SAN JOSE, U.S./TAIPEI -- Apple is to replace Intel processors used in Mac computers with chips designed in-house, similar to those already powering iPhones, iPads and Apple Watches, in an important shift by the California-based tech giant.
The decision is a win for Taiwan Semiconductor Manufacturing Co, the world's largest contract chipmaker, which will deepen its relationship with Apple by producing chips for the next generation of MacBooks and other Mac computers, sources told Nikkei Asian Review. Currently, TSMC is Apple’s sole supplier for iPhone, iPad, and Airpods mobile processors.
Apple made the announcement at its closely watched Worldwide Developers Conference on Monday, confirming the previously reported switch to Apple silicon -- a brand-new chip designed by Apple and based on Arm Holdings technology -- for its Mac lineups.
"With its powerful features and industry-leading performance, Apple silicon will make the Mac stronger and more capable than ever," Apple CEO Tim Cook said in a press release.
Apple said it plans to ship the first Mac with Apple silicon by the end of the year and complete the transition in about two years.
The company also introduced several updates to various operating systems at the conference, which is being held online-only for the first time.
Apple's move to introduce its own Arm-based processor chips for MacBook will be a blow to Intel, whose X-86 technology has dominated the PC industry for decades.
Apple ranked No. 4 in PC sales last year, behind Lenovo Group, HP and Dell. The Cupertino-based company shipped 17.68 million personal computers in 2019, accounting for 6.6% of global market share, according to data from IDC.
However Apple will not be totally cut off from Intel. The company said it will continue to support and release new versions of operating systems for Intel-based Macs for years to come, and "has exciting new Intel-based Macs in development."
Intel shares traded up 0.79% on Monday, recovering some of the losses from last week after initial reports on Apple's switch indicated Macs might be fully moving away from Intel chips.
Apple said the in-house-designed processor will give Macs an industry-leading performance per watt, meaning future MacBooks will have much longer battery life and higher-performance graphics processing units. Better GPUs will enable app developers to design even more powerful "pro apps," or apps developers use to create apps, and high-end games.
Sources told Nikkei that Apple intended to introduce its new Mac by the end of this year using TSMC’s 7 nanometer process technology, before switching to 5nm technology next year. TSMCs 5nm process is considered the world's most advanced chip manufacturing technology. Apple’s upcoming iPhones, the company’s first 5G smartphone, also use TSMC’s 5nm process technology.
“Apple will test this first with the 7nanometer process tech . . . there are still a lot of tests and trials to be done between the new CPU and the Mac operating system,” a source told Nikkei.
This is not the first time Apple has switched its PC processors. The company in 2005 said it was switching to Intel's X-86 chips from the PowerPC technology -- a product of its collaboration with IBM and Motorola, also known as the AIM alliance. The announcement was made by Steve Jobs, with former Intel CEO Paul Otellini also on the stage at WWDC that year.
But over the 15 years partnering with Intel, Apple never gave up on the idea of developing its own processor for its MacBooks, multiple sources told the Nikkei Asian Review.
Apple designs its own processor chips for iPhones, iPads, AirPods and HomePods, all based on Arm's mobile chip design blueprint. Those chips are all produced by TSMC. Arm is owned by SoftBank Group, the Japanese conglomerate.
"Apple has made enormous investments in Arm chip design and it's logical that it extends that capability beyond the iPhone and iPad," said Geoff Blaber, vice president at market research firm CCS Insight. "Its motivations for doing so include reducing its dependence on Intel, maximizing its silicon investment, boosting performance, and giving itself more flexibility and agility when it comes to future products."
Apple also announced in Monday's keynote that it will release a new Mac operating system named Big Sur, along with the latest iPhone operating system iOS 14, and updates for the iPad, Apple Watch, and Apple TV.
All operating system updates will be available to the public in the fall.
With in-house processors powering the next-generation Macs, and the latest operating systems to be integrated with the new chips, developers can now make their iOS and iPadOS apps available on the Mac without any modifications, making it easier to develop applications and also add more offerings in Mac computers.
"This was a seminal event as the chip announcement is the first step of many more down the horizon in our opinion, as Apple takes the reins of its architecture and the cross-pollination between software and hardware becomes ubiquitous going forward," said Dan Ives, managing director at Wedbush Securities.
"Despite the challenges, embracing Arm and making hardware more consistent across the iPhone, iPad and Mac ranges is a strategic necessity," CCS Insight's Blaber said.
Replacing Intel processors with Arm-based chips might pave the way for more computers to follow suit.
Intel's X-86 technology, which its smaller U.S. chip rival Advanced Micro Devices also uses, has dominated the global PC, notebook and server industry for decades, mainly due to its computing performance. On top of that, the software and operating system ecosystem are better than with the Arm-based chips.
On the other hand, Arm-based chips are used in more than 90% of global mobile devices because the power efficiency is better than with Intel's offerings.
As the Arm-based chips' performance becomes more powerful, more and more chip developers will start to move in on this laptop pie that Intel previously had all to itself. Qualcomm has teamed up with several notebook computer makers, such as Lenovo, in the last two years to introduce notebooks with Arm-based CPUs.
Intel and AMD's X-86 infrastructure for microprocessors for notebook computers accounted for 99.6% of the market in 2019, while Arm-based processors in the segment accounted for as little as 0.4%, according to research company IDC.
Joey Yen, an analyst with IDC, said it could be a big opportunity for Arm as Apple finally is turning to Arm's infrastructure for processors used in notebook computers.
"Previously, Arm could not build a big enough ecosystem for notebook computer processors because Intel and the operating system provider Microsoft are bound together so closely," Yen said. "A lot of software is not running as smoothly on Arm's platform as on the Window-Intel platform. But Apple is a totally different story, it develops its own devices and operating systems -- MacOS. It could be a major breakthrough for Arm-based CPUs entering the laptop market."
"We need to monitor later how many models of Apple's MacBooks are using Arm-based CPUs," Yen added. "But it's still a big milestone for Arm even though we are still not sure if that would eventually lead to a big success and whether its performance could match Intel's offerings."