TSMC Not Charging Apple for Defective 3nm Chips Ahead of iPhone 15 Pro Introduction

Chip supplier TSMC has taken the unusual step of not charging Apple for defective 3nm chips ahead of the introduction of the iPhone 15 Pro and the A17 Bionic chip, The Information reports.

tsmc semiconductor chip inspection 678x452
The ‌iPhone 15 Pro‌ is widely rumored to feature the A17 Bionic chip – Apple's first chip manufactured with a ‌3nm‌ fabrication process. The ‌3nm‌ node allows transistors to be even more densely packed, resulting in better performance and efficiency.

Introduction of upgraded chip technology like ‌3nm‌ involves the production of a high number of defective chips until the manufacturing process can be perfected. According to The Information, TSMC is only charging Apple for "known good dies," with no fee for defective chips. This is highly unconventional, since TSMC clients usually have to pay for the wafer and all of the dies it contains, including any defective ones.

Since Apple's orders from TSMC are so large, it can apparently justify absorbing the cost of defective chips. Apple's willingness to be the supplier's first customer for new manufacturing processes helps it pay for the research and development of new nodes, as well as the facilities to make them.

The size of Apple's orders also enable TSMC to more quickly learn how to improve and scale up a node during mass production. Once production and yield issues with manufacturing ‌3nm‌ chips improves and other customers seek the technology, TSMC can demand higher prices from those clients, as well as charge for defective dies.

Update: According to Apple analyst Ming-Chi Kuo, The Information's report is not quite accurate. Kuo says that Apple's standard deal with TSMC does not ever include "defective" chips. Apple purchases "finished goods" that are of the expected quality rather than "wafer-buy," which can include defective chips.

Most chip buyers have a "wafer-buy" deal with TSMC and must eat the cost of defective chips, but in the case of TSMC and Apple, TSMC absorbs the cost through the price of the chips.

Related Roundup: iPhone 15 Pro

Top Rated Comments

NT1440 Avatar
8 weeks ago

Only a company with Apple's influence can get away with this...
They’re single-handedly funding the N3 node, so it’s not “getting away” with anything. Apple put up billions in capital investment to get this node up and running. Without them, N3 wouldn’t be produced.
Score: 32 Votes (Like | Disagree)
SigurTom Avatar
8 weeks ago
Makes sense, I only pay for known good iPhones.
Score: 26 Votes (Like | Disagree)
jecowa Avatar
8 weeks ago
The way I heard it was that TSMS's 1st-gen 3nm process was not very desirable by customers because of its yield, and Apple was kind of saving them by using it. So maybe not charging them for defects is their thanks back to Apple.
Score: 22 Votes (Like | Disagree)
jz0309 Avatar
8 weeks ago
Unusual? Been in semi industry for decades and a lot of companies pay for “known goo die”…
Score: 19 Votes (Like | Disagree)
teknikal90 Avatar
8 weeks ago

Unusual? What kind of moron pays for broken materials?
according to the article, the entire industry?
Score: 13 Votes (Like | Disagree)
BorisDG Avatar
8 weeks ago

Sounds like TSMC is getting a high yield of 3nm chips for the iPhone 15s… ??
Around 85% which is not bad, but not perfect/optimal for sure.

Unusual? What kind of moron pays for broken materials?
They can build other products from the "defective" chips. Look at A15 for example. It has so many variations, because of yield issues:

Full A15 (5 GPU / 6 CPU cores):

* iPhone 13 Pro/13 Pro Max/14/14 Plus

Binned A15 #1 (4 GPU / 6 CPU cores):

* iPhone 13/13 Mini, SE (3rd gen)

Binned A15 #2 (5 GPU / 6 CPU underclocked cores)

* iPad Mini 6

Binned A15 #3 (5 GPU / 5 CPU cores - 1x Blizzard efficiency core disabled):

* Apple TV 4K (3rd gen)
Score: 13 Votes (Like | Disagree)

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