Is Apple’s Chip Supply Stressed?
Does Apple Inc. (NASDAQ:AAPL) have “moore” reason to worry? According to a note written on Tuesday morning, Jefferies & Co. analyst Peter Misek seems to think so. He cites Moore’s Law and says he believes Apple, as well as other high-end smartphone makers, will start to feel the law’s stresses as it begins to face some natural limits.
The note comes as an increasing number of experts in the semiconductor business are ruminating about the end of Moore’s Law and what it will mean for its disciples. Apple, one of the world’s top suppliers of mobile computing devices, could be among those most affected.
Reuters reminds us that “Moore’s Law refers to the trend that the number of transistors that fit on an integrated circuit roughly doubles every two years. Coined by Intel (NASDAQ:INTEL) co-founder Gordon Moore, the “law” has become a key driver within the chip business.”” However, as analysts at Bernstein Research point out, the law faces natural limits, and that’s where Apple is in trouble. The team predicts that the chip industry will soon face a “hard stop” on Moore’s Law as early as 2030, given limitations imposed by laws of physics, thermodynamics and other challenges. The issue, titled “Moore Stress,” could result in significant upward pressure on leading-edge component prices.
Misek argues that Apple’s main disadvantage lies in its outsourcing of its own high-end processor design for products like the iPhone and iPad. As the crippling of Moore’s Law leads to an increase in “leading edge factory costs” at a higher rate than the cost savings generated by lower cost per transistor, Apple and other makers of high-end smartphones will both feel the effects. However, this is where Samsung gets its edge on Apple. Because Samsung manufactures its own chips, it’s less vulnerable to the trend than Apple is.
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