On April 2, Bloomberg reported that Apple (NASDAQ:AAPL) intends to begin transitioning its Macs away from Intel (NASDAQ:INTC) processors and onto Apple-designed chips as early as 2020. This isn't the first time this rumor has come up, but the source here is highly credible.
This, unsurprisingly, led to a sell-off in Intel shares, as the loss of Apple's business would lead to a significant revenue reduction for Intel.
An analyst with Stifel Nicolaus (via Barron's), in defending Intel's shares following this news, suggested that Apple might be switching away from Intel chips because Apple's PC market share has been on the decline and the Mac maker is looking for a way to differentiate its products from those made by other computer makers to regain share.
Here's why I don't really buy that explanation.
Can a custom processor drive share gains?
The fundamental premise behind the analyst's argument is that by moving away from common Intel processors and onto proprietary processors, Apple can offer customers a meaningful selling point that'll get them to consider a Mac over a non-Apple computer.
The problem with this premise is simple: Apple is losing market share to other computer makers who are also building machines using Intel processors. What this suggests is that the other computer makers are gaining share against Apple for other reasons entirely unrelated to the processor.
Indeed, I strongly suspect that the average consumer cares more about things like the form factor of the machine, battery life, screen quality, keyboard quality, and weight.
If Apple is being limited along some of these vectors because of its use of Intel processors and thinks that it can meaningfully improve one or more of these important product characteristics by switching to internally designed processors, then that would make sense.
However, I don't think that Apple would see much, if any, marketing benefit from simply swapping out an Intel processor for an Apple processor while keeping everything else the same. The Apple-designed processor can only be a point of differentiation if it fundamentally delivers a user experience that Intel processors can't.
How can Apple differentiate with its own processor?
My guess is that Apple's goal with respect to its own processor will be to deliver the same kind of CPU performance that Intel's mobile processors can, but at dramatically lower power consumption. Additionally, I wouldn't be surprised if Apple were to incorporate more powerful graphics and media capabilities than what Intel is planning to add to its own chips.
Beyond the Mac maker simply trying to do what Intel already does, but better, Apple is likely to want to integrate proprietary accelerators, like the Apple Neural Engine, that can handle certain tasks more efficiently.
Since Apple has tight control over the operating system and much of the software that runs on the Mac, Apple would be able to co-design future versions of Mac OS to take full advantage of the proprietary accelerators that it embeds inside of its custom-designed Mac processors. Apple would also likely expose application programmer interfaces (APIs) to allow third-party Mac OS app developers to take advantage of that hardware as well.
If Apple can take full advantage of this tight hardware/software co-development, then it can deliver features and functionality -- as well as potentially battery life -- that it may simply have been unable to do with Intel parts.