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Apple Plans for a Future Without Intel

By Danny Vena – Apr 5, 2018 at 9:31AM

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Apple has been controlling more and more of the processors that operate its devices. It may now have its sights set on Intel.

Over the last several years, Apple (AAPL 2.56%) has been increasingly venturing into the design process for chips used in a variety of its devices, including the iPhone, Apple Watch, and iPads. The company's first foray into chip design came with its 2008 acquisition of boutique chip company P.A. Semi. Two years later, Apple debuted the A4, the company's first system-on-a-chip (SoC), which saw use in the iPhone 4, iPad, iPod Touch, and Apple TV. 

Since then, Apple has designed numerous processors -- a dozen in all -- that have played a growing role in the inner workings of its devices. Apple has used the chips to increase resolution, measure movement, and add security for payments and biometric data -- like fingerprints and FaceID.

Now, it seems, Apple may be taking its silicon ambitions to the next level.

iPhone 8 Plus and iPhone 8 with water splashing around them.

Apple's chip ambitions extend beyond its mobile devices. Image source: Apple.

Apple inside

Apple is planning to use chips designed in-house in future versions of its Mac computers, replacing the current processors supplied by Intel (INTC 2.71%), beginning as soon as 2020, according to a report by Bloomberg.

Apple derives a variety of benefits by designing its own chips. The process gives Apple additional control over the eventual product cost of the chips. The company also gains exclusive use of the end result, potentially giving it an edge over the competition. It can also incorporate specific design elements that further integrate its various products into the Apple ecosystem.

Two major security vulnerabilities that were discovered in Intel's processors last year may also have factored into Apple's decision.

Continuing a fine tradition

One of the key components in the latest iPhone models was the A11 Bionic chip, which brought deep learning artificial intelligence (AI) out of the cloud, and instilled the capability into the device itself. Apple said the new chip powered its FaceID authentication system, provided the backdrop for its TrueDepth camera system, and underpinned its augmented-reality capabilities. 

Apple said the chip was capable of "600 billion operations per second for real-time processing" and called the A11 "the most powerful and smartest chip ever in a smartphone." The processor contains a six-core CPU design with two cores dedicated to performance, four dedicated to efficiency, and a controller that can harness all six cores simultaneously, providing 70% greater performance than its predecessor.

Part of a broader strategy?

Late last year, reports emerged that Apple wanted its Macs to have access to a multitude of apps, similar to those available for its iPhones. The way things stand now, that requires the development of two distinct apps -- one for Apple's iOS, for mobile devices, and one for its macOS, which works on desktop and laptop computers -- an expensive process most app developers are unwilling to undertake. Apple has been working on a way to unify the apps so that they can run on both operating systems. This could also feed into Apple's plans to double its service revenue to $50 billion by 2020.

Chips designed by Apple for its Mac computers could take the company one step closer to integrating its operating systems, or to eventually developing just one that could work seamlessly across all the company's products. Using custom processors would also make Apple less dependent on Intel's internal timelines, allowing the company to bring new features to its devices at its own pace.

While we'll have to wait and see if these plans come to fruition, it isn't surprising that Apple would take the logical next step in owning its processor designs.

Danny Vena owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.

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