Nearer to Monopoly

6 June 2005



Apple to Switch to Intel Chips

Apple Computers is switching from IBM processors to those made by Intel. The change is blow, but not a lethal one, to IBM. It is a risk for Apple, as much of its software will need a rewrite. The winner here is Intel, which already has 80% of the chips market.

The break in the decade-long relationship between Big Blue and Mr. Jobs’ little operation finally came over Apple’s future needs. The company wanted IBM to produce a larger variety of the Power PC processors that run Apple Macs. IBM wanted no part of such a low-volume, and hence low-profit, business.

IBM will suffer with the loss of this customer. Every business that loses an account is worse off. But the PowerPC processor will be part of the video-game future. Microsoft’s Xbox, various Nintendo products and Sony’s PlayStation will use it. Since only a few versions of the chip are needed, this is a higher volume business, and so higher profits should follow.

For Apple, this represents another shift in architecture, and as Insight 64 analyst Nathan Brookwood told News.com, “I don’t know that Apple’s market share can survive another architecture shift. Every time they do this, they lose more customers.” The shift will start at the low-end of Apple’s range, with products like the Mac Mini where Apple presumes brand loyalty hasn’t been established. And there’s plenty of work in Cupertino, California now for software engineers who get to re-code the Mac OS to work on x86 chips.

Intel gets a virtual stranglehold on the chip market with this move. With 80% control of the chip market already, it is hard to see how it loses its dominant position. That is not to say it has a lock on the market; its competition can still fill niches it doesn’t want or can’t exploits with sufficient margins. However, it’s getting close to the point where regulators may start wondering if they should intervene.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
Produced using Fedora Linux.

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