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escher
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TSMC said to rebuff Apple, Qualcomm
Peter Clarke
8/29/2012 5:19 AM EDT
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.
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Bloomberg article
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Qualcomm sees 28-nm capacity crunch through 2012
On Qualcomm's manufacturing options
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m00nshine
8/29/2012 8:38 AM EDT
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
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peter.clarke
8/29/2012 9:00 AM EDT
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.
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abraxalito
8/31/2012 1:29 AM EDT
+1 for Morris Chang. He must have a wry smile on his face when turning down Apple proferring its corporate begging bowl. The tortoise gets his day in the sun :)
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bobbytsai
8/29/2012 10:18 AM EDT
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 $$. Apple and Qualcomm should build there own fabs and license processes. A large bleeding edge fab cost 10 billion. fab 15 is a $10 billion project. more large fab in planning (power chip land purchase) $1 billion is a joke.
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SiliconAsia
8/29/2012 12:26 PM EDT
I agree with you Bob.
This is a win-lose deal. No one with business-savvy mind will accept such an offer. This kind of deals only give the fraction of ROI Morris is looking for.
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abraxalito
8/31/2012 1:36 AM EDT
Mr Chang is sitting pretty knowing that he's holding the aces here. Those guys will come back with better deals, given time.
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bobbytsai
9/2/2012 1:13 AM EDT
this is just the first round of negotiations. if apple and qcom capitalize fabs and license processes and pay tsmc to manage fabs, maybe. tsmc needs to extract a lot more $$ for their goodies. why risk deprecation on dedicated fabs. that's just crazy talk.
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milosb55
8/29/2012 12:17 PM EDT
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.
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SiliconAsia
8/29/2012 12:28 PM EDT
I see how Apple can go down the drain quickly with Common Platform. There is no longer a common platform - who's common?
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pinhead
8/29/2012 1:56 PM EDT
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?
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HS_SemiPro
8/30/2012 2:29 AM EDT
Well Platform still have Samsung, Global Foundries,IBM, Toshiba, ST, Malta FAb can supply Apple, 28nm tech has same base as Samsung, developed at IBM JDA
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SiliconAsia
8/30/2012 11:15 AM EDT
That's not true HS_SemiPro. Samsung no longer offers initial 28 Common platform process. They have migrated/evolved while others are still staying behind.
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wilber_xbox
8/29/2012 2:16 PM EDT
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.
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abraxalito
8/31/2012 1:40 AM EDT
Obviously money is not king here or Apple and Qualcomm wouldn't come a-knocking. They've been caught short and think they can just buy their way out. They'll need to think again.
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Luis Sanchez
8/30/2012 1:05 AM EDT
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!
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SiliconAsia
8/30/2012 11:19 AM EDT
It's not that there are not enough fabs or money. It's technology know-hows and yielding. 28/20nm and advanced technologies are getting harder and harder to get yield up to achieve the level of economics and only TSMC, Intel and Samsung are able to demonstrate that right moment.
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Neo1
8/30/2012 1:36 AM EDT
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.
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abraxalito
8/31/2012 1:43 AM EDT
Its clear from reading the article that Apple and Qualcomm aren't coming to TSMC as customers. Customers would form an orderly queue and wait in line like everybody else does.
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chipmonk
8/30/2012 11:00 AM EDT
Is GloFo not yet a credible alternative to TSMC at 28 nm ? Had heard something about QCOM exploring contracts with GloFo. How about Apple too ?
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SiliconAsia
8/30/2012 11:21 AM EDT
QCOM has contracts with TSMC, UMC and Samsung already and now they are exploring contracts with GloFo and SMIC? Why now?? Why not earlier?? Maybe Apple will follow suit - Samsung, TSMC first then UMC then GloFo then SMIC....
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pelle
8/31/2012 5:36 AM EDT
Apple will have to go to intel again for their silicon and all it will cost them is ditching ARM for Atom...
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wilber_xbox
8/31/2012 8:28 AM EDT
forecast or idea for another rumor mill? Maybe business opportunity for Intel to cage a star customer.
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Lucent Chang
8/31/2012 5:37 AM EDT
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.
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peter.clarke
8/31/2012 6:35 AM EDT
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."
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Stanley_
8/31/2012 10:10 AM EDT
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.
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Robotics Developer
8/31/2012 7:56 PM EDT
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..
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HS_SemiPro
9/1/2012 10:31 PM EDT
Looks like a good opportunity for Global foundry here, if they have the goods, now is the time to show.
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escher
9/3/2012 1:35 AM EDT
As Jerry Sanders famously said: "Real men own fabs". Perhaps Qualcomm is regretting not building its own manufacturing line in the US.
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ip2design
9/3/2012 1:58 AM EDT
It's time to Apple to build its own Fab or get closer to Intel. Skills are still there and there is enough money at the bank.
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