[weitendorf]

TSMC doesn’t get to take the profit that currently accrues to Nvidia and Apple, even though they absolutely could from a business/leverage perspective, because they are an economic colony of the United states and hiking their prices (which Apple and Nvidia would have almost no choice but to pay, but would upset their benefactors) would jeopardize their national security/defense.

In a world where TSMC is functionally capable of the same level of production but not in such a complicated geopolitical situation regarding semiconductor manufacturing, things would be quite different.

[fittingopposite]

Got me curious, how does TSMC price their products? Why don't they optimize for their own profitability?

[hylaride]

TSMC builds new bleeding edge fabs and then amortizes them for many different customers over a decade or more, starting with higher margin customers (apple, nvidia, etc) and working down as time goes on and the higher margin customers then move on to newer plants. Today's bleeding edge fabs become tomorrow's mass market fabs for lower margin chips that go into cars/toasters/etc. The idea is that the early adopters pay for a decent chunk of the CAPEX and then it becomes a commodity play. It's the same way some auto manufacturers put new tech into their premium cars, then it trickles down to the mass market cars over time.

It's the main reason outsourcing fabs is so much more economical. If NVIDIA built fabs just for itself, the fab's CAPEX would be amortized over fewer components than if a third party did, even if NVIDIA was the largest customer. It's also one of the main reasons Intel fell behind. So much of their cashflow was to build fabs that made an order of magnitude less chips than TSMC. Even worse, they had to write down the CAPEX for the fabs, which affected their financial statements.

Anyways, companies like apple and nvidia have very long term horizons and contracts, which probably have first right of refusal contracts on capacity, etc. In the short to medium term, apple probably isn't paying much more for most components. If this memory shortage lasts decades, they'll eventually end up paying more.