How Intel Got Blindsided and Lost Apple’s Business
Here’s why Apple stopped using Intel processors for Mac computers in favor of its own chips based on ARM designs
After 14 years of collaboration, Apple announced last month that it will no longer be using Intel’s processors for its Mac laptops and desktops. It will rely instead on Apple’s own processor designs, which, just like the chips it uses in its iPhones and iPads, are based on the ARM architecture developed by ARM Holdings, a British chip design firm.
It’s a move that has been long anticipated, driving feverish speculation in online forums for the last 10 years or so. It represents a momentous victory in the fight between ARM Holdings and mighty Chipzilla itself, Intel — a fight that has been quietly raging since the iPhone launched back in 2007.
We often laud the benefits of competition. We want to see innovative companies competing with one another in free markets, to better serve the needs and desires of consumers. All too often, however, the profits go to large corporations whose success lies not so much with their ability to satisfy consumers as it does with their ability to maintain and exploit their market dominance, stifle competition, and force consumers to put up with whatever they’re given.
Fortunately for ARM, Intel didn’t seem to see it as a threat until it was too late.
So when little ARM Holdings started challenging mighty Intel’s dominance of the market for computer processors in the early 2000s, one might have expected Intel to successfully use its size and financial muscle to swat away that challenge.
And yet Apple’s recent announcement is yet another in a series of huge wins for ARM over its much larger and more powerful rival. The little guy (although owned by SoftBank since 2016, it’s still far smaller than Intel) is slowly winning, and Intel appears powerless to stop it.
How Intel missed the threat
Intel has been central to some of the most important innovations in computing history. It is credited with creating the world’s first commercially available microprocessor in 1971. I own a number of Intel-powered computers myself, and they continue to serve me very well. However, it has also has been associated with some rather restrictive business practices. It was sued for antitrust behavior by semiconductor rival AMD in 2004 and ended up paying out $1.25 billion in settlements. It’s also still fighting a $1.2 billion antitrust fine levied by European regulators nearly 10 years ago. Fortunately for ARM, Intel didn’t seem to see it as a threat until it was too late.
Apple was one of the founding partners that established ARM (then known as Advanced RISC Machines Ltd) back in 1990. Apple even used an ARM processor in its ill-fated Newton personal digital assistant in 1993. But the partnership began delivering serious profits when Apple introduced its ARM-powered iPod in 2001. The iPod didn’t need a powerful processor, but it needed a processor that required very little power, so as not to be too much of a drain on the iPod’s battery. ARM’s power-sipping processors were perfect for the task.
The iPod, of course, took off and became hugely successful. But it seems highly unlikely that the people at Intel were at all concerned that it was powered by an ARM processor. The iPod was a specialist device, not a general computing device. ARM and Intel appeared to be operating in two completely different markets.
So while ARM focused on producing low-power chips for portable devices, Intel continued raking in the profits by pushing their processors to work ever harder and hotter and seemingly giving less thought to power-efficiency. This approach culminated in its notorious Pentium D processors, launched in 2005. I was the unfortunate owner of a desktop computer powered by a Pentium D processor. It required a huge heat sink and multiple fans to keep it cool. Boy, was that machine noisy!
The iPhone changed everything
In 2007, the iPhone, also powered by an ARM processor, changed the world. Once the App Store launched, the iPhone was no longer a specialist device. It was a general-purpose pocket computer. ARM was now encroaching on Intel territory.
The iPhone became ubiquitous, and Apple’s competitors raced to make rival devices, running on Android. These, too, were powered by ARM processors.
Intel had missed the boat. They belatedly pushed their chips into a few smartphones, but none of the phones sold that well. ARM dominated the mobile market, and phone manufacturers had no good reason to switch to Intel.
Smartphones formed a brand-new market, and while Intel missed the opportunity to capture a share of it, its core business of manufacturing processors for desktops and laptops remained secure. The iPhone’s ARM processor had demonstrated new capabilities for mobile computing, but it couldn’t replace the functionality or processing power you could get from an Intel-powered PC or Mac.
The iPad amped up the threat
Then, in 2010, Apple introduced the iPad, which represented another revolution in mobile computing. Relying on ARM chips, the iPad managed to dissipate heat without needing fans and could last 10 hours before needing to be charged, despite being much thinner and lighter than a laptop. At the time, you’d be lucky if your laptop battery lasted two hours. (In review tests, two of the top three selling laptops of January 2010 lasted barely more than 2 hours 30 minutes on a “balanced” power setting even when brand new.)
The success of the iPad led Intel to become extremely concerned about the prospect of tablets cannibalizing the laptop market.
Since tablets more closely rivaled the capabilities of a laptop than smartphones, they represented a much more direct threat to Intel’s core business.
The success of the iPad led Intel to become extremely concerned about the prospect of tablets cannibalizing the laptop market. Laptop manufacturers, who were equally concerned about this, launched their own tablets. But these too were powered by ARM processors.
By this time, Intel had developed some lower-power Atom processors that could power tablets. But Atom processors have often been less than impressive. Initially developed and marketed as a cheaper line of chips for netbooks, Atom chips were designed to undercut the competition but to have limited performance so as not to undermine sales of Intel’s more premium-priced processors. Atom chips also faced compatibility problems as nearly all the apps in the Android app store were written with ARM processors in mind.
Given that tablets had rendered netbooks obsolete and manufacturers weren’t likely to buy Atom chips on their merits, Intel offered tablet manufacturers steep discounts and marketing rebates to try and buy some share of the tablet market. Although this convinced some tablet manufacturers to use Atom chips, none of these tablets were big success stories.
Intel eventually got fed up with throwing money away and gave up in defeat. And when the subsidies stopped, tablet manufacturers simply went back to using ARM chips.
Losing focus on innovation
While ARM and its partners were looking for ways to create genuinely exciting and innovative new products that really got consumers excited, Intel seemed to be more concerned with hindering the competition and protecting its own market dominance.
As ARM consolidated its grip on the smartphone and tablet markets, it was also setting its sights on the laptop market.
While Apple was developing the revolutionary iPad, Intel was trying to see off rivals in the almost instantly obsolete netbook category. When Intel pushed its Atom chips into smartphones and tablets, it wasn’t offering consumers a superior experience. It was trying to undermine the profits of rivals who offered ARM-based alternatives.
Intel’s forays into netbooks, smartphones, and tablets were fundamentally defensive moves aimed at protecting its territory. Meanwhile, as ARM consolidated its grip on the smartphone and tablet markets, it was also setting its sights on the laptop market.
Tablets never replaced laptops as many had envisioned, perhaps in part because Tim Cook proved to be a much more conservative leader than Steve Jobs. Cook was concerned about the possibility of iPad sales cannibalizing the Mac, and Apple didn’t push the iPad hard as a laptop replacement since it wanted consumers to buy both an iPad and a Mac.
There were some ARM-powered Chromebooks. And Microsoft launched its poorly implemented and ill-fated Windows RT for use on ARM-powered devices. But without a fully coordinated approach to both hardware and software, no serious threat to Intel emerged.
Now, 10 years after introducing the iPad, Apple has decided that the time has come to use its resources, market power, and devoted fanbase to make the Mac ARM-powered as well.
ARM’s secret weapon
But why has Apple decided to switch the Mac over to ARM? Perhaps because it gives Apple more top-to-bottom control over the design of its devices.
Intel runs a closed, secretive system, designing and manufacturing its processors all by itself and providing them on a take-it-or-leave-it basis. This is not a system that lends itself very well to innovation. If you make Intel-based devices, you have to put up with Intel’s specific designs, Intel’s prices, and Intel’s timetable.
ARM works more flexibly. It provides base designs but allows its design partners (such as Apple, Qualcomm, and Samsung) to adapt and improve them for their own specific purposes. Chip fabricators can then compete for the business of actually manufacturing them.
Apple makes far more money out of its ARM partnership than it has ever made out of its partnership with Intel.
Manufacturers of mobile devices are happy to rely on the ARM architecture because they can buy their processors from a competitive market. If one supplier lets them down or tries to up their prices, they can go elsewhere.
ARM is the bedrock of an open system in which ARM licensees are enabled and encouraged to innovate to compete against one another while simultaneously working together to strengthen the entire ARM ecosystem. It’s this business model that has helped ARM create the processing power for the big personal computing revolutions of the last two decades: music players, smartphones, and tablets.
Admittedly, ARM benefits greatly from having mighty Apple as a friend. Apple makes far more money out of its ARM partnership than it has ever made out of its partnership with Intel. The power efficiency and thermal characteristics of ARM chips are a large part of what has enabled Apple to pursue the slim and sexy design aesthetic that has made its iPhones and iPads so popular.
And now, with Apple’s help, ARM has finally broken through in the laptop market. That’s great news for ARM, great news for Apple, and absolutely brilliant news for fans of great technology and fair competition over brute market power.