January 22, 2026 Apple’s once-solid relationship with Taiwan Semiconductor Manufacturing Company (TSMC) is facing challenges, thanks in part to the explosive growth of AI and the increasing dominance of Nvidia in the semiconductor space. According to CEO Jensen Huang, Nvidia now occupies the largest customer spot at TSMC, a position Apple had held for more than a decade.
For years, TSMC has been Apple’s exclusive chip manufacturer, powering everything from iPhones to Macs with its custom A-series and M-series processors. This mutually beneficial relationship has helped Apple stay ahead of its competitors by providing early access to the most advanced chips, thanks to TSMC’s massive investment in new fabrication plants. In return, Apple’s enormous scale and long-term chip orders helped justify TSMC’s capital expenditures.
However, as AI’s demand for specialized hardware skyrockets, Nvidia, with its GPUs powering AI data centers globally, now wields immense influence over TSMC, which is re-prioritizing production to meet the demand for these AI processors.
The shift in power has implications for Apple. TSMC, which had previously been a critical partner for Apple’s chip needs, is now being forced to accommodate Nvidia’s surge in demand. As a result, Apple is facing higher production costs for its processors. Industry sources claim that TSMC raised prices on Apple’s chips for the first time in years, with the company no longer guaranteeing priority access for Apple in its foundries. This has reportedly put Apple in a weakened bargaining position.
This price hike is just one part of the growing strain AI demand is placing on the global chip market. AI’s impact on the semiconductor industry has been profound, driving not only GPU demand but also causing a ripple effect on other components like RAM and SSDs. Apple, which relies heavily on these components, is facing increased costs that could eventually result in higher prices for consumers.
The rising competition in the chip market comes amid the massive investments pouring into AI infrastructure. At the World Economic Forum, Huang described the current moment as the beginning of “the largest infrastructure buildout in human history,” with investments in semiconductors, data centers, and AI-specific applications in full swing.
In response to these changes, TSMC is expanding its global footprint with plans to build 20 new fabrication plants. This move comes as manufacturers like Foxconn, Quanta and Inventec are also ramping up their efforts to meet AI demand. With companies like Micron, and Samsung investing billions in memory to support AI systems, the semiconductor industry is indeed undergoing a significant transformation.
