Apple reluctantly agrees to TSMC's price increases

The big picture: Taiwan Semiconductor Manufacturing Company (TSMC) is one of the largest processor manufacturers in the world, creating chips and wafers for many companies, including AMD, Nvidia, and Apple. As one of TSMC’s biggest customers, Apple was not happy following an announcement that TSMC would increase prices in 2023.

Recently, TSMC has seen a high level of demand due to many of its customers launching new product lines. Nvidia’s RTX 40-series graphics cards hit stores on October 12, and AMD recently released its Zen 4 processors, with RDNA 3 graphics cards soon to follow.

While AMD and Nvidia are big names to tech enthusiasts, neither company compares to Apple regarding TSMC’s bottom line.

In December 2021, DigiTimes noted that Apple accounted for over 25 percent of TSMC’s total sales. These numbers are no surprise since the tech titan sells hundreds of millions of products annually, according to Business of Apps. Nearly all Apple devices use processors supplied by TSMC, showing that it relies heavily on the fabricator. The iPhone 15 is slated to pack a 3nm A17 Bionic chip from the Taiwanese manufacturer.

Recently, TSMC announced that starting in 2023, it would institute a six-percent price increase to purchase processing wafers. The company’s executives claim that inflation has increased the cost of labor, electricity, and raw materials used to produce wafers. They also note that fab plants are expanding production capabilities and that these higher prices will help TSMC in the long term.

Apple reluctantly agrees to TSMC's price increases

While numerous companies that rely on TSMC wafers were quick to accept the price increases, Apple was initially hesitant to agree to such changes. However, TSMC wiped their brows in relief on Monday when UDN reported that Apple had officially agreed to the price bump. Nvidia closely monitored the situation, believing that if Apple could negotiate a lower price, it might be able to do the same.

Overall, some insiders believe these price hikes are reasonable, stating that inflation and the cost of raw materials warrant the changes. The demand for microprocessors has also seen a boom in recent months, furthering TSMC’s reasoning for the increase as it hopes to capitalize on the market.

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