Major Intel Investor Naively Urges Chipmaker to Try and Win Back Apple (Here’s Why That Won’t Happen)

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This will be a year long remembered in the annals of Apple history, as the company underwent the first major architectural transition of its Mac hardware in well over a decade, abandoning the much more ubiquitous Intel platform that it’s depended on for the past 14 years to chart its own course.

While this isn’t the first time that Apple has switched CPU architectures, it’s the first time it’s done so from such an incredible position of strength — moving away from a platform that’s become the de facto computing standard into an entirely new architecture of its own design. By comparison, its previous transitions were done to abandon sinking ships, but this time around it’s building an entirely newer and strong fleet.

Of course, not everyone is thrilled about Apple’s move, and there are signs that it could be a huge nail in Intel’s coffin, since not only is a major partner moving away from the iconic chip designer, but it’s managed to leave its former supplier in the dust with the architecture of its new M1 chip.

According to Reuters, it’s got some investors worried, with chief among these being the “activist hedge fund” Third Point, which has a $1 billion stake in Intel that’s now at risk.

In a recent letter to Intel’s chairman seen by Reuters, Third Point is pushing Intel to make some pretty significant changes — things that it believes the chipmaker needs to do in order to survive now that it’s lost Apple’s business. Many of its recommendations are logistical in nature such as moving chip fabrication — the manufacturing process — to third parties such as TSMC, and focusing all of its efforts instead on chip design.

Although this is exactly the strategy that Apple uses for its chip engineering — including with its new M1 chip — Intel has always insisted on owning the entire process, from design to the actual final manufacturing. It’s an approach that has traditionally worked for the company over the years, but now Third Point feels that it’s putting Intel at a competitive disadvantage.

Third Point’s Chief Executive, Daniel Loeb, isn’t beating around the bush here either; the letter to Intel Chairman Omar Ishrak calls for “immediate action to boost the company’s position as a major provider of processor chips for PCs and data centres,” where it’s already been losing ground to competitors such as Advanced Micro Devices (AMD) and Nvidia.

In this case, Apple’s departure may just represent the largest and biggest final straw in Intel’s looming decline, which Loeb suggests could also represent the decline of America’s technological lead.

Without immediate change at Intel, we fear that America’s access to leading-edge semiconductor supply will erode, forcing the U.S. to rely more heavily on a geopolitically unstable East Asia to power everything from PCs to data centers to critical infrastructure and more.

Daniel Loeb, Third Point CEO

Perhaps most surprisingly, however, Loeb is also urging Intel to try and offer new solutions to try and retain customers such as Apple, Microsoft, and Amazon, who have all moved to developing “their own in-house silicon solutions” and sending them to East Asia to be manufactured.

In fact, Loeb is even obliquely threatening to use its clout to force new members onto Intel’s Board of Directors who may be more sympathetic to its position, should it sense “a reluctance to work together to address [its] concerns.”

Never Ever Getting Back Together

In the case of Apple, this is undoubtedly a hopeless cause, as the company’s reasons for leaving Intel had far more to do with charting its own course than anything Intel had done or failed to do.

The reality is that Apple’s plans to move to its own ARM-based silicon have been in the works for years — quite likely for as long as it’s been building its own A-series chips for the iPhone and iPad, since of course the same expertise can be applied to designing chips for the Mac.

So, even if Intel had offered the “new solutions” Loeb is suggesting years ago, it wouldn’t have stopped Apple’s plans, and in fact it may not even have slowed them down. Apple moved into the M1 chip when it was ready, and it seems unlikely the timing was directly connected to Intel’s performance.

In fact, in a recent interview with Gene Munster, former Intel engineer Zheng Li noted that the reason for the rise of the ARM architecture in the first place among mobile computing devices was to shake off the Intel-Microsoft duopoly in the PC industry, making sure that they couldn’t repeat the same thing with mobile devices.

Intel and Microsoft really captured most of the market share in terms of earnings in the PC industry, and when the mobile revolution was happening, most of the big players were just kind of playing chess with each other to make sure that Intel and Microsoft didn’t repeat the same thing. It was going to be a brand new system, and Qualcomm, Apple, Nokia — a number of companies — were really trying to muscle Intel and Microsoft out of the duopoly it had in the PC architecture.

Zheng Li, former Intel engineer

Zheng adds that Apple also had a home field advantage with ARM, since it had previous experience with it — Apple had originally helped to develop the architecture back in the ‘90s — and of course using it in the iPhone and iPad means that it didn’t need to pay nearly as much of the “ecosystem margins” to big players like Intel if they could simply take advantage of the new architecture. Once Apple had broken that new ground, others like Qualcomm were quick to follow suit for the same reasons.

However, Zheng also adds another compelling reason why Apple’s reliance on Intel was likely seen as a necessary evil by the Mac maker, in that Intel was free to take whatever skills and expertise it gained in designing custom chips for Apple and then turn around and sell those designs to Apple’s competitors. This is why, as Zheng reveals, the revolutionary ultra-slim design of the original 2006 MacBook Air only lasted for about a year before others like Dell and HP were able to accomplish the same thing.

So it wouldn’t be at all surprising if Apple had its exit strategy from Intel already planned from the day it first embraced the x86 architecture back in early 2006, and it sounds like the same story that’s been playing out with Qualcomm; Apple needs its chips right now to put 5G modems in its latest iPhones, but it’s working hard to change that — and ironically it’s also using Intel to do so.

So as much as Third Point may naively hope that Apple will return to Intel as a customer, that’s simply not going to happen. In fact, we suspect that the only way Intel will ever be able to start making chips for Macs again is if it simply sells itself to Apple outright — and that’s assuming Apple would even want to buy it.

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