Apple’s move to M1 chips will save $2.5B this year – IBM exec


An report by a senior IBM exec indicates that this year, Apple’s shift to M1 chips would save the company about $2.5B, with much greater savings to come as Apple moves the entire Mac portfolio to its own silicon. Admittedly, the study is based on a set of estimates, and possibly unreliable, but the overall image it paints seems plausible….

IBM AI strategy chief Sumit Gupta carried out the back-of-an-envelope calculations. He estimates that it will cost Apple somewhere in the $40-50 range to manufacture M1 chips, against around $200 for the Intel Core i5 processor in the MacBook Air, and more for the entry-level MacBook Pro edition.

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: 8.6M units x $250 = $2.15 B

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 […]

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.

Gupta acknowledges that his numbers are a guess, and encourages others to quibble, as I’m sure they’re going to do. The M1 chip, for instance, has many more components than just the CPU, including a GPU and RAM, so it is not difficult to imagine a cost of production closer to $100 than $50. But then Apple can save on the cost of the discrete components that the SoC is replacing. The calculations often neglect the immense costs of R&D, and he admits that Apple would have been able to reach better agreements with Intel.

The big picture, however is correct: the financial savings will be well into the billions by the time Apple makes the transition to Apple silicon across the Mac range. The switch from Apple to M1 chips is really achieving the best of all worlds here: significantly improved performance, significantly increased battery life, and savings of multi-billion dollars.

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