Apple, Qualcomm Cautious About Placing Orders For TSMC’s 7nm Process

Taiwan Semiconductor Manufacturing Company (TSMC) is looking at a not-so-stellar first half of 2019 after landing lower-than-expected 7nm chip orders from big clients Apple, Qualcomm and HiSilicon.

The world’s largest independent semiconductor foundry will unlikely see its 7nm process capacity fully utilized in the January-June period next year because of reduced orders, Digitimes reported Wednesday citing local Chinese-language newspaper Commercial Times.

Apple has relied on TSMC’s manufacturing process technologies for its iPhone processors in recent years. However, the Cupertino giant has decided to cut back on its 7nm chip orders for the first half of 2019.

Tim Cook’s company is said to be cautious about placing orders for the new 7nm chip solution. It also doesn’t help that Apple saw the sales of its latest-generation iPhones weaken about a month after their commercial debut.

Taiwan’s Central News Agency reported late last month that the weakening demand for Apple’s iPhone XS, iPhone XS Max and iPhone XR would cause TSMC to post a 14-16 percent revenue drop in the first quarter of 2019.

Apple isn’t the only one that’s cautious about adopting the new semiconductor manufacturing process. Qualcomm and HiSilicon are also circumspect on this matter that they haven’t increased their orders for early 2019

Industry sources said TSMC would utilize only 80-90 percent of its total capacity because of the diminished orders. The company did not respond when asked to comment on the leaked information. However, it is set to give an outlook update to its investors in mid-January 2019.

Back in June, Digitimes learned that TSMC was aggressively working to overcome production challenges after noticing the increasing demand for smaller fabrication processes. The company was further inspired to focus on its 7nm process amid news that many of its clients were skipping the 10nm process for the smaller manufacturing technology.

TSMC started mass production of its first 7nm process, called N7, in June 2018. For this year, the Taiwanese firm is expecting its 7nm chip sales to account for nearly 10 precent of its total wafer revenues. It then hopes to see the figure increase to more than 20 percent next year.

Given the reduced orders, it is unlikely for TSMC to realize its goals for its 7nm process. Its other clients — Nvidia, AMD, Xilinx and MediaTek — are also adopting the 7nm chip solution, but it’s not clear if they are increasing their orders for next year.