It is a big surprise that Apple is preparing to start buying chips for its devices from a factory under construction in the US, marking a big step.
Apple Inc. is preparing to source chips for its devices from an under-construction plant in Arizona, US, marking a major step toward reducing the company’s reliance on Asian manufacturing.
Chief Executive Officer Tim Cook made the revelation at an internal meeting in Germany with local tech and retail staff as part of a recent tour of Europe, according to comments reviewed by Bloomberg News. He added that Apple may also expand its supply of chips from factories in Europe.
“We’ve already decided to buy out an Arizona plant, and this Arizona plant is starting in ’24, so we have about two years ahead of us, maybe a little less,” Cook told employees. “And in Europe, I’m confident we’ll be sourcing from Europe as those plans become clearer,” he said at the meeting, which was attended by Apple Services Chief Eddy Cue and Deirdre O’Brien, head of Retail and Human Resources. . .
Cook is likely referring to a factory in Arizona that will be run by Taiwan Semiconductor Manufacturing Co., Apple’s exclusive chip manufacturing partner. That plant is scheduled to open in 2024. And TSMC is already looking forward to a second U.S. facility, part of a broader drive to increase chip production in the country.
Shares of TSMC rose as much as 2.9% in Taiwan trading Wednesday after Bloomberg News reported on Cook’s comments. Apple had changed little.
Shares of TSMC rose 7.9% on Tuesday after Berkshire Hathaway Inc. of Warren Buffett had announced that it had taken an interest in the company.
Representatives from Apple and TSMC declined to comment.
Intel Corp. is also building factories in Arizona that will open as early as 2024. The chipmaker was a major Apple supplier for many years, but it’s unlikely to recapture that business. Apple has replaced Intel processors in Macs and other products with its own components, and the chipmaker has an unproven track record of manufacturing designs from other companies.
The U.S. government is dangling about $50 billion in incentives — part of legislation known as the Chips and Science Act — to encourage semiconductor manufacturing to expand into the United States. The iPhone maker currently sources its device processors from TSMC factories in Taiwan, an area with an excessively large manufacturing share. At the meeting, Cook said 60% of the world’s processor supply comes from Taiwan.
“Regardless of what you may feel and think, 60% coming from somewhere is probably not a strategic position,” he said.
Processors are at the heart of almost every Apple product, be it the high-end Mac Pro desktop computer, the iPhone, or even AirPods. The chips were designed by Apple and then manufactured by TSMC. Bringing even some of that production back to the US – after years of dependence on Asia – would be an important step.
A lingering question is whether the planned factory is right for Apple’s needs. The Taiwanese company has said the factory will initially have a capacity of 20,000 chips per month and will use a 5-nanometer manufacturing process. That wouldn’t satisfy Apple’s desire for more advanced 3-nanometer chips in the near future.
TSMC could theoretically introduce advanced manufacturing faster than it has announced so far. Apple could also potentially use the Arizona production for less complex components in its devices.
While most of the final assembly for Apple products is done in China and surrounding countries in Asia, Apple does have a number of suppliers that produce components domestically. The Cupertino, California-based company has touted that Mac Pro models sold in the US are assembled in Texas.
Like the US, Europe offers incentives to encourage more chip production. In his remarks, Cook did not specify where in Europe the company might source additional chips, but Bloomberg News has reported that TSMC is in talks with the German government about setting up a factory in that country.
Apple is growing fast in Germany. The company has hundreds of local engineers working on an effort to replace Qualcomm Inc. components. in iPhones with a homegrown cellular modem.
More broadly, the Chips and Science Act and additional efforts in Europe are poised to reshape the chip industry, Cook said at the meeting in Germany.
“I think you’re going to end up seeing significant investment in capacity and capability in both the United States and Europe to try to refocus market share from where silicon is produced.”