The A5 System-on-a-Chip (SoC) chips that are used in the iPad 2 and iPhone 4S, include dual-core CPUs, (Essentially, they are almost like having two central processing units.) The Apple TV does not need all this power, so it ran the original A5 with one core disabled. This would help reduce fabrication production loss, since frequently, a wafer has a certain number of flaws, and these flawed processors could still be used. But once you need a quantity higher than the natural error rate, you begin using “good” dual-core processors for your restricted needs. Wasteful. Let’s face it, 5,000,000 is a pretty large number of units!
So Apple Inc. (NASDAQ: AAPL) went out and made a new version of the A5 especially for the Apple TV, one designed with a single core.
The chip is therefore smaller, which means you get more per wafer off the fab line, yielding lower cost. It does not cost to produce a single chip, rather to make a wafer. If you get more product per wafer, you have lower per-unit cost. Fine and dandy, we have just contributed a 1/100thpercent to the gross margin.
But there is another significant change here. The incredible folks at Anand Tech. were not content at this, but went on to explore the possibility that the power consumption of the chip had improved. Their analysis shows that there indeed was a very significant power savings in the new chip – 40-50% in the various operating scenarios.
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