Who will make Apple's iOS mobile processors?

Who will make Apple's iOS mobile processors?

Summary: Analysts keep predicting a new mobile processor customer for Intel. The candidate that some consider unlikely candidate given the history of the computer industry: Apple.

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Who will build Apple's processors for its mobile devices? The current maker is Samsung. But analysts suggest that Cupertino may be looking to additional sourcing and some unlikely new foundry partner: Intel.

Intel CEO Paul Otellini this month suggested that acting as a foundry to Apple's ARM-based processors "would be an interesting model." http://www.zdnet.com/intel-we-could-be-a-foundry-if-the-fit-was-right-7000008427/ Analysts are doubling down on the idea.

A recent EE Times piece by Rick Merritt says that Intel could be the new partner. While it has its own low-power processor aimed at mobile devices, it may be facing declining production in the desktops computer segment.

Face it, the market has shifted from the desktops Intel dominates to tablets and smartphones where it barely participates. But world-class semiconductor manufacturing is as valuable as ever, even as Moore’s Law slows.

Here, Intel is still tops. First with high-k metal gate transistors. First with FinFETs. Tons of capacity in leading-edge fabs all over the world. There’s little doubt it will be first to field the extreme ultraviolet lithography that is key to next-generation processes.

Merritt points to rumors that Intel will make high-end router chips for Cisco. Apple could be another customer. However, he says this will take some major reformulation of Intel's corporate identity.

Expanding on the idea, Jean-Louis Gassée at Monday Note says that market issues with Windows transitions haven't helped Intel much and that an Intel-Apple partnership makes sense.

This wouldn’t be an easy decision for Intel: the volumes are high — as high as 415M ARM chips for 2013 according to one analyst — but the margins are low. And Intel doesn’t do low margins. Because of the Wintel duopoly, Intel’s x86 chips have always commanded a premium markup. Take Windows out of the picture and the margin disappears.

Also, Intel would almost certainly not be Apple’s sole supplier of ARM chips. Yes, Apple needs to get out of its current and dangerous single source situation. But Tim Cook’s Supply Chain Management expertise will come into play to ensure that Apple doesn’t fall into a similar situation with Intel, that the company will secure at least a second source, such as the rumored TSMC.

Gassée also refutes the rumor floated in November that Apple would ditch ARM for an Intel processor. He points to speculation by another analyst that Intel would act as a foundry for an ARM-core processor for future iPhones if Apple would take up an Intel processor for the iPad. Crazy talk.

The speculation by an RBC analyst that Intel will offer its services to build ARM chips for the iPhone on the condition Apple picks an x86 device for the iPad is nonsensical: Apple won’t fork iOS. Life is complicated enough with OS X on Intel and iOS on ARM.

There were also rumors in November that Apple would switch to an ARM processor for its Macintosh lines. I suggested that this rumor was likely a bargaining tactic to get Intel to give up a bit of margin. Now, with these other rumors of Intel acting as a foundry for Apple's ARM-based processors, we uncover another potential twist in the negotiations.

This story keeps getting more complicated. As my colleague Adrian Kingsley-Hughes points out, Apple could decide to go with Taiwan Semiconductor Manufacturing Company (TSMC) instead.

Predicting next year's Oscar winners appears to be an easier task.

Check Out: Apple ditching Intel for ARM on the Mac? Stop the insanity!

Topics: Apple, Intel, iOS, Laptops, Microsoft, Samsung, ARM

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73 comments
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  • Apple needs to change SOMETHING and fast

    AAPL dropped below $500 in pre market trading and really hasn't recovered much since then.

    We all know that Nokia is dead (we are told this over and over again by all the Apple people). Yet while Apple has dropped 20% in the last 3 months, Nokia has gained 40%.

    I'll let that sink in.

    That is a 60% difference in performance.

    I'll let that sink in too.

    Now, we've been told in the past that the quality of a product is directly related to the performance of the manufacturer's stocks. Whenever anyone states that an Apple product sucks or that an MS product is good, we are simply told that this can't be true, just compare AAPL to MSFT. Well, I'm comparing AAPL to NOK and using that logic, it is clear that Apple products suck while Nokia products (like the fantastic Nokia Lumia 920) are excellent.

    Unless stock price doesn't count anymore?
    toddbottom3
    • Once agin you're defacing the comments stream with something irrelevant

      Surely it must stretch even a professional spin-mesiter like yourself to somehow spin up a way that your comment has anything directly to do with the actual story about chip manufacturing. As if Nokia recovering somewhat from an all time low and Apple slipping from an all time high is somehow tightly linked to who makes the chips?

      Seriously? Now you're reduced to just vandalism?

      Oh...and, just for giggles...for all of 2012 it looks like Nokia is down by about 20% (from around $5 to $4 and AAPL is up by 25% (from around $400 to %$500).
      UGottaBKidding
      • Maybe a change in chip manufacturer is what AAPL needs?

        After all, this stock has been decimated by the market. Apple needs to do something and fast. Perhaps partnering up with Intel will improve the only thing that matters: AAPL stock price.

        As for your "giggles", it does absolutely nothing to change the fact that AAPL stock is in a freefall while NOK is doing incredibly well. If you started with $1000 worth of AAPL and $1000 worth of NOK 30 months ago, you would be down to below $800 if you'd foolishly picked AAPL and up to $1,400 if you'd wisely chosen NOK. I was actually wrong above when I used 60%. You are actually 75% better off today if you'd bet on NOK instead of AAPL 3 months ago.

        Unless stock price doesn't count anymore?
        toddbottom3
        • I'd suggest you avoid buying stocks.

          30 months ago, AAPL was at $269, and NOK was at $7.83.

          Today, AAPL is at $519, and NOK is at $3.95.

          So $1000 in AAPL 30 months ago is worth $1929, and $1000 in NOK 30 months ago is worth $504.
          msalzberg
          • Your thinking in terms of buy and hold.

            Up or down is the same in stocks if sell stock short. That is sell Nokia at$7.83 and buy at $ 3.95 to cover the short sale. So if you sold Nokia short its as good as buying Apple on the way up.
            Altotus
        • Nope, profit is how you

          keep score in this game.
          baggins_z
      • Quite stunning the difference in maturity levels

        I will let all the posts here speak for themselves. Quite the stunning difference in maturity levels and content.
        toddbottom3
        • 30 months ago? What ARE you talking about?

          Todd, dear fellow...In your response above you made a ludicrous statement about share prices from 30 months ago. At that time Nokia was trading above $14...now $3.95. Thirty months ago Apple was trading at $160; now $520. So...that $1,000 investment in Nokia is now worth $350 odd and the AAPL $1,000 is worth $3,250. Sounds good to me.

          Did you mean "3 months ago"? Perhaps your comment was a typo? Though, I have to say that it serves to make a pretty damning point against your case nonetheless. Choosing three months as your time frame is surely some good cherry picking! Not the best example of maturity one might say...at least in terms of content. Not up to your usual professional standards.
          UGottaBKidding
          • You're right.

            The quality of the professional trolls has really slipped around here.
            msalzberg
          • What do you think?

            "Perhaps your comment was a typo?"

            You are clearly an intelligent person.

            "Choosing three months as your time frame is surely some good cherry picking!"

            So what is picking 1 year as a time frame? Is 1 year the only time frame that counts?

            No matter the huffing and the puffing and the blowing of houses down, it is undeniable that in the last 3 months, AAPL is an absolute disaster and NOK is a beautiful gem. Or do you want to deny that?
            toddbottom3
          • NonZealot, there's a reason one year is used.

            Capital gains of less than one year are short-term and are taxed at the same rate as ordinary income.

            Capital gains of more than one year are long-term, and are taxed at either a rate of 0% or 15%, depending on income.

            Like I said, I suggest you limit yourself to buying CDs at a bank, and avoid the stock market. Oh, and don't do your taxes yourself.
            msalzberg
          • Isn't that what a cherry is?

            Look at your accidental 30 month example...or almost any other time frame you want..including the one year example you again cite... (NOK down 12% Apple up 36%)...indeed....you illustrate my point again...you're undeniably cherry picking when you choose to focus on just the one three month point. Essentially every other time frame one might choose to look at tells a rather different story..but you keep trying. It's a strange way to make a living...but..it seems to work for you.
            UGottaBKidding
          • I'm picking a recent time frame

            I'll ask again UGattaBKidding:
            No matter the huffing and the puffing and the blowing of houses down, it is undeniable that in the last 3 months, AAPL is an absolute disaster and NOK is a beautiful gem. Or do you want to deny that?

            I'm still waiting for you to explain how AAPL hasn't lost 20%+ in the last 3 months.
            toddbottom3
          • What's the point?

            Unless you or I happened to make a binary decision to buy either Nokia or Apple exactly according to your cherry-picked time frame then it's irrelevant.

            I doubt that Apple share holders are all that happy about a 20% decline from all time highs...but, given that Apple is still up more than 36% on the year (even AFTER the recent decline) and up by hundreds of dollars per share over any longer time frame you choose to select, I doubt that many consider it a disaster...any more than shareholders who bought Nokia over the same very, very broad time frame (any time from one year ago to 10 years ago) consider Nokia a gem....beautiful or otherwise.

            I suggest that the huffing and puffing is coming from you as you attempt to force this chat into the only narrow time frame that fits your rather embarrassing argument
            UGottaBKidding
          • What's the point?

            I stated it at the very top:
            Apple needs to change SOMETHING and fast

            The last 3 months are an indication of things to come if apple doesn't change something fast. Perhaps teaming up with Intel will do the trick.

            And remember, things like revenue and profit don't count (going based on what apple people have stated time and time again). Only the stock price matters and AAPL is in a free fall.
            toddbottom3
          • As if one quarter actually means something in the scheme of things?

            Seriously? 90 days and you're panicking on behalf of Apple shareholders? Really?

            Come on back in a year and, if the free fall has continued (I can barely type that without laughing), then I will bow to your wisdom and foresight. Until then, I doubt that many long term Apple shareholders will let their knickers get in a knot. Though I am sure that they truly appreciate your well-intentioned panic on their behalf.
            UGottaBKidding
          • I accept the terms of your offer

            "Come on back in a year and, if the free fall has continued (I can barely type that without laughing), then I will bow to your wisdom and foresight."

            This is acceptable to me.

            "Though I am sure that they truly appreciate your well-intentioned panic on their behalf."

            I feel very sorry for all those people who got suckered into all the "AAPL will hit $1000 within days" hype that got posted on ZDNet back when AAPL was at $700. Since then, it has plummetted and real people got hurt by this. AAPL was not a good buy at $700 considering how much it has free fallen since then. Those people would have been far better off to short AAPL and buy NOK.
            toddbottom3
          • At that exact time and at pretty much only that time...you're right

            At almost any other time in the last ten years you are REALLY wrong!

            Can we please leave it at that....as that's every bit as much as a fact at the cherry picked three month time frame you choose to focus on.
            UGottaBKidding
          • So ten years is now the gold standard?

            Did apple only incorporated 10 years ago? I don't think that is right.

            So I have to ask why you chose this magic number of "10" as being the exact right amount of years that we must focus on? Can't we look back 20 or 30 years?
            toddbottom3
          • What part of "any any time" didn't you understand?

            Are you being willfully obtuse or are you just getting a little tired? As msalzburg commented elsewhere...the quality of professional trolls really is slipping!
            UGottaBKidding