It's no secret that Apple (AAPL) is working on building out its semiconductor team, as it looks to cut its bill of materials for its iDevices, particularly with the advancement of the 64-bit A7 chip. What is a secret (and perhaps less of a shock) is that not only is Apple working on improving its margins for its iDevices, it's doing so with its MacBooks, potentially at the expense of Intel (INTC).
In a research note, JP Morgan analyst Rod Hall notes that Apple could potentially cannibalize its popular MacBook Air line within the next 12 months, potentially even this year, by adding a keyboard and mouse user interface to iOS, Apple's mobile operating system.
Dubbed "iAnyWhere," this feature, along with the peripheral devices like keyboards and mouses, could boost Apple's earnings power by more than 10% over the next 12 to 24 months, and give the company an opportunity in the cheaper laptop market.
"We believe that the $500-$1,000 laptop market is a $63bn/yr opportunity that Apple barely participates in," Hall wrote in the note. "Even if we add the tablet market to this market, Apple only has [less than a] 20% share vs. [a 40% share in the $1,000-and-greater laptop market]."
If Apple were to build keyboard and mouse features into its iOS, it would continue the cross-over that we've seen from iOS and OS X, Apple's desktop operating system. So far, we've seen features like Apple Maps, Notes, and other iOS-centric features cross over to OS X, but for now, Apple has never made a computer (yet) that can run entirely on iOS.
The announcement of the 64-bit A7 chip by Apple with the iPhone 5s took the semiconductor world by storm. "The 64-bit Apple chip hit us in the gut," one Qualcomm (QCOM) employee said, as quoted by MacRumors. "Not just us, but everyone, really. We were slack-jawed, and stunned, and unprepared. It’s not that big a performance difference right now, since most current software won’t benefit. But in Spinal Tap terms it’s like, 32 more, and now everyone wants it."
While this may be a sucker punch to the whole chip industry, it's important to note that OS X drivers are now 64-bit, and the A7 is close to the computing power of current Intel processors. It's certainly within the realm of probabilities that the A8 (Apple's next chip) could compete, or potentially surpass Intel's processors in terms of power, potentially putting Intel in a precarious position with Apple.
If Apple does indeed go into the $500 to $1,000 laptop category, with iAnywhere, tablets could begin to replace PCs at an even faster rate than they already are. Right now, Hall believes that some people are buying tablets in addition to PCs, but that could change: "If iAnywhere allowed these users to flexibly use an iPad as both a PC and a Tablet we believe that many would elect to simply own one device. We also believe that many users currently purchasing lower priced laptops from vendors like Dell would choose to switch to Apple."
It's been bandied about for a few years that Apple would make a MacBook running on iOS, given the advancement's Apple has made in chip power with its A-series chips. The move from the A6 to A7 was a massive jump in computing power, and based on channel checks and die casts, the A8 may be just as big a jump, perhaps more so.
The bottom line here is that if Apple's A8 chip is as powerful as assumed, and Apple continues to tweak iOS to make it be the one operating system to rule them all, than Intel's current business with Apple has a huge question mark hanging over it. Right now, the only thing missing from the iPad Air to replace a MacBook Air is more DRAM (iPad Air at 1 GB, MacBook Air at 4 GB).
It's your move, Intel.