Why Apple is (Mostly) Immune to Chip Shortages

There’s a chip shortage. No, not potato chip or corn chip. That might… honestly be worse. But silicon chips. There’s just nowhere nearly enough supply to meet all the demand. Can’t get ‘em for cars. Can’t get ‘em for consoles. Maybe, soon, not even for phones. But what about the next Mac, the next iPhone, the next iPad? A14X, A15, M1X, M2? What about Apple chipsets? Let’s call up industry analyst Ben Bajarin and find out!

Essentially, these categories we're talking about, all right? PCs, cars that are trying to be more autonomous, obviously, smartphones, et cetera. They all make products on the leading edge, and that's generally done at TSMC. Vast majority done at TSMC and then a little bit at Samsung. And the reality is they're just out of space, right? It's not just that we went into COVID. Yes, that happened. Factories shut down for a good month to two months, so that already initialized some delays. And then on top of that, we are dealing with unprecedented demand in smartphones and PCs and in some other categories as well. So, essentially, it's very, very hard to find chips and those foundries like TSMC and Samsung don't have excess capacity for new chips, new customers, new products. They're just trying to catch up with the demand that they have on these existing products that they're trying to make. So it's impacting everybody. I mean, we're seeing delays of product launches across the board because of this. But the root of it is simply we don't have enough semiconductor manufacturing capacity to meet the demand of today's broad consumer and tech environment.

And we heard even before the current reporting on this, that, for example, Apple bought so much of TSMC's five nanometer process that other customers had to go to Samsung instead, just because they couldn't get enough of that node. And rumors are they're doing the same thing with three nanometers.

Yeah, no, that's absolutely right. I mean, Qualcomm's a good example because Qualcomm does dual source their current Snapdragon parts. So they do have some of their 800 chips are made at TSMC and some are made at Samsung. And the difference there is that their TSMC chips are made on seven-nanometer. Their Samsung chips are made on eight nanometers. So there's not a lot of performance difference but Samsung doesn't have a seven, so, essentially, Qualcomm bought up that supply. So the reality is that I think you'll see more companies, by necessity, have to work with TSMC, and Samsung, and probably Intel, in order to meet demand for their products and just make sure they can make their chips at any number of those foundries.

So when you hear about companies like Samsung or automotive companies having trouble sourcing chips, or the PS5, things like that, how do you see that affecting Apple, if at all? Is it more about a when? Or is it possible that they've just logistically managed this well enough that it won't be as perceptible to consumers?

There is no one in this industry who sells at scale premium computers than Apple. And so someone has to essentially be willing to afford the latest cutting edge process, which is not cheap. In fact, there's been a lot of news about TSMC lately saying that they're probably going to have to increase the price of their wafer because it is more expensive and more complex. So only really in my opinion, one customer can afford to eat into that and afford any increase in pricing at scale. So if you're TSMC, you're saying, "Look, I got a customer here who's gonna sell "170, 180 million premium units a year. "No one does that. They're buying this in advance. "They're gonna be the ones that get all these chips," right? It's just how it's gonna fall. So, Apple being in control of so much premium. And then, again, you add Macs to that, right? So as they bring the Mac line into ARM and are buying products, they're gonna ship 20, 30, 40 million Macs, potentially, down the line. That's again, that's a large number of chips, right? In terms of premium. Samsung doesn't sell maybe about that many premium smartphones worldwide, and Apple's gonna do that with the Mac.

Almost like they fund the new process nodes and then get priority those nodes. And that avoids a lot of the congestions that other customers face.

Yeah, I mean, that's the reality. Is they 100% do. And that's why when I wrote this article, you tweeted it, it was pretty popular, about why Apple should extend an arm to Intel. And I use those two words intentionally. That if Intel wanted to start making ARM processors, Apple is the only one who can work with them and afford to help Intel on the bleeding edge. And my argument for doing so was simply so Apple would have a United States-based semiconductor partner. In case of whatever geopolitical politics might happen between China and Taiwan, you guarantee that you're okay if you have a U.S. partner. Apple's the only one who could help Intel fund the next node because of all the points that I just made about TSMC. Should Apple ever decide to do that.

Do you foresee any large-scale issues with Apple getting the chips that they'll need for the 2021 products, the 2022 products before things start to balance out again?

Not at large-scale. I mean, I do think... And again, right, just look at this in the reality of prior to COVID, Apple still was up against demand restraints into supply, even when there was no issue, right? It wasn't exactly easy to go and find an iPhone 12 or 12 Pro in the longevity, right? So they were already up against supply constraints for their own products that they were making, even without COVID. So, all that means is that you might see longer delays, but I don't think we're talking like, "Oh, I can't make this product anymore." Or, "I need to delay the launch six months." I think we might be talking months or two. So some of those delays, the launch time delays that Apple has seen and availability might get a couple of weeks longer. But to be honest with you, they're gonna be the least hit out of all of this. You know, I guess my concern would be what about products that aren't the iPhone? So could Mac be impacted because we're talking some SKUs is only a couple of million units, right? Those are where even Apple themselves is going to have to prioritize their supply.

Like A15 over M2, which makes a lot of sense strategically.

Exactly, right? And so, with what we expect next week with iPads, right? Or perhaps something around Macs, the reality is they have to make product decisions on where they can allocate their SKUs based on availability. And they're just gonna go with what is in the most demand.

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