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It’s going to be challenging for other vendors to compete with Apple’s M1 chip: TECHnalysis Research

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Bob O'Donnell, TECHnalysis Research President and Chief Analyst joins the Yahoo Finance Live panel to discuss Apple debuting their new iPad Pro device.

Video Transcript

ZACK GUZMAN: I want to turn from one tech giant of course there, Netflix, to another one that we've been watching this week, Apple coming off their big event yesterday with a few interesting product releases. Shares right now off by about a half a percent after that event. But we got some interesting updates, including the company's newly redesigned iMac featuring their in-house M1 chips, as well as purple iPhone and the introduction of Apple Air Tags, which seemingly will be taking on Tile in direct competition to help users find their various items that they want to slap an Air Tag on.

And for more on everything we learned at that event, I want to bring in Bob O'Donnell. TECHnalysis Research President and Chief Analyst joins us right now. And Bob, I mean, these events are always interesting to see how people are going to react to how important the new product launches are. But what do you grade maybe what we learned about what Apple is most excited on right now?

BOB O'DONNELL: Well, you know, the big takeaway for me, Zack, was the emphasis they put on their M1 chip. It's not necessarily something you think is going to be the primary thing. But when you look at the run of the show that they had yesterday, there was quite a bit of emphasis on that M1 chip.

Obviously, we saw them bring it to the iMac, which everybody knew was going to happen. They weren't entirely sure when, but there was a good sense that it was going to happen. And then the big surprise was that they also put it into the iPad Pro. And so to me, that said several important things.

Number one, it says to consumers, hey, if you're going to buy any Apple product, you want to make sure you get something that's got that M1 thing in it. Two, for developers, if they've been wavering on whether or not they may need to create applications that are native to run on the M1 chip, it's very clear they have to do it. And then finally, number three, for the industry as a whole, they're saying, hey, we are moving aggressively forward on custom silicon. This is our way to differentiate. And that's a serious gauntlet that they threw down, and I think it's going to make it very challenging for other vendors to try and compete with them.

AKIKO FUJITA: What does that mean in the context of what we've been talking on the shortage globally with semiconductors? I mean, Apple seemed to allude to the fact that they're not going to be hit in a significant way. But what's your assessment?

BOB O'DONNELL: Well, you know, everybody ultimately is going to be affected to some degree. But Apple's a big enough customer of TSMC-- who, of course, they get their chips from-- that they're probably number one on the list. So anybody who gets priority is going to be Apple. And one of the interesting things about using the M1 in more products is, theoretically, that makes it more straightforward. There's a little bit less diversity, because they're buying more M1s and putting them in more places. So if one company can crank out as many M1s as possible, which TSMC is going to be doing for Apple, theoretically there's a minor cost advantage by increasing the quantity of that particular chip.

I mean, look, it's still something we have to watch, Akiko, for sure. And I don't think necessarily Apple's completely void of any concern here. But I think they're in as good a spot as anybody is.

AKIKO FUJITA: The iPad has been a real bright spot for the company, especially during this pandemic, as so many people work from home, but especially a lot of kids that are learning online remotely too. $800 for this new iPad Pro. How much of that momentum do you think can be sustained given how many people bought it last year?

BOB O'DONNELL: Well, it's a fair question. The thing here, this really was an iPad Pro event, right? This isn't necessarily a product you're going to buy for your kids. This is for creative professionals and people who are really looking for a high-end tablet. And that's, by the way, always been a relatively modest market in terms of actual size.

But it's a halo product. It gives you that impact of, wow, this is what they can do now with the technology. The display enhancements they made on the iPad Pro are very impressive sounding. Of course, I haven't seen it yet. But from the technical specs and how they describe it compared to their high-end monitor, it sounds pretty good. So I think what they're doing is they're able to take some of these higher-end technologies, put them into a showcase product, and then that's sort of eventually waters down into the other products.

And Apple's very good at doing that, right? They always have these kind of halo products. And with the iPad Pro, that's what they're doing, along with obviously nice design, which they're obviously very good at as well.

ZACK GUZMAN: Yeah. And you mentioned their halo products. And that was the one-- I don't know why, but for me, Air Tags just sound exciting. You know, people love Tile. And they came out at 29 bucks, the things that you're going to be able to attach and track your things.

You know, they have the Find My App for, you know, if you lose your laptop or iPad or whatever. But now this is for anything in the world that you might own. But people have overlooked Apple's devices push in the past. So what do you make of that move?

BOB O'DONNELL: Well, look, it's an important thing. I mean, accessories are a huge part of any mobile company's business, and Apple's in particular. It's very important. And the beauty of Air Tags-- remember that all of these devices, whether it's Tile or the Samsung ones that they just introduced or Apple's air tags is that they rely on connections to other devices to find your stuff, right? There's one thing about finding something within your house. It can use local signals. But if you leave something in a taxi or an Uber or somewhere else, you have to rely on all the other devices. And because, Apple has a billion installed devices, theoretically the experience with Air Tags should be better and more seamless.

And of course, Apple worked hard to integrate privacy and security issues, or features, in there-- they talked about those issues-- to make sure people are comfortable with that. So I think it's a clever move. I mean, is it going to set the world on fire? No. But is it going to tie a little bit more devices into the Apple ecosystem that aren't made by Apple? It kind of does. And that's an interesting perspective as well.

AKIKO FUJITA: And Bob, we've all been there. Losing my keys, losing my phone on the plane. This could have been really helpful, especially during that time. It's always good to get your analysis. Bob O'Donnell, TECHnalysis Research President and Chief Analyst.