Apple fires Intel


November 10, 2020

PLUS: Vaccine news shakes up stocks.
November 10, 2020
The Hustle
TOGETHER WITH
Felix Gray

Good news: Results from Pfizer’s phase 3 clinical vaccine trial suggests it’s 90%+ effective. However, caution is in order as the results are still very preliminary and have not been peer-reviewed.

Bad news: We’re only doing good news today.

The Big Idea
chip gif

How Apple built its own chip empire and gave Intel the boot

If you’re Intel, you’re gonna want to put earmuffs on for Apple’s “One More Thing” event today.

Apple is expected to announce the first MacBook to run on its in-house silicon chip in lieu of Intel’s — a change that will allow all of the company’s major product lines to run on the same architecture.

For a firm that prizes tight hardware and software integration, this is a major milestone.

The investment that started it all

When examining Apple’s most noteworthy acquisitions, 2 immediately come to mind:

  • NeXT Software for $404m in 1997: The purchase of Steve Jobs’ post-Apple startup included the precursor to iOS and brought Jobs back to the company he founded.
  • Beats for $3B in 2014: The Dr. Dre and Jimmy Iovine headphone company is Apple’s biggest acquisition and laid the groundwork for Apple Music.

But a 3rd (and highly consequential) deal has defined Apple’s mobile product road map: the acquisition of P.A. Semi for $278m in 2008.

Per tech analyst Ben Thompson, P.A. Semi secured the talent and IP “that would undergird [Apple’s] A-series of chips, which have powered every iPad and every iPhone since 2010.”

The P.A. Semi deal came 10 months after the first iPhone release

At the time, it was clear that the future was mobile — and that meant chips had to properly balance performance and energy efficiency.

Intel, then the world’s biggest chipmaker, wouldn’t deliver the mobile-friendly chips the iPhone needed… so Apple started building an in-house solution.

Apple steadily improved its chips and acquired more semiconductor talent and IP: Intrinsity in 2010 ($121m) and parts of Dialog Semiconductor in 2018 ($600m).

The MacBook started using the Intel chip in 2006

Thompson notes that the rationale for an Intel / MacBook breakup is years in the making:

  • Performance: The mobile A-series chip has improved markedly.
  • Chip economics: Apple captures more margin by using chip designs from ARM and outsourcing production to Taiwan Semiconductor Manufacturing Co. (TSMC).
  • Control: Tighter hardware-software integration means the potential for new features that are exclusive to MacBook.

Apple first announced that MacBooks would transition away from Intel back in June. Today, the deed is likely to be done.

Earmuffs, Intel. Earmuffs.

Check out related coverage:

  • Apple’s $2T secret sauce
  • How Nvidia overtook Intel
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Snippets
  • It feels like we’re drinking more booze than ever, but alcohol makers are hurting. On-prem (e.g., restaurants) accounts for 20% of sales in the US and is down big.
  • McPlant is McDonald’s foray into plant-based substitutes for burgers, chicken, and eggs. Unlike Burger King, which partnered with Impossible Meats, Mickey D’s is going at it mostly alone (after a brief foray with Beyond Meat).
  • Data giant Bloomberg is going deeper into consumer media, taking its more lifestyle-focused QuickTake brand to the streamers with hours of daily live content.
  • Quartz’s CEO and staff are buying the struggling biz media firm from its Japanese owner, Uzabase.
  • This year, 71 startups have reached unicorn status (vs. 79 in 2019). Healthcare, productivity, and fintech lead the way. Meanwhile, a red button app is valued at $200m.
 
Stonks
vaccine

Vaccine hype spurs massive rotation in stock

When the pandemic struck America in March, the stock market imploded.

Sectors closely tied to the “in-person” economy — travel, energy, restaurants, and retailers without an online presence — were hit the hardest.

Meanwhile, digital-friendly sectors such as cloud computing, streaming, at-home wellness, and gaming surged.

Yesterday, promising results from Pfizer’s phase 3 vaccine trial sparked a huge rotation in stocks, perhaps highlights of what’s to come.

The winners

  • Airlines: A vaccine is the first step in getting travelers back in the air. The sector ripped higher with Delta (+17%), American (+15%), and JetBlue (+22%) leading the way.
  • Energy: Pretty simple — if you’re not going anywhere you don’t need gas. The energy ETF XLE (+14%) jumped in hopes of a pickup in global movement of just about anything.
  • “Oh sh*t I might need to see other people”: The reality of the need to get dressed again set in as appearance stocks — from makeup (Ulta Beauty, +15%) to high-end clothing (Ralph Lauren, +20%) — saw huge gains.

The losers

  • At-home fitness: Who didn’t take advantage of Peloton’s $10 monthly sub during lockdown? Investors are clearly worried orders will dry when gyms reopen, and $PTON (-20%) was down big.
  • Remote work plays: Will a return to work reduce the need for Zoom meetings and Docusign virtual signatures? $ZM (-17%) and $DOCU (-15%), 2 COVID staples, both had brutal days.
  • Chillin’ at home: Are the days of ordering Dominos, and bingeing Netflix numbered? $DPZ (-6%), and $NFLX (-9%) were both down.
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SPONSORED

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New App Alert
Parler logo

Parler is a ‘free speech’ alternative to Twitter. It just shot to the top of the App Store.

Parler dubs itself the “non-biased, free speech” social media app.

My First Million’s Shaan Puri noted over the weekend that Parler had hit the top of the App Store, where it remains.

The app was founded in 2018…

… and made news earlier this year when Sen. Ted Cruz joined the platform. It was in semi-protest at Twitter, Facebook, and other Silicon Valley giants for “flagrantly silencing” millions of conservative voices.

According to The Verge, Parler differentiates itself from other social networks by refusing to moderate content, “including hate speech and misinformation.”

It’s been very active since the election

Twitter’s aggressive use of warning labels on political-related content and Facebook’s outright ban of users has juiced Parler’s numbers. #GrowthHack

Of the app’s 4m users, 25% of them (1m) joined over the past 6 weeks per The Verge.

The traffic was so heavy in recent days that the site crashed, leading Dan Bongino — conservative media star and Parler co-owner — to (ironically) tweet, “I’m asking for your patience while we deal with the exponential growth… my apologies for the glitches.”

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On Brand
tequila shot

When brand extensions go wrong

I’ve been instructed by my editor to stop making jokes about a certain South African entrepreneur.

So, you’ll have to put your thinking hats on for this next sentence: A certain electrical vehicle maker that rhymes with “Resla” released its own tequila last week.

The “Resla” tequila sold out immediately, following in the footsteps of a previous “Resla” short shorts apparel drop.

Is there anything this EV car company can’t sell?

We can’t know for sure, but let’s dig through corporate history’s worst brand extension mistakes to see where the limits might be:

  • Harley-Davidson cologne: In 2019, Harley-Davidson sold ~$238m in merch (~5.2% of revenue). Not among the sales: a failed cologne from the mid-1990s that cost $60 a bottle, with names like Black Fire, Destiny, and Hot Rod.
  • Apple’s game console project: In partnership with Japanese game maker Bandai, Apple released the Pippin. It cost 2-3x more than other consoles and only sold 42k units (vs. 350k Nintendos in the first 3 days after the N64 console was released in 1996).
  • DuPont made a shoe (LOL): On a mission to make a leather substitute, the chemical giant created Corfam. DuPont spent $100m to make the material and for some reason decided that dress shoes were the move. Corfam had basically zero breathability, and stank feet was almost certainly a problem.

If “Resla” can do high heels, it’s game over.

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Editing by: Zachary “Beat it, Intel” Crockett, Lorraine, Alsace (Staff Geographer).

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