Apple may have spared billions of dollars in faulty costs for the advanced chip planned for the iPhone 15 Pro, which is set to debut next month.
On Monday, August 7, reports emerged that Apple inked an unusual agreement with Taiwan Semiconductor Manufacturing Company (TSMC). The deal stipulates that TSMC would bear all the costs associated with any poor quality resulting from the production of the 3-nanometer (nm) chips meant for Apple devices. This move could save Apple billions on their iPhones and computer products.
This arrangement stands out because TSMC usually requires clients to cover all expenses related to wafers, including any defective products. However, under this agreement, TSMC will only charge Apple for the known good products, waiving fees for any defects.
Sources say that TSMC's 3nm chip production for Apple will have a yield rate of about 70-80% for about a year before full-scale production. This suggests that for every five chips produced, one might be defective.
At first glance, this seems like a disadvantageous move for TSMC. However, considering Apple's massive orders and its willingness to adopt cutting-edge manufacturing technologies, TSMC's decision to absorb the costs of defective chips becomes more understandable.
By refining their production processes while supplying for Apple, TSMC can quickly learn how to improve and scale up production. Once the production issues of the 3nm chips are resolved, TSMC could then charge higher prices to other clients and reinstate charges for defective products.
According to the reports, Apple's 3nm chips will potentially lead the pack this year. Intel is the only other company reported to have a deal with TSMC for 3nm chips set for next year.
If these reports hold, Apple's first device featuring a 3nm chip, the iPhone 15 Pro, would greatly benefit. Rumors have swirled that the iPhone 15 Pro will feature Apple's first-ever 3nm chip-the A17 Bionic.
Some outlets speculate that Apple's 3nm chip could include up to 4 dies, supporting as many as 40 computing cores. Given that Apple's current M2 chip features a 10-core CPU, with the M2 Pro and Max having 12-core CPUs, the 3nm process might significantly enhance multi-core performance, marking Apple's most substantial performance and efficiency boost since 2020.
In May, Taiwanese reports, citing industry insiders, mentioned that nearly 90% of TSMC's first-generation 3nm chip production capabilities were reserved by Apple. These chips are expected to be utilized in upcoming iPhones, Mac computers, and iPads.
Compared to the 4nm chips used in the iPhone 14 Pro and Pro Max, the 3nm chip is said to improve the iPhone 15 Pro's energy utilization by 35% and performance by 15%.
Beyond the iPhone 15 Pro, Apple's M3 Macs and iPads are also expected to employ these chips. Anticipated releases this year include a 13-inch MacBook Air and a 24-inch iMac, both equipped with 3nm chips in the M3 range. Next year's new iPad Pro might also feature this chip.
Other reports suggest that TSMC is also focusing on an enhanced 3nm process, termed N3E. Apple devices will eventually transition to chips made using the N3E process. Commercial production of the N3E chip is expected to begin in the latter half of this year, with shipments likely increasing next year.
