Can Apple Become the Intel of Mobile Chips?
I know what you're thinking. You're scratching your head and wondering, "What is this Fool talking about? Intel (NAS: INTC) is the 'Intel of mobile chips,' isn't it?" Especially since Apple (NAS: AAPL) gets its Mac-bound processors from Intel, after all.
Let's back up a step.
According to In-Stat, Apple is potentially set to become the largest mobile processor company in the world by year's end. It's worth noting that In-Stat is including laptops in its definition of "mobile products," which is how Intel is able to claim top-dog status. Desktops and servers are excluded, because, let's face it, who grabs their data server along with their smartphone and keys on their way out the door?
The study includes portable media players such as the iPod Touch (which Apple doesn't break out specifically from its broader iPod category), along with handheld gaming devices from the likes of Nintendo and Sony.
Most people, including myself, tend to classify just smartphones and tablets as mobile devices, most of which carry ARM Holdings (NAS: ARMH) -based designs, but that's a debate for another day.
In-Stat estimates that Apple shipped roughly 176 million processors within its iDevices, which represented a 13.5% market share, while Intel shipped 181 mobile chips for a 13.9% slice. Apple reported sales of about 93.1 million iPhones and 40.5 million iPads in calendar 2011, which accounts for 133.6 million of its ARM-based chips, before counting iPods.
With those definitions in mind, the researcher thinks Apple has a decent shot of dethroning Intel as the top mobile processor maker in 2012.
In-Stat analyst Jim McGregor attributes continued iPhone and iPad strength as the key to Apple's possibly taking the lead. He believes that Apple's role as a processor company will be even more emphasized as mobile devices continue to take off, especially as Intel has yet to make a dent in smartphones and tablets, although the chip giant is making a big push this year with its Medfield Atom chip.
He even touches on the possibility that Apple may one day switch its Macs over to its proprietary A-family of chips, which would be a big loss for Intel since Macs have outpaced the broader PC market for 23 consecutive quarters. Rumors of ARM-based MacBooks have circulated for years, and Apple has probably tested such prototypes, but Intel's spot in Macs is probably safe for the time being.
Intel chips lead in performance, although ARM chips still have the advantage with power efficiency, which is a dynamic that ARM CEO Warren East doesn't think will change anytime soon.
If you can't join 'em, beat 'em (hopefully)
Tablets are a pretty big threat to Intel, as it currently lacks any design wins in that form factor, which is why it will also be pushing its Ultrabook reference designs very aggressively to fend off the slates.
Separately, IDC recently released its 2011 estimates with tablet shipments of 68.7 million units and sees 2012 shipments jumping by 54% to 106.1 million units, an increase from its prior forecast of 87.7 million. The tablet market's growth is another reason you need to be looking at mobile component plays right now.
Meanwhile, Canaccord Genuity thinks Apple might sell as many as 65.6 million iPads this year, which would imply a 62% market share when cross-referencing IDC's forecast. For 2013, the analyst thinks that figure could reach as high as 90.6 million, while Morgan Stanley's Katy Huberty thinks 129 million is possible next year.
That's a lot of gadgets not carrying Intel chips, instead carrying ARM chips from the likes of Apple, Qualcomm (NAS: QCOM) , NVIDIA, and Texas Instruments, among others. Qualcomm's Snapdragons lead that pack, as the chipmaker grabbed 50% of all smartphone processor revenue last year.
Microsoft's (NAS: MSFT) upcoming Windows 8 should give Intel an invitation to the tablet party, with Hewlett-Packard CEO Meg Whitman effectively confirming plans for such a device recently. The flip side of that coin is that Windows 8 is also letting ARM into Intel's traditional PC turf.
Apple vs. the world
Most people don't think of Apple as a "chipmaker." While it outsources manufacturing to Samsung and maybe eventually Taiwan Semiconductor Manufacturing one day, so does just about everyone other than Intel. So in that sense, it's as much of a mobile-chip maker as any of its ARM-licensing brethren.
Apple's chip strategy is clearly evolving, and although its A-family of chips is strictly destined for iDevices within its carefully curated garden, it's one that's growing so fast that not even Scotts Miracle-Gro Ortho Weed-B-Gon MAX can hold it back.
It would be quite a feat if Apple takes the gold, because that would mean that Apple's mobile products alone would surpass all of Intel's mobile customers combined in shipments.
Can Cupertino claim the crown? I think so.
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At the time this article was published Fool contributorEvan Niuowns shares of ARM Holdings and Apple, but he holds no other position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Intel, Microsoft, and Apple.Motley Fool newsletter serviceshave recommended buying shares of Intel, NVIDIA, Scotts Miracle-Gro, Apple, and Microsoft, writing puts on NVIDIA, and creating bull call spread positions in Apple and Microsoft. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days. The Motley Fool has adisclosure policy.
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