Apple could be sourcing US semiconductors for its devices in the next few years, signaling the company’s move to rejigger complex and now unreliable supply chains across Asia.
CEO Tim Cook spoke with engineers in Germany during an internal meeting about sourcing chips from a plant in Arizona in 2024, according to Bloomberg.
“We’ve already made a decision to be buying out of a plant in Arizona, and this plant in Arizona starts up in ’24, so we’ve got about two years ahead of us on that one, maybe a little less,” Cook said.
Cook explained Apple could broaden its sourcing in the Western world to purchase chips from Europe:
“And in Europe, I’m sure that we will also source from Europe as those plans become more apparent.”
The meeting included Apple services chief Eddy Cue and Deirdre O’Brien, the head of retail and human resources.
Bloomberg pointed out that the Arizona factory Cook was referencing is likely the one being built by Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker. Last week, there was news that TSMC was expanding its US footprint by constructing another advanced semiconductor plant.
Apple currently sources its chips from TSMC plants in Taiwan, which Cook said produces about 60% of the world’s processor supply.
“Regardless of what you may feel and think, 60% coming out of anywhere is probably not a strategic position,” he warned.
The security of Taiwan has been a significant issue as China considers the self-ruled island part of its territory. Any invasion would cut TSMC’s supply chain and trigger global economic turmoil overnight.
Cook realizes the current geopolitical risk in the region will only worsen and is driven to revive the US semiconductor industry with help from the US government’s $50 billion legislation known as the Chips and Science Act.
Bloomberg had some concerns about TMSC’s new factory:
A lingering question is whether the factory as planned is suited to Apple’s needs.
The Taiwanese company has said that the plant will initially have a capacity of 20,000 chips per month and use a 5-nanometer production process. That wouldn’t satisfy Apple’s near-future desire for more advanced, 3-nanometer chips.
However, Bloomberg said TSMC could “theoretically introduce advanced production more quickly than it has so far announced. Apple also could potentially use the Arizona production for less complex components in its devices.”
And this news comes as Apple has sustained about a $1 billion hit due to recent zero Covid lockdowns in China at its factory in Zhengzhou, according to analysts at Jefferies.
Apple has also shifted some iPhone 14 production from China to India to diversify supply chains.
Apple is reducing its reliance on China and beefing up its supply chain management strategy in response to the ongoing de-globalization trend.
Ming-Chi Kuo, an analyst for TF International Securities, said the US market could be entirely supplied with Apple products made outside of China within 3-5 years.
A recent Rabobank analysis of ‘friendshoring’ showed US companies shifting production outside of China could end up in countries like Vietnam, India, Brazil, Bangladesh, Indonesia, Mexico, Turkey, Egypt, and South Africa.
If Apple wants to simplify its supply chain, perhaps chip production in the US and assembly in Mexico, this scenario could take years to execute.