Apple Faces Challenges in Advanced Chip Supply from TSMC

Apple's Supply Chain Statement

Apple announced that its performance in the second quarter of fiscal year 2026 will be limited by the availability of processors manufactured using TSMC's most advanced production technologies. This type of statement, which the company has not made for years, is being closely monitored by the industry. It appears that as production of AI accelerators based on TSMC's latest manufacturing processes accelerates, Apple believes it cannot secure sufficient chip capacity for its popular products.

Statements from Company Executives

Apple CEO Tim Cook stated in his remarks, "On the supply side, I mentioned the constraints we saw in the second quarter, which were reflected in the revenue guidance Kevan provided earlier. The constraint I mentioned is due to advanced chip manufacturing capacity, and this is partly a result of us posting high growth of 23% in the first quarter and having less flexibility to increase capacity as much as we wanted during that process."

The company's CFO, Kevan Parekh, emphasized that their guidance for the upcoming quarter is based on the company's 'best estimates regarding limited supply,' underlining that the situation is dynamic. Tim Cook avoided commenting on the supply situation beyond the second quarter, saying, "Supply is a function of many things that are very dynamic in the industry. Therefore, I don't want to comment on it."

Uncertainty Despite Record Sales

Apple's product and service sales reached $143.756 billion in the quarter ending December 27, 2025, a 15.6% increase compared to the same period the previous year. While Mac and wearable sales declined, iPhone, iPad, and service sales broke records. However, the company expects revenues in the second quarter of fiscal year 2026 to be around $107.75 - $110.62 billion, a 13% - 16% increase compared to the same quarter the previous year, due to constraints in iPhone supply.

Has TSMC's N3 Capacity Reached Its Limit?

Apple's latest iPhone 17 and iPhone 17 Pro models are based on the A19 and A19 Pro chips manufactured using TSMC's N3P production technology. Apple was TSMC's priority customer for next-generation chip manufacturing technologies. However, it appears that demand for products based on processors manufactured with 3-nanometer class technologies has exceeded supply precisely when TSMC's N3 supply has reached its limit.

Although TSMC now has multiple N3-compatible fabs, almost all of its major customers are producing 3-nanometer class products. More importantly, Nvidia has begun mass production of its next-generation Rubin GPUs and accompanying processors for its next-generation Vera Rubin platform for AI, which requires a significant amount of N3 capacity. This explosion in AI infrastructure within the industry is beginning to affect component costs and supply even for other major players like Apple.

Concerns Also Over Memory and Storage Supply

Apple CEO Tim Cook also mentioned the company's concerns about future memory and storage supply and prices during the call. Large manufacturers typically have long-term supply agreements for commodities like memory. However, the supply chain structure for logic chips (like those used in iPhones) and memory chips is fundamentally different.

Memory is considered a commodity, and manufacturers can direct capacity among customers, densities, and even memory types (HBM, LPDDR, GDDR) with fewer process changes and shorter qualification cycles. Chip manufacturing capacity at TSMC, however, is structurally more difficult to secure because it is usually reserved far in advance. Rapid substitution is not possible when demand explodes.

Apple's statements show that the tension in the global semiconductor supply chain is not limited to the automotive or AI sectors but is also directly affecting consumer electronics giants. The industry has turned its eyes to TSMC's capacity expansion plans and whether other major technology companies will make similar announcements.