The Chip Strategy of Apple

The Chip Strategy of Apple

Apple has expanded its capabilities beyond the designing and manufacturing of consumer electronic devices, developing software applications, and distributing or publishing digital content. It has also become a chipmaker. To be more specific, as part of its business strategy and more specific product strategy, Apple has become a fabless semiconductor company that designs various chips for different devices.

Looking Into the Chip Strategy of Apple: An Explanation of the Goals and Objectives of the Semiconductor Strategy of the Company

The company has been considered a chipmaker following the release of the Apple A4 Bionic system-on-a-chip in 2010. This was an Apple-designed chip and it was manufactured by Samsung Electronics. It powered the first-generation iPad, iPhone 4, the fourth-generation iPod Touch, and the second-generation Apple TV. The company has since been designing most of the chips that power its range of consumer electronic products. There are several reasons why Apple has decided to begin designing and using its own chips.

Apple used chips from other manufacturers such as Intel Corporation and Motorola before the introduction of the Apple A4 Bionic. Intel Core processors power all of its Mac devices beginning in 2006 after ditching PowerPC processors in 2005. Some generations of Mac devices used graphic processors from AMD and Nvidia. The earlier generations of the iPhone and the iPod Touch used systems-on-a-chip from Samsung Electronics.

Nevertheless, starting from the A4 Bionic, the company has started building its capabilities to design various chips for various devices. It was in 2020 when it announced that it started to ditch Intel Core processors for chips designed in-house. The introduction of the Apple M1 chip that powered the 2020 MacBook Pro and the 2020 MacBook Air further legitimized Apple as a fabless semiconductor company with a serious chip strategy.

1. Reducing Dependence on Third-Party Chip Providers and Capitalizing on the Benefits of Contract Manufacturing

Part of the reasons why Apple has embraced becoming a chipmaker is to lessen its dependence on third-party semiconductor suppliers. This also represents one of the goals and objectives of its specific chip strategy. There are also more specific reasons why the company wants to become independent from chipmakers like Intel and AMD.

The first is that it wants to improve its overall supply chain by eliminating or minimizing the risks that come from the technological setbacks of semiconductor suppliers. Take note that Intel has experienced problems in developing and utilizing the latest process technologies in chipmaking. This affected the long-term product strategy of Apple.

Furthermore, considering its emerging capabilities in designing chips, it wanted to utilize the technologies used by contract manufacturers. The company now outsources the production of its chips from Taiwan Semiconductor Manufacturing Company or TSMC. This semiconductor contract manufacturer is known for its advanced process technologies.

It is important to note that the Apple M1 chip is the first commercial system-on-a-chip in the world that is based on the 5nm process technology. TSMC had the technologies and other manufacturing capabilities to mass-produce M1 chips. This same contract manufacturer helped Apple introduce its first chip based on the 3nm process.

Having the capability to design its own chips gives Apple greater flexibility when it comes to experimenting with chip architecture and newer computer systems. Furthermore, because it is a fabless semiconductor company, it also gives it the freedom to utilize the manufacturing expertise and newer technologies of contract manufacturers.

2. Expanding the Applications of Advanced RISC Machines Architecture Across Apple Devices and Bank on Its Advantages

Another interesting goal behind the chip strategy of Apple is the expansion of the commercial applications of instruction set architecture based on reduced instruction set computer or RISC and the Advanced RISC Machines or ARM architectures. ARM is the instruction set architecture of chips that power mobile devices like Android and iPhone.

Several critics were unconvinced when the company announced that the new chips that would power its newer generations of Mac computers would be based on the ARM architecture. However, based on benchmark test results and real-world applications, these chips proved to have enough processing capabilities to run personal computers.

There are specific reasons why Apple switched to ARM. For starters, when compared to the x86 architecture of Intel, ARM-based chips can achieve higher performance at lower power consumption. The company also has solid experience in designing and implementing ARM-based chips. The Apple M1 chip was based on the Apple A14 chip.

Nevertheless, based on the aforementioned, Apple wants to use the ARM architecture across all of its devices. The specific advantage of this instruction set architecture includes performance improvements relative to power consumption, better heterogeneous computing or parallel computing, and faster operations while minimizing execution time.

3. Improving Further Hardware-Software Optimization and Creating a Diversified and Competitive Product Ecosystem

Apple has a reputation for designing devices for software and also for developing software applications or compelling software developers to develop for its devices. This is evident from the strong hardware-software optimization that results in enhanced performance, more efficient power consumption, and better application of security solutions.

Designing chips in-house gives the company more control over the integration of its devices and software. Hence, by designing its own chips, it has more control over its hardware and software, which translates further to additional performance improvements, better overall user experience, and a more uniformed product ecosystem experience.

The ARM architecture has enabled it to design chips optimized for software and services. This is evident from its Unified Memory Architecture and the utilization of coprocessors such as the Neural Engine and the Secure Enclave. These hardware components have provided relevant devices with performance boosts and added features.

Furthermore, in consideration of its product strategy and product ecosystem, another rationale behind the chip strategy of Apple is to expand further its product portfolio and make its specific products more competitive. Strong hardware-software optimization gives its devices an unparalleled competitive advantage over their counterparts.

Remember that the M1 chip is based on the A14 chip while the M1 Pro, M1 Max, and M1 Ultra are based on the M1. The established and expanding experience and expertise of the company in chipmaking allow it to streamline certain processes across the different facets of its research and development activities. This translates to cost reductions.