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2021.01.10 Penn Wealth Report Vol 9 Issue 01

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14 penn wealth Report volume 9 issue 01 10 Jan 2021 Copyright 2021. All Rights Reserved. Science & Technology Investor investment intelligence A brief history of Apple's relationships with its chipmakers, and the decision to go it alone. It was the second major Apple AAPL $118 event in as many months, which is almost unheard of. Just a few weeks after unveiling the highly-anticipated iPhone 12 5G lineup of smart- phones, the $2 trillion Cupertino-based tech giant hosted "One More ing" to introduce the world to its new line of Macs. CEO Tim Cook didn't open with the devices themselves, how- ever; he opened with the star of the show: the company's own M1 chip which will power the new generation of computers. at move, though pre-announced in June, sent shock waves throughout the semiconductor industry. Its impact on the world's largest chipmaker cannot be overstated. From Motorola to IBM to Intel. e first Macs ran on Motorola's 68000 series architecture. In 1994, after Motorola began falling behind on delivery of its new 68040 CPU, Apple started to worry about its reliance on one chip supplier. Around the same time, IBM IBM $117 approached the firm with a novel idea of developing a family of single-chip microprocessors to increase efficiency. Intrigued, yet respectful of its longstanding relationship with Motorola, Apple helped launch what would be known as the AIM alliance, composed of Apple, IBM, and Motorola. e transition was made to IBM's PowerPC processors. By 2005, Apple's Steve Jobs had begun forging a strong rela- tionship with Intel INTC $45 , spurred in part by IBM's trouble in fabricating a chip smaller than 90 nanometers (nm) in size. At that year's World Wide Developer Conference (WWDC), he made the shocking announcement that Apple would be ditching PowerPC chips in favor of Intel's x86 processors. e first-gener- ation of Intel-based Macs were released the following year under the operating system Mac OS X, which turned out to be a mas- sive leap in technology. Shortly after Jobs made the switch to Intel's x86 he let the chipmaker in on his plans to launch an advanced new cellphone, and brought the company what he believed to be an enormous gift: he wanted Intel to make the processors for the devices. Incredibly, Intel didn't see the benefit, and declined the offer. Truly one of the greatest blunders in tech history. After the rejection from its trusted chipmaker, Apple (as was discovered some time later) turned to Samsung for a compa- ny-branded ARM 11 processor for the iPhone. In essence, Apple would design the chips and have them fabricated somewhere else, such as at a Samsung or Taiwan Semiconductor TSM $97 fab cen- ter. As is so often the case, one horrendously bad yet seemingly innocuous—at the time—decision by a company would come back to haunt them years later. Moving on from Intel: Apple designs a revolutionary chip. Recall that the catalyst for Apple's move from IBM's PowerPC platform to Intel's x86 involved the difficulty IBM was having breaking below the 90nm size for its chips. Fast forward fifteen years and the exact same type of challenge helped doom the Intel-Apple relationship. Semiconductor companies are generally divided into two camps: those which design the chips and those which manufacture the chips at fab facilities. Intel, however, is a ver- tically-integrated firm which does both. at concept may seem to make sense, but the inability of the company's production facilities to move from a 10nm chip to one just 7nm in size frus- trated Apple, which is obsessed with the size, weight, and battery life of its Macs. Having a deep relationship with both Samsung and Taiwan Semiconductor (thanks to Intel), Tim Cook knew that both of these companies already had the capacity to build chips just 5nm in size—an enormous leap from the 7nm chip which Intel couldn't yet build! e die was cast. e M1, the first chip in the Apple Silicon family, is nothing short of remarkable, and it is receiving rave reviews from a spec- trum of techies, from journalists to developers. During the Apple presentation, Tim Cook made the bold claim that the new MacBook Air, powered by M1, was faster than 98% of laptops sold within the last year. In a clear shot at Intel, which makes the processors for the vast majority of PCs being sold, Apple even revived its "I'm a Mac" campaign, with the visibly agitated personification of a PC proclaiming that he is proud of the noise he makes and his limited battery life. Ouch. e seamless interplay between the hardware and software of the Macs, thanks directly to the M1, allows for lightning-fast speed. e chip contains four high-efficiency cores and four high-performance cores, helping everything run faster and smoother on the devices. For anyone who understands the difference in performance between 8GB of RAM and 16GB (hint, don't buy the former if you need speed and multi-task- ing capabilities), the M1 will simply provide a shockingly-good experience. And this is just the first generation of the chip. Developers are also raving about the advances, with one pro- claiming on Twitter that he almost feels sorry for Intel. And the battery life, one of the great pet peeves of laptop users from the start, has been greatly enhanced on the new Macs. Intel is firing back, claiming that it only receives about 5% of its revenue from Apple. at may be true, but the self-inflicted damage to its reputation by letting a hardware company and two fab companies leapfrog its own technology may bleed over into its relationships with the PC makers. And that is troublesome. Apple is Making its Own Chips, and that is Disastrous for Intel Point

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