How Intel Corporation is Driving Apple's Plummeting Mac Prices

Here’s why Intel was really the driving force behind Apple’s falling Mac prices this year.

Jun 18, 2014 at 5:00PM

Although Apple sources its mobile chip architecture from the likes of ARM Holdings, semiconductor powerhouse Intel (NASDAQ:INTC) still remains a key supplier for Apple (NASDAQ:AAPL) in the post-PC world.

Apple Imac Lineup Copy

Source: Apple

Apple has relied on Intel to supply the CPUs that power its Mac lineup for years now, a lineup that recently witnessed its second price decline so far this year. As Apple investors wrestle to understand the true motive driving Apple's Mac price drops, and seeming neglect of this once-key product group, they need to understand that it's Intel that's actually been the main culprit in Apple's wholly unexciting year for the Mac.

Inside Apple's Mac price declines
On Wednesday, Apple announced an updated pricing scheme for its iMac lineup. With Wednesday's changes, Apple's entry-level iMac now costs just $1099. This marks the second price cut for Apple's Mac lineup this year. In April, Apple pulled a similar move with its MacBook Air refresh, reducing the sticker price of its cheapest MacBook Airs to $899 and $999 for its 11-inch and 13-inch models, respectively.

More broadly though, today's move serves as a strong indicator that Apple doesn't have much up its sleeve in terms of meaningful upgrades to its Mac lineup across the board in 2014.

The culprit? Intel
If you're looking to assign blame for Apple's lack of attentiveness to the Mac in 2014, look no further than Intel.

The reason? In order to actually execute on many of the rumored advancements Apple has reportedly considered bringing to its Mac lineup, such as a Retina display MacBook Air or a 4k iMac, Apple will also require a faster, more powerful, and efficient chip than the current line of Core i5 processors that power Apple's iMac and MacBooks can deliver.

More to the point, Intel will likely be unable to deliver its upcoming Broadwell 14 nanometer chipset architecture in time for Apple to integrate this supped-up line of chips into its Macs by the end of the year. Apple's April move to release the cheaper and only slightly more powerful MacBook Airs strongly suggested this was the case, and Apple's willingness to run essentially the same play with its iMac refresh roughly two months later make this sad fact a virtual lock. It's an unfortunate storyline in what will, in many ways, be a year of product revitalization as a whole for Apple.

So much more to Apple than just Macs
This storyline will likely prove somewhat of a non-starter in terms of Apple's financial results. As the iPhone and iPad have surged to dominance in their respective mobile markets, Apple's Mac lineup has become a less and less critical percentage of revenue, only 13% of Apple's fiscal year 2013 total sales.

As tablets, including Apple's iPads, decrease the overall argument in favor of PC or laptop ownership, a de-emphasizing of the Mac lineup from a financial impact perspective is likely to continue. That's not necessarily a negative for Apple, a company that's never been afraid to cannibalize sales of one product in order to secure the future of an emerging product line. So although some big-ticket trends are clearly weighing on Apple's Mac's prospects, it's also worth remembering that Intel should also share some of the blame this year.

Leaked: Apple's next smart device (warning, it may shock you)
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Andrew Tonner owns shares of Apple. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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