“Desktop Class”

Like many, I was surprised by the new 64-bit A7 at today’s Apple Event. I didn’t think it would be possible to double CPU speeds again in one year (vis a vis the already fast A6), and I certainly didn’t expect a 64-bit CPU. However, I don’t think the biggest news here is the performance of the iPhone 5S, as impressive as it is. I think the biggest news is that the A7 is legitimately a “desktop class” processor, as Phil Schiller put it.

Performance

Is that possible? Could the A7 really be desktop class? After browsing some Geekbench 3 scores, I believe the answer is “yes.”  To be competitive with the current Intel MacBook Airs, an ARM-based MacBook Air will need to generate roughly similar single-threaded integer performance, because not all tasks can scale with additional cores.  There are currently no iPhone 5S benchmarks in the Geekbench browser (though that will change in about a week), but we can extrapolate from the iPhone 5 benchmarks.  Relative to the iPhone 5, a Haswell Core i5 MacBook Air is 2.1x to 4.2x faster on single-threaded integer tasks (I omit the AES benchmark since it is orders of magnitude faster on Intel hardware due to the AES Instruction Set).  The geometric mean across all 12 tests is 2.5x, so an A7-based MacBook Air would need to be around 2.5x faster than today’s iPhone 5.

Let’s assume that the A7 really is “2x faster” than the iPhone 5’s A6, as Apple claims.  Honestly I suspect this is conservative; the A6 is about 2.7x faster in Geekbench 3 integer performance than the A5, and Apple claimed a “2x” performance gain there as well.  Let’s also assume that Apple could crank the clock speed by at least 25% with a MacBook Air power envelope instead of an iPhone power envelope.  If so, an A7 optimized for a MacBook Air could achieve similar single-threaded integer performance as the current Haswell MacBook Air (2x*1.25 = 2.5x).  Combined with multiple cores and good memory bandwidth, I expect that an A7-based MacBook Air would perform quite well.  It would also  get great battery life.

Update: the benchmarks are out, and while a 25-30% clock-boosted A7 doesn’t quite get to Haswell MacBook Air levels, it gets 80% of the way there.

Economics

What is the advantage of an ARM-based MacBook Air?  In a word, cost.  No one outside Apple and Intel knows exactly how much Apple pays Intel for each Core i5, but it’s likely in the range of $250–300.  According to Wikipedia the CPU’s price is $342, though large OEMs like Apple surely get a discount.  Most of this price represents pure margin, going either straight to Intel’s profits or into developing the next generation of CPUs and fabs.  The bottom line is that an A7 would cost Apple much, much less than $250–300 to manufacture.  For reference, the bill of materials for the entire iPhone 5S is very unlikely to exceed $300.

Cutting a couple hundred dollars of cost from the MacBook Air would give Apple a lot of options.  One option would be to lower the price of the low-end model by 20% while maintaining the same profit margin.  Another option would be to maintain the current price while dramatically boosting profit margins.  In reality I expect they would choose some combination of these two options.

Put another way, Apple could match Wintel prices and maintain a comfortable 25–30% margin while the Wintel OEMs struggle to maintain a 5–10% margin after paying the Microsoft and Intel IP “fees” for using Windows and x86/x64.  That’s not to say that Apple would offer $500 laptops; I doubt they’d be willing to make the build-quality sacrifices needed to produce a $500 laptop.  But they could literally price match any “Ultrabook” out there with similar specs and earn a much, much higher margin than their Wintel competitors.

The clear loser in this scenario would be Intel.  Not only would they lose current Apple sales, but they could lose current sales to other OEMs as well if Apple gets aggressive on pricing to gain additional market share.  In the longer term Microsoft could also suffer.  The ARM version of Windows, Windows RT, has been a resounding failure to date.  ARM MacBooks with competitive performance would put Microsoft in the uncomfortable position of either saddling its OEMs with high hardware costs (by forcing them to use expensive Intel CPUs) or abandoning its biggest competitive advantage (the huge library of existing x86-compatible Windows software).  If it becomes necessary to make that decision, Steve Ballmer might be glad he was forced out.

The Bottom Line

  • An A7-based MacBook Air could likely be performance competitive with current Haswell MacBook Airs
  • But it would likely cost Apple a couple hundred dollars less to manufacture than current MacBook Airs
  • This cost advantage could put Intel, PC OEMs, and eventually Microsoft in a bind
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