Apple's next iPhone chip could cost 80% more
What's the story
Apple is said to be facing a major year-on-year (YoY) increase in chip costs, as it gears up to switch its iPhone processor to a 2nm manufacturing process. The upcoming A20 chip, which will power the iPhone 18 series, could cost around $280 per unit. This is an increase of nearly 80% over the previous generation's price tag.
Manufacturing transition
Apple's shift to TSMC's 2nm process
Apple is expected to partner with TSMC for the A20 chip, making it one of the first major customers to adopt this new manufacturing process. The move comes as part of Apple's strategy to secure access to cutting-edge manufacturing technologies. However, unlike previous transitions from 5nm and 3nm processes that improved performance and power efficiency without such a steep cost increase, the jump to 2nm seems more disruptive.
Production hurdles
Challenges and costs
The first-generation nanosheet yields are fragile, driving up the cost of usable chips. Advanced packaging techniques needed for modern system-on-chips also add to the expense. Rising memory prices are further inflating the overall cost of iPhone components. These factors combined make the transition to A20 much more expensive than previous node shifts.
Tech transition
Technical advantages and obstacles
The 2nm process introduces gate-all-around transistor designs or nanosheets. These transistors wrap the gate fully around the silicon channel, allowing tighter control of electrical flow. This results in better power efficiency and higher transistor density but is harder to manufacture reliably at scale. The benefits for iPhone users will likely be seen in sustained performance and battery life rather than headline benchmark numbers.
Production partner
TSMC's role in Apple's A20 chip production
TSMC is seen as the best bet for early 2nm production, which is why Apple, Qualcomm, and MediaTek are all tied to its initial capacity. Although the exact allocations remain unclear and usually change as yields improve, Apple is believed to command a large share of that early output. This partnership with TSMC positions Apple to secure early access to the new manufacturing process.
Competitive landscape
Samsung's 2nm process and its impact on Apple's costs
Samsung is also working on a 2nm gate-all-around process for future Exynos chips, including the Exynos 2600. Despite its foundry business struggling with consistency in recent years, these efforts are still relevant. Even for Apple, credible competition can influence pricing and timelines at TSMC. However, it remains to be seen how these rising costs will ultimately affect iPhone pricing as 2nm production matures.