anyone ask the question who actually trains these AI models? Most is through exploitation.

 

[Unregistered 4U]

If they do the Intel deal as rumored, Intel will contract manufacture the chips in (I think) Arizona and elsewhere. Tim Cook may suck at managing software development, but he is a supply chain genius.

The important part of that idea is Intel actually meeting the contracted goals. They’ve not shown any ability to perform any better than they have historically, so counting on Intel is going to remain a bad bet. The story says Apple are competing, but it does not say that they’re not winning that competition, just that the rules have changed. Apple with their considerable buckets of money are still in an advantageous position.

 

[turbineseaplane]

Gonna have to raise prices y’all
😛

 

[Unregistered 4U]

For people thinking Apple can just "own" a fab, no.

It's not like buying a coffee machine. Most of the expensive, time consuming, and risky part is development work of new processes and nodes. You then need the volumes to match up with those expensive nodes to pay for NRE.

Do some people think TSMC just buys ASML machines, runs them, and collects profits?

Some folks think that Tim Cook waves his hands and iPhones magically appear in shops worldwide! To them, since it’s so easy for them to produce, they don’t deserve to sell the phones for more than $50 and they shouldn’t profit from the App Store at all, so I wouldn’t be surprised if people misunderstood TSMC.

 

[code-m]

Regulation is needed in this area.

Free market. If consumer electronics and computers get expensive then people will be unable to purchase it due to budget concerns. Businesses operating cost will go up and directly affect the cost to the customer and contribute to tight budgets.

AI companies will be spending so much on hardware, software and human labour for now that it will push people to cloud computing or just boycott AI. Business will be also facing a similar predicament, higher cost of hardware, paying for AI integration or licensing and consumer acquisition cost will be higher.

 

[code-m]

this too shall pass

It will but at what cost and what will be the end result.

 

[code-m]

Maybe we just have to look at this in a different way. Maybe people will continue to use their computers longer and realize upgrading as often is really not necessary.

Yet Apple still sells entry Mac models with 256GB of storage when it would be better with 512GB from a longevity perspective.

 

[Pezimak]

It is inevitable that the damage being caused by the Ai boon was going to impact Apple, I fully expect price increases across the board of their products. Heaven forbid they ever reduce that 30 odd percent profit margin.

 

[jarman92]

but it's also true that AI is a genuinely transformative technology that could change everything in the future, so it's not to say the growing pains won't be worth it in the end.

I don't believe there's any evidence that that's true, and that "could" is doing a hell of a lot of work.

 

[code-m]

Intel will also prioritize AI customers as soon as they can if AI customers pay more. Only regulations will help to control greed. But we voted for no regulations.

AI is anything but green. It uses a lot of electricity to operate and water to cool for hardware that is short-lived. Added to that we have electric vehicles and other things that are demanding more electricity and you will soon learn that this is not sustainable from an environmental aspect.

 

[RKYA8866]

Can’t help but laugh about this. Apple has been taking advantage of everyone from vendors, “partners”, and customers and now they have to somewhat conduct business in a more conventional way and face some competition.

 

[840quadra]

So much for loyalty for a brand / customer that helped grow TSMC . Though I know Apple also will pull a switch on partners as well. Looking back to the AIM (Apple, IBM, Motorola) alliance and Intel dealings likely makes any Apple partner a bit cautious.

 

[falainber]

Regulation is needed in this area.

Now you want more regulation! Regulate Apple suppliers not Apple!

 

[I7guy]

Free market. If consumer electronics and computers get expensive then people will be unable to purchase it due to budget concerns. Businesses operating cost will go up and directly affect the cost to the customer and contribute to tight budgets.

AI companies will be spending so much on hardware, software and human labour for now that it will push people to cloud computing or just boycott AI. Business will be also facing a similar predicament, higher cost of hardware, paying for AI integration or licensing and consumer acquisition cost will be higher.

So I’m told regulations are good. Helps the little guy out.

 

[I7guy]

Now you want more regulation! Regulate Apple suppliers not Apple!

Bring it on. MR posters seem to think regulations will solve many issues in the industry.

 

[ghanwani]

Cool. We can now blame AI for inflation and shortages in everything.

 

[840quadra]

AI is anything but green. It uses a lot of electricity to operate and water to cool for hardware that is short-lived. Added to that we have electric vehicles and other things that are demanding more electricity and you will soon learn that this is not sustainable from an environmental aspect.

Yes on Electricity, and "depends" on water. Most of our new builds (I work for a datacenter company) use recirculated air-cooled systems (like a cooling system in your car), which heat exchange to a subordinate CDU system that recirculates its own (even cleaner) water.

Some sites / builds still use cooling towers, however as Ashrae eases up on cooling requirements, and as firms like Nvidia allow for even warmer liquid cooling temps, the demand on water (for cooling tower sites) should go down as well.

 

[code-m]

Even Apple being the richest cannot compete with AI. The AI-companies print money by just investing in each other and they can pay whatever crazy money to be able to get all the fab they want. The demand is impossible to satisfy and due to endless amount of investor money, they can just pay whatever sum they can come up with to kick out all other customers.
There is a reason RAM price is skyrocketing; AI just sucks all available fab up and they pay crazy premium. The rise in RAM pricing is only due to the limited supply.

Not only RAM prices skyrocketing, storage and now CPU prices will go up. Think of every device that uses some sort of CPU in it like cars, smart appliances, power adapters, smart monitors etc.

It seems AI will bring the industry to a crawl if like the CPU crunch during the pandemic.

 

[code-m]

So I’m told regulations are good. Helps the little guy out.

It depends on perspective. Some regulations are required or needed for the very reason you mentioned to help the little guy out while other times the good intention can have consequences just like not doing anything. It’s a balancing act and we don’t know if it’s even needed here yet relating to AI scooping up and jacking up prices.

 

[darkblu]

Not only RAM prices skyrocketing, storage and now CPU prices will go up. Think of every device that uses some sort of CPU in it like cars, smart appliances, power adapters, smart monitors etc.

It seems AI will bring the industry to a crawl if like the CPU crunch during the pandemic.

Those embedded CPUs/MCUs don't use TSMC's recent fabnodes. So don't assume this to be a 2020 redux in this aspect. These are brand new challenges. Namely that we (collectively we, not just industry investors) put too much money in the pockets of a few companies, which money now destabilizes the chip markets.

 

[falainber]

It's really simple. NVIDIA sells their AI chips for tens of thousands of dollars. Apple can't compete with that. Their customers (indirectly via iPhone BOM) won't pay more than a few hundreds bucks for the chip. Granted Apple chips might be smaller (less silicon) but they are not that small either.

And, in the end it is the customers that determine what they want more: AI or iPhones. It's not government business to tell us what we want/need. I do not see a problem here.