Apple (NASDAQ: AAPL) appreciated 82.3% in 2020, with dividends included. Miraculously, even in the midst of a COVID-19 pandemic, Apple’s financial results showed incredible resilience. As the summer progressed, enthusiasm for a potential 5G “super cycle” skyrocketed, taking Apple’s stock to new highs. The iPhone giant divided into stock is 4 by 1 in August.
And while the launch of the iPhone 12 in October, Apple’s first iPhone 5G, was undoubtedly a big deal, I would say that the most impressive achievement of Apple technology in 2020 was something else.
Image source: Apple.
The M1 chip: 10 years under construction
In early November, Apple launched its new line of Macs to be powered by its proprietary M1 system-on-chip. It is the first line of Macs that will be powered by Apple’s internal chip design, as opposed to the Intel (NASDAQ: INTC) processors that they used in the past. According to Apple, the new M1 chip features “up to 3.5x faster CPU, up to 6x faster GPU, up to 15x faster machine learning (ML) features and up to 2x longer battery life than before . ” Current specifications show that the M1 battery lasts about twice as long, and recent benchmarks show that it is much faster than the Intel chips that powered last year’s Macs. The unified M1 architecture allows the CPU, GPU, neural mechanism, controllers and other parts of the processor system to access the same memory, so data does not have to be copied as it flows between each component. This increases speed and efficiency.
How did Apple achieve this feat by defeating Intel, known as the gold standard for complex PC processors in the past two decades, and focused exclusively on leading chips? Part of the answer is that the M1 took 10 years to manufacture and another part that it had the help of two important partners.
Apple’s two dance partners
Due to Apple’s scale and prestige, it has close partnerships across the chip industry, both on the design and foundry side. In this case, M1 came about through close coordination with the private company ARM, which licenses its computing instruction architecture to third parties and competes with the x86 architecture used by Intel and Advanced micro devices (NASDAQ: AMD).
According Twitter (NYSE: TWTR) posts from Shac Ron, a former Apple engineer who worked on the project, not only coordinated Apple with ARM, but also helped ARM build its 64-bit custom instruction set (ISA) architecture even before ARM finish creating it. “M1’s performance is not like that because of ARM ISA, ARM ISA is due to Apple’s core performance plans a decade ago.”
Second, since Apple has developed its own chips, it has used foundry Semiconductor manufacturing in Taiwan (NYSE: TSM) as your partner for highly complex manufacturing. Two years ago, Taiwan Semi overtook Intel in terms of manufacturing capacity. Cutting-edge chip production has become increasingly difficult to achieve as chip densities increase and the distance between transistors becomes smaller, and Taiwan Semi’s diverse customer base has enabled it to gain an advantage in proprietary factories from Intel.
The close partnership, with Apple as TSM’s main customer, is how Apple became the first company to market 5nm chips, which pack an impressive 16 billion transistors in each M1.
Qualcomm, you are next
Why is Apple designing its own Mac chips really big business – maybe even bigger than the new iPhone 5G? Because while the brand, marketing, design and iOS operating system have provided Apple with a kind of barrier against other cellphone and computer companies, as long as Apple uses the same semiconductors as other cellphone and computer manufacturers, there is so much differentiation that Apple products can really have. By disintermediating big, powerful processor companies and putting in their own high-performance chip designs, Apple is digging an increasingly deep economic gap against rivals. It is also a very good time, as more and more people are working from home and need to update their home computers – a trend that should remain high in relation to history, even after the end of the pandemic.
As good as the new iPhone 5G is, it still uses a Qualcomm (NASDAQ: QCOM) modem, and Apple certainly argued with Qualcomm about paying Qualcomm’s exorbitant royalties in the recent past. However, after purchasing the Intel mobile modem unit in 2019, Apple is expected to produce its own 5G modem this decade.