The A5 System-on-a-Chip (SoC) chips 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, designed with a single core. The chip is therefore smaller, which means you get more chips per wafer off the fab line, yielding lower costs and slightly higher margins.
But there is another significant change here. The incredible folks at AnandTech went on to explore the possibility that the chip’s power consumption had improved. Their analysis showed significant power savings in the new chip – 40%-50% in the various operating scenarios.
| Apple TV (3rd gen) Platform Power Consumption | ||||
| A1427 (2012) | A1469 (2013) | |||
| Idle – Min Power (Ethernet Connected) | 1.41W | 0.70W | ||
| Photo Stream Scrolling (CPU Test) | 1.84W | 1.07W | ||
| Skyfall 1080p iTunes Trailer (Ethernet) | 1.58W | 0.81W | ||
| Skyfall 1080p iTunes Trailer (5GHz WiFi) | 1.55W | 0.85W | ||
| Netflix 29.97 Short (Ethernet) | 1.62W | 0.85W | ||
Source: AnandTech
Are there other implications?
Perhaps the new chip is for the Apple TV only, or perhaps it has another purpose: a new iPhone Mini.
The production of the new, single-core A5 makes financial sense just for the Apple TV. We can only look forward to more of these units being sold as more and more people join the Apple ecosystem. The savings here justify the cost of development.
However, it also makes sense that the scaled-back A5 could be used in a new, smaller iPhone. While overall performance of this phone might be compromised, that shouldn’t be a major factor for a low-end model. It would still have the capacity to stream full HD video.
With the recent news blitz surrounding Samsung (NASDAQOTH: SSNLF) and their new Galaxy S4, a lot of attention is focused on Apple. The S4 of course runs Google (NASDAQ:GOOG)’s Android operating system which is taking market share away from Apple’s iOS. Android, with its myriad of OEMs, has been able to hit a wide range of price points, particularly lower ones that Apple Inc. (NASDAQ:AAPL) has traditionally eschewed. But just as the iPods slowly expanded downwards to the Shuffle model, it may be inevitable that the iPhone does the same. Apple would not be looking for profits here, but rather to catch younger and other less affluent customers and bring them into the Apple ecosystem.
Conclusion
The changes to the Apple TV appear to be minor tweaks to lower cost. While investors certainly would applaud such a move, it hardly merits much attention.
If, however, this signals a whole new product, one that would open up a new, low-priced category, then this would be important news for Apple Inc. (NASDAQ:AAPL) as an investment. A move into that space would very likely increase the overall market share of iOS phones, something with which investors seem to be obsessed. That would have a positive effect on Apple’s flagging share price.
The article Why Apple’s Small Device Might Be a Big Deal originally appeared on Fool.com and is written by Malcolm Manness.
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