1 Problem With Apple Inc.'s iPhone Chip Strategy

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In the fall of 2014, Apple (NASDAQ: AAPL) unveiled the iPhone 6 and iPhone 6 Plus to succeed the prior generation iPhone 5s. While the iPhone 5s had a relatively small 4-inch display, the iPhones 6 and 6 Plus had large 4.7-inch and 5.5-inch displays, respectively.

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The 4.7-inch display featured a resolution of 1334-by-750 pixels. In terms of pixel density, the display on the iPhone 6 was identical to that on the iPhone 5s -- but, in being a larger display, the iPhone 6's display had more pixels than the one on the iPhone 5s.

The iPhone 6 Plus not only included a display with yet even more pixels than the one on the iPhone 6, but the pixel density of its 1920-by-1080-pixel display was much higher than that of the iPhone 6 at a whopping 401 pixels per inch.

The iPhone 6 Plus' display had way more pixels than the displays on either the iPhone 5s or iPhone 6.

And, yet, the graphics processors inside of the iPhone 6 and iPhone 6 Plus were identical. Three iPhone generations later, Apple's iPhone 8 and iPhone 8 Plus still have the very same display resolutions that the iPhone 6 and iPhone 6 Plus do, and both phones are powered by, yet again, the same graphics processors.

What's even crazier is that the iPhone X, which has a display packing over 30% more pixels than the iPhone 8 Plus' display does, also uses the same graphics processor that's found in the iPhone 8 and iPhone 8 Plus.

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In this column, I'd like to explain why Apple needs to fix this going forward by building separate chips for the smaller-screen iPhone models and the larger-screen models.

The problem will still exist next gen

The good news is that Apple is reportedly going to build three new iPhones next year. One will reportedly have a large 6-inch liquid crystal display (LCD), while the other two will consist of a direct successor to the current 5.85-inch iPhone X and a larger-screen iPhone X successor with a 6.46-inch 2800-by-1242-pixel display.

I don't think the requirements of the LCD iPhone will influence the A12 chip's capabilities much; the design point -- that is, the cost considerations, performance, and power consumption -- will be in service of making the best 5.85-inch iPhone X possible.

In terms of graphics capabilities, this will mean a graphics processor capable of enabling smooth, high-quality graphics on a display with a resolution of 2436-by-1125-pixels for a total of 2.74 million pixels.

However, if the rumors are true that Apple is preparing a larger next-generation iPhone X with a 2800-by-1242-pixel display, then that same graphics processor will need to drive a display with approximately 3.48 million pixels on it.

That'd be a 27% jump in pixel count.

Now, for non-3D gaming applications, a graphics processor common to the 5.85-inch iPhone X and a 6.46-inch iPhone X will do just fine. But when it'll come to 3D gaming, the use of a common graphics processor between the two phones will mean that the smaller phone will also be the zippier phone.

Now, to be clear, the gap in pixel count between the next-gen iPhone X and the potential next-gen 6.46-inch iPhone X won't be anywhere near the gap in pixel count between the iPhone 8 and iPhone 8 Plus was, so a graphics processor designed for the 5.85-inch iPhone X will have an easier time driving a 6.46-inch iPhone X's display than a graphics processor designed for the iPhone 8 would have driving the iPhone 8's or iPhone X's display.

However, to maximize the user experience of the next-gen iPhone X family, particularly in gaming, augmented reality, and other graphics-intensive applications, Apple should strongly consider building two variants of its iPhone processors.

For example, the 5.85-inch next-gen iPhone X could have an A12 chip, while the 6.46-inch next-gen iPhone X could have a, perhaps, A12+ chip.

The A12+ chip would be based on the same basic building blocks as the A12, but it could have, say, more graphics cores, faster speed processor cores, and possibly even support for a wider memory interface to keep the A12+ chip properly fed with data.

Such a chip would make Apple's supply chain management more difficult compared to building a single chip that can be used in any design, and it'd probably require Apple to throw more engineers at chip development, but I'm confident that neither of these factors would be a gating factor to Apple choosing to build two different chips for its iPhone line.

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Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.