The gold rush across the high-end processor market might help Apple’s processor manufacturing partner, TSMC, drive harder bargains than in the past. That’s because Apple’s huge appetite for processors is being met by fast-growing demand for chips for servers. As a result, the cost of the chips used inside Macs, iPads, and iPhones will likely increase, putting even more inflationary pressure on Cupertino’s bottom line.

Sitting in the iTree, Apple and TSMC

Apple has been TSMC’s biggest customer for years. The relationship began with the iPhone, expanded into chips for iPads, and got a pretty cherry popped on top when Macs adopted Apple Silicon chips — also made by TSMC. Apple leads the industry, so in the last few years, demand for Arm-based chips grew swiftly as the industry chased in its wake. 

This is particularly evident in servers for artificial intelligence; companies like Nvidia and AMD are knocking at TSMC’s doors, demanding chips for servers that haven’t yet been built for AI server farms not yet deployed to meet anticipated demand for an industry now using money it will have to pay back to investors. (That’s likely to continue until the AI bubble bursts.)

What it means

At present, the growing competition for TSMC’s manufacturing output means even Apple’s huge orders don’t carry the kind of price negotiation weight they have in the past. The impact so far seems to be that Apple has had to agree to higher prices, and is struggling for production capacity, Culpium claims.

“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.”

Life on the edge

The shift is driving record revenue for TSMC — up 35% — and comes as growth in demand for smartphones plateaus. Now that Apple has resolved its Apple Intelligence strategy with a new deal with Google for Gemini, the company will be investing in further server capacity to serve its billion users, which will likely raise the profile of Apple’s TSMC order book. Recent reporting suggests Apple is about to make deep investments in server capacity to meet its own anticipated AI demand.

At present, chips for Apple are being made at a dozen TSMC factories. TSMC is also investing $165 billion in new US factories, and doubtless wants to see that significant investment generate an equally significant return.

Coming up on the horizon, Apple has ordered much of the production of TSMC’s upcoming 2-nanometer processors for use in future devices. We know that’s going to mean even more performant and power efficient chips in iPhones, iPads, Macs, and Vision devices. And we also know that the power and performance of these systems will give Apple an even broader path toward deployment of AI at the edge. 

But a little reality check

I don’t expect Apple to have a major problem obtaining the chips it requires. They might cost a little more, and we’ve all heard the speculation some Apple chips could eventually be manufactured in the US by former processor partner, Intel. But Apple is consistent, reliable, and even if demand for smartphones isn’t increasing at the rate it once was, there are still hundreds of millions of them made each year. 

That demand means Apple can consistently place massive orders. It spent $24 billion with TSMC in 2025. TSMC will not leave this important customer in the cold, particularly as so much of the server side demand it faces might yet prove misplaced as the AI bust beckons. With this in mind, reports Apple might end up unable to get parts will likely turn out to be exaggerated. It’s just going to have to pay a little more.

Which means so will you.

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