It has been known for quite some time that Apple (NASDAQ:AAPL) is planning to launch a spiritual successor to the four-inch iPhone 5s, commonly referred to as the iPhone 6c. According to respected KGI Securities analyst Ming-Chi Kuo, the new iPhone will feature Apple's latest-generation A9 processor.
However, there have been some contradictory reports -- from sources that, to me, are less reliable than Kuo -- that the iPhone 6c will instead use Apple's older-generation A8 chip.
In this article, I'd like to go over some -- in my view, quite compelling -- reasons that this new phone should feature the A9 rather than the older A8.
Strengthening the iOS software ecosystem with powerful hardware
Arguably the biggest competitive advantage that Apple has in the smartphone market is the strength of iOS and its ecosystem. Since Apple tends to ship fairly high priced and powerful devices, developers can generally assume a greater level of processing power compared to what they can assume is available on the Android platform.
To illustrate this point, the lowest end iPhone that's currently for sale is the iPhone 5s, which features Apple's A7 processor. Although the A7 has been eclipsed in performance by Apple's latest chip offerings, it is still quite a bit faster than the majority of the low-end and mid-range Android chips in the market today (though next year mid-range Android phones should see a solid boost in performance with processors like the Qualcomm (NASDAQ:QCOM) Snapdragon 650/652 processors).
If Apple endows the next-generation entry-level iPhone with a chip as powerful as the A9, developers can start targeting their apps for that level of performance, ultimately leading to a richer and more vibrant iOS software ecosystem relative to Android.
Since Apple is working feverishly to get as many Android users to "switch" to iOS as possible, strengthening the software ecosystem is unequivocally a good thing.
A small, slim, and powerful device needs an efficient processor
The A9 is built on 14/16-nanometer manufacturing technologies from both Samsung (OTC:SSNLF) and TSMC (NYSE:TSM). These technologies are key to enabling the massive performance-per-watt boost that the A9 delivered over both the A7 and the A8 chips built on older 28-nanometer and 20-nanometer technologies, respectively.
Although the A8 was a bit more efficient than the A7 and delivered a reasonable -- though not earth-shattering -- boosts in performance, the A9 offered substantial improvements in both performance and efficiency.
It's worth pointing out that in order to get the A8 chip to fit into the fifth-generation iPod Touch -- a slim, four-inch handheld device -- Apple had to dial down the chip's CPU speed from 1.4 gigahertz in the iPhone 6/6 Plus to just 1.1 gigahertz.
The iPhone 6c will also be a four-inch device, though we don't know how thick it will be. That being said, I am sure that Apple would love to be able to slim the device down a bit from the 7.6 millimeter thickness of the iPhone 5s.
In order to deliver substantially more performance in a slimmer device, Apple is going to need a chip that's significantly more efficient than either the A7 or the A8. The A9 -- which is already being manufactured in the tens of millions of units -- seems to fit the bill quite nicely.
Are there any downsides to using the A9 over the A8?
Nothing in life is free, and obviously the A9 chips is more expensive to manufacture than the A8. The A9 also likely requires the use of more expensive (although more power efficient) LPDDR4 memory rather than the LPDDR3 memory that the A8 uses.
However, the difference in raw manufacturing costs between the A8 and A9 is probably on the order of low-to-mid single digit dollars. Using LPDDR4 also probably adds a couple of bucks to the bill of materials cost relative to using LPDDR3.
However, Apple is a premium device company and it's not as though it is trying to sell these phones for cheap; the rumored price range for the new four-inch iPhone is $450 to $550. A few bucks in additional bill of materials costs to make the product substantially better (increasing the likelihood that iPhone 4s/5/5c/5s owners will choose to upgrade) seems more than worth it in this case.