Apple (NASDAQ:AAPL) may ditch Intel (NASDAQ:INTC). Sure, it may be a few years out, but it's something the company is exploring, according to Bloomberg. Apple has already opted to design its own chips in its important smartphone and tablet product lines, and Macs could be next.
The quest for thinner form factors and power conservation
Apple's mobile semiconductor business has several layers. The new A7 chip found in the iPhone 5s, for instance, is designed by Apple, licenses 64-bit architecture from ARM Holdings, and is manufactured by Samsung. Of course, there's one major name missing from this equation: Intel.
As the semiconductor business becomes increasingly mobile, many original equipment manufacturers, or OEMs (like Apple), have chosen alternatives to Intel. Though Intel still sets the standard in PCs and laptops, there are better solutions when power conservation is a major priority.
ARM Holdings, on the other hand, is known specifically for its power-conserving architecture, leading Apple to license ARM Holdings chip technology over Intel in mobile devices. Lacking power needed for desktop-class performance, however, Apple has only opted to bypass Intel in mobile devices, not PCs.
But if Intel can't find a way to conserve more power in its chips in the near future, Intel's sluggishness may lead Apple to ditch it in its desktop business, too. Intel has responded to Apple's concern for low-power processors by telling Apple that it is prioritizing the development of the technology. Still, this didn't stop Apple execs from expressing their concern. According to Bloomberg, a shared chip design across both mobile and desktop makes sense:
As handheld devices increasingly function like PCs, the engineers working on this project within Apple envision machines that use a common chip design. If Apple Chief Executive Officer Tim Cook wants to offer the consumer of 2017 and beyond a seamless experience on laptops, phones, tablets and televisions, it will be easier to build if all the devices have a consistent underlying chip architecture, according to one of the people.
With a slow-growing PC industry already hurting Intel, losing Apple as a client wouldn't be good for the company. Macs accounted for 11.6% of U.S. PC shipments in the second quarter of 2013, according to Gartner -- a significant enough slice of the pie for Intel to be concerned.
Apple's A7 processor is the first major move by Apple in this direction. The company says that the 64-bit processor has desktop-class processor architecture. Some critics pointed out that the A7's architecture is a bit unnecessary right now, since one of the key advantages of 64-bit is the ability to handle more than 4 GB of memory. Since no iDevice has this much memory, those gains are lost. However, this sets the stage for developers to begin optimizing apps for 64-bit architecture so when iDevices do reach that threshold, Apple will be prepared. Forward-thinking, indeed.
Though the A7 is not powerful enough to support PC performance, it's certainly setting the foundation for a potential common chip design at some point in the future.
A major switch like this is accompanied by a few risks.
First, will Apple be able to design ARM-based chips that are powerful enough for a PC? Intel's chips are suitable for power users, supporting the speed and graphics required for desktop-class performance.
Second, would Apple be able to keep up with Intel if it decided to ditch the company for a chip that is designed for both mobile and desktop use? This is basically the problem Apple had to deal with in 2005 when Apple was forced to migrate to Intel's superior chips.
The Apple way
Ditching Intel could make sense for Apple.
Dropping Intel echoes Apple's history of vertical integration. And as the world's most valuable company, Apple has more than enough cash to make the required capital investments. Even more, it wouldn't be the first time that Apple has navigated chip architectures. In fact, the Apple executive leading the switch in 2005 to Intel was none other than now-CEO Tim Cook, whom Steve Jobs had put in charge of the project. Negotiating terms and organizing the supply chain, Cook helped Apple switch over to Intel fairly seamlessly.
For a company whose brand is built around a superior user experience, a seamless experience across mobile and desktop devices, enabled by a common chip, makes sense. Is the 64-bit ARM-based architecture of Apple's A7 chip the first step for Apple in a direction that will inevitably lead the company to bid Intel farewell?
Fool contributor Daniel Sparks owns shares of Apple. The Motley Fool recommends and 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.