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Apple has 'sweetheart deal' with TSMC that saves it billions of dollars

Processors are made in wafers. (Source: TSMC)

TSMC's new 3nm manufacturing process has around a 30% failure rate but under exclusive terms, the company only charges Apple for working processors.

Apple has long had what its COO Jeff Williams has described as an "intense" relationship with TSMC. Now a new report from The Information claims that this relationship is unique out of all of TMSC's other clients, and all other processor manufacturers too.

Specifically, TSMC does not charge Apple the complete cost when it produces a wafer containing hundreds of processors. Instead, it only charges the company for what The Information says are referred to as "known good dies."

Ordinarily, the price difference is not statistically significant because typically some 99% of processors on a TSMC wafer are good. But at present, TSMC is only seeing between 70% and 80% success rate with its new 3nm processor, which it began mass production of in December 2022.

That will improve, but as well as Apple profiting by not paying for failed processors, so TSMC profits, too.

It's previously been reported that Apple has bought out TSMC's 3nm production capacity. production capacity. But The Information reports that TSMC is able to develop newer technologies specifically because Apple is willing to order new processors early, and in volume.

So Apple is helping fund the development of 3nm processors. Once the failure rate improves, and TSMC's capacity increases, the company will be able to sell 3nm processors to other companies who do not have such a sweetheart deal.

It's been estimated that moving to a 3nm manufacturing process means that the forthcoming iPhone 15 could be 35% more power efficient because of the new technology.

Neither Apple nor TSMC have commented publicly.