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Potential Shift in TSMC’s Client Landscape: Nvidia vs. Apple

For an extended period, Apple has been TSMC’s primary client, primarily due to the foundry’s pivotal role in manufacturing key components for Apple’s product lineup. This includes the A-series processors used in iPhones and iPads, as well as the M-series chips for select iPads and Macs. Additionally, TSMC is slated to produce the 5G modem chips designed by Apple, which are expected to supplant the Snapdragon 5G modems in future devices like the iPhone SE 4 and the upcoming iPhone 17 Slim.

In 2024, Apple’s business with TSMC accounted for 25.2% of the foundry’s annual revenue, with Nvidia contributing a notable 10.1%. However, as analyze by Citi Securities indicates, a shift may be imminent. The rising demand for AI chips is projected to elevate Nvidia’s share to around 20% of TSMC’s gross revenue this year, potentially surpassing Apple’s long-held position as the largest customer.

This transition could be facilitated by Nvidia’s extensive client portfolio, prompting the company to increase its chip orders from TSMC as its market demands ramp up. Such a surge in order volume would support Nvidia’s ascent to the status of “TSMC’s top customer.” Furthermore, the demand for specialized AI-based ASIC (Application-Specific Integrated Circuit) chips is expected to skyrocket in the next two to three years, indicating promising growth ahead for TSMC, especially as most AI chips transition to TSMC’s 3nm technology node by the end of 2025. This shift will likely elevate the average selling price for TSMC’s silicon wafers, enhancing its profitability.

Despite the potential for Nvidia to outpace Apple, it is essential to note that Apple will remain a significant contributor to TSMC’s business. The company has reportedly secured all available capacity at TSMC’s 2nm node for the upcoming A20 and A20 Pro processors, slated for the iPhone 18 series set to launch in 2026.

TSMC aims for a revenue increase of 20% to 25% this year while maintaining gross profit margins above 50%. According to Citi Securities, part of TSMC’s growth strategy will involve manufacturing chips that enable on-device AI for smartphones and PCs. This approach is increasingly valued for its superior security compared to traditional cloud-based AI processing. Meanwhile, it is predicted that Nvidia will capitalized on the overall surge in AI technology.

Nevertheless, speculation surrounds the possibility that Nvidia’s growth may not adversely affect TSMC. Recent rumors suggest that both Nvidia and Qualcomm might consider transitioning their operations to Samsung Foundry, despite Samsung’s historical challenges with yield rates in advanced chip manufacturing.

Source
www.phonearena.com