Apple’s US chip move is about both marketing and technology


You can just imagine it now. The year is 2025 and Apple Inc. Chief Executive Officer Tim Cook has just taken the stage to announce the company’s latest gadget. It’s faster, more powerful, and better than the previous iteration in every way. And one more thing: it contains chips made in the USA by A. The crowd applauds.

Apple, its key component supplier Taiwan Semiconductor Manufacturing Co., the US Congress and the Arizona state government have been working on this moment since early 2020. Dozens of press releases have been written, billions of dollars spent, and numerous speeches made praising America’s return to chip supremacy. The world’s great superpower, which was once a world leader in semiconductor manufacturing, has ceded control to Taiwan, which hosts more than 90% of the planet’s peak capacity.

At a recent meeting with employees in Germany, Cook revealed what the world knew: “We’ve already made the decision to buy a plant in Arizona, and that Arizona plant will start operating in 24,” he said in a comment reviewed by Bloomberg News’ Mark Gurman. Apple is the world’s most valuable company, the top-grossing smartphone maker, and accounts for 26% of TSMC’s revenue. And it’s American. Naturally, the company wanted to source from this new factory. (To be fair, Cook didn’t name TSMC, but it’s highly unlikely he was talking about Intel Corp., which also operates factories in the state.)

Likewise, TSMC works closely with customers, which also include Nvidia Inc., Qualcomm Inc., and Advanced Micro Devices Inc. – all American – and does not make important decisions without consulting them. This year’s record investment of $36 billion was not pulled out of thin air, but carefully planned after extensive discussions with the very customers who would buy capacity from the Hsinchu-based company.

While buying US-made components is a big step forward for Apple, it barely moves the needle when it comes to global sourcing. First, TSMC’s new fab will make chips at the 5-nanometer technology node. That was the leader last year, but the chipmaker has already moved to 3nm (smaller is better) and, thanks to the breakneck speed of technological development, will be even further ahead by the time the plant opens in 2024. It’s extremely unlikely that Apple will be using Arizona-made processors to power its latest iPhones any time soon.

TSMC won’t have the capacity anyway. The new site will produce 20,000 silicon chip wafers per month. That’s less than 1.6% of the 1.3 million currently produced monthly. And even if it adds another plant in Arizona, as expected, the US plant will be nowhere near able to fill Apple’s entire orders. More likely are orders for a few key chips used in smaller devices like AirPods, TV, HomePod or Watch.

Then there is Europe. On his recent tour, Cook hinted that the continent would be another source of chips. TSMC has no factories there and has not announced plans for any. Financially it makes no sense. The chipmaker’s strength lies in its concentration on one island, with its facilities and engineers all just a high-speed drive away from each other. That angers customers, however, because Taiwan also faces greater risks if tensions with China heat up.

A new plant in Japan and the Arizona project will already be beyond human resources, and another site on the other side of the world will make operations even more challenging. Still, there’s a good chance Germany will spend enough money and provide enough incentives to snag a factory and the braggart rights that come with it when it comes to luring TSMC to its shores. Such a European factory would also not be a leader and therefore would not be able to produce Apple’s most advanced processors used in iPhones, iPads and Macs. And that’s okay.

What these factories are likely to offer are fewer components made using legacy manufacturing processes. And while legacy technology isn’t that cool, it’s critical to the global semiconductor supply chain. Today, more chips are made using techniques available in 2010 than those introduced in the last two years. The recent shortage, which has hit products ranging from cars to computers, was largely due to capacity constraints for technologies released a dozen years ago.

You won’t hear politicians crow about spending billions of dollars (or euros) to lure in a factory that makes “old” chips. But that’s the reality, and it’s perfectly acceptable because these are the very components the world needs most. Of course, Apple, Nvidia, Qualcomm, and AMD will all be eager to announce their US-made chips, but actual offerings will be meager and token.

The purpose of TSMC’s global expansion is not to distribute the world’s best chip manufacturing technology around the globe. It aims to allay concerns, increasingly expressed by business and political leaders, that too much capacity is concentrated in one place.

More from the Bloomberg Opinion:

• US focus on chips could prove fatal mistake: Tim Culpan

• Vietnam grows by 7%. It can do much better: Shuli Ren

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

This column does not necessarily represent the opinion of the editors or of Bloomberg LP and its owners.

Tim Culpan is a columnist for Bloomberg Opinion covering technology in Asia. He was previously a technology reporter for Bloomberg News.

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