Apple CEO Tim Cook (R) looks at a newly designed MacBook Air laptop during WWDC22 at Apple Park on June 6, 2022 in Cupertino, California. Apple CEO Tim Cook kicked off the annual WWDC22 developers conference.
Justin Sullivan | Getty Images
Apple’s new laptops announced Monday, featuring the iPhone maker’s next-generation internal chips, could pose new challenges to Microsoft’s lucrative Windows business.
Since Apple began selling Macs powered by its own M1 processors in late 2020, the company’s computer business has been booming. Earlier this week, Apple introduced the M2, which debuts in the new MacBook Air and 13-inch MacBook Pro.
The new chip will contain 25% more transistors and 50% more bandwidth than M1.
Mikako Kitagawa, an analyst at the technology industry research firm Gartner, said Apple could continue to gain market share with the M2 architecture. In 2021, Apple had 7.9% of global PC shipments by operating system, while Windows controlled 81.8%, according to Gartner estimates. The company expects Apple’s share to rise to 10.7% by 2026, while Windows’ share will fall to 80.5%.
Kitagawa said an updated forecast is coming in the coming weeks that will likely make Apple’s performance look stronger.
Apple’s Mac business has been revived with new devices featuring the company’s own chips as replacements for Intel processors. The first was the MacBook Air released last year, followed by updated models of the iMac, Mac Mini, and MacBook Pro laptop, and a new model for power users called Mac Studio.
Apple’s newer devices have longer battery life than their older Intel-based counterparts and plenty of processing power.
Sales have increased. Apple’s Mac business grew 23% in fiscal 2021 to more than $35 billion in revenue. In the March quarter, Mac sales were up more than 14%, faster than any other Apple hardware category. Apple CEO Tim Cook told analysts in April that “the incredible customer response to our M1-powered Macs has contributed to a 15% year-over-year revenue increase despite supply constraints.”
That’s not good news for Microsoft.
Most of Microsoft’s Windows revenue comes from licenses it sells to Dell, HP, Lenovo and other device manufacturers. That amounts to 7.5% of Microsoft’s total revenue and nearly 11% of gross profit, Morgan Stanley analysts led by Keith Weiss wrote in a note this week.
As Microsoft loses market share, “a lot of price control is lost in the marketplace,” said Brad Brooks, CEO of cybersecurity start-up Censys and former corporate vice president for Microsoft’s Windows consumer company.
Most of the revenue from Windows licensing to device manufacturers comes from commercial customers. Brooks said Apple is making progress among consumers, and he learned during his nine years at Microsoft that there is a positive correlation between consumer use and what happens at work.
“Once they start using a different product in their home environment, they’re more likely to adopt that environment into their professional environment,” Brooks said, speaking of the business leaders who make decisions about buying technology.
Brooks said he switched to a Mac as his main computer in 2017 and said he would like an M2 machine in the future. All of his company’s 150 or so employees use Macs as their primary computers, he said.
Companies have been slow to adopt Apple’s M1 computers due to concerns that key applications would be incompatible. But Adobe, Microsoft and other developers are gradually rolling out native versions of their software for the devices, said Kitagawa, who now expects business adoption to grow.
Patrick Moorhead, CEO of industry research firm Moor Insights and Strategy, said Windows PCs could ultimately have battery life and performance on a par with Apple’s latest Macs. Among the chipmakers who use them, “it’s now closer between Apple and AMD than between Apple and Intel,” Moorhead said.
However, Apple has other levers to pull on as it could offer cheaper computers. Moorhead envisions a MacBook SE that might cost $800 or $900, compared to the $1,199 starting price for Apple’s upcoming M2 MacBook Air. It would be similar to what Apple has done with the iPhone SE, a budget iPhone that lacks some of the company’s latest smartphone improvements.
“A MacBook SE at a much lower price would seriously disrupt Windows,” Moorhead said.
Microsoft did not respond to a request for comment.
— CNBC’s Kif Leswing contributed to this report.
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