LONDON – Apple and Qualcomm have each offered more than a $1 billion to foundry Taiwan Semiconductor Manufacturing Co. to obtain a dedicated supply of processor chips, and both their offers have been rejected, according to a Bloomberg report.
Apple needs the chips for its own smartphomes and tablet computers – iPhones and iPads – while Qualcomm is the leading supplier of application processors to the rival Android platform of mobile equipment. Both the Apple and Qualcomm proposals included investments in TSMC (Hsinchu, Taiwan), Bloomberg said quoting unnamed sources.
At present Apple relies on Samsung Electronics Co. Ltd. for its leading edge A5 processor but Apple is in a high profile legal dispute with Samsung over the look and feel of smartphones. Apple has been reported to be working with TSMC (Hsinchu, Taiwan) to bring up a 28-nm A6 processor. Meanwhile Qualcomm, which has designed the Snapdragon processor, is known to be suffering from a shortage of supply at the 28-nm node.
There has been speculation that companies such as Apple and Qualcomm would try to use their financial muscle to obtain a secure supply of leading-edge chips which at present is limiting sales of mobile equipment.
In July Morris Chang, chairman and CEO of TSMC, said the company was considering operating single-customer wafer fabs so a rejection of the Apple and Qualcomm investment proposals may have resulted from detailed terms or the fact that equity was being sought.
However, as a foundry supplier TSMC profits from serving many fab-lite and fabless chip companies, including Broadcom, Nvidia, MediaTek and many others. If it was seen to be too close to Qualcomm or Apple it might risk its independent status and drive other customers into the arms of rival foundry suppliers.
In addition Lora Ho, chief financial officer of TSMC, has expressed reservations about operating single-customer wafer fabs. "You have to be careful. Once that product migrates, what are going to do with that dedicated fab? We would like to keep the flexibility," the Bloomberg report quoted Ho as saying.
this is just the first round of negotiations. if apple and qcom capitalize fabs and license processes and pay tsmc to manage fabs, maybe. tsmc needs to extract a lot more $$ for their goodies. why risk deprecation on dedicated fabs. that's just crazy talk.
Stanley_, you make a lot of sense! I wonder why TSMC would need the money offered by Apple/Qualcomm when they can just sell them chips. TSMC is in the drivers set here and they get to steer their own course, everyone else is going to have to get onboard for the ride..
TSMC is one of biggest and most recognized company in Taiwan. It's more than just business and economy. It's national pride. The Taiwan government will not allow TSMC's business decision is influenced by foreign company.
I feel we are all missing a key point here.....As far as we know....Apple and Qualcomm came to TSMC offering to INVEST in TSMC in return for special access to leading-edge capacity.
The key word is invest....in other words Apple and Qualcomm wanted a minority stake in TSMC which they could of course sell at a later date.......as a sort of surety.
I suspect Morris Chang just said: "No you dont get a piece of the company. Just give us your money and we'll let you know when your chips are ready."
I assume 2 reasons that TSMC reject APPLE & QCOM
1. In 1996, UMC co-build 5 8inch fab with 5 different customers, but merged back in 2000 due to these fab utilization were slow down.
2. If TSMC agrees, how TSMC rejects other design house and IDM as a pure play foundry?
My ides is maybe TSMC should follow ASML's strategy to let Apple and QCOM become as stockholders for their first priority wafers foundry.