Long-term yields for U.S. Treasuries should indeed firm but be tempered by a slowing as this phase o...
Apple Takes a Bite of This Chip Maker
09/29/2011 10:00 am EST
When a tech juggernaut picks a relative newcomer’s equipment over the existing tech titans, it’s time to pay attention to the opportunity, writes Paul McWilliams of Next Inning Technology Research.
Speculation was rampant and included rumors there was a new MacBook Air in the works that would use MRVL in place of the current Intel (INTC) offering. Other rumors suggested AAPL was in the process of designing a new server to be used for internal applications like iTunes or the new iCloud.
As I wrote several years ago, when AAPL purchased Palo Alto Semiconductor (PA Semi), and reiterated when AAPL bought an architectural license from ARM Holdings (ARMH), I think there is a risk that AAPL will move its computing platform to an internally designed ARMH core chip.
However, due to the acceleration of INTC’s roadmap, I think the date of that risk has been at least pushed out, if not averted entirely.
Remember, PC products are sold in much lower volumes at AAPL, and a change in the processor platform carries with it a number of impacts and distractions I simply don’t think AAPL should try to deal with at this stage of the game. I think given the fact the price of INTC was moving up Friday, right along with MRVL, suggests the market was seeing this in a similar light.
So, if not the MacBook Air or a new server design, the question lingers—why would AAPL adapt for the new MRVL processor?
As I see it, there are two rational reasons. One would be to evaluate the MRVL chip in comparison to an upcoming AAPL-designed quad-core processor. Remember, AAPL’s first processor, the A4, was simply a copy of the Samsung processor it had been using all along.
The second, which is known as the A5, was an AAPL-designed dual-core with substantial video processing capability that I’ve yet to see fully defined. As I see it, it’s only logical to assume a quad-core has been developed and will be released in the not too distant future—maybe in the iPhone 5 or iPad 3.
The second possibility I see is using MRVL in an entirely new iOS device—maybe the rumored iTV. While it would seem that a quad-core processor would be overkill for a TV, I think we have to assume that if AAPL in fact releases a TV under its brand name, it will be quite different from what we’re used to seeing.
It would, of course, have Apple TV embedded, quite likely a remote that looks a lot like a mobile iOS device (iPod or iPad), and support some degree of native computing power.
Bottom line: Even if AAPL was simply benchmark testing the new MRVL processor, I see this as a positive move for MRVL. A benchmark test effort would strongly suggest AAPL sees MRVL’s quad-core as a strong product and believes it must be ready to compete against it.
The other alternative of intending to use it would be better, and clearly a huge upside for my bullish thesis. However, as I’ve outlined in the past, I think MRVL is a good speculative investment without any consideration its processors will be used by AAPL.
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