Monday, August 20, 2012

Finally, a wrong move?

You can look at it as an advantage or as a drawback, but when Apple makes any kind of play, it is bound to invite numerous discussions, debates and scrutiny. The same is true for its latest acquisition of Intrinsity. Is Steve Job’s new penchant for semi-conductors the ‘wrong move’ that experts had been waiting for so long? by Amir Moin

It’s hard to discount the ability of Apple Computers to offer differentiated, futuristic and well designed products that enthrall customers across the globe, a fact that the iPod and iPhone have proved beyond doubt. But Steve Jobs also realises the perils of not watching his back. In what comes out as the latest edition of Apple’s endeavours towards becoming a fully integrated consumer electronics company, Apple has acquired Intrinsity, a small Austin-based firm for $121 million, that makes embedded processor cores, circuit design tools, design services and intellectual property based on their proprietary Domino Logic.

The reason why this acquisition is ringing alarm bells in the industry is because Apple had acquired another fabless semiconductor company, P.A. Semiconductors in April 2008; subsequently, in April 2009, Apple hired two former ATI/AMD chip designers. One was Raja Koduri, the former Chief Technology Officer (CTO) at AMD’s graphics group and the other was Bob Drebin, who held the same position at AMD before Koduri.

The induction of these highly skilled hires also coincided with Mark Papermaster’s official return to work at Apple. Papermaster was instrumental in developing the PowerPC architecture with IBM. His return at Apple was delayed owing to the legal settlement between them and his former employer, IBM. These developments have led the industry to believe that Apple plans to have the chips custom made in its own backyard. Tom R. Halfhill, Senior Analyst, The Linley Group, US, tells B&E, “By developing custom SoCs and embedded-processor cores, Apple is assuming more risk, but the potential payoffs are great: less dependence on third-party suppliers, greater differentiation, higher retail prices and richer profit margins.” Given the super secretive nature of the company, this revelation shouldn’t come as a surprise.

But there is more to this than meets the eye. By acquiring Intrinsity, Apple buys four things: Intrinsity’s Fast 14 technology, exclusive access to Intrinsity’s processor cores, a skilled processor design team and a multi-gigahertz Fast 14 implementation of ARM’s Cortex A9 Dual core processor. The last item has been in development for the past one year and could figure in Apple’s plans for future iPhones, iPads, and other gadgets.

With the acquisition of Intrinsity, Apple is poised to do what IBM did in the 1980s. It will be ‘legitimizing’ tablet computers, just as IBM had legitimized personal computers with its first PC in 1981. IBM was late in the market, but set a standard that soon dominated the market. In order to make tablets practical, five technologies have to mature – lightweight rechargeable batteries with high energy density; low-power microprocessors with enough performance to run complex software; flat, lightweight screens with pen or touch sensitivity; sophisticated graphical user interfaces; and smartly incorporated broadband wireless networking. These technologies are now on the verge of a boom. “With iPad, Apple is adding its usual extra elements: superlative user interface, trendy industrial design, cultural caché & unmatched marketing hype,” says Halfhill.


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