The News: Bloomberg News reported Tuesday that Apple is preparing to announce as soon as this month that it will use its own processors in Macs starting next year. The new Macs will incorporate the same internally-developed semiconductors, based on Arm Ltd. chip-architecture technology, that powers the iPhone. According to Bloomberg’s Mark Gurman, Apple plans to move its entire Mac product lineup to its own chips because of their higher performance and improved power efficiency. Read the full news piece.
Analyst Take: The rumors of Apple and its Mac line going away from Intel have all but been confirmed until today’s news. This is barely news, but the wider perspective coming from the media that this is a three alarm fire for Intel is worth addressing. While I believe the news is material, I think Intel is well positioned to weather the loss of Apple as the company is well diversified and CPUs for PCs and Mac devices are a smaller part of the companies revenue and earnings.
In the Bloomberg Piece, the author provided the following perspective:
The move will have multiple negative ramifications for Intel’s chip business. The most obvious is the direct impact of losing revenue as the sole processor supplier for Apple’s PC line. The Mac currently represents 12% of the U.S. PC market based on units sold, according to the latest Gartner data. And Bernstein estimates Apple’s laptop line accounts for 2% to 4% of Intel’s sales and mid- to high-single digit percentage of its earnings.
Given the smallish market share of Mac overall, you can see its contribution to the top and bottom line. Again, these numbers aren’t insignificant, but they are also not irreplaceable. It could be argued that the resources that Intel is required to commit to Apple could be redeployed to provide greater support to other OEM PC partnerships such as Dell, Lenovo and HP. Resources could also be reinvested into the company’s quickly growing datacenter business and/or could be utilized to scale efforts in areas like Cloud and AI, where Intel has had success, but have significant opportunity for growth.
ARM Architecture is a Challenger But Realistically AMD is a Bigger Threat
Over the past couple of years we have seen more of this type of pressure on Intel. ARM has offered its Windows on ARM architecture that has been used by the likes of Lenovo, Samsung, Microsoft Surface and others, with the promise of greater battery life and always connected capabilities. And while some of these deliver a beautiful form factor, the uptake on these units has been somewhat soft as software compatibility has been an issue.
The new processors for Mac will also use ARM. I believe Apple has made this announcement early on because it will need to start focusing developers on building software for its ARM based Mac. This will get done, but it will take time and Apple has been more subject recently to faux pas than it has been in the past as its software and hardware has seen more issues in the past few years. Much more than the Steve Jobs Apple, which was oft-touted for its quest for perfection. This means users will be expecting an equal or better experience on the new ARM based Mac. While I’m sure it will happen, it will take time and this will be time that Intel can use to redirect efforts as I suggested above.
If I had to point out the bigger challenge for Intel, I would say right now it has been the rise of AMD. I have long held the position that AMD has a long way to go in order to catch Intel, and based upon market share, this is still the case. However, over the past few quarters, AMD has been more problematic for Intel than I believe losing Apple’s Mac business will be.
With AMD being aggressive with its PC chips and having been able to deliver 7nm and a wide variety of new Ryzen based PC chips that are being more quickly adopted by OEMs–I believe Intel would be better served investing in accelerating process technology and fighting to regain market share it has given up on client computing to AMD. If I were Intel, this is where I would be directing more and more focus within the client computing group. This is a challenge that Intel is well prepared to handle.
Overall Impressions on the Apple Intel Update
Look, this isn’t really new news. It has been a known plan and as Apple has continued its vertical integration in its iPhones and iPads over the past few generations, no one expected Apple to stay with Intel forever.
For Intel, I’m cautiously optimistic that this just won’t be as big of a deal as it has been made out to be. I remember last year when Apple bought the modem business from Intel for its 5G phones, there was a lot of speculation about it being a big problem for Intel. If you look at the past few quarters results for Intel, it doesn’t seem to have been a big problem. In fact, the company has been able to lean into other parts of the business, most specifically its data center business and have some really solid results. Meanwhile, Apple had to go back to Qualcomm to at least fill short term voids for its iPhone modems because the acquisition was only a step toward delivering its own mobile chips–5G will be a whole different challenge with modem+RF (A story for another day).
Intel is more diversified than ever. Its “Data-Centric” strategy has launched it into more business area, which has seen its total addressable market scream north of $300 Billion. While it never helps to lose Apple, or the bragging rights that come with supplying Apple, Intel has been through this before with Apple and it is even better prepared now than it was the first time around.
Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.
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