At this scale and volume, it's not really about good faith.

Changing fabs is non-trivial. If they pushed Apple to a point where they had to find an alternative (which is another story) and Apple did switch, they would have to work extra hard to get them back in the future. Apple wouldn't want to invest twice in changing back and forth.

On the other hand, TSMC knows that changing fabs is not really an option and Apple doesn't want to do it anyway, so they have leverage to squeeze.

At this level, everyone knows it's just business and it comes down to optimizing long-term risk/reward for each party.

About 17 years ago I worked at a company that was clamoring to get products into Costco, when we did I was shocked at the fees they charged us for returns. If they're the gold standard for supplier relations it's a wonder anyone bothers being a supplier.

Apple loaned TSMC money in order to build manufacturing capacity back around the M1 era. They’ve done that for a number of suppliers and the “interest payments” were priority access to capacity. Everyone was complaining about how Apple got ARM chips while others had to wait in line.

That said, they did that for a sapphire glass supplier for the Apple Watch and when their machines had QC problems they dropped them like a rock and went back to Corning.

But is that really any different from any other supplier? And who tf do you think they’re going to drop TSMC for right now? They are the cock of the walk.

Counter argument is that is NVIDIA friendly to their supply chain? I have to think that maybe they are with their massive margins because they can be - their end buyer is currently willing to absorb costs at no expense. But I don't know, and that will change as their business changes.

Your underlying statement implies that whoever is replacing apple is a better buyer which I don't think is necessarily true.

Even if Apple isn't very good at reciprocating faithful service from its suppliers, there's also the matter of how it treats suppliers who cause it problems instead.

Suppliers really hate working with Costco. They're slow to pay, allow for only small margins, and often need too high of a percentage of a businesses revenue, all of which is not friendly towards suppliers.

Agreed TSMC can do whatever they want. in 2027 no other fabs will match what tsmc has today, anything that requires the latest process node is going to get more expensive, so your apple silicone and your AMD chips

No public company will be loyal or nice to their suppliers. That is just not in the playbook for public companies. They have "fiduciary duty", not human duty.

Private companies can be nice to their suppliers. Owners can choose to stay loyal to suppliers they went to high school with, even if it isn't the most cost-efficient.

> they arguably treat their suppliers relatively poorly compared to the Gold standard like Costco.

I’m not saying you’re wrong but you’re previous paragraph sounding like you were wondering if it was the case vs. here you’re saying it’s known. Is this all true? Do they have a reputation for hammering their suppliers?

I think it is less of a trade and more of a symbiotic capital cycle, if I can call it that?

Nvidia's willingness to pay exorbitant prices for early 2nm wafers subsidizes the R&D and the brutal yield-learning curve for the entire node. But you can't run a sustainable gigafab solely on GPUs...the defect density math is too punishing. You need a high-volume, smaller-die customer (Apple) to come in 18 months later, soak up the remaining 90% of capacity and amortize that depreciation schedule over a decade.

Why are foundries going 'All In' on AI? They fab chips for customers, doesnt matter what chips they are and who the customer is.'Who will pay the most for us to make their chips first' is the only question TMSC will be asking. The market of the customer is irrelevant.

> AI chips depreciate quickly -- not because the old ones go bad

I've heard that it's exactly that, reports of them burning out every 2-3 years. Haven't seen any hard numbers though.

Still more predictable than GPU buys in the current climate. Power connector melting aside, GPUs in most cases get replaced less frequently than cell phones, unless of course you have lots of capital/profit infusion to for whatever reason stay ahead of the game.

Heck if Apple wanted to be super cheeky, they could probably still pivot on the reserved capacity to do something useful (e.x. revised older design for whatever node they reserved where they can get more chips/wafer for cheaper models.)

NVDA on the other hand is burning a lot of good-will in their consumer space, and if a competitor somehow is able to outdo them it could be catastrophic.

> GPUs are easily as predictable as mobile phones

They really, absolutely, are not.

It's not about "will there be a new hardware", it's about "is their order quantity predictable"

> Regardless of that, fab industry is based on a short and mid term auction-like planning

Not a system that necessarily works all that well if one player has a short-term ability to vastly outspending all the rest.

You can't let all your other customers die just because Nvidia is flush with cash this quarter...

Would it be feasible for them to buy Intel instead? Starting your own foundry would likely take over a decade.

Very much this.

I thought the prediction was that the scaling of LLMs making them better would plateau, not that all advancement would stop? And that has pretty much happened as all the advancements over the last year or more have been architectural, not from scaling up.

Feels like top of s curve lately

You say that, but to me they seem roughly the same as they've been for a good while. Wildly impressive technology, very useful, but also clearly and confidently incorrect a lot. Most of the improvement seems to have come from other avenues - search engine integration, image processing (still blows my mind every time I send a screenshot to a LLM and it gets it) and stuff like that.

Sure maybe they do better in some benchmarks, but to me the experience of using LLMs is and has been limited by their tendency to be confidently incorrect which betrays their illusion of intelligence as well as their usefulness. And I don't really see any clear path to getting past this hurdle, I think this may just be about as good as they're gonna get in that regard. Would be great if they prove me wrong.

Why should that change TSMC decision making even a little?

The reality is that TSMC has no competition capable of shipping an equivalent product. If AI fizzles out completely, the only way Apple can choose to not use TSMC is if they decide to ship an inferior product.

A world where TSMC drains all the venture capital out of all the AI startups, using NVidia as an intermediary, and then all the bubble pops and they all go under is a perfectly happy place for TSMC. In these market conditions they are asking cash upfront. The worst that can happen is that they overbuild capacity using other people's money that they don't have to pay back, leaving them in an even more dominant position in the crash that follows.

Nvidia is not a venture capital outlet. They are a self-sustaining business with several high-margin customers that will buy out their whole product line faster than any iPhone or Mac.

From TSMC's perspective, Apple is the one that needs financial assistance. If they wanted the wafers more than Nvidia, they'd be paying more. But they don't.

Louis Vuitton didn't make 18% of all handbags in 2024.