TSMC is reported to receive Apple's A13 chip order, and its global market share may exceed 60% in the future

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Taiwanese media Digitimes quoted industry insiders as saying that Apple recently confirmed that all A13 chips in 2019 will be delivered to TSMC. Previously, TSMC won large chip orders from Huawei, Qualcomm, MediaTek, AMD, NVIDIA and other companies. In the first half of 2018, TSMC's global market share reached 56%. With the expansion of customer base and order scale, the industry expects that TSMC's global market share is expected to exceed 60% in 2019.

TSMC's revenue has been on the rise recently. Its revenue in September was NT$94.922 billion, up 4.2% from the previous month and 7.2% from the previous year, the second highest monthly revenue in recent years. TSMC said that this was mainly due to the depreciation of the Taiwan dollar and the surge in demand for 7nm orders. There will be more high-performance 7nm chip orders from AMD and NVIDIA in the future.

With the sharp increase in revenue in September, TSMC's total revenue in the third quarter reached NT$260.347 billion, an increase of 11.6% from the second quarter and 3.2% from the third quarter of 2017. The overall performance slightly exceeded the expectations for the third quarter at the Q2 earnings conference. From January to September, its cumulative revenue also reached NT$741.7 billion, a year-on-year increase of 6%.

Apple's partnership with TSMC began in 2014, when Apple's new iPhone and iPad chips were all produced by TSMC. After co-manufacturing Apple's A9 chip with Samsung in 2015, TSMC lived up to expectations and won exclusive orders to produce Apple's A10, A11, and A12 chips with its advantages in technology and yield rate.

Apple's decision to place all its chip orders with TSMC was also a "bet" made by the two companies that year. Apple's Chief Operating Officer Jeff Willams said at TSMC's 30th anniversary celebration in 2017 that when the two sides were discussing possible cooperation, they mentioned that if Apple wanted to place 100% of its orders with TSMC, TSMC would have to invest $9 billion to produce 500 million chips. Both companies took a big risk at the time, because at the time, few semiconductor companies would invest $9 billion for a single customer.

Arete Research analyst Brett Simpson said in an interview with EE Times: "As long as TSMC continues to provide innovative products every year and has a high yield rate, TSMC is expected to remain Apple's sole supplier in the next few years."

Randy Abrams, an analyst at Credit Suisse, said TSMC is likely to remain the sole supplier of Apple processors until 2020, a unique situation for Apple, which has traditionally preferred to have multiple Asian suppliers provide key components to spread risks and gain control over pricing.

For TSMC, supporting Apple represents a huge capital investment and also means that it must launch semiconductor industry-leading technology at a faster pace.

According to reports, TSMC took the lead in entering the 7nm process era in April this year and will be the first chip foundry to truly mass-produce 7nm EUV process. In the future 5nm process era, I am afraid that only one or two companies can follow TSMC's pace.

In the global chip foundry market, as GlobalFoundries' manufacturing progress has been hindered and Intel and Samsung's manufacturing progress has been slow, TSMC has taken the lead in mass production of 7nm technology and is currently the winner in 7nm process technology.

GlobalFoundries, the world's second largest chip foundry, announced in August this year that it would suspend its 7nm FinFET (fin field effect transistor) project worth tens of billions of dollars. In the future, the consumer electronics industry will rely more on TSMC and Samsung.

Intel used to maintain a leading edge in semiconductor process technology, but has slowed down its development since 2014. 14nm has become its longest-lived process technology in history. Since the 10nm process, the yield rate cannot be effectively improved, and its mass production plan has been delayed.

Digitimes reported that although Intel has confirmed that it will achieve full mass production of the 10nm process in 2019, it is very likely to abandon its chip foundry business due to the impact of process delays and the transition from old to new platforms, and it will find it difficult to win orders from major customers such as Apple.

Samsung was once the exclusive manufacturer of Apple's A-series processors for iPhone and iPad products. However, as competition and legal disputes between the two companies intensified, Apple began to turn to TSMC. Since Samsung lost Apple's chip orders, it has tried to regain chip orders from TSMC.

Digitimes reported in June this year that Samsung also wants to take a share from TSMC in 2019 and strive to win back some orders for the A13 chip. Previously, Samsung was also developing InFO (fan-out) packaging technology and claimed to have surpassed TSMC in all aspects at the 7nm node through advanced EUV (extreme ultraviolet lithography) technology. However, Apple seems to prefer TSMC's InFO technology, and all A12 chip foundry orders were given to TSMC.

Previously, TSMC has stated that its InFO technology is excellent in reducing the thickness of chip packaging, and can also improve the performance and energy efficiency of the chip at the same time. This is one of the reasons why TSMC has been able to win exclusive orders from Apple in succession.

TSMC's leading position in chip technology has also brought them opportunities beyond Apple.

EE Times analysts mentioned that TSMC's leading position in 7nm technology has won new business opportunities for the company. Bernstein Research analyst Mark Li pointed out that TSMC will regain orders for advanced product lines from Qualcomm this year. Li said: "This is an important development because Qualcomm has been purchasing high-end products from Samsung and Globalfoundries since 2014."

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