Apple’s Wireless In-House Chip Manufacturing Could Spell Doom For Traditional Chipmakers

Recently, it was reported that Apple has engaged in a high-level executive reshuffle, along with a general redistribution of resources to ramp up its efforts in the chip making space. They have also moved into hiring for positions for modem chip engineering in San Diego, directly competing on Qualcomm’s turf. Apple’s new moves into the chip-making sector may signal the change of market sentiment regarding their dependency on manufacturers such as Intel. Moreover, it can also demonstrate the increased emphasis of Apple on in-house chips and modems.

Currently, Apple uses Intel’s modems to ensure wireless connectivity and mobile Internet on their devices that require this, such as the newer iPhones and certain variants of the iPad. Even as Intel has projected the year 2020 as a potential target for introducing 5G mobile modems that can be used in Apple devices, the company seems to want to leapfrog its competition while cutting costs and increasing margins. Could Intel be put in the same position that Qualcomm was in a couple of years ago? Read on to find how Apple stands to disrupt the chipmaking market as a whole.

Apple’s Long-Standing Pain Point

Mobile models make up a chunk of the manufacturing costs of iPhones, with Apple having to shell out $15 to $20 on each of them, which amounts to closely $3 to $4 billion for the 200 million iPhones it manufactures. This has long been a pain point for the company, as they previously worked with Qualcomm to source these modems.

Qualcomm is the market leader in wireless modem technologies, as its modems are used in over 50% of phones in the world owing to their presence on the Snapdragon 845 mobile processor. They also supplied these modems to Apple in the past, and fell out of favour by the time the 2018 iPhone launch rolled around. This led to them being replaced by Intel modems, who, after a flop attempt of trying to bring the x86 platform to phones, found success in the modem sector.

Apple has long been trying to eliminate this pain point from their processes, as competitors Samsung and Huawei already make their own modems. This offers advantages over using an external modem, as they have successfully integrated the modems into their processes, offering improvements in battery life and space. Moreover, this also offers a much more tighter integration with existing components, something Apple is looking forward to with the investment in AR.

Apple’s Starts Its Chip Making Efforts

The company’s senior VP of hardware technologies, Johny Srouji, was recently assigned to take over modem design efforts in January. While this was previously a matter that was handled by the supply chain division, and is now a part of the internal chip manufacturing push that Apple has undertaken. Srouji is responsible for making the A-Series processor in iPhones and iPads, along with the instant Bluetooth pairing chips for Airpods.

The Silicon Valley giant posted over 10 job listings for modem engineers in San Diego, a hub for wireless design talent because of Qualcomm’s longtime presence there. This occurred in late 2018, showing that Apple’s efforts to make its own modem remain scheduled for some indefinite time in the near future. The listings were for engineering positions regarding work on multiple types of chip components, including engineers to work on the company’s Neural Engine artificial intelligence processor and wireless chips.

Even as Apple’s 5G modem chips remain comfortably in the future for now, it is possible that another revolution in computing has already begun. Their existing line-up of in-house made chips may present an interesting opportunity to fragment the chipmaking market once again.

Apple’s Line-Up Of Processors Can Change Everything

When Apple announced the iPhone X, they also introduced a significant upgrade to their A’x’ series of chips. The A11 chip announced with the iPhone X, Apple achieved dedicated AI compute locally on phones. This was built to allow the algorithms that dictated features such as Face ID, or animated emoji that engaged in facial tracking.

Their newly announced CoreML framework would also allow developers to access the power that the dual-core neural engine offered, which was pegged at around 600 billion operations in one second. This showed the amount of involvement that Apple had towards AI as an integral part of their services, as they also focus greatly on augmented reality and image recognition, both driven by ML. The chip can also lay the groundwork for a more comprehensive healthcare experience using the Apple Watch.

The A11 was then followed up with a huge upgrade in the form of the A12 Bionic model which was incorporated into the 2018 line up of iPhones. The A12 Neural Engine adopted an eight-core design, which allowed it to handily beat the performance offered by the A11 NE. This enabled it to run 5 trillion operation in a second, all while being compact enough to fit into an Apple phone.

The real clincher to Intel, however, came with the launch of iPad Pro and its accompanying A12X Bionic processor. This ARM-based processor was powerful enough to beat notebook-class Intel i7 processors in terms of raw strength. While this should have set off warning bells at Intel headquarters, there is definitely more brewing in Apple’s labs.

Apple’s Plan To Fragment The Chipmaking And Computing Markets

With the strategic placement of the iPad Pro as a laptop replacement, and the tight integration of the ARM-based chips with iOS’ various features, Apple is setting a bigger plan in place. The company still depends on Intel for the CPUs in their MacBook and iMac lineups, an environment ripe for change. The development being put in place for the creation of A’x’ series of chips will be reflected in a future ARM-based Macbooks.

Industry specialists have pointed to different factors that could point towards this move, including recently announced support for iOS apps on Mac, and a general lack of satisfaction due to the reduced control they have over Intel CPUs. The outlook for these products could be in 2020 or 2021, and would allow Apple to break away from Intel’s processor release schedule and have higher profit margins.

The rise of inference chips as a movement also offers Apple a unique advantage in this market, as they have already invested into creating AI cores for their Neural Engine offerings. It is left to see how the market reacts over the next few years.

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