The calculations for the bottom of an envelope were carried out by Sumit Gupta, IBM AI’s strategy manager. He estimates that production of M1 chips will cost Apple between $ 40 and $ 50, compared to around $ 200 for the Intel Core i5 processor in the MacBook Air, and more for the entry-level version of the MacBook Pro.
Laptops that use the ARM M1 instead of Intel x86 processors are the MacBook Air and the MacBook 13-Entry, which has a combined volume of nearly 14 million MacBook units. Assuming the following costs for Apple:
- Cost of ARM-based Apple M1 processor: $ 50 (may be closer to $ 40)
- Intel Core i5 Dual-Core for MacBook Air: $ 200 (maybe $ 175)
- Intel Core i5 Quad-Core for MacBook 13-Entry: $ 250 (maybe $ 225)
MacBook costs with Intel:
- MacBook 13-Entry: 8.6 million units x $ 250 = $ 2.15 billion
- MacBook Air: 5.4 million units x $ 200 = $ 1.07 billion
- Total = $ 3.2 billion
MacBook costs with M1 based on ARM:
- MacBook 13-Entry: 8.6M units x $ 50 = $ 268M
- MacBook Air: 5.4 million units x $ 200 = $ 429 million
- Total = 697 M $
That’s a savings of $ 2.5 billion for Apple […]
The math is simple and straightforward for Apple. They are saving over $ 2 billion by switching to their M1 chips. And they get better performance, better battery life, and of course, can innovate in silicon (neural networks, graphics, etc.).
It also suggests that other ARM-based laptop silicon vendors, such as Qualcomm, are likely to succeed in building market share in the laptop market.
Gupta admits his numbers are very rough and invites others to quibble, which I’m sure will. For example, the M1 chip has many more components than the processor – including a GPU and RAM – so it’s not hard to imagine a production cost closer to $ 100 than to $ 50. But Apple will then save on the cost of the discrete components that it replaces with the SoC. The calculations also ignore the huge R&D costs and he acknowledges that Apple could have negotiated better deals with Intel.
The big picture, however, will be correct: By the time Apple switches to Apple silicon across the entire Mac lineup, the financial savings will run into the billions. Apple’s switch to M1 chips really does get the best of all worlds here: dramatically improved performance, dramatically increased battery life, and multi-billion dollar savings.
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