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In a recent column published by Seeking Alpha, contributor Mark Hibben offered up his commentary on the news (first published here) that Apple (NASDAQ: AAPL) may opt to use graphics processors from graphics specialist NVIDIA (NASDAQ: NVDA) in future Mac products.
As part of this commentary, he made the following observation:
Although this possibility seems interesting, I don't think we'll see it happen anytime soon (if ever).
NVIDIA's GPUs are powerful, but Apple has been doing a fine job
The graphics processors that Apple includes in its iPad-specific processors, which are implementations of technologies developed by Imagination Technologies (NASDAQOTH: IGNMF), tend to be best in class.
According to tests performed by AnandTech, the A9X inside of the 12.9-inch iPad Pro far and away outperforms any other mobile processor in many graphics tests (including 3DMark Sling Shot, GFXBench 3.0, and Basemark ES 3.1).
That includes the graphics processor inside of NVIDIA's own Tegra X1 system-on-a-chip (though to be fair, the X1 came out first and is built on an older manufacturing technology, putting it at a disadvantage to the A9X).
In August, NVIDIA gave out the first details of its next generation Tegra processor, code-named Parker. This is a part manufactured in Taiwan Semiconductor Manufacturing Company's (NYSE: TSM) 16-nanometer technology (putting it on manufacturing process parity with the A9X) and could very well take the mobile graphics performance crown from Apple.
However, it's important to note that the A9X is nearly a year old at this point and is likely to be replaced by the A10X in early 2017. With the A10X I would not be surprised to see Apple take the mobile graphics processor performance crown back from NVIDIA (especially since the A10X is likely to be manufactured in TSMC's newer 10-nanometer technology).
The point of this discussion isn't to disparage NVIDIA's Tegra efforts. Rather, the purpose is to show that -- at least when it comes to graphics processors integrated into tablet-class processors -- Apple is already fielding leadership products.
Based on this, it's really tough to make a compelling case for Apple to ditch Imagination's offerings for NVIDIA's.
What could compel Apple to switch?
Nothing is impossible, and I can imagine a scenario under which Apple does switch from Imagination's graphics processors to NVIDIA's. It would essentially come down to NVIDIA putting together significantly more powerful and power efficient solutions than what Imagination would be able to provide.
That said, a single generation of leadership isn't likely to be enough to seal the deal. I believe that Apple would have to look at both companies' long-term graphics processor road maps and come to the conclusion that NVIDIA is not only going to take the efficiency lead in one generation, but sustain (or, preferably, grow) that lead out in time.
NVIDIA's graphics processors have gotten much more efficient over the years (in the world of graphics processors targeted at personal computers, NVIDIA is generally believed to have the most power efficient solutions available), but Imagination isn't sitting still.
Further, I would imagine that Apple has significant influence on Imagination's technology road map. Not only is Apple a key customer of Imagination's graphics technologies, but Apple actually owns a significant portion of Imagination.
I'm not saying it's impossible for NVIDIA or another graphics processor vendor (such as ARM Holdings) to displace Imagination, but it'd be exceedingly difficult to do so. As such, I don't recommend current or potential NVIDIA shareholders to invest in the company's stock on the basis of a potential deal to supply intellectual property to Apple for its iDevices.
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Ashraf Eassa has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple and Nvidia. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.