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Intel Corporation Message Board

  • wallisweaver wallisweaver Jan 27, 2013 2:08 AM Flag

    Intel Making Apple's ARM Chips Will Leave Samsung Behind

    Intel fabs are running at much less than capacity and are over a generation ahead of all the other possible foundries for Apple. Intel is already running at 22nm and moving to 14nm, while TSMC, the largest alternative, is now at 28nm and moving to 20nm. Apple could therefore skip a generation from the 32nm used in the iPhone 5 and iPad 4, going straight to 14nm, and use the process shrink for better performance and better battery life and be a generation ahead of competitors. Even if Apple takes a more conservative approach, it can move all its ARM chip production to Intel's already proven 22nm process while rivals deal with any teething troubles in the ramp up of equivalents.

    Apple also wants to move all the business it can from Samsung (SSNLF.PK), its greatest rival in the high end smartphone market. It would certainly prefer that Samsung didn't see Apple's optimized ARM chip designs before they are part of a shipping iPhone or iPad. In addition Samsung has no great incentive to even move as fast as TSMC, as while it produces Apple's ARM chips, Samsung and Apple are both on the same fab process. This can create the impression that Apple is falling behind other rivals and therefore the iPhone and iPad are not as premium as they used to be.

    Apple's main advantage now in ARM chips is the integrated graphics licensed from Imagination. In benchmarks, Apple's A6X is competitive in CPU tests but surges ahead in areas like games, which can use the better graphics. However Samsung too can integrate better graphics, and given the size of the Galaxy screen, has every incentive to do so.

    So it makes sense for Apple to move to Intel and once again increase the performance gap between iPhone/ iPad and the Android phones and tablets. If the usual 2 years for a chip generation holds, iPhones made now with chips from Intel's 14nm line will still be competitive in 2015 when Samsung moves to that process. So then Apple will be able to market its cheaper 2 year old iPhones to the mid range as being as up-to-date as the best Samsung phones.

    In summary, if it produces Apple's ARM chips, Intel:

    gains new production of 300+ million chips / year
    $5.5-6bn (+11-12%) more revenue at $18 to $20 per chip
    50% gross and 40% operating profit should be possible (TSMC makes mid to upper 40s gross with an operating profit of low to mid 30s)
    possible exclusivity premium from Apple and / or payments for equipment for foundry upgrades
    strong further use of the current 22nm lines where depreciation has largely been paid for with x86 production
    good yields, as many problems will have been sorted out with x86
    better fab utilisation
    diversifies revenue stream away from x86 and Wintel
    will reinforce Intel's position as the no. 1 chip producer

    Apple gains:

    exclusivity from a trusted partner, possibly in exchange for a premium, who won't produce chips for Samsung.
    strong partner it has no need to subsidize, able to produce all the ARM chips Apple needs
    worldwide chip production from up to 8 fabs reducing possibilities of disruption in the supply chain
    US produced chips - important given the commitment to US manufacturing
    faster access to future chip processes which give longer battery life and/ or better performance
    helps with marketing iPhone as always ahead of other phones
    removes the Samsung drag on improvements and increases the time it takes for Samsung to catch up

    Samsung loses:

    revenue down by $3.5-4bn (current ARM chip production for Apple)
    chip costs for its own phones and tablets go up
    no more foundry subsidies from Apple paying for plant and new equipment
    lower throughput to take care of depreciation.
    weakens position as no.2 chip producer by revenue
    reduces likelihood of holding on to a large part of Apple's NAND memory chip needs (Apple is the world's largest buyer)

    Samsung clearly hopes that it can replace the profits from chip production by selling more phones and tablets. It may well do, if being a generation behind Apple doesn't make Samsung's top end ranges look like also-runs.

    Sentiment: Strong Buy

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    • Intel making Apple's ARM chips will kill low power IA, Intel's favorite project. They would never do that. Secondly, Intel is not in a position to fab anything other than chips they have fabbed before which are their own chips. They are not designed to operate like a foundry.

      • 1 Reply to khitchdee
      • "Intel making Apple's ARM chips will kill low power IA, Intel's favorite project. They would never do that."

        [Intel won't make ARM chips. They'll force Apple to convert. Apple will do it because of the superiority of the technology. End of story...]

        "Secondly, Intel is not in a position to fab anything other than chips they have fabbed before which are their own chips. They are not designed to operate like a foundry."

        [Sure, Intel managed FinFET but can't figure out how to make chips for Apple. If that allows you to sleep at night, just keep mumbling it to yourself as you drift off to fantasy land...]

        Sentiment: Strong Buy

 
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