Insight Bite: Apple’s Silicon Advantage Could Rest on Shaky Ground

Apple’s custom M1 chip has made a spectacular debut, hitting headlines in recent weeks for delivering a game-changing combination of powerful performance and long battery life.

As custom Arm-based silicon, the M1 appears to have significantly outpaced competitors, giving Apple’s new MacBooks the edge in terms of app compatibility, performance and raw power over Microsoft’s Surface Pro X series, which run on silicon developed by Microsoft and Qualcomm that suffers from less-than-optimal emulation and limited app support.

Yet while M1 has surged ahead, Apple’s competitive edge may not be built on a sustainable foundation.

The bulk of Apple’s advantage can be traced to the cutting edge TSMC 5nm process, which delivers more performance at a lower power consumption than the equivalent Intel x86 chips made on 14nm process (10nm TSMC equivalent), which are effectively at least two chip generations behind.

As Apple and Arm Holdings have secured 80 percent of TSMC’s 5NM capacity, M1 chip production is occupying the majority of TSMC’s 5nm process. This creates a significant competitive moat, but not one that is impossible to cross.

In addition, Apple’s M1 performance also benefits from tight integration with its BigSur Mac OS, which is designed to run optimally on the chipset. This confers significant advantages in terms of performance and battery life, and allows Intel apps to be run on Apple silicon using a powerful emulator called Rosetta 2.

When x86 and Qualcomm get established on 5nm however, Apple’s silicon lead could be significantly eroded.

Similarly, Microsoft’s new bespoke design of ARM chips could further eat away at Apple’s advantage. Such custom designs would allow the firm to leverage the same tight integration with its chipset as Apple has with its M1 processor, closing the performance gap and creating a new era of competition.

Matthew Byatt, Managing Partner and Semiconductor Practice Lead at Acuity Advisors comments:

“Chipset companies continue to strive for differentiation and yet are increasingly squeezed. There is a growing use of standard architectures (such as ARM) on one side and an increasing reliance on advanced process fabs like TSMC on the other. Differentiation has to come from additional system functionality and M&A is one of the main ways for these companies to achieve this..”

Matthew Byatt, Partner

Matthew Byatt, Managing Partner

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