Sina Technology, Zheng Jun, from Silicon Valley, USA
It’s WWDC, Apple’s annual developer conference. Although this year’s WWDC is online for the first time due to the new crown epidemic, this does not affect the brilliance of the products to be released. Apple will regularly update the five software platforms of IOS, Mac OS, iPad OS, watch OS and tvos, and may also release some hardware products. Sina science and technology will broadcast live online from 1:00 a.m. Tuesday Beijing time.
In addition to the regular software and hardware new releases, another focus of WWDC this year may be the replacement of Apple’s processor. No surprise, Apple will officially announce that the Mac will switch to its own A-Series new chips based on the 5-nanometer process, gradually shifting from x86 architecture to arm architecture. The suspense is just how Apple plans to make the transition of the entire MAC product line step by step.
Apple and Intel are doomed
The news is not surprising. Silicon Valley has been rumored for at least three or four years. As early as 2018, Apple has tested the MAC chip based on a series. Obviously Intel has known this for a long time. According to Apple’s strategy of making its own heart and integrating software and hardware, the “heart changing” of MAC product line is only a matter of time. Cell phones, tablets, speakers and TV boxes all used their own chips before, and computers were just the last puzzle. What’s more, apple now uses some of its own chips on macbooks, including the T-series security chip for touch ID.
It’s not the first time Apple has changed its processor. Apple was founded on April Fool’s day in 1976. For more than ten years, the computer microprocessors used MOS and Motorola architecture; in 1991, apple formed an aim alliance with IBM and Motorola, and then turned to PowerPC architecture; in 2005, Apple announced the conversion of Intel x86 architecture processor, which has been used up to now.
After 15 years, I feel a little bit. Paul Otellini, the former CEO of Intel, took office in 2005 and his first project was to persuade jobs to bring apple into the x86 camp. At the WWDC 05 keynote speech when jobs announced the core change, Otellini even wore the iconic Bunny suit of that year.
At that time, apple changed its processor mainly because jobs was dissatisfied with the progress of IBM’s PowerPC research and development, and thought that Apple’s competitiveness was hindered. But at that time, many Apple fans were resistant to changing the processor, because being different was a big selling point of Apple’s computer; before that, apple publicly mocked Intel’s windows PC.
Although the sales volume of Apple computers was very small at that time, the total sales volume in 2005 was only 4.53 million, but the brand value brought by this move to Intel was far higher than the actual chip sales growth. More importantly, bringing apple together meant a fatal blow to the PowerPC camp. Jobs and Otellini, two silicon valley legends, have gone west. Jobs died in 2011 at 56, while Otellini died in 2017 at 66. Intel even mentioned when mourning Otellini that he brought apple into the x86 camp.
Now the fate of apple and Intel is coming to an end. It’s the second time Apple has broken up with Intel in two years. As Intel’s 5g baseband continues to be difficult to produce, Apple was unable to reach a settlement with rival Qualcomm in litigation last year to continue to purchase Qualcomm’s mobile baseband chips. Intel, which lost its main customers, was forced to give up its mobile baseband business and sold it to apple for $1 billion. For two years, apple and Intel ended their cooperation in two markets in a row, which is obviously Intel’s loss.
Billions of dollars in lost revenue
In the past few years, Intel did not make good progress in the field of PC processor. It met with Moore’s law wall, and fell into a standstill at the stage of 10 nm, only to see competitors surpass themselves with 7 nm technology. In addition, in addition to AMD, Qualcomm’s arm chip is also gradually entering the notebook processor market. Although it is a big strategic need for apple to replace its own processor, the slow development of Intel processor has indeed dragged down Apple computer, just like IBM 15 years ago.
So how will Apple Mac abandon Intel this time? There is no doubt that there will be a huge loss of revenue. PC processor is Intel’s main revenue business. In spite of the continuous decline in revenue share in recent years, PC business still contributed nearly half of Intel’s revenue in the first quarter of this year.
According to IDC, Apple’s share of the global PC market last year was about 6.6%, with sales and share declining. Last year, the global PC market grew for the first time since 2011, with a year-on-year growth of 2.7%. It’s hard to get rid of the downturn in the “post PC” era, but the previous MAC growth against the trend seems to have lost the momentum of growth.
But the good times are not long, and the new crown epidemic that is coming soon has brought a clear blow to the consumer electronics industry. In the first quarter of this year, the global PC shipments fell by 9.8%, and apple was the largest manufacturer among them. In the first quarter, the shipments fell by 20.7%. The market share not only fell below 6%, but also fell to the fifth place in the world. In fact, Apple’s shipments have been declining in the past few years since 2015, when they exceeded 20 million.
Berstein, an American securities firm, roughly estimated that if Apple replaced all its processors at $170-215 per processor, the loss to Intel’s annual financial statements would be about $2 billion to $3 billion. This is a huge revenue loss of course, but considering Intel’s annual revenue of more than 70 billion dollars, the loss of 2% – 4% of the revenue does not seem to hurt.
At present, there are many windows notebooks based on ARM chips in the market, but they haven’t really opened the market. However, with Apple’s switch to arm architecture, a large number of developers will also be driven from x86 architecture to taking into account the arm architecture ecology, which will promote arm architecture chips to usher in new growth opportunities in the PC field, thus bringing unexpected help to Qualcomm. In the long run, Intel will undoubtedly face greater competitive pressure in the PC field.
Intel focuses on Transformation
However, Intel executives are now focusing more on new digital businesses. Over the past few years, Intel has been making strategic transformation, investing tens of billions of dollars in strategic acquisitions, aiming to reduce its dependence on PC business and move to a new data centric business area. Although Brian Krzanich, the former CEO, left unexpectedly due to personal problems, Robert swan, the new CEO, continues to promote Intel’s transformation.
From the current situation, Intel’s transformation has achieved certain success. More than ten years ago, Intel in Otellini era missed the era of mobile Internet. This time, intel was ahead of the industry, expanding new businesses such as cloud computing, artificial intelligence, automatic driving, Internet of things and edge computing. These new businesses are Intel’s future. Just like windows is to Microsoft, PC business is very important to Intel, but it is not the focus of high-level attention at present.
Intel’s PC business has an annual revenue of about $35 billion, which is a very limited market growth space and is also facing the encroachment of AMD and Qualcomm. At the same time, Intel made $23.5 billion in revenue last year from its more profitable data center server chips, with a 93% market share. In the first quarter of this year, Intel PC business revenue increased by 14%, but data center business revenue increased by 43% year on year.
Compared with the PC market that has been saturated and is difficult to grow significantly, the data center and new business market have broad growth space, and will undoubtedly become the new growth impetus of Intel in the future, and the proportion of PC business revenue will continue to decline. In 2012, Intel’s PC business accounted for 72% of its revenue, but by 2020, it had dropped to 49%.
Intel’s new market is a huge market space with a value of 300 billion US dollars. At present, it is still in the initial stage, and it is urgent to occupy the first opportunity in these new market areas as soon as possible. By contrast, the billions of dollars of losses brought by Apple’s “change of heart” are nothing at all, and can even be easily offset by the growth of new businesses.
Although Apple’s break-up with Intel will cost the latter billions of dollars in revenue, Apple has set its strategy many years ago. This is the short-term pain Intel will face sooner or later, but also the inevitable result. For Intel, it is far more significant to continue to vigorously promote the transformation of new data business and open a broader blue ocean and new market than to fight in the red sea of PC market