TSMC reportedly priced Apple's A16 Bionic SoC 2.4 times higher than its predecessor

We all figured that Apple gave the iPhone 14 and iPhone 14 Plus leftover chipsets to help differentiate them from the more expensive iPhone 14 Pro models. This way more consumers would have the incentive to spring for the pricier handsets with the new chipsets. But new information reported by Nikkei Asia (via Wccftech) would seem to suggest that there was an ever better reason for Apple to recycle the iPhone 13 series' A15 Bionic chip inside this year's non-Pro iPhone 14 models.

The new report says that Apple paid more than twice as much for the A16 Bionic than it paid for the A15 Bionic. If true, the company saved a ton of cash by breaking from tradition and equipping the non-Pro iPhone 14 handsets with the older SoC. Nikkei Asia says that for the 4nm A16 Bionic, Apple paid TSMC $110 for each chip. TSMC's N4 process node used to manufacture the A16 Bionic is actually an enhanced version of its 5nm node. Still, most of us media types refer to it as a 4nm chipset.

A lower process node means that smaller transistors are used and this allows a chip's transistor count to be higher. And the higher a chip's transistor count, the more powerful and energy-efficient it is. The A15 Bionic was made using TSMC's second-generation 5nm process node (N5P) and carries 15 billion transistors compared to the nearly 16 billion in the A16 Bionic and 11.8 billion in the A14 Bionic.

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The A15 Bionic cost Apple approximately $45.80 for each chip. Part of the price increase is due to the lower process node for the A16 Bionic and next year's A17 Bionic, expected to power the iPhone 15 Pro and Ultra models, will be made using TSMC's 3nm process node. Recently we've heard that Apple, after first rejecting it, has given in to a 3% price hike demanded by TSMC for the A17 Bionic. Besides the price hike for the iPhone's Applications Processor (AP), the company had to pay $15 for Sony's CMOS image sensor. While 30% larger, the sensor's price was 50% higher.

Apple has not raised its pricing in the U.S. for the 2022 iPhone handsets this and production costs for all iPhone 14 models (including non-Pro and Pro variants) were up 20% according to Nikkei Asia in conjunction with Fomalhaut Solutions. This means that Apple's profit margins are taking a hit this year; eventually, the pressure from Wall Street (and from Apple's executive offices) will force the tech giant to raise iPhone pricing.

Next year would seem to be an opportune time for Apple to change its iPhone pricing. After all, we expect to see a redesign for the iPhone 15 series including the end of the line for the Lightning port on the iPhone as the USB-C era is likely to begin. And Apple could see a hit to its top-line growth from this move as well since it no longer will be able to force users to buy accessories that work only with the proprietary Lightning port on new models.

Additionally, there is speculation that Apple will be replacing the "Pro Max" model with an iPhone 15 Ultra and this could result in the release of (imagine the words in italic are being said by former Apple design chief Jony Ive) the priciest and most expensive iPhone yet. Apple could differentiate the iPhone 15 Pro and iPhone Ultra by more than just the screen size. For example, the first periscope camera on an iPhone might be found next year on the iPhone 15 Ultra only.

If the iPhone 15 Ultra does become the only model next year to sport a periscope camera, it would indicate that the device will deliver improved optical zoom compared with the iPhone 15 Pro. Currently, the only difference between the iPhone 14 Pro and iPhone 14 Pro Max is the latter's bigger screen (6.7-inch vs. 6.1-inch) and larger capacity battery (4323mAh vs. 3200mAh).

Chip prices could continue to rise for the foreseeable future. Starting in 2025, TSMC plans on producing 2nm chips. While the foundry hasn't said anything about what lies beyond 2nm, rival Samsung Foundry announced last week that in 2027 it will start producing chips using a 1.4nm process node.