Coverage: Apple plans to stop using Intel chips

Apple Inc. is planning to use its own chips in Mac computers beginning as early as 2020, replacing processors from Intel Corp., according to media reports on Monday.

Ian King and Mark Gurman of Bloomberg News had the story:

The initiative, code named Kalamata, is still in the early developmental stages, but comes as part of a larger strategy to make all of Apple’s devices — including Macs, iPhones, and iPads — work more similarly and seamlessly together, said the people, who asked not to be identified discussing private information. The project, which executives have approved, will likely result in a multi-step transition.

The shift would be a blow to Intel, whose partnership helped revive Apple’s Mac success and linked the chipmaker to one of the leading brands in electronics. Apple provides Intel with about 5 percent of its annual revenue, according to Bloomberg supply chain analysis.

Intel shares dropped as much as 9.2 percent, the biggest intraday drop in more than two years, on the news. They were down 6.4 percent at $48.75 at 3:30 p.m. in New York.

Anita Balakrishnan of CNBC.com reported that Apple has been exploring chip acquisitions in recent years:

Johny Srouji, Apple’s senior vice president of hardware technologies, said last year that Apple was eyeing chip-based acquisitions in Israel, while chief financial officer Luca Maestri has said that a huge chunk of Apple’s R&D budget goes to chips.

“Today, we do much more in-house development of some fundamental technologies than we used to do a few years ago, when we did more of that in the supplier base — the work we do around processors or sensors,” Maestri said at the Goldman Sachs Technology and Internet Conference in San Francisco last year. “It’s very important for us because we can push the envelope on innovation, we can better control timing, cost, quality. We look at that as a great strategic investment.”

While Intel has many lines of business, it is still known for its “Intel inside” computer stickers. Apple is a large and influential customer. The Mac Pro and iMac Pro use the Intel Xeon, the iMac has Intel Core i5 and i7 processors, and Macbooks use versions of the Intel Core i5, Intel Core m3 and Intel Core i7.

Chris Welch of The Verge reported that Apple also uses Intel chips in some of its phones:

Aside from the processors in its Macs, Apple also uses Intel’s modem chips in some iPhones.

Apple’s last major Mac processor transition of this scope occurred when it moved away from IBM’s PowerPC chips in favor of Intel’s. Apple co-founder Steve Jobs announced the move in 2005 and it was completed by the end of the following year. As in that earlier example, Bloomberg notes this would require a “multi-step transition.” Intel chips will almost certainly remain in Apple’s top-end machines like the iMac Pro and forthcoming Mac Pro revision until the company can produce in-house chips that are capable of meeting the demands of professional Mac users.

The decision to power Macs with its own chips comes after years of rapid improvement and evolution of the ARM-based processors that Apple has built into its iOS devices, the Apple Watch, and the Apple TV. Apple’s latest iPhones and iPads have grown more powerful than some of the company’s past Macs. Designing future Macs around its own chips would afford Apple more flexibility in releasing new products, and the added level of hardware control would also let the company further bolster security.