Apple to phase out Intel chips from its product line

With Apple distancing itself from Intel chips marks a significant shift for its Mac lineup. The strategic initiative should be seen in the light of Apple designing its processors for the iPhone 4 in 2010 and has steadily increased the number of chip it handles directly.

In a strategic initiative, code-named Kalamata, aimed at backward consolidation, starting from 2020 Apple Inc will stop using Intel Corp’s chips and will instead starting using its own semiconductors for its Mac computers, says a Bloomberg’s report citing sources.

Although the initiative is still in its early stages it is nevertheless significant since it forms part of a bigger gameplay.

With the news reaching the market, Intel’s shares climbed down by 6.1% to $48.92.

According to Kevin Cassidy, an analyst at Stifel, the market was “over reacting” and that Intel’s prospect are still good.

“We do not expect any other PC manufacturers will consider designing its own CPUs,” wrote Cassidy in a note.

Analysts expect Apple to phase Intel’s chips over a span of time.

“While it’s possible that Apple may replace Intel in some of its lower-end product lines, we think it will be difficult for Apple to completely replace Intel by 2020, especially on its higher-end offerings,” said Kinngai Chan, an analyst from Summit Insights.

For the fiscal year 2017, Apple had reported $229.2 billion in revenues with Mac sales amounting to 19.2 million units which amounts to 11% of its total revenues.

Although the desktop and the laptop markets were down in a trough midst the rise of tablet computers and smartphones, the sales of Macs rose by 4% in 2017. According to IDC, PC sales have been seeing a drop since 2011 and registered only a small decline in sales of 259.5 million units in fiscal year 2017.

“We can push the envelope on innovation. We have better control over timing, over cost and over quality,” said Luca Maestri, Apple’s CFO in 2017.

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