After 15 Years, Apple Prepares to Break Up With Intel
Apple could announce plans as soon as Monday to replace Intel processors in Macs with chips that it designed itself.
OAKLAND, Calif. — Silicon Valley is bracing for a long-expected breakup of Apple and Intel, signaling both the end of one of the tech industry’s most influential partnerships and Apple’s determination to take more control of how its products are built.
Apple has been working for years on designing chips to replace the Intel microprocessors used in Mac computers, according to five people with knowledge of the effort, who weren’t authorized to speak about it. They say Apple could announce its plans as soon as a company conference for developers on Monday, with computers based on the new chips arriving next year.
Apple’s move is an indication of the growing power of the biggest tech companies to expand their abilities and reduce their dependence on major partners that have provided them with services for years — even as smaller competitors and the global economy struggle because of the coronavirus pandemic.
Facebook, for example, is investing billions of dollars into one of Indonesia’s fastest-growing apps, a telecom giant in India and an undersea fiber-optic cable around Africa. Amazon has built out its own fleet of cargo planes and delivery trucks. And Google and Apple continue to buy upstarts to expand their empires.
Taiwan Semiconductor Manufacturing, the partner Apple uses to build similar components it designs for iPhones and iPads, is expected to make the Mac chips in factories in Asia — an arrangement much like Apple’s use of Foxconn to assemble iPhones.
Intel and Apple declined to comment. Bloomberg previously reported on Apple’s plans.
Other big tech companies like Amazon and Google already design some of their own chips, both for performance and potential cost reasons. Some tasks, like artificial intelligence and the rendering of 3-D images, can be handled more efficiently on special-purpose circuitry rather than the general-purpose microprocessors that are Intel’s mainstay.
Since 2005, Macs have used effectively the same Intel chips that most PCs do. Making its own processors would give Apple even more control over how Mac computers work. Apple has always designed the chips used in iPhones and iPads, adding features to customize designs licensed by Arm, a semiconductor firm owned by the Japanese conglomerate SoftBank. Apple’s forthcoming Mac chips are also expected to rely on Arm technology, improving compatibility with its mobile devices.
Apple has created a large chip-design team, building on the 2008 purchase of a 150-employee start-up, PA Semi. A large number of them once worked at Intel, including Johny Srouji, who reports directly to Apple’s chief executive, Tim Cook.
Apple’s move would be a symbolic blow to Intel, particularly when civilian and military officials are concerned over the weakening of American leadership in chip manufacturing, which they regard as crucial to the country’s ability to retain an edge over China. Legislation introduced in Congress last week, with rare bipartisan agreement, would funnel tens of billions of dollars to bolstering U.S. research and manufacturing in semiconductors.
Intel has long been a U.S. standard-bearer in the semiconductor business, particularly in the complex manufacturing processes that turn silicon wafers into the chips that power computers, smartphones, cars and consumer devices.
The move’s financial impact on Intel would be muted, at least in the short term. Intel sells Apple about $3.4 billion in chips for Macs each year, according to C.J. Muse, an Evercore analyst. That is less than 5 percent of Intel’s annual sales, and Mr. Muse forecast that the blow would be closer to half that since Apple might change the chips on only some Mac models. Apple sells nearly 20 million Macs a year.
“That’s not chicken feed, but it’s compared to total PCs sold of about 260 million” a year, said Tim Bajarin, an analyst who has tracked Apple for nearly 40 years. Intel supplies the chips for just about every PC.
But the long-term effects could still be serious for Intel. The chipmaker’s lofty profit margins have long been linked to its track record of delivering the most powerful computing engines on the market, particularly for laptops and computer servers. But Intel has never done well selling chips for newer tech products like smartphones and tablets.
Apple’s last chip transition for Macs, in 2005, was viewed as a major step in the long-term comeback orchestrated by Steve Jobs, one of the company’s founders, as well as a big victory for Intel. Macs had long relied on a design, called PowerPC, that was a collaboration among Apple, Motorola and IBM. But Mr. Jobs bet that Intel could provide much faster performance.
That selling point has been undermined by troubling news from Intel’s huge factories. Much of the company’s success in computers stems from its history of packing more transistors on each square of silicon, which allows the chips to keep carrying out more computing tasks at a lower cost.
But Intel has stumbled badly in that industrywide race to miniaturize. Intel’s latest process for making chips, once expected as early as 2015, did not enter high-volume production until 2019. The delay aided Taiwan Semiconductor and Samsung Electronics, which produce chips designed by multiple companies. The competitors exploited Intel’s lag to take a technology lead.
“Intel has fallen behind by 12 months, maybe 18 months,” said Handel Jones, chief executive of International Business Strategies, which offers consulting services to the chip industry.
Apple was troubled by the production stumble, according to three people familiar with the situation, who were not authorized to speak about confidential dealings between the companies. Intel also ran into stronger-than-expected demand for other types of chips, causing production shortages that crimped sales for some PC makers last year. The combination further tarnished Intel’s image as a reliable producer.
Robert Swan, Intel’s chief executive, has vowed to make the changes necessary to regain technology leadership and prevent product shortages. But if Apple succeeds in offering Macs with its own chips that seem noticeably superior to Intel’s, analysts and industry executives said, other PC makers might shift more models to chips from rivals like Advanced Micro Devices or even start designing their own chips, though that would take years.
“I think it could inspire other companies to look at non-Intel processors,” said Patrick Moorhead, an analyst at Moor Insights & Strategy. “Reputationally, this is not a good thing for Intel.”
Microsoft, a longtime Intel partner, already sells some laptop computers with Arm-based chips from Qualcomm, though analysts said their performance didn’t match that of models powered by Intel technology. If that situation changes, they add, Apple and Intel could become outright rivals, using their hefty marketing might to counter each other’s technical claims.
Another trend making it easier for Apple to consider the shift is the increasing use of web-based software, rather than software running on people’s PCs and tailored for their hardware.
Still, Macs in particular are a mainstay of certain creative professions, such as animation and film editing, and developers of those software applications will have to modify Mac programs to take advantage of Apple’s new chips. That could lead to a delay in some software working for the new Macs when they are released, said Jeff Johnson, a Mac developer in Madison, Wis.
“The professional software is the hardest and slowest software to make big changes to, so those are the types that you may not see ready on Day 1,” he said. “The new Macs may have some issues out of the gate.”
Apple could announce plans as soon as Monday to replace Intel processors in Macs with chips that it designed itself.
Apple Plans to Announce Move to Its Own Mac Chips at WWDC
Apple Inc. is preparing to announce a shift to its own main processors in Mac computers, replacing chips from Intel Corp., as early as this month at its annual developer conference, according to people familiar with the plans.
The company is holding WWDC the week of June 22. Unveiling the initiative, codenamed Kalamata, at the event would give outside developers time to adjust before new Macs roll out in 2021, the people said. Since the hardware transition is still months away, the timing of the announcement could change, they added, while asking not to be identified discussing private plans.
The new processors will be based on the same technology used in Apple-designed iPhone and iPad chips. However, future Macs will still run the macOS operating system rather than the iOS software on mobile devices from the company. Bloomberg News reported on Apple’s effort to move away from Intel earlier this year, and in 2018. Apple shares were up less than 1% Tuesday while Intel was down less than 1%.
Apple is using technology licensed from Arm Ltd., part of Japanese tech conglomerate SoftBank Group Corp. This architecture is different from the underlying technology in Intel chips, so developers will need time to optimize their software for the new components. Cupertino, California-based Apple and Santa Clara-based Intel declined to comment.
This will be the first time in the 36-year history of the Mac that Apple-designed processors will power these machines. It has changed chips only two other times. In the early 1990s, Apple switched from Motorola processors to PowerPC. At WWDC in 2005, Steve Jobs announced a move from PowerPC to Intel, and Apple rolled out those first Intel-based Macs in January 2006. Like it did then, the company plans to eventually transition the entire Mac lineup to its Arm-based processors, including the priciest desktop computers, the people said.
Apple has about 10% of the PC market, so the change may not cut into Intel sales much. However, Macs are considered premium products. So if the company moves away from Intel for performance reasons it may prompt other PC makers to look at different options, too. Microsoft Corp., Samsung Electronics Co. and Lenovo Group Ltd. have already debuted laptops that run on Arm-based chips.
Apple’s chip-development group, led by Johny Srouji, decided to make the switch after Intel’s annual chip performance gains slowed. Apple engineers worried that sticking to Intel’s road map would delay or derail some future Macs, according to people familiar with the effort.
Inside Apple, tests of new Macs with the Arm-based chips have shown sizable improvements over Intel-powered versions, specifically in graphics performance and apps using artificial intelligence, the people said. Apple’s processors are also more power-efficient than Intel’s, which may mean thinner and lighter Mac laptops in the future.
Apple’s move would be a highlight of this year’s WWDC, which will be held online due to the Covid-19 pandemic. Because of the fluid nature of the global health crisis and its impact on Apple’s product development, the timing of the chip announcement could change.
At the conference, Apple is also readying updates to its other operating systems -- iOS, iPadOS, tvOS and watchOS -- with changes to augmented-reality capabilities, deeper integration with outside apps and services, and improved Apple Watch fitness features. A big priority is improving the performance of its mobile software after last year’s release, iOS 13, suffered from several issues.
The company is working on at least three of its own Mac processors, known as systems-on-a-chip, with the first based on the A14 processor in the next iPhone. In addition to the main central processing unit, there will be a graphics processing unit and a Neural Engine for handling machine learning, a popular and powerful type of AI, the people said. In the past, Apple has made chips for specific Mac functions, such as security.
Intel has faced more competition as its lead in production technology -- a key way to improve semiconductor performance -- has slipped. Taiwan Semiconductor Manufacturing Co. makes processors for many of Intel’s rivals using a more advanced process.
TSMC will build the new Mac processors using a 5-nanometer production technique -- the same approach as for the next iPhones and iPad Pros. Intel rivals Qualcomm Inc. and Advanced Micro Devices Inc. also use TSMC to make their chips.
The Apple chip project has been in the works for several years and is considered one of the company’s most secretive efforts. In 2018, Apple successfully developed a Mac chip based on the iPad Pro’s processor for internal testing, giving the company confidence it could announce such a shift this year.
WWDC 20 Keynote starts tomorrow at 10:00 a.m. PT, 1:00 p.m ET so we may find out then.