TSMC Declines Apple’s $1 Billion Proposal at Securing Exclusive Chip Production

As the smartphone market continues to explode in popularity, more and more chips are required to produce devices. Bloomberg reports (as first noted by MacRumors) Apple and Qualcomm both were turned down by Taiwan chipmaker TSMC in their attempts to secure exclusive chip production, with proposals of more than $1 billion plus each:

Apple Inc. and Qualcomm Inc. were rebuffed in separate attempts to invest cash with Taiwan Semiconductor Manufacturing Co. in a bid to secure exclusive access to smartphone chips, people with knowledge of the matter said.

Both proposals included investments, each of more than $1 billion, for the world’s largest custom maker of chips to set aside production dedicated to making chips exclusively for them, said the people, who declined to be identified because the details are not public.

Last July, we read about how Apple uses its cash hoard to gain exclusive access to early technology and component parts. Last July, TSMC reportedly started trial manufacturing of Apple’s A6 chips, with a later report by Digitimes claiming Apple had signed a deal with the company.

For TSMC, they want to remain flexible enough to freely switch production easily between customers and various products. TSMC’s Chief Financial Officer, Lora Ho, noted the company would like to remain independent and does not need any external cash injections. Specifically, TSMC views risk in dedicating facilities to one customer as things can change at any time. Its ability to diversify its customer base is the reason for its success as the world’s largest chipmaker, in an industry Bloomberg estimates to be worth $219 billion:

“You have to be careful. Once that product migrates, what are going to do with that dedicated fab?” said Ho. “We would like to keep the flexibility.”

For Apple’s sake, finding a new chipmaker would reduce its reliance on Samsung as its main source of chip components for iOS devices. Apple’s recent $1 billion dollar legal victory over Samsung surely has strained the relationship between both companies. It would be in Apple’s best interest to find an alternate chipmaker, and TSMC appears to be the perfect fit. But as of now, exclusive chip access for future iOS devices doesn’t appear to happening anytime soon.

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