Summary

Thunderbolt 3-equipped Mac computers which update to macOS High Sierra 10.13.4 can use external Graphics Processing Units.

Apple endorsed external Polaris and Vega Radeon GPUs. The external GPU implementation on macOS High Sierra is reportedly based on AMD's XConnect technology.

As the exclusive supplier of discrete GPUs to Apple, AMD gets supplementary benefits from Apple making Macs more attractive to gamers, designers, content creators, and virtual reality enthusiasts.

Apple's lingering interest in the $170 billion video games industry is a long-term tailwind for AMD.

Apple (AAPL) promised last June 2017 to enable external GPU (Graphics Processing Unit) support for Macs. Advanced Micro Devices (AMD) investors should now be delighted that Apple kept its promise. The March 30 announcement of Apple said that Thunderbolt 3-equipped Macs who upgrade to macOS High Sierra 10.13.4 can now use external graphics processors [eGPU].

(Source: Apple)

AMD is currently the exclusive supplier of discrete graphics for Macs. Apple making Macs more usable for gamers, content creators, and virtual reality enthusiasts can boost future sales of AMD GPUs. AMD needs this help from Apple to offset the possibility of weaker GPU demand from cryptocurrency mining.

Future sales of Radeon external GPUs can help AMD maintain the growth momentum of its Computing and Graphics division. GPU purchases of Ethereum cryptocurrency miners helped Computing and Graphics post a 54% Y/Y growth last year. Bitmain allegedly has an upcoming Ethereum-centric ASIC miner. This has worried analysts/investors. They think AMD will see lower Radeon sales this year.

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(Source: AMD)

Macs' average selling prices are much higher than Windows/Chrome OS computers. However, Apple still sold 19.25 million Macs last year. Apple's potential as a GPU sales booster is greater than that of cryptocurrency miners. Apple is recommending only third-party eGPU boxes using Polaris and Vega Radeon GPUs. For optimal performance, Apple recommended AMD's higher-priced desktop GPUs: Radeon RX 570, RX 580, Vega 56, Vega 64, Radeon Pro WX 9100, and Radeon Pro WX 7100.

Apple itself sold a developer-exclusive eGPU box for $599 using an RX 580 GPU last year. Apple likely optimized macOS Sierra to perform better with external Radeon GPUs. Sonnet (who made the 350W Breakaway Box eGPU chassis) made a "use-at-your-own-risk" warning last year to MacBook/iMac owners who plan to use Nvidia (NVDA) GPUs with its chassis.

Why eGPUs Are Popular

Prolonged use of discrete GPUs such as gaming and photo/video editing in laptops causes often leads to overheating and battery drain. Frequent use of graphics-intensive/temperature-raising software/games can reduce the lifetime of Mac/Windows laptops. This is why PC leaders like Apple can only sell laptops with weaker mobile versions of desktop Radeon discrete GPUs.

Even the most expensive MacBook Pro configurations only use the mobile Radeon Pro 560 GPU (a weakened version of the desktop GPU, RX 460). The Radeon RX 460 is an entry-level desktop GPU that retails for less than $170. The most expensive versions of the iMac 2017 come with the Radeon Pro 580 - a 20% slower version of the desktop Radeon RX 580.

Mac-using VR developers, gamers, and content creators/design professionals obviously needed eGPUs to get greater productivity from their iMacs and MacBook Pro computers. Just like how Apple made the $99 Pencil to work best on iPads, Apple can sell its own brand of $699-1,299 eGPU boxes using AMD's latest generation GPUs. Mac users are loyal and will likely pay a premium for an Apple-branded external graphics processor product.

Doing so will help Apple increase its share in the $30 billion per year PC gaming hardware industry. This niche market fits perfectly with Apple's high-end approach to computer marketing. Pricey/high-end products account for 43% of the $30 billion PC gaming hardware business.

The Global PC Gaming Hardware

(Source: Jon Peddie Research)

PC sales leaders Lenovo (OTCPK:LNVGY) and Hewlett Packard (HPQ) have dedicated gaming PC and laptops because the market for high-end gaming rings is obviously lucrative. HP also has its own $300 eGPU chassis (no GPU card included) for sale. Lenovo sells a $400 Graphics Dock eGPU product that already comes with a GTX 1050 video card.

AMD and/or Apple have to imitate Nvidia's recent enthusiasm for external GPUs. Nvidia's Quadro External Graphics push is riding the bandwagon for eGPUs. This is to enable 1.1 billion PC gamers and 25 million creative professionals improve the usability of laptops/all-in-one computers. Quadro External Graphics is similar to AMD's XConnect technology first unveiled in 2016.

I suspect that Apple Mac's recommendation for Radeon GPUs for eGPU has to do with its macOS implementation favoring AMD's XConnect technology. Extreme Hardware said external GPU on macOS Sierra appeared to be based on XConnect.

(Source: AMD)

Conclusion

The rising popularity of external graphics processors is an important tailwind for AMD. Apple's strong brand power and legions of Mac loyalists is very important to Radeon GPU sales. AMD's 2017 surge in GPU revenue is partly due to the growing sales of Mac computers. Being the exclusive discrete graphics processor supplier to Apple is more important than cryptocurrency mining.

After a dip in 2016, Mac unit sales again grew last year.

(Source: Statista)

Going forward, AMD has long-term benefits from Apple's lingering interest in taking a bigger share of the $170 billion video games software/hardware industry. Apple extended the coverage of its mobile-first proprietary Metal graphics API to PCs, smart TVs, and virtual reality devices. The Apple TV trademark was updated earlier this year to cover video games hardware.

The new support for eGPUs for Macs is another strong evidence that the opportunity in video games is heavy on Apple's mind. AMD shareholders should celebrate that Apple chose Radeon over Nvidia's GeForce/Quadro GPUs.

AMD's Radeon GPU wagon is now hitched to Apple's star ambition to become a major player in the $170 billion video games industry.

Disclosure: I am/we are long AMD, AAPL, TCEHY, NVDA, LNVGY, HPQ.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Thunderbolt 3-equipped Mac computers which update to macOS High Sierra 10.13.4 can use external Graphics Processing Units.

Apple endorsed external Polaris and Vega Radeon GPUs. The external GPU implementation […]

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