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Is Apple Going to Spend $10 Billion on a Chip Factory?

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Apple has been using Samsung to manufacture the processors to run the iPhone and iPad but the two companies are waging war in competing products and the courtrooms.  There has been a lot of speculation that Apple plans to move some of its production from Samsung to TSMC and possibly IntelTSMC has also said that having a plant dedicated to a single customer could make sense.

It would be a solid business decision for Apple to make this move but it is not without risks.  Given the huge quantities of components needed to make the hundreds of millions of units it sells and the intricacies of these devices Apple does expose itself to product disruptions.

An article from Larry Rulison at the Albany Times Union says that Deloitte is searching for a major semiconductor facility for an unnamed company and believes it is TSMC who would use it build components for Apple (known as Project Azalea).  After looking at Austin it appears that New York may be the leading candidate and estimates that the plant could cost up to $10 billion.

Apple has the resources to make this type of investment and it has been investing a tremendous amount of its capital in its suppliers.  At the end of September the company had over $121 billion in cash and investments and an additional $15 billion in machinery and equipment (largely at its manufacturing partners) and over $21 billion in off balance sheet third party manufacturing and component commitments.

Disclosure: My family and I own Apple shares

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