Here's a problem you probably didn't expect: what happens when one customer wants so many chips that even the world's biggest chipmaker can't keep up? Taiwan Semiconductor Manufacturing Co. (TSM) is finding out, and the answer involves some awkward conversations with Apple Inc. (AAPL).
Nvidia Corp. (NVDA) CEO Jensen Huang made waves over the weekend when he told TSMC it needs to "work very hard" to meet rapidly rising demand. Speaking in Taiwan after dinner with senior supply-chain executives—including TSMC Chairman and CEO C.C. Wei—Huang didn't mince words: Nvidia alone could require the foundry to more than double its chip production capacity over the next decade.
"Nvidia needs a lot of wafers" this year as it scales AI infrastructure, Huang said, according to SCMP reporting on Sunday. That's the kind of understatement that keeps supply chain managers up at night.
The New King of Chips
Nvidia has officially become TSMC's largest customer, and was among the first to adopt the foundry's cutting-edge A16 process node. Huang emphasized that Nvidia's demand for leading-edge process technologies would be enough by itself to drive a capacity increase of more than 100% over time, TechNode reported Monday.
TSMC is taking this seriously. The company has already signaled aggressive investment plans, saying capital spending could rise as much as 37% this year to $56 billion. And that's just the beginning—spending is expected to grow significantly again in 2028 and 2029.
Apple's Uncomfortable Position
Meanwhile, Apple is reassessing its relationship with the chipmaker it's relied on exclusively for over a decade. Riding the AI boom, Nvidia has captured a major slice of the world's most advanced semiconductor capacity, leaving Apple in an unfamiliar spot: not the most important customer in the room.
According to the Wall Street Journal, Apple is evaluating whether to move part of its low-end processor production to alternative suppliers, a shift that would end more than 12 years of exclusive cooperation with TSMC, TechNode reported Monday.
It's not just about hurt feelings. Rising memory prices from suppliers such as Samsung Electronics Co, Ltd (SSNLF) and SK Hynix are also pressuring Apple's margins. When your main chip supplier is stretched thin and your memory costs are climbing, suddenly diversification looks a lot more attractive.
Analysts cited by IThome note that Intel Corp (INTC) could begin manufacturing chips for non-Pro iPhone models using its 14A process as early as 2028. That would be a remarkable turn of events—Intel making chips for Apple, the company that famously ditched Intel processors in favor of its own custom designs.
The Market Responds
TSMC stock has gained over 65% in the last 12 months, leapfrogging the likes of Tesla Inc. (TSLA) and Broadcom Inc. (AVGO). Nvidia hasn't done too badly either, gaining 64% over the same period and becoming the first company to hit a $4.5 trillion market cap last October, toppling Big Tech giants like Apple and Microsoft Corp. (MSFT).
In premarket trading Monday, Nvidia shares slid 2.05% to $187.21, while Apple dipped 0.42% to $258.39. Taiwan Semiconductor also traded lower, down 1.15% at $326.75, according to market data.
The real story here isn't just about one chipmaker trying to keep up with demand. It's about how the AI boom is reshaping decades-old relationships in the semiconductor industry. When your best customer for over a decade suddenly isn't your biggest customer anymore, that changes everything. And when the new biggest customer wants you to double capacity just for them, well, some other customers are going to feel the squeeze.
