By Dan Gallagher

Apple's top chip-making partner needs it less and less these days.

TSMC, the Taiwanese chip manufacturing giant that makes the main processors for the iPhone and Apple's other products, posted strong first-quarter results on Thursday that included its highest gross margin in more than 20 years.

But that was almost entirely due to booming demand for AI chips such as those designed by Nvidia, which TSMC also manufactures. This could help explain why Apple's share price slipped around 1% on Thursday following TSMC's results, even as most other tech stocks rallied.

AI chips are part of TSMC's high-performance computing, or HPC, segment. The company said HPC revenue jumped 20% year over year for the first quarter, and accounted for 61% of the company's revenue during the period. Smartphone revenue fell 11% year over year to account for barely one-quarter of TSMC's business in the first quarter.

That is the lowest contribution from smartphones in at least eight years, according to data from Visible Alpha. It is less reflective of the iPhone business than of the powerful economics of AI computing demand. Apple hasn't reported its own results for the March-ending quarter yet, but analysts believe iPhone revenue jumped 20% year over year to $56.2 billion, according to estimates from Visible Alpha. By contrast, Nvidia's data center revenue is projected to soar 86% year over year and hit $72.7 billion in the April-ending fiscal quarter.

The issue for Apple is that TSMC's chip making capacity is a finite resource-especially for the most advanced production processes that are needed for chips used in flagship iPhone models as well as AI processors. On the company's last earnings call in January, Apple Chief Executive Tim Cook said it was unable to fully meet demand because of limited availability of those advanced production lines, though it didn't mention TSMC by name.

"We are currently constrained. And at this point, it's difficult to predict when supply and demand will balance," Cook said on the late January call. For Apple, getting its chips made isn't getting any easier.

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April 16, 2026 15:15 ET (19:15 GMT)

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