The Bull Case for Intel: TSMC's Crazy Pricing Power
Apple (NASDAQ: AAPL) sells hundreds of millions of devices each year. For those supplying parts or services necessary to get those devices into consumers' hands, winning Apple's business is a huge deal. Some suppliers depend on Apple so heavily that they have no choice but to bow down to Apple's demands, especially if competitors are gunning for the same business.
Taiwan Semiconductor Manufacturing (NYSE: TSM) may be the only Apple supplier where the script is flipped. Apple depends on TSMC to manufacture its custom chips, and TSMC generated around 26% of its total revenue last year from its largest customer, which is presumably Apple. In theory, Apple should have some leverage in pricing negotiations.
The problem is that TSMC is pretty much the only game in town, at least when it comes to manufacturing the most advanced chips. More than half of semiconductors manufactured by third-party foundries come from TSMC, and the company has pulled away in terms of manufacturing technology. TSMC's manufacturing prowess is partly responsible for the incredible performance and efficiency of Apple's chips.
Source Fool.com