A new report this morning notes that Apple supplier Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, is on the offensive at a time when the soaring costs of chip development are becoming an impossible burden for many industry players. Patently Apple covered this issue last week in a report titled "Apple's new iPhones will be First to Market with 7nm Processors as most Competitors can't afford 7nm Costs."

TSMC, the sole supplier of central processing units for Apple's smartphones since the 2016 and is determined to take advantage of its 7 nanometer technology to expand its control of the global chipmaking market. TSMC's Fab 15 B production site in Taichung, as noted in our cover graphic, is responsible for making the 7 nm chips for the iPhones.

Yesterday Apple rolled out new iPhones powered by TSMC's 7 nm chips with smaller circuit line widths that generally offer greater performance. The iPhone X, the previous top-of-the-line model, used a 10 nm CPU called the A11 Bionic.

Development of smaller, more powerful processors is widely believed to be reaching its technological limits, and further advances would require enormous investment. Production would require extreme ultraviolet lithography systems made by ASML of the Netherlands, which cost at least $100 million per unit.

Patently Apple reported back in July 2017 that TSMC was preparing to deliver a next generation 7nm processor next year that will incorporated Extreme Ultraviolet Technology EUV.

An industry engineer in Taiwan told the Nikkei Asian Review that even spending a fortune would not guarantee a competing chipmaker would be able to achieve the same product quality as TSMC and in fact it could worsen profitability without winning new orders. Patently Apple posted a report in late August covering AMD switching to TSMC for 7nm production because GlobalFoundries decided that they weren't going to develop and produce a 7nm processor as once thought.

With GlobalFoundries, the No. 2 foundry, dropping out of the 7nm race, we may see the rivalry among lower-ranked players, including the third-largest, United Microelectronics Corp. (UMC) of Taiwan, intensify.  

Next-generation chips for high-specification smartphones have been the major growth driver of the global semiconductor market and Apple is the first to deliver on 7nm with Huawei the only other OEM that will offer a 7nm processor this year for their P20 smartphone in October.

Below are some of yesterday's keynote moments covering the A12 Bionic with its advanced Neural Engine. TSMC has to be excited to see Apple deliver the most powerful processor in a smartphone today that they helped to make happen.

With Apple's new 7nm A12 Bionic, their Neural Engine is now able to perform 5 trillion operations per second vs the A11 Bionic that delivered 600 billion operations per second. The A11 Bionic's Neural Engine offered 2 cores while the new A12 Bionic Neural Engine takes a gigantic leap forward with an 8 core design. Apple's Phil Schiller talks about the A12 Bionic starting at the 46:20 mark of the iPhone event keynote here.

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