Apple's iPhone 18, slated for a 2026 release, may come with a higher price tag in India, and a key factor contributing to this potential increase is a strategic move by Taiwan Semiconductor Manufacturing Company (TSMC). TSMC, Apple's primary chip supplier, is reportedly raising prices for its next-generation process nodes, including the cutting-edge 2-nanometer (nm) technology expected to power the iPhone 18 Pro.
According to industry reports, TSMC has communicated to its major clients that manufacturing costs for sub-5nm chips will rise by 3-10% starting in 2026. The most significant increase is expected for the new 2nm process, which incorporates a more complex "gate-all-around" transistor design. While this new design promises substantial efficiency improvements, it also significantly raises fabrication expenses.
Apple's upcoming A20 Bionic chip, anticipated to be used in the iPhone 18 Pro and iPhone 18 Pro Max, is expected to be built on this advanced 2nm technology. Wafer costs are projected to surge by over 50% compared to the current 3nm process, potentially leading to increased production costs for Apple's high-end chips.
The shift to 2nm technology necessitates new manufacturing equipment, extensive upgrades to fabrication facilities, and enhanced precision at all production stages. Initial production yields are also expected to be slow, resulting in fewer functional chips per wafer, further driving up costs. TSMC is simultaneously investing heavily in new fabrication plants in Taiwan and the United States, and these costs are likely being passed on to its customers. As the dominant supplier of advanced chips, TSMC's pricing decisions have a significant impact on the global market.
India is already one of Apple's most expensive markets, due to import duties and logistical costs. Therefore, any rise in component costs can quickly compound, especially for Pro models that rely on the latest silicon. If Apple cannot fully absorb TSMC's 2026 price increases, it may be compelled to raise prices for the iPhone 18 in India.
To mitigate the impact of rising costs, Apple has historically limited the use of next-generation chips to its premium models. For instance, when 3nm technology was introduced in 2023, only the Pro models received the new A17 chip, while standard models continued to use older silicon. Analysts predict that Apple may follow a similar strategy with the iPhone 18.
Foxconn, Apple's primary contract manufacturer, is significantly expanding its operations in India, with plans to double iPhone production in the country. This expansion includes a Rs 15,000 crore investment in Tamil Nadu, focusing on value-added manufacturing, R&D integration, and AI-led advanced tech operations. Foxconn is also investing $1.5 billion to expand its Indian operations as Apple diversifies production away from China. Despite these efforts to increase local production, the reliance on advanced chips from TSMC remains a critical factor in determining the final cost of iPhones in India.
