Apple Should Switch Chips for the iPhone 5

Apple Should Switch Chips for the iPhone 5

Apple's (NAS: AAPL) chip strategy continues to evolve as it branches out different members of its A-family of chips for different purposes, yet I can't help wondering whether the iPhone maker would be better off going with someone else.

The company's current A5X chip found in the third-generation iPad is its newest iteration, and features a dual-core CPU and quad-core GPU. More specifically, it includes a two relatively stock Cortex A9 cores licensed from ARM Holdings (NAS: ARMH) and a quad-core PowerVR GPU licensed from Imagination Technologies. It packages these together, slaps its "A" branding on it, and calls it a day.

Sources: Apple, Qualcomm.

Sources: Apple, Qualcomm.

On the other hand, dominant mobile-chip maker Qualcomm (NAS: QCOM) licenses an ARM instruction set, which allows it to be ARM-compatible but also lets the company build its chips from scratch in a more elegant manner. This is why the dual-core Snapdragon S4 built on its newest Krait architecture can outperform the quad-core NVIDIA (NAS: NVDA) ARM-based Tegra 3. This is also why I'd rather see a Snapdragon in the next iPhone than an A6.

Oh, snap
Beyond performance, there would be functionality gains. One of the reasons Qualcomm is the mobile-chip king is that it has enormous advantages in integration, especially in areas like cellular connectivity. Its Snapdragon S4 chips feature integrated 4G LTE, serving up speedy data while eliminating the need for a discrete baseband modem and saving valuable real estate inside.

Qualcomm is currently the sole supplier of discrete baseband modems for iPhones and cellular-enabled iPads, after Apple ditched Infineon shortly after Intel (NAS: INTC) acquired it. So it still enjoys a cushy iSpot. Apple continues to push the envelope physically and is expected to make the iPhone incredibly thin, meaning physical space constraints are increasingly important.

iPhone 4S logic board showing A5 processor and discrete baseband modem. Source: iFixit.

iPhone 4S logic board showing A5 processor and discrete baseband modem. Source: iFixit.

For example, here are images of the iPhone 4S logic board from iFixit's teardown, highlighting two separate components that could potentially consolidated into one if Apple switched to Snapdragons. The S4 also outperforms the iPhone 4S in CPU benchmark tests.

Performance, schmerformance
Of course, this won't happen for a number of reasons. For starters, Apple has already embarked upon this path starting with the original iPad in 2010, and it surely doesn't see much reason to change course. Apple has achieved the unthinkable in the world of consumer electronics: It doesn't rely on tech specs to sell its products.

Instead, it focuses on other innovations, such as industrial design, screen resolution, or software. It focuses on the overall experience and usability while marketing to the average consumer who doesn't care about the clock speed of the processor or how much RAM is inside. You buy an iPhone for the whole package.

There's also a matter of pure branding and marketing. Snapdragons are frequently found in many Google Android devices and allMicrosoft Windows Phone devices. The last thing Apple would want is to be associated with its rivals, especially the ones from Mountain View and Redmond, because it would probably view that as a form of commoditization. At the very least, it would contribute to consumer perception of commoditization.

By sticking with its own A-brand of chips, Apple can tout the fact that it's "custom silicon" and other marketing fluff. It can quietly opt not to disclose various specifications, leaving interested parties to find out on their own, while the average consumer has already bought an iPhone.

Keep dreaming
The most compelling reason will be physical space considerations, but I still doubt that will ever sway Apple's chip strategy. It's likely unable to develop integrated LTE in-house, since Apple has little to no direct knowledge in that department, unless it wants to go out and acquire someone's wireless unit.

Apple should switch to Snapdragons because they're simply the best mobile processors out there. Too bad it never will.

Even though Apple is stuck in its ways, those ways seem to be working as consumers snap up iPhones en masse. Sign up for The Motley Fool's brand-new premium Apple research service to read more. This company is looking to put an end to Qualcomm's dominance and is off to a solid start. This special free report will get you up to speed.

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Fool contributorEvan Niuowns shares of Apple, but he holds no other position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Qualcomm, Apple, Microsoft, Google, and Intel.Motley Fool newsletter serviceshave recommended buying shares of Intel, Google, Microsoft, NVIDIA, and Apple, 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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