Home/ Technology / News/  Apple’s biggest chip gamble yet

With its star having dimmed in Apple Inc.’s firmament, the Mac might seem safe for the company to shake up. But there is still some risk to messing with a 36-year-old business.

Apple on Tuesday announced its first Mac computers running on the company’s own central processor. That chip, dubbed the M1, will replace the processors from Intel Corp. that have powered the Mac lineup since 2006. It will start in the company’s smallest laptops—the MacBook Air and 13-inch MacBook Pro—as well as the Mac Mini, all of which begin shipping next week.

Apple expects to transition its full lineup of Macs to its in-house processors over the next two years. Going in-house with a key component should give a boost to the company’s profit margins. Matthew Cabral of Credit Suisse estimates a 1.5% potential uplift to per-share earnings once the entire Mac lineup has made the switch.

Apple is hardly new to the chip game. It has been designing its own processors for the iPhone and iPad for a decade now and its goal of displacing Intel’s position in Macs has been rumored for years. The timing is good. Taiwan Semiconductor Manufacturing, which has been fabricating Apple’s in-house processors since 2014, has leapt ahead of Intel in chip-production technology. Apple’s M1 and the A14 chips for the latest iPhones and iPads will be built on TSMC’s 5-nanometer manufacturing process. Intel’s most advanced chips are built on a 10-nanometer process, and delays with its transition to 7-nanometer have shaken up the storied chip maker.

But the M1 chip still puts Apple into a different competitive league. The market for smartphone processors wasn’t well established when the company began using its own in-house A4 chip in 2010 so there was less basis for comparison. But the PC market has long been dominated by the x86 processors produced by Intel and Advanced Micro Devices. Processors built on the competing standard from Arm Holdings, used widely in smartphones, have had a very difficult time penetrating the PC market due to trade-offs between power consumption and performance.

Apple spent most of its event Tuesday arguing against this notion, boasting of the superior performance specifications of its new chips. Only time will tell if those claims hold up. Pierre Ferragu of New Street Research notes that Apple is using a chip architecture “that is fundamentally different from what Intel and AMD do." Alternatively, Stacy Rasgon of Bernstein says that Apple’s success with its new in-house Mac processors could serve as “existence proof" for other non-x86 chips in the PC and server markets—damaging Intel’s position even further.

Having generated $28.6 billion in sales for the fiscal year ended September, the Mac still ranks fourth among Apple’s five business segments in terms of annual revenue, just edging the iPad. But the recent surge driven by working and schooling from home has brought a wave of new customers: Mac revenue jumped 11% in the latest fiscal year. Many customers snapped up the Intel-based Air, which was just updated in March but is now no longer available on the company’s online store, making room for the new models.

When it comes to betting on its own chips, Apple most certainly hasn’t hedged.

This story has been published from a wire agency feed without modifications to the text

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