I think most people call it inflation. Inflation, economic fallout of CV19 pandemic and policies, recession. Interesting times.
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Apple Reportedly Agrees to TSMC Chip Price Hike After Refusing Last Week
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Not likely that TSMC would purposely, let alone "gladly," give up its biggest most stable customer for a different customer that has a long history sourcing production capacity elsewhere.
Except that anyone who actually thinks realizes that "just increase the cost of our phones" is not as simple as folks who do not think may believe. Because just increase the cost of our phones has impacts all the way back the supply chain, duh. Higher phone prices usu mean lesser unit sales which means less component sales all the way back the supply chain, duh. Less component sales means less economies of scale all the way back the supply chain, duh. Less economies of scale all the way back the supply chain means everyone makes less profit, duh.
So yes, it is a problem for all.
Apple adds a fixed percentage on top of COGS (cost of goods sold) to hit their expected GPM (gross profit margin). For Apple it's currently around 40%.
It's the way corporations, large and small, work.
Right, but it's the "currently at" portion that needs evaluated. It's at that point because that's where Apple has determined profit is maximized. Let me ask you this, would you pay $3,000 for an iPhone? Maybe but how many people would be willing to pay that much? My point is that people have a limit and how many sales they loose for each price increase directly affects profit. Charging more may not be the point where that happens.
For Apple to all of a sudden charge $3,000 for an iPhone tomorrow, Apple's iPhone COGS (materials, labor, freight, etc) would have to instantaneously more than double.
That's not likely. And because Apple materials purchasing and manufacturing managers are shrewd, Apple competitors who buy similar materials and manufacturing services to manufacture their phones, will be subject to the same increases on COGS. Apple phone competitors will thus need to meet their wall street-expected GPM and will need to increase their prices to around $3,000 for an equivalent phone. Would there be pushback from customers? Sure. But that would be the same with Apple phone competitors.
Not a likely scenario, but that's what would need to happen.
"Maybe but how many people would be willing to pay that much?"
Likely far less than now. Apple would need to reevaluate the viability of that market, and come up with other solutions (better technology, more efficient manufacturing, etc) to drive down COGS. As would Apple competitors.
Like you? I assume you're an Apple fan since you frequent this website designed for Apple fans.
You're correct that Apple customers will have this cost passed onto them, just like any business would.
TSMC is a single source. As far as Apple is concerned, they are a monopoly with pricing power. If Apple wants pricing power back they will have to develop a new source capable of achieving the semiconductor manufacturing process capabilities that, right now, only TSMC can achieve.
If they switch to 3mn they will get a larger yield of chips per wafer. It's possible it will still be cheaper for apple to make chips with a 3nm process even if TSMC charges 3-5% more per 12" wafer. It just won't be as steep of a discount that Apple was hoping to get due to the larger yield. Smoke and mirrors!
Maybe this has something to do with a sudden departure at Apple...?
Samsung supposedly has made great strides with 3nm and Intel has aggressive plans for their fab business. My guess is Apple is keeping their options open.
The US Dollar is getting really strong, even China is struggling financially. Perhaps what Foxconn was asking for became more affordable for Apple. 🤷
www.bbc.com
Five reasons why China's economy is in trouble
President Xi Jinping faces his greatest challenge yet ahead of a historic Communist Party meeting.
www.bbc.com
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Seems like a price hike for the products launched with 3nm chips might happen.
you needed a class to tell you that? sumerian farmers realize this when they try to trade their crop
Suppliers are going to have a field day with "The Blevinator" off collecting race cars, playing golf and fondling large breasted women... his dental plan is gone though. 🤭
And with contingencies, for example: a certain minimum baseline quantity prix fixe, more units ? get a discount on those, less? more $ per unit, failure of supplier to fulfill base contract for quantity/quality? huge penalties or breach of contract lawsuit