[Apple Shockwave](38) Semiconductor for Smartphones, Delay This and You Fall Behind

Apple Chip Performance Improvement Slows Down
RISC-V Architecture Emerges as 'Post ARM'
Need to Explore Potential Expansion of ARM License Fees
Google, Qualcomm Lead Proactive Responses in Android Camp
Apple Extends Cooperation with ARM Beyond 2040 but Takes Some Measures
Concerns Over China’s Possible Escape Route to Evade Western Semiconductor Regulations

Editor's Note[Apple Shockwave] is a content series that examines the upheaval caused by Apple entering the semiconductor market. You might wonder why Apple is involved in semiconductors. Apple is no longer just a company that makes smartphones and computers. After long efforts starting from the late founder Steve Jobs, Apple has designed world-class semiconductors used in mobile devices. If Intel was the leader in the PC era, Apple has become the top predator in the mobile era semiconductor ecosystem. Amid the global semiconductor supply chain crisis and large-scale investments in semiconductor production facilities, we will carefully examine the upheaval and prospects in the semiconductor market brought about by Apple Silicon to broaden our readers' insights. Apple Shockwave will visit readers every weekend. After more than 40 installments, it will be published as a book.

There have been ongoing criticisms that Apple's semiconductor design, which soared dramatically starting with the 'M1', is no longer as impressive as before. It has now been three full years since Apple Silicon, that is, semiconductors designed in-house by Apple, began to be installed in all iPhones, Mac computers, and iPads. During this period, the iPhone chips have evolved up to the 'A17 Pro', and the PC and iPad chips have advanced to the 'M3' (of course, various types of high-performance chips beyond the base models have also been introduced).

The remarkable performance improvement of the M1 compared to the previous A12Z chip was largely due to Apple abandoning Intel chips and shifting the foundation of semiconductor design to ARM. By adopting ARM's design, which consumes less power than Intel, Apple demonstrated its strength by surpassing market incumbents Intel and AMD in mobile chip production in one fell swoop.

The M-series, which appeared after the rapid growth of the A-series chips used in iPhones, was a decisive moment showing the decline of Intel's x86 architecture, which had dominated the market, and the rise of the ARM architecture.

Apple's M3, M3 Pro, and M3 Max chips unveiled at the 'Scary fast' event on October 30, 2023

The M-series, which emerged during the COVID-19 pandemic, achieved great success amid the surge in PC demand from businesses and individuals. Especially, MacBooks, which outperformed Intel-based CPUs in performance and battery life while being more affordable, acted like a 'catfish' in the market.

However, evaluations suggest that Apple Silicon's growth has slowed over the past three years. The newly introduced M3 following the M2 seems to be narrowing the gap with competitors rather than widening it. Notably, although Apple has practically monopolized TSMC's 3-nanometer process and introduced semiconductors at least one generation ahead of competitors, there is little consensus that this represents a dramatic change. Sales of MacBook computers and iPads are also declining.

If the evolution of the manufacturing process has not yielded sufficient performance improvements, are there alternatives? The semiconductor industry expects that there are. One such alternative is 'RISC-V', which originated at the University of California, Berkeley (the number 5).

RISC-V is considered the only viable alternative that can effectively replace ARM. In the future, system semiconductors are likely to see competition among three camps: x86, ARM, and RISC-V.

ARM's design is also based on RISC. RISC stands for Reduced Instruction Set Computer. By using a reduced instruction set, it simplifies the architecture compared to the CISC (Complex Instruction Set Computer) used by the x86 family. The company name ARM itself proves its RISC origin. ARM stands for Advanced RISC Machine.

RISC-V chips are about 30-50% smaller in size and consume up to 60% less power compared to ARM chips with similar performance. Although there are implementation challenges to overcome, these advantages are hard for semiconductor companies to ignore. Especially in server chips rather than consumer device terminals, there is great expectation that RISC-V can play a significant role.

RISC-V is a presence that even ARM, responsible for ARM-based chip designs, fears. Imagine a scenario where ARM designs are removed from all iPhones, Mac computers, and iPads manufactured by Apple. ARM would lose the iPhone, the world's best-selling smartphone. Application processor (AP) manufacturers for Android phones like Qualcomm and MediaTek could also follow Apple's direction.

For this reason, ARM cited the rise of RISC-V alongside the instability of the Chinese market, represented by ARM China, as key business risks in its IPO filing.

ARM IPO: Could It Accelerate RISC-V Growth?

Interestingly, ARM's IPO could become a catalyst that accelerates the transition to RISC-V. Public companies inevitably face strong shareholder demands for performance growth. ARM's stock price has not changed significantly from its IPO price of $51. Although U.S. Treasury yields have soared and most big IT tech companies' stock prices have been sluggish, ARM's stock price, once considered a semiconductor market prodigy, has not met expectations.

The foundation for stock price growth is performance. The easiest way to increase ARM's performance is to have more products using ARM-designed semiconductors, such as smartphones, sold, thereby increasing license fee revenue. If this growth strategy is difficult, there is another option: raising license fees. There have already been predictions that ARM might charge license fees per device rather than per chip. ARM has filed a lawsuit claiming that the license agreement with Nuvia, acquired by Qualcomm, is invalid. It is presumed that the lawsuit arose because the license agreement Nuvia had was smaller in scale than Qualcomm's.

RISC-V is open source. Using RISC-V means reduced costs compared to ARM. This is a highly attractive factor. Apple is also restraining iPhone price increases. Naturally, there is strong pressure to reduce costs. Even a small reduction in payments to ARM affects performance improvement.

Recently, with U.S. interest rates soaring, IT companies are focusing on cost-cutting measures such as restructuring. If performance is sufficient, the environment is forming where RISC-V can be adopted.

The Android camp is approaching RISC-V faster than Apple. Google, which provides the Android operating system, and Qualcomm, a leading AP chip manufacturer for Android phones, are making swift moves to adopt RISC-V. In August 2023, Qualcomm, Infineon, NXP, Nordic Semiconductor, and Bosch announced a joint investment in a new company based on RISC-V.

Google announced through its blog that Android's support for RISC-V will be fully underway.

Google, the creator of Android, posted a blog titled 'RISC-V and Android: What You Need to Know' on its open-source blog on October 30, 2023. Through this, Google also presented a timeline to provide an Android developer emulator by 2024. This signals the establishment of an environment to launch RISC-V-based Android apps and devices. Google had previously expressed hope that RISC-V would become a Tier 1 architecture like ARM, and this announcement shows an acceleration in its response to RISC-V. Google's announcement can also be linked to Qualcomm's announcement of launching a RISC-V-based smartwatch chip next year.

Samsung, a key player in the Android camp, is also researching RISC-V. In May 2023, Samsung announced that it would participate as a board member in RISE (RISC-V Software Ecosystem), an open-source software development project launched by the Linux Foundation, a nonprofit open-source organization. Besides Samsung, Google, Intel, Nvidia, and Qualcomm are also participants.

There are signs that Apple is also preparing for RISC-V, but its adoption timing may be later than Android's. According to ARM's IPO filing, Apple and ARM have extended their cooperation until after 2040. Even so, if the Android camp advances, Apple cannot ignore RISC-V. Apple played a foundational role in ARM's birth, and as an anchor investor in ARM's IPO, the relationship between the two companies cannot be viewed on the same level as other companies. There is also speculation that even if Apple uses RISC-V, it will apply it in the artificial intelligence (AI) field rather than CPUs.

Apple has not feared change. Apple has already replaced key chip suppliers several times. Chip companies abandoned by Apple, such as Motorola and Intel, have consistently declined.

China: A Wildcard in RISC-V Expansion

Changes in international affairs could also influence RISC-V's future. This is because China stands to gain the most from RISC-V's development. Being open source, anyone can use it. This conflicts with the current reality where Western countries, including the U.S., restrict the sale of the latest ARM architectures to Chinese companies to limit the growth of China's semiconductor industry.

ARM China has already become a separate entity from the headquarters. If China also dominates the open-source RISC-V, it would create loopholes in Western semiconductor regulations against China. Already, big Chinese tech and semiconductor companies such as Alibaba Group and Baidu have formed a RISC-V patent alliance.

Because of this, voices are growing in the U.S. political sphere calling for RISC-V to be included in regulations against China.