Apple Should Switch Chips for the iPhone 5

Apple's (Nasdaq: AAPL  ) chip strategy continues to evolve as it branches out different members of its A-family of chips for different purposes, yet I can't help wondering whether the iPhone maker would be better off going with someone else.

The company's current A5X chip found in the third-generation iPad is its newest iteration, and features a dual-core CPU and quad-core GPU. More specifically, it includes a two relatively stock Cortex A9 cores licensed from ARM Holdings (Nasdaq: ARMH  ) and a quad-core PowerVR GPU licensed from Imagination Technologies. It packages these together, slaps its "A" branding on it, and calls it a day.

Sources: Apple, Qualcomm.

Sources: Apple, Qualcomm.

On the other hand, dominant mobile-chip maker Qualcomm (Nasdaq: QCOM  ) licenses an ARM instruction set, which allows it to be ARM-compatible but also lets the company build its chips from scratch in a more elegant manner. This is why the dual-core Snapdragon S4 built on its newest Krait architecture can outperform the quad-core NVIDIA (Nasdaq: NVDA  ) ARM-based Tegra 3. This is also why I'd rather see a Snapdragon in the next iPhone than an A6.

Oh, snap
Beyond performance, there would be functionality gains. One of the reasons Qualcomm is the mobile-chip king is that it has enormous advantages in integration, especially in areas like cellular connectivity. Its Snapdragon S4 chips feature integrated 4G LTE, serving up speedy data while eliminating the need for a discrete baseband modem and saving valuable real estate inside.

Qualcomm is currently the sole supplier of discrete baseband modems for iPhones and cellular-enabled iPads, after Apple ditched Infineon shortly after Intel (Nasdaq: INTC  ) acquired it. So it still enjoys a cushy iSpot. Apple continues to push the envelope physically and is expected to make the iPhone incredibly thin, meaning physical space constraints are increasingly important.

iPhone 4S logic board showing A5 processor and discrete baseband modem. Source: iFixit.

iPhone 4S logic board showing A5 processor and discrete baseband modem. Source: iFixit.

For example, here are images of the iPhone 4S logic board from iFixit's teardown, highlighting two separate components that could potentially consolidated into one if Apple switched to Snapdragons. The S4 also outperforms the iPhone 4S in CPU benchmark tests.

Performance, schmerformance
Of course, this won't happen for a number of reasons. For starters, Apple has already embarked upon this path starting with the original iPad in 2010, and it surely doesn't see much reason to change course. Apple has achieved the unthinkable in the world of consumer electronics: It doesn't rely on tech specs to sell its products.

Instead, it focuses on other innovations, such as industrial design, screen resolution, or software. It focuses on the overall experience and usability while marketing to the average consumer who doesn't care about the clock speed of the processor or how much RAM is inside. You buy an iPhone for the whole package.

There's also a matter of pure branding and marketing. Snapdragons are frequently found in many Google Android devices and all Microsoft Windows Phone devices. The last thing Apple would want is to be associated with its rivals, especially the ones from Mountain View and Redmond, because it would probably view that as a form of commoditization. At the very least, it would contribute to consumer perception of commoditization.

By sticking with its own A-brand of chips, Apple can tout the fact that it's "custom silicon" and other marketing fluff. It can quietly opt not to disclose various specifications, leaving interested parties to find out on their own, while the average consumer has already bought an iPhone.

Keep dreaming
The most compelling reason will be physical space considerations, but I still doubt that will ever sway Apple's chip strategy. It's likely unable to develop integrated LTE in-house, since Apple has little to no direct knowledge in that department, unless it wants to go out and acquire someone's wireless unit.

Apple should switch to Snapdragons because they're simply the best mobile processors out there. Too bad it never will.

Even though Apple is stuck in its ways, those ways seem to be working as consumers snap up iPhones en masse. Sign up for The Motley Fool's brand-new premium Apple research service to read more. This company is looking to put an end to Qualcomm's dominance and is off to a solid start. This special free report will get you up to speed.

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Qualcomm, Apple, Microsoft, Google, and Intel. Motley Fool newsletter services have recommended buying shares of Intel, Google, Microsoft, NVIDIA, and Apple, writing puts on NVIDIA, and creating bull call spread positions in Apple and Microsoft. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (2)

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  • Report this Comment On July 21, 2012, at 8:37 PM, bsimpsen wrote:

    Are you aware that Apple also has an ARM architecture license? Are you aware that Apple also purchased two design houses (PA Semi and Intrinsity) that are CPU architecture specialists? Are you aware that Apple purchased Anobit, which is a Flash system architect?

    I don't think you know nearly enough about this subject to be making the claims you do.

  • Report this Comment On July 21, 2012, at 9:00 PM, H3D wrote:

    "The company's current A5X chip ... includes a two relatively stock Cortex A9 cores licensed from ARM Holdings (Nasdaq: ARMH ) and a quad-core PowerVR GPU licensed from Imagination Technologies."

    Functionally relatively stock, perhaps. On power consumption, best of breed, and power consumption is where it matters.

    And when you claim that Apple requires two packages, there Qualcomm uses one, Apple have the RAM in the same package, layered on top.

  • Report this Comment On July 21, 2012, at 9:46 PM, kpbpsw wrote:

    The snap dragon is not capable of reasonable support of the display resolution of the new iPad. While in term soy pure cpu performance it may be better than an A5 in real world performance it is not.

    And Qualcomm is not a good chip partner.

    They have caused numerous delays for Apple as they could not delver enough baseband low power chips for the volumes Apple needs.

  • Report this Comment On July 22, 2012, at 3:48 AM, jwtrotter wrote:

    This writer has posted I think three articles in the last 48 hrs or so that basically has "I'm paid by Qualcomm to be their cheerleader" written all over, implied and inferred. How can anyone take this guy seriously? And the comments about Snapdragon being able to outperform the likes of Nvidia's Tegra line also are flawed arguments that is not a consensus opinion. He seems to overlook major flaws in Qualcomm's 'leadership' that includes critical standards expected in graphic chip design where both Apple and Nvidia are ahead with their current offerings.

  • Report this Comment On July 22, 2012, at 5:45 AM, H3D wrote:

    The arguement that Qualcomm has benefits of vast volume are also spurious.

    In the class of processors that we are talking about Apple has roughly 35% OS the phone market and 70% of the tablet market. More considering that many low end smart devices really aren't in the same processor class.

    If Apple has about half that market, and NVidia, Qualcomm, TI, Intel, ... combined have the other half, then how does Qualcomm have a volume advantage over Apple?

  • Report this Comment On July 22, 2012, at 8:46 AM, winklerf wrote:

    bsimpsen:

    I'm pretty sure the author of the article knows more about the subject of processor manufacture than you do since he makes the distinction between IP license and instruction set license. Apple's in house design group doesn't do a whole lot of design. They just slap together IP developed by other companies. The author has that down exactly correct while you choose to believe that Apple actually does meaningful design when they don't.

    H3D:

    The A5 has best in class power consumption and near the bottom processor performance. While many think it is good enough or otherwise just don't know any better, claiming best real world performance because Apple sells a lot of devices for reasons that have nothing to do with processor performance is a stretch.

    Evan:

    There is no chance that Apple will go with a Qualcomm snapdragon for their processor before late 2013, because TSMC just can't deliver the volume at 28nm that they would need. Further, I don't think TSMC would be able to ramp up fast enough. They are just horrible when it comes to delivering volume. There is a reason Apple isn't using them for their own processors.

    When it comes down to it, there are only two or three manufacturers that can handle Apple volume, Samsung and Intel for certain, and maybe Global Foundries/IBM, which uses the same process technology that Samsung does.

    As for developing integrated LTE, Apple won't really need to do so. If they stay with Samsung, they can just license what they need from them.

  • Report this Comment On July 22, 2012, at 2:36 PM, gonza2 wrote:

    Snapdragon S4 has two A15 cores, and Nvidia quad core Tegra 3 cores are older A9 cores. That's why overall performance is similar.

  • Report this Comment On July 23, 2012, at 12:49 PM, jnail wrote:

    I understood that the S4 and Tegra 3 performance was equal ( using benchmark testing ) for the moment but the Tegra 3 performance has not been optimized by software to use the 4 cores.

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