The 2012 F1 season has so far seen seven different winners from five different teams in its first eight races, and reached new heights of competitiveness in Valencia where just 0.3 seconds covered the top 13 cars in Q2.
Michael reckons that with the potential for an improvement worth just a few thousandths of a second to transform a team's qualifying result, the pressure on development will reach a new intensity.
"There's a lot of development still to come and that's going to be the story of the rest of the year," he said. "Every team is going to be bringing it, including us, more and more over the next few races.
"The development rate this year is going to be really fierce. Because in the past there have been things that maybe for half a tenth, you would have lumped it for something else. But 50 milliseconds is one place, so you are going to be bringing gains that are tinier and tinier.
"It would be interesting to look at what the top 10 to 15 is like from the start of the year because it feels like it is getting tighter and tighter."
He feels this is leading to a fundamental change to teams' development priorities.
"The funny thing is that it probably puts more onus on mechanical items because the aero stuff comes no matter what," Michael suggested. "Everyone's aero programmes are massive and they are developing the car aerodynamically.
"Normally the things that are compromised in the short term for aero are mechanical items because you look at something [mechanical] and it's only worth a tenth whereas you can get two and a half or three tenths from aero, but it won't be like that now. It puts the onus on mechanical items.
"Aero is still key, aero is first order, but it just means that you've got to find time to do the rest of it."
Michael added that this focus on time gains from fine detail was also influencing teams' approach to pitstop improvements.
"It's why things like pitstops get a lot of focus because they are differentiators now," he said. "If you dropped a second on a pitstop previously, it didn't matter did it because the gaps were so big you had covered them because car performance was dominant.
"So every tiny little thing is becoming important and it's becoming a very well-refined show. To make a mistake, and it's no different for McLaren, if we make a mistake we pay for it and I guess that's why we put a lot of focus on not making mistakes. The year is going to be about that."