In a report this week, Bloomberg has revealed plans for Apple to engineer processors for its notebook and PC designs, mirroring in many ways its development and integration with silicon chip design for its mobile products including iPhone and iPad. According to the report, Apple would begin the rollout of these new processors in Macs in 2020.
While this rumor has circulated since the beginning days of Apple investing in chip design for its phone and tablet business, the information now appears to be more solid than it has ever been. This partly comes as the technology markets recognize the strength that Apple has demonstrated in its A-series chips that have powered many generations of iPhones. These new processors have improved in performance, efficiency, and capability and in many ways have left competing mobile processors behind in raw speed.
Apple recently added a graphics processor into its chip design, displacing long-term partner Imagination Technologies that had been licensing its tech to the Cupertino giant. The graphics system is one of the last remaining pieces to the puzzle that will allow Apple to create a fully vertical silicon design path for its mobile products.
The Kalamata Initiative, as it is being called by Bloomberg, would attempt to create the same level of control to the chips that power its notebooks and desktop PCs.
Many tech pundits have taken to this news as a bluff, part of an elaborate part of negotiation and market influence, attempting to force Intel to adjust pricing or product direction. While possible, the rumors this time hold significant weight based on the source and the timeframe given. It also seems unlikely that Apple would be this far along in development of an incredibly expensive project utilizing any number of highly paid, high-profile engineers if leadership didn’t believe the direction would hold merit.
Intel investors clearly took the story as a negative to the company’s future, with stock prices falling sharply. Though Apple only holds about a 10% market share in the notebook space, and less than that for desktop systems and all-in-one designs like the iMac, losing out on Apple’s business would cost Intel about 5% of its revenue, based on the Bloomberg report.
The public perception of Intel might take a small hit with the move from Apple, but in reality, any fear of other companies following Apple down the road of custom chip design are unfounded. No other PC vendor has the design chops or financial capability to start a ground-up initiative for a chip like Apple has done, nor do they have an avenue of development that Apple enjoyed with the iPhone and iPad products.
Intel maintains a strong leadership position over AMD and Qualcomm in the mobile space, both in terms of technology and market share, so I do not expect this Apple news to have any striking, far-reaching impact.
Other than the immediate loss of income, the other risk Intel could face is a strengthened competitive marketplace. Qualcomm has been pushing to enter the notebook PC space with its Windows on Snapdragon initiative (the Snapdragon is the company’s name for its custom processor design) and PC vendors that see Apple’s confidence in going with an Arm-based alternative would be more willing to take the same bet. Qualcomm has notebooks powered by its own custom chips in the market today from HP and ASUS, however, so any threat to market share is already being tested.
Another wrinkle in the story is Apple’s need for Intel technology in the modem space. As Apple tries to discredit and renegotiate with Qualcomm over the San Diego-based company’s 4G and 5G intellectual property and licensing, Apple has used Intel modems as a second source for its iPhones to pressure Qualcomm. Apple does not have its own modem technology, and as of today there has been no credible report of one at the ready, so anything driving a wedge between Apple and Intel could have fallout in the mobile space as well.
If the rumors are true and Apple does begin to replace Intel processors with its own designs in notebooks starting in 2020, it could have a significant impact on the technology space. Apple’s ability to fully integrate hardware and software cohesion should allow it to provide interesting platform benefits including better battery life, unique features, and improved time to market that relies only on its own roadmaps.
Many analysts believe that Apple notebooks have fallen out of the leadership position with lackluster updates and slow hardware iterations. Being able to control more of the hardware stack gives Apple the ability to differentiate beyond the tech that Intel can provide.
It would also mean a hairy transition from Intel-compatible software that currently runs on the Mac operating system powered machines today to Arm-based software. This will require both an emulation layer (converting from one kind of software to another on the fly) that will be costly on performance and a push to drive software developers to retool their applications.
Apple had experience with this process 12 years ago courtesy of its move from PowerPC-based chips from IBM to Intel processors. The overlap caused some hiccups and poor consumer experiences but Apple’s ability to control hardware and software gives them the capability to direct the change easier than other vendors.
Apple has a significant leadership position in sales and mindshare in the smartphone market and can use that to force developers to code specifically for its devices in the mobile space. On the PC side, with only ~10% of users running macOS versus Windows, it will take additional investment and effort to convince software companies to spend time and energy to customize software for that sliver of the install base.