- Apple enjoyed a long run at the top of the tech supply chain.
- Now, this prized position is being usurped by AI companies and cloud giants.
- These new AI players are becoming more important customers for chipmakers and other suppliers.
For over a decade, Apple sat at the center of the tech supply chain. Its enormous scale let it dictate pricing, lock up capacity, and steer the roadmaps of suppliers that made everything from chips and memory to substrates and packaging. That era is ending.
"Apple is no longer the gravitational center of the hardware universe," said Brad Gastwirth, global head of research and market intelligence at Circular Technology, who tracks the industry's supply chain.
"Apple still moves huge volumes and has unmatched brand strength. But the company is no longer the anchor client for fabs, substrate makers, or key component suppliers. That's a fundamental change."
This is important because the tech companies that control the supply chain are more likely to win. When you can order the largest amount of a key component, you get better pricing and a more reliable supply. That results in better-priced products that are available sooner than your rivals. This power is now shifting toward AI giants, including Nvidia and huge cloud players such as Amazon, Microsoft, and Google (aka "AMG").
The most visible sign is at TSMC, the world's largest chipmaker. It's famous for churning out cutting-edge iPhone chips, which gave Apple a huge advantage over other consumer hardware players.
When TSMC reported results this week, it became very clear that its smartphone business is no longer its most important segment. High-performance computing — a category dominated by AI chips for companies like Nvidia and hyperscale cloud providers — now accounts for roughly 58% of TSMC's revenue, far surpassing smartphone processors.
TSMC makes chips for Nvidia's AI servers, which are being snapped up in huge volumes by the cloud giants. They pack this gear into huge data centers that train and run AI models to power new services such as ChatGPT. Is that a better business than making iPhone chips?
TSMC's CEO C.C. Wei answered that. He's been talking to these AI giants a lot lately. Here's what he said on this week's earnings call:
"They show me the evidence that the AI really helps their business. So they grow their business successfully and see the financial return. So I also double-checked their financial status. They are very rich."
Suppliers go where the money is. Increasingly, the biggest Benjamins are coming from AI and cloud giants, not Apple.
Memory shift
This shift is rippling through the rest of the supply chain. Memory chip makers are reallocating capacity away from phones and PCs to feed AI data centers hungry for DRAM, dynamic random access memory. This is a common type of memory chip that's used in AI servers and iPhones.
Memory prices have surged lately, and that's likely to push up smartphone costs and potentially squeeze margins. Nvidia has locked in long-term memory supply, leaving smartphone makers with less negotiating power.
"For the past 15 years, Apple's scale let it dictate component supply, pricing, and roadmaps," Gastwirth said. "That leverage diminishes when suppliers earn higher margins and higher growth from AI customers than from smartphones."
An obscure bottleneck
Bottlenecks are emerging in unexpected places, too. A shortage of high-end glass cloth, a critical input for chip substrates, has suppliers prioritizing AI customers who pre-pay and sign multi-year contracts.
Apple, which uses these substrates across nearly all its products, is now competing with AI chipmakers for limited supply and even sending engineers to help smaller suppliers qualify alternative materials, according to a report this week from Nikkei.
Foxconn moves on
Manufacturing partners are also re-prioritizing. Foxconn, once synonymous with iPhone assembly, now generates more revenue from AI servers than from consumer electronics. Its fastest-growing customers are hyperscalers and Nvidia, not Apple.
None of this makes Apple irrelevant. The company remains one of the world's largest buyers of components. However, in a supply chain increasingly shaped by AI, pricing, allocation, and capacity planning are being set elsewhere — and Apple is learning what it's like to be just another very large customer.
"In the 2010s, Apple set the pace for the supply chain," Gastwirth said. "In the late 2020s, Nvidia, hyperscalers, and AI infrastructure now dictate pricing, allocation, and long‑term capacity planning."
Apple didn't respond to a request for comment on Friday.
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