Yesterday, Apple announced its new iPhone line up including the iPhone 5S and iPhone 5C. The interesting part from our perspective is that the iPhone 5S features a 64-bit A7 applications processor, which is the mobile industry’s first commercial 64-bit smartphone chip. Apple beat specialists like Qualcomm, Broadcom, Samsung and NVIDIA to bring the first 64-bit smartphone applications processor chip to market. Apple seems to have at least a 6-9 month advantage with 64-bit commercial smartphone chips, in our view. Intel’s 22 nm-based 64-bit Merrifield smartphone chip will debut early next year and the 64-bit Bay Trail chip for tablets will debut this month.

Apple surprised with its semiconductor prowess as the 64-bit A7 chip packs 1 billion transistors. For context, Intel’s 3rd generation Core product Ivy Bridge has 1.4 billion transistors. The A7 chip’s transistor count compares well with desktop and notebook processors released in 2010-12 time frame. Apple, an architecture licensee of ARM CPU cores, is clearly demonstrating its vertical integration advantage with tight integration between hardware and software. It seems that the A7 chip is manufactured using 28 nm process technology (TSMC or Samsung is unknown at this point). Apple claims its A7 chip is twice as fast as its previous generation A6 chip, while doubling on graphics performance. While unconfirmed, the A7 chip most likely integrates Imagination Technologies’ PowerVR SGX6-series GPU (codenamed Rogue).

ARM, the key CPU IP supplier to smartphones and tablet chip companies, revealed its 64-bit plans in 2012 by announcing ARMv8-based Cortex-A50 series. The 64-bit Cortex-A53 and A57 chips eliminate the RAM limitations of 32-bit chips and OEMs will be able to add more than 4GB of RAM. At that time, ARM announced that first 64-bit commercial chips will be available in 2014. But, Apple’s architecture license must have enabled it to bring its own chips to market ahead of ARM’s schedule.

While the use cases for 64-bit chips may be limited in the near-term, application developers are likely to find a few. One potential application is Adobe Photoshop. We feel that the 64-bit chips are more appropriate to big screen devices like tablets and Apple is likely to announce an A7-based new iPad in future. Apple kicked off 64-bit mobile chip wars at a time when 32-bit multi-core penetration in smartphone apps processors reached two-thirds of the total AP market.

We estimate that vertical vendors such as Apple, Huawei and Samsung captured 25 percent of volume share in the smartphone apps processor market in 2012. By our estimates, Apple ranked number two in the smartphone apps processor market and number one in the tablet apps processor market in 1Q 2013. Samsung’s industry first big.LITTLE chip Exynos 5 Octa chip coupled with Apple’s industry-first 64-bit smartphone chip announcements this year suggest that these vertical vendors have high ambitions to lead the technology curve. However, vertical vendors currently lack cellular SoC products, which leaves enough room for merchant vendors to continue to grow in the fast growing smartphone and tablet apps processor markets.

Sravan Kundojjala