One of the big features that Apple (NASDAQ:AAPL) advertises quite aggressively is a technology known as the Neural Engine. This Neural Engine, Apple says, is a processor embedded inside of Apple's A11 Bionic processor that's designed to perform what Apple refers to as "hardware that's purpose-built for machine learning, a type of artificial intelligence that enables computers to learn from observation."
Per Apple, this Neural Engine is "a dual-core design that recognizes people, places, and objects" and can perform these machine-learning computations "at up to 600 billion operations per second."
"It is the driving force behind innovative new features like Face ID and Animoji," Apple says.
While I, and perhaps many others, were working under the impression that the Neural Engine was developed by Apple (Apple has been bringing a lot of chip technology in-house), SemiAccurate's Charlie Demerjian recently claimed that this isn't the case.
The neural engine is made by...?
According to Demerjian, the Neural Engine inside of the A11 Bionic processor is "pretty obviously licensed CEVA (NASDAQ:CEVA) DSP cores." Demerjian also indicates that he was able to confirm this with sources inside of Apple.
CEVA is a small semiconductor intellectual property vendor that stays in business by licensing specialized processors known as digital signal processors (DSPs) for integration into larger chips.
CEVA licenses a wide set of DSPs targeting many different applications including wireless communications (think cellular modems and cellular base stations), audio/voice processing, Wi-Fi connectivity, Internet of Things applications, imaging,, and computer vision.
If the Neural Engine inside of the A11 Bionic is, indeed, a CEVA design, it's probably either the CEVA-XM6 (a DSP that CEVA says is aimed at "vision & deep learning") or the CEVA-XM4 (an "imaging & vision DSP").
If I had to put money on it, if the Neural Engine in the A11 Bionic is a CEVA DSP, it's the CEVA-XM6 or some customized derivative of it for Apple.
Looking for financial evidence
I recently examined CEVA's most recent quarterly filing and noticed that in its most recent quarter, 16% of the company's revenue came from licensing and royalty payments from DSPs sold into "non-baseband" (a baseband refers to the processor found inside of a cellular modem) products such as "audio, imaging and vision."
This was up only 2% from where it was in the third quarter of 2016, implying modest year-over-year growth in non-baseband DSP revenue.
More interestingly, while CEVA reported a surge in "licensing and related revenue" during the third quarter, the company's total royalty revenue -- that is, the ongoing revenue streams from licensing deals that were already inked -- was down slightly year over year.
To get a sense of whether these financial results would've included revenue from shipments of Apple's A11 Bionic chip, I dug into CEVA's most recent form 10-K filing and found this bit about when CEVA recognizes royalties (emphasis added): "Revenues that are derived from the sale of a licensee's products that incorporate our IP are classified as royalty revenues. Royalty revenues are recognized during the quarter in which we receive a report from the licensee detailing the shipment of products that incorporate our IP, which receipt is in the quarter following the licensee's sale of such products to its customers."
So, if I understand this correctly, if Apple sells a bunch of iPhone 8/8+/X phones with an A11 Bionic chip to customers in one quarter, it will let CEVA know just how many of those chips that it shipped in that quarter in the following quarter. CEVA would then recognize the royalty revenue from the A11 Bionic chips in the quarter that it receives the information from Apple.
Apple didn't begin shipping A11 Bionic-powered processors to customers until the middle of September. CEVA's most recent quarter ended on Sept. 30, so it is unlikely that its financial results for that quarter would've included much, if any, A11 Bionic-related revenue if it is indeed inside of the chip.
Apple's first full quarter of A11 Bionic chip shipments is going to be the quarter that ends in late December or early January, so it'll likely be sometime in January when Apple lets CEVA know (again, that's if CEVA is supplying the Neural Engine) how many A11 Bionic chips it shipped.
CEVA's current quarter likely ends either in late December or early January so its next earnings report might contain A11 Bionic-related royalty revenue (though those royalties could be pushed out to the following quarter).
Indeed, if we see a large spike in non-baseband DSP revenue in CEVA's financial results when it next reports earnings or in the report after that, then the odds that the Neural Engine inside of the A11 Bionic is a CEVA-made DSP would look quite good.