Apple Silicon switch could lead to lower-cost Mac lineups, analyst says

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in General Discussion
JP Morgan expects the first Apple Silicon Mac to drive innovation, cut material costs, and possibly lead to a more diversely priced lineup of Mac devices.

Credit: Andrew O'Hara, AppleInsiderCredit: Andrew O'Hara, AppleInsider
Credit: Andrew O'Hara, AppleInsiderCredit: Andrew O'Hara, AppleInsider


In a note to investors seen by AppleInsider, analyst Samik Chatterjee believes that the most important announcement at Apple's November 10 event will be at least one new Mac model equipped with the proprietary Apple Silicon chip.

This device will officially kick-start the two-year transition to first-party chipsets in macOS devices, Chatterjee said. The transition will ultimately allow Apple to leverage the gains it has made with its own proprietary silicon.

"With the move to in-house capabilities, Apple is looking to regain control over the pace of the technology roadmap on the processor chips, and create a common architecture across all Apple products, making it easier for developers to write and optimize applications for the product ecosystem," the analyst writes.

For consumers, Chatterjee believes that a lower bill of materials cost with a new Apple Silicon chip could lead to Mac devices with a lower price point targeting a wider market. More specifically, the analyst contends that Apple could release an SKU with a price point between that of the MacBook Pro and the MacBook Air.

The analyst estimates a standalone market opportunity of 10 to 15 million unit volume for the new Mac device, with a starting average selling price (ASP) of $1,000. That implies about a $15 billion opportunity for Apple, "which will assure multi-year growth in a lackluster PC market."

In addition to gains in compute power and efficiency, a move to proprietary Apple Silicon could also allow Apple to bump up its pace of technological innovation once it has control of the chip design roadmap. Intel, which Apple has used for 15 years, has seen delays in its roadmap in recent years.

All in all, Chatterjee believes that an internally designed chipset could lead to a reduction in BOM costs of about $75 by "engaging directly" with foundry partners like Taiwan Semiconductor Manufacturing Company (TSMC).

That could be important to future Mac growth as Apple's ASP for the lineup tracks around $1,400, which is quite a bit higher than competitors. A less expensive Mac device could provide a "runway for growth" with an expanded lineup.

In addition to Mac announcements, JP Morgan also forecasts that Apple could release non-related products such as a new Bluetooth and Ultra Wideband "AirTags" tracking accessory.

Chatterjee is maintaining his AAPL price target of $150, based on a 2022 earnings-per-share of $4.85 and a blended price-to-earnings multiple of around 31x.
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Comments

  • Reply 1 of 44
    eriamjheriamjh Posts: 1,350member
    I initially thought this could occur, but I really think that Apple will hold the price points.  Maybe, we could see Apple knock $100 off the intel equivalent.  

    I suspect that Apple will use the margin to increase the content of the devices, like better screens, better cameras, 5G chips, etc.   Premium prices with premium features.
    retrogustostompyspock1234designr
  • Reply 2 of 44
    red oakred oak Posts: 905member
    The performance + battery improvements alone are enough to fundamentally change Apple's unit market share in the PC industry.    This analyst seems to be missing that fundamental point.   A lower priced SKU variant is just the icing on the cake.  

  • Reply 3 of 44
    Cost ≠ Price
    elijahgwilliamlondonrazorpitGG1
  • Reply 4 of 44
    maestro64maestro64 Posts: 5,022member
    Do you think the cost to apple would drop considering all the licensing fees they will not have to pay Intel to use their overly expensive processors. The chip costs to Apple will be a fraction of the cost of having Intel inside.

    The real question, how much of this cost reduction will Apple pass forward.
  • Reply 5 of 44
    elijahgelijahg Posts: 2,506member
    maestro64 said:
    Do you think the cost to apple would drop considering all the licensing fees they will not have to pay Intel to use their overly expensive processors. The chip costs to Apple will be a fraction of the cost of having Intel inside.

    The real question, how much of this cost reduction will Apple pass forward.
    Huh? There are no licensing costs to using Intel CPUs, that's all included in the cost of the CPU. 

    The second part of your post is more pertinent, with Cook at the helm I doubt there will be much, if any price reduction, even if Apple's costs are less. Remember unlike Jobs, Cook is all about the profit.
  • Reply 6 of 44
    davgregdavgreg Posts: 921member
    The ability to run iOS apps on the ARM Macs is going to be a big deal for many of us. Hoping a Mac mini with ARM is in the mix. 
    GG1
  • Reply 7 of 44
    mike1mike1 Posts: 2,808member
    The purest example of any potential price reductions could be the Mac Mini. It is a computer only. It is not burdened with other costs such as the screen,camera, keyboard, battery etc. that add to bill of material cost and can somewhat mask the cost of the processor.
    williamlondoncat52retrogustoGG1
  • Reply 8 of 44
    The cost of the chip might reduce but the cost of developing the next one and keeping ahead of Intel will not. It's not just a matter of reusing iPhone chips - Mac chips will need their own special sauce. Apple should use any spare to invest in research to increase the distance between Macintosh and the rest.
    retrogustorazorpituraharamac_dogKTRh4y3sJWSC
  • Reply 9 of 44
    uraharaurahara Posts: 590member
    maestro64 said:
    ...
    The real question, how much of this cost reduction will Apple pass forward.
    Why should they?
    They are introducing a better CPU to a consumer. Why would they need also to reduce a price on a computer which is better?
    mac_dogwilliamlondonspock1234tokyojimuJWSC
  • Reply 10 of 44
    rob53rob53 Posts: 2,723member
    Apple already has amortized a lot of the development costs of an ASi Mac because of all the development work done on iOS devices. Intel CPUs are expensive so Apple can remove that cost from the final price. Yes, Apple has been spending money on developing a Mac version but they aren’t starting from scratch, they’re simply enhancing the existing SoC designs they already have. We’ll see what happens tomorrow but I’m confident Apple is ready to start their next evolution and won’t be greedy.
    forgot username
  • Reply 11 of 44
    The cost of the chip might reduce but the cost of developing the next one and keeping ahead of Intel will not. It's not just a matter of reusing iPhone chips - Mac chips will need their own special sauce. Apple should use any spare to invest in research to increase the distance between Macintosh and the rest.
    Ah but Apple has already laid out those costs.  Their R&D going up is in no small part to these chip developments.  But that money they have already spent.  The marginal cost of these chips is going to be much less that what they pay intel.  And they will not be splitting those "fixed" costs over millions of phones iPads and macs.
  • Reply 12 of 44
    KTRKTR Posts: 192member
    maestro64 said:
    Do you think the cost to apple would drop considering all the licensing fees they will not have to pay Intel to use their overly expensive processors. The chip costs to Apple will be a fraction of the cost of having Intel inside.

    The real question, how much of this cost reduction will Apple pass forward.
    Knowing apple, I think the price will stay the same.  I think they all want to get higher margins.  But then again, they could make the rices lower and make the rest of the pc market take notice.  It COULD force the rest of the pc market to lower THER prices, in tern causing them to have lower margins.  lol.
    h4y3s
  • Reply 13 of 44
    KTRKTR Posts: 192member

    maestro64 said:
    Do you think the cost to apple would drop considering all the licensing fees they will not have to pay Intel to use their overly expensive processors. The chip costs to Apple will be a fraction of the cost of having Intel inside.

    The real question, how much of this cost reduction will Apple pass forward.
    maestro64 said:
    Do you think the cost to apple would drop considering all the licensing fees they will not have to pay Intel to use their overly expensive processors. The chip costs to Apple will be a fraction of the cost of having Intel inside.

    The real question, how much of this cost reduction will Apple pass forward


    If any
  • Reply 14 of 44
    stompystompy Posts: 369member
    KTR said:
    maestro64 said:
    Do you think the cost to apple would drop considering all the licensing fees they will not have to pay Intel to use their overly expensive processors. The chip costs to Apple will be a fraction of the cost of having Intel inside.

    The real question, how much of this cost reduction will Apple pass forward.
    Knowing apple, I think the price will stay the same.  I think they all want to get higher margins.  But then again, they could make the rices lower and make the rest of the pc market take notice.  It COULD force the rest of the pc market to lower THER prices, in tern causing them to have lower margins.  lol.
    My guess is that the price will stay the same.

    If true, my hope is that Apple will increase the base storage and/or RAM for every model.
  • Reply 15 of 44
    red oak said:
    The performance + battery improvements alone are enough to fundamentally change Apple's unit market share in the PC industry.    This analyst seems to be missing that fundamental point.   A lower priced SKU variant is just the icing on the cake.  

    It'll be generations behind AMD in performance and won't gain much now that AMD will own Xilinx. Both will be introducing FPGAs and more DSPs to their CPU designs. AMD has the most advanced CPU designs in the world.

    Prices will be the same but their profit margins will increase due to being the CPU designer.
    cat52
  • Reply 16 of 44
    There will also be savings from getting rid of 3rd party GPUs!
    williamlondonforgot username
  • Reply 17 of 44

    salmonstk said:
    The cost of the chip might reduce but the cost of developing the next one and keeping ahead of Intel will not. It's not just a matter of reusing iPhone chips - Mac chips will need their own special sauce. Apple should use any spare to invest in research to increase the distance between Macintosh and the rest.
    Ah but Apple has already laid out those costs.  Their R&D going up is in no small part to these chip developments.  But that money they have already spent.  The marginal cost of these chips is going to be much less that what they pay intel.  And they will not be splitting those "fixed" costs over millions of phones iPads and macs.
    CPU designs are never ``money already spent.'' It's a continuous ever increasing investment.
    williamlondoncat52
  • Reply 18 of 44
    h4y3sh4y3s Posts: 54member
    I’m hoping for a Chromebook killer: a MacBook 12” for $699. 128GB/8GB RAM! Powered by an A14 SOC of some flavor. 
    forgot usernamenarwhal
  • Reply 19 of 44
    KTRKTR Posts: 192member

    rob53 said:
    Apple already has amortized a lot of the development costs of an ASi Mac because of all the development work done on iOS devices. Intel CPUs are expensive so Apple can remove that cost from the final price. Yes, Apple has been spending money on developing a Mac version but they aren’t starting from scratch, they’re simply enhancing the existing SoC designs they already have. We’ll see what happens tomorrow but I’m confident Apple is ready to start their next evolution and won’t be greedy.
    Keep in mind that Apple does not want to be too dependent or reliant on the iPhone. Before the iPhone, the mac was apple bread and butter.  

    forgot username
  • Reply 20 of 44
    eriamjh said:
    I initially thought this could occur, but I really think that Apple will hold the price points.  Maybe, we could see Apple knock $100 off the intel equivalent.  

    I suspect that Apple will use the margin to increase the content of the devices, like better screens, better cameras, 5G chips, etc.   Premium prices with premium features.
    Agree. In general, Apple doesn’t compete on price.
    edited November 2020 lkrupp
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