Please provide the guidance from Apple on the operating temperatures. That would be helpful. This is not the guidance provided for most NVIDIA, Intel and AMD processors -- the processors I am most familiar with -- which is generally between 90°C and 100°C at the high end.
Apple doesn't publish such guidance because they aren't selling M1 series chips to anybody else. They are their own system integrator, so it's all on them and they don't really need to publish.
If you want to complain about their lack of openness, be aware that not publishing specs is the industry norm for internal-use-only chips. In fact, it's common even in chips sold to other companies. If it's not sold through a wide variety of channels to a wide variety of customers, odds are good you'll need to be a real sales prospect willing to sign a NDA before you see anything more than marketing material. Unfortunate, but it is the reality we live in.
Intel is a company which sells through a wide variety of channels, so they do openly publish some specs (not all, there's still plenty of NDA-only stuff). If you browse ark.intel.com (Intel's public database), it looks like they're typically aiming for 100C Tjunction in their desktop and mobile CPUs these days.
100C is not so far away from 105C, and I can tell you from experience that logic silicon rated for Tj(max)=105C is quite common. Why? Well, that's the kernel of truth you're misapplying here...
I think the shortest way to say it is that if the design team does its job, it's generally possible to achieve ~10 year lifespan assuming continuous operation at Tjunction = 105C. 10 years is a nice round number which is well beyond both the legal minimum warranty period and customer expectations across the world. It also has some pessimism baked in: few CPUs are asked to run at their max temp rating 24/7/365 for 10 years continuously.
So, 105C is a common choice for Tj(max) in consumer electronics. Other values are popular too, you'll see 85C on many components, but for high performance logic it's usually 105C.
Why did Intel choose 100C instead of 105C? Anyone's guess, but it's in the same ballpark. It's not because there's any risk of immediate or long-term physical damage if an Intel chip slightly exceeds 100C. (That said, you wouldn't want to operate it beyond 100C - Intel probably closed timing at 100C, so there's a risk of incorrect program execution at 101C and stock clocks.)
Prolonged and sustained high CPU temperatures are a concern for the longevity of your laptop. This is common knowledge and has been for a long time. I am not saying that your system board melts at above 105°C. So, yes, you can operate your laptop at these temperatures. However, prolonged and sustained operating temperatures above 105°C will likely shorten the life of your laptop. This is a widely held view in the computing community.
Excessive heat can damage your computer's performance and lifespan. But at what point is it overheating? How hot is too hot?
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It may be a widely held view. That doesn't mean it's true. Common knowledge about deeply technical topics is frequently flawed or wrong.
So yes, it's a highly popular view that You Must Be Very Worried about temps in the range of 100C. But when actual engineers like me look at a number in that range, and it's a specific hotspot on the M1 die, it's a yawner. It's a number which is reasonable on its face, and if it's happening on all machines (which it appears to be), it's likely that it's actually within spec.