Apple and Its ARM Competitors
Intel and AMD are facing a large number of competitors, now that ARM has become a viable alternative on the desktop and on servers. But will this competition not also hurt Apple?
Now, by switching to ARM, Apple opens a Pandora box. Now its main competitors in the CPU area not limited to AMD and Intel. There are also a number of other manufacturers like Qualcomm, Allwinner, Samsung and countless others who licensed ARM.
Superficially this may seem like a problem to Apple. They have all these competitors making ARM chips just like them. Isn’t there a high chance one of them makes a better chip than Apple? However there is a key difference between Apple and Intel:
Apple is not in the business of selling microchips. Apple is in the business of selling Macs, iPads and iPhones.
If Intel cannot sell their chips, then they cannot make money. If Apple cannot make better ARM chips than the competition, then they can switch to buying ARM chips from whomever make the best ones. No, in fact it is even simpler than that. Almost all ARM competition is based on intellectual property (IP) sold by ARM Ltd. Companies such as Qualcomm, Amazon and Ampere buy finished designes such as the Neoverse N1 microprocessor core from ARM Ltd.
These companies can then use tailor made software to duplicate a bunch of these Neoverse cores several times over, connect them, add some memory and voilà the got the blueprints for an entirely new chip. This blueprint can be sent to large semi conductor facilities run by companies like TSMC, which mass produces chips for customers.
That means Apple isn’t tying up massive quantities of capital to be able to built their M1 chips. It is really just software design. There are no enormous Apple M1 chip factories. Apple just take blueprints of their M1 chips and send them to TSMC.
To understand the significance of this, let us continue with our silly car analogies: Tesla is in a somewhat similar position. Their competition buys batteries and electric motors from suppliers. Tesla these same suppliers should any of them make better batteries or electric motors than them. That means e.g. Volkswagen cannot easily make a car with better batteries and electric motors than Tesla, because VW buys these components from independent companies which could also sell to Tesla.
But for Tesla there is a higher financial risk. Their motor and battery production ties up a lot of capital. They cannot simply walk away from a large battery factory without taking a huge financial hit. But they could sell the factory, so it is not all bad.
Apple in contrast does not have any liabilities like that. They don’t own any of the factories making Apple products and thus if they give up on a particular chip design, it has minimal cost to them. Their cost is simply money wasted on research and development of a chip that didn’t turn out to be a world beater.