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.
It would be strange twist of fate, maybe instead of paying apple 1 billion Samsung will be asked to invest 1billion into apple dedicated fab. not like apple needs extra billion cash as world most rich company. But I guess apple will ask to glofo before then
Well what's a billion dollars or two between friends?
It is strange that Morris Chang should let slip that dedicated company fabs or lines might be appropriate but then turns down such offers.
TSMC has worked hard to become a leading supplier of high-performance silicon and was prepared to invest many billions of dollars when others were not. It would be quite natural that now it has the industry over a barrel it wants "full meausure" for its manufacturing services.
Qualcomm and Apple would come in demanding a dedicated fab, negotiated operating margins and capacity then when the fab is no longer bleeding-edge, want another fab leaving TSMC holding the bag on deprecation. Qualcomm has done this in subcon test and packaging for years. Why should TSMC give up control over how to run capacity and invest $$. Apple and Qualcomm should build there own fabs and license processes. A large bleeding edge fab cost 10 billion. fab 15 is a $10 billion project. more large fab in planning (power chip land purchase) $1 billion is a joke.
It seems obvious that Apple should setup their own Fab in order to solve long term dependencies. The easiest way is for Apple would be to join Common Platform and to invest $6B-$B into the Manufacturing Facilities.
Well, Apple is obviously already designed-in to the "common platform", yet it seems that only Samsung is able to actually yield the part.
I think it's definitely cheaper for Apple to either "foundry" the part or form a partnership, but who in their right mind would partner with Apple?
Why Apple need TSMC, which is already overbooked to capacity. With the kind of cash Apple has and the kind of business model Apple follow, it can put its money in other fab companies and reap the benefits for years to come.
Does this means there aren't enough fabs in the world now? Perhaps talking about 28nm there aren't.
Who will open the next one and seize this business opportunity?
We're seeing moves which aren't the everyday buy and sell thing. Patents litigation and now offerings for guaranteed production? What does all this mean? Seems we're in a mobility boom!
While TSMC was right in rejecting the offer I still feel they could have negotiated an alternate way to resolve this shortage. TSMC is reducing its silicon forecast one hand and turning the other side when the customers come asking. Or is it that their 28nm node is still not up to the mark. The smaller foundries are still long way behind as compared to TSMC and cannot offer the same economies of scale, perhaps big A should checkout the IBM shoppe.