What is the reason why TSMC has signed a contract with Apple that does not charge for defective chips manufactured in the 3nm generation process?

by Business Durham

It is rumored that Apple will adopt TSMC's 3nm generation process (N3) for the A17 Bionic chip that will be installed in the M3 series and iPhone 15 series, which are SoCs for Mac. The Information of IT media, Apple exclusively orders TSMC to manufacture chips by N3, and in return TSMC signs a contract that ``TSMC will bear all the costs due to defective processor dies that have been manufactured'' It is reported that there are

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Rumors have already been reported that Apple will announce the M3 series as the next-generation model of its own SoC for Mac in 2023, and will release a Mac equipped with the M3 series from the end of 2023 to the beginning of 2024.

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Apple's M2 series uses N5P, an improved version of TSMC's 5nm generation process, but the M3 series is said to use TSMC's N3 process. N3 is a process node announced by TSMC in 2020, and it was reported that mass production was in place in April 2022.

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N3 has a higher logic density per silicon die area than N5P, which can be expected to reduce power consumption and improve performance. However, when manufacturing with a fine process like N3, a certain percentage of defective products will inevitably occur at the beginning of the production line.

Normally, when a chip maker orders a chip to be manufactured by a semiconductor fab, they have to pay for the entire product, even the defective one. For this reason, chip makers sometimes reuse defective dies by disassembling them, or lowering the operating clock and using them for lower-end models.

by Payton Kramer

However, according to The Information, TSMC has signed a contract with Apple to ``do not charge for defective dies''. 23% of TSMC's $72 billion (about 10.3 trillion yen) revenue in 2022 is paid by Apple, making Apple the largest customer for TSMC. The Information reports that ``TSMC's 3nm generation process technology will be monopolized by Apple for about a year until sufficient production capacity is secured.'' In order to continue the contract with Apple, which is the largest customer, TSMC is asking for the condition that 'we will not charge for defective products'.

Also, if Apple orders a large amount of M3 series and A17 Bionic chips from TSMC in the N3 process, TSMC will be able to improve the yield rate while improving the mass production system. The Information points out that the aim is not only to maintain the contract with Apple, but also to improve the N3 process with Apple's large orders, so that customers other than Apple will also pay attention to the N3 process.

Ars Technica, an IT news site, said, ``Apple, NVIDIA, AMD, and Qualcomm all outsource the manufacture of cutting-edge chips to TSMC, and in the past few years, many manufacturers have overcome TSMC's competitors such as Samsung and GlobalFoundries. Yes, even Intel has built in its own factories for most of its history, but relies on TSMC for Arc GPUs and some parts of the Meteor Lake generation,' he said. He said that the relationship allows TSMC to continue to hold the number one share in semiconductor manufacturing.