Apple Inc. (NASDAQ:AAPL) did manage to surprise a bit on Tuesday when it revealed that the iPhone 5S is the first smartphone with a 64-bit processor. So why did Apple do this and what does this mean for European semiconductor suppliers? Jefferies analysts Lee Simpson and Robert Lamb consider these questions.

Apple iPhone 5S

Why did Apple push ahead with 64 bits?

Many are considering why Apple Inc. (NASDAQ:AAPL) went ahead with a 64-bit phone so much earlier than others. After all, most of the apps on the device are still going to be 32-bit for some time, so they won’t make full use of the handset’s processing capabilities yet. Bears are already chiming in and saying that the 64-bit capability is unnecessary right now because no one else is ready for it.

Jefferies analysts suggest that perhaps Apple Inc. (NASDAQ:AAPL) may be incentivizing the ecosystem before it releases a 64-bit iPad. The company could also be moving toward a big increase in memory, as some have already been expecting to see a 128 GB iPhone this time around. Still others say Apple is trying to converge Mac and iDevices. But whatever the reason, Apple bears are undoubtedly happy that Apple is first in this area.

Apple’s processor “a coup for ARM”

Jefferies analysts also note that the design of Apple’s A7 process in ARMv8 is “a coup” for ARM Holdings plc (NASDAQ:ARMH) (LON:ARM). They said since the iPhone 5S is the first smartphone that’s enabled with a 64-bit processor, ARM receives at least a 2 percent royalty rate or around 45 cents per phone.

In addition, since the iPhone 5S processor is so dense, they believe it has a large GPU, possibly from Imagination Technologies Group PLC (LON:IMG). The analysts said both the CPU and GPU are twice as fast as those in the iPhone 5, which would suggest that both have either had a process shrink or a core count increase. They said they are not yet sure if comments about “console-level graphics” or Open GLES 3.0 compliance mean that the GPU is a PowerVR Series6 version.