Will Apple switch to Intel chips?

Media reports say the iPod maker will announce sometime Monday a switch from IBM.

June 6, 2005: 7:27 AM EDT


AMSTERDAM (Reuters) - Apple Computer Inc. is expected to announce Monday a shift to chips made by Intel Corp. in its Macintosh computer line next year, a risky move costing hundreds of millions of dollars, according to several published reports.

Such a move, which has been talked about for years, would be a change in strategy for Apple (down $1.80 to $38.24, Research), a high-profile win for Intel (down $0.26 to $27.33, Research) and a blow to International Business Machines Corp. (down $1.56 to $75.79, Research) and Freescale Semiconductor Inc. (down $0.21 to $20.74, Research), current suppliers of the PowerPC chips used in its Macintosh systems.

Apple and Intel executives were not immediately available to comment on the report in the Wall Street Journal Web site published late on Sunday, which added to a report on Web site CNET that appeared late Friday. Both reports cited unidentified sources.

Apple has a near 2 percent share of the global personal computer market, but after years of decline it is now gaining on its rivals as its iPod music players re-establish the firm as a trendsetter in design and software.

Steve Jobs, Apple's chief executive, is expected to explain the shift Monday during a keynote speech at the company's annual software developers conference in San Francisco, people familiar with the situation told the Journal.

Intel, the world's biggest chipmaker, may be able to provide Apple with cheaper, faster and more energy-efficient chips, while throwing in its usual marketing subsidies.

The chips may initially be used in Apple's cheapest Mini computer before it makes a transition to more powerful machines, the Wall Street Journal said.

Flirt with Intel
For years Jobs has flirted with Intel, putting pressure on Freescale and IBM to catch up with Intel and come up with faster and more energy-efficient PowerPC chips.

In September 2002 he said at the Apple Expo in Paris that Freescale and IBM "were showing some good stuff", but also that "it was nice to have an option" in Intel.

A shift to a new chip, however, would not be easy and might cause disruptions for Macintosh users and software developers, analysts said.

Application programs will have to be adapted to run on Intel's x86 chips, the calculating engines used in most computers running Microsoft's (down $0.36 to $25.43, Research) Windows operating system.

"It could cost hundreds of millions (of dollars) of re-engineering. It's not easy work. It's deep work at the base of the (software) kernel," said analyst Brian Gammage at research group Gartner.

He said that, unlike Intel, IBM and Freescale do not provide long-term technology roadmaps that can help its computer customers win large contracts from big corporations.

"I still think this might just be sabre rattling from Apple," Gammage said.

Apple may feel IBM needs another shot across the bow because that company is deeply involved in, and possibly distracted by, the challenging development of the new Cell processor for Sony's PlayStation 3 videogame console.

If Apple will indeed re-engineer its operating system and other applications so that the software runs on Intel chips, it opens the possibility that hackers and clone manufacturers could assemble their own Mac PCs with cheap, generic hardware and store-bought copies of Apple's software.

"That's a tantalizing prospect. The Macintosh operating system could potentially compete with Windows," Gammage said.

It would be a strategy that Apple tried before in the early 1990s without much success. The licensing programme was shut down after Jobs returned to Apple in 1996.

Apple is offering $50 for iPod battery problems.