(Award-winning tech columnist Jon Markman publishes of Strategic Advantage, a popular daily newsletter about the digital transformation of business, entertainment and society -- and how to invest in it. Click here for a free two-week trial.)
Apple is doing to personal computers what Tesla ( (TSLA) - Get Report) is doing to automobiles, only faster and with wider implications. The entire computer processor ecosystem is about to be disrupted.
Investors need to be on the right side because the losers will be decimated.
To recap, Apple is transitioning away from Intel ( (INTC) - Get Report) chips for its computers to proprietary units based on designs from ARM Holdings, the same architecture that powers iPhones and iPads. The first benefit of the change is lower power consumption. However, Apple’s new chip, called M1 brings a quantum leap in performance, too.
It’s a hard combination to pull off. Power efficient products are supposed to come with weaker performance. It’s a trade-off consumers have come to accept.
When Toyota made the hybrid electric Prius, consumers quickly rationalized that saving the planet from climate change meant living with a white knuckle experience during every freeway merge. Then Tesla came along with heart-thumping performance and a full electric power plant. It was a revelation that seemed too good to be true. It also changed the trajectory of making cars forever.
A decade later all of the world’s leading carmakers are headed toward electric propulsion. In the not too distant future vehicles will not have radiators for cooling, transmissions and drivetrains for transferring power, or internal combustion engines for that matter.
The M1 represents a similar sea change for personal computers. With 16 billion transistors and matching 8 core central processing unit and graphics processing units, M1 flips traditional design on its head by bringing the entire system onto one chip. The SoC also incorporates security, input/output capabilities and memory that is simultaneously shared between all of the parts of the chip.
This 16 core design is capable of processing a mind-blowing 11 trillion operations per second.
When Apple managers made claims a week ago about 20 hour battery life plus much better CPU and GPU performance, technology writers were understandably skeptical. Call it the Prius phenomenon.
However, based on fresh reviews Tuesday from tech outlets like the Verge, Cnet and Wired, Macbook computers with the new M1 are definitely more Tesla-like.
Marques Brownlee, a popular YouTube tech reviewer noted that the entry level M1 machines had better CPU performance than any Intel-based Mac machine ever. The GPU scores were better than the most expensive Macbook computer.
This transition to custom SoC silicon for computers is clearly the start of something big and important. Competitors such as Lenovo, Hewlett Packard ( (HPQ) - Get Report), Dell Technologies ( (DELL) - Get Report) and others will follow. They have little choice.
Investors need understand what this means. I’ll go back to the Tesla analogy.
If the entire global auto fleet is headed toward electric propulsion, longer-term investments in companies that make radiators, transmissions and combustion engines would be unwise.
Currently companies like Micron Technology ( (MU) - Get Report), Advanced Micro Devices ( (AMD) - Get Report) and Intel that make separate memory modules, GPUs and CPUs. That ecosystem is not dead but SoC designs means the longer-term growth of these markets is certainly in peril.
On the other hand some businesses are going to be big winners.
Taiwan Semiconductor ( (TSM) - Get Report) is the world’s largest microprocessor contractor. In addition to working with Apple engineers on the M1, TSM makes ARM-based processors for Qualcomm ( (QCOM) - Get Report), the supplier of most of the SoCs running on Android devices.
It’s noteworthy that Qualcomm and Microsoft (MSFT) partnered in October 2019 to bring ARM chips to the Windows operating system. The always on, always connected PCs had great battery life but got relatively poor reviews based on underwhelming performance.
Given the new Macbooks, expect the next iteration from this pairing to be much better.
The bottom line is a really big change is underway in personal computing. It’s going to bring new chips that dramatically shrink the current ecosystem. There will also be new opportunities for investors who are adept at looking forward and accepting change. Taiwan Semi is emerging as the front-runner to benefit and is buyable on pullbacks, while Micron and AMD face danger.