In the evolving landscape of semiconductor manufacturing, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) is expediting its capacity expansion efforts driven by the surging demand from artificial intelligence leader Nvidia Corp.. This escalation has introduced fresh competitive dynamics affecting long-standing partners such as Apple Inc..
At a recent gathering in Taiwan, Nvidia's CEO, Jensen Huang, underscored the immense pressure on Taiwan Semiconductor to scale production to match Nvidia's rapidly increasing requirements. Huang highlighted that Nvidia alone might necessitate more than doubling the foundry's chip production capacity within the next decade. This statement reflects the company's aggressive AI infrastructure buildup and the ensuing strain on semiconductor supply chains.
During the event, which included senior supply chain executives and TSMC’s Chairman and CEO C.C. Wei, Huang revealed that Nvidia's wafer demand is exceptionally high for the current year, fueled by its expansive AI initiatives. Nvidia has notably become the largest customer of TSMC and was among the pioneers in adopting the cutting-edge A16 process node technology.
Further commentary from Huang projected that Nvidia’s appetite for advanced process technology alone would justify over a 100% increase in TSMC’s chip manufacturing capacity over time. This aligns with Taiwan Semiconductor’s earlier announcements of bold investment plans, including a capital expenditure increase of up to 37% this year, totaling approximately $56 billion, with expectations of continued substantial growth in 2028 and 2029.
Meanwhile, Apple is reassessing its supply strategy in light of these developments. Nvidia's surge in AI chip demand has effectively displaced Apple as TSMC’s top customer, securing a substantial share of the semiconductor market's most advanced manufacturing capacity. This shift signals a potential realignment in Apple's sourcing approach, especially for lower-end processors.
Reports indicate that Apple is actively exploring alternatives to TSMC for segments of its low-end chip production. Such a move would mark a significant departure from its over ten-year exclusive manufacturing relationship with TSMC. This strategic reconsideration is compounded by increasing costs from memory suppliers like Samsung Electronics Co., Ltd. and SK Hynix, which are exerting additional pressure on Apple’s profit margins.
Industry analysts suggest that Intel Corp. might start producing chips for Apple's non-Pro iPhone models using its 14A process technology as soon as 2028, potentially offering Apple a viable alternative to TSMC for certain product lines.
Stock market activity reflects these sector movements. Over the past 12 months, TSMC's shares have surged more than 65%, outpacing companies such as Tesla Inc. and Broadcom Inc. Nvidia’s stock climbed 64% within the same period and achieved a milestone by reaching a $4.5 trillion market capitalization last October, surpassing major technology corporations including Apple and Microsoft.
In premarket trading on Monday, Nvidia shares declined 2.05% to $187.21, Apple’s shares fell 0.42% to $258.39, and TSMC’s stock decreased 1.15% to $326.75.
Taiwan Semiconductor’s accelerated investment trajectory and Nvidia’s dominant AI-driven demand are reshaping the semiconductor manufacturing landscape. Simultaneously, Apple’s strategic supply considerations underscore the shifting alliances and cost challenges central to future market dynamics.