Why Apple May Dump Intel’s Chips For Its Own

When Apple announced a shift from IBM and Motorola’s PowerPC chips in 2005, competitors using Intel’s chips in their computers had a big edge in performance. Today, some of Apple laptops that are built with Intel chips are getting trounced.

And it’s Apple’s own mobile chips inside iPhones and iPads that are doing the trouncing. That’s why it makes sense for Apple shift again, away from Intel to chips of its own design.

On Monday, Bloomberg reported that Apple had decided to use its own chips in its computers starting as soon as 2020. The effort, code named Kalamata, is still in an early developmental stage, Bloomberg reported, but it has spooked Intel’s investors. Fortune reached out to Apple for comment and will update this story if a response is received. Intel declined to comment.

Shares of Intel plunged 6% to close at $48.92 on Monday. But even with the sharp drop, the stock’s price remains higher than it was just six weeks ago.

The would-be rationale for Apple’s new chip strategy is to allow its mobile products and computers to work together more seamlessly. But there’s also the increasingly embarrassing performance issue. Last year’s iPad Pro models using Apple’s homemade A10X processor (which is based on designs from ARM Holding) outperformed the company’s 13? MacBook Pro laptops, which had Intel i7 chips, on some benchmark tests. Apple’s more recent A11 Bionic chip used in the iPhone X and iPhone 8 had even higher benchmark scores.

Intel’s many efforts to build chips for mobile devices have never caught on, despite billions of dollars of losses. And now it faces the prospect that its PC chips will also be surpassed by rivals spawned from the mobile arena.

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Apple has been growing its chip design capability since the Steve Jobs-era, when the company bought PA Semi for $278 million in 2008. Since then, Apple has built an all-star team of chip designers, currently led by Johny Srouji.

The homegrown chips allowed Apple to replace Qualcomm processor chips from iPhones years ago and more recently replace graphics processing chips in the devices from Imagination Technologies Group. Apple doesn’t appear to own the patents to make its own mobile modem chips, an area in which it has increasingly been shifting from Qualcomm (qcom) to chips made by Intel in an effort to cut costs.

But despite all of Apple’s chip switching, a complete transition from Intel would take time. In 2005, Apple’s biggest challenge in swapping chip designs was rewriting all of its software to operate better with Intel’s chips. This time around, in addition to having to tweak its software, Apple would also have to develop a line of chips for desktop and laptop computers. Its homegrown mobile chips are the equal of chips used in its slowest laptops, but the company has never publicly shown that any of its chips could run its most cutting edge laptops, let alone the 18-core Xeon Intel behemoth at the core of its iMac Pro.

Rumors of Apple dumping Intel have surfaced periodically, not coincidentally around times when the two companies negotiated new deals, industry analyst Patrick Moorhead, president of Moor Insights, noted on Twitter. “Doesn’t mean untrue but usually means it’s negotiation time,” he wrote.” I could imagine a few amped up iOS-based MacBooks, but not a wholesale 2020 change to all Macs.”

The loss of Apple’s (aapl) business alone should be manageable for Intel (intc). Macs accounted for less than $4 billion of Intel’s annual revenue, or less than 6% of the company’s $65 billion of expected sales this year, analyst Michael McConnell at Keybanc pointed out in a report on Monday.

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