Excerpt from their reactions to Bloomberg’s scoop. More as they come in.
John Pitzer, Credit Suisse: The Sky Is Falling…Again. INTC’s stock declined as much as 9% intraday, reacting to a Bloomberg story that stated AAPL may use internally developed chips for its PCs as soon as 2020. While this has been an existential threat ever since AAPL introduced the A4 processor in CY10 for the iPhone, and was first speculated by Bloomberg in 2012 (article link here), there has been little incremental speculation in the last 18-24 months and the specificity of the article does lend some credibility. It is clear to us that AAPL has been working towards a goal of “moving up the stack” if only to keep INTC “honest” – but we see the sell-off as an over-reaction, especially ahead of what we expect to be strong earnings on 04/26. Maintains Outperform rating and $55 price target on Intel.
Amit Daryanani, RBC: A New DIY Project? Thinking Through INTC Chip Transition. While we think this is a low probability event, the potential to do so or even be discussing this – could simplistically provide AAPL with gross margin tailwinds (either via better concessions from INTC or cheaper cost if they truly design these chips in house). We estimate by moving processors in house and away from INTC, AAPL could see EPS benefit in the range of $0.20-0.25. Even though incremental EPS impact isn’t significant, the potential move could enable AAPL to better differentiate its Mac line up vs. PCs. Designing its own chips enable AAPL to determine a technological roadmap for Macs that is independent of INTC. We could see AAPL designing its chips for better AR/VR performance and AI workloads; similar to its recent iPhone A11 Bionic chip. The move could also help create a seamless experience across its devices as iPhones and iPads already have chips designed by AAPL in them. However, we note that the shift would be technically complex and likely not be immediate. Net/Net: We see AAPL benefiting from multiple tailwinds 1) Gross margin upside from cost downs, NAND tailwinds & yield efficiencies, 2) Services growth that should contribute to sales and ~50-60bps to GMs, 3) Capital allocation that could enable ~500-600bps of share reduction annually over the next 5+ years. Maintains Outperform and $203 price target on Apple.
Horace Dediu, Asymco: Apple has always sought to maintain control over the critical components in its products. The process of elimination of single source suppliers of silicon is at least 10 years old. Flexibility in design, responsiveness to new dimensions of performance and changing product cycle times has meant that the CPU is holding Apple back. The most important chips were replaced first and now we are likely at the point of replacing the Mac’s chips. The performance measure that defines Mac basis of competition has stopped being raw processing power and has shifted to power/speed and increasingly video processor throughput.
Ben Bajarin, Creative Strategies: ARM Mac’s Cometh. Given both Apple’s silicon roadmap and its hardware and software roadmap, that timing seems plausible. The bigger question is why Apple would make a change, and more importantly pour so much R&D developing a custom chip for Mac hardware when they still only sell roughly 20 million Macs a year… The big picture point is Apple is going down a different path than every other hardware maker and their priorities and needs when it comes to semiconductors are vastly different than everyone else’s. This is the main reason why it is inevitable Apple for Apple to make all the important silicon in every piece of hardware they make.
Ben Thompson, Stratechery: ARM on Macs? I have steadfastly held that Apple would not start making its own chips for the Mac… The Mac Pro, though, is a reason why I think this report might be correct. As you will recall, it was a year ago tomorrow that Apple held an unprecedented meeting with five journalists to explain what went wrong with its flagship computer, and promise to do better. Ever since then the company has gone out of its way to reiterate its support for the Mac, and emphasize that it played an important role in the future… If the company did indeed have a change of heart, not simply about its flagship computer, but about the Mac line as a whole, it would follow that its weighing of the costs and benefits of a processor architecture change would be affected as well. That is, if Apple, from the executive team on down, is fully committed to the Mac as an essential piece of Apple’s future, then the long-run benefits of switching to ARM are worth the short-term pain.
Gene Munster, Loup Ventures: Quick Thoughts. This is a prediction in hindsight. The rumors should come as no surprise. The writing has been on the wall for awhile, given what they’ve done with most of their products. Now these chips are as powerful as what’s in some Macs, so it makes sense that the time has come.
Just for fun and ironic effect…
Tim Cook, Apple CEO: In a 2015 fireside chat. We don’t believe in having one operating system for PC and mobile. We think it subtracts from both, and you don’t get the best experience from either. We’re very much focused on two.
UPDATE: For more, see the round-up assembled by Barrons’ Tiernan Ray, who has better access to Intel analysts than I do.
See also: Mighty Intel feels Apple chill