How Apple Will Save Billions of Dollars on Chips for New iPhone

When Apple’s next iPhone goes on sale in September, its upgraded core processor will be more powerful than that of any rival smartphone.

That’s possible because of Taiwan Semiconductor Manufacturing Co., which makes all of Apple’s custom chips. TSMC is using a new process to make smaller, faster and more power-efficient chips, which it refers to as 3 nanometer, for Apple roughly a year before it makes them for anyone else. But that’s not the only thing TSMC is doing for Apple: A sweetheart deal between the companies means TSMC effectively eats the cost of the defects that inevitably crop up in a new manufacturing process.