Apple could end up saving a staggering $500 million a year if it goes ahead with rumoured plans to start developing its own computer processors, reports CNBC.
That’s according to Merrill Lynch, which is the wealth management arm of the Bank of America. The firm believes that if Apple stops buying its PC chips from Intel, it can make savings across the entire business.
Earlier this week, Bloomberg published a report claiming that Apple is looking to develop its own in-house chips for future Mac computers. The firm is expected to begin using them by 2020.
Sources familiar with the situation told Bloomberg that the project, which is codenamed Kalamata, will allow the American tech giant to link all of its products together.
Although the project is only in the “developmental” stages, it will form a major part of future hardware from the company. However, these plans would likely make a dent in Intel’s global profits – with Apple currently providing 5 percent of its revenue.
Now, financial analyst Wasmi Mohan – who works at Merrill Lynch – has added further discussion to the rumours by claiming that Apple would be able to boost productivity by making its own chips.
He believes that the “insourcing of chips could benefit Apple by not being dependent on Intel’s processor cycles, by lowering the Mac costed bill-of-materials by ~$40-50, and by potentially streamlining and reducing R&D spend”.
In a client note, Mohan explained that Apple can boost research and production rates by focusing on self-developed internals. This would effectively cut out the middleman.
“The benefit to Apple would be two-fold: 1) aggregating development across iOS and MacOS can help lower the overall cost of R&D by potentially combining development teams and potentially reducing time to market for new products and Apps, and, 2) internally developing the processor can help save some cost vs. purchasing the processors from Intel,” he said.