Note: This is my personal perspective and not in any way associated with my employer.
I was really puzzled why Apple built their own ARM-based processor chips for laptops given their marketshare. In particular, now that there is real competition between Intel and AMD, giving us competitive pricing and CPU chips.
So, here is a financial diagnosis based on a lot of estimates …. feedback welcome :). Note: I do realize other benefits like getting iOS apps on Mac, ability to innovate & differentiate in the silicon, and Apple’s claim that the ARM-based laptops have longer battery life (hard to believe given how much of the power is actually in the display).
Mac Volume and Breakdown
Based on this 2018 revenue analysis, Apple sold 18.2 million Macbooks for $25.5 Billion in revenue. This puts ASP (average selling price) at $1,400.
2020 has been a great year for Macbook (and all laptop companies) because of COVID-19. So far, they have done about $30B in Macbook revenue in 2020. With a ASP of $1.4K, that is 21.4 million units — across 3 product types: MacBook Air, MacBook Pro 13 (entry and high-end), MacBook Pro 16.
Now, here come my estimates, based on lots of reading and guess-estimates — this is where I am sure there will be lots of disagreement from my readers.
- MacBook 13-Entry: 40% = 8.6 M units
- MacBook 13-High End: 25% = 5.4 M units
- MacBook Air: 25% = 5.4 M units
- MacBook 16: 10% = 2.1 M units
Savings from ARM M1 over Intel CPUs
The laptops that use the ARM M1 instead of Intel x86 CPUs are the MacBook Air and the MacBook 13-Entry, which is a combined volume of almost 14 million MacBook units.
Assuming the following costs for Apple:
- ARM-based Apple M1 processor cost: $50 (might be closer to $40)
- Intel Core i5 Dual-Core for MacBook Air: $200 (maybe $175)
- Intel Core i5 Quad-Core for MacBook 13-Entry: $250 (maybe $225)
Costs of MacBooks with Intel:
- MacBook 13-Entry
- MacBook Air: 5.4 M units x $200 = $1.07 B
- Total = $3.2 B
Costs of MacBooks with ARM-based M1:
- MacBook 13-Entry: 8.6 M units x $50 = $268 M
- MacBook Air: 5.4 M units x $200 = $429 M
- Total = $697 M
That is a saving of $2.5 Billion for Apple!!!
Performance and Battery Life
GeekBench just published some performance data using their benchmarks that simulate real-life usage. And the Apple M1 based MacBooks blow away Intel based ones.
Also, per several reports the battery life of the M1 based MacBooks is about 2x higher than the Intel based ones. What a slam dunk!
ARM-based CPUs for Laptops are Here to Stay
Since Apple already builds ARM-based SoCs for their iPhones and iPads, the incremental cost of building a SoC for laptops is probably in the range of $100–200 Million.
The math is easy and simple for Apple. They save over $2 Billion by moving to their M1 chips. And they get better performance, better battery life, and of course, can innovate in the silicon (neural nets, graphics, …).
This also suggests that other ARM-based laptop silicon providers like Qualcomm are likely to be successful in building marketshare in the laptop market.
What do you all think? Are my volume assumptions right?
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