Apple’s soaring stock price over the past two decades has been driven by its iconic consumer devices. It started with the iPod and iMac. Then came the iPhone and iPad. And more recently, the Apple Watch and AirPods.
But there’s a lot more to the biggest U.S. company by market cap than just gadgets. At its Silicon Valley headquarters, in a non-descript room filled with a couple hundred buzzing machines and a handful of engineers in lab coats, Apple is designing the custom chips that power its most popular products.
“One of the most, if not the most, profound change at Apple, certainly in our products over the last 20 years, is how we now do so many of those technologies in-house,” said John Ternus, who runs hardware engineering at Apple. “And top of the list, of course, is our silicon.”
In November, CNBC visited Apple’s campus in Cupertino, California, the first journalists allowed to film inside one of the company’s chip labs. We got a rare chance to talk with the head of Apple silicon, Johny Srouji, about the company’s push into the complex business of custom semiconductor development, which is also being pursued by Amazon, Google, Microsoft and Tesla.
“We have thousands of engineers,” Srouji said. “But if you look at the portfolio of chips we do: very lean, actually. Very efficient.”
Unlike traditional chipmakers, Apple is not making silicon for other companies.
“Because we’re not really selling chips outside, we focus on the product,” Srouji said. “That gives us freedom to optimize, and the scalable architecture lets us reuse pieces between different products.”
Apple’s head of silicon, Johny Srouji, talks to CNBC’s Katie Tarasov at Apple headquarters in Cupertino, California, on November 14, 2023.
Andrew Evers
Powering iPhones since 2010
Srouji came to Apple in 2008 to lead a small team of 40 or 50 engineers designing custom chips for the iPhone. A month after he joined, Apple bought P.A. Semiconductor, a 150-person startup, for $278 million.
“They’re going to start doing their own chips: that was the immediate takeaway when they bought P.A. Semi,” said Ben Bajarin, CEO and principal analyst at Creative Strategies. With its “inherent design focus,” Bajarin said, Apple wants “to control as much of the stack” as possible.
Two years after the acquisition, Apple launched its first custom chip, the A4, in the iPhone 4 and original iPad.
“We built what we call the unified memory architecture that is scalable across products,” Srouji said. “We built an architecture that you start with the iPhone, but then we scaled it to the iPad and then to the watch and eventually to the Mac.”
Apple’s silicon team has grown to thousands of engineers working across labs all over the world, including in Israel, Germany, Austria, the U.K. and Japan. Within the U.S., the company has facilities in Silicon Valley, San Diego and Austin, Texas.
The primary type of chip Apple is developing is known as a system on a chip, or SoC. That brings together the central processing unit (CPU), graphics processing unit (GPU) and other components, Bajarin explained, adding that for Apple there’s also a neural processing unit (NPU) “that runs the neural engine.”
“It is the silicon and all of the blocks that go on to that silicon,” Bajarin said.
Apple’s first SoC was the A series, which has advanced from the A4 in 2010 to the A17 Pro announced in September of this year. It’s the central processor in iPhones, as well as some iPads, Apple TVs and the HomePod. Apple’s other major SoC is the M series, first released in 2020, which now powers all new Macs and more advanced iPads. That product is up to the M3 line.
Launched in 2015, the S series is a smaller system in package, or SiP, for Apple Watch. H and W chips are used in AirPods. U chips allow communication between Apple devices. And the newest chip, the R1, is set to ship early next year in Apple’s Vision Pro headset. Dedicated to processing input from the device’s cameras, sensors and microphones, Apple says it will stream images to the displays within 12 milliseconds.
“We get to design the chips ahead of time,” Srouji said. He added that his staffers work with Ternus’s team “to exactly and precisely build chips that are going to be targeted for those products, and only for those products.”
The H2 inside the 2nd generation AirPods Pro, for instance, enables better noise cancellation. Inside the new Series 9 Apple Watch, the S9 allows for unusual capabilities like double tap. In iPhones, the A11 Bionic in 2017 had the first Apple Neural Engine, a dedicated part of the SoC for performing AI tasks totally on-device.
The latest A17 Pro announced in the iPhone 15 Pro and Pro Max in September enables major leaps in features like computational photography and advanced rendering for gaming.
“It was actually the biggest redesign in GPU architecture and Apple silicon history,” said Kaiann Drance, who leads marketing for the iPhone. “We have hardware accelerated ray tracing for the first time. And we have mesh shading acceleration, which allows game developers to create some really stunning visual effects.”
That’s led to the development of iPhone-native versions from Ubisoft‘s Assassin’s Creed Mirage, The Division Resurgence and Capcom‘s Resident Evil 4.
Apple says the A17 Pro is the first 3-nanometer chip to ship at high volume.
“The reason we use 3-nanometer is it gives us the ability to pack more transistors in a given dimension. That is important for the product and much better power efficiency,” Srouji said. “Even though we’re not a chip company, we are leading the industry for a reason.”
Apple’s first 3-nanometer chip, the A17 Pro, enables ray tracing and other advanced graphics rendering for improved gaming on the iPhone 15 Pro and Pro Max, shown here in Cupertino, California, on September 12, 2023.
Katie Tarasov
Replacing Intel in Macs
Apple’s leap to 3-nanometer continued with the M3 chips for Mac computers, announced in October. Apple says the M3 enables features like 22-hour battery life and, similar to the A17 Pro, boosted graphics performance.
“It’s early days,” said Ternus, who’s been at Apple for 22 years. “We have a lot of work to do, but I think there’s so many Macs now, pretty much all Macs are capable of running Triple-A titles, which is not what it was like five years ago.”
Ternus said that when he started, “the way we tended to make products is we were using technologies from other companies, and we were effectively building the product around that.” Despite a focus on beautiful design, “they were constrained by what was available,” he said.
In a major shift for the semiconductor industry, Apple turned away from using Intel’s PC processors in 2020, switching to its own M1 chip inside the MacBook Air and other Macs.
“It was almost like the laws of physics had changed,” Ternus said. “All of a sudden we could build a MacBook Air that’s incredibly thin and light, has no fan, 18 hours of battery life, and outperformed the MacBook Pro that we had just been shipping.”
He said the newest MacBook Pro with Apple’s most advanced chip, the M3 Max, “is 11 times faster than the fastest Intel MacBook Pro we were making. And we were shipping that just two years ago.”
Intel processors are based on x86 architecture, the traditional choice for PC makers, with a lot of software developed for it. Apple bases its processors on rival Arm architecture, known for using less power and helping laptop batteries last longer.
Apple’s M1 in 2020 was a proving point for Arm-based processors in high-end computers, with other big names like Qualcomm — and reportedly AMD and Nvidia — also developing Arm-based PC processors. In September, Apple extended its deal with Arm through at least 2040.
When its first custom chip came out 13 years ago, Apple was unusual as a non-chipcompany trying to make it in the cutthroat, cost-prohibitive semiconductor market. Since then, Amazon, Google, Microsoft and Tesla have tried their hand at custom chips.
“Apple was sort of the trailblazer,” said Stacy Rasgon, managing director and senior analyst at Bernstein Research. “They sort of showed that if you do this, you can have a stab at differentiating your products.”
Apple’s senior director of hardware validation Godfrey D’Souza shows off an M3 SoC in an Apple chip lab in Cupertino, California, on November 14, 2023.
Sydney Boyo
‘Modems are hard’
Apple isn’t yet making every piece of silicon in its devices. Modems, for example, are one big component the company has yet to conquer on its own.
“The processors have been remarkably good. Where they’ve struggled is on the modem side, is on the radio side in the phones,” Rasgon said. “Modems are hard.”
“Qualcomm still makes the best modems in the world,” Bajarin said. “Until Apple can do as good of a job, I have a hard time seeing them fully jump to that.”
Apple’s Srouji said he couldn’t comment on “future technologies and products” but said “we care about cellular, and we have teams enabling that.”
“Our aspiration is the product,” Srouji said, when asked if Apple will try to design every part of its chips. “We want to build the best products on the planet. As a technology team, which also includes the chips in this case, we want to build the best technology that would enable that vision.”
To deliver on that objective, Apple will “buy off the shelf” if it means the team can focus “on what really, really matters,” Srouji said.
Regardless of how much silicon Apple eventually designs, it still needs to manufactureits chips externally. That requires massive fabrication plants owned by foundry companies like TSMC.
More than 90% of the world’s advanced chips are made by TSMC in Taiwan, which leaves Apple and the rest of the industry vulnerable to the China threat of invasion.
“There is obviously a lot of tension around, like, what would plan B be if that happened?” Bajarin said. “There isn’t another good option. You would hope that Samsung is also competitive and Intel wants to be there. But again, we’re not right now. It’s really all at TSMC.”
Apple is at least looking to bring some of that manufacturing to the U.S. It’s committed to becoming the largest customer at TSMC’s coming fab in Arizona. And on Thursday Apple announced it will be the first and largest customer of the new $2 billion Amkor manufacturing and packaging facility being built in Peoria, Arizona. Amkor will package Apple silicon produced at TSMC’s Arizona fab.
“We always want to have a diversified supply: Asia, Europe and the U.S., which is why I think TSMC building fabs in Arizona is great,” Srouji said.
Finding talent
Another concern is the shortage of skilled chip labor in the U.S., where advanced fabs haven’t been built for decades. TSMC says its Arizona fab is now delayed to 2025 because of a lack of skilled workers.
Whether or not it has to do with a shortage of talent, Apple has seen a slowdown in the release of new chips.
“Generations are taking longer because they are getting harder and harder,” Srouji said. “And the ability to pack more and get power efficiency is also different than 10 years ago.”
Srouji reiterated his view that Apple has an advantage in that regard because “I don’t need to worry about where do I send my chips, how do I target a larger customer base?”
Still, Apple’s actions underscore the competitiveness in the market. In 2019, Apple chip architect Gerard Williams left to lead a data center chip startup called Nuvia, bringing some Apple engineers with him. Apple sued Williams over IP concerns, before dropping the case this year. Qualcomm bought Nuvia in 2021, in a move to compete in Arm-based PC processors like Apple’s.
“I can’t really discuss legal matters, but we truly care about IP protection,” Srouji said. “When certain people leave for certain reasons, that’s their choice.”
Apple has additional macro challenges in its core business because smartphone sales are just recovering from their lowest levels in years.
However, demand for AI workloads is leading to a surge in orders for silicon, especially for GPUs made by companies like Nvidia, whose stock has jumped more than 200% this year tied to the popularity of ChatGPT and other generative AI services.
Srouji said his team at Apple has been working on its machine learning engines, the Apple Neural Engine, since years before it was launched in the A11 Bionic chip in 2017. He also pointed to embedded machine learning accelerators in its CPU and “highly optimized GPU for machine learning.”
In July, Bloomberg reported that Apple built its own large language model called Ajax and a chatbot called Apple GPT. A spokesperson declined to confirm or deny the accuracy of the report.
When asked if Apple appears to be falling behind in AI, Srouji said, “I don’t believe we are.”
Bajarin is more skeptical.
“It’s doable on Apple’s last year chip, even more capable on this year’s chip with M3,” Bajarin said, regarding Apple’s position in AI. “But the software has got to catch up with that, so that developers take advantage and write tomorrow’s AI software on Apple Silicon.”
He anticipates improvements, and soon.
“Apple had an opportunity to really get on that from day one,” Bajarin said. “But I think everyone expects it’s coming in the coming year.”
The Trump administration has floated a plan to trim about $6 billion from the budget of NASA, while allocating $1 billion of remaining funds to Mars-focused initiatives, aligning with an ambition long held by Elon Musk and his rocket maker SpaceX.
A copy of the discretionary budget posted to the NASA website on Friday said that the change focuses NASA’s funding on “beating China back to the Moon and on putting the first human on Mars.”
NASA also said it will need to “streamline” its workforce, information technology services, NASA Center operations, facility maintenance, and construction and environmental compliance activities, and terminate multiple “unaffordable” missions, while reducing scientific missions for the sake of “fiscal responsibility.”
Janet Petro, NASA’s acting administrator, said in an agency-wide email on Friday that the proposed lean budget, which would cut about 25% of the space agency’s funding, “reflects the administration’s support for our mission and sets the stage for our next great achievements.”
Petro urged NASA employees to “persevere, stay resilient, and lean into the discipline it takes to do things that have never been done before — especially in a constrained environment,” according to the memo, which was obtained by CNBC. She acknowledged the budget would “require tough choices,” and that some of NASA’s “activities will wind down.”
The document on NASA’s website said it’s allocating more than $7 billion for moon exploration and “introducing $1 billion in new investments for Mars-focused programs.”
SpaceX, which is already among the largest NASA and Department of Defense contractors, has long sought to launch a manned mission to Mars. The company says on its website that its massive Starship rocket is designed to “carry both crew and cargo to Earth orbit, the Moon, Mars and beyond.”
Musk, who is the founder and CEO of SpaceX, has a central role in President Donald Trump’s administration, leading an effort to slash the size, spending and capacity of the federal government, and influencing regulatory changes through the Department of Government Efficiency (DOGE).
Musk, who frequently makes aggressive and incorrect projections for his companies, said in 2020 that he was “highly confident” that SpaceX would land humans on Mars by 2026.
Petro highlighted in her memo that under the discretionary budget, NASA would retire the SLS (Space Launch System) rocket, the Orion spacecraft and Gateway programs.
It would also put an end to its green aviation spending and to its Mars Sample Return (MSR) Program, which sought to use rockets and robotic systems to “collect and send samples of Martian rocks, soils and atmosphere back to Earth for detailed chemical and physical analysis,” according to a website for NASA’s Jet Propulsion Laboratory.
Some of the biggest reductions at NASA, should the budget get approved, would hit the space agency’s space science, Earth science and mission support divisions.
Petro didn’t name any specific aerospace and defense contractors in her agency-wide email. However SpaceX, ULA and Jeff Bezos’ Blue Origin are positioned to continue to conduct launches in the absence of the SLS. Boeing is currently the prime contractor leading the SLS program.
“This is far from the first time NASA has been asked to adapt, and your ability to deliver, even under pressure, is what sets NASA apart,” she wrote.
President Trump’s nominee to lead NASA, tech entrepreneur Jared Isaacman, still has to be approved by the U.S. Senate. His nomination was advanced out of the Senate Commerce Committee on Wednesday.
Chinese bargain retailer Temu changed its business model in the U.S. as the Trump administration’s new rules on low-value shipments took effect Friday.
In recent days, Temu has abruptly shifted its website and app to only display listings for products shipped from U.S.-based warehouses. Items shipped directly from China, which previously blanketed the site, are now labeled as out of stock.
Temu made a name for itself in the U.S. as a destination for ultra-discounted items shipped direct from China, such as $5 sneakers and $1.50 garlic presses. It’s been able to keep prices low because of the so-called de minimis rule, which has allowed items worth $800 or less to enter the country duty-free since 2016.
The loophole expired Friday at 12:01 a.m. EDT as a result of an executive order signed by President Donald Trump in April. Trump briefly suspended the de minimis rule in February before reinstating the provision days later as customs officials struggled to process and collect tariffs on a mountain of low-value packages.
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The end of de minimis, as well as Trump’s new 145% tariffs on China, has forced Temu to raise prices, suspend its aggressive online advertising push and now alter the selection of goods available to American shoppers to circumvent higher levies.
A Temu spokesperson confirmed to CNBC that all sales in the U.S. are now handled by local sellers and said they are fulfilled “from within the country.” Temu said pricing for U.S. shoppers “remains unchanged.”
“Temu has been actively recruiting U.S. sellers to join the platform,” the spokesperson said. “The move is designed to help local merchants reach more customers and grow their businesses.”
Before the change, shoppers who attempted to purchase Temu products shipped from China were confronted with “import charges” of between 130% and 150%. The fees often cost more than the individual item and more than doubled the price of many orders.
Temu advertises that local products have “no import charges” and “no extra charges upon delivery.”
The company, which is owned by Chinese e-commerce giant PDD Holdings, has gradually built up its inventory in the U.S. over the past year in anticipation of escalating trade tensions and the removal of de minimis.
Shein, which has also benefited from the loophole, moved to raise prices last week. The fast-fashion retailer added a banner at checkout that says, “Tariffs are included in the price you pay. You’ll never have to pay extra at delivery.”
Many third-party sellers on Amazon rely on Chinese manufacturers to source or assemble their products. The company’s Temu competitor, called Amazon Haul, has relied on de minimis to ship products priced at $20 or less directly from China to the U.S.
Amazon said Tuesday following a dustup with the White House that had it considered showing tariff-related costs on Haul products ahead of the de minimis cutoff but that it has since scrapped those plans.
Prior to Trump’s second term in office, the Biden administration had also looked to curtail the provision. Critics of the de minimis provision argue that it harms American businesses and that it facilitates shipments of fentanyl and other illicit substances because, they say, the packages are less likely to be inspected by customs agents.
Jeff Bezos, founder and executive chairman of Amazon and owner of The Washington Post, takes the stage during The New York Times’ annual DealBook Summit, at Jazz at Lincoln Center in New York City, Dec. 4, 2024.
Michael M. Santiago | Getty Images
Amazon founder Jeff Bezos plans to sell up to 25 million shares in the company over the next year, according to a financial filing on Friday.
Bezos, who stepped down as CEO in 2021 but remains Amazon’s top shareholder, is selling the shares as part of a trading plan adopted on March 4, the filing states. The stake would be worth about $4.8 billion at the current price.
The disclosure follows Amazon’s first-quarter earnings report late Thursday. While profit and revenue topped estimates, the company’s forecast for operating income in the current quarter came in below Wall Street’s expectations.
The results show that Amazon is bracing for uncertainty related to President Donald Trump’s sweeping new tariffs. The company landed in the crosshairs of the White House this week over a report that Amazon planned to show shoppers the cost of the tariffs. Trump personally called Bezos to complain, and Amazon clarified that no such change was coming.
Bezos previously offloaded about $13.5 billion worth of Amazon shares last year, marking his first sale of company stock since 2021.
Since handing over the Amazon CEO role to Andy Jassy, Bezos has spent more of his time on his space exploration company, Blue Origin, and his $10 billion climate and biodiversity fund. He’s used Amazon share sales to help fund Blue Origin, as well as the Day One Fund, which he launched in September 2018 to provide education in low-income communities and combat homelessness.
