In a move that some did not expect, Apple is floating the idea of looking at Samsung and Intel as its providers for custom chips over TSMC, now that TSMC supply is being taken over by AI industries. What challenges is the rise of AI introducing for those needing custom chips, what has Apple said, and what does this show us regarding the ongoing chip supply issues?
What Challenges Has the Rise of AI Introduced for Chip Supplies?
It only seemed like yesterday when the COVID pandemic was causing all kinds of issues in the supply of chips. But despite the many years since COVID, and the supposed recovery, the age of AI has now dawned on humanity introducing even more challenges.
At first, chips were in short supply due to closure of facilities and instability in demand, but now, it seems that AI is consuming all available capacity. This has led to a situation where leading foundries such as TSMC and Samsung are running at or near full capacity, driven by unprecedented demand for high-performance processors and memory to serve AI workloads. As a result, traditional customers in other sectors are finding it increasingly difficult to secure production slots, even as these foundries expand their capabilities.
In fact, it has become so severe that customers are willingly taking Intel parts that Intel themselves would normally scrap. But while this is great for Intel, it has now meant that other, smaller businesses are struggling to place chip orders.
Now, this has led to shortages in consumer-level supplies, and this is seeing the effects trickle into the supply chain. For example, now that RAM is hard to get, it is seeing markets such as the PC industry into a downward spiral.
Additionally, the ongoing chip crunch is not limited to logic chips for AI. Memory components, such as DRAM and NAND, are also in short supply because AI systems require vast amounts of fast memory. This has exacerbated problems for device makers, including large companies like Apple, who are now facing extended lead times and increased costs for key components.
With capacity becoming a bottleneck, some companies now have had to just accept lower-yield or previously undesirable components just to keep production running. These decisions have ripple effects throughout the electronics industry, affecting not only large manufacturers but also small and medium-sized enterprises that have less leverage in the supply chain.
Apple to Consider Samsung and Intel as Chip Providers
In a move that some may not have expected, Apple is now exploring early-stage discussions with Intel and evaluating Samsung Electronics facilities as it looks to diversify its chip manufacturing base (Apple’s biggest customer, TSMC).
According to sources close to the matter, the move to diversify comes from the desire to reduce supply chain risk, especially when considering how AI is driving demand and component shortages. Apple has long depended on TSMC for leading-edge process technology, particularly for its custom-designed system-on-chip (SoC) processors in iPhones, iPads, and Macs. However, with delays and constraints now more common, Apple is examining whether Samsung or Intel can provide sufficient capacity and technological parity for its future requirements.
While Samsung and Intel are both investing heavily to catch up with TSMC’s advanced manufacturing nodes, neither currently matches TSMC’s combination of yield, volume, and technical maturity on the most advanced (e.g., 3nm) processes. This is a major consideration for Apple, which requires large-scale, consistent output for its flagship products.
The exploration of alternate suppliers also comes after Apple restructured its hardware engineering teams last year, with a new chief hardware officer, Johny Srouji, taking charge of Apple’s silicon development efforts. Srouji has played a critical role in establishing Apple’s custom silicon strategy, and his leadership reflects the company’s increased focus on managing supply chain risks and advancing its in-house chip design capabilities.
If Apple does move forward with Samsung or Intel, it would offer a major boost to those companies’ foundry businesses. For Intel, securing Apple as a customer would validate its push to become a competitive contract manufacturer, while for Samsung, it would reinforce its ambitions to be a leader in advanced semiconductor fabrication.
While Apple has not made any definitive decisions, the exploratory talks with Intel and Samsung indicate a real strategic shift internally in its chip manufacturing strategy. By engaging with multiple suppliers, Apple likely aims to enhance the resilience of its supply chain, adapt to the evolving demands of the AI era, and maintain its leadership in the highly competitive tech industry.
What Does this Show us Regarding Ongoing Chip Issues?
If there is one thing that we can all be sure of, its that us engineers can never get a break when it comes to the supply of chips. With the growing AI market, and the massive valuations being handed out to numerous AI companies, it seems that engineers will continue to struggle with supply in the near future.
Some observers might assume that if the AI "bubble" were to burst, chip availability would suddenly improve, but this is a major (and dangerous) oversimplification.
For example, the collapse of the AI market could, and will likely, see major financial pressures on companies,leading to the closure of facilities, datacenters, and foundries. Companies that needed the capacity themselves could collapse as a result of financial challenges, and this would have a domino effect on the industry. This would not necessarily lead to a surplus of cheap chips; instead, it could result in reduced production capacity and ongoing volatility in the supply chain.
So, what can we take away from Apple looking towards other manufacturers?
Well, it’s clear that Apple is getting desperate, and this should be seen as a major red flag for the industry. Apple’s willingness to consider alternative suppliers is a strong indicator that even the largest and most influential tech companies are feeling the pressure of constrained chip supply.
Thus, this move shows that reliance on a single foundry, even one as advanced as TSMC, is increasingly seen as a strategic vulnerability in a world of persistent supply risk and geopolitical uncertainty. Ultimately, the ongoing supply challenges and Apple’s actions are demonstrating that engineers and manufacturers will continue to face difficulties in sourcing advanced chips, regardless of short-term fluctuations in demand.
As such, the industry’s structural issues, including limited foundry capacity and complex global logistics, are likely to persist for the foreseeable future.
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