Apple – Feeling the squeeze.

Apple ups its cadence as competition heats up.

• Apple appears to be taking a leaf out of Nvidia’s book in launching a new chip just 6 months after it launched the last one in order to remain two generations ahead of Qualcomm even though it does not seem to be competing directly with it.
• Apple also updated its ageing iPad line demonstrating the possibilities available when one can choose between performance and power efficiency.
• Apple updated its iPad Air and iPad Pro lines but as usual, the real action was at the top of the range with the lower models receiving upgrades previously offered in the pro models.
• The new iPad Pro is impossibly thin at 5.3mm (11”) and 5.1mm (13”) which has clearly been enabled by the new M4 chip.
• The bump up in performance of the M4 over the M3 is not clear but one can make a very rough guess.
• The M4 (10 CPU cores) is 50% faster than the M2 processor in the old iPad and the M3 (8 CPU cores) is 17% faster than the M2 on a single-threaded benchmark test.
• This leads me to very roughly deduce that the M4 is around 20% faster than the M3 on single-threaded performance which sounds about right given the days of huge jump-ups thanks to Moore’s Law are clearly behind us.
• However, this is not the point of the new iPad as I suspect that the M4 in this product has been optimized for efficiency as an iPad simply does not need the kind of power that the M4 could offer when running flat out.
• Instead, the battery has been reduced in size enabling the very thin form factor with the M4 optimised for efficiency to enable the device to have the same battery life as its predecessor.
• The real question is why did this necessitate a new chip when this could probably have been achieved with the M3 although the device might not have been quite so thin?
• I think that it is no coincidence that Apple has increased its product release cadence when equivalent silicon products are coming into a market that it has pretty much had to itself for several years.
• This is one of Nvidia’s strategies to keep competition at bay by updating its chips so frequently that its competitors are always at least one or two generations behind.
• Qualcomm’s latest generation of X Elite chips sits just behind the M3 in terms of raw performance and performance per watt and this latest release edges Apple further into the lead.
• I view this as a positive sign for Qualcomm as Apple is clearly taking the threat seriously even if it is not competing directly with X Elite as the purchase decision for a Mac is more about software than hardware.
• Qualcomm is unlikely to launch the X Elite 2 before Snapdragon Summit in Q3 2024, but I am not sure that this matters very much as I see the initial target being Intel, not Apple.
• Hence, we may see M5 launch with the next hardware update in September and Apple settle into the Nvidia 6-month product cadence.
• The net result is an impossibly thin iPad Pro (which I don’t think anyone asked for) which refreshes the line enough to justify and maintain Apple’s premium position in the tablet market.
• The other main innovation was an update to the Apple Pencil with the Pro version now supporting a squeeze to bring up contextual menu and the rotation of brushes with the rotation of the device.
• Apple has done enough to keep its position in the tablet market and has demonstrated the possibilities that are offered by having silicon that can offer both power efficiency and performance at the same time.
• I expect that we are going to similar moves at Computex (PC industry trade show) this year where I am looking for a substantial number of devices from PC OEMs to launch using Qualcomm’s new X Elite and X Plus chipsets.
• There will be a number of SKUs available meaning that OEMs can optimise for efficiency or performance or anything in the middle to create a range of products suitable for multiple laptop use cases.
• For the moment, Apple does not have to worry about this which is good as it has plenty of other issues to deal with such as declines in its largest market (China) and sluggish growth in its hardware business that the services business is not yet big enough to offset.
• This leaves a company with a relatively high multiple and very little prospect of returning to good profit growth which is why I still have no inclination to own it.