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Wednesday, January 18, 2023
Apple’s decision to design its own components could mean better designs and sales
Apple (AAPL) on Tuesday launched its latest line of MacBook Pro and Mac mini computers. And while the systems may look similar from the outside, what matters is what’s inside. Both the Pro and mini are equipped with the M2 Pro, the latest version of Apple’s M2 chip. The MacBook Pro also provides access to Apple’s high-powered M2 Max.
The move is the latest step in Apple’s quest to own and improve everything that goes into its products from the bottom up. It’s also reportedly working on a chip that combines its own modem, Wi-Fi and Bluetooth modem capabilities, and its own display technology, according to Bloomberg.
This is all part of Apple’s strategy to bring most of its technology under its own umbrella, rather than relying on contract partners like Intel (INTC), Qualcomm (QCOM), Broadcom (AVGO) and Samsung. While giving up expensive contracts with other tech companies is sure to save Apple some cash, the effort is more than that.
The richest company in the world can control everything from the appearance to the functionality of the devices that it designs and sells. This may be more important than cutting their expenses.
“This is Apple’s smart strategic poker strategy and [CEO Tim] Cook,” Wedbush analyst Dan Ives told Yahoo Finance. “Apple is beating Intel at its own game on the chip front, and this innovation is significantly underestimated by Street.”
Improved performance and better designs can gain more market share
Apple’s latest computers promise better performance and battery life than previous computers running Intel’s chips or Apple’s own M1 chips. In fact, the company claims that a MacBook Pro equipped with Apple’s M2 Pro can get up to 22 hours of battery life on a single charge. That’s an absolutely insane claim, and if true, it would make the MacBook Pro one of the longest-lasting laptops on the market.
And this is exactly the kind of performance improvement that could increase Apple’s market share in the long run. Simply put, Apple’s hardware with better overall capabilities will be far more attractive to consumers than comparable Windows-based laptops and desktops.
According to market research firm Gartner, in Q4 2022, Apple’s Mac desktop and laptop lineup accounted for only 10.7% of the global market. That’s below the likes of Dell at 16.7%, HP at 20.2%, and Lenovo at 24%. Even though Apple’s highest market share in Q4 in the last three years was 10.7%, the company is still far from being a dominant force in the laptop and desktop space.
But by improving its chips and further differentiating what it can do relative to Windows PCs, Apple can demand more from the PC market even at a time when PC sales are falling.
“The beauty of the Apple model is that they will continue to make their chips faster than any other hardware company and will sell the benefits of speed for decades to come,” Loup Ventures managing partner Gene Munster wrote in an analyst note.
“Speed is a gift that keeps on giving when it comes to retaining customers and increasing Mac revenue.”
Displays and design changes
Of course, there’s more to having your own chip and component designs than just a performance boost. Apple’s move to control things like display technology will give the iPhone maker more say over the look and feel of everything from the Apple Watch to its smartphones.
According to Bloomberg’s Mark Gurman, Apple is working on its own microLED display technology for the upcoming Apple Watch and plans to eventually bring the feature to its iPhone. MicroLED technology promises the same deep blacks and vibrant colors found in OLED displays with the brightness of standard LCD panels. With the new panel, Apple can further refine the design of the Apple Watch and ultimately the iPhone to its liking, without being at the mercy of third-party partners.
Outside of design, bringing more aspects of the product line in-house gives Apple the ability to update its devices more frequently.
Apple’s Intel-based Macs have been known to go weak without upgrades for years at a time. But Apple regularly breathes fresh air into its laptops and desktops with its M-series chips, giving consumers a reason to switch to a new Mac or MacBook more often.
Then there’s the supply chain aspect of Apple’s plan. No, the company will not physically build the chips and displays that will eventually go into its devices. So there will still be some weak spots in the supply chain, as we’ve seen this year working at iPhone maker Foxconn’s factories in China.
However, by taking over even a part of the overall product development process, Apple can reduce the complexity of the supply chain and prevent future slowdowns in the manufacturing process.
Apple is still a long way from designing every aspect of its devices. And already had to contend with hiccups while developing his own chips. It was originally expected to pack its own modems into the 2023 iPhone, but had to lean on Qualcomm for another year for the chips.
But as the company streamlines its design and manufacturing processes, expect to see not only an increase in the bottom line, but the potential for all new features and designs that would otherwise be impossible for the iPhone maker.
Now we will have to wait to see how and when these changes become reality.
By daniel howley, technology editor at Yahoo Finance. follow him @DanielHowley
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