Apple/chips: homemade chips does not mean homemade fabs

Apple is determined to gain control over every possible component in its products. Nestled inside Apple’s new MacBook Pro laptop are the tech giant’s own chips. Its desire to innovate means reducing reliance on partners such as Intel, Qualcomm and Broadcom. But there is a limit to Apple’s in-house ambitions.

Even if Apple continues to design more of its own chips, it will still rely on companies such as Taiwan Semiconductor Manufacturing, the world’s largest contract chipmaker, to make them. Silicon Valley may be home to the first chip companies, but the US outsources most production to Asia. Almost 90 per cent of global chip production in 2020 occurred outside the country.

Last year, the US attempted to reverse this trend with the Chips and Science Act, which adds billions of dollars of incentives for domestic design and manufacturing facilities such as semiconductor fabrication plants, known as fabs. The investment came at a low point for semiconductors. In November, global sales fell 9.2 per cent from the previous year, according to the Semiconductor Industry Association. Overall, it forecasts a drop of more than 4 per cent in 2023 as economic headwinds hit demand. But fab investment is a long-term endeavour and recovery is expected by 2024.

Will Apple build its own US-based fabs one day? It would be an enormous cost. TSMC’s investment in two fabs in Arizona is pitched at $40bn. Even Apple, with more than $48bn in cash and marketable securities at the last count, would balk at that. The initial outlay is not a one-off, either. Leading-edge design requires constant upgrades in design, technology and devices.

Tension with China and a supply chain crunch have left the US determined to create a barricade around its own technology. But Apple’s link with TSMC is unlikely to be broken. In December, Apple said it would soon buy chips made in the US. That does not mean it will buy them from a US company.