At present, all A-series processors used in the iPhone are manufactured by TSMC in Taiwan, China. Although the company has opened a plant in the US state of Arizona, the facility still lags significantly behind its Taiwan plants in terms of technology.

Specifically, the Arizona plant only produces chips on a 4nm process, while TSMC in Taiwan has advanced to 2nm technology, which is expected to be used for the A20 Pro chip in the iPhone 18 Pro. That technology gap is equivalent to two to three generations, a huge distance in the semiconductor industry.

By the end of 2027, TSMC’s second plant in Arizona is expected to be able to produce 3nm chips. However, by that time, TSMC in Taiwan will have moved on to the more advanced A16 process, continuing to maintain its lead in performance and energy efficiency.

Amid rising risks, Apple is proactively seeking alternative manufacturing partners. According to Bloomberg, the company has held discussions with Intel and Samsung.

If a partnership succeeds, Apple could become a customer of Intel Foundry, the contract chip manufacturing service Intel is aggressively promoting. Samsung, meanwhile, has invited Apple executives to visit the advanced chip manufacturing plant it is building in Texas.

However, according to sources close to the matter, Apple has not placed any orders with either company. Part of the reason is that the company remains cautious about using technology outside the TSMC ecosystem, a partner that has worked with Apple for years and proven its capabilities.

In fact, Apple has not always been fully dependent on TSMC. In the past, Samsung produced chips for the earliest iPhone generations, from the original model to the iPhone 5s.

With the iPhone 6s generation, Apple split A9 chip orders between Samsung and TSMC to reduce risk. From the A10 chip onward, however, Apple decided to place its full trust in TSMC, marking a complete commitment to the Taiwanese partner.

New pressure: AI chip hunger threatens supply

Beyond geopolitical factors, Apple is facing another challenge: the boom in artificial intelligence. Huge demand for GPUs and AI accelerator chips is putting pressure on TSMC’s production capacity.

During a recent earnings call, Tim Cook admitted: “We have less supply chain flexibility than normal.” The remark suggests Apple could face the risk of chip shortages for iPhones and Macs in the near future.

One reason Apple has remained loyal to TSMC lies in special partnership terms. Normally, TSMC customers must pay for the entire silicon wafer, even when the number of qualified chips, or dies, is not high.

Each 2nm wafer currently costs around US$30,000, and chip design companies must bear the risk of production yield. Apple, however, is believed to benefit from a “Good Die Only” arrangement, paying only for chips that meet quality standards.

This mechanism allows Apple to shift much of the manufacturing risk to TSMC while ensuring cost efficiency at the scale of hundreds of millions of devices each year, an advantage few customers can enjoy.

Although Apple is actively looking for backup options, it still faces a difficult problem: how to reduce dependence on TSMC without sacrificing performance, cost and reliability.

Samsung has previously struggled with yield issues, while Intel is still rebuilding its position in the contract chip manufacturing sector. For a customer as large as Apple, any mistake could carry consequences worth billions of US dollars.

Hai Phong