TSMC fully booked for the year, Apple major factor
Last week, DigiTimes reported that TSMC's production capacity for the fourth quarter of 2014 was already almost fully booked, a scenario that had not occurred for many years. The tight capacity was described as being caused by a ripple-effect due to TSMC landing CPU orders from Apple, which has also brought in other peripheral IC orders for iPhone, iPad and iWatch devices. This has forced chip suppliers for mobile devices to scramble for more wafer production capacity.
TSMC dominates low power smartphone chip production
TSMC, based in Taiwan, is the leading independent semiconductor foundry in the world, and currently dominates the production of advanced lower-power, integrated smartphone SoCs with its 28nm process technology. A significant lead with respect to process technology and production quality (especially the ability to bring leading-edge processes to high volume production well before competitors, and with higher levels of integration) has led to the proportion of smartphone SoC chips manufactured at TSMC, which was already high, to increase signficantly in 2014, primarily because of the shift by Apple of the production of its SoC chips used in iPhones and iPads (such as the A8 used in upcoming iPhone 6 models) from Samsung Semiconductor to TSMC.
TSMC has already for some time produced the vast majority of SoC chips for leading smartphone chip companies Qualcomm and MediaTek, who have a virtual duopoly for the supply of smartphone chips for the Android platform that dominates the industry (with Qualcomm serving primarily the high-end and MediaTek primarily the low-end), and with the addition of Apple now manufactures the overwhelming majority of smartphone chips worldwide.
Shortage has already affected industry, high stakes involved
However, already in April 2014 it was reported that the lead time for advanced 28nm processes (used for the overwhelming majority of Qualcomm's and MediaTek's smartphone chips) had extended to several months. The allocation of significant capacity to TSMC's new 20nm process (which is an extension of the existing 28nm process technology used by TSMC) for Apple's new chips has made the shortage of capacity even more acute.
Behind the scenes, it is likely that a high-stakes power struggle for production capacity at TSMC has been unfolding between the leading smartphone chip companies Qualcomm, Apple and MediaTek, as well as other parties depending on TSMC capacity such as NVIDIA, Marvell and Broadcom. Apple and Qualcomm are two of the richest technology companies in the world, with tens of billions of dollars of cash, and can commit billions of dollars for securing capacity (and have done so). Meanwhile, MediaTek is close neighbour of TSMC in Taiwan with intricate ties at several levels, so is not likely to be displaced.