Apple and TSMC: AI boom puts chip alliance to the test

Apple is facing increasing pressure in chip manufacturing. A new report reveals that the company no longer receives preferential treatment and is simultaneously having to pay significantly higher prices. The main reason for this is the ongoing AI boom, which is putting a heavy strain on TSMC's production capacity. This is shifting a power dynamic that has been considered stable for years.

The relationship between Apple and TSMC was long characterized by clear advantages for both sides. Apple gained early access to state-of-the-art manufacturing processes, while TSMC could rely on high and consistent order volumes. However, the market situation has changed. Artificial intelligence is massively driving demand for high-performance chips and is putting even established partnerships to the test.

Apple's visit brings bad news

When TSMC CEO CC Wei visited Cupertino last August, he brought bad news for Apple. Wei informed Tim Cook's management team that Apple should prepare for the biggest price increase in years.

The reaction was muted. TSMC had already announced price increases in previous quarters. The chipmaker's growing gross margins also made it clear that TSMC now has significantly more pricing power than a few years ago. But the price increase wasn't the real problem.

Apple is fighting for chip capacity

As analyst Tim Culpan reports, Apple is now in direct competition for production capacity. The ongoing AI boom is causing more and more manufacturing capacity to be reserved for GPUs. These chips primarily come from customers like NVIDIA and AMD.

A crucial factor is the size of these chips. AI GPUs require significantly more space per wafer than traditional smartphone processors. This means they occupy a disproportionate amount of capacity in TSMC's factories. For Apple's chip designs, this means that even at TSMC's roughly two dozen plants, a guaranteed slot is no longer guaranteed.

According to sources, Apple may no longer even be TSMC's largest customer. This is information that was presumably not openly discussed during the visit to Cupertino.

A partnership in transition

Fundamentally, the collaboration between Apple and TSMC remains important and profitable for both sides. Nevertheless, it's hardly surprising that the AI boom is noticeably changing the relationship. There have been indications of this shift in the past.

Last fall, the China Times reported that the upcoming A20 chip for the iPhone would be significantly more expensive due to increased TSMC prices. This would noticeably impact the cost structure of future iPhone generations.

Discussions with Intel and the search for alternatives

Additionally, there have been several reports that Apple is in talks with Intel about a renewed collaboration, specifically regarding the potential production of chips for Macs and iPhones.

No one expects Apple to completely abandon TSMC. However, rumors clearly indicate that diversifying the supply chain is becoming more important than before. Reliance on a single manufacturer is increasingly becoming a risk in the current market environment.

Forecasts and expectations for Apple's Q1 2026 results

Apple caught between rising costs and new market conditions

The specific consequences of this development for consumers are currently difficult to predict. However, it is clear that rising chip prices and limited production capacities could have long-term repercussions. Should the iPhone 18 series ultimately be noticeably more expensive than previous models, this is likely to be a major contributing factor.

Apple remains a key player in the semiconductor market, but faces new challenges. The AI boom has shifted priorities at TSMC and shows that even for long-standing major customers, nothing can be taken for granted anymore. (Image: Shutterstock / Pham Minh Son)