Apple Loses Grip on Tech Supply Chain

For over a decade, Apple sat at the absolute center of the tech supply chain. Its enormous scale allowed it to dictate pricing, lock up capacity, and steer the roadmaps of suppliers for everything from chips and memory to substrates and packaging.

That era is now ending. A fundamental shift is underway, with AI companies and cloud giants usurping Apple's prized position. These new players are becoming more important customers for chipmakers and other suppliers, reshaping the industry's power dynamics.

Apple's dominance was built on its ability to move huge volumes of hardware, giving it unmatched brand strength and purchasing power. For years, it was the anchor client for fabs, substrate makers, and key component suppliers. This leverage allowed Apple to secure better pricing and a more reliable supply than its rivals.

However, industry analysts confirm this dynamic has fundamentally changed. As Brad Gastwirth, global head of research and market intelligence at Circular Technology, stated:

"Apple is no longer the gravitational center of the hardware universe. 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."

The power to control the supply chain is critical because the company that orders the largest amount of a key component gets better pricing and availability. This results in better-priced products that reach the market sooner than rivals. That power is now shifting toward AI giants, including Nvidia and huge cloud players such as Amazon, Microsoft, and Google.

The most visible sign of this shift is at TSMC, the world's largest chipmaker. TSMC is famous for churning out cutting-edge iPhone chips, which gave Apple a massive advantage over other consumer hardware players for years. However, recent financial reports reveal a dramatic change in priorities.

When TSMC reported results this week, it became 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 manufactures chips for Nvidia's AI servers, which are being snapped up in huge volumes by cloud giants. They pack this gear into massive data centers that train and run AI models to power new services such as ChatGPT. TSMC's CEO C.C. Wei addressed the value of this business on a recent 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, and increasingly, the biggest profits are coming from AI and cloud giants, not Apple.

The shift is rippling through the rest of the supply chain, creating new bottlenecks and reallocating resources. Memory chip makers are moving capacity away from phones and PCs to feed AI data centers hungry for DRAM (dynamic random access memory).

This common type of memory chip is used in both AI servers and iPhones. The reallocation has caused memory prices to surge, which is likely to push up smartphone costs and potentially squeeze margins. Nvidia has already locked in long-term memory supply, leaving smartphone makers with less negotiating power.

As Gastwirth explained, this erosion of leverage is significant:

"For the past 15 years, Apple's scale let it dictate component supply, pricing, and roadmaps. That leverage diminishes when suppliers earn higher margins and higher growth from AI customers than from smartphones."

Bottlenecks are emerging in unexpected places as well. 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.

Manufacturing partners are also re-prioritizing their business models. 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. Apple is learning what it's like to be just another very large customer rather than the one dictating the rules.

"In the 2010s, Apple set the pace for the supply chain. In the late 2020s, Nvidia, hyperscalers, and AI infrastructure now dictate pricing, allocation, and long‑term capacity planning."

The era of Apple as the undisputed center of the hardware universe has passed. The future of the tech supply chain is being written by the companies building the infrastructure for artificial intelligence.