The biggest surprise of Apple Inc. (NASDAQ:AAPL)’s iPhone event a couple of weeks back was the 64-bit A7 processor, according to William Blair analysts Anil Doradla and Brian Nugent. Analysts believe that the timing of the first Product (2013 versus 2014/2015) and the platform choice (iPhone instead of iPad/Mac) were both different from investor expectations. As a result, Street is now busy analyzing the effect the 64-bit processor will have on the mobile industry.
Rivals may soon follow Apple
William Blair analysts expect Apple Inc. (NASDAQ:AAPL) rivals to soon come up with 64-bit processors for their next generation premium smartphones and tablets by 2014. Analysts believe that chip vendors like Qualcomm and Samsung may follow Apple Inc. (NASDAQ:AAPL)’s lead and enhance their 64-bit road maps.
On the performance front, Apple Inc. (NASDAQ:AAPL) iPhone 5S users should notice only slight improvements by the use of 64-bit solutions as against 32-bit, according to analysts. To fully utilize the potential of the 64-bit structure, devices require more than 4 gigabytes of memory, which analysts believe is highly unlikely in most of the current applications. Apart from limited memory, most of the devices are not ‘complex enough’ to experience a significant enhancement due to a 64-bit ecosystem.
Apple Inc. (NASDAQ:AAPL) is using the 64-bit processor as a prime feature while marketing the iPhone 5S, but analysts believe that the real motive of A7 is to prepare the Apple Inc. (NASDAQ:AAPL) ecosystem for the extensive use of ARM-based 64-bit architectures in iPads and Macs, which can efficiently use A7. Introducing 64-bit in iPhone is an attempt by Apple Inc. (NASDAQ:AAPL) to lay the foundation for the ARM Holdings plc (ADR) (NASDAQ:ARMH) (LON:ARM) based products. Analysts believe the transition by Apple Inc. (NASDAQ:AAPL) is faster than many had expected, and the company, because of its early initiative, is in the best position to make full use of this transition across its entire portfolio of devices.
Apple’s transition, a potential opportunity for ARM
For ARM Holdings plc (ADR) (NASDAQ:ARMH) (LON:ARM), analysts believe Apple Inc. (NASDAQ:AAPL)’s transition to a 64-bit solution will generate additional revenue of $6 million in 2014, which is based on 80 million iPhone 5S shipments. Though there is a possibility that other players may come up with 64-bit processors in 2014, the mass market adoption of such devices will primarily be in 2015.
According to analysts, the transition will prove to be a potential catalyst for ARM Holdings plc (ADR) (NASDAQ:ARMH) (LON:ARM)’s core mobile business owing to higher royalty rates and incremental licensing opportunities. For mobile alone, the transition has the potential to up ARM’s earnings by more than 10 percent in 2017.
