Apple M5 Chip Targets AI PC Market, Fuels TSMC Demand

Amid industry anticipation for Apple's new products powered by its in-house M4 chip, sources reveal that Apple has already started developing the next-generation M5 chip. This M5 processor, built on a robust Arm architecture, is expected to play a pivotal role in the ongoing AI-driven PC market competition. Utilizing TSMC's advanced 3nm process, the M5 chip could debut as early as the second half of next year, driving continued demand for TSMC's advanced process capabilities.

TSMC, as usual, has refrained from commenting on specific client orders. Analysts point out that Apple is a key partner for TSMC, with a strong collaborative relationship where Apple relies heavily on TSMC's advanced wafer foundry services across its product lines.

In this surge of AI-powered PC innovation, where x86 leaders like Intel and AMD are launching new processors, Apple is pushing forward to expand its market footprint as a dominant player in Arm-based processors. Industry insiders predict that the forthcoming M5 chip will offer enhanced AI performance and computing power, potentially igniting a wave of upgrades across Apple's product lines. This, in turn, is expected to drive substantial orders for TSMC and benefit Apple's product assembly partners.

Despite the 3nm process being used for the M5 chip rather than TSMC's newer 2nm technology, industry analysts attribute this to cost considerations. Nevertheless, the M5 will stand out from the M4 by leveraging TSMC's System on Integrated Chips (SoIC) packaging with 3D-stacked chip designs, offering improved thermal management and reducing power leakage compared to traditional 2D chip designs.

Alongside ongoing 3nm production, Apple is reportedly reserving capacity in TSMC's future 2nm and A16 (1.6nm) processes. The 2nm process, expected to be available in time for the next iPhone generation, could see deployment in the anticipated iPhone 17 Pro models. Meanwhile, the rumored ultra-slim iPhone 17 Air is likely to continue with the 3nm process.

During a recent earnings call, TSMC Chairman C.C. Wei noted that client interest in the 2nm process has surpassed demand for 3nm, with the A16 process generating substantial interest for AI server applications. As demand for high-performance computing continues to grow, the 2nm process is expected to attract robust orders, outpacing even the strong demand seen for 3nm.