Can't Rely Solely on TSMC, Ming-Chi Kuo: Apple Is Systematically Cultivating Intel, Targeting a "Key Supplier"

``` Apple is seeking a more strategically significant second pivot for its advanced process supply chain. The latest industry research from Ming-Chi Kuo reveals that Apple's partnership with Intel is not merely a trial run, but is being pursued across three major product lines to verify the possibility of Intel becoming a key supplier in the future. On May 15, TF International Securities analyst Ming-Chi Kuo tweeted that Apple has initiated projects using Intel’s 18A-P process for entry-level or older models of iPhone, iPad, and Mac processors, and will employ Intel’s advanced Foveros packaging. The order structure shows that iPhones account for about 80%, which is similar to Apple's terminal device sales structure. The market implication of this arrangement is that Apple does not intend to shake TSMC’s core position in the short term, but is proactively developing alternative capabilities. As TSMC’s advanced process resources become tighter and increasingly shift towards AI-related demand, Apple is motivated to expand its supply choices while it still holds bargaining power. For Intel, this may be a rare “training ground” window for its advanced process foundry business. For TSMC, its status remains solid for the coming years, but its lead is becoming a focal point for clients, policies, and competitors to hedge against shared risks.

**Focus of Cooperation: Entry-level and Legacy Chips, Covering Apple’s Three Major Product Lines** Ming-Chi Kuo says the foundry partnership between Apple and Intel may be focused on relatively low-end or legacy chips in the iPhone, iPad, and Mac series. These chips will use Intel’s 18A-P manufacturing process and exclusive Foveros advanced packaging. About 80% of the orders are concentrated in the iPhone product line. Kuo believes this reflects Apple’s terminal device sales mix and shows Apple is not just selecting a single low-risk product for testing, but is verifying Intel’s capability under conditions closer to real business structure. He also says Apple is simultaneously evaluating other advanced process technologies from Intel. However, Intel’s mass production timeline and ultimate shipment scale remain unclear, and there are currently no clear shipping plans at the terminal or EMS end. **Apple's Intent: Developing a Second Source While Bargaining Power Remains** Kuo judges that Apple is establishing projects simultaneously across all three major product lines—iPhone, iPad, and Mac—with Intel, and the wafer input ratio is close to market sales structure, meaning Apple is simulating and verifying the possibility of Intel becoming a supplier for all product lines in the future. This is not only to reduce dependence on a single supplier or to increase bargaining power with TSMC. More critically, Apple realizes that if TSMC’s advanced process resources continue to tilt toward AI, the cost and difficulty of developing new suppliers in the future may be higher. Therefore, Apple is choosing to pursue cooperation with Intel while it still has strong bargaining power, and, using its own chip design advantage, maintains transaction relations with TSMC. This is a dual-track strategy: core supply continues to rely on TSMC, while long-term flexibility is established through Intel. **Intel's Opportunity: Apple Orders Are a Complete Training Ground** In the coming years, almost all of Apple’s advanced process orders will remain concentrated at TSMC. Thus, Kuo believes Apple is almost the only—and also the most comprehensive—training opportunity for Intel’s wafer foundry. The reasons are that Apple’s orders cover all product lines, the scale is large enough, and the design and production rhythm must be dynamically adjusted according to market changes. Such a client can test Intel’s overall ability in process technology, packaging, mass production cooperation, and delivery management. However, in the short term, Apple’s orders are unlikely to reverse Intel’s foundry business losses in a single quarter, and the supply ratio will be limited by capacity and yield rate. Kuo states that Intel internally has mixed feelings about Apple orders: the opportunity is huge, but execution is equally challenging. Apple’s high standards, plus Intel’s strategy of taking on other client orders simultaneously, will magnify the complexity of rebuilding advanced foundry business. Kuo believes Intel is at a window period driven by its own efforts, geopolitics, and clients hedging risks, but whether it can deliver depends on execution. **Yield Challenge: Whether 18A-P Can Scale Up Is a Key Variable** Kuo says Intel’s production yield target for 2027 is first to stably reach above 50% to 60%. The material also mentions that industry chain researchers estimate TSMC’s current most advanced 2nm process node yield rate exceeds 70%. This means that for Intel to truly become a key supplier to Apple, merely securing project validation is not enough. Yield rate for 18A-P, mass production pace, client shipment scale, and gross margin improvement will all be core indicators for investors to evaluate Intel’s foundry revival narrative. Currently, Intel stock pricing logic not only focuses on data center server CPU cycles, but also includes the expectation of “America’s tech giants having a second advanced foundry source.” But if yield rate, mass production, or profitability improvement fall short of expectations, this high-flexibility narrative may face pullback pressure. **TSMC's Situation: No Short-Term Worries, But Becoming a Risk Hedge Target** Kuo believes that even if Intel ships fairly smoothly, TSMC will still account for over 90% of Apple’s advanced process supply. In other words, TSMC’s leading position in Apple’s supply chain remains solid for the coming years. But the problem is, TSMC’s lead itself is becoming the focus of risk hedging for all parties. When advanced process becomes a scarce resource and resources continuously tilt toward AI, Apple will naturally seek cooperation with Intel to enhance bargaining and supply flexibility. Kuo says Apple is not alone. All key players in advanced process are hedging risks around TSMC: the US government advances domestic capabilities through various semiconductor policies, Apple cultivates Intel, and Samsung leverages memory business profits to invest in advanced process. Relatively, TSMC currently mainly relies on excellent execution to face competition. Kuo believes this is akin to betting its competitive edge on the assumption that its execution will continue to lead. **Pricing and Capacity: TSMC Needs to Account for Potential Competitive Risks** Kuo points out that, aside from execution, TSMC has limited external hedging tools, which is a structural issue: the US is both TSMC’s key market and technology partner, but also a major source of policy pressure; other possible partners—including mainland China, the EU, and Japan—either cannot or find it difficult to form effective hedges. In market strategy, external hedging tools such as business diversification, dispersed customer structure, technology licensing, and supply chain localization, all may face diminishing marginal utility because of TSMC’s leading position. Thus, Kuo believes that accelerating the accumulation of internal capital is a more pragmatic approach, and internal capital comes from pricing power in advanced process. This means not only reasonable profits, but also pricing for future risks. Intel is a specific example. Kuo states that when Intel places orders with TSMC for its own products in order to free up capacity for “training” with Apple, this is not an ordinary order for TSMC, but one that may bring potential competitive risks. If TSMC decides to trade with Intel, it should consider this competitive relationship—reconstructed by geopolitics and client structure—when pricing risk and allocating capacity. Risk Warning and Disclaimer The market is risky; investment should be made cautiously. This article does not constitute personal investment advice and does not take into account individual users’ specific investment goals, financial situations, or needs. Users should consider whether any views or conclusions in this article are suitable for their own situation. Investments made based on this are at their own risk. ```