A lot has been made about Apple's (NASDAQ: AAPL ) "64-bit" A7 processor. While the move to the ARMv8 instruction set (i.e. the 64-bit ARM instruction set) brings with it some modest performance gains, the real "magic" behind what Apple did is just design an exceptionally good microprocessor. Now, it's not as though Qualcomm (NASDAQ: QCOM ) or any of the ARM vendors couldn't use ARM's off-the-shelf 64-bit A53/A57 designs or implement their own ARMv8 core, but it's all a question of timing and, more importantly, software support. That being said, it's puzzling that Qualcomm seems to fear Apple but not Intel (NASDAQ: INTC ) in this space.
Qualcomm's Apple fear is really customer anticipation
There have been reports that Apple's 64-bit A7 announcement was a "punch in the gut" to Qualcomm, but this seems pretty strange. Sure, Apple can go ahead and parade that it moved to "64-bit" before everybody else, but this isn't something that the average consumer buying a smartphone really cares about. That being said, the smartphone/tablet market is a cutthroat one with a pretty low barrier to entry so any and all competitive advantages are welcome (and any major disadvantages – perceived or real –are amplified). When Apple went "64-bit," all of the other mobile device vendors probably started nagging their silicon partners for 64-bit chips as well.
What's really puzzling, though, is why Qualcomm is so worried about Apple. First off, Qualcomm makes a mint selling cellular modems to Apple (which, by the way, has shown no hint of wanting to design its own), so Apple's "success" is Qualcomm's success. Further, Qualcomm collects a nice royalty check for each iPhone sold, so it's not as though Apple is foe here – it's very much a friend. Now, on the whole 64-bit marketing angle, sure – Apple going 64-bit is going to make the OEMs want to go 64-bit, too. However, Apple itself isn't going to be taking meaningful sales from Snapdragon-based phones on this 64-bit marketing campaign alone – Apple can/will take share because people like the new iPhone.
Intel is the real problem
While Apple touted its 64-bit A7, little did anybody in the press/media really care that Intel's mobile processor cores have been 64-bit capable since the initial Atom in 2008. Now, since Intel's SoCs haven't really been good until fairly recently, Intel wasn't a threat. But now that Intel now designs rather good chips (and getting better by the day), this is the real threat to Qualcomm.
What's interesting is that even if Apple hadn't gone 64-bit when it did, Intel would have been able to play up the 64-bit angle and Qualcomm would, again, be in the same position. But what's even more interesting is that Qualcomm knew that once Intel got a credible solution out that it would be able to hype up 64-bit – and yet it was Apple that caught it off guard. Now, the big problem for Intel is getting a 64-bit version of Android up and running (hardware without software to run it is useless), but Intel demonstrated this at its recent analyst day! Forget Apple, Intel is the real 64-bit "threat."
Foolish bottom line
It will be interesting to see if Intel is able to take full advantage of its 64-bit lead in the merchant chip space. While Apple itself isn't a direct threat to Qualcomm chip sales, the 64-bit hype from Apple did push the OEMs to search for 64-bit solutions as quickly as possible. If Intel can deliver ahead of Qualcomm (and it seems that it will), then that is the real issue for Qualcomm, not Apple. However, long-term, all mobile SoC players will have 64-bit cores -- so this is a temporary issue at best.
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