Apple's Silicon Strategy

Apple Silicon was introduced to the world in 2020 with the M1 chip, but Apple’s Silicon strategy started well before that, with the A4 chip for the first iPad, way back in the 2010s. Back then, it was nonsensical to see why Apple would invest a massive amount of capital in developing its own chips for its smartphones and tablets, going against market practice. Today, that strategy shines through Apple’s accounts as clear as a cloudless day. We examine how Apple utilizes Apple Silicon through its product line.

The Silicon Strategy

Apple’s family of chips is not remarkable for it’s raw performance, but it help Apple to create products that are just impossible for other competitors to copy. Let’s start with how Apple released its Apple Silicon line over the course of a year.

The latest generation of Apple Silicon will be introduced with the latest generation of iPhones, Apple’s most profitable and sellable product in history. It’s actually one of the most sellable product in the entire human history despite its complexities.

We take an example in September 2024, Apple released the iPhone 16 and iPhone 16 Pro featuring the A18 Pro and A18 chip. The design paradigm of the A18 series of mobile chips will be extended to create the M5 chip. That M5 chip will be first introduced on the latest generation of iPad Pro.

After the latest M-series chip has been cooking on the iPad Pro, Apple will unleash the M-series chip using a two-prong strategy: a slew of new M-series chips on the MacBooks and updating the iPad Air using an older M-series chip. In this case, Apple updated the MacBook Air and MacBook Pro to use the M5 that was previously unveiled on the iPad Pro. They will further expand the M5 series family by introducing the M5 Pro and M5 Max chips. The M4 that was introduced the year before now goes to the new iPad Air models, keeping the M4 chip alive.

The latest edit of this narrative is that Apple has started using last year’s A-series chip as an entry-level MacBook, which we now know as MacBook Neo.

The final release would be Apple’s desktop machines that will get the latest M-series chip like the M5 and M5 Pro for the iMac and Mac Mini and M5 Max and an unreleased Ultra chip for the Mac Studio. Occasionally, if Apple is up to it, Apple might update the Mac Pro with the latest M-series Ultra chip.

After all said and done, Apple will repeat this process with the release of the latest iPhones and together with that event, the latest A-series standard and pro chips.

The Why

The way Apple is fielding its silicon has several benefits.

The main reason is cost. By sheer volume, it is safe to say that 80% of Apple Silicon sales are comprised of the A-series (currently A19/A19 Pro/A18 Pro) chips and the M-series chips (currently M4 and M5). These are the chips that power the MacBook Airs, iPhones, and iPhone Pros. By trickling down the previous generation of M-series chips (M4 in this case) to cheaper devices like the MacBook Pro and iPad Air, Apple managed to keep the production of their best-selling chips for at least 2 years. This means that Apple will recoup the cost of investing in a new production line for those chips in the first year and generating massive profit margines on the 2nd year.

Another reason is that vertical integration that Apple made with their hardware and software, has allowed Apple to create impossible products. Take, for example, their latest cheapest laptop, the MacBook Neo. Yes, there are laptops that are as cheap as the $599 ($499 if you’re a student) MacBook Neo, but none have the build quality, the screen resolution, and the ecosystem that comes with the MacBook Neo. Apple managed to make the MacBook Neo because Apple owns the entire stack: the hardware, the chips that run the CPU and GPU, and most importantly, the Apple ecosystem that the MacBook Neo provides.

Conclusion

Apple is one of the companies that invests in long-term success rather than just focusing on the next quarter. Because of this, a lot of Apple’s move might seems non-trival or obvious in the short term but looks absolutely logical when looking back for a few years. One of the best decisions Apple has made is investing in building its own Silicon to run all of its devices.

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Other Ecosystem Items

• Apple TV (Amazon) / Apple TV 4K (Amazon)
• AirTags (Amazon)
• HomePod Mini (Amazon)