[Taiwan Chip Report] iPhone Production Costs Cut... TSMC's Advanced Process "Saves 2 Trillion KRW Annually"

Apple Cuts $10 Per 16e Device
'Chipset Independence' from Qualcomm Also Discussed
Plans for 1.4nm Process Since 2018

Taiwan's TSMC, which firmly maintains its position as the world's leading foundry (semiconductor contract manufacturing) company, has been reported by local Taiwanese media to be helping its clients save on production costs for their flagship products through its cutting-edge processes. In particular, the reports highlighted that TSMC has helped reduce the production costs of Apple’s iPhones, noting that this is expected to positively impact TSMC as it seeks to expand its foundry business in the United States following its announcement of new investments there.

TSMC AFP Yonhap News

According to local media such as Taiwan Economic Daily News on April 28, Apple was able to save $10 (about 14,320 KRW) per device by outsourcing the baseband (the chip required for wireless transmission and reception of voice and data) of the 'C1' communication modem chipset, installed in the iPhone 16e released in February, to TSMC's 4nm (nanometer; 1nm = one billionth of a meter) process. Citing recent data compiled and released by Counterpoint Research, the media analyzed that TSMC’s ability to deliver high-performance products on time contributed to reducing the overall production costs of the iPhone 16e.

If future shipments of the 16e reach 22 million units, Apple’s headquarters estimates that it could save a total of $220 million (about 315 billion KRW). If annual shipments reach 200 million units, it is projected that initial production costs for the C1 chipset could be reduced by $2 billion (about 2.864 trillion KRW).

The smartphone industry is watching closely to see whether Apple can achieve true 'chipset independence' from Qualcomm through this move. The C1 is Apple’s first modem chipset designed and developed entirely in-house. It consists of the baseband, a 5G FR1 transceiver, and a power management chip (PMIC). The 5G FR1 transceiver was also manufactured using TSMC’s 7nm process. It is considered the most power-efficient modem ever installed in an iPhone. Despite still having a supply contract with Qualcomm, Apple began using the C1 in the iPhone 16e and plans to expand its use in the future. In this context, the latest data from Counterpoint Research provides further justification for Apple’s decision to utilize the C1 from a cost perspective. Furthermore, TSMC’s advanced process has enabled Apple to physically realize its self-designed C1 while also reducing costs, effectively giving a significant boost to Apple’s pursuit of chipset independence.

Apple is expected to produce and sell even more iPhone 16e units in the future, and as a result, TSMC is projected to generate significant profits. Apple is one of TSMC’s most important and high-volume clients. Thanks to orders from Apple and others, TSMC’s revenue from advanced processes below 7nm now exceeds 70% of its total revenue, reaching as high as 73%, according to Taiwan Economic Daily News. Specifically, shipments from the 7nm process account for 15%, the 5nm process for 36%, and the 3nm process for 22%. If the $100 billion (about 146 trillion KRW) U.S. investment project announced at the White House in March is realized, it is reported that 30% of sub-2nm process volumes will be produced at the TSMC factory to be built in Arizona.

In addition, TSMC recently announced plans to begin 1.4nm process production starting in 2028. Kevin Zhang, TSMC’s Senior Vice President, stated at the '2025 North America Tech Conference' held in Silicon Valley, California, on April 23 (local time), “A14 (1.4nm) is a next-generation advanced silicon technology based on a complete node transition,” adding, “Compared to N2 (2nm process), it is up to 15% faster, reduces power consumption by 30%, and increases transistor density by 1.23 times.”

Taiwan Economic Daily News = Yoon Hyejung

Translation = Asia Economy

※This column has been published as part of a strategic partnership between Asia Economy and Taiwan Economic Daily News.