Intel Facing Major Problems After Being Dumped By Apple
Intel is facing major revenue shortfalls, after the processor Company that has failed to get traction in the smartphone market was dumped by Apple overnight after losing out to Qualcomm in a major intellectual property fight that cost Apple up to A48 Billion last year.
Overnight Apple announced that they are adding a new level of pain for Intel telling the audience at their World Wide Developer event that they are going it alone with the new ARM processors because they are “more efficient and faster” than what Intel is delivering for their MAC notebooks.
Chief Executive Tim Cook said that Apple would begin jettisoning Intel processors from its Macs later this year and that the new ARM PC’s will start hitting Australian stores in the last quarter 2020.
Apple said the transition from Intel to its own processors would occur over the next two years, with the first Macs with custom-designed chips shipping by year-end.
“Embracing Arm and making hardware more consistent across the iPhone, iPad and Mac ranges is a strategic necessity,” said Ben Wood, chief of research at CCS Insight. He said Apple’s motivations were “reducing its dependence on Intel, maximising its silicon investment, boosting performance and giving itself more flexibility and agility when it comes to future products”.
Cook characterized it as the biggest transition ever for the Mac, which has gone through three other evolutions in its three decade history.
“From the beginning, the Mac has always embraced big changes to stay at the forefront of personal computing. Today we’re announcing our transition to Apple silicon, making this a historic day for the Mac,” Cook said. “With its powerful features and industry-leading performance, Apple silicon will make the Mac stronger and more capable than ever.”
The company said the chips, based on Arm Holdings technology, will improve battery life and allow for faster processing speeds and new security features.
Last year Intel slowed down production of PC processors to appease Apple who was hoping that Intel Could supply their 5G processors. This proved to be a disaster that not only alienated their PC customers it led to many witnessing PC shortfalls due to a lack of supply.
Late last year after lengthy court hearings Apple caved in dumping Intel and settling with Qualcomm to the tune of US$4.5 billion, which is the amount that Qualcomm revealed in its Q2 earnings it will get from the settlement agreement between the companies.
The sudden roll over came after Apple had decided that Intel’s modems (which Apple had been exclusively using in the interim due to its fight with Qualcomm) wouldn’t be ready in time for a 5G iPhone, leading Apple to fork out between $4.5 to $4.7 billion to make up with Qualcomm.
That amount of money is separate from any future royalties that Apple will pay for using Qualcomm chips in its devices going forward.
The loss of Apple volumes on their production lines comes 15 years after Apple struck a deal with Intel to power its Mac laptops and computers.
The WSJ claims that the change reflects a turnabout in Silicon Valley since Steve Jobs revealed the Intel partnership in 2005.
At the time, Apple was a fraction of Intel’s size and counted computers as its largest business.
Now, it boasts a market value six times larger than its long-time supplier and a semiconductor division that has been designing mobile processors with performance capabilities rivalling Intel’s computer chips.
“At Apple, integrating hardware and software is fundamental to everything we do,” Mr. Cook said. “That’s what makes our products so great, and silicon is at the heart of our hardware.”.
Intel has not commented on their loss.
Apple’s plan to bring its own processors to MacBooks has the potential to open its laptops to more iPhone developers, making it possible for their mobile apps to work more seamlessly on the roughly 20 million Macs it ships each year.
It is an ambitious undertaking that will require some software developers to update their applications for the new system claim observers.
The new chips could make it possible for Apple to bring special features to future Macs, just as it has done to speed image processing through machine-learning algorithms on its iPhones.
It can also integrate 5G modem chips in the future, helping unlock new sales of a Mac business that was Apple’s third-largest unit, with nearly $26 billion in sales, last year.
The plan fits into Apple’s broader strategy of replacing many third-party chips with components designed in house. The technology giant now makes about 42% of the core components in iPhones, according to Wayne Lam, an independent technology analyst, up from 8% less than five years ago.
Intel Shares were up at the close of business in New York.