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Apple (AAPL) is reportedly developing its own processors to replace the chips that Intel (INTC) currently supplies for the iPhone maker’s Mac line of desktops and laptops. And according to Bloomberg, the changeover might happen as soon as 2020.
As you’d expect, Intel’s shares took a major hit following the news, falling 6% at market close on Monday. It’s certainly a blow to Intel, but it may not be as big of a deal as the sell-off would suggest.
That’s because Apple is only Intel’s fifth largest customer behind giants like Dell, HP and Lenovo, and according to Mercury Research’s Dean McCarron, makes up just $600 million in sales per quarter. In 2017, Intel’s PC division made $34 billion, Reuters reported. In total, the company made $62.8 billion in revenue in 2017.
It’s also worth noting that Intel is still the undisputed leader when it comes to processors for desktop and laptop computers across the board. As McCarron points out, Intel owns 88% of the laptop and desktop market worldwide. Its nearest competitor, AMD (AMD) has seen growth in the sector as of late thanks to its Ryzen chips, but it’s still far from a threat to Intel’s dominance.
And Apple hasn’t always used Intel chips. The Cupertino-based company previously used PowerPC processors, until former-CEO Steve Jobs announced the transition to Intel in 2005.
By making its own chips, Apple would be able to build specific features into its laptops and desktops without the need of a third-party manufacturer like Intel. It would also enable Apple to further merge its Mac line of computers with mobile devices like the iPhone and iPad.
Producing its own processors will also further differentiate Apple’s machines from competitors like Dell and Lenovo. But the company will have to ensure that its own chips are able to match the capabilities of its current Intel-powered computers.
The challenges ahead
While losing Apple will sting Intel, the desktop and laptop markets haven’t been bastions of good fortune for the chipmaker over the last few years. Sales of PCs decreased precipitously for years, as fewer people upgrade as often, and smartphones and tablets have become the primary computing devices for more consumers.
More recently, sales have begun to even out, with IDC reporting that the market saw 0.7% year-over-year growth in the fourth quarter of 2017, noting not to expect astronomical growth from this sector.
As far as overall PC share goes, Apple’s laptops, desktops and workstations made up just 8.2% of the market, with HP, Lenovo and Dell making up the vast majority of sales.