[애플 쇼크웨이브]⑦ iPhone 15 Pro 2 million costs have been won? The reason is the 3nm chip

iPhone price is expected to rise for the first time after 2017
High possibility of entering 200 million won
TSMC 3-nano process chip is the key impression factor
‘Made in America’ chips could lead to higher prices

[애플 쇼크웨이브]is content that looks at the location of the upheaval that occurred when Apple jumped into the semiconductor market. You might think Apple is a semiconductor. Apple is no longer just a company that makes smartphones and computers. After a long effort by the late founder Steve Jobs, Apple has designed state-of-the-art semiconductors used in mobile devices. If Intel was in the PC era, Apple has become the top predator in the semiconductor ecosystem in the mobile era. In the midst of a global semiconductor supply chain crisis and investment in a large-scale semiconductor production line facility, we will take a close look at the semiconductor market turbulence and prospects brought about by Apple Silicon to broaden your insight. Apple Shockwave visits readers every Saturday. After more than 40 series, it will be published as a book.

Newbie A college student is waiting for the ‘iPhone 15 Pro’ to be released this fall. Samsung Electronics’ ‘Galaxy S23’, which has become powerful, continues the ‘Pumppu’ and is ‘Jonber’. The iPhone 15 Pro has a price tag of at least 1.55 million won, but since the simple payment service Apple Pay has started, the will to switch to the iPhone this time is strong. However, in order to buy the iPhone 15 Pro, Group A is more likely to have to pay a higher cost. This is because the price of the iPhone is likely to rise significantly. If Apple raises the price of the iPhone Pro, it will be the first time since 2017. Why does this happen when A tries to buy an iPhone?

Upgraded iPhone chips cost more

Semiconductors are the most important parts of a smartphone. In particular, the value of the application processor (AP) which plays the role of the brain and the communication modem is key. Analyst TechInsight analyzed the total manufacturing cost of the Apple iPhone 14 Plus to be $527, with the dual modem accounting for $47 and the AP accounting for $81. If other semiconductors are included, it is understood that semiconductors will account for 54% of the total manufacturing cost of an iPhone.

Apple froze the price of the iPhone 14 series in the US last year, even as car prices soared through the ceiling due to a shortage of semiconductor supply caused by Corona 19. The A16 chip used in the iPhone 15 Pro is using an improved 4-nano process compared to the 5-nano A15. Despite rising chip prices, Apple chose to freeze prices again this time. Since the release of the iPhone X, the 10th anniversary model of the iPhone in 2017, Apple has maintained the price of its pro-level product line without raising prices. $999 for the Apple iPhone was a meaningful price tag, equivalent to Daiso’s ‘1,000 won’.

Jeff Fu, an analyst at Haitong Securities, China’s largest securities firm, predicted in a recently released report that the price of the iPhone 15 Pro could rise by $200. The possibility of using a titanium frame is also a factor that will lead to an increase in price, but the key is the ‘A17’ chip to be used in the iPhone 15 Pro. When Apple introduced the iPhone 14 last year, it used the ‘A15’ used in the iPhone 13 for the general model, and the recently introduced ‘A16’ for the high-end pro level. It is very likely that the iPhone 15 that will appear this year will use the A17 in the pro line and the A16 in the general iPhone. There is also a possibility that if Apple introduces the top-of-the-line ‘iPhone 15 Ultra’, a price tag of 3 million won will be attached. Apple is serious about the ‘class divide’ these days.

Has Apple CEO Tim Cook really changed his mind about iPhone prices? If so, the reason is most likely due to the semiconductor. As the price of high-end chips used in the iPhone Pro series, which has recently emerged as a flagship product, has skyrocketed, the main analysis is that it has become difficult to maintain the price of the iPhone at the level present That means the $999 price tag could finally cross the $1000 mark. The domestic selling price may approach 2 million won.

The performance of semiconductors improves as advanced micro-manufacturing processes are applied. Increasing performance by integrating more transistors of the same size reduces power consumption.

Apple is strategy to open the gap again through the galaxy s23 using the ‘Snapdragon 8 2th generation’ chips manufactured by Samsung Electronics manufactured by TSMC 4 Nano Fair. Compared to the A16, the performance of the A17 was analyzed to have improved by around 60% for single core and around 40% for multi-core. The analysis that the application of the 3-nano process has had a significant effect on the improvement in performance is obvious. As Apple occupies all of TSMC’s first-stage 3-nano process, AMD, Nvidia, and Qualcomm are expected to receive chips produced in TSMC’s other 3-nano process, N3E, from the second half of this year, later than Apple.

An improvement in performance is to be welcomed, but a rise in price is an ‘uninvited guest’. According to foreign media, Apple is said to have almost monopolized the 3-nano process that TSMC began mass-producing at the end of last year. TSMC and Samsung Electronics have homework to increase the yield of the 3-nano process.

If you want to monopolize a little production, you have to pay more. This is the reason why the additional price negotiations between Apple and TSMC, which were biased towards Apple, shifted to TSMC. WCCF Tech evaluated that “Apple is willing to accept a large cost to monopolize TSMC’s 3-nano process.” In fact, if TSMC’s 4-nano process, which has improved the 5-nano process, is changed to a 3-nano process, chip power efficiency is known to improve by about 35%. The chip size is also smaller and the performance increases by around 15%. In the case of the iPhone 15 Pro, which uses a fair 3-nano chip, battery life increases and performance improves.

The problem is that TSMC puts a higher price tag on semiconductors produced in the 3-nm process. It is evaluated that TSMC took the lead in negotiations as Apple tried to monopolize production in a situation where TSMC started mass production in December last year and there was not enough production. One 3-nano process wafer introduced by TSMC is known to cost 20,000 dollars. The price of TSMC’s 5-nano process wafer is estimated to be around $16,000.

Last year’s iPhone price freeze can be seen as a phenomenon caused by the strong dollar. Even if the price of parts bought outside the US increased, there was a ‘buffer’ that could be sufficiently offset when converted into dollars (in Korea, iPhone prices rose significantly due to the weak and won). The situation is different this year. In a situation where the exchange rate did not change significantly compared to last year, a guest appeared uninvited, saying that the prices of parts had skyrocketed. At this point, it is very likely that Apple will set a different iPhone price tag to maintain profitability and protect its share price. MacRumors.com also predicted that Apple may raise prices this time around to maintain profitability.

Coincidentally, the 75% share of the premium phone market is also a factor that increases Apple’s upside price potential. According to market researcher Counterpoint Research on the 23rd, global smartphone sales last year fell 12% compared to the previous year, but premium smartphone sales increased 1%. Apple accounted for 75% of all premium smartphone sales. Apple’s market dominance and high customer loyalty are factors that reduce consumer resistance to price increases.

There are also objections. Experts also suggest that Apple may not reflect all of the increase in chip procurement costs in product prices. This is because CEO Cook, a master of supply chain management, has a natural knack for cutting costs. It is an established theory in the industry that when Cook starts negotiations, he puts pressure on the other party to the point of suffocation. Unlike the founder of Apple, Steve Jobs, who opened his wallet generously for good parts, Cook was a leader in industrial engineering. They are masters at cutting parts costs, improving processes, and managing inventory.

There are other ways to try to reduce the cost of parts. It is a method of replacing chips that depended on external sources with self-developed products. The fact that computers using Apple’s ‘M1’ chip are cheaper than computers using chips supplied by Intel also leads to this speculation. Apple is expected to use its self-developed modem chip in the iPhone from next year. Cristiano Amon, CEO of Qualcomm, which supplies modems to Apple, also revealed this publicly at the Mobile World Congress (MWC) held in Barcelona, ​​Spain earlier this month.

‘Made in America’ double-edged sword

The expansion of semiconductor production in the United States, which the US government is pushing for, is also a destabilizing factor that can raise iPhone prices.

Samsung Electronics, TSMC, and Intel are building high-tech semiconductor factories in the United States. Through this, the United States is expected to be able to significantly solve the semiconductor supply chain crisis, but analysis is being raised that there are also concerns about the side effect of the increase in smartphone prices.

Recently, CNBC reported that there is growing concern that chip manufacturing prices will rise due to semiconductor production in the United States, which will skyrocket the price of finished products such as smartphones and game consoles. This is because the cost of building and operating a semiconductor plant in the US is expensive compared to Taiwan or Korea.

Until now, Apple has been using AP semiconductors produced by TSMC’s Taiwan plant, but CEO Tim Cook has declared the use of American-made semiconductors. When TSMC’s Arizona plant is operating at full scale, it can be expected that US-made semiconductors will be used in the iPhone.

Robert Mokos, CEO of Social Mobile, estimated that the cost of manufacturing chips made in the United States could soar up to 40% compared to those made in Taiwan. In this case, a cost increase factor of about $100 or more is created just for the iPhone.

TSMC’s chief financial officer, Wendell Huang, also mentioned in a recent earnings call that the cost of building a plant in the United States is much more expensive than in Taiwan. TSMC is investing $40 billion in a fab being built in Arizona, USA. “The cost of building a fab in the US could be four to five times higher than in Taiwan,” he said. This is because, in addition to inflation, the cost of labor, licenses, and occupational health and safety regulations are significantly higher in the United States than in Taiwan.