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Apple cashes in on its Mac chip bet

January 28, 2022, 6:01 PM UTC

Apple’s ability to weather supply chain issues and post record quarterly sales of $124 billion understandably drew the most headlines Thursday, but there’s another success story deeper in the financial statements.

A little over a year after Apple made a huge bet on bringing Mac chip design in-house, putting its own M1 processors into the lineup, the gamble is paying off handsomely.

Apple recorded nearly $11 billion in Mac sales during the holiday quarter, up 25% from the prior year. In all, Apple’s Mac division brought in a record $37.4 billion for the calendar year 2021, kicking into gear a category that had stagnated at around $25 billion in sales as recently as 2019.

For that, CEO Tim Cook on Thursday thanked the company’s switch from Intel to Apple Silicon chips, saying the sales boost is “very much because of M1.” Apple unveiled its first M1-powered laptops in late 2020, and continues to bring in additional devices. The latest switch came in October 2021, when the higher-cost MacBook Pro series came into the fold. 

“Customer satisfaction is off the charts,” Cook said during the company’s earnings call. “And so what I see this as is a product that will be very successful in a number of different markets, from education to business to the creative industry and in all geographic markets. We’re not limiting ourselves.”

To be sure, Apple’s Mac sales surely have benefited from the increase in work-from-home customers. CNBC reported earlier this month that worldwide PC shipments in 2021 hit their highest mark in nearly a decade, largely due to effects of the pandemic.

Apple also does not release sales figures by model, leaving it uncertain just how much M1-powered devices pushed Mac sales higher.

Still, the impact of M1 is clear. The relative rise in Mac sales far outpaces PC sales growth at HP and ranks slightly better than Dell. Notably, the division’s biggest quarter to date followed the debut of the high-end, M1-powered MacBook Pro, which retails at $1,999 and up. 

The switch to self-designed chips bodes well for other tech giants taking greater control over their designs—but only if done right. Apple drew rave reviews of its M1 chips, boasting high-end processing and graphics performance that helped extend laptop battery life. The switch made Apple less reliant on Intel, which had slipped from its best-in-class standing.

Whether fellow PC makers can match Apple’s standard remains to be seen. Google is expected to shift to self-designed chips in its Chromebooks and tablets by 2023, per a Nikkei Asia report this past summer. A December 2020 Bloomberg report suggested Microsoft is also making a similar move with its Surface line of PCs, though no updates have emerged since then.

Apple also faces competition from its spurned partner, which boasts that its new Intel 12th-generation processor is faster than Apple’s top chip. (Whether that’s true is a bit unknown and complicated, and Apple’s forthcoming M2 processor may have a say in the matter.)

The Mac unit still represents a small sliver of Apple’s business, accounting for just shy of 10% of sales. While quarterly Mac revenues jumped $2.1 billion year-over-year, iPhone sales rose by $6 billion.

Still, every billion matters for a company like Apple, whose shares were up nearly 6% in mid-day trading Friday following its latest earnings. And with its own chips in hand, the future looks bright for a once-lagging division.

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Jacob Carpenter

NEWSWORTHY

Elon leaves ‘em wanting more. Investors shed Tesla stock Thursday in a sell-off that cooled Friday morning, as news of the electric vehicle automaker’s scaled-back plans for 2022 worried shareholders, CNBC reported. Tesla shares tumbled 12% on Thursday and before rebounding by 1% as of early Friday afternoon following the company’s holiday-quarter earnings report, which featured CEO Elon Musk nixing any possibility of the long-awaited Cybertruck or the hoped-for $25,000 sedan hitting the market in 2022. Musk remains bullish on this year, predicting strong manufacturing growth and developments in the company’s self-driving technology.

Ganging up on Apple. The attorneys general of 35 states filed an amicus brief Thursday in support of Fortnite developer Epic Games’ ongoing antitrust lawsuit against Apple, Bloomberg reported. The top state lawyers argued that a California federal judge erred when she ruled that Apple does not run its lucrative App Store like a monopoly, largely leaving its current fee structure and terms of service intact. The Department of Justice also submitted a filing in opposition to the ruling, arguing that the decision “could imperil effective antitrust enforcement.” Epic Games is appealing the verdict, while Apple officials said they remain confident that the ruling will be upheld.

Crypto survives Moscow? Russian political leaders appear poised to place strict regulations on cryptocurrency, rather than issuing a nationwide ban proposed by the country’s central bank, Reuters reported Thursday. Under a “road map” created by top members of President Vladimir Putin’s administration, Russia would allow domestic banks to buy and sell cryptocurrencies, while foreign exchanges could operate there with state-issued licenses. The Russian central bank previously argued that cryptocurrency represents a threat to the country’s monetary policy, financial system, and environmental agenda.

FCC kicks out Unicom. Leaders of the Federal Communications Commission unanimously voted Thursday to revoke the license of telecom provider China Unicom’s U.S. subsidiary, the latest move by federal officials to limit China’s presence in the U.S. tech sector, The New York Times reported. The agency’s four commissioners ruled that concerns about national security and spying warrant the removal of state-owned China Unicom, which is accused of misleading the FCC and Congress about its activities in the U.S. The company is one of China’s largest mobile service providers, but it maintained a small American footprint.

FOOD FOR THOUGHT

The NSO story runs deep. A New York Times investigation published Friday shed new light on the deep ties between the Israeli government and the controversial Israeli spyware company NSO Group, whose Pegasus technology has been deployed against dissidents, journalists, and human rights advocates by autocratic political leaders. The report details how government officials arranged secret regulatory pacts with NSO Group that helped Israel’s diplomatic efforts across the country. Times reporters also broke news that the U.S. FBI toyed with NSO Group’s encryption-breaking technology before deciding not to employ it on American soil.

From the article:

The combination of Israel’s search for influence and NSO’s drive for profits has also led to the powerful spying tools ending up in the hands of a new generation of nationalist leaders worldwide. Though the Israeli government’s oversight was meant to prevent the powerful spyware from being used in repressive ways, Pegasus has been sold to Poland, Hungary and India, despite those countries’ questionable records on human rights.

The United States has made a series of calculations in response to these developments—secretly acquiring, testing and deploying the company’s technology, even as it has denounced the company in public and sought to limit its access to vital American suppliers.

IN CASE YOU MISSED IT

Elon Musk tried to distract the market with plans for a shiny new Tesla robot. It backfired horribly, by Christiaan Hetzner

Softbank’s COO demanded a $1 billion bonus. Is any exec worth that much?, by Eamon Barrett

Elizabeth Warren wants Bitcoin miners to explain the climate impact of their power hungry rigs, by Josh Saul and Bloomberg

China’s Big Tech leads in VR and AR patent applications. But China’s metaverse may look different from everyone else’s, by Yvonne Lau

Toward data dignity: How we lost our privacy to Big Tech, by Tom Chavez, Maritza Johnson, and Jesper Andersen

Warner Music is determined not to make another Napster mistake as it plots A-list concerts in the metaverse, by Marco Quiroz-Gutierrez

BEFORE YOU GO

Ahh, the simple things. The days of quickly pulling down your mask to open an iPhone look like they’re coming to an end—if you have the right device. The website 9to5mac.com spotted Thursday that Apple’s latest iPhone operating system update allows masked users to open their smartphone with Face ID. An update prompt notes that the software “can recognize the unique features around the eye area to authenticate” the iPhone owner. Alas, the technology only appears to work on iPhone 12 and 13 series devices.

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