A couple of days back, Apple decided to stop licensing graphics chips from Imagination Technologies Group Plc (IMG.L). This decision comes soon after the company is planning to take greater control of the core technologies in its products including its hefty margin and space for future innovation, which is most likely to be the AR in this case.
However, this is not the first move, as the company has reduced the dependency on an outsider like ARM Holdings Plc. It's worth mentioning that Apple once relied heavily on ARM to design the main processor for the iPhone, but it now licenses only the basic ARM architecture and designs most of the chip itself.
In addition to that, Apple also bought Beats for $3million and replaced the chips with their own custom-designed W1 Bluetooth chip.
Nowadays, most vendors of consumer electronics products rely on outside suppliers for chip design and development, including ARM, Qualcomm, and NVIDIA, primarily because it is extremely expensive.
Even before ending this deal, Apple also hinted on preparing their own graphic processors as well. They have introduced a piece of its own code called Metal for app developers. App developers use Metal to make their apps talk to the graphics chip on the iPhone.
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With this process, Apple can swap the chip without disturbing the developers work. Additionally, this could bridge the gap between developers and graphic ships on iPhones and desktop, which currently requires some separate coding.
Shebly Seyrafi, an analyst at FBN Securities, estimates that the average price of an iPhone increased only 1 percent to $695 last quarter, while costs increased 8 percent to $420, resulting in an iPhone gross margin of 39.6 percent. That is down from the 44 percent average gross margin for iPhones in 2015, according to Seyrafi's estimates.
“By promoting Metal instead of relying on other existing standards, Apple is not only able to control what graphics chip functionality is exposed at its own pace but also blur the line for developers between coding for desktop and mobile GPUs," said Pius Uzamere, the founder of a virtual reality startup called Ether.