Rare public remarks by the man who runs Tim Cook’s supply chain.
Introducing COO Jeff Williams at TSMC’s 30th anniversary celebration Monday, CEO Morris Chang described his company’s relationship with Apple as brief but “intense.”
From Williams’ remarks (transcribed from the webcast):
The risk [for Apple of doing business with TSMC] was very substantial.
The nature of the way Apple does business is that we put all of our energy into our new products and then we launch them, and if we were to bet heavily on TSMC there would be no backup plan. You cannot double plan the kind of volumes that we do.
We want leading edge technology but we want it at established technology kind of volumes.
That may be what Dr. Chang is referring to when he mentions “intense.”
From the TSMC side it also means a huge capital investment. And it means ramping faster than the more careful yield plan that the industry is used to.
But together we decided to take the bet, take the leap.
And Apple decided—it’s our first engagement—Apple decided to have 100% of the new iPhone and new iPad chips [A11 application processors] sourced at TSMC.
And TSMC invested $9 billion and had 6,000 people working ’round the clock to bring up a [unintelligible] fab in a record 11 months and in the end the execution was flawless. And we’ve gone on to ship over half a billion chips together in that short window.
There are not many companies that will spend $9 billion on a single bet. And for that we thank you Dr. Chang.
My take: People talk loosely about “betting the company” on this or that strategy. This is the real thing.
I’m reminded of a quote attributed to Field Marshall Rommel: “The difference between a risk and a gamble, is that you don’t have a backup plan if the gamble fails.”
This approach makes ssense to me, since Apple is developing a genuinely unique chip/system. I think the A-series has to be seen differently than an Intel modem vs a Qualcomm modem (LTE), which might be available to other customers. Differences in capability may exist between modems, but they are “standardized” for all potential customers. The A-series (as the heart of the phone) is a different animal, and having differences of fab process and capability would be very painful to manage. It could have been a different supplier, but for Apple, a pure-play foundry for the A-series is probably a must, and by almost a full order of magnitude, that means TSMC.
Nice find, Philip, Thanks. I’ve always felt, and stated, that the chip side of Apple’s mobile devices is a big deal and generally ignored.
$9 Billion is a lot of money. It’s beyond the reach of Apple’s competitors except perhaps for Samsung and Huawei. But it is small considering the advantage Apple gets in this “post PC” era. Outside of our North American and European world, the SmartPhone is “it”. Apple’s chip plus software platform has widened the gap, by a lot.
We can safely ignore supply chain rumors or comparison of Android devices to iOS devices – epherma.
If TSMC were to “bank” on a customer to provide the revenue necessary for multi-billion dollar capital investments, there’s no better customer than Apple.
TSMC operates in a highly competitive environment and must maintain its leadership in the foundry business by providing cutting edge technology in high volumes. The only mobile device maker able to deliver the revenue volume TSMC requires for growth and to maintain its competitive advantage is Apple.
Conversely, what other foundry could deliver in very high volumes the custom chips Apple requires for its world leading mobile devices?
This is not only a partnership born of necessity, one could argue it’s a partnership of inevitability.