Apple and Intel have emerged as the first adopters of Taiwan Semiconductor Manufacturing Co.'s next-generation chip production technology ahead of its deployment as early as next year, Nikkei Asia has learned.

The development shows how TSMC continues to be vital to U.S. companies' chip ambitions, even as Washington attempts to bring more semiconductor production to American soil.

Apple and Intel are testing their chip designs with TSMC's 3-nanometer production technology, according to several sources briefed on the matter, with commercial output of such chips expected to start in the second half of next year.

Nanometer refers to the width between transistors on a chip. The smaller the number, the more advanced the chip, but also the more challenging and expensive they are to build. The most advanced chip production tech being used for consumer products today is TSMC's 5-nm technology, which is used for all iPhone 12 processor chips.

According to TSMC, 3-nm technology can increase computing performance by 10% to 15% compared with 5-nm, while reducing power consumption by 25% to 30%.

Apple's iPad will likely be the first devices powered by processors made using 3-nm technology, sources said. The next generation of iPhones, which are to roll out next year, are expected to make use of the intermediate 4-nm tech for scheduling reasons.

Intel, America's biggest chipmaker, is working with TSMC on at least two 3-nm projects to design central processing units for notebooks and data center servers in an attempt to regain market share it has lost to Advanced Micro Devices and Nvidia over the past few years. Mass production of these chips is expected to begin by the end of 2022 at the earliest.

"Currently the chip volume planned for Intel is more than that for Apple's iPad using the 3-nanometer process," one of the sources said.

For Intel, which both designs and manufactures chips, the collaboration with TSMC is aimed at tiding the company over until it can get its own in-house production technology on track. The company has delayed the introduction of its own 7-nm production technology to around 2023, well behind Asian rivals TSMC and Samsung Electronics. The release of Intel's latest Xeon processors powered by the company's 10-nm technology has also been delayed from the end of this year to the second quarter of next year, the company said this week.

Intel CEO Pat Gelsinger has described the company's relationship with TSMC as one of "co-opetition" -- a blend of cooperation and competition. The U.S. company earlier this year confirmed it will work with TSMC on several processor chip projects, marking the first time in its history that it will outsource the manufacture of its core products.

Intel's smaller rival, AMD, whose market share for notebook processors rose from 11% in 2019 to more than 20% last year, is set to adopt TSMC's 5-nanometer chip production technology for its notebook processors next year, multiple people said. Nvidia, the most valuable American chip company, announced this year it will move into the server chip market to grab market share from Intel. Nvidia's first server CPU chip will use TSMC's 5-nm tech and will be available by early 2023, according to Nvidia.

The race to adopt the latest chip production nanotechnology is not only a commercial pursuit, geopolitics also plays a role. The U.S., the European Union and Japan, citing national security risks, are rushing to bring vital chip production onshore. Washington passed a $52 billion package to invest in the semiconductor industry to restore the country's chip manufacturing leadership.

Washington has also said Intel's delay in rolling out its 7-nanometer chip production technology presents a security risk, and the Department of Energy switched from Intel-made chips to those produced by TSMC for its supercomputer, although the latter are not made in the U.S.

Huawei used to be among the most aggressive major clients when it came to embracing the industry's latest chipmaking technologies, but it was blocked by the U.S. government from engaging with TSMC due to concerns about national security.

In response to Nikkei Asia's request for comment, Intel confirmed it is working with TSMC for its 2023 product lineup but did not say which production technology it is using.

TSMC said it does not comment on individual customers' plans, while Apple did not respond to Nikkei Asia's request for comment.

By: DocMemory
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