https://www.semiconductor-digest.com/apple-is-americas-semiconductor-problem/ Semiconductor Digest [ ] [Search] Semiconductor Digest Apple Is America's Semiconductor Problem * Home * Webinars * Technology Papers * Videos * Podcasts * Events * Subscribe * Contribute * Advertise * * [ ] [Search] Semiconductor Digest [ ] [Search] * HOME * Semiconductors * Packaging * MEMS * Displays * AI * Design * Events * Magazine + Magazine + Subscribe + Contribute + Advertise + Solid State Technology Archives + SEMICON West Show Daily * Resources + Webinars + Technology Papers + Videos + Podcasts + Events + Social Media + Solid State Technology Web Archives * Subscribe * Advertise * About Us + Meet the Team + Contact Us [ ] [Search] Home >> Apple Is America's Semiconductor Problem Semiconductors Apple Is America's Semiconductor Problem Pete Singer 8 hours ago 0 By Matt Stoller, Director of Research at the American Economic Liberties Project and Laurel Kilgour, Research Manager at the American Economic Liberties Project With the 2022 CHIPS Act, the federal government made a massive investment to reshore semiconductor chip fabrication. Why? Covid-era shortages of semiconductor chips had revealed America's shocking dependence on brittle international supply chains. In 1990, 37% of the world's chips were made in the US. By 2020, it was 12%. So when the pandemic disrupted sourcing of foreign chips, automakers faced a 52-week long waiting list for chips needed for advanced features and had to slash new car production, spiking used car prices. Chips are embedded in nearly every electronic device, so the risks of weak domestic production are far-reaching. In the mission to reshore chip fabrication, smartphone giant Apple - the biggest buyer of semiconductors in the world - is looking to burnish its patriotic image. In May of last year, Apple announced a deal to contract with chipmaker Broadcom to source its 5G radio and wireless chips in the United States. The year before, Apple indicated that it was going to source about one third of its mobile phone processors from a soon-to-be constructed fab in Arizona operated by Taiwan Semiconductor Manufacturing Company (TSMC). In this narrative, as a good corporate citizen, Apple is using its leverage as a large buyer of semiconductor chips to push chip makers to move production back to the U.S.A. This narrative is false. Apple's rise to become the world's foremost producer of smartphones--using a range of exclusive deals, anti-competitive practices, and race-to-the-bottom sourcing strategies--is intimately intertwined with why we needed to pass the CHIPS Act in the first place. No single company is more responsible for thinning out America's chip manufacturing than Apple. Apple is the primary obstacle to the success of reshoring chip fabrication, and more action needs to be taken by the federal government to rein in its control over the global electronics supply chain. Apple's sheer size as a buyer puts this into perspective. In 2022, Apple bought $67 billion of semiconductor chips, a full 11% of the global market for chips across all industries. Apple buys a far larger share of smartphone and computer semiconductors, given that it accounts for half of global smartphones sales and earns 85% of all smartphones profits. Apple's supply agreements with U.S. mobile operators demand that Apple products get the deepest subsidies and the largest share of sales. That hardware dominance means that Apple can monetize apps and services embedded on iPhones, like Apple Music, support, and its 30% tax on all app store sales. Apple executives acknowledged that Google paid them $20 billion in 2022 to be Safari's default search engine. At points within the last decade, Apple earned over 100% of smartphone profits, because Android manufacturers were taking losses and Apple forced users to adopt its services. With this position, Apple uses its outsized buying power to squeeze the margins of its suppliers such as Foxconn, leading to poor pay and terrible working conditions in Chinese factories. When iPhones have experienced sales declines, Apple can unilaterally force suppliers to accept large price cuts while threatening to go to China to find other suppliers, just so that Apple can maintain its high profit margins. Even for the American suppliers who have managed to stay in business, things are hard. With Apple accounting for most or all of the revenue of many of its suppliers--by buying most of their output and blocking its competitors from using similar components--suppliers "dare not put a foot wrong" by speaking against Apple, or even mentioning it by name. In 2017, when Apple announced it was moving away from using UK-based Imagination Technologies for graphics processors, the company lost two thirds of its value overnight. Apple's monopsony power means component suppliers have few buyers. This economic power has allowed Apple to single-handedly push an enormous fraction of the world's electronics supply chain to East Asia and to China specifically. A brief look at Apple's 2023 supplier list reveals a vast range of hundreds of foreign suppliers, particularly in China. Only a handful are based in the United States; not nearly enough to maintain a resilient supply chain. Far from building U.S. capacity, Apple was adding new suppliers in China at a breakneck pace prior to and through the pandemic, a dependence which led to delays and product shortages during lockdowns. Apple had long been planning to use memory chips from China's Yangtze Memory Technologies Co. (YMTC) in its iPhones, before the Department of Commerce banned YMTC and other Chinese chipmakers from buying the equipment needed to make the most advanced chips. Apple was going with YMTC because, as YMTC's chips are heavily subsidized by the Chinese government, they were about 20% cheaper, despite being technologically inferior to rivals like South Korea's Samsung or American chipmaker Micron. Said another way, Apple was using Chinese subsidies to actively undermine Micron, the last remaining U.S. memory maker, until the U.S. government stepped in. Apple's moves to keep competitors locked out of the market further push supply chains abroad. Just last summer Apple announced a deal to buy 100% of the output of the most advanced chips from TSMC in Taiwan, the company that makes 90% of the world's leading edge chips. This move guaranteed that none of Apple's competitors could use similar chips for more than a year. Also key to Apple's smartphone strategy is control of the designs and intellectual property for the chips going into its devices. In maintaining its dominant position in smartphones, Apple has pursued a chain of acquisitions in the market for chip design to own the intellectual property over many of the most advanced chips. This has extended to stealing core pieces of technology from startups making new chips and electronic devices, only to have them manufactured and assembled abroad. Fortunately, some actions are being taken. The Department of Justice's antitrust division is reportedly investigating a potential monopolization case against Apple for many of these tactics. The International Trade Commission recently banned imports of several types of Apple watches over the company's theft of core pieces of technology. However, more is needed, both to rein in Apple's outsized chokehold over the chip market and to ensure the success of the CHIPS Act. Exclusive deals, like Apple's deal to lock up 100% of TSMC's capacity, should simply be illegal. As the world's largest buyer of semiconductors, Apple's hasty reassurances that it will buy some chips from Broadcom, made from old processes, does not put a dent in its sourcing of chips made abroad from cutting-edge processes. If Apple wants to source its chips for pennies from foreign suppliers, it should have to pay a price to do so, such as a duty on imported iPhones using only foreign-sourced chips. Realizing the promise of the CHIPS Act depends on acknowledging and addressing Apple's outsized influence over our domestic chip industry. [d8672e574b931a38acdce3] Pete Singer Pete has over 40 years of publishing experience. He co-founded Semiconductor Digest and the Gold Flag Media company with publisher Kerry Hoffman in 2019. Previously, he spent over 25 years at Semiconductor International and 11 years at Solid State Technology. 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