Daniel Eran Dilger
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Why Did Apple Buy PA Semi?

pa semi apple
Daniel Eran Dilger
Just ahead of its recession defying, record setting Q2 2008 earnings reports, Apple revealed plans to buy PA Semi, a chip designer specializing in processors based on IBM’s Power architecture. This news sparked a flurry of confusion from observers: why is Apple getting into the semiconductor business after partnering with Intel in its Mac systems, aligning with ARM licensees for its mobile WiFi iPhone platform, and particularly after decisively migrating away from PowerPC in 2006?

What is PA Semi?
Apple’s acquisition target isn’t a chip manufacturer. As a “fabless” chip designer, PA Semi (short for Palo Alto Semiconductor) only develops chip designs that are actually built by other companies. One of PA Semi’s investors is Texas Instruments, a chip fabricator that both designs its own processors, such as the ARM-based OMAP series that dominate the smartphone market, and builds chips designed by others, including Sun’s SPARC. This suggests that TI is the primary fab for PA Semi’s chip designs, although this has not been publicly announced.

PA Semi licensed IBM’s Power architecture technology to design its PWRficient series of 64-bit processors suitable for use in applications from desktop computers to server storage controller backplanes. Last spring, the ghost of Amiga, Inc. announced plans to build a new desktop system based on PA Semi’s PWRficient 2GHz PA6T-1682M dual core 64 bit CPU.

The new PWRficient processor has also gained high profile customers from real companies, from storage magnate NEC to server maker Mercury to aerospace and defense titans Lockheed Martin and Raytheon. A report by Rick Merritt in EETimes stated that the processors have uncharacteristically been rapidly adopted for use in more than ten defense systems designed into US Department of Defense programs currently in use “in every major branch of the armed services.” Earlier in the year, PA Semi bragged that a hundred companies had expressed interest in its new processors.

Amiga News
EETimes.com – DoD may push back on Apple’s P.A. Semi bid

Why Would Apple Want PA Semi?
Given that Apple migrated away from the Power architecture in its desktop Macs in favor of Intel’s x86 Core processor, and has used ARM processors in its mobile devices from the 2001 iPod to the iPhone, how does it make any sense that the company would buy up a chip designer that develops high end, yet highly efficient processors Apple is unlikely to ever use?

Apple just exited the server storage market with the termination of its Xserve RAID. Its server line sells to a relatively small population of primarily education institutions and video production companies. Apple has no products that really correlate with the flagship PWRficient PA6T-1682M.

When asked about the acquisition in its earnings conference call, Apple declined to answer the question. Instead, Apple CFO Peter Oppenheimer noted that the company acquires lots of smaller technology companies but that it does not “comment on our purpose or plans” for those acquisitions.

No PWRficient Macs.
While Apple’s Universal Binary architecture would theoretically allow the company to introduce Macs, MacBooks and Xserves based on the 64-bit dual core PWRficient processors, it is extremely unlikely that the company has any interest in doing so.

One of the main reasons for moving to Intel’s Core x86 processor family was to share economies of scale with the PC industry at large. Part of that relates to software compatibility, and in particular the ability of Macs to run Windows, both in a virtual environment such as Fusion or Parallels and natively via Apple’s Boot Camp configuration tool. This flexibility, or at least the advertising merits of the Mac’s potential to run Windows, has unquestionably boosted Mac sales and lowered barriers to adoption.

Apple is even seeing additional interest in its server line due to the development of server versions of VMWare and Parallels, which offer the ability to host multiple Windows, Linux, and Mac OS X Server environments on a single Xserve. A migration to any other processor architecture, even one with significant performance or power efficiency advantages, would only hamstring existing strategies to migrate from PCs to Macs. Apple is committed to Intel Core processors in its Mac computers and servers and is well served by Intel’s current lineup and future roadmap.

No PWRficient Mobiles.
Back in the late 80s, after growing dissatisfied with the scant options available in mobile processors (principally AT&T’s Hobbit chip), Apple partnered with its UK equivalent Acorn Computer to codevelop a new generation of mobile savvy processors known as the ARM architecture. Acorn used them in its desktops, Apple used them in the Newton, and today roughly 80% or more of mobile devices are based on ARM chips.

Apple discontinued its use of ARM processors with the Newton in 1998, but resumed in 2001 with the iPod. Today, all of its iPods, the iPhone, and Apple’s current AirPort base station products use ARM processors. The ARM architecture has developed into a vibrant marketplace, where multiple vendors compete to design and build processors based on technology licensed from ARM, from Texas Instruments’ OMAP line to the “system on a chip” products from Marvell and Samsung that Apple uses.

Apple currently has no need to look elsewhere for mobile processors; even if it did, it would soon have options from Intel’s new Atom line, which plans to offer a low power, x86 compatible chips that could be suitable for use in mobile devices like the iPhone as early as next year. Clearly, Apple didn’t buy PA Semi to go into business developing its own mobile alternative processor given the already cutthroat competition between ARM licensees and Intel’s Atom, both of whom would kill for Apple’s business.

On top of all that, PA Semi’s PWRficient chips, while sipping only a fifth of the power of a comparable Intel x86 or Freescale PowerPC processor in server applications, are not comparable to the low power mobile ARM processors Apple now uses nor the Atom mobile processors Intel promises for the future. Reconfiguring PA Semi to be a mobile chip designer would take several years; its first product took nearly a half decade to complete.

Origins: Why the iPhone is ARM, and isn’t Symbian
Newton Lessons for Apple’s New Platform

No PWRficient?
The lack of any obvious application of PWRficient in Apple’s products has already spooked PA Semi’s existing clients. EETimes reported that just two days prior to the announcement of its purchase by Apple, “PA Semi informed its customers it was being acquired and it could no longer guarantee supplies of its chips. The startup did not identify the acquiring company but said that company may be willing to supply the chip on an end-of-life basis, if it could successfully transfer a third-party license to the technology.”

The report then flatly reiterated that “PA Semi customers were told the acquiring company was not interested in the startup’s products or road map, but is buying the company for its intellectual property and engineering talent.”

Among PA Semi’s talent is founder Dan Dobberpuhl, who at DEC developed the pioneering T11 in 1981, the blazing fast Alpha in 1992, and the highly efficient StrongARM processors in 1995. After Compaq bought DEC in 1998, the StrongARM business was acquired by Intel and rebranded as XScale.

After pouring around $5 billion into Xscale to develop it into a mobile competitor to TI, Intel gave up and sold off the business to Marvell for $600 million in 2006. After failing miserably as an ARM licensee, Intel has attempted to build an efficient new mobile processor business around its low power x86 chips known as Silverthorne and Moorestown, an effort recently rebranded under the trademark Atom.

The problem for Intel so far has been that no customers have shown any interest in Atom outside of Microsoft’s UMPC partners, who haven’t managed to sell units in any serious quantity. Intel has targeted Apple as a possible suitor and even portrayed the iPhone as a candidate in its Atom roadmaps. Getting its Atom processors inside Apple’s iPhone, iPod Touch, and AirPort base stations would be a major coup for Intel, but current and future ARM processors already deliver stiff competition in cost, size, and efficiency.

In 1998, Dobberpuhl left Digital and founded SiByte, which developed the first integrated multicore systems on chip. His company sold to Broadcom for $2 billion in 2000. In 2003, Dobberpuhl left Broadcom to start PA Semi, recruiting top talent from Intel, Broadcom, and AMD.

Will Apple Rescue Intel’s Silverthorne?

How Does PA Semi Serve Apple?
Given that Apple currently has lots of competitive, commodity processors to choose from, both for its conventional computers and its emerging mobile devices, why would the company invest in a chip designer? One reason hinges on the intersection of differentiated diversity and shared similarity.

While Apple benefits greatly from the open markets for x86 and ARM chips and from relying on Intel to design much of its Mac logic boards, it no longer has any edge in components that it once held as a PowerPC user. Between 1994 and 2005, Apple experienced waves of efficiency, performance, and cost advantages over PC vendors tied to Intel’s x86 architecture, particularly as Intel delivered a string of disappointments from the Pentium Pro to Itanium to the blazing hot Pentium 4.

Those PowerPC advantages were difficult to maintain in competition with Intel’s vast economies of scale, particularly as Apple’s PowerPC partners lost interest in investing in the desktop market. AMD also contributed significantly to the x86 market by offering Intel credible competition and forcing Intel to abandon its unwieldy 64-bit processor plans and the megahertz myth of the Pentium 4 in favor of copying AMD’s own 64-bit implementation of x86. Once Intel laid out plans to design an AMD-64 compatible, efficient chip based on its earlier Pentium III architecture, Apple had no reason to keep waiting for new blood to squeeze from the PowerPC turnip.

Apple’s migration to Intel was particularly traumatic for PA Semi, which had been working to develop an efficient PowerPC processor that Apple could use in its laptops in place of the aging G4 chips from Freescale (Motorola) and IBM. The problem was that PA Semi wouldn’t have its new chip ready until well into 2007, while Intel’s new Core processor would be available in early 2006. Intel could also provide Apple with a full array of chips for everything from desktops to workstations to servers. Apple was able to complete a full transition of its entire product line within a year, well before PA Semi’s potential laptop processor would even become available. Apple also adopted a new low power Intel x86 processor for use in Apple TV.

PA Semi was simply gunned down by the juggernaut of Intel, and at this point, backtracking to salvage the work done to develop a workable PowerPC processor makes no sense. While Apple has no apparent use for PWRficient, there are other ways it could use PA Semi’s assets and engineers.

Differentiating Through Mac Hardware Acceleration.
While the transition to Intel has afforded Apple tremendous new opportunities, the downside to using commodity chips is that Apple’s roadmap is now closely tied to Intel’s. That means there are fewer surprises Apple can pull off and less differentiation between Macs and generic PCs. While it makes no sense for Apple to jump back into the PowerPC business for its own products, the company could use PA Semi to deliver specialized processors and chipsets to differentiate its product line.

Apple has invested heavily in building software tools that spin processor intensive tasks out to specialized hardware. Core Video and Core Graphics allow developers to harness the raw and often idle capacity of graphics processors without needing to specialize in GPU programming or dealing with the specifics of any particular graphics hardware. Mac OS X also offers an Acceleration Framework that intelligently targets other features in the hardware to speed things up, whether its the AltiVec unit on PowerPC or the SSE features of Intel’s processors.

That gives Apple the ability to add specialized hardware of its own design to its Mac products and fully exploit that potential with tight software integration, much of which is already in place. Because it would own the designs, Apple could establish significant performance advantages over commodity PCs in general tasks, and also deliver acceleration for specific tasks such as video and audio transcoding. Because Apple now sells millions of Macs per quarter, adding highly efficient hardware acceleration chips across the board would add only minimal cost while delivering a significant and tangible advantage that would be expensive and complicated for other PC vendors to match.

This would not only fuel the embarrassing shootouts that Steve Jobs loves to showcase, but also highlight the difficulty Microsoft has in herding its stray cat PC hardware partners when it comes to tight hardware and software integration. Just as the highly integrated hardware and software of the iPod and iPhone demonstrated how clumsy PlaysForSure and Windows Mobile were, additional Mac hardware acceleration, transparently available to developers, would further prove the Windows PC to be a third rate product.

Differentiating Through Specialized Embedded Chipsets.
Just as with the Mac, the other half of Apple’s business, its mobile device offerings including the iPod and iPhone, similarly lacks any need for an outright CPU replacement. However, Apple could use PA Semi’s assets to develop its own mobile chipsets, from wireless components to signal processors. Apple currently relies upon a series of vendors to develop these parts, and regularly moves between vendors to find the best prices and components possible.

However, this exposes Apple to easy copying. Anyone can take apart an iPod and duplicate Apple’s product by simply buying up the same off the shelf components and developing their own software. That exactly what Microsoft did, as noted by Mark Kaelin in a News.com feature titled “Cracking open the Microsoft Zune,” forwarded in by reader Kevin Marchand.

Kaelin pointed out, “On the inside, the Zune is remarkably similar to the iPod Nano. Many of the parts are exactly the same. The difference is that the interface chips and software in an iPod are made by Apple. I know some die-hard fans will protest, but the insides don’t lie. The Microsoft Zune is a few Apple chips from being an iPod.”

By developing more its own integrated components, Apple could potentially save money, support new proprietary features, and throw copycats off its trail and force them to develop their own devices from scratch. As Apple blazes into uncharted territories by accelerating its iPod line into a new series of WiFi mobile devices, cost savings, differentiated features, and difficult to copy designs will all become increasingly important. PA Semi’s hardware expertise can help in that regard.

Photos: Cracking open the Microsoft Zune – News.com

Love the Players, Not the Game.
Of course, Apple could also be interested in PA Semi primarily for its 150 engineering employees, its patents, and its relationship with Texas Instruments, which apparently builds the processors PA Semi designs. By acquiring PA Semi, Apple could custom design its own ARM ‘system on a chip’ designs for TI to build, forging an interactive partnership with TI on the mobile side that reflects its cooperative partnership with Intel on the laptop, desktop, and server side.

Additionally, those 150 engineers have experience in developing low level software that likely complements Apple’s efforts in both the mobile and desktop arenas. Apple is migrating toward LLVM as its development compiler, developing new applications for multitouch, and managing who knows what other engineering projects as it doubles it campus size and expands into new markets. Hiring a productive team of experts, described in the Microprocessor Report as “an all star group of designers,” is easier than recruiting 150 individuals and teaching them to work together.

Over the last five years, PA Semi has received $100 million of venture capital investment, making Apple’s $278 million purchase seem like a steal. Prior to Apple’s move to Intel, announced mid 2005, Apple worked closely with PA Semi to determine the viability of its chip design due a year or so later than Intel’s Core processors. The tech press saw so much potential between Apple and the advertised specs for PA Semi’s new PowerPC chip that many couldn’t get over the idea that Apple chose to work with Intel instead.

In late 2005, Jon Stokes of Ars Technica wrote that in view of IBM’s promises of a faster desktop CPU and PA Semi’s planned PWRficient chip, Apple “jumped ship because they no longer care about making leading-edge computer hardware” and that subsequently, “the Mac line is no longer the foundation for Apple’s future growth, and it could very well go bye-bye.”

Instead, powered by Intel processors, Apple has seen phenomenal growth in Mac unit sales. That has helped the company amass a $19 billion cash pile that allowed Apple to snatch up the team at PA Semi at a bargain basement price in the midst of a recession. Apple is having its cake and eating it too.

How Apple’s PA Semi Acquisition Fits Into Its Chip History

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  • elppa

    There’s lots of good, very reasonable sounding ideas in this article, but I’m not sure after reading it I’m any closer to knowing Apple’s plans for PA Semi.

    This Dan Dobberpuhl sounds like a bit of a genius. I keep coming back to this quote:

    “PA Semi customers were told the acquiring company was not interested in the startup’s products or road map, but is buying the company for its intellectual property and engineering talent”

    Maybe it’s just for the staff, after all SJ often describes hiring as one of the most difficult tasks.

  • Jon T

    Thanks for dispelling the more fanciful speculation floating around.

    It sounds to me as though PA Semi only ever wanted to be part of the Apple story, and after a few scary moments got there in the end.

    Amusing to imagine an offer from Microsoft of say, $1bn, being declined..

    And as a bonus, we can also lay to rest all those stupid ‘give the cash back to the shareholders’ demands.

  • zaxzan

    No, as far as I can see Dan you didn’t miss anything. What would I know anyway, unless you were discussing disparate Film / TV Lighting techniques.

    Anyway –

    My flabber is gasted and my gaster is flabberd at how you are able to nail down all those particulars:- those facts, figures, statistics, data and knowledge into your “RD Magazine” in such a small time frame … It doesn’t seem to be Rough at all.

    Well done yet again Dan. I’ve said it previously and I’ll say it anew. You rock sir!!!

  • WholesaleMagic

    The acquisition of PA Semi seems like a VERY interesting twist that opens up a whole lot of exciting new pathways for Apple to tread. I just can’t wait to see what happens in the next few years.

    Your research and summary skills are phenomenal. I’m surprised that you haven’t been snapped up by some magazine (or maybe they offered and you declined). I’m a second year journalism student in Sydney, Australia. I’m writing a series of feature articles with a political focus, and I’m finding it hard to come up with enough material to create good, solid pieces. How you do it, I don’t know.

  • Doxxic

    Apart from the theories mentioned in Dan’s article, it occurs to me that the Power PC platform is great for gaming consoles…
    Could this have anything to do with that???

  • JustDoug

    Consider: OS X already supports ppc. In fact, it’s still very much being supported. Apple is very familiar with it. They also have experience in being able to cut OS X to fit into such different packages as the iPhone and iPod Touch. They seem to be headed into making the Always Online consumer lifestyle a reality. They’ve recently released the Macbook Air which practically relies on wireless. They also have fond memories of the Newton; something that came too soon and died all too young.

    Why not a Newton II or the legendary Mac Slate/Pad? Why not a ppc based Super PDA-plus? It wouldn’t have to be a desktop per se, so any advantage of being Intel compatible is rather moot. That low, low power requirement and being able to use an already proven chip design that they’re very familiar with, adding in their experience with the gesture interface of the iPhone/iTouch…

    Hey, it could happen.

  • ArnisAndy

    “… Between 1994 and 2005, Apple experienced waves of efficiency, performance, and cost advantages over PC vendors tied to Intel’s x86 architecture, particularly as Intel delivered a string of disappointments from the Pentium Pro to Itanium to the blazing hot Pentium 4.”

    Uh, I don’t think this is quite true. If memory serves me correctly (which it often doesn’t) the Intel variants outperformed (at least integer calculations which makeup the majority of processing) their PowerPC equivalents. By equivalent I mean chips that were shipping at the time. The PowerPC did more in less Gigahertz and less wattage, but the Intel chips were clocked so much faster that it they did more for less money (though less efficiently). The Steve often compared the PowerPC’s to less-than-current Pentiums of the time and then claimed superiority.

    “The Megahertz Myth” was just Apple’s marketing hype machine. To use the car analogy it is like Apple saying, “Our new Lexus is 250 horsepower and gets 35 miles to the gallon while Intel’s Cadillac is 200 horsepower and gets 20 miles to the gallon” when in reality Intel is off shipping a Cadillac Superduper that is 350 horsepower and get 15 miles to the gallon. Back when gas was cheap no one gave a durn about the cost of fuel.

    Concerning adding specialized hardware to the Apple’s, given the performance of the Intel chips, specialized hardware onboard the MACs for video and audio seems unnecessary. With Intel back making it’s old argument that with multiple cores, who needs dedicated GPUs, making specialized chips to do thing the CPU can do satisfactorily isn’t likely. Note that Intel’s old argument typically only gets implemented on low-end machines because dedicated GPU’s will always outperform a CPU based system and users are hungry for better 3D graphics in their games.

    I think, Dan, your thoughts on the embedded route is the more likely use.

    Apple’s Intel move was brilliant. I’m really excited to see how the LVVM technology gets used and how the iPhone will continue to improve.

  • blacktalonz

    The DOD concern is not the kiss of death for this purchase as many are assuming. If these PWRficient are truly used in volume then finding a licensee will not be difficult. It could be licensed to TI directly thus cutting out a layer of cost, or to the DOD contractors directly. The only downside would be if PS Semi is contractually obligated for roadmap development for x amount of years.

    Daniel, as usual, has hit the nail on the head. This purchase is about the supporting chipsets for Apple’s mobile computing devices. Daniel has already provided a wonderful in depth analysis why Apple needs this.

    The only thing I have not heard anyone mention is how this purchase will be used to lockdown Apple’s mobile platform. Since Apple is using off the shelf components to build the iPhone and iPod Touch, hackers were able to use already existing tools to explore, hack and compile for these devices. Granted some custom coding went into the hackers work, but a lot of off the shelf tools were used to get it all started.

    If Apple condenses all these these chipsets into a proprietary package then hackers will not be able to use common tools from other platforms to keep going after the iPhone.

    I think we will shortly see how serious Apple is about locking down iPhone 2.0. No one knows how long Apple and PA Semi have been collaborating on a SOC to add layers of abstraction to keep hackers out of the iPhone. If Apple has agreed to purchase them, then I would bet that the technology is in place, engineering samples are working, and a fab has been lined up!

  • brett_x

    The quote “Apple is a software company….” came to mind when reading this article. I couldn’t find the whole quote, but didn’t SJ follow that up with something like “and in order to make the best software, you have to design your own hardware” ? That fits perfectly into your “Differentiating Through Mac Hardware Acceleration” scenario. I really hope Apple does plan to make additional components that really give them the edge over PC designs.

    One poster on another site also brought up one possibility: create a proprietary chip so that OS X will only boot on Apple machines. $278M seems a bit steep for that sole purpose, though.

  • http://lantinian.blogspot.com lantinian

    Another great insight into the little future of Apple’s plans.
    It amazing how you can pull this off considering that Apple of all does not talk about its plans – At all.

  • Boregard

    My guess, following Kahney’s book “Inside Steve’s Brain” is that Apple had one or two key product needs that made them look at PAS in the beginning for specific advantages.

    I think Steve then probably found other reasons to like the PA Semi, that would prove valuable in the long run.

  • AdamC

    Great article Dan, my take on this is OSX works best on a PPC chip – I maybe wrong but my guts feelings say so (My G4 powerbook while running Leopard is flawless but my intel Mac mini is giving me a hard time).

  • sebastianlewis

    If Apple bought them for the employees then each one of them is worth almost $2M to Apple.

    I’m really happy to see that Apple is making investments in its hardware instead of blowing it all away on Adobe which wouldn’t be enough to keep all of their employees, well employed and would be an absolute mess to integrate into Apple unless they planned to operate Adobe as a subsidiary only partially integrating it into Apple.

    As for the ideas about its portfolio… better graphics and sound in the iPhone and maybe their computers, maybe an improved disk controller in their general line of computers, an integrated network controller to cover this mess of chips for Bluetooth, WiFi, EDGE, and UMTS/HSPA… who knows really, but anything that improves their hardware is no doubt a good thing.

    One possibility that I kept expecting in your article but didn’t see at all are additions to Apple’s product lineup that WOULD benefit from PA Semi’s portfolio, it’s always a possibility I guess, I just hope Apple doesn’t waste resources on a “Large iPod touch” device when they could focus on making their notebooks better instead.


  • stuartleitch

    Also in the news today:


    Wolfson aquired by TI. Wolfson used to make a custom component for iPods. Is this a coincidence?

    I’m hoping that the real reason for PA Semi’s aquisition is ” none of the above” i.e. something really breathtaking.

  • sartor


    Darn good writing there Daniel Eran Dilger!

    Just Brilliant!

  • http://johnsessays.blogspot.com John Muir

    I was going to write about this subject myself, but it’s all pretty much covered here. Damn you Daniel: you’re fast! :D

    PA Semi’s talents – taken inside out of the stormy economic weather and need to hawk their wares in public – are potentially fascinating. I think we’ll see their hand in all of Apple’s gear in the next few years as – like you said – Apple are their own economy of scale!

    As for Jon Stokes: give him a little slack. He’s a PowerPC fan through and through, and wrote those words when the Intel news was still sinking in. I generally find him and John Siracusa the two Ars writers who make up for many of the others. I’ll leave the reader to figure out who those could be…

  • gothgod

    It is all about locks.
    Sure it would be nice with some fancy-pants hardware booster, but the main reason is to kill or make it uninteresting to run osx on an ordinary pc. It might also be aimed for closing up the iPhone (though unlikely to me). Even though you like them a lot, Apple is still a company.

  • http://johnsessays.blogspot.com John Muir

    @ gothgod

    Some good “open sourced ideology takes on corporations” think there. I say it’s bunk.

    When you make something just to get in hackers way – i.e. a lock – you add nothing and just hinder yourself. Daniel’s right that Apple are after differentiating hardware features, and I’m pretty sure that in-house solutions are the way to go if targeted wisely and of course paid for by the volume we see they are easily maintaining. But just a lock? For no other purpose? Nope.

    What do you do if you really want to get past a lock? Pick it. That’s what’s behind the warez scene and the DRM busters like DVD Jon. It’s a puzzle to them which they enjoy tinkering around with and taking apart. If Apple did the same kind of stuff, expect a similar or even greater following of interested parties.

    Meanwhile: how about this turn towards custom design is really a reaction to the market conditions:

    1. AMD is weak right now so Intel’s rapid innovation surge may well slow back down … hopefully not, but it’s worth considering.

    2. ARM and x86 alike are purely commoditised. There is no differentiation in them, or indeed the chipsets and SOC’s available. Apple can do more with this than anyone else – thanks to OS X’s spectacular portability – but why choose to sit here when other options can be explored now that they have the money?

    3. Copycats as mentioned in the article, have been appearing more and more in recent years. Hideous iPod knockoffs are being one-upped with apparently functional iPhone clones (at least on a buyer’s first inspection). Why leave this threat on the table? It’s not simple locks which is the best way to deal with it either: as Microsoft are the real clone to note! But custom silicon for *custom functionality*.

    I think we could be in for many great surprises yet. I’m sure Steve will just about be able to manage to come up with novel ways to demonstrate them in keynotes for years to come!

    A parting note: now compare this buy to the ongoing Yahoo fiasco.

  • jezcaudle

    The correct saying is:

    You can’t KEEP your cake and eat it.

    Which you can’t unless you eat feeckle matter and even then you wouldn’t know which bit was the cake – except for the bits of sweet it is all mashed together.

    I worked for an investment bank and suggested that they stockpile cash for the coming recession. While volumes would be thin they would have the time to invest in new technology and train the staff to use it. They would even be able to buy other investment houses on the cheap.

    I was laughed at. They told me about shareholder value and the like. The bank has since been taken over for next to nothing during the current credit crisis with it’s share price on the floor.

    It looks like Apple has the right idea about using a recession to buy up what it needs on the cheap and if sales do slow down they can use the slower pace to get the R&D correct and when recession ends they will have a stellar line of products waiting to be bought.

    Nice article. You are the only person to have pointed out that Apple could use the processors in it’s computers if it so desired. Other people have said that this is not possible when quite clearly OS 10.5 runs on PowerPC computers – I have it running on an iMac G5.

    Maybe where virtualisation is not important we will see the companies chips – iPhone, Apple TV, high end video kit. Maybe not – it will be interesting to see what happens and if things like H264 accelerator chips do make their way into Apple kit.

  • benlewis

    Great article, and fast to print! Also interesting in terms of your discussion around keeping and acquiring talent in your “How Microsoft has become the Beleaguered Apple ‘96” article a few days ago. I would guess that 90% or more of PA Semi’s employees won’t have any problem changing their commute from Palo Alto to Cupertino (unless they have a lot of people who live in the City). Now that Apple is a talent magnet, it seem like they hold all the cards, including location, location, location.

  • lmasanti

    “The report then flatly reiterated that “PA Semi customers were told the acquiring company was not interested in the startup’s products or road map, but is buying the company for its intellectual property and engineering talent.””

    Do somebody knows what’s in PA Semi Intellectual Property portfolio?

  • MikieV

    I’m with gothgod:

    “Sure it would be nice with some fancy-pants hardware booster, but the main reason is to kill or make it uninteresting to run osx on an ordinary pc.”

    Instead of trying to keep people from runing OSX on non-Apple hardware, add a proprietary co-processor(s)to make Apple hardware run OSX significantly faster than any non-enhanced computer.

    Especially funny if the “accelerator” would boost performance of Windows-based software in Bootcamp or Paralells/Fusion… that wouldn’t give potential “switchers” any extra incentive, would it? :P

  • Pingback: Kort iPhone-nieuws: Community Sources 3.8, Apple en PA Semi, HWPen 1.0.1, OpenRepo, Remote Buddy » Nieuws » iPhoneclub.nl()

  • sebastianlewis

    @ArnisAndy, it’s not unnecessary if by adding custom hardware they can boost the performance of the hardware without relying on Intel’s roadmap, especially since at least until Nehalem, there’s still a huge bottleneck between the CPU and the RAM. They might even be able to cut down on the number of chips they ARE using, I think some sort of network chip that can handle Bluetooth and WiFi and Gigabit Ethernet, might work, but maybe they can’t get those all in one chip, maybe they can create a controller so that it’s easier for the software to switch between WiFi, Ethernet, and WAN (via ExpressCard). If they can boost H.264 encoding performance in the MP and MBP or maybe boost decoding/encoding of ProRes 422. All the GPUs I think Apple is currently using already have hardware decoding for H.264 though… hmm. Throwing power is never the best solution if you can create a chipset that does it more efficiently, even if it adds a little complexity.

    As for keeping people from copying… err, a DRM chip wouldn’t work, it would really just be a bi-product of having custom hardware, but Apple isn’t going to waste time purposely trying to keep people from copying their hardware.


  • SteveP

    OK, FINALLY signed up!
    I agree with the differentiation thoughts, in general. That was my first consideration, also.
    However, as to the worries about the language regarding Apple’s reasons, they may have no ‘interest’ in the products or roadmap, but that doesn’t seem – to me – to discount them continuing a profitable business! I see no reason why they can’t continue current products AND use engineering/design staff for their own specific product design also. I doubt they need the whole 150 person staff for their own projects a -t least at present.
    Also, since they are a fabless company, consider this. (Yes, I may be totally off base! :) )
    When they ‘worked with’ Intel on the chip for the ‘Air’, Intel ended up with a design that they will make available to anyone else, too.
    IF Apple had ‘designed’ the concept ‘in house’ they might have been able to have Intel Fab it, but retained exclusive rights. Or they might be able to add other ‘innovations’ to Intel chips and have them fabbed ‘exclusively’.
    Just some thoughts to play with.

  • Vr8

    You’re all talking history!

    In a few years from now;

    Everything in a Apple product will be PASSD.

    A hugh ground database.

    Apple’s own satellite-system.

    Apple’s own telecom-system.

    No more OS X installed on your Mac, start it up in Safari.

  • Vr8

    You’re all talking history!

    In a few years from now;

    Everything in Apple products will be PASSD.

    A hugh ground database.

    Apple’s own satellite-system.

    Apple’s own telecom-system.

    No more OS X installed on your Mac, start it up in Safari.

  • http://johnsessays.blogspot.com John Muir

    @ SteveP

    I somehow doubt Intel would be pleased to let someone else in to design with them: far as I know, they’ve always been an independent bunch, dominating the rest of the industry.

    However, I do hear that integration is pushing on as always, so maybe … maybe.

    Somehow though, I reckon the first Intel heard of the PA Semi deal was yesterday like the rest of us.

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  • SteveP

    It was just my understanding that Apple HAD worked with Intel on the design of the small form factor chip used in the Air.
    Guess it kind of depends on how much of a ‘joint’ effort that was. I certainly don’t know the details. Was just thinking there might be a way for Apple to make this kind of collaboration more exclusive.
    Like I said, just thoughts.

  • ArnisAndy

    I read lots of buzz about the fabled tablet Mac. I bring it up here because of some conjecture I’m reading here about the use of Mac’s newly purchased IP.

    I think the niche for a tablet Mac/new Newton is too small for Mac to sink much development into it. Microsoft has had meager luck with their tablet PC’s, but their’s are primarily standard laptops plus some extra.

    The issue all comes down to to text. Hand writing is way to slow to enter emails. If it were so great then Palm would have kept it in their Treo’s instead of keyboards. Granted Palm’s Jot was not a natural writing style. But, how many would want to write your emails via a pad and paper.

    So the only real benefit of the tablet configuration is the portrait view for browsing and note taking. The Tablet PC has the nice ability in that it keeps one’s notes and diagrams in raw format and then does OCR to allow you to search them later. That is nice, but I still would always want a keyboard handy. Eventually one will want enter lots of text (like my lame comment here) and will need a keyboard. If one is going to carry an extra keyboard around, why not just carry a laptop.

    That’s why I think the form factor like the Eee PC 900 (with a more usable 1024×900 screen) is the better way to go. Than a tablet only (with separate plug-in keyboard.) And the reality of the Eee PC is that one still has to carry it in a separate bag. If it can’t go in the pocket like the iPhone, it goes in a bag. And if I’m carrying a bag for my tablet and extra keyboard, might as well put a (light) laptop in it like MacBook Air.

    So my meandering to a point is, for Mac to have a successful product I think it will need an attached keyboard. And IF they do it, it will look end up looking very much like a Tablet PC (albeit with better s/w).

    OK, watch Apple go and release something to make me eat my words.

  • jfatz

    Actually, jezcaudle, the phrase only makes sense as: “You can’t eat your cake, and have it too.” That’s also the oldest known form of the proverb. (Of course, all Old English-y. ;-) )

  • http://www.atsysusa.com atsysusa


    You left out one not so obvious opportunity. It could be part of Apple’s stealth penetration of the enterprise through expansion of their server line into the UNIX HPC space using the IBM Power Series.

    The RISC architecture is better suited to these applications than the x86 CISC architecture.

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  • JustDoug

    I rarely do follow-up posting, but after that semi-facetious “it could be” offering and reading some of the other thoughts in replies here, I got to thinking. It could work.

    Imagine a sort of iPhone on steroids, display the size of a small book or clipboard, given more horsepower than is possible with ARM. Primarily wireless, but also having 3G capability, it could fit in a comfortable niche between the iPhone and full-on laptops. As the iPhone/iTouch have proven, a soft keyboard is workable. With even more display real estate, it would probably work even better. E-book, PDA, graphic tablet, Web surfing pad- the REAL “ultra portable computer” people are mistaking the iPhone for. Think about it, and remember that it wouldn’t be like what has come before. Also remember what the pundits said what the iPhone was going be like and how it would work before (and after in some case) it came out.

    Using a ppc chip design they essentially own outright- a chip architecture Apple is already quite familiar with- would help prevent copycat knockoffs. Not only would erstwhile competitors have to emulate the OS and software, they’d have to duplicate the hardware without having it available off the shelf. No more ZunePods

    It would also let Apple finally delivery that dual G5 Laptop after all this time.

  • Boregard

    All the comments above are interesting speculation.

    I haven’t seen one of them suggest that Apple is deliberately leading competitors astray by giving an IP reason for buying to throw everyone off track for a key competitive reason in a specific upcoming product to need custom chips.

    Steve is notorious for being tight lipped, and trying to throw off the competition.

  • http://johnsessays.blogspot.com John Muir

    @ SteveP

    The Intel CPU in the MacBook Air is a Penryn die set in a Nehalem-specific laptop package, if I got my codenames right. Basically: it is *current* generic Core2 silicon put on top of next-gen-later-in-the-year “packaging” – the bit between the expensive little rectangular “die” and the motherboard – which will soon enough be available to everyone anyway.

    Apple’s involvement may well have been a lot of pestering!

    Intel rushed out a new combination of Intel technologies to suit them, but they are still all Intel. Trying to get them to monkey around with the stuff inside the die – the thing they really care about and is their raison d’être – is a whole other game.

    @ the tablet Mac conversation

    Good to see there’s so much consensus on form factor, software/hardware keyboard etc. Apple would have a guaranteed winner there, for sure! :P

  • Berend Schotanus

    “Apple currently relies upon a series of vendors to develop these parts, and regularly moves between vendors to find the best prices and components possible.”

    One of the things I admire so much in Apple is that it is not a “one truth” company (or at least not anymore).
    Prior to the Intel switch both PowerPC and Intel would have been options with pro’s and con’s. In fact to many outsiders PowerPC seemed the more obvious choice or at least the choice that would be most in line with Apple philosophy. Apple made a choice that amazed anyone but with hindsight appeared to be brilliant. How did they do that? Just good luck? Just good intuition?
    It appears to me making this kind of choice requires an awful huge amount of in-depth knowledge of processors. So even without building the chips themselves they would have needed the expertise. If Apple want to keep its lucky hand in choosing suppliers in the future it will continue to need this kind of expertise.

    I don’t want to dismiss any speculation about development of proprietary hardware but even just for the assessment of third party components acquisition of know-how might be very valuable.

    P.S. Good article!

  • Berend Schotanus


    The Zune is made of the same components as the iPod, so what? The Zune is a crappy player anyway and seems to prove just the same components is not enough to add the magic touch…

  • stefn

    The Zune is made of the same components as the iPod.
    That’s like saying
    * a hamburger and a steak are both beef dishes
    * a hang glider and a fighter are both aircraft
    * a Ford and a Honda are both cars
    * South Park and Picasso are both art
    …that last one works either way.

  • Boregard

    Gut feel tells me that custom chips designed to speed up handling of huge datasets, shall we say high-def next-gen video for instance, may get a significant boost with a proprietary solution.

    Such chips could handle importing, editing and eventually display of such content.

    Jobs & Crew keep their eye on the ball. The ball is content handling. The big nut is gigabytes of video at incredible rates. That includes everything from wireless & wired routers, computers, display specific boxes and servers, & would not necessarily exclude iPhone and slightly larger video screen outputs. Apple is supposedly working on next-gen vehicle systems, and that itself is a mega-opportunity, given the tens of millions of vehicles manufactured every year.

    It doesn’t take many orders in automotive to justify designing your own chips with some of the brightest minds in the industry.

  • http://johnsessays.blogspot.com John Muir

    @ stefn

    I’ve a PC blowhard friend who imported his own Zune into Britain (where they are not on sale) instead of getting an iPod because “the audio quality isn’t good enough”. His thinking was straight out of the Windows enthusiast playbook: iPod = Mac = closed, Zune = PC = better / cheaper / whatever hardware.

    No. He doesn’t really get it. Yet he carts the thing around, wondering why everyone thinks he made a dumb mistake.

  • Boregard

    As I recall it, Apple OWNS the music playback position in the automotive industry TODAY!

    Who is to say whether Apple will not provide integrated vehicle audio-visual systems for the automobile industry.

    Ah, the volume of it all…

  • danielg

    There needs to be economy of scale to justify vertical investment in semiconductors. The two market segments that seem to fit that bill are extending the Apple experience to the car and the living room.

    Currently, Apple has the Apple TV, but it is pretty wimpy. The consumer price point for these devices is around $300-400. It needs to have CableCard to support protected content. For set top box vendors, the two main pieces of margin they give away are to the silicon vendors and to the retail channel.

    The main chip vendor in this arena is Broadcom. They sell all of the pieces you need to do cable TV. But they also sell it as a system package. Want to use Microtune tuners instead of Broadcom tuners? Go ahead. You’ll still pay for the Broadcom tuners. Scientific Atlanta (Cisco) makes a lot of their own silicon.

    PA Semi could become the chip design house for Apple and reduce the amount of margin they give away to silicon vendors. Apple also owns their own retail distribution channel. This plan would only work if they can get volumes up to the point where it is cheaper to make their own chips rather than buy from Broadcom.

    Doing entertainment electronics for cars and extending the Apple experience to cars would be interesting. The problem is that the automobile manufacturers don’t pay a lot for OEM electronics. For Apple to get $50 a unit in royalties/revenue, the automobile retailer must get $350 in revenue. Auto electronics are a sales sweetner. They are the thing that a retailer can give away to make the sale. Auto dealerships make most of their money on service and will give you the better radio/DVD/etc. to get your goodwill so you will come in and get a $35 oil change.

    This market is so extremely commoditized that I don’t see how having a chip house translates into enough sales to justify having the chip house.

    I can see them trying to extend the Apple experience. My experience is in designing and building set top boxes. I can see a use for one’s own chips there.

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  • joepal

    Daniel and a few others have touched on this idea about differentiation and hardware acceleration. Is it possible that this is part of Apple’s plan to license OS X to Dell and HP and others?

    Using specialized accelerators that are available only on Macs, Apple could provide an enhanced OS X experience while allowing commodity PC manufactures to put OS X on their own PCs.

    Apple’s computer sales would not be cannibalized and they could start growing their market share significantly faster.

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  • airmanchairman

    @Berend Schotanus: with regard to your insightful comment:
    “In fact to many outsiders PowerPC seemed the more obvious choice or at least the choice that would be most in line with Apple philosophy. Apple made a choice that amazed anyone….”
    I would add that many an analyst at the time suggested Apple’s switch to Intel chips was a reaction to IBM’s reluctance to bump up the processing power and design of the PPC to levels where IBM feared the highly-rated XServe would start to pose a threat to IBM’s own server offerings.

    In the light of that suggestion, Apple’s recent financial rehabilitation and acquisition of PA Semi would suggest that Apple, as alert as ever to changing conditions, are keeping their eye on the ball and their options open to minimise dependency on outside forces beyond their control, and bring more of their critical advantages in-house where they can be protected from copying by IP. An in-house PA Semi would give control over design, and Apple’s increased marketplace clout would ensure that they get all the power they need from fabricators.

    I suppose this would also fit nicely into DED’s ideas of differentiation and hardware acceleration, which I tend to lean towards as more likely. A case of killing several birds with one stone, possibly?

  • anonymous500r

    Maybe Apple sees it’s mistake to move away from the Power Architecture. I would hope that with IBM’s Power6 architecture humming away at 4.7ghz they had bought this company to attempt to bring the Power architecture back into their pro line.