Over one year ago, I had this to say about Intel
Intel founder Andy Grove famously said that “only the paranoid survive.”
So if I imagine myself as an Intel executive, I’m forced to ask the question, what would keep me up at night?
The answer is this: the arrival of Apple (NASDAQ:AAPL) or Microsoft (NASDAQ:MSFT) Windows PCs running on processors using ARM Holdings (NASDAQ:ARMH) designs instead of Intel chips.
Well, if a report from Bloomberg
is correct, Apple is actually considering replacing the Intel processors used in the Mac line with the same kind of ARM-based chips used in the iPhone and iPad.
I'll cut right to the chase.
If -- and I'll emphasize that we're still in the "if" stage now -- this happens, consider it a nightmare scenario for Intel over the long term.
First, let's explore whether this is even possible.
My inclination is to say yes, it is. While Intel has a lot more experience than Apple in designing processors, Apple's come a long way in a very short period of time.
Look at the iPad line. It's less than three years old, but the newest fourth-generation model delivers screaming performance and extended battery life on a 9.7" 2048x1536 screen for just $500.
Think about how good these Apple processors will be in three to five years.
I bet they'll be more than fast enough to make Apple reconsider whether it makes sense to hand over 60%+ gross margins to Intel.
Furthermore, Apple would be able to run the same operating system across all devices -- PCs, tablets, smartphones, and whatever hasn't even been invented yet -- providing users with perfectly seamless transitions between different products.
Now let's talk Intel's side of the equation.
Keep in mind, I consider this to be a long-term risk for Intel -- something that could hit it three years from now at the absolute earliest, or not at all. In the third quarter of this year, Apple had 5.6% of the global PC market. I calculated this number by dividing Apple's reported Mac sales into the worldwide number reported by Gartner.
So Apple ain't a big deal, right?
In mid-2009, NPD released one of the most staggering statistics regarding the PC market I've ever seen: the fact that Apple controlled over 90% of the US market for PCs over $1,000.
And keep in mind, Apple has gained significant market share since then with groundbreaking products like the Macbook Air. So its stranglehold on high-end PCs has gotten stronger, not weaker.
So what does this mean?
Well, it's simple. Apple moves a lot of expensive Intel PC processors, and thus it would be a terrible customer for Intel to lose.
Furthermore, think about Apple's influence within the gadget industry.
What Apple does, everyone else copies.
(NASDAQ:GOOG) Android smartphones and tablets have mostly imitated the iPhone and iPad.
Apple was also the first mainstream PC company to dump floppy drives, go all-LCD in displays, abandon legacy ports, and embrace built-in Wi-Fi. Everyone else followed along.
Heck, the supposed next big thing in Windows PCs -- the Ultrabook -- is simply a copy of Apple's revolutionary MacBook Air line, which debuted way back in 2008.
One other point: If Apple dumps Intel, expect competing PC makers to push Microsoft to get further into bed with ARM.
Position in AAPL
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