Apple Talks About Sole Sourcing from TSMC

　　At its 30th anniversary celebration this week, Taiwan Semiconductor Manufacturing Co. (TSMC) hosted a forum of key customers including semiconductor CEOs and Apple chief operating officer Jeff Williams.

　　Williams provided a rare glimpse into TSMC’s role as the sole supplier of Apple’s A11 application processor and where he sees the electronics industry going in the next ten years.

　　From now to TSMC’s ramp up of 7nm process technology in 2018, TSMC will probably remain the sole source of application processors for Apple, according to independent analyst Andrew Lu, who writes reports for information provider Smartkarma.

　　At the 7nm+ node starting later in 2018, Samsung will be very competitive on technology and pricing, and TSMC may lose some of Apple’s business at that point, Lu said.

　　Samsung, TSMC’s main rival for Apple’s application processor business, probably walked away from the Apple A11 opportunity because it was unwilling to make the multibillion dollar capital investment needed to clinch the deal, according to another analyst with an investment bank who asked that his identity be withheld.

　　As long as TSMC can develop its technology ahead of Samsung, Apple will stay with TSMC, but Apple will not let the Taiwan foundry make any mistakes, Lu said.

　　Excerpts of the conversation Monday (Oct. 23) between TSMC Chairman Morris Chang and Apple COO Williams follow below:

　　Morris Chang: Our partnership with Apple does not go back very far. It has been intense and important. Certainly, very important for TSMC.

　　Jeff Williams:

　　Shortly after the introduction of the Cray 2 supercomputer, 25 years later, we put the same processing power into peoples’ pockets with an iPhone 4 in 2010.

　　It was actually 2010 that the first seeds of our partnership between Apple and TSMC were planted. I had flown to Taiwan and had dinner with Morris Chang and (his wife) Sophie at their house. It was a wonderful dinner.

　　We were not doing business with TSMC at that time, but, we had a great conversation. We talked about the possibility of doing stuff together, and we knew the possibilities were great if we could take leading-edge technology and marry it with our ambitions.

　　It seems obvious right now, but it wasn’t then, because the risk was very substantial.

　　The nature of the way Apple does business is we put all of our energy into products, and then we launch them.

　　If we were to bet heavily on TSMC, there would be no backup plan. You cannot double plan the kind of volumes that we do. We want leading-edge technology, but we want it at established technology volumes.

　　That may be what Morris Chang refers to when he mentions 'intense.'

　　On the TSMC side, that means a huge capital investment. It means ramping faster than the more careful yield plan that the industry is used to.

　　Together, we decided to take the bet, to take the lead and Apple – this was our first engagement — decided to have 100 percent of our new iPhone and new iPad chips — application processors — sourced at TSMC.

　　TSMC invested $9 billion and had 6,000 people working round the clock to bring up the Tainan fab in a record 11 months, and in the end, the execution was flawless. We’ve gone on to ship over half a billion chips together in that short window, and I think TSMC has invested $25 billion — $9 billion on that first venture — there are very few companies in the world that would spend $9 billion in capital across everything and without a single debt.

　　So for that, we thank you, Morris Chang, and everybody at TSMC. It’s been a wonderful partnership.

　　Williams continues on the direction of development in the next 10 years.

　　Williams:

　　Now for me, the request was to describe the next 10 years in silicon, which I’m completely incapable of doing. So I’m going to reframe the question. I think in politics they call this a ‘pivot’.

　　When we look back a decade ago, the question we had was ‘do we have enough processing power in silicon to match our ambitions?’

　　The big challenge we had as we looked at the mobile revolution was this tradeoff between performance and power. The view at the time was you had to choose. You had one or the other.

　　Largely as a result of what the fabless model has done, what TSMC has done, what many people in this room have done, including (ARM CEO) Simon Segars and his organization, we came to the point where those tradeoffs are not necessary. We have performance in thoroughly constrained environments. This opens up for the next decade a whole new world.

　　In the next decade, the question is not so much ‘do we have enough processing power to meet our ambitions’. The question for us is ‘do we have the right ambitions to utilize this technology’.

　　We at Apple are not concerned about the talk of slowing in the semiconductor industry. That’s not the case at all. We think the potential is huge. We believe strongly in the cloud side, but the future will be a lot of on-device processing. We believe this is the best way to deliver great features without sacrificing responsiveness, privacy and security.

　　We see that in our brand-new A11 bionic chip made here at TSMC. Every time somebody takes a photo, there’s over a hundred billion operations. That’s just mind boggling.

　　The potential is limitless. We’ve put a neural engine on the chip, and I won’t repeat some of the things that Nvidia CEO Jensun Huang shared (on the subject of artificial intelligence).

　　We have the same view of the potential of AI to deliver a much safer and autonomous system. The neural engine on our chip has already enabled face ID processed locally.

　　We view that the next 10 years (will be) about the ambition to make life better. Probably one of the most significant examples of this is the opportunity to use transistor technology advancements and power scaling to revolutionize healthcare.

　　We think the industry is ripe for change. We think there is tremendous potential for on-device computing, to do cloud computing as well, and through deep learning, machine learning and ultimately artificial intelligence to change the way healthcare is delivered. I can’t think of anything more significant than this.

　　The question in front of us is ‘do we have the right ambitions.’ There is no such thing as autonomous innovation. Human beings dream it, human beings drive it, sure we’ll have deep learning, but there’s no such thing as autonomous innovation, so it’s up to us during this generation and the next 10 years to take advantage of what can be realized in the silicon world.

　　We at Apple are really inspired. Those of us that started many years ago and sat in front of a green monochrome computer screen were super inspired. If in the next 10 years we do just a few ‘gee whiz’ things like flying-car kind of dreams and then the rest of the time, we’re using faster chips to do the same things we are doing faster, we will have squandered one of the biggest opportunities in front of us.

　　I think we are at an inflection point. With on-device computing coupled with the potential of AI (there’s the opportunity) to really, really change the world. We couldn’t be more excited at Apple.