Nvidia beats Apple to become chipmaker TSMC's biggest customer, and I'm not sure that's a good thing

In case it wasn't already abundantly clear, Nvidia is doing pretty well right now, thanks mainly to demand for its AI processors. However, the true scale of its might has been made even more transparent by the revelation that it has now overtaken Apple to become the biggest customer of Taiwanese chip-making giant, Taiwan Semiconductor Manufacturing Company (TSMC).

Where in 2024, Nvidia provided just 11% of TSMC's revenue, coming in a distant second place to Apple's colossal 25% contribution, Nvidia has now apparently overtaken Apple. Not only is this a strong indication of just how much AI is impacting the world, but it reportedly has implications for the prices Apple is set to pay for production of its chips, potentially making future iPhone 18 products more expensive. Implications for prices of the best graphics cards aren't exactly good either.

The extent to which Nvidia has been demanding more and more output from TSMC has been clear for some time. However, it was only in the last few days that Nvidia CEO, Jensen Huang, publicly stated on a podcast that Nvidia had now overtaken Apple to become TSMC's biggest customer.

Speaking on the "A Bit Personal" podcast hosted by CEO of the Global Semiconductor Alliance (GSA), Jod Shelton, Huang was retold the tale of how, many years ago, upon first meeting the founder of TSMC, Morris Chang, Huang stated Nvidia would one day be one of the biggest customers of TSMC. In reply, Huang said "by the way, Morris would be happy to know that Nvidia is TSMC's largest customer now."

Huang also noted that "we were his largest customer during the PC revolution, and now we're the largest again." This refers to the time before the smartphone explosion that saw Apple come to dominate chip production purchasing, when TSMC was primarily occupied with producing gaming GPUs for AMD and Nvidia.

Huang wasn't drawn on the numbers involved in this new dominance. However, a subsequent rumor suggests the company now accounts for 13% of TSMC's revenue, up from 11% in 2024. This is a long way from the 24% that Apple occupied in 2024, but the rumor, from a Weibo account named "Fixed-focus digital cameras" also explicitly states that "Apple is no longer TSMC's largest customer."

Why Apple's share has dropped so dramatically isn't entirely clear. It certainly seems unlikely that Apple has reduced its orders. Instead, it would seem to point to increased demand from other customers as well, such as from AMD.

Whatever the exact reason, this rumor also states that, as a consequence of Apple losing such a dominant position, "TSMC's CEO visited Apple headquarters to demand the largest price increase in recent years."

What this all means for PC gamers looking to buy a graphics card for a reasonable price is probably very little, or at least very little that's positive. The vast majority of the extra revenue Nvidia will be driving is due to orders for dedicated AI GPU/processors. Because of the high price Nvidia can demand for these chips, TSMC can, in turn, charge a high price to Nvidia and prioritize its production capacity for these chips, at the cost of gaming GPUs, Apple phone processors, and more.

When was that AI bubble predicted to burst again?…