Apple expands its walled garden with shift to integrated Mac chips

With the announcement at Monday’s Worldwide Developers Conference that Apple is ditching Intel to use in-house-designed processors for future Mac computers, chief executive Tim Cook heralded the shift “a huge leap forward”.

For years, Apple’s chief differentiator to smartphone rivals Google, Huawei and Samsung has been the integration of its hardware with software and services, with the iPhone’s Apple-designed processors a major factor in its success.

Now, with the transition to “Apple Silicon” for Macs, Mr Cook is moving to integrate the technology behind its computers too, giving the machines the first overhaul of their chip architecture in 15 years.

The move will extend Apple’s control over its products and its customers, while also giving the machines what Johny Srouji, who has been leading Apple’s processor projects since 2008, described during Monday’s keynote address as “a whole new level of performance”.

It will also enable Mac users to access the myriad apps currently available on other Apple devices for the first time, and allow app developers to expand the reach of their products for a broader audience.

‘You’ve got to pursue every lever’

What developers expect is that the new Mac chips — based in part on designs from Arm, the British group owned by SoftBank, and to be manufactured by Taiwanese chipmaker TSMC — will be more efficient, especially in terms of heat performance. Mr Srouji emphasised “performance per watt”, meaning fast speeds but low power consumption. 

“The new ‘system-on-a-chip’ allows completely new laptop designs,” said Pete Jarvis, vice-president of business development at Polyverse, a cyber security start-up. “You can use an iPad Pro with the new keyboard for hours, [but] try doing the same with a MacBook Pro. You’ll burn your thighs.”

Apple’s strategy could prove risky. The burden for in-house designers to outperform Intel is heavy, plus it requires millions of developers to retune their apps to be compatible with new hardware. But the pay-off could be huge: apps designed to run on the iPhone would work across Apple’s hardware ecosystem, giving desktops more of a smartphone feel with millions of available apps.

A significant challenge for Intel now is that building your own silicon is incredibly expensive

Meanwhile, the shift is likely to be lucrative because Apple already makes far more revenue from services than it does from Mac sales — $46bn versus $25.7bn last year.

“The range of apps that users will be able to run on these new Macs is truly unprecedented,” said Craig Federighi, Apple’s software chief.

Analysts at Bernstein estimated Apple could save $1bn-$2bn a year by transitioning away from Intel — though they called this “noticeable but still immaterial in the grand scheme of things” for a company with $260bn in revenue.

The bigger impact might not be measured in dollars, nor in Mac sales — where Apple hold just a 7 per cent share of worldwide PC shipments, according to Gartner — but in the company’s ability to refine every part of its machines itself, said Julie Ask, analyst at Forrester Research.

“If you’re constantly trying to double the computer power year-in, year-out . . . you can’t just pursue one lever,” she said. “You’ve got to pursue [every lever to] get you there.”

‘A further consolidation of their power’

For the millions of third-party app developers working with Apple, the big question is whether its transition, which is expected to take two years, should be seen as further entrenching the dominance of the App Store, or a welcome opening of the Mac to more outside apps.

David Heinemeier Hansson, an app developer who has been engaged in a public feud with Apple over its app restrictions in the past week, said he fears this will give the $1.6tn tech giant even greater authority over developers.

“This is further consolidation of their power,” he said. “Now they don’t have to answer to Intel any more either. Apple gets to set more of the rules, more of the time.”

However, others argued that the shift to in-house Mac processors represents less of a threat to developers than had been previously feared.

Heading into the event, there was speculation that Apple “would use the transition as an opportunity to force all Mac software to go through the Mac App Store,” said Matt Ronge, chief executive of app developer Astro HQ.

The fear was that users would no longer be able to download Mac applications directly from their websites, and developers would instead be forced to pay the 30 per cent “tax” currently imposed on subscriptions purchased through the App Store on other Apple devices.

“Based on what I've seen,” said Mr Ronge, “they are not doing that, thankfully.”

Instead, Apple is giving developers time and help with the transition, with the goal of making the Mac ecosystem more open, he said. “[That] caused most third-party Mac developers to breathe a sigh of relief.”

For Intel, the immediate impact could be limited, with Mac chips estimated to account for just 5 per cent of its revenue. But the wider ramifications are likely to be significant for the US chipmaker, which had already been dethroned by TSMC in the wider market.

“A significant challenge for Intel now is that building your own silicon is incredibly expensive,” said Geoff Blaber, analyst at CCS Insight. “You've got to be running your manufacturing plants at capacity or the economics just don't add up. [With Apple] pushing all this business to TSMC, that gives them a huge advantage. Particularly when you then start to add up all the other customers that they've got — scale becomes everything.”