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2 Reasons that the Apple Inc. iPhone 5se Will Use the A9 Chip

By Ashraf Eassa – Feb 9, 2016 at 8:45PM

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This Fool takes a closer look at why Apple might choose to use its premium A9 processor in a relatively low-cost 4-inch iPhone.

According to 9to5Mac's Mark Gurman, Apple's (AAPL -3.00%) upcoming 4-inch smartphone will use the company's latest A9 processor rather than the older generation A8 processor as had been previously speculated. If this is true, then this is certainly good for Apple customers, as the A9 processor is extremely capable and should provide excellent performance for years to come.

However, there may be other reasons that Apple will use this chip rather than the A8/M8 combination.

Reason no. 1: "Hey, Siri" functionality
According to Apple, the integration of the M9 co-processor (essentially a sensor hub) into the same die as the A9 chip allows for the always-on "Hey, Siri" functionality that was introduced with the iPhone 6s/6s Plus.

Since the iPhone 5se is a "new" iPhone, and since I'm sure Apple wants to give customers every reason (within engineering/cost limits) to upgrade, including the A9 with the integrated M9 co-processor makes a lot of sense.

Reason no. 2: Cost and board space
In previous columns, I have argued that the A8 processor is a bit cheaper for Apple than the A9. For one thing, it's built on a less sophisticated chip manufacturing technology and the chip size is smaller, both things that should drive a cheaper chip.

Additionally, from a broader system bill-of-materials point of view, the A9 requires the use of faster but more expensive LPDDR4 memory.

However, something that I hadn't considered before is that the integration of the M9 co-processor into the A-series chip should actually yield some cost savings. For one thing, Apple previously bought discrete M-series co-processors from NXP Semiconductors (NXPI -2.32%).

I don't think this chip was particularly expensive, but note that NXP had to design, build, test, and package a separate chip. On top of that, NXP's margins are generally quite good (high 40% range), so Apple was not only paying for NXP's costs to build the chip, but it was likely paying NXP nice margins on top of that.

By integrating the M-series co-processor onto the same piece of silicon as its A-series processor, Apple doesn't have to worry about paying a third party for a separate chip as well as margins on top of that -- it's now just a small part of its A-series processor.

It's not clear if the cost savings associated with the absorption of the M9 co-processor into the A-series processor offsets the higher costs associated with the more advanced process and larger die size relative to the A8, but it can certainly help soften the blow.

Further, by integrating that functionality into the A-series processor, Apple saves the board space associated with plopping down a separate chip. For a compact phone like the iPhone 5se, board space is at a premium.

The iPhone 5se should be a solid device
Although the iPhone 5se isn't expected to have all of the new goodies found inside of the iPhone 6s/6s Plus, if it comes packed with an A9 chip, it should at least provide best-in-class flagship device performance for a relatively affordable price. This should be especially attractive to customers in emerging markets, who should be able to get iPhone 6s/6s Plus class performance for much cheaper than those larger phones.

I look forward to seeing exactly what Apple does with the iPhone 5se.

Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple and NXP Semiconductors. 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.

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