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Apple, Inc. Is Building a SWAT Team

By Evan Niu, CFA – Oct 28, 2016 at 12:00PM

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The tech titan welcomes yet another chip into the family.

The "T" in T1 must refer to "Touch." Image source: Apple.

There's seemingly no limit to Apple's (AAPL -1.83%) chip ambitions. Just when we thought the company was branching out enough, it can't seem to stop introducing new proprietary designs for its silicon.

There was the S1 that debuted in the Apple Watch last year, followed by the S2 for Apple Watch Series 2. The delayed AirPods feature a W1 to deliver wireless connectivity alongside audio playback. All of this is concurrent with the primary A series of mobile processors, which will likely start seeing deeper integration of graphics technology as well.

Well, say hello to the Apple T1.

"T" stands for "Touch"

For the first time ever, Apple is bringing Touch ID to the Mac, which I've been asking about for over a year. It's not as if this wasn't obvious, either. After debuting on the iPhone, Touch ID was always destined to make its way to the rest of the lineup; it was just a matter of when. Now that the new MacBook Pro is getting Touch ID, it's also just a matter of time before it penetrates the rest of the Mac lineup, potentially with a desktop accessory that includes a Touch Bar and Touch ID at some point on the horizon.

When Apple first introduced Touch ID, it went to great pains to emphasize the security of fingerprint data. All fingerprint information would be stored locally on the iPhone in what Apple called a "Secure Enclave." This was actually a fairly commoditized off-the-shelf part developed by ARM, but that didn't stop Apple's marketing department. But now Apple has seemingly actually customized the design for its own purposes, and rebranded a new T1 chip that handles Touch ID and the secure enclave.

Marketing chief Phil Schiller describing the new Apple T1 chip. Image source: Apple.

Don't be surprised if Apple brings the T1 to other devices in the years ahead, including future iPhones and iPads.

This trend won't stop

As usual, Apple didn't disclose much on the technical front. The company instead referred to the new brand in passing, and we'll have to wait for tech teardowns to learn more about the silicon itself.

The most important thing here is that Apple's chip ambitions are only getting greater. That's three new sub-families of chips -- S, W, and T -- that we've seen just over the past two years that Apple has designed, each with a specific purpose within the lineup. Eventually, it seems that Apple will continue this ongoing expansion, and its products may eventually consist of a wide range of Apple-designed semiconductors. Longer-term, that potentially poses a threat to various suppliers, since Apple is signaling that it wants to do as much as possible in-house. There will always be functions beyond Apple's expertise, but suppliers that provide lower-level functions better watch out.

The most current generation of these chips is now the A10 Fusion, S2, W1, and now T1. When you include Apple's A chips, maybe it's not a coincidence that we get S-W-A-T, given the tactical nature of the company's aspirations.

Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. 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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