In 2008 Apple acquired a small fabless PowerPC chip design company called PA Semi for 278 million dollars. Two years later they debuted their first in-house design system-on-a-chip, the A4 in the Apple iPad. This system-on-a-chip basically puts almost all the functions of a computer on a single piece of silicon to improve performance & reduce power consumption. This is really important for compact phones which have limited amounts of space and power. Since then the sophistication of the A4 series chip has skyrocketed, making Apple chips the fastest in the market. The A7 chip in the iPhone 5S, in particular, went 64-bit, way ahead of the competition catching competing companies like Qualcomm off-guard.

Four years later the A11 in iPhone 8, produced Geekbench scores that aren’t on par with laptop processors. These are really amazing chips that Apple does not make,  you see they only design the chip but they do not manufacture it. That rough work is outsourced to another company and that company is the biggest semiconductor company in Taiwan even in the world too. Yet few have ever heard of Taiwan Semiconductor Manufacturing Company or TSMC. So what does this TSMC do? And how did Apple change TSMC? Let’s find out.

Overview

TSMC started its journey in 1987 with the partnership of Taiwan, Philips, and Morris Chang, the founder, and ex-CEO of TSMC. But when the company was founded, there were already some legacy players like Intel, Texas Instrument, and NEC dominating the market. So to build their position in the market TSMC took years to develop and manufacture advanced semiconductors as the brand value doesn’t matter in this industry. 

Though the first chips TSMC produced were 2 process nodes that were 2 generations behind the market, Morris somehow managed to attract the customers at a low cost. In other words, Morris sold the first chips of TSMC at a loss. But it was necessary to fill the gap so in 4 to 5 years, TSMC was able to reduce the gap between 1 node processor. 

That same year in 1993, Morris also took TSMC shares public through Taiwan Stock Exchange and after 4 years TSMC was the first Taiwanese company listed on New York Stock. With that public share and Dot-com Bubble, Morris was able to conduct the most aggressive strategy in the 1990s. This resulted, in the company introducing the world’s first 0.18-micron (µm) low-power process technology in 1998 and continued to roll out new low-power processors every two years. This aggressive R&D and introduction of new advanced processors eventually led TSMC an industry leader. 

As the mission was accomplished, Morris at age of 70 handed over the position of CEO to Rick Tsai in 2005. Under Rick’s leadership TSMC continued its rapid innovation of chips and between 2006 to 2008, the company took its biggest jump of innovation from 65 nm chips to 40 nm ones. 

Apple’s Contribution 

Despite the company progressing fast, they were not able to do much business due to experiencing a massive recession in the chip industry with the Dot-com Bubble. But when this recession rolled out, Morris saw a big opportunity for the semiconductor industry through the emergence of mobile technology like smartphones and tablets, in short, his next big customer Apple. 

So he held back the TSMC ship sail at age of 78 in 2009 and worked on cracking a deal with Steve Jobs. However, the dream became true in 2011 when Apple agreed to run a trial production of A5 and A6 with TSMC.

After that, it didn’t take long for TSMC to become a long term supplier of Apple and along with that TSMC also got some big-shot deals including AMD, ARM, Broadcom, Marvell, MediaTek, and Nvidia. Now if we take a look at the whole chip industry market, TSMC alone is holding a share over 52% in the global market in 2021 according to Statista. However among those big industry players, Apple was always a big prime customer for TSMC. As the other companies working with TSMC mostly work on inventories where Apple sells finished products at a flagship price, it was a great opportunity for TSMC to make a good amount of money. 

Though Nvidia is also shipping their flagship A100 compute GPU for data centers and high-performance computers from TSMC, that’s only in a limited number. Even once the second-biggest customer of TSMC, Huawei has also ended the business due to US- China issues. So TSMC’s ultimate target was to satisfy Apple, and to match the pace of Apple introducing new iPhones and Macbooks every year has initiated TSMC to refuel its R&D strategy. After the trial production of A5 and A6, Apple agreed to continue their business with TSMC for their further production.

Leading semiconductor foundries revenue share worldwide from 2019 to 2022, by quarter

And in September 2014, Apple first fabbed their customer with the TSMC-produced 20 nm processor. But that was not enough for Apple to rely fully on a sole supplier so news came out that Apple was looking for a 2nd supplier. Even for iPhone 6S and 6S Plus, Apple dual sourced the A9 chips from both TSMC and Samsung. But a brouhaha arose by the media alleging Samsung chips for worsening battery life. Along with that, the patent war that started between Samsung and Apple in 2011 for design and utilities was also a big reason for Apple to end its partnership with Samsung. 

After all, doing business with a rival company is not a wise thing to do. Where else, TSMC never goes into competition with their customers and maintains these core values strictly. Therefore Apple feels TSMC was more trustable for doing business with. Apple decided to single-source chips from TSMC, in 2016. This means TSMC has to introduce new and better chips every year to fulfill Apple’s new iPhone demands.

And that cost a bit hard for TSMC. Morris invested 9 Billion Dollars and 6000 people on work to build a new fab for Apple. Thus it was a big commitment, and only a few companies at that time could invest so much in their business. However, that huge investment didn’t go to waste and after starting business with Apple, TSMC’s revenue grew twice from its previous 5 years. 

With that now Apple is contributing 26% of TSMC revenue which is approximately $14.27 billion. Along with growing the business Apple also was the reason for TSMC to introduce new and most innovative chip wafers every year. If we see the previous graphs of TSMC chips we can see a big gap between the innovations of new chips.

But for Apple’s strategy has to be changed, so Morris gets along with a half-step strategy. This was a step ahead from the American giant Intel that was using a Tick-Tock strategy for years and brought new chip sets roughly between 18 months to 2 years. 

While, with half step strategy TSMC decided to improve their chip performance 10-20% every year. For example if you differentiate the latest iPhone 13 Pro’s A15 Bionic Chip with the A14 one, you won’t see big mesmerizing innovation. Yet, you can see a faster and power efficient performance from the previous model while both are manufactured with 5nm chips. Even the term nanometer is just used for marketing, as there is no size difference between a 14nm and 7nm chip. 

Apple A15 Bionic vs Apple A14 bionic: Benchmark

In short, it is just a wise decision of Morris to take little steps instead of unnecessary high-risk jumps. So the company is still able to pull out new and improved chip nodes every year and fulfill the demand of its most important customer, Apple. This eventually cleared the fact that behind TSMC big shot success and innovative chipset Apple has a deep influence. Also, working with a tech giant has increased the growth rate and potentiality of this Taiwanese company. It is now the world’s largest semiconductor foundry. 

Final Say

And as a remark of the influence, TSMC is soon going to show its new charm with the 3 nm chips starting production in the later half of 2022. The DigiTimes Asia reports state that the company is planning to manufacture a set of 30000 to 35000 wafers using the 3nm chip. And possibly iPads are going to be the first products that will be introduced with this N3, according to Wccftech. Doesn’t matter what product Apple is putting the new chipset in but this is going to be a game-changer for the world and TSMC too.