Highlights
- TSMC has imposed steep price hikes and Apple now faces tougher competition for chip production capacity.
- TSMC’s net profit jumped 35% in Q4, revenue rose 21%, and capital spending is set to increase by about 40%, reinforcing its dominance in advanced chip manufacturing.
- Analysts view TSMC as a primary beneficiary of the AI wave, while Apple explores diversification amid rising costs.
Apple’s long-held advantage as a top customer of Taiwan Semiconductor Manufacturing Company (TSMC) is coming under pressure as the global artificial intelligence boom reshapes demand for advanced chips, a new report suggests.
Apple Faces Higher TSMC Prices, Capacity Competition
According to Tim Culpan writing at Culpium, Apple is now being forced to accept some of the steepest TSMC price increases in years while also competing more aggressively for chip production capacity. Culpan notes, “When CC Wei visited Cupertino last August, he had bad news for his largest client. Apple would need to acquiesce to the largest price rise in years, TSMC’s CEO told its executives. Tim Cook and his team took the news on the chin. Wei had been telegraphing hikes in earnings calls over the past few quarters, and the Taiwanese chip maker’s rising gross margins were testament to its increasing pricing power.”
The report adds that pricing was not the only concern. “That wasn’t the worst news, my sources tell me. Apple, which once held a dominant position on TSMC’s customer list, now needs to fight for production capacity. With the continuing AI boom, and each GPU from clients like Nvidia and AMD taking up a larger footprint per wafer, the iPhone maker’s chip designs are no longer guaranteed a place among TSMC’s almost two dozen fabs. What Wei probably didn’t tell Cook is that Apple may no longer be his largest client.”
AI Boom Reshapes Apple–TSMC Relationship
Apple and TSMC have shared a long and mutually beneficial partnership, but the surge in AI-related demand is clearly altering the dynamics. Major GPU customers such as Nvidia and AMD are consuming more wafer space, reducing the certainty Apple once enjoyed when securing capacity for its iPhone and Mac chips.
Earlier reports had already hinted at this shift. A China Times report last fall suggested that Apple’s upcoming A20 chip for future iPhones would become significantly more expensive due to TSMC’s price hikes. Separately, multiple reports have pointed to Apple and Intel exploring a renewed partnership to manufacture both Mac and iPhone-class chips.
While Apple is not expected to walk away from TSMC, these rumours indicate a growing need for supply chain diversification.
TSMC Expands Investment as Profits Surge
As Apple grapples with higher costs, TSMC is benefiting strongly from the AI boom. The world’s largest contract chipmaker said it plans to increase capital spending by around 40% this year after reporting a 35% jump in net profit for the latest quarter.
Taiwan Semiconductor Manufacturing Corp., a key supplier to companies including Nvidia and Apple, posted a net profit of 506 billion new Taiwan dollars ($16 billion) for the October–December quarter, up 35% from a year earlier and ahead of analyst expectations. Revenue for the quarter rose 21% year-on-year to more than 1.046 trillion new Taiwan dollars ($33 billion).
TSMC said it plans to raise its capital expenditure budget to $52 billion–$56 billion for 2026, compared with about $40 billion last year. The company’s shares have gained more than 8% since the start of the year, reflecting its strong position in the AI-driven semiconductor market.
Strong Outlook Backed by AI Demand
Other technology giants including Microsoft, Meta, and Alphabet, are also pouring billions into AI infrastructure, further supporting demand for advanced chips. “We expect our business to be supported by continuous strong demand for our leading edge process technologies,” TSMC chief financial officer Wendell Huang said during a conference call, adding that spending would be “significantly higher” over the next three years.
TSMC’s Taiwan-listed shares have climbed more than 8% since the beginning of the year and reached record highs this month. With a market capitalisation of about $1.4 trillion, it is now Asia’s most valuable company.
Alphabet, Google’s parent company, crossed the $4 trillion market capitalisation mark this month, becoming the fourth Big Tech firm to do so after Nvidia, Apple, and Microsoft. However, concerns remain that heavy AI spending could fuel a potential bubble, occasionally triggering sell-offs.
Global Expansion and Analyst View
TSMC has committed around $165 billion in investments in the United States and is accelerating construction of new facilities in Arizona, aiming to build a large fabrication plant cluster. Analysts at Morningstar remain optimistic about the company’s outlook, calling TSMC a primary beneficiary of the AI boom due to its dominance in advanced chip manufacturing.
“It is immune from market share shifts as almost every AI company relies on TSMC to make chips ranging from application-specific integrated circuits to GPUs (graphics processing units),” the Morningstar analysts said. They also noted that TSMC is protected by strong buffers from “deep-pocked” customers, even if short-term demand fluctuations occur.
As AI continues to reshape the semiconductor industry, Apple’s changing position at TSMC highlights how even the biggest tech players are being forced to adapt to a rapidly evolving supply chain.
FAQS
Q1. Why is Apple facing higher costs at TSMC?
Answer. Apple is being forced to accept steep price hikes from TSMC and compete more aggressively for chip production capacity. The AI boom has increased demand for GPUs from companies like Nvidia and AMD, reducing Apple’s once‑secure priority access to TSMC’s fabs.
Q2. How has TSMC benefited from the AI boom?
Answer. TSMC reported a 35% jump in net profit and a 21% rise in revenue in the latest quarter. It plans to boost capital spending by around 40% this year, with a budget of $52–$56 billion for 2026, reflecting strong demand for advanced chips.
Q3. What is TSMC’s global expansion strategy?
Answer. TSMC has committed about $165 billion in U.S. investments, accelerating construction of new fabs in Arizona. Analysts view TSMC as a primary beneficiary of the AI boom, since nearly all major AI companies rely on its advanced chip manufacturing.