Transcription
This is the iPhone Air. It was the big star of the new lineup unveiled by Apple in September. At just 5.6mm, it is the thinnest iPhone ever, with a nifty, flexible new front camera and the ability to dual record from the front and back simultaneously.
Their features shared by the 17 Pro, plus some new AI features, all powered by a more hidden star, Apple Custom Silicon. A19 Pro is going to be around here, just near the top side of the vapor chamber. Apple's most advanced chip yet, the brand new A19 Pro is inside both the Air and the 17 Pro, and I got a rare chance to see inside the 17 Pro for a peek at the new chip at the big unveiling.
A major change, Apple's put neural accelerators inside the six GPU cores to help power AI on device. We've given software developers tools across all our major compute platforms now to build AI in naturally to every application. The integration of the neural processing is reaching MacBook Pro class performance inside an iPhone.
The Air also has a new Apple-designed modem, C1X, and Apple's first wireless chip in iPhone N1. Is this Apple moving towards controlling the full stack of silicon inside the phones? Yes, and actually truly being able to design and optimize a solution for what that given product needs. And really, I think that's where the magic is. When we have control, we are able to do things beyond what we can do by buying a merchant silicon part.
All this comes as Wall Street is putting pressure on Apple about their AI strategy. This part really comes down to how far they can go on their own in AI, right? They're not OpenAI, they're not Google. They probably won't ever have their own Apple model like Google or OpenAI. They're still going to run those services on iPhone, right? They want the iPhone to be the best place for developers to run their AI.
Now we're at Apple headquarters in Cupertino, California for the first ever US interviews about what's powering the new iPhone lineup, custom chips. The Air is Apple's first major new iPhone design since 2017. So why did the company's stock dip on the big reveal, although it has recovered in the days since? This is a really tough moment for Apple because the company's got this difficult headwind that people want to hear more, see more about AI, waiting to hear a bit more about Apple intelligence.
What do you say to those on Wall Street who are concerned about your AI strategy? I think for what we are doing with iPhone, I think we are building the best on-device AI capability that anyone else has.
Behind the Air's enhanced durability ceramic shield, within the new raised plateau that houses the 48-megapixel camera, there is news about AI. Apple's implemented a new chip architecture to prioritize it. You're integrating neural accelerators into each GPU core, how exactly does that work? The GPU is actually a collection of tiny little processors, all running in parallel. With this year's GPU, and the A19 Pro, we're integrating neural processing in a way that allows someone who's writing a program to one of those small processors, extending the instruction sets, and they can switch back and forth between 3D rendering instructions and neural processing instructions, all seamlessly inside the same micro-program. And so when you look inside the neural engine, for example, you have a lot of dense matrix math. We didn't have that capability on GPU, but now we do with A19 Pro.
Apple's original AI hardware, its Neural Engine, was first unveiled back in 2017. The Neural Engine was barely mentioned at the launch. Instead, it's all about adding compute power to the GPUs, with those neural accelerators. They're essentially just additional cores to have a specific design, in this case, very similar to a tensor core, or like a tensor core, to run that, those transformer engines, that matrix multiplication math. But putting that in the GPU, actually makes it a little bit more like some of the things like Nvidia does, in cloud processors and some of the things that other silicon vendors do for AI.
Now, our GPU gives us the ability to apply neural processing across applications that are traditionally more graphics-based. For example, gaming applications; using AI to enhance the quality of the imaging, as well as to improve the efficiency of some of the image rendering. And so by placing it there, we've given them a tool where using the neural engine was maybe a little bit harder. Now they've got it built right into the engine they're already using.
Do you think the A19 Pro should signal to investors that Apple does have it together when it comes to AI strategy? Yeah, I mean, I think just the GPU architecture because that neural accelerator comes on all of the chips, right, all the way down to the to the entry-level iPhone 17. I think that's showing you that they're making compute and architectural changes for AI, both on device, and then obviously things I believe, you know, that they'll do in hybrid-cloud. Through our extension of private cloud compute, we have a very great story that's evolving over time. But right now, we are we are focused on making sure that these phones, that we're shipping today, will be capable of all the important on-device AI workloads that are coming.
Why is on-device AI so important? We've talked a lot about this, privacy is a big deal. We know that when we can do things on-device, we are able to manage people's privacy in the best way. The other thing about it is, it is efficient for us, it is responsive. We know that we are much more in control over the experience.
In the Air, the A19 Pro is housed in the new raised plateau on the back. And so this design of this also helps with thermal dissipation, but also it gives as much room as possible on this side of the surface area to maximize for battery life. Following overheating issues in the iPhone 15. A new vapor chamber in the Pro models keeps the custom chips cool. We think about how that all goes together, including with that forged unibody aluminum design, which is incredibly thermally conductive, so that we can effectively dissipate heat, with the vapor chamber, with where it's positioned, with our chip, and it's even laser-welded into it, which creates a metallic bond, which also helps dissipate heat.
And the A19 Pro wasn't the only new chip Apple unveiled. Introducing N1, our Apple-designed chip, which enables the latest wireless networking technologies. Apple announced its first in-house wireless and Bluetooth chip for all new iPhones, and an updated Apple modem for iPhone Air, nudging out Broadcom and Qualcomm chips. Would it be fair to say that Apple now controls all of the core chips in its own phone? Yes, 100%.
Apple has been making its own networking chips for AirPods and Apple Watch for nearly a decade. We are able to co-design our SoC A19 Pro with N1 to build power management capabilities that allow us to keep the application processor, the big SoC A19 Pro, mostly asleep, while the wireless is running, but quietly, we can build in co-designed interfaces into that N1 that allow us to do processing on the SoC at extremely low-energy for background tasks. So we can be, for example, allowing the device to sort of track location with high accuracy, so that your device can actually be more intelligent about where you are. Yeah, one of the things people may not realize is that your Wi-Fi access points actually contribute to your the device's awareness of location. So you don't need to use GPS, which actually is a cost more from a power perspective.
Until now, Broadcom was the main supplier of wireless chips in iPhones. Broadcom's stock fell slightly on the N1 news but bounced back quickly. Apple does still have a licensing deal with Broadcom for its technology. N1 is in the entire 17 lineup and iPhone Air. Will we see wireless and Bluetooth chips in all Apple devices? General focus is on building the right solution for a given product, but yes, you could expect to see that. Did this indicate a sea change toward Apple trying to control the full silicon stack? Absolutely. I mean, I think this has been their goal from day one, which is anywhere that they can make a custom chip, or that they need to make a custom chip because it improves the experience, which I think is really the example you see with their modem.
That new Apple modem, C1X, is in the Air. Its first iPhone modem, C1, came out in February in the 16E. Over the last six months, we've really driven a significant performance boost on C1 such that now it's twice as fast in terms of speed, and at the same time, we actually drove an energy efficiency even further. So for the same use case, C1X now uses 30% less energy, if you compare it to the modem that's in iPhone 16 Pro. That modem in the 16 Pro, it's made by Qualcomm. Their whole proposition there is we can do this at lower power. It may not be as good as Qualcomm's yet, right, in terms of just overall throughput and performance, but they can control it and they can make it run at lower power. So you're going to get better battery life. And obviously controlling the modem makes the sense when you want to miniaturize things, right? So if we think about where my glasses might go right. Other form factors that are super small, they need to control that stack.
Qualcomm stock wasn't much impacted by the news, having long warned investors of the coming change. We've known it's a long time coming. It was just a matter of when. And then when does it go across the portfolio, right? That was the biggest question. And I think you're just seeing right that pace to be the next couple of years to completely phase them out. But I do think it's a testament to it's not on the Pro because Qualcomm still makes the best modems. And why not see an Apple modem inside the iPhone 17, or the 17 Pro or Pro Max. Well, we were really focused on what we needed for iPhone Air. And we have great, great products with iPhone 17 and iPhone 17 Pro as well. And over time, we see Apple cellular solutions in more products.
Like with Broadcom, Apple will continue its licensing deals to use some of Qualcomm's core technology. Does the C1X, Apple making its own modems for phones, signal trouble for Qualcomm? No, I don't think so. I mean, again, I think there's still the gold standard for modems. Um, you know, what they do with the Snapdragon line is still pervasive across the vast majority of high-end Android smartphones.
Apple does still rely on others for smaller key components, like Samsung for memory, and Texas Instruments for analog. But the core chips? How long do you think it'll be until we see every iPhone with Apple-designed modems, Apple-designed wireless and Bluetooth chips? I think there's a good chance by next year, but for sure in the next two years, and all devices, right? So we expect that there would be modems coming to Mac, we would expect there's modems coming to iPad. So I think over the course of the next few years it will be on all of the portfolio.
Are we going to see neural accelerators in the GPU cores of the M5, for instance, and on other devices? We have a unified approach to architecture. My group, when we architect our GPUs, we're looking across the full set of chips. We like to say that our generational improvements in GPU and the features that we put in them, we extend them across products as appropriate. So. So, probably.
As for where Apple will make so many custom chips, the A19 Pro is at the leading edge of Taiwan Semiconductor Manufacturing Company's three-nanometer node. At its new campus in Arizona, where we got a tour, TSMC is working toward three-nanometer production by 2028, but it's not there yet. But if you need to be on the leading edge, it's going to be Taiwan for the time being. Have you seen signals that Apple is concerned about that, and trying to change it? I mean, I think everybody is concerned about this because there's really a question of what part of tariffs impact the silicon supply chain, right? And I think this is obviously why Apple and Tim Cook are on their mission and now they're talking about investing in America. Also geopolitics relying entirely on Taiwan. Does that pose risk for Apple? It does. As we're accelerating toward wanting to use the best process node available, that will still be in Taiwan, until, you know, Intel becomes a viable option. So, that's I think, really the challenge, is that's going to be a while, at least, right the next 2 to 3 years.
How likely is it that Apple will start making some chips with Intel in the next few years? I think there will be serious consideration if 14A really does deliver on all of its promises. In August, Apple increased its commitment to manufacture in the US amidst Trump's new promise of a 100% tariff on ships from companies not making domestically. Apple is leading the creation of an end-to-end silicon supply chain, right here in America. TSMC is ramping to three nanometer in Arizona. I've been there. They aren't there yet, so right now I presume these will be made in Taiwan.
What is the goal as far as manufacturing in the U.S.? Down the road? I think we are super excited about TSMC's push into US manufacturing. Obviously, it will help us from a time zone perspective, and we also appreciate that the diversity of the supply is also really important. $600 billion being spent in the US over the next four years. Do you know how much of that is going toward custom silicon? I hope it's a lot.