2. TSMC is much larger than Apple's manufacturing requirements. To keep it running, they would have to commit to doing a lot of contract work for other companies, which really isn't Apple's style. Moreover, many of TSMC's current clients (like AMD, Intel, Nvidia, and Qualcomm) might be uncomfortable with Apple controlling the company, as that would introduce conflicts of interest.
3. Owning TSMC would put Apple in charge of the company's technology development, and would expose them to significant financial risk if TSMC suffered a failure, much like Intel has been harmed by their failures to develop a 7nm process. Contracting out their semiconductor manufacturing allows Apple to switch foundries if needed.
Well the point of a hostile takeover is that the current controller doesn't want to sell. They lose control because enough stockholders who previously supported them are willing to sell. It looks like the founder only controls 7%, so I don't think it would be impossible to find enough stock that is willing to be sold.
Risk/reward? What if TSMC invests billions into the next process and never gets good yields? It's happened to other fab owners. (Remember when Intel had competitive products?) Then Apple is out billions of dollars for nothing. But if they are just TSMC's customer, then they don't take on that risk. Their risk is that TSMC raises prices, or other people can make CPUs as good as theirs. But that is not a huge risk for Apple; if they can't buy capacity, neither can their competitors.
I also have to imagine that if people are making a big antitrust stink to the government about how Apple takes 30% of Fortnite loot boxes, there will be an equally big problem when AMD, Nvidia, Broadcom, Qualcomm, Marvell, etc. can't have chips produced anymore.
On the other hand, Samsung owns a fab and makes phones, so it's not unheard of. Samsung has other big semiconductor businesses, though, and it's not clear that Apple really wants to enter into those. You don't need to manufacture your own flash memory to make good laptops; Samsung's SSD business does well on its own.
I really like vertical integration in general, but sometimes things work great even when they're completely decoupled. Two small projects is a lot easier to run than one big project, so you have to show some benefit for integrating things. In Apple's case, it was clear that Intel's CPUs weren't getting them where they wanted to go with thin laptops, so they made their own. They had to in order to sell competitive laptops. This whole thing is in its early days, though, and we don't even know if they're going to beat Intel or AMD. So the summary is, being TSMC's customer is working out great for Apple; they specify a CPU and they get a good one at a cost that the market seems OK with. They want to make a big bet and dramatically change the computing landscape, but that might not work out. What if Intel totally leapfrogs Apple Silicon? It is so uncertain that it is hard to say "they should just buy TSMC". Rather, they should sit and wait and see how they do, and then decide if more integration will let them make better phones, tablets, and laptops.
They have a few internationally, including a 160nm fab in the US already. All their cutting-edge stuff is in Taiwan, though. The one being built for in the US, expected to be for a DoD contract, is the first cutting-edge one outside of Taiwan, but its capacity is miniscule compared with what they have in Taiwan today.
> The simple answer is that TSMC is a national strategic asset of Taiwan, and as such, is not for sale to anyone at any price.
Ahem. ARM.
Seriously, though. Take a look even at TikTok. I was pleasantly surprised that it's not for sale, either. Why does every tech company has to be HQ'ed in the US?!
Some people think TSMC is part of Taiwan's strategy to stop China invading.
After all, TSMC helps make Taiwan one of America's valued trading partners, even if America doesn't officially acknowledge Taiwanese sovereignty.
So long as a Chinese invasion will mean American companies lose access to TSMC and Chinese companies gain it, they hope this provides them the same protection Kuwait and Saudi Arabia enjoy. Or at least, if not certain protection then a high enough chance of protection to discourage an invasion.
As the UK does not have an expansionist neighbour disputing their sovereignty, ARM is not a strategic asset in the same way.
Could be a couple reasons, but one I see is that they too expensive for Apple to do so.
Apple also isn't the type to manufacture chips for other companies which is a lot of TSMC's revenue (this article is only for one size). So they would be taking a huge loss in value just to have control.
Much more likely for Apple is to try and create their own manufacturing lines.
I'd bet on "Taiwan would block it". If Apple bought TSMC, they'd probably want to diversify production locations away from a geopolitically interesting island. But having TSMC there makes it a lot more likely for people to come to the defence of the island in the case of war...
It's also not in Taiwan's interest to align too close to the US. The bulk of Taiwan's exports are to China, and they stand to lose the most in the trade war if the US attempts to ban business with more Chinese companies. We can't realistically defend them in a hot war either.
The Taiwanese notably are framing the Huawei issue as a ban on a specific company rather than trade with China in general [1]. Whether that continues to be true might hinge on November...
It's less about making people physically send ships and troops to defend them than it is making sure that any attempt by the PRC to invade or blockade them would have crushing effects on the mainland money-train that is the lifeblood of the party.
I can imagine that Apple is fairly happy at the moment as a customer of TSMC; they do the heavy lifting on the lithography front and Apple just provide the designs.
Purchasing TSMC would lead to it having to deal with maintaining relationships to people it actively competes on several levels with. This would almost certainly lead to accusations of anti-competitive behaviour.
Hah, all the other TSMC customers would no doubt band together to stop, if not through regulatory means, putting up a counteroff for some jointly owned controlled. It's too vital.
I thought ASMC really cornered the market on the EUV lithography process that is required for making 5nm chips. Wouldn't Apple be better off buying them?
ASML? They're a big player in EUV, but not the only one.
Buying ASML also wouldn't really gain Apple anything. There's tons of technology and know-how that goes into a fab beyond buying a lithography machines.
FWIW, Horace on Critical Path says that large M&A is just something Apple doesn't do. It's a recurring topic and he goes over the rationale in this episode.
I barely understand what Horace is talking about (square hole, round peg) and would only butcher his thesis. Sorry.
These podcasts are in the "think out loud" format, vs finally crafted presentations. So I listen at high speed and rewind to replay the key points.
Edit: Gonna risk it.
Large M&As are notoriously bad moves. Beats was Apple's largest acquisition, which Horace thinks was ok because it probably broke even. (I have a different take: it was an acqui-hire and they got some head phones as bonus.)
Reinvesting cash surplus is also bad, because it's shareholder's cash for them to invest themselves. Also, to do so would make Apple a hedge fund, which is a huge distraction.
Horace doesn't touch on Apple style partnerships, the deep investments into their suppliers. Not quite keiretsu. Not quite monopsony. Definitely not WalMart style partnerships, which is very abusive. Maybe more like defense or auto manufacturer partnerships, where it's more mutually beneficial. Like Toyota does. I would love to read case studies about Apple's partnerships.
Yes I think that. If Chinese actors buy all the lockheed stock eventually they'll have control. Lockheed would probably be banned from the US like Huawei is at that point but China would control it.
If you hold more than 5% of a public traded company you have to announce it. That will be the latest when the US will invoke national security laws and either buy or just take it all back.
1. TSMC has very low margins. Buying the company means lowering Apple margins, that are the highest on the world.
2. Lots of companies depend on TSMC, if Apple did that they will be sued for monopolistic behavior.
3. Apple benefits enormously from the cheap devices that TSMC makes for other companies, that is volume, improvement of technology that Apple can use(ARM). It is over 5x the volume in sales of Apple products.
4. It is a strategic interest company of Taiwan,Europe, China and US.Buying it is not economics,it is geopolitics.
