Apple’s 12-Year Chip Partnership with TSMC May Be Coming to an End as Intel Emerges as Potential New Supplier

In a seismic shift that could reshape the global semiconductor landscape, Apple is reportedly exploring the possibility of manufacturing some of its lower-end processors with a company other than Taiwan Semiconductor Manufacturing Company (TSMC), ending a 12-year exclusive partnership that has defined Apple’s silicon strategy since 2014.

The AI Boom Creates Supply Chain Pressure

According to a report from The Wall Street Journal, Apple’s exploration of alternative chip manufacturing options comes as TSMC faces unprecedented demand from artificial intelligence companies, particularly Nvidia, which has reportedly surpassed Apple as TSMC’s largest customer. This AI-driven surge in demand has created a ripple effect throughout the semiconductor supply chain, forcing Apple to consider diversification strategies that were previously unthinkable.

The timing is particularly significant given the current market dynamics. As AI servers require increasingly sophisticated and powerful chips, the competition for manufacturing capacity at leading foundries like TSMC has intensified dramatically. Industry analysts suggest that Apple’s move could be both a strategic hedge against supply constraints and a negotiating tactic to maintain leverage in an increasingly competitive landscape.

Intel Emerges as the Most Likely Alternative

While The Wall Street Journal report did not specify which companies Apple might be considering for chip manufacturing, previous rumors have strongly pointed to Intel as the most likely candidate. GF Securities analyst Jeff Pu recently predicted that Intel could reach a chip supply agreement with Apple for at least some non-professional iPhone models starting in 2028.

This potential partnership would mark a dramatic reversal of fortune for Intel, which lost Apple’s Mac business when the company transitioned to its own Apple Silicon processors in 2020. The timeline suggested by analysts indicates that Intel could supply Apple with at least a portion of the A21 or A22 chips for future iPhone models, assuming the companies can reach an agreement.

A Complex Return to Intel’s Fold

The relationship between Apple and Intel would be fundamentally different from their previous partnership. Unlike the era of Intel Macs, where Apple used Intel-designed processors with x86 architecture, Intel’s role in this new arrangement would be strictly limited to fabrication rather than design. This means Apple would continue to design its own chips using ARM architecture, while Intel would simply manufacture them using its advanced process technology.

Industry sources suggest that Intel’s 18A process technology could be particularly attractive to Apple for manufacturing its lowest-end M-series chips for select Mac and iPad models as early as mid-2027. Tianfeng Securities analyst Ming-Chi Kuo has indicated that Apple plans to utilize Intel’s advanced manufacturing capabilities for these entry-level products, though he did not mention the iPhone in this context.

The Strategic Implications

Apple’s potential move away from exclusive reliance on TSMC represents a fundamental shift in the company’s supply chain strategy. For over a decade, Apple has enjoyed the benefits of a close partnership with TSMC, which has provided the company with cutting-edge manufacturing capabilities and priority access to advanced process nodes. However, the AI boom has fundamentally altered the competitive landscape, with companies like Nvidia, AMD, and various cloud service providers all vying for the same limited manufacturing capacity.

The diversification of Apple’s chip manufacturing could provide several strategic advantages. First, it would reduce the company’s exposure to potential supply disruptions or capacity constraints at any single foundry. Second, it could provide Apple with additional negotiating leverage when discussing pricing and terms with its suppliers. Third, it would allow Apple to maintain its aggressive product release schedules even in the face of industry-wide supply chain challenges.

Memory Chip Prices Add to the Pressure

The potential shift in chip manufacturing strategy comes against the backdrop of rising memory chip prices, which have also been putting pressure on Apple’s margins. During a recent earnings call, Apple CEO Tim Cook acknowledged that rising memory chip prices had a “minimal impact” on the company’s gross margin in the previous quarter, but he expects “a bit more of an impact” in the current quarter.

Cook indicated that Apple is prepared to “look at a range of options to deal with that” as necessary, suggesting that the company is actively exploring various strategies to mitigate these cost increases. This could include everything from negotiating better terms with suppliers to potentially passing some costs on to consumers, though Apple analyst Ming-Chi Kuo does not expect price increases for the upcoming iPhone 18 lineup.

Financial Performance Remains Strong

Despite these supply chain challenges, Apple continues to deliver impressive financial results. The company recently reported record-breaking revenue of $143.8 billion last quarter, representing a 16% year-over-year increase. For the current quarter, Apple is predicting similar growth of 13% to 16% year-over-year, with gross margins expected to remain strong at 48% to 49%.

These robust financial results demonstrate Apple’s ability to navigate complex supply chain challenges while maintaining its market position and profitability. The company’s strong cash position and diversified product portfolio provide it with the flexibility to weather short-term supply disruptions and invest in long-term strategic initiatives like diversifying its chip manufacturing base.

The Global Semiconductor Landscape Shifts

Apple’s potential move away from exclusive reliance on TSMC reflects broader changes in the global semiconductor industry. The AI boom has created unprecedented demand for advanced chips, leading to capacity constraints at leading foundries and forcing even the largest customers to explore alternative sourcing options.

This shift also highlights the increasing importance of semiconductor manufacturing as a strategic asset. Countries and regions around the world are investing heavily in domestic chip manufacturing capabilities, recognizing that control over semiconductor production is increasingly critical to economic competitiveness and national security.

Looking Ahead

As Apple explores alternatives to its long-standing partnership with TSMC, the semiconductor industry is watching closely. The potential involvement of Intel in manufacturing Apple’s chips could provide a much-needed boost to the struggling chipmaker while also reshaping the competitive dynamics of the industry.

For consumers, the impact of these changes may be minimal in the short term, as Apple’s chip design capabilities remain world-class regardless of who manufactures them. However, in the longer term, increased competition for manufacturing capacity could potentially impact product availability or pricing, particularly if supply constraints become more severe.

The next few years will be critical in determining whether Apple’s exploration of alternative chip manufacturing options leads to a fundamental restructuring of its supply chain or remains a strategic hedge against potential disruptions. Either way, the company’s willingness to consider breaking its 12-year exclusive partnership with TSMC signals a new era of flexibility and pragmatism in Apple’s approach to semiconductor sourcing.

Tags

Apple silicon, TSMC, Intel, chip manufacturing, semiconductor supply chain, AI boom, iPhone processors, M-series chips, Apple Silicon transition, chip fabrication, semiconductor industry, memory chip prices, Apple earnings, chip diversification, semiconductor manufacturing, AI servers, Nvidia, chip supply chain, Apple iPhone, Mac processors, iPad chips, semiconductor strategy, chip design, foundry capacity, semiconductor competition, chip manufacturing costs, Apple supply chain, semiconductor technology, chip production, semiconductor market

Viral Sentences

Apple breaks 12-year chip partnership with TSMC, Intel may return as supplier

AI boom forces Apple to explore chip manufacturing alternatives

Nvidia surpasses Apple as TSMC’s largest customer amid AI surge

Intel could manufacture Apple’s lower-end iPhone chips starting 2028

Apple’s silicon strategy shifts as memory chip prices rise

TSMC faces unprecedented demand from AI companies

Apple explores chip diversification to maintain supply chain leverage

Intel’s 18A process technology attracts Apple for Mac and iPad chips

Apple reports record revenue despite memory chip price pressures

Semiconductor industry reshapes as Apple considers Intel partnership

Chip manufacturing capacity becomes strategic battleground

Apple’s chip design remains world-class regardless of manufacturer

Memory chip prices impact Apple’s gross margins in current quarter

AI server demand creates semiconductor supply chain pressure

Apple’s supply chain strategy evolves amid industry changes

,