Apple is planning to use its own chips in Macs starting in 2020 according to ann unconfirmed Bloomberg news article. This could provide $AAPL with gross margin tailwinds on two fronts, improved Intel pricing or cheaper in house production.
Apple is planning to use its own chips in Macs starting in 2020 according to an unconfirmed Bloomberg news article. This could provide $AAPL with gross margin tailwinds on two fronts, improved Intel pricing or cheaper in house production.
Intel Chips in Macs a Thing Of The Past?
A report from RBC estimates by moving processors in house and away from INTC, AAPL could see EPS benefit in the range of $0.20-0.25. Even though incremental EPS impact isn’t significant, the potential move could enable AAPL to better differentiate its Mac line up vs. PCs. Designing its own chips enable AAPL to determine a technological roadmap for Macs that is independent of INTC.
Apple Inc. NASDAQ: $AAPL – Apr 3, 4:00 PM EDT 168.39 +1.71 (1.03%)
Intel Corporation NASDAQ: $INTC – Apr 3, 4:00 PM EDT 49.75 +0.83 (1.70%)
It should be noted that Apple already designs its A-series chip for iPhones which have A11 Bionic capabilities to handle AI workloads. Furthermore $AAPL designed chips like S series for its watch and W series for customized bluetooth connections in AirPods.
AAPL has also used TSMC and Samsung fabs for its chips, RBC notes..
That would be a key, independance from Intel and also provide even a greater ‘surprise factor’ with less knowing about it. Another factor is it could bring NVidia in with it’s concessions to Apple. Back to Intel the recent blocked Broadcom takeover of Quallcom brings into further possibilities. While many doubt the vailidty of the Bloomberg story the rationale is there.
RBC also suggests; AAPL designing its chips for better AR/VR performance and AI workloads; similar to its recent iPhone A11 Bionic chip. The move could also help create a seamless experience across its devices as iPhones and iPadsalready have chips designed by AAPL in them. However, we note that the shift would be technically complex and likely not be immediate.
The conclusion from RBC gives a good overiew of the benfits and where $AAPL is now:
RBC: Net/Net: We see AAPL benefiting from multiple tailwinds
- Gross margin upside from cost downs, NAND tailwinds & yield efficiencies,
- Services growth that should contribute to sales and ~50-60bps to GMs,
- Capital allocation that could enable ~500-600bps of share reduction annually over the next 5+ years.
Maintain Outperform and $203 PT.
Increasingly designing customized chips:
Source: Bloomberg, RBC