Apple’s newest homegrown chips present a fresh challenge to Microsoft’s Windows business

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  • Apple is positioned to capture PC market share from Microsoft Windows after announcing MacBook laptops with next-generation M2 chips.
  • Adobe, Microsoft and other app developers are making their software compatible with Apple silicon, giving companies more incentive to switch.

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Apple’s new laptops announced Monday that include the iPhone maker’s next-generation in-house chips could present new challenges to Microsoft’s lucrative Windows business.

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Ever since Apple began selling Macs powered by its homegrown M1 processor in late 2020, the company’s computer business has been gathering momentum. Earlier this week, Apple introduced the M2, which will debut in the new MacBook Air and 13-inch MacBook Pro.

The new chip will include 25% more transistors and 50% more bandwidth than the M1.

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Mikako Kitagawa, an analyst at technology industry research company Gartner, said Apple may continue to grow market share with the M2 architecture. According to Gartner estimates, in 2021, Apple accounted for 7.9% of worldwide PC shipments by operating system, while Windows controlled 81.8%. The firm expects Apple’s share to rise to 10.7% in 2026 as Windows’ share will drop to 80.5%.

Kitagawa said an updated forecast that will likely strengthen Apple’s performance over the next few weeks.

Apple’s Mac business has been revived by new devices sporting the company’s own chips as replacements for processors from Intel. The first MacBook Air was released last year, followed by updated models of iMac, Mac mini and MacBook Pro laptops, and a new model for power users called the Mac Studio.

Newer devices from Apple tend to have longer battery life and a lot of processing power than their older Intel-based counterparts.

There has been a jump in sales. Apple’s Mac business grew 23% to more than $35 billion in sales in fiscal 2021. In the March quarter, Mac sales grew more than 14%, a sharper increase than any other Apple hardware category. Apple CEO Tim Cook told analysts in April that “the incredible customer response to our M1-powered Macs helped drive 15% year-over-year growth in revenue despite supply constraints.”

This is not good news for Microsoft.

The majority of Microsoft’s Windows revenue comes from licenses it sells to Dell, HP, Lenovo and other device makers. That’s 7.5% of Microsoft’s total revenue and about 11% of gross profit, Morgan Stanley analysts led by Keith Weiss wrote in a note this week.

As Microsoft loses market share, “a lot of pricing control is lost in the market,” said Brad Brooks, CEO of cybersecurity start-up Sensis and former corporate vice president for Microsoft’s Windows consumer business.

Most of the revenue for device manufacturers from Windows licenses comes from commercial customers. Brooks said Apple is leading the way among consumers, and he learned during his nine years at Microsoft that there is a positive correlation between consumer use and what happens at work.

“Once they start using a different product set in their home environment, they are more likely to adopt that environment in their professional settings,” said Brooks when speaking of corporate leaders, who make purchase decisions.

Brooks said he switched to the Mac as his main computer in 2017 and said he wants an M2 machine in the future. He said that about 150 employees of his company use Macs as their primary computer.

Businesses were slow to adopt Apple’s M1 computers because of concerns that key applications would not be compatible. But Adobe, Microsoft and other developers have gradually come out with native versions of their software for the devices, said Kitagawa, who now anticipates corporate adoption.

Patrick Moorhead, CEO of industry research company Moor Insights & Strategy, said Windows PCs may eventually have battery life and performance that match Apple’s latest Macs. “Among the chipmakers they use,” Moorhead said, “it’s closer than between Apple and AMD, between Apple and Intel.”

Apple, however, has other levers to pull, as it can offer cheaper computers. Moorhead envisions a MacBook SE that could cost $800 or $900, compared with a starting price of $1,199 for Apple’s upcoming M2 MacBook Air. It will be similar to what Apple has done with the iPhone SE, a budget iPhone that lacks some of the company’s latest smartphone enhancements.

“A MacBook SE will disrupt Windows in a very big way at a very low price point,” Moorhead said.

Microsoft did not respond to a request for comment.

– CNBC’s Keef Lacewing

watch: Goldman Hall says M2 chip, Apple’s Pay Later service most important announcement at Apple’s WWDC

Credit: www.cnbc.com /

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