SK Hynix bears may have been right.

Second-quarter operating profit climbed a mind-boggling 557% to a record 60.54 trillion won ($4.2 billion). But that was short of the 64.31 trillion won average of analyst estimates compiled by FactSet.

Revenue also missed. FactSet’s survey saw 84.17 trillion won, yet the world’s largest maker of high-bandwidth memory (HBM) only delivered 79.32 trillion won (also a record). Yonhap Infomax had similar estimates, so this wasn’t a sampling error.

Here’s what happened.

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Chinese AI models are the hottest topic in tech this week. Moonshot AI topped the headlines with its Kimi K3 model, followed soon after by Alibaba’s Qwen 3.8-Max.

They’re generally viewed as technological developments.

I see them as economic developments. And over the long term I believe we need to spend more time looking at the US-China AI battle through the lens of economic rivalry.

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I don’t normally publish on a Sunday, but this Sunday is different. It’s World Cup Final Day. Outside of the Olympic opening & closing ceremonies, it’s one of the world’s most-watched events.

So I am using it as an excuse to tell you about the star of the show — the ball — and to explain one of the most important lessons in technology.

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TSMC is now without a doubt the world’s premier facilitator of the AI boom.

Second-quarter earnings, reported Thursday afternoon, were themselves quite undramatic. Revenue was in line with guidance and gross margin just beat its own outlook.

The real excitement came with three announcements:

• Full-year revenue guidance raised: from over 30% growth to over 40% YoY in USD terms

• Full-year capex raised: from $52-$56 billion, to $60-$64 billion

• Another $100 billion added to its Arizona plans, to include a 2nm fab, taking it to $265 billion

Not announced, but surfaced through my analysis of reported data, was a 15% increase in average prices to the highest on record. This rising ASP indicates that recent price hikes across all leading nodes, reported exclusively by Culpium last month, have already started to kick in.

The impact is evident even when accounting for the higher proportion of revenue from leading edge versus legacy.

Higher prices, rising revenue expectations and a boost in capex are all clear signs that TSMC is more optimistic about the AI boom than it was six months ago.

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• 140.9 points, driven by rapid uptick in chipmaking

• +1.4 pts, rising for 10th straight month

• Divergence emerging between strong upstream and weaker downstream tiers

This month’s CASCI report was delayed by a typhoon which swept across Taiwan and shut businesses for two days. There’s no indication that operations across the supply chain were affected, but it’s another reminder of the resilience needed when doing business in Taiwan.

The Composite View

For the first time this year a clear divergence is emerging between upstream and downstream tiers of the AI compute supply chain.

Although there continues to be growth across all tiers — the sector is still broadly strong — CASCI data shows acceleration at the top and deceleration at the bottom.

Making and selling a chip doesn’t guarantee demand exists for that chip to be assembled into a final AI device such as a server. This is a warning sign that inventory may start piling up if server assemblers cannot digest the supply of components quickly enough.

Observers should watch announcements from major server buyers for signs that they’re pausing the incremental increases in capex forecast that we experienced over the past few quarters.

Upstream

TSMC’s massive growth (58% in USD terms for June) is not isolated. Acceleration among upstream AI compute suppliers was seen across the entire passive and semiconductor components sector. Chip designers, chip manufacturers, and makers of upstream parts are receiving and fulfilling orders at a continuously faster rate.

Mid-stream

There’s solid growth at the mid-stream of the AI compute supply chain with the largest pace of acceleration in six months.
However, there’s some divergence to be seen. Mechanical parts for AI servers, particularly metal components, used at the PCB and rack level are experiencing unprecedented growth and upward momentum. This is tempered by slightly milder growth in other areas, notably in cooling systems and related parts.
That said, momentum in the mid-stream returned in June, an indication that acceleration may continue for a few months.

Downstream

Server assembly is at the weakest pace of growth in at least six months, even after accounting for seasonality. Growth decelerated for a second straight month and a continued slowdown could push this tier to the weakest in more than a year.
There’s an important caveat we need to be aware of when examining this development. Many assemblers have moved more of their components to a consignment model. Rather than buy and on-sell parts, they’re letting clients procure these parts and ship them to the assembler’s factory. This can crimp top-line growth and impact gross margins. However, Culpium analysis indicates this shift only partially explains the deceleration.
While there remains growth in output of AI servers, CASCI data shows manufacturing momentum at the end of the supply chain is starting to weaken.

Capacity

Construction of factories and installation of equipment decelerated in June, falling from recent highs. Data indicates this may be a pause in the construction phase as opposed to a slowdown or cancelation of equipment orders.

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SK Hynix is going big in America. The world’s premier maker of high-bandwidth memory is set to raise around $28 billion from a sale of American Depositary Receipts that will be listed on the Nasdaq this week.

Unlike compatriot Samsung which has a large suite of products, SK Hynix only makes memory chips: DRAM and NAND. As a result, this listing is a good chance for American investors to get exposure to one of the chief beneficiaries of the AI boom.

Rather than offer a lazy summary of the prospectus with screenshots and cliches, I decided to dive into data that isn’t immediately obvious. This includes a lot of information that is not even in the US-listing document.

SK Hynix Has Been Slow to Expand

This is really counterintuitive, and something most folks don’t want to admit. But the numbers don’t lie.

Based on quarterly bit-shipment data provided by both Samsung and SK Hynix, I calculated just how much they’ve raised output since the Covid-led rise in 2020, through the 2023 downturn, and into the AI-boom sparked by the launch of ChatGPT in 2022.

Over that time SK Hynix’s compound average growth rate (CAGR) was around 11%. The gap to Samsung is particularly acute over the past two years when AI became such an obvious driver of DRAM demand.

It is Highly Leveraged to HBM

Call it a bug, call it a feature, but let’s call it what it is. SK Hynix was the global pioneer of high-bandwidth memory when the others dared not tackle the myriad challenges that came with developing stacked DRAM which relies on advanced packaging.

Today, SK Hynix is rightly reaping the rewards for that R&D risk. HBM is 5x the price of standard DRAM when measured on a per-bit basis. The result is a massive jump in both revenue and profit margins.

Yet, by my calculations HBM accounted for around 8% of SK Hynix’s total DRAM bit-shipments last year and around 40% of DRAM revenue. At first glance this looks like low exposure, which it is. But given the massive price premium for HBM over standard flavors like DDR, this low exposure means high leverage.

Every bit of new HBM sales is equivalent to 5-bits of DDR revenue. That’s great when the market is growing. But when it slows, every 1-bit fall in HBM demand will have the same impact on revenue as losing an order for 5-bits of DDR.

Any analyst or investor who is modeling SK Hynix’s HBM as a competitive advantage in the AI boom must factor in this leverage. A slowdown in AI-chip demand could have a much larger impact on this company compared to Samsung and Micron.

Its Quadrillion-Won Plan Makes the US Look Small

American investors may be eager to throw money at SK Hynix. The love is not reciprocated. The US is its single-largest source of revenue at 69% last year, but the Icheon-based company has not, and will not, make America a significant manufacturing base. Less than 1% of its non-current assets — property, plants and equipment — are in the US.

A $3.9 billion plan to build in West Lafayette, Indiana is the company’s first significant step onto US soil. But that investment will barely the move the needle. The new plant will only provide back-end packaging, a low-value component of memory production, and pales in comparison to the 1.1 quadrillion won (yes, quadrillion!) SK Hynix has announced for Korean expansion over the next eight years. Even in USD terms — $710 billion — it’s a staggering figure which also shows that barely 0.5% of its capex is scheduled for American soil.

China Ties Will be Hard to Break

SK Hynix’s operations in China are deeper and broader than many realize. It makes both DRAM and NAND there, has a packaging & testing operation, and even a budding foundry joint venture.

Its position in China was cemented by the 2020 purchase of Intel’s NAND business. This included a Dalian NAND-manufacturing facility which has since been folded into its spunoff Solidigm unit.

Its headcount also tilts toward China. Around a quarter of SK Hynix’s global workforce is in China. The company even has a legal obligation to keep prices low in the country as part of a deal to get antitrust approval for buying Intel’s NAND business.

Health and Safety Concerns Persist

Some care, others may not. Either way, it is worth pointing out a few outstanding safety incidents including two which occurred as recently as last month.

In the latest accident, a fire broke out at its Cheongju plant which makes DRAM, including HBM. As a result, a gas leak occurred between fab M15 and its M15X extension resulting in the emission of toxic fluorine gas. At least seven people were affected and taken to the onsite medical clinic, local media reported.

Separately, a worker died last month after battling illness for at least 15 months. Details are murky, but according to the company the employee was categorized in March 2025 as suffering an occupational illness. Neither incident was mentioned in the Nasdaq IPO prospectus.

Generally speaking, semiconductor manufacturing might be considered a low-risk occupation for workers. But numerous noxious chemicals are used, and when accidents happen serious injury and death has been the tragic result.

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Apple’s decision to raise prices across the board last week took a lot of people by surprise. Customers rued their decision to hold off buying a new MacBook Neo or MacBook Pro after seeing costs jump.

Many also saw it as another example of Apple flexing its pricing power, convinced that consumers will still buy no matter how much Cupertino charges.

It’s the exact opposite.

It was an admission of defeat. Proof that decades of strict supply-chain discipline and buying power no longer hold up.

Apple had tried for months to save money, my sources tell me. But skyrocketing DRAM costs have driven the price of memory from $30 per phone to over $130 apiece, bringing it above 30% of the cost of building an iPhone, according to my discussions with sources.

In reality, Apple’s decision to add $100 to a MacBook Neo, $300 to a MacBook Pro, and $500 to a Mac Studio shows Apple’s waning position in the global supply chain for technology hardware.

The hikes also reveal the company’s Achilles’ heel, where Tim Cook and his team have minimal bargaining power.

Regular readers of Culpium have watched me map out this change over the past six months.

In January I wrote that Apple is Fighting for TSMC Capacity as Nvidia Takes Center Stage.

“The iPhone maker’s chip designs are no longer guaranteed a place among TSMC’s almost two dozen fabs. What (CEO CC) Wei probably didn’t tell Cook is that Apple may no longer be his largest client.” — Culpium, 15 January 2026.

Then, in February, I shared that TSMC’s N2 Node is Almost Booked Out for the Next Two Years. The ongoing struggle for TSMC capacity “came to light during the Covid pandemic when car makers were caught short. The current situation, however, is more acute than ever.”

Happy Conundrum

By happenstance, Apple soon found itself caught in an interesting conundrum. In April I wrote that it was running out of the binned chips used in the MacBook Neo and was considering whether to order more. “If they do proceed with a fresh order … then it will most likely need to raise prices of the MacBook Neo.” A big part of that higher cost, I explained at the time, was the likely need to pay more for its A18 Pro processors.

Apple did end up ordering that fresh batch, and in May I explained that pricier logic chips weren’t the only challenge in keeping a lid on costs. “DRAM prices have escalated since the initial production run, driving the Neo’s bill of materials much higher.”

And if all of that wasn’t enough of a hint, there was my very blunt assessment that Memory Makers Are Strangling the Rest of the Tech Industry. “SK Hynix didn’t sell more DRAM, it just charged more for it,” I wrote in April.

So in that context we can see that Apple’s price hike last week was not sudden, it was not rash, and it wasn’t Tim Cook displaying some fit of pique.

It was calculated, planned, and executed over a period of months. Apple could see it coming as far back as six months ago, my sources tell me, and has been preparing the groundwork ever since.

And the messaging was carefully stage managed.

First was the timing. Cook, as CEO, or his CFO Kevan Parekh could have signaled the price rise back in its April 30 earnings call, or they could have done so in the next event around a month from now. But they chose the end of June, when the message wouldn’t get lost.

Then they chose the medium. In this case, an interview with The Wall Street Journal’s Rolfe Winkler, the same reporter who got exclusive tours of Apple supplier facilities including TSMC, Foxconn, and GlobalWafers back in February.

To be clear, I am not dissing Winkler for getting an interview with Cook and being a conduit for Apple’s message. I have conversed with Winkler many times, he has quoted me in his pieces, and I find him to be a very diligent journalist. In fact, I know from first-hand experience that any interview with an Apple executive will yield little beyond the exact message Apple wants conveyed.

And so it was in that interview that Cook softened the ground for what would come next.

“The main point is unfortunately price increases are unavoidable. We’re doing our best to mitigate the huge increases that are being passed to us,” Cook told the WSJ.

That point about mitigating price increases is not just PR fluff aimed at making us feel sorry for the company — although that’s part of it.

The truth is, my sources tell me, Apple has been pushing its supply chain hard over the past six to 12 months to save pennies and pounds. But the inflationary winds are stronger than even Mighty Apple can bear.

Eat the Cost

Apple could, theoretically, eat the cost and suffer lower margins as a result. But come on, it’s a publicly listed company whose $4 trillion value derives from a combination of cult-like following and the fattest margins in consumer electronics.

Within days of that WSJ interview came the price rise. And with it the blame game.

Listen to Jon Y from Asianometry and myself discuss how memory-makers ignored the coming AI boom in this episode of Supply-Chained.

Memory chips aren’t the only thing that’s become more expensive over the past year. We already know that logic chips have gone up in price, which includes not only core A-series and M-series processors but also microcontrollers, power-management, networking, and display drivers. There’s also upward pressure on magnets, exterior casings, and even batteries.

But Cook chose to blame memory.

Memory takes the rap for two reasons. It’s the component he has the least control over. More importantly, according to my discussions across the supply chain, memory’s contribution to Apple’s total components costs will climb to as much as one-third of the bill of materials for many devices during calendar 2026. And Cook could do nothing to stop it.

What’s different about memory is Apple’s minuscule position in that market. Apple can, and has, bullied display makers into cutting OLED prices, keeping battery costs under control, and squeezing more out of camera-lens suppliers. That’s because in most cases it’s one of, if not the, largest customer.

For dozens of companies the calculus is stark: lose Apple and you lose a huge slice of your business. The corporate graveyard is full of suppliers who once leant too heavily on Apple. If you’re lucky the company will buy you out. Unlucky and you’ll face bankruptcy.

A major criticism leveled at Apple in the past week is that the company turned the screws on memory makers for years, and this price increase is its comeuppance. But that’s not quite how it works, especially in DRAM.

Lack of Leverage

Apple has very little leverage over memory-chip makers. The company was once famous for buying up NAND because at the time the iPod was the single-largest use for this relatively expensive storage solution. Today, NAND is the primary storage in both laptops and smartphones, and Apple has a minor share in both.

Lenovo, Dell, and HP are the global leaders in personal computers, with each putting roughly the same amount of DRAM and NAND into their products as go into any flavor of Mac. And at roughly 20% global smartphone share, the iPhone has no monopsony power over Samsung, SK Hynix or Micron. There’s also the mammoth amounts of memory buzzing away in data centers across the globe dishing out Netflix shows, Spotify streams, and Substack feeds.

As a result, Apple is nowhere near the largest buyer of DRAM and has a dwindling share of NAND purchases.

Memory makers will neither dine out nor go bankrupt on the basis of Apple orders.

To the big three, Apple is just another customer. As proof, witness Micron’s recent announcement that it has signed 16 Strategic Customer Agreements (SCAs) “across the data center, consumer and auto market segments.” My sources tell me that cloud-service providers are a major component of this SCA roster, an indication that end-customers are getting more involved in the purchasing deals that were once left to manufacturing partners like Foxconn, Wistron, and Flex.

Crocodile Tears

Yet Micron is crying crocodile tears, referencing the last memory downturn as proof of its downtrodden status.

“We told a couple of the customers who were being very aggressive with pricing at that time that this is not constructive,” Micron Chief Business Officer Sumit Sadana told the WSJ. “A lot of the industry investments got shut down in 2023 because of really poor pricing and really poor margins.”

Many, including the WSJ, figured Sadana was talking about Apple, even though he didn’t name the company directly.

I don’t know whom he was referencing, but there’s a few things worth noting. The most obvious: he said “a couple.” So, Apple isn’t solely responsible, if at all. Second, as I explained above, Apple simply does not have enough sway to depress Micron’s capex plans if there’s enough market-wide demand to justify expansion.

Which brings me to another important point. While Micron recently signed over a dozen SCAs, Apple is also putting its own balance sheet to work by making advanced payments to the Boise, Idaho-based company to help its expansion in New York.

What’s more, Micron blaming the last downturn for failure to expand now is utterly nonsensical. ChatGPT came out in 2022 and within months it was clear that AI had ignited a computing-hardware boom. As early as May 2023, in a previous life, I wrote that Nvidia isn’t the only one getting a massive AI boost. It was clear to me, a humble journalist, that memory demand was about to take off.

To blame Apple, a minor buyer of a commodity product in the middle of a boom in which Apple has played almost no part reeks of hypocrisy, stupidity, and fear. Yes, fear.

As much as we all want to blame Apple, the truth is Micron and its fellow oligopolists are enjoying stratospheric price hikes without having made the capacity investments needed to meet the demand of an epoch-defining moment. That doesn’t make them downtrodden, that makes them antitrust targets.

At the same time, raising prices doesn’t help Apple sell more products in an era of tepid smartphone and PC growth. Many people want to label Apple a bully. It’s certainly earnt that label for its actions over the past quarter century. But that was then, and we’re in a new era.

Apple didn’t raise prices because it’s a bully, it did so because it’s no longer a bully. In fact, Apple is starting to look like the opposite: an insecure kid struggling to remain relevant in a global supply chain that’s found another schoolyard king.

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TSMC used its North American symposium in April to debut the foundry’s next process node and put memory-chip maker SK Hynix in the spotlight.

“This year, we are introducing derivatives of A14, including A13 and A12, both planned for production in 2029,” Kevin Zhang, TSMC’s senior VP of business development and global sales told the Santa Clara crowd.

Delivering the keynote, SK Hynix’s Head of Engineering Ahn Hyun outlined his company’s plan to build TSMC’s logic process into the base die of its HBM4 memory. “Let us become one team that shares technological progress in real time,” he said.

But behind the scenes — away from the spotlight and left off the presentation slides — TSMC was delivering another set of news to customers: brace yourself, we’re about to raise prices across multiple geometries.

Since early this year, business development and sales teams at TSMC have been told by senior leadership that they need to find ways to charge more, according to multiple sources I’ve spoken with in recent months. The Taiwanese foundry watched its memory counterparts enjoy higher prices and wanted in on the action, managers told them, according to my sources.

Tie those prices rises to TSMC’s value proposition and technical strengths, staff were instructed.

“The best piece of opinion writing I've read in a long time” — SOPA 2026 Award judges on Culpium’s nomination.

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While rumors in Taiwanese local media have pointed to increases at the 3nm node, the reality is far more broad. All advanced nodes will become more expensive, that means 7nm and everything beyond it, TSMC told its clients.

That’s a three-fold expansion in the breadth and depth of the price rises that clients had previously feared. TSMC’s 3nm node accounted for 25% of wafer revenue in the first quarter, yet the entire advanced-node portfolio made up 75% of its wafer sales.

Supply-Chained: A weekly podcast by Tim Culpan of Culpium, and Jon Y of Asianometry.

“TSMC does not comment on pricing. Our pricing strategy is strategic, not opportunistic,” the company said in an emailed response to Culpium. “We will continue to work closely with customers and sell our value to them.”

Reading between the lines, I take that as a tacit admission. And it shouldn’t be a surprise that price rises would come. Earlier this month Chairman and CEO CC Wei told TSMC shareholders at its annual general meeting that he “would like to” raise prices. CFO Wendell Huang told the BBC the same day that he “does not rule out” price increases.

What caught some clients by surprise was these hikes being implemented even at the relatively older 7nm node — the first to deploy EUV lithography tools. What’s more, some clients believe TSMC will also jack up prices on some legacy nodes.

Price rises have already started rolling out, I am told. And even where they haven’t, clients have been instructed to build the higher cost structure into their purchase orders.

The exact scale of the increases has been hard to ascertain. I have been getting conflicting figures, which indicates the scale may not be uniform across clients, nodes and product categories, but they seem to fall in the 5% to 10% range.

Full-year revenue is expected to rise at least 30% to more than $160 billion in 2026, according to Culpium estimates. Around $85 billion will come in the second half, when the price rises kick in, and we can expect at least 80% of wafer revenue to come from advanced nodes. That means prices rises on close to $70 billion of sales, assuming a proportional increase in non-wafer revenue comprising around 15% of the total.1

Assuming an average 5% price rise, the hike could give TSMC a boost of 2 percentage points or more to full-year gross margin, according to Culpium analysis. Of course, that’s nothing compared to the price gouging being dished out by the memory makers. Samsung, SK Hynix and Micron jacked up prices between 65% and 90% in the first quarter alone, helping them raise gross margins by as much as double.

Clients may not love TSMC’s price hike, but at least they can pass it on to their own customers. As Tim Cook told the Wall Street Journal’s Rolfe Winkler last week, “unfortunately, price increases are unavoidable.”

Maybe those red Macbook Neos will arrive after all.

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A footnote: Culpium once again won the silver medal (Honorable Mention) at the Society of Publishers Asia annual journalism awards in the Opinion Writing category. It’s a rare feat to be a finalist once, to do so in consecutive years is a greater honor. And we’ve only been going for two years! I plan to continue the pace of journalistic innovation and analysis. Your support allows me to keep doing so.

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A decade of acquisitions by GlobalWafers and its parent Sino-American Silicon vaulted the Taiwanese company into the top echelons of semiconductor wafer suppliers just as the world’s hunger for chips became even more ravenous.

But that momentum is under threat in Texas where the Lone Star State and the Federal Government need to make tough decisions about industrial policy, according to my sources.

I talked to numerous people over the past few months who are familiar with GlobalWafers’ $7.5 billion Texas project to get an understanding of what’s happening there, and why it matters. This includes a brief interview with company Chairman Doris Hsu.

What I learnt is that also under threat, beyond the Taiwanese company’s massive investment, is America’s long-term plans to develop semiconductor independence.

It’s the story of old industry versus new. Traditional manufacturing versus high-tech, entrenched interests versus newcomers. And of course, politics and lobbying.

Interestingly, the future of the nation’s chip-resilience strategy could be swayed by a team of researchers at the University of Texas and their much-anticipated report due by the end of Summer.

Luring the Taiwanese

While TSMC got a lot of the glory for its $65 billion investment in Arizona, GlobalWafers also joined the CHIPS Act program with its $3.5 billion plan to build a new wafer-making facility in Sherman, Texas. The company already had a small footprint in the area through its 2008 purchase of GlobiTech, but this fresh project would really put Texas on the map. When complete, the factory would give America its largest silicon-wafer foundry, offsetting the global production imbalance which tilts toward East Asia.

To lure GlobalWafers, Biden’s Commerce Department awarded the company $406 million in direct funding to cover both the Texas plant and a smaller facility in St. Peters Missouri. Local governments also offered incentives.

When Trump returned to office, his administration quickly set about securing further promises from Taiwan’s chip sector. TSMC Chairman and CEO CC Wei went to the White House to add $100 billion to his earlier pledge. GlobalWafers played its part by doubling its commitment to $7.5 billion.

In addition to securing its place in the US market, the Texas facility would further cement GlobalWafer’s position as the world’s third-largest supplier of silicon wafers behind Japan’s Shin-Etsu and SUMCO.

But cement is the problem.

Soon after the plans took root, GlobalWafers hit a snag. A consortium of investors had bought land around six miles away with the plan to develop a cement aggregate plant. This project, called Black Mountain, would mine the local limestone by blasting the ground with explosives, digging up the rock, then pulverizing it into powder. The resultant mix would then be fed into a kiln where it’s baked into what we know as cement.

Silicon wafers are the very start of the chipmaking process. Silicon is chosen because it can be both an electrical conductor or an insulator depending on which chemicals are applied to it — hence the term semi-conductor.

But for the wafer to have the uniform electrical properties required to make electronic chips, it must be formed as a perfect lattice structure. This is done through what’s known as the Czochralski method: A single crystal — the seed crystal — is dipped into a crucible of molten silicon. It’s then slowly drawn upwards over a period of days to form a cylindrical ingot which then gets sliced into wafers. It must be perfect, down to the molecular level. Any seams — grain boundaries — could impact the chips built on top.

To achieve this, the environment must be dead still and squeaky clean because even the smallest amount of vibration or dust could ruin the entire process.

To ensure this stability, foundry constructors dig deep into the ground to find a firm, immovable foundation upon which to anchor the ingot-making equipment. That way, the process isn’t disturbed when rumbling trucks, nearby construction noise, or even strong winds shake the shallow layers of dirt. So while the factory shell and facilities can sit on the topsoil, the manufacturing tools need to be fastened to the stable bedrock below.

But when the Black Mountain project appeared on her radar, GlobalWafers Chairman Doris Hsu knew she had a problem.

“We’re on the same bedrock,“ Hsu told me in an interview recently. Mining the ground with explosives six miles away would shake the same rock upon which GlobalWafers had secured its $3.5 billion factory, and likely kick up enough fine dust and particles to contaminate the ingot-making process.

“One is the vibration, the second one is particles,” Hsu told me recently, outlining her concerns. “We care about both. Both are critical, both could kill us.”

Then the lobbying really kicked in.

GlobalWafers and Doris Hsu weren’t the only ones worried about a cement kiln built in their North Texas region of Grayson County. Local communities, environmental groups and even a local pastor were against the project.

But with $3.5 billion, and soon $7.5 billion, on the line GlobalWafers had more at stake than most. Texas Instruments plans to invest $40 billion over four fabs in Sherman, so it arguably has the most to lose from any interruption, yet the US chipmaker has remained largely silent. Semiconductor manufacturers are already accustomed to attenuating ground vibrations and may be more resilient against blasting of the same bedrock.

Texas’ Light Touch

The challenge for GlobalWafers America (GWA), community leaders, and that local pastor is that what makes Texas such a great place to invest also makes it a tough place to halt a project once it’s underway. Compared to say, California, Texas has a very light-touch when it comes to regulation. And for Black Mountain opponents there were few legal channels through which a cement kiln could be stopped. Except for the dust.

The significant amounts of particles kicked up by a cement mine and kiln — they’re almost always located next to each other — means any proposal must first get approval from the Texas Commission on Environmental Quality (TCEQ). So instead of appealing to any sense of community justice or plain old NIMBYism, opponents played the environment card. The potential for air pollution warranted the Black Mountain project being shelved, they argued.

Among those allied with GWA and friends was Texas Lieutenant Governor Dan Patrick.

“I ask you to immediately pause the permitting processes for all permanent cement production plants statewide until the legislature can weigh in,” Patrick wrote to TCEQ Chairman Jon Niermann in April 2024. “Under no circumstance should this permit be expedited.”

By February 2025, Representative Brian Birdwell introduced SB1758, a bill so finely tuned for a specific purpose that I am going to call it the GlobalWafers Act.

The bill specifically bans TCEQ from issuing a permit to any new cement kiln that has an aggregate production facility within 10 miles of “a semiconductor wafer manufacturing facility that begins commercial operation after January 1, 2025, and before December 31, 2025.”

GlobalWafer’s new Sherman plant is the only one which falls in this category, and Black Mountain Cement is the only project planned within that 10 mile radius. Without naming either company, the Texas legislature sought to halt one in favor of the other.

Curiously, the bill included a grandfather clause exempting any aggregate facility from financial damages if it was already operating in the vicinity before the semiconductor-wafer plant. That, however, was a red herring. No such factory exists.

With the Lieutenant Governor on board, and the bill introduced to the legislature, all that was left was for proponents to get it over the line and into the hands of Governor Greg Abbott for his signature.

Manufacturing Discontent

While there no doubt was a lot of local opposition to Black Mountain, and hence backing for SB1758, the groundswell support for the GlobalWafers Act may be less than it appears. In fact, there’s evidence that much of the submissions made to the legislature as part of the public-comment process were engineered rather than organic.

For example, the phrase “for the protection of our local and state economy” or similar terminology appeared in almost 40 of the 88 comments received by the legislature. And curiously, the exact sentence “I support SB1758 for the protection of our local and state economy, needed growth in the technology field, and for the protection of our national security that the domestic semi conductor sector provides” appears 18 times.

Nevertheless, the lobbying worked and the bill passed both chambers and was sent to Governor Abbott. Who ignored it. Instead, it became law after waiting in his hands for the requisite 20 days.

But SB1758 is only a temporary victory. The moratorium expires in September 2031. For GlobalWafers, the uncertainty continues until a final determination can be made by the people of Texas and their governors.

Further Research

The next step in the process comes in August. Written into the GlobalWafers Act is a requirement that the Bureau of Economic Geology of The University of Texas at Austin conduct research to analyze the impact of aggregate production and the “vibrational parameters necessary to ensure the successful operation of a semiconductor wafer manufacturing facility within 10 miles.” That team has spent the past year running experiments and blasting the earth to see whether a cement mine and a silicon-wafer factory can co-exist.

If they can’t, then a decision has to be made.

Black Mountain and its supporters make the argument that cement is an important component of a modern economy. Not just for industry, but for residential development and transport. North Texas, they contend, has a shortage of cement which could be a curb on everyone’s prosperity.

That Governor Abbott declined to sign off on the GlobalWafers Act says something in itself. What’s more telling though is that, according to sources I spoke to, the Governor was not present when the project was announced in 2022, nor at the May 2025 grand opening. In fact, I am told Abbott has never visited GlobalWafers’ new facility in Sherman, Texas. The Governor did, however, meet Hsu during a July 2024 trip to Taiwan where he thanked her for the GlobalWafers investment.

While we mustn’t read too much into Abbott’s lack of presence, it is fair to conclude that the Governor of Texas is not a vocal supporter of one of the state’s largest and most consequential foreign investment projects. That lack of backing doesn’t bode well for GWA’s continued expansion given the continued uncertainty.

And Hsu needs the support. GlobalWafers’ current capacity, including the already-announced expansions, are sufficient to meet customer needs for the next few years.

But American companies, including Apple, Nvidia and AMD, are fighting over capacity at TSMC’s Arizona facility and are leaning on the Taiwanese company to make even more chips at the Phoenix site. And that’s not to mention President Trump’s continued pressure to bring more high-tech production to America.

An announcement on a third round of expansion at TSMC’s Arizona site is likely in coming months, my sources have told me. Expansion at Texas Instruments as well as more chips being made at US facilities run by Samsung, Intel, Micron and others opens up the possibility that more silicon wafers will be needed.

If that happens, GlobalWafers might need to invest even more. It could do so in Texas, or it could look elsewhere including back in Asia where most of the global wafer capacity is already based. Expansion overseas at the expense of the US would be counter to the administration’s goal of building technology resilience and boosting national security.

Chip-Blocking Trump

Hsu told me that she is also keen to expand in order to capture more of the global semiconductor wafer market. Adding another phase in Texas would mean another $4 billion or so of investment into Texas. But shelling out that kind of money could be risky if the cement issue isn’t resolved.

The legislature appears to be on GWA’s side, but not necessarily the state’s executive. Continued reticence by the State of Texas to come out with clear and unwavering support for GlobalWafers could be seen as Governor Abbott chip-blocking Trump and his MAGA agenda.

The University of Texas report is coming soon. It won’t settle the issue, but will include recommendations that can either be implemented or ignored. And at the very least, it will force the people and the leadership of Texas to make a decision. More chips, or more cement.

Thanks for reading.

More from Culpium

• 139.5 points, record high.

• +1.7 pts, driven by capacity expansion

• The CASCI cycle remains Strong, indicating continued upward momentum ahead

Upstream:

We saw continued growth in semiconductor and component makers in May. GPU and ASIC companies such as Nvidia and AMD are driving a continued boom with their release of new products for the next round of compute-platform upgrades.

Mid-stream:

Makers of electronics modules as well as mechanical parts are seeing a pause in growth. While revenue continues to rise, the rate of expansion is flat. Many of the parts going into new AI servers require reconfiguration. This includes new approaches to cooling and upgraded power-delivery.
This tepid growth is now quite prolonged, which indicates the pause is not a temporary blip. Culpium advises watching this tier closely.

Downstream:

There was significant weakness in server and system assembly in May. However, this is so far a one-off and could indicate a temporary reset after solid data over the past year. Culpium believes it’s too early to be concerned because new end-products are in the pipeline. These new systems include those based on Nvidia’s Vera Rubin platform as well as white-box installs by hyper scalers built around their own custom ASICs.

Capacity:

Companies that build factories and supply equipment are experiencing red-hot growth throughout the manufacturing value chain. Culpium has never seen anything like this.
Equipment makers are churning out new tools and machinery to meet escalating demand, largely from semiconductor fabrication, packaging, and testing.
Revenue in this sector is a reflection of delivery and contract-completion milestones. While the construction segment of the Capacity tier is solid, this strength is largely driven by equipment.

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CASCI is a weighted index tracking revenue of Taiwanese companies in the AI compute supply chain. Taiwanese companies make up the majority of upstream, mid-stream, and downstream of AI server manufacturing.

Notes for Editors & Analysts:

CASCI is published monthly by Culpium as a service to readers.
Media and analysts are welcome to cite CASCI or the Culpium AI Supply Chain index, with attribution and link. For example, “AI server manufacturing remains strong, according to the latest CASCI report from Culpium.”
Data graphics may be reproduced with credit.
Entire contents of Culpium or CASCI reports may not be reproduced unless a publishing fee is paid.

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Intel is suffering a shortage of cutting-edge laptop chips built on its own 18A process node, hampering plans by computer makers to ramp up production, multiple sources told Culpium.

Codenamed Panther Lake and Wildcat Lake, the processors are two of three chips made at 18A. The third, called Clearwater Forest and branded as Xeon 6+, is a server chip that was officially launched this week.

The chipmaker is struggling with delivery of the laptop chips and has been unable to provide clarity on when the shortage would ease, according to people I’ve spoken to at major PC brands, smaller laptop makers, and system assemblers. The supply constraints may not be entirely within Intel’s control, one of the sources told me, but instead also due to its relationship with supply chain partners including TSMC.

There is “some” shortages, Alex Katouzian, Intel’s general manager of Client Computing and Physical AI told me Tuesday in Taipei when I noted that multiple customers have faced trouble getting Panther Lake and Wildcat Lake. “We’re overcoming it,” he said to me at the end of a company press conference which included CEO Lip Bu Tan.

Intel’s struggle to deliver its first two products built around 18A are hurting manufacturers and brands who’d hoped to use the new chips, branded Core Series 3 and Core Ultra Series 3, to spark new interest in laptops, I was told.

It also stands in contrast to Intel earlier telling clients to switch over to the new chips from older versions.

Nikkei’s Lauly Li and Cheng Ting-fang reported in March that Intel was telling customers that supply of Alder Lake, Raptor Lake and Arrow Lake could run out because additional allocation was unlikely. My sources confirmed their reporting.

Alder Lake and Raptor Lake were launched at least four years ago and are both made on the company’s Intel 7 node (aka 10nm). Arrow Lake is more recent, at less then two years old, and made on TSMC’s N3 node. Arrow Lake is branded Core Ultra Series 2, while Lunar Lake is also made on a TSMC N3 variant. They’re predecessors of Panther Lake and Wildcat Lake.

“The US company says the supply situation of cutting-edge CPUs -- namely the Panther Lake and Wildcat Lake lines -- is better than that of processors based on older generations of chipmaking technologies,” Nikkei reported in March.

But according to my discussions with multiple sources, the supply situation of these two chips is not actually better.

Panther Lake was released in January and Wildcat Lake came out in April. The two chips are made on Intel’s 18A process, its comeback node, and are therefore seen by clients and investors as a key indicator of whether Intel can retake the lead in process technology from TSMC and Samsung.

It’s possible that Intel is pushing clients away from the TSMC-made Arrow Lake because its relationship with the foundry may be under strain, and this tension may continue over into troubles for the Intel-made chips, one of the people told me. Executives at Tuesday’s press briefing noted on multiple occasions that Intel still leans on external partners such as TSMC for select technologies.

The Core Series is a collection of compute dies, with the two latter versions largely made on Intel’s 18A, but they all use I/O chips made with TSMC’s advanced EUV processes. Even though the new versions of the compute dies are made at Intel 18A, the US chipmaker still sources these I/O chips from the Taiwanese foundry.

TSMC’s capacity is notoriously tight right now, and Intel is unlikely to be high on the priority list in Hsinchu. As a result, any challenges Intel may be facing with 18A output could be exacerbated by a struggle to get supply from TSMC. It also highlights how reliant Intel is on TSMC, even as it trumpets a comeback heralded by the launch of 18A.

Intel touted inhouse manufacturing when it launched Panther Lake in January with the headline: Intel Core Ultra Series 3 Debuts as First Built on Intel 18A. It did not mention TSMC as a supplier of parts of the final product, implying that the chip is made entirely at its own fabs.

One person at a tier-two laptop brand thought their company’s inability to procure the chips was due to bigger brands getting priority allocation. Yet I spoke with people at three of the world’s top-six laptop brands, and they all gave the same feedback: supply is tight. This indicates that we’re looking at a supply issue rather than a problem of demand being too strong or some customers getting priority.

Smaller unbranded manufacturers, who assemble according to orders from clients, echoed the same sentiment as the brand names. People at two separate smaller manufacturers I spoke with said they are asking clients to secure supply first before they could accept the assembly orders. This model, known as consignment, contrasts with an end-to-end manufacturing approach where the factory handles all of the procurement.

Among the theories presented to me by computer makers was the belief that Intel is prioritizing production of the Xeon 6+ server chip at the expense of the laptop chips. They also expressed concern that this situation could worsen now that Xeon 6+ has been formally launched in the market.

I asked at the Intel press conference how the company allocates 18A capacity. “It’s complicated,” Kevork Kechichian, general manager of the company’s Data Center Group, replied. “It’s not an easy thing.”

Thanks for reading.

More From Culpium:

I was asked recently what’s different about Computex this year to make it suddenly so hip. Nothing. I’ve attended each year since 2000 and it’s barely changed.1

What has changed in recent years is that the world discovered a renewed interest in computers, along with the sudden realization that Taiwan dominates the industry. This year servers — being massive computers built inside big, boring, black boxes — are now part of popular conversation and cultural discourse in ways never before seen in history.

This is my primer for how to navigate Computex, how to get the most out of it, and how to understand what’s really go on at the world’s most-important trade show.

Computex’s origin story is right there in the name, Computer Expo, and the annual event has been true to its word even as the world’s interest in computers waxed and waned.

For many years, the rise of consumer electronics, games consoles, and smartphones made computers seem dull. But the event never veered from being a showcase for computer makers who want to show off their desktops, laptops, servers, motherboards, cables, peripherals, and all that makes up the PC industry.

The show proper starts on the Tuesday of the first week of June. The Monday is not officially a show day, but some companies hold events. For a while Saturday was the final day and open for the public to come take a look (now it’s Friday). I recommend avoiding Saturday at Computex.

There’s three main parts to Computex:

• The industry keynotes.

• Forums.

• The show floor.

Keynote Speeches

Keynotes are a chance for executives to sell people on their company, their ecosystem, and their latest products. Remember, the target audience for Computex is engineers, product managers, supply-chain buyers, and global sourcing executives. It’s a tech-savvy solder-and-motherboards kind of crowd. Bus speeds and thermal thresholds are normal shop talk for these people.

For many years Intel saved one of its annual chip announcements specifically for launch at Computex. AMD often did the same. Taiwan’s VIA Technologies became a hero at Computex one year, and Intel was the villain when it burst its smaller rival’s balloons (literally, I am not kidding). Graphics chip makers ATi and Nvidia leant heavily on Computex to introduce their niche products to an attentive audience.

Computex is, and always was, the premier computer expo.

As a result, the CEO of Intel would usually provide a keynote, and one or two other bosses might show up to give a talk. A couple of foreign CEOs was about all we could expect, while local leaders like Jonney Shih of Asustek or Gianfranco Lanci of Acer would fly the Taiwan flag. Regional or VP-level bosses of global names tended to stand in as ambassadors for their companies.

This year, Computex has attracted more overseas bosses than any year I can remember, including:

• Qualcomm, Cristiano Amon

• Intel, Lip-Bu Tan

• Arm, Rene Haas

• AMD, Lisa Su2

• Nvidia, Jensen Huang3

• Marvell, Matt Murphy

• Rafael Sotomayor, NXP

Computex is not important because of all the tech CEOs who make it to Taipei. It’s the reverse, they all come to Taipei because Computex is so important.

The world’s industry elite are here in Taipei to kiss the technology ring.

I count AMD’s Lisa Su in that list, even though she was in town prior to Computex and not for the show itself. Nvidia’s Jensen Huang isn’t appearing at Computex either, for that matter. Not officially, anyway. His GTC Keynote on Monday is not part of the official Computex lineup.

But that’s kind of the point. So many executives realize that Computex, and Taiwan more broadly, are so important to their businesses that they’re finding ways to squeeze into the packed schedule. They want to make big announcements while the world’s eyes are on them, and then meet people behind closed doors to build the relationships that will make or break their businesses over the following 12 months.

The action doesn’t really happen in the keynotes, anyway. All that news will naturally flow from embargoed interviews and press releases timed to land just as the boss steps on stage.

Forums

Since the keynotes are well covered by media, press releases, and social media, your time is probably better spent in smaller sessions dedicated to super niche topics. For example, Craig McDonnell a managing director at ABB Robotics, will hold a session on Industrial-Grade Physical AI for Robotics this year. If that’s not your thing, then consider Ed H. Chi of Google DeepMind and his talk on The Future of Personalized Universal Assistants. There’s many more. There’s also side events, such as Innovex which is focused on startups and budding companies.

Companies want to present at these forums as a way to push their vision and ecosystem. Companies also want to be in the audience to learn what their rivals and partners are up to, and to swap business cards. I guarantee you’ll learn more and make better-quality connections from a few well-chosen forums than you will by attending every single one of the keynotes.

The Show Floor

I am constantly surprised when I learn that Computex visitors schedule their exit for the Wednesday or Thursday. But that’s an understandable choice if you’re not aware of where the real riches lie. And I think these early departures are informed by the dearth of good stuff left in the final few days of most other trade shows.

But the best action is neither at the keynotes nor the forums. It all happens on the show floor, in the VIP sections of those 3x3 booths,4 at the invitation-only hotel suites, and inside meeting rooms of the tech companies whose offices surround the Taipei Exhibition Hall in the nearby Nangang and Neihu districts.

Many businesses, both local tech companies and the local offices of foreign companies, mark Computex as black out days in their calendar, banning leave or business travel to ensure all hands on deck.

Overseas clients are the bread-and-butter of Taiwanese industry, particularly in tech, and local partners are primed for this annual pilgrimage. Experienced hands come because they understand something that many visitors do not. Winning over the PC ecosystem is crucial to them winning market share among end-buyers.

The tech ecosystem is more bottom-up than many imagine. Foreign clients have the money, but local suppliers have the talent and the connections.

A module maker who doesn’t want to design a circuit-board around your chip will not be an advocate for your product. A thermal management or mechanical parts player who won’t take the time to learn and build around your specs will not have something ready when assemblers need it.

And an assembler who doesn’t want to invest time and resources into developing a system that incorporates your product, in part because upstream players don’t have the pieces in place, will not even bother presenting it to a brand-name PC player.

While Dell, HP, Lenovo, Acer and Asus decide what products to sell, with what specs, and at what price, their hands are tied if the rest of the ecosystem is disinterested.

A little-known reality is that system manufacturers and their suppliers make many of the important product and engineering decisions before presenting them to the brand-name client. These choices mark the difference between your component being taken seriously or it being yet another oddity that barely shipped.

While there are many parts made in South Korea, Japan, China and even the US, it’s the Taiwan Hardware Mafia who really call the shots. A disinterested assembler, or a confused and harried module maker could kill your product before it’s left TSMC’s fabs. This is not some conspiracy. It’s cold, hard pragmatism.

Tech cycles are short. Margins are thin. Technical hurdles are high. The only speed at which this industry can operate is fast. And doing so requires cooperation among both competitors and partners. As Lisa Su said of her rivals recently in Taipei, “we’re all friends because we all grew up together.” Bringing something new to market is a huge risk for every single player who may be involved in its manufacture.

The show floor, and the hidden back rooms, are where these relationships develop. It’s at these booths where a niche maker of thermal plates, or high-speed cables, or multi-layer printed-circuit-boards shows their products. They then listen as current or prospective clients share their engineering troubles, outline their own sales projections, and then seek advice on how to build a product with oppressive margins to impossible deadlines

For major names like Intel, AMD, Nvidia, Qualcomm and Marvell, not being talked about in these discussions means your chips are being rejected by people who build the final products. Equally, failure to show and support those manufacturers will result in them working with a supplier who will.

Like any industry, relationships and interoperability matter. What’s unique about technology hardware is the combination of physical products manufactured within a product-development cycle that works at tech speed.

Computex presents a unique chance to observe this ecosystem. You just need to know where to look.

Thanks for reading

More from Culpium

TSMC’s CC Wei has negotiated with Donald Trump, delivered price rises to Tim Cook, and haggled over capacity allocation with Jensen Huang.

His hour-long talk with over 7,000 staff on Wednesday morning was far more crucial to the company’s long-term success than any other showdown the chipmaker’s Chairman and CEO is ever likely to face.

Faced with growing discontent over what many see as an unfair tweak to their compensation schedules, Wei canceled a business trip and at 5:30pm Tuesday night announced an impromptu townhall for 10am the next day. The event was in-office only — streamed to company auditoriums and meeting rooms — and booked out within 10 minutes, sources told me. Those who missed a slot could not dial in, I was told, a sign of the company’s paranoia about leaks.

TSMC pays out 12.5% of an employee’s annual bonus each quarter, with the final 50% delivered in July the following year. This quarter the company trimmed its payout while maintaining that full-year bonuses would still be higher than the prior year.

Tune in to this week’s Supply-Chained with Tim Culpan (Culpium) & Jon Y (Asianometry).
ASML: Riding the AI Wave, but Crushed by its Own Success

As Wei explained it, company profit is shared across three key categories: shareholders, employees, and ESG.

The reason for this adjustment is so the company could allocate “an even larger share of our earnings towards initiatives that foster social sustainability in order to give back to Taiwan.” In other words, more for ESG and less for staff.

The company’s explanation is staggering, confusing and not at all appeasing for thousands of the company’s 91,000 employees. Many have taken to bulletin boards and social media to express their frustration, anonymously, over what was seen as both a lack of gratitude and a measure of backsliding.

What’s particularly galling to many staff is that Wei’s own total compensation ballooned last year to $78 million — stated as NT$2.4 billion. Some employees whom I spoke with were flabbergasted when told of the CEO’s total compensation, which only came to light buried in the pages of its 2025 annual report which was published recently. They knew it was big but didn’t know it was that big. A small fraction of that figure comes from his salary, with the bulk coming from bonuses and allowances tied to performance, as well as profit sharing.

But beyond the actual figure, Wei’s total compensation as a share of net income climbed 75% in 2025. Likewise, his compensation has outpaced median employee salaries in recent years, according to Culpium calculations based on data in TSMC’s annual report and information filed to the Taiwan Stock Exchange.

In most Western countries, such large executive compensation packages are par for the course. In Taiwan, however, there’s an expectation that a modicum of egalitarianism be maintained between management and the rank and file.

Asked about his salary during Wednesday’s meeting, Wei punted and explained that his package is decided by the board, I am told. He also downplayed the prospect of a Samsung-style employee union, suggesting they’re more trouble for workers than they may be worth.

The issue is that many employees feel they’ve been working brutal hours to help expand capacity and churn out the world’s most high-tech chips amid a historic boom in demand driven by AI. It’s the staff, they reason, who should be getting the spoils and not some vague notion the company has about fostering “social sustainability.”

We would like to extend our sincere appreciation to all colleagues for their invaluable contributions. As the company continues to grow, we are highly confident that the full-year growth percentage of our employee profit sharing (based on performance evaluation) will surpass that of last year. We also believe that, with the company's sustained future growth, our profit sharing will continue to increase. — TSMC Statement, 25 May 2026.

As this issue started to boil over, a number of employees reached out to me directly to vent their frustration, share their take, and ask if I had further information. That a journalist was seen as a more reliable source than their own company speaks volumes. The tamest comments I got framed the saga as merely a problem of poor communication rather than corporate malice. Others were not so kind and noted that Wei himself enjoyed record compensation last year while revenue, profit and market cap have climbed to record highs.

These issues put together are not a good look for Wei.

In Wednesday’s townhall, he didn’t back down on TSMC’s decision to amend the payout plan. Instead, he spent time explaining the policy and then taking questions on dozens of topics which started to veer far away from the original agenda, my sources tell me.

This event may have succeeded in fending off a revolt, for now, but the lessons from Samsung show that management should not take employee goodwill for granted.

Wei, who’s been in the role for eight years, will surely know that the last time a CEO of TSMC messed up employee relations he lost his job. Wei is in his current position as a direct result of his predecessor, Rick Tsai committing an unforgiveable sin.

Back in 2009, in the dark days of the global financial crisis, Tsai implemented unprecedented layoffs. Even though the scale of the cuts — at 5% of staff — was small by Western standards, the move was widely seen as a breach of an unwritten covenant: never lay off employees.

Within months of those layoffs founder Morris Chang — who held onto the Chairmanship after handing the CEO role to Tsai — apologized for the cuts and said TSMC would welcome back all those who were laid off. Soon after, Tsai himself was booted though he stayed at the company for a few more years in a lesser role. Chang retook the CEO role and then groomed two replacements: Wei and Mark Liu, who both shared the Co-CEO role until Chang’s later retirement.

Wei has climbed through the ranks and has first-hand understanding that for a knowledge-based company at the leading edge of technology, employees are the primary reason TSMC has defeated Intel, Samsung, UMC and numerous others. And they’re also responsible for continuously keeping Apple, Nvidia, AMD and hundreds more addicted to the Hsinchu-based giant.

“Human capital is TSMC’s most treasured asset. The Company strives to provide employees with meaningful work, continuous learning, a healthy and inclusive workplace, and high-quality compensation and benefits” — TSMC 2025 Annual Report.

But touchy-feely measures like staff gymnasiums, exclusive company-branded merch, an annual sports day, and the warm glow of being a good corporate citizen do not make up for the one reason workers at every company turn up each morning: the money.

And Wei himself knows a little about money. His own compensation has climbed 10-fold over the past decade. It would be hard to argue that he does not deserve the fat pay package, but it would be impossible to argue that his staff don’t deserve more, too.

And now is not the time to turn his back on an employee-first culture or pinch pennies.

A widening global rollout, including a record pace of expansion in Taiwan, coupled with new fabs in Arizona, Japan and Germany will raise the need for staff. And finding the right staff isn’t easy. More than half its headcount has at least a Master’s degree. Concurrent booms among memory-chip makers, a resurgence at Intel, and more global tech companies getting into the chip-design business is increasing competition for a limited pool of talent.

Its troubles in Arizona highlight the issue of attracting and keeping talent. TSMC is facing a class-action lawsuit claiming discrimination, while a rising number of staff are quitting to return to their old jobs at US companies like Intel, Micron and Texas Instruments. Then there’s China, where dozens of state-backed companies are eager to write fat checks to any TSMC engineer willing to cross the Taiwan Strait.

TSMC is rightly proud of its ESG policies, which include buying renewable energy, recycling water, and giving to charity. But in attempting to “foster social stability,” Chairman and CEO CC Wei may be forgetting the most important policy of all: If you don’t keep your staff happy, someone else will.

Thanks for reading.

More From Culpium:

Allow me to congratulate you on your successful trip to Beijing. I’ve heard the trees at Zhongnanhai are quite lovely. I cannot visit of course, since your host thinks of me as a “separatist,” which is a swear word in their country.

You can tell me more about those trees, and Beijing, and Mr. Xi when we talk. I assume we will talk since, when asked by reporters on Air Force One about selling us weapons, you replied “I have to speak to the person, you know who he is, that’s running Taiwan.”

That person, Mr. President, is me. It’s possible you forgot my name. No problem, I’ll remind you: It’s Lai Ching-te. The “te” is pronounced “de,” but you can just call me William Lai. I am the elected president of Taiwan, so I am the person who is running Taiwan. I’ve been doing so since 2024.

I hope we get to talk, because it would be helpful for me to set the record straight and ease your concerns. It seems you have many concerns when it comes to Taiwan, including the view that Taiwan is a “problem” to be “solved.”

Let’s start with Taiwan independence. Mr. Xi probably told you that he is worried Taiwan will declare independence. Or maybe he didn’t say that he’s “worried.” He probably used harsher words than that. Let me allay your fears Mr. President, I will not declare Taiwan independence because we’re already independent. We exist under the name “Republic of China,” but as you know Mr. President, that is not the same as the “People’s Republic of China” where you traveled last week.

Think of it like the “Democratic People’s Republic of Korea,” run by your not-so-democratic friend Mr. Kim Jong-un, and the “Republic of Korea” which actually does have democracy. To the rest of the world they’re known as North Korea and South Korea. Different countries, independent of each other, and using names that are different to their official titles. Imagine if President Kim were to threaten to invade South Korea should Seoul declare independence.

But as I said, Mr. President, I don’t intend to declare independence for Taiwan. Now, I may make some bold and inflammatory statements from time to time, but really that’s just pillow talk for my political base. We’re a democracy, after all, and that means keeping core constituents happy. I am sure you’re familiar with the concept.

Presidential Office responds to remarks by US President Donald Trump in media interview

For example, “lock her up” and “build the wall” were quite helpful in energizing your supporters, but you didn’t actually do either and no one held you to it. Except in my case, we did lock him up. I mean, he was convicted of graft and probably did do it. But who’s to say? It’s really just convenient that our independent judiciary found one of my major political rivals guilty.

But there’s something else that’s been gnawing away at me, and 23 million of my fellow countrymen.

Chips.

You keep claiming that Taiwan took your chip industry. At first I thought it was just one of those throwaway lines aimed at shocking your audience. But you’ve said it so many times that I am starting to think you believe it.

This really isn’t true, Mr. President. Taiwan didn’t steal America’s chip industry. If anything, Mr. President, we saved it.

You needn’t take my word for it, I am a politician after all. Perhaps you could ask Jensen Huang, whom I know you listen to. Now, I cannot speak for Mr. Huang, but he has said on more than one occasion that if it wasn’t for TSMC then Nvidia wouldn’t exist.

This is indeed the truth.

You see Mr. President, Taiwan paid one of America’s ailing industrial empires a handsome sum of money in the 1970s. The year was 1976, and Taiwan’s Industrial Technology Research Institute (ITRI) signed a $3.5 million deal with Radio Corporation of America to teach our engineers how to make chips. Taiwan’s gross national product was just $1,143 per person that year, so $3.5 million was a huge sum for a developing country. But still, we paid in full. We didn’t steal.

Now, as you know Mr. President, thousands of people come to the US every year and pay large amounts to learn from prestigious institutions like the University of Pennsylvania, your alma mater. They then take that knowledge back home and apply it locally. That’s what our engineers did.

After learning from RCA, they returned home and found they’re pretty good at this semiconductor stuff. I guess you Americans are great teachers, because within months of their return our young engineering students were making chips even more efficiently than their American masters ever did.

That same year, Mr. President, an American citizen proposed a radical idea to his bosses at Texas Instruments. How about making chips for external clients instead of just for itself. This business model, known later as a chip foundry, was rejected. The Texans weren’t interested.

A decade later, that engineer-turned-executive moved to Taiwan — a place he’d never previously resided — and started the business he’d previously suggest to his superiors at that great American institution. His name, Mr. President, is Morris Chang and the company was TSMC. He stole nothing, Mr. President, in fact he’d offered that very idea and the business plan to his US employer 10 years earlier and they turned him down. He event went back to Intel and TI to see if they’d like to invest in his new startup, they again said no.

This was a missed opportunity by those two American companies, but a great win for America. That’s because, Mr. President, Taiwan’s budding chip industry was a partner to the US, not a foe. As Silicon Valley faced growing rivalry from Japan and later South Korea, Taiwan’s counterpart — the Hsinchu Science Park — became America’s biggest supporter. Qualcomm, which helped America dominate mobile phone technology for the past three decades, would have got nowhere without TSMC as a neutral party, making its chips without competing against it.

And when Apple wanted to have a US-made processor for its iPhone, America’s beloved Intel “ended up not winning it or passing on it, depending on how you want to view it.”

Instead, Steve Jobs was forced into the arms of his biggest rival, South Korea’s Samsung. Later, after accusing Samsung of stealing from him and threatening “thermonuclear war” it was Taiwan who stepped up and helped Apple extricate itself from Samsung. After an introduction by Foxconn founder Terry Gou, you remember him, TSMC’s Morris Chang built a dedicated factory for Apple in record time and at record cost. Dr Chang even agreed to develop a process node just for Apple.

What I am trying to say, Mr. President, is that the first iPhone processors weren’t even American. But Taiwan didn’t steal them. They in fact handed control over Apple’s chips back to Apple when an American couldn’t (or wouldn’t) do the job, and another foreign rival started “stealing” US technology.

Then there’s the story of AMD. After making its own chips for decades, AMD was losing far too much money to sustain the pace of innovation. No one stole anything from AMD, it just couldn’t keep up, so it sold its manufacturing business. Not to Taiwan, but to a group of Middle East investors who dubbed it Globalfoundries.

But those new UAE owners didn’t necessarily have the interests of AMD, or America at heart. Mr. President, these Emirati owners extracted a promise from AMD that all its best chips would be made at Globalfoundries. Unfortunately, Globalfoundries wasn’t very good. They were so bad, in fact, that AMD paid the Emirates-owned company to not make its chips. That’s right, Mr. President, a storied American company had to pay its foreign-owned supplier for the right to not make its products for them.

However, who do you think saved AMD? You guessed it, Taiwan.

When that 10-year exclusivity deal finally expired in 2019, AMD went straight to TSMC. And what happened next will amaze you. Within two years of being unshackled from its unfair deal, revenue doubled. Within four years, AMD revenue had climbed four-times. This is not gossip or hearsay, Mr. President, these are facts documented in detail by the great American AMD.

So we come back to Nvidia. Another great American company that wouldn’t exist without TSMC. When a young startup founder with great ideas and courage, but no reliable manufacturing partner and almost no money sent a letter to Taiwan in 1997, he was astounded by the response. Jensen Huang was desperate. But instead of being dismissed for being too small or irrelevant, Dr Chang called Mr. Huang directly, and then met with him in person. He promised that TSMC employees would 'jump through hoops' for Nvidia. And they’ve continued to do so for three decades.

If you want to learn more about stolen businesses and technology, Mr. President, I invite you to contact folks at T-Mobile, Boeing, GE Aviation, Cisco and Google. Each of them can provide accounts of their own technology being stolen, by China.

You see, Mr. President, we don’t have any need or interest in stealing from our friends. And we still see the US as a friend.

This is a point of conflict in Taiwan now, actually. My opponents accuse my government of being too close to the US. These political rivals, from the Chinese Nationalist Party (KMT), feel Taiwan should be a little more distant from Washington and a little closer to Beijing. Your continued complaints that Taiwan stole a key industry from America make my case tougher by the day, even despite the fact that Washington’s historic support for Taiwan is a key reason why the KMT survives to this day.

I understand that you need to look after your people and your own political interests, and that bashing Taiwan is useful in achieving that. Like you, I am also an elected leader who first came to power with less than a majority of the vote. But, hey, we didn’t make the rules! Amirite?

Still, despite this Taiwan-bashing, our companies are still investing in America. Foxconn, whom you once boasted was going to build “the Eighth Wonder of the World” in Wisconsin, is making amends for that broken promise. In fact, it’s now making more of its AI servers in the US than anywhere else. TSMC is following through on its commitment to expand in Arizona, and many more companies including Quanta and WiWynn are spending their own money to help you “Make America Great Again.”

You may not be aware, Mr. President, but Taiwanese companies did more to boost American computer and electronics manufacturing in the ten years through 2023 than Chinese businesses did. Our $7.3 billion in foreign direct investment in the US outweighs $6.6 billion from China, and that’s before the massive influx from TSMC really kicked in. Then there’s the massive increase to $165 billion which TSMC has promised as a result of your superb leadership. Is there any Chinese company which has promised you anything close to this figure?

Mr. President, I am not complaining. Politics is politics, and for a man who wrote The Art of the Deal, I understand that these statements about Taiwan stealing your chip industry might be just part of your negotiating tactic. But I wouldn’t be doing my duty, as the man “that’s running Taiwan,” if I didn’t correct the record.

Yet, on another point of record, I should also thank you for your fine display of statesmanship. You told the press, when asked about Mr. Xi’s warnings over Taiwan, that you “heard him out” yet “made no commitments.”

I take this response as you showing the world that you didn’t let Mr. Xi box you into a corner. Any lesser leader would have either pushed back or cowered, you did neither.

I have also held my ground. After months of wrangling and politicking, our government has finally succeeded in pushing through a special defense budget which will allow Taiwan to purchase more than $24 billion in US weapons. That means more money for great American companies like RTX Corp and Lockheed Martin.

In summary, Mr. President, we didn’t steal your chip industry and we are willing to pay for our own defense.

But I have a favor to ask. When you do make the call, which I am most looking forward to, I hope it’ll be to tell me you’re approving the arms sale my DPP government expended a lot of political capital trying to fund.

You see, we too have an election coming up, and I’d hate to resort to waving the Taiwan independence flag in order to win votes. But if I do, don’t worry, it’s just politics.

Lai Ching-te (William)
President of Taiwan (aka Republic of China)

Thanks for reading.

Readers: This is satire, written by Tim Culpan for Culpium. It was not written by President Lai Ching-te of Taiwan.

Chinese AI models really aren’t as good as their US peers, despite claims on both sides to the contrary. That’s not just my assertion, but the view of many Chinese themselves. And they’re desperate to access the best models available.

After doing a backflip on banning Nvidia chip sales to China, AI will be among the items on Trump’s agenda when meeting with Chinese leader Xi Jinping this week in Beijing.

Catch the latest episode of Supply-Chained across all podcast platforms.

The disparity in both computing power and AI models has spurred a burgeoning industry of arbitrageurs in China who hunt down loopholes and flagrantly flout curbs to access models from OpenAI, Anthropic, and Google. It’s an industry driven by China’s lagging position and users’ desire to access something better.

Those exploiting this mismatch are not even trying to hide.

“Shattering commercial and geopolitical silos,” is the boast from B-AI, an outfit backed by Trump friend-turned-foe Justin Sun.

B-AI (白) is merely the latest in a long lineup of what Chinese call “transfer stations” — middlemen who take in AI requests from users and reroute them to US providers, then return the response.

The advantage is written clearly on their own websites. “No more worries about account bans/limits,” another transfer station called OneToken states plainly.

Writing for ChinaTalk, Qian Zilan — a research associate at the Oxford China Policy Lab — recently gave a detailed rundown on the mechanics of transfer stations titled How to Buy Cheap Claude Tokens in China. It’s well worth a read.

US companies’ curbs on using their models date back a few years. In July 2024, OpenAI cut off Chinese access to its Application Programming Interface (API) a few months after announcing that it “terminated accounts associated with state-affiliated threat actors.” An API allows programmers to send data directly to a server without the an interface wrapper such as a Website or mobile app.

As Kevin Xu of Interconnected Capital wrote at the time, “plugging the leaky API bucket is the next phase of AI model export control.”

To be clear, these bans didn’t come directly from the US government, instead they’ve been largely imposed by the AI companies themselves. A year after OpenAI’s API curbs, Anthropic closed a loophole in its own rules by preventing Chinese-owned entities from using its models.

“Companies from these restricted regions—including adversarial nations like China—continue accessing our services in various ways, such as through subsidiaries incorporated in other countries,” it wrote at the time.

OpenAI and Anthropic have numerous reasons to want to boot Chinese from their platforms, beyond supposed concerns over national security. A major catalyst is allegations that rivals like DeepSeek are harvesting data from US providers and then distilling them down to create their own models. This has been lauded by many as an example of Chinese “brains” defeating American “brawn.”

Despite the supposed advantage brought by this innovation, Chinese AI providers still seemed pretty excited about Americans exiting their local market. Within hours of OpenAI’s 2024 announcement, Zhipu AI welcomed ChatGPT refugees to its platform with a “relocation plan.”

And yet, Chinese users don’t seem satisfied with local offerings, hence Xu’s prophetic view about ban-enforcement becoming a cat-and-mouse game. Wherever there’s strong demand, eager entrepreneurs will step in to offer supply.

AI Flash Boys

The result is a growing industry of what I call “AI Flash Boys.” The term Flash Boys was popularized by Michael Lewis in his best-selling book of the same name. By exploiting lags between the time an order is made and the time it’s placed on a stock exchange, high-frequency traders (HFTs) could intercept trades and front-run them.

Whenever a disparity exists in availability and access, an arbitrage opportunity arises. In Flash Boys, availability was the supply of market orders and access was the time at which someone could view them. HFTs had an advantage in when they could see and act upon a buy or sell request. Location is the most common form of arbitrage — a commodity bought and sold in disparate locations or exchanges offers a chance to trade both ends and pocket the difference.

The key to a profitable arbitrage strategy, though, is that the disparity must be both persistent and scalable enough to be worthwhile.

In China, the AI Flash Boys are benefiting from disparities in not only region, but price. And they’re exploiting local users’ escalating demand for the world’s best AI models.

The region issue is somewhat obvious, and arises from the ban imposed by service providers. If you can fake your location, then you can pretend to be non-Chinese. VPNs were once the primary method, but everyone has cottoned on to this approach and it rarely works. Beijing often tolerates VPNs, but has shown a willingness to shut them down. Likewise, Western providers regularly cut connections that come in via VPN.

Transfer stations get around this by having a genuine non-Chinese connection. Situated in Singapore, Malaysia, or even the US, they open up API access directly to Anthropic or OpenAI with little trouble. They then offer Chinese consumers access, with local billing in Chinese yuan via AliPay, WeChat Pay, e-CNY, cryptocurrencies, and even Apple Gift Cards. Hence, the transfer station links the two sides.

Pulling Wool

An interesting quirk of the Chinese model is that transfer stations offer access to US models at crazy big discounts. The method is ridiculously simple — like forehead-slappingly “why didn’t I think of that?” simple. OpenAI, Anthropic and Google are so desperate to get people onto their platforms that they give away time-limited freebies. Transfer stations exploit these vouchers — a phenomenon known among consumers as “pulling wool” (薅羊毛) — to open accounts en-masse and then cycle through them as they expire.

US service providers offer other ways to game the system. Microsoft, for example, gives discounts of as much as 75% if you batch your queries to OpenAI for a reply sometime in the next 24 hours. There’s also discounts for tokens already created and served up previously by the AI model. Meanwhile, unlimited plans offered by Anthropic and their ilk allow transfer stations to spread the cost over hundreds of their individual customers.

Cache Distillation

Then there’s caching, header-swapping, and other dubious schemes. By saving queries submitted by Chinese users and the response from the US provider, transfer stations can build their own model, a form of distillation which I call “Cache Distillation.” They can then dish up the same response next time a different user asks a similar question, with the legitimate claim that it came from ChatGPT or Claude.

More nefarious though is header-swapping. A provider sends the query to a cheaper local model, such as DeepSeek, or a lower-spec version of the same US model, then returns the reply with a claim (via the data header) that it was delivered by the premium alternative.

The fact that new players like Justin Sun-backed B-AI are entering the market while hundreds of other providers have been thriving for years tells you something about the Chinese AI market. This kind of arbitrage is only possible because Chinese users consistently see US models as a preferred choice over local options.

And this view is not just prevalent among everyday consumers. Upper echelons of the Chinese government also want access to the best America has to offer.

Mythos Envy

Last month, a Chinese think tank asked Anthropic directly for access to its powerful new artificial intelligence model, insisting the startup change its stance on curbing availability to Beijing, the New York Times reported on May 12. The answer was no, the newspaper reported.

“A senior US official said AI and cybersecurity were high on the agenda with Beijing, noting concerns with ‘the latest models of AI,’” the NYT wrote. While it wasn’t clear exactly which model the Chinese think tank wanted, the newspaper hinted that they were talking about Anthropic’s unreleased Mythos, billed as so powerful that “it was skilled at finding software vulnerabilities and could cause a cybersecurity reckoning.”

With Nvidia’s Jensen Huang in tow, and in light of Trump’s previous reversal on banning chip sales to China, there’s no telling what concessions the US president will offer to Xi Jinping during his visit.

Perhaps he’ll keep acceding to Huang’s wish to let some Nvidia chips remain on sale in China, and at the same time placate hawks back home by formally curbing Chinese access to US models.

Even though China decided it would regulate the import of Nvidia’s H200 chip soon after Washington lifted a ban on shipments to the country, Beijing has not formally banned access to American AI models. Instead, it limits usage through virtual curbs such as putting them outside the Great Firewall and regulating usage through censorship laws. This is the same tactic used to push Google and Facebook out of China more than a decade ago.

It’s also the same loophole which transfer stations are exploiting, and it’s a tactic that Beijing is well aware of. In fact, it follows China’s own track record of allowing access to, and development of, innovative technologies to further the nation’s progress and then yanking that availability when it feels the time is right.

As a result, this quasi-legal status of US models in China allows local developers to leverage superior foreign models, without legitimizing them or giving American AI providers true access to its market. And they can be shut out at any time for any reason — or no reason — just by enforcing existing regulations.

With AI safety on the agenda this week, we might expect Washington and Beijing to pen some kind of watery agreement to “not do evil” and “keep talking,” but it’s in neither Xi’s nor Trump’s interests to truly shutdown the flow of tokens between their nations.

In fact, the grey market may be just what the US president wants. His family’s World Liberty Financial just announced “World Router,” the company’s entry into the transfer-station business. That could incentivize Trump to back a ban on US models in China, while leaving the door open for transfer stations to keep doing business. Xi would surely approve, unless China one day catches up in which case these transfer stations will no longer be needed.

Thanks for reading.

More from Culpium:

• 137.8 points, a new record.

• +2.1pts, accelerating from +0.2pts in March

• Upstream growth is rising, Mid-stream, Capacity both slowed significantly.

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Upstream:

Upstream suppliers in semiconductors, materials, and passive components once again saw a large increase in growth, an indication of strong momentum for the primary parts used in AI servers.
This tier still lags the growth levels seen in mid- and downstream, but points to more product being pushed down the channel and into the supply chain.

Mid-Stream:

Companies in the middle of the supply chain weakened.
While they’re still showing growth, module makers, mechanical suppliers for racks, drawers, and fittings, as well as cooling systems manufacturers are collectively showing their weakest levels of expansion since April 2025.

Downstream:

Companies focused on system integration and final assembly of AI servers saw their growth rates unchanged in April, the mildest pace in many months.
Coupled with slowing supply from mid-stream, we can see early signs of a possible pause in AI-server growth.

Capacity:

The business of supplying equipment and constructing facilities remains strong, but is weakening significantly.
It’s important to remember that this tier of the supply chain reflects long-term trends, with monthly swings often unstable as it reflects completion of phases rather than specific changes in contracts or sales. That said, it’s worth watching capacity suppliers over a period of months to assess whether manufacturers are adjusting their expansion plans.

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CASCI is a weighted index tracking revenue of Taiwanese companies in the AI compute supply chain. Taiwanese companies make up the majority of upstream, mid-stream, and downstream of AI server manufacturing.

Notes for Editors & Analysts:

CASCI is published monthly by Culpium as a service to readers.
Media and analysts are welcome to cite CASCI or the Culpium AI Supply Chain index, with attribution and link. For example, “AI server manufacturing remains strong, according to the latest CASCI report from Culpium.”
Data graphics may be reproduced with credit.
Entire contents of Culpium or CASCI reports may not be reproduced unless a publishing fee is paid.

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Apple has doubled its MacBook Neo production plans after the laptop’s runaway success, my sources tell me.

Last month Culpium broke news that Neo sales were doing better than Apple had expected, pushing the company into a tough dilemma. Demand heavily outstripped supply, forcing the company to quickly make a decision about the product’s near-term future, Culpium wrote at the time.

Apple is in talks with suppliers to handle a massive dilemma posed by sales of its MacBook Neo that have surpassed expectations, I am told. The question they must answer, and soon, is whether to boost production of the hit laptop, or let their inventory of parts run out, my sources tell me — Culpium, 7 April 2026.

Its earnings report last week brought this issue to life, with Neo driving Apple’s best fiscal second-quarter for Mac revenue since the Covid pandemic.

“Right now we’re supply-constrained on the MacBook Neo,” CEO Tim Cook said in the company’s April 30 investor conference call. “We were very bullish on the product before announcing it, but we under-called the level of enthusiasm that would be with it.”

Tune in to this week’s Supply-Chained with Tim Culpan (Culpium) & Jon Y (Asianometry).

Episode 3: ARM Might be Swallowing its Own Poison Pill

MacBook Neo is now seen as a legitimate alternative to Chromebooks, powered by Google’s ChromeOS, as well as low-end Windows laptops. The cheapest member of the MacBook series is likely to lure more companies and students into adopting the MacOS ecosystem, broadening Apple’s user base.

We’re swapping out Chromebooks for Neos over the next few weeks
by u/shinyshirtlesssulu in MacbookNeo

This unprecedented popularity left Apple with an important decision to make: It could sell out of the Neo, thus forgoing sales but preserving profit margins. Or order up a new batch and face a severe cut in gross margins amid escalating DRAM prices and a higher cost-base for the core processor.

Apple recently made its decision and opted to put more units of the Neo in customer hands.

As a result, it’s now asking suppliers to prepare capacity for 10 million units of the debut version of the Neo, up from an initial estimate of 5 million to 6 million, my sources tell me. Delivery times for the laptop have ballooned to as much as four weeks as Taiwan’s Quanta and Foxconn rush to fill orders from factories in Vietnam and China.

This renewed commitment to meeting demand means Apple must also ask TSMC for a hot lot of A18 Pro chips, the same processor used in the iPhone 16 Pro. The system-on-chip is made using TSMC’s N3E process, with the initial production run underway at least two years ago.

However, the chips used in the Neo are actually downbinned versions of the one used in the iPhone, meaning some parts of the die were considered defective or unable to run at its full design spec.

In keeping with industry practice, instead of scrapping these “less-than-perfect” chips, Apple turned off the defect parts and repurposed it for another product. As Ben Thompson of Stratechery wrote at the time, this downbin strategy means the SoCs in the Neo are effectively “free chips.”

Jon and I discussed binning at length in a recent episode of Supply-Chained.

The iPhone 16 Pro’s processor has six GPUs, whereas the MacBook Neo’s has only five — it’s the same chip, but with one GPU core turned off.

With a fresh batch of A18 Pro SoCs, most of the new processors for the Neo will actually be top-tier and only some would fall into the downbin category. This means that in most cases the six GPUs would be fully functional. Apple is likely to deal with the disparity by simply switching off one of the GPUs through software.

The other issue Apple must face is the higher price. While TSMC may forego massive price premiums for a hot-lot run, the SoC will still be more expensive than the first batch because they’ll mostly be top-tier rather than downbin versions. In addition, DRAM prices have escalated since the initial production run, driving the Neo’s bill of materials much higher.

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Apple currently offers the Neo in 256GB ($599) and 512GB ($699) versions with four colors apiece. A month ago I suggested that to deal with the higher cost and lower margins of a new batch, Apple may kill the cheaper version and only offer the 512GB variant. It recently followed that strategy with the Mac Mini, pulling the $599 256GB model from sale leaving only the $799 512GB version available.

Alternatively, Apple might add some new colors to the Neo lineup to soften the impact of higher prices and boost enthusiasm for the device.

Thanks for reading.

More from Culpium:

Samsung reported first-quarter earnings Thursday morning. What it revealed was great news for itself and fellow memory-chip makers but bodes very badly for everyone else.

Revenue at the South Korean company’s memory division doubled from the prior quarter as it started catching up to smaller compatriot SK Hynix in the lucrative market for high-bandwidth memory (HBM). Like SK Hynix a week ago, Samsung made all the right noises about HBM being important and its determination to boost supply.

Reading between the lines, though, it doesn’t feel like either company is taking the AI boom seriously enough, and they certainly don’t seem to care much about their long-time clients in the smartphone and computer sectors. At best, it looks like Samsung, SK Hynix, and US rival Micron are more intent on leveraging their pricing power than helping clients get the products they need.

Tune in to this week’s Supply-Chained with Tim Culpan (Culpium) & Jon Y (Asianometry).
Episode 2: Binning. An Old Nvidia Practice that’s Also Behind Sparse Supply of Macbook Neo

Witness SK Hynix’s first-quarter results. DRAM revenue, which accounts for 78% of its business, climbed around 65% while the average selling price also climbed around 65%.

SK Hynix didn’t sell more DRAM, it just charged more for it.

Samsung and Micron told a similar story. At Micron, whose latest quarter ended in February, ASP was up a mid-60s percent with revenue growth in the low-70s — its actual shipments, measured in bit-growth, barely budged. Similarly, Samsung’s DRAM revenue-growth tracked prices not output: ASP was up more than 90%, while shipments inched up just a few percentage points.

There have been loud complaints that TSMC didn’t expand enough to meet growing AI-driven demand from Nvidia, AMD, and cloud-service providers. But there’s been scant attention paid to the fact that these three major memory-chip suppliers collectively failed to either see, or take seriously, this historic moment.

I find that staggering, because I foresaw it three years ago.

“AI companies are likely to buy up more DRAM than any other slice of the technology sector in history,” I wrote in a previous life (gift link). “Established giants like Microsoft Corp. and newcomers such as OpenAI are set to pound on the doors of Samsung, SK Hynix and Micron”

That was back in May 2023, and over the past year this “pounding on the door” scenario has played out exactly as I predicted. And if I, a mere outside observer, could see what was about to happen then it’s impossible that executives at three huge semiconductor companies couldn’t.

Instead, what we’ve seen in recent quarters is management enjoying huge gains in revenue and profit without having to do the actual work of, well, shipping more product. The commodity nature of memory chips is such that when demand exceeds supply, prices quickly rise. The reverse is also true.

What’s worse, they’re all now crowing that this situation won’t end anytime soon.

“Amid this supply-demand imbalance, customers are prioritizing securing volume over pricing which is sustaining the current pricing strength,” SK Hynix CFO Kim Woo-hyun boasted last week. “Accordingly, we expect a favorable pricing environment to continue for the time being.”

Samsung was just as blunt about how desperate its customers are, and how the world’s biggest memory-chip maker plans to keep taking advantage of them.

“Unlike previous years, customers who are concerned about supply shortages are actually bringing forward their demand for 2027 already,” it said in Thursday’s investor call. “So, currently just based on pre-booked demand alone, the supply-demand gap is looking to widen further in 2027 versus this year.”

From a purely capitalistic point of view, I guess you can’t blame them. The memory sector is cyclical. You enjoy the growth years when you can, and limit pain of the down cycle when it comes. That’s the business model, and both management and investors have learnt to accept it.

Unfortunately, on this occasion customers are learning that they too must accept the vagaries of the memory industry. But it’s causing a lot of pain, will likely lead to billions of dollars in lost revenue, and hand more control to Chinese rivals just as global technology competition escalates.

Worst hit will be PC and smartphone makers, who are having to rethink their product strategies given the long-term higher costs of both DRAM and NAND. We’re already seeing this play out.

All but Apple experienced a drop in first-quarter smartphone shipments, according to data from Counterpoint Technology Market Research. Xiaomi was worst hit, with a 19% fall.

“The brand is facing acute pressure as its heavy exposure to the price-sensitive entry-level segment makes it highly vulnerable to rising memory costs,” Counterpoint wrote of Xiaomi’s struggles. A delay in Samsung’s premium S26 series meant that even the Korean brand couldn’t stave off a downturn brought on by shrinking demand for mass-market devices.

Samsung’s smartphone chief addressed this issue in Thursday’s earnings call, noting the need to manage cost pressures and reorient toward premium devices over low-end models. I discussed this dilemma at length last week with Jon of Asianometry in our debut episode of Supply-Chained.

The PC sector will be similarly affected. Lenovo, which is number one with around 25% of the market, skews toward consumer and small & medium-sized business customers. That makes it potentially more vulnerable than HP and Dell who lean more heavily on larger corporate customers by selling both personal computers as well as infrastructure products like servers.

The three big memory-chip makers needn’t care. They have customers lining up for the next few years, many trying to lock in multi-year purchasing agreements. That’s given these oligopolists the confidence to finally start boosting capex, albeit too late and by too little.

But it’s not going to much help the rest of the tech sector, because most of that money is going toward boosting HBM supply used in AI servers, leaving those requiring legacy DRAM to flounder.

Boring old DRAM is needed in PCs, smartphones, games consoles, security cameras, cash registers, and cars. It’s boring because it’s ubiquitous. And it cannot be replaced by HBM because the high-bandwidth variant is attached directly to a processor via advanced-packaging techniques such as TSMC’s Chip-on-Wafer-on-Substrate (CoWoS). Legacy DRAM is often just soldered onto a printed circuit board and slotted into the final device.

The top three, which collectively control 90% of the DRAM market, may feel that they don’t need the old-school DRAM market anymore. But that’s very short sighted, because they’re handing orders and client relationships over to rivals in China, which threatens to take over the memory sector like it did legacy semiconductors and LCD display panels.

Whereas Western brands had become wary of buying memory chips from China, they now have no choice. Even HP, with its long-term No China policy, must turn to ChangXin Memory Technologies (CXMT), a growing player in DRAM and Yangtze Memory Technologies Co. (YMTC), which is now a force in NAND.

HBM may be the hot item now, but legacy DRAM will forever be important to the world because of its simple but critical role in how information is computed. The risk is that, as with other commodities like rare earths, China may soon have command of a critical product crucial to the global technology sector. Not that it’s Samsung, SK Hynix, or Micron’s job to care. Their job is to make money, not protect supply chains or national security.

Maybe Seoul, Tokyo and Washington might start to care, but given the current emnity between them all, I struggle to see their governments working together to effectively address the issue.

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In the short term, those parts of global tech sector which are not building AI servers — which is most of the global tech sector — will continue to suffer. In the long-term, the entire tech sector may find itself facing an even worse problem than high memory-chip prices. Unless someone stands up and does something about it, before it’s too late.

Thanks for reading.

More From Culpium

Cook’s re-engineering of Apple started in 1998, more than a decade before he took the CEO mantle from Jobs. He had an impact almost immediately, but there are many misunderstandings about what Cook actually changed about Apple’s operating model.

Introducing Supply Chained
A new podcast hosted by Tim Culpan of Culpium (me) and Jon of Asianometry.
We explore the depth & history of supply chains to unveil how today’s technology is made. And what comes next.
We hope you’ll join us.

As senior VP of worldwide operations, Cook was not the man who brought outsource manufacturing to Apple. Nor was he the man who brought China into the company’s supply chain. Both moves predated both Cook, and even Steve Jobs’ return to the company he founded.

Ireland, Singapore, Japan, and South Korea had been sources of Apple product and components since at least the early 1990s, both for inhouse production and also external component supply.

Outsource contract manufacturing was already well underway, not from Asia but via American companies such as SCI Systems and Solectron who pioneered the model. Foxconn founder Terry Gou, at the encouragement of a senior Apple executive, embraced that electronic manufacturing services (EMS) framework.

Seeing the future, Gou slowly oriented his Taiwanese empire away from mere plastics and mechanical components — like metal PC cases — and dove deep into integrated vertical manufacturing. Dell and Compaq had signed on as clients well before Apple came along.

In other words, outsourcing to Asia was underway by the time Cook arrived. It was already in Apple’s future. Cook embraced it.

Yet, Cook and his team brought important operational innovations that remain significant a quarter of a century later. Among them, Apple went deeper into the little-understood but hugely impactful practice of equipment consignment. I wrote about this 16 years ago when I profiled Gou and Foxconn for Bloomberg Businesweek. Patrick McGee covered it in his recent book “Apple in China.”

Made to Measure

Apple often pushed the boundaries of what was physically possible, and that usually meant the need to use new and unique equipment. Its suppliers rarely had the funds to buy such expensive kit, so Apple would write the check with a very specific stipulation: it could only be used to make Apple’s products. This allowed the manufacturer to get the tooling needed to satisfy Apple’s niche requirements, but also locked up factory capacity and resources. Cupertino still uses this strategy today.

There are numerous examples of Apple building unusual relationships with its supply chain, down to insisting that an off-the-shelf component be tweaked just for them.

But beyond the minutiae of manufacturing, Tim Cook’s Apple changed the world in bigger ways.

In my opinion, three foreigners have done more for the development of the modern PRC than anyone else. The first is Henry Kissinger (iykyk). The second is Terry Gou. And Tim Cook is the third.

Gou’s impact was already apparent in the mid-1990s as he connected foreign clients with Chinese workers in the former farmlands of Shenzhen. He was the ultimate salesman, middleman, and logistics chief. Cook signed on.

As Apple factories around the world were shuttered, and contracts started disappearing from Japanese and Korean factories, Cook went all-in on China. By the early 2000s, Foxconn was China’s biggest exporter and a big chunk of that was for Apple.

By 2010, Apple was Foxconn’s single-largest customer. Through its partnership with mostly Taiwanese factories in China, Apple fed, trained, and nurtured more Chinese people than any non-government enterprise on the planet. The continuous income stream Apple provided became an important foundation for the technology-manufacturing hub that China enjoys today.

Cook’s Compromise

But it also made Apple overly reliant on a single country, one that is increasingly at odds with the values of human rights, privacy, and freedom which Apple claims to embrace. To keep China as both a supplier and buyer of its goods, Tim Cook made compromises.

Apple has booted products from its App Store used by pro-democracy movements and bolted shut technological loopholes which allowed people to communicate directly rather than via restricted communications networks. And while industry peers slowly and quietly reduced their China footprint, Apple hung on.

For each of these decisions, the buck stopped at Tim Cook. Such choices have attracted accusations that Apple is a hypocrite, or even downright evil. Maybe, but that’s also a little simplistic.

Consider its 2012 decision to join the Fair Labor Association, an industry group that had counted Nike among its members. There’s no doubt this decision was prompted by the spate of suicides at Foxconn two years prior. Yet, having spent more time in and around Foxconn campuses than most, I can tell you that conditions there are far better than many were led to believe. I can also tell you that trying to paint a more nuanced picture quickly attracts allegations of being an Apple apologist.

Whatever the supposed sins of Apple and Foxconn, the truth is that both companies — and the rest of the iPhone-maker’s suppliers — were quick to embrace change. To seek to do better. That came from Cook.

He backed up his directive for better conditions with the money needed to do so. Foxconn doubled — then tripled — wages and passed the bill to Apple. I have not seen or heard anything to suggest Steve Jobs ever noticed, nor cared about suppliers or their workers. Cook visited regularly and genuinely seemed interested in their plight.

Planet Possible

The biggest impacts from Cook’s leadership span the globe. In 2013 he hired Lisa Jackson, the former head of the US Environmental Protection Agency. Jackson wasn’t brought on board as a marketing ploy or to tick a box, it was a recognition that Apple is truly serious about cleaning up the planet.

In today’s political climate, environmental initiatives are branded mere wokeness. But Apple’s long-term strategies in areas such as pollution control, use of sustainable materials, and connecting to renewable energy are bringing about real change. Because it has the money to pay for these costly measures, both directly and through funding its suppliers, the world now enjoys a cleaner planet than had Apple not even bothered.

Apple’s massive spending power means companies can afford to invest in offshore windfarms and solar arrays, recycle commodity products and rare earths, and develop innovative chemicals and textiles. In a world where caring for others and the planet has been made to seem weak, solutions to protect the environment fell out of favor. But now, at a time when rare earths are hard to come by and energy security is of increasing concern, these strategies seem more relevant than ever.

The Ternus Take

John Ternus, who joined Apple just three years after Cook, looks set to embrace some of his predecessor’s philosophy. In a commencement speech to the graduating class of 2024 at his Almer mater, the University of Pennsylvania, he spoke of “a deep desire to do what we can to protect the environment.”

Yet, he also urged graduates to “build what interests you. Build what excites you. But above all else, build it in a way that aligns with your values.” Like Cook before him, Ternus’s values probably include labor rights and environmental protection. But let’s hope he also embraces human rights and freedom of speech for everyone, not just Apple’s Western hemisphere.

It was always understood that Cook would run Apple very differently to Steve Jobs. Now, upon his retirement, it’s abundantly clear that Tim Cook has indeed built Apple in his own image.

Thanks for reading.

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TSMC’s first-quarter earnings were a display of records across the board: revenue, gross margin, operating profit, net income, wafer shipments, and even ASP. Investors ought to be delighted by what they see.

But I can imagine clients are disappointed.

Not only did TSMC take more of the semiconductor value chain for themselves than ever before, the Taiwanese giant also failed to deliver an upgraded spending forecast for 2026. The best CFO Wendell Huang could offer was to narrow TSMC’s outlook to the “upper end” of the $52 billion to $56 billion capex range it announced in January.

There’s a chance this figure will get a bump later in the year, but the $11.1 billion it spent in 1Q — lower than the $11.5 billion it forked out the prior quarter — means the already backend-loaded spending plan doesn’t leave a lot of room to purchase and install a significantly larger amount of capacity this year.

It’s not all TSMC’s fault. The company needs to secure land, build shells, install utilities, kit out clean rooms, and spin up very complicated equipment. It doesn’t do any of this alone.

Despite the challenges, TSMC wafer shipments grew 28.1% year-over-year in the March quarter, the fastest pace in six years. Sedate growth in recent quarters was due more to supply constraints than demand, so this jump is an indication that new capacity really is coming online.

In addition, TSMC has amended its long-time business model of building new fabs instead of retooling existing ones. Holding onto and operating a chip factory with old equipment and technology is highly profitable because the major cost has already been depreciated. An old fab is a cashcow, a new one is a money sink.

Yet to meet customer needs, TSMC has shuttered 6-inch and 8-inch lines to make room for leading-edge capacity. On paper, that’s not a financially optimal move, but CEO CC Wei likely sees it as a strategically savvy one because it’s the fastest option that he has available to quickly boost supply given his many constraints.

Still, frustration with what many blame as TSMC’s inability or unwillingness to expand has attracted accusations that the Taiwanese company alone is the major speed brake on the world’s AI future. I’ve written before that I think this is untrue and unfair.

Today, I’d note that I haven’t heard a peep out of those same critics with regards to the global shortage of memory chips. Dell CEO and founder Michael Dell was recently cited as saying that “a structure is forming where total memory demand increases by approximately 625 times.” Yikes!

The desire to do an end-run around “the TSMC problem” recently spurred Elon Musk to start moving on plans to get into the chip-fabrication game, and has roped in Intel to help. Details are hazy, but I suspect Musk/Tesla will license technology from Intel and become an important financial backer of Intel’s future expansion plans. Heck, Musk should go all the way and just buy Intel, I say.

Wei seems almost amused at the prospect of Elon Musk soon discovering what he already knows. Something Intel knows, and Samsung knows, and GlobalFoundries knows. And that IBM and Motorola once knew: Making chips is hard.

“There are no shortcuts. The fundamental rules of the foundry game have never changed,” Wei told investors Thursday when asked his thoughts on Tesla and Intel’s plans for Terafab. “They need technology leadership, manufacturing excellence, and customer trust. And most of all service.”

Wei is currently overseeing capacity expansion in four countries across three continents, making him the world’s most preeminent expert on constructing semiconductor factories.

It takes two to three years to build a new fab, and another year or two to ramp up capacity, Wei noted — “no shortcuts.”

Of course, Musk’s move might be a massive headfake, designed to pressure TSMC to expand even quicker so that he can get on with the task of launching AI data centers in space. If so, Wei isn’t buying it, and he’s certainly not about to accelerate TSMC’s growth trajectory to just to stave off a possible loss of orders to Intel and Terafab.

“We repeatedly say that we prepare capacity to meet customers’ demand, not because of our competitor and not because of other considerations,” he said. “The most important one is our customers’ demand, and they work with TSMC so that we plan our capacity and our capital expense.”

Of course, this might be TSMC’s own psyops. The flipside to the “expand now, pay for it later” thesis is that extra industry capacity would give clients more leverage when a slowdown comes, especially since a chipmaker’s capital costs are baked in to its balance sheet and income statement. Seeding doubts into Musk’s mind, Inception style, could pay off bigtime if the world’s richest man later gets cold feet.

Musk’s plan is to scale from an initial output of 100,000 wafers per month to an eventual capacity of one million. Although he didn’t give a timeline, the urgency of his galactic mission suggests that he’d want to do so in under a decade. It took TSMC 37 years to reach the same point. That might make the incumbent chipmaker a bit of a tortoise, but in a few years the hare may learn for himself that there truly are no shortcuts.

Thanks for reading.

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