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When announced a shift from and Motorola's PowerPC chips in 2005, competitors using chips in their computers had a big edge in performance. Today, some of Apple laptops that are built with chips are getting trounced.
And it's Apple's own mobile chips inside iPhones and iPads that are doing the trouncing. That's why it makes some sense for Apple to shift again, away from Intel to chips of its own design.
On Monday, Bloomberg reported that Apple had decided to use its own chips in its computers starting as soon as 2020. The effort, code named Kalamata, is still in an early developmental stage, Bloomberg reported, but it has spooked Intel’s investors. Fortune reached out to Apple for comment and will update this story if a response is received. Intel declined to comment.
Shares of Intel plunged 6% on the news to close at $48.92 on Monday. But even with the sharp drop, the stock’s price remains higher than it was just six weeks ago.
The would-be rationale for Apple’s new chip strategy is to allow its mobile products and computers to work together more seamlessly. But there’s also the increasingly embarrassing performance issue. Last year’s iPad Pro models using Apple’s homemade A10X processor (which is based on designs from ARM Holding) outperformed the company’s 13″ MacBook Pro laptops, which had Intel i7 chips, on some benchmark tests. Apple’s more recent A11 Bionic chip used in the iPhone X and iPhone 8 had even higher benchmark scores.
Intel’s many efforts to build chips for mobile devices have never caught on, despite billions of dollars of losses. And now it faces the prospect that its PC chips will also be surpassed by rivals spawned from the mobile arena.
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Apple has been growing its chip design capability since the Steve Jobs-era, when the company bought PA Semi for $278 million in 2008. Since then, Apple has built an all-star team of chip designers, currently led by Johny Srouji.
The homegrown chips allowed Apple to replace processor chips from iPhones years ago and more recently replace graphics processing chips in the devices from Imagination Technologies Group. Apple doesn’t appear to own the patents to make its own mobile modem chips, an area in which it has increasingly been shifting from Qualcomm to chips made by Intel in an effort to cut costs.
But despite all of Apple’s chip switching, a complete transition from Intel would take time. In 2005, Apple’s biggest challenge in swapping chip designs was rewriting all of its software to operate better with Intel’s chips. This time around, in addition to having to tweak its software, Apple would also have to develop a line of chips for desktop and laptop computers. Its homegrown mobile chips are the equal of chips used in its slowest laptops, but the company has never publicly shown that any of its chips could run its most cutting edge laptops, let alone replace the 18-core Xeon W Intel behemoth at the core of its iMac Pro. (And on Tuesday, Intel introduced an even higher-performing line up, bringing its Core i9 chip to laptops for the first time.)