Apple is building a moat (of semiconductors)

Apple is building a moat (of semiconductors)

Summary: Apple is collecting chip gurus. The big question is why.

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Apple is collecting chip gurus. The big question is why. 

The Wall Street Journal delivers a nice roundup of Apple's recent hires: Raja Koduri, former CTO of AMD's graphics group, and Bob Drebin, another AMD alum. And let's not forget former IBMer Mark Papermaster. Papermaster, who leads Apple's iPhone and iPod unit now, was the subject of a non-compete tug-of-war. Papermaster is a microchip expert---not that he'd ever pass Drebin or Kodui in the hall to talk shop or anything crazy like that. 

Toss in Apple's acquisition of P.A. Semi and the company is looking downright chipper. 

The Journal writes:

Besides a desire to beat rivals to market with new features, Apple's shift is also an effort to share fewer details about its technology plans with external chip suppliers, say people familiar with the moves.

In other words, Apple is building a moat around its iPhone and iPod businesses. Apple can expand into chips, be extremely focused and provide a leapfrog advance. New chip capabilities make their way into Apple products (rest assured it won't share) and the company gets to play defense. 

Mobile advances have a way of winding up in every mobile device eventually. If Apple's chips can integrate with its software to deliver distinguishing results it can distance itself from the pack. 

It's unclear whether Apple's chip fetish will work, but on paper the idea makes a lot of sense.

Topics: Processors, Apple, Hardware, Networking

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62 comments
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  • Why is Apple doing it? Because they can.

    Apple has the free cash (nearly $30 Billion) to keep R&D
    moving ahead at any pace they desire. A lot of the
    competition has to watch the bank accounts very carefully
    and trip costs, like R&D, industrial designers, etc.

    If I was competing with Apple I would be worried right
    now, especially if cash was tight for me. After the iPod
    and iPhone/iPod touch I would he hating to think of what
    Steve Jobs was working on as he stayed at home regaining
    his health.
    Ken_z
    • You are DEAD wrong.

      They didn't do it because they can. They do it because they are Apple. APPLE MAKES THINGS.

      Many companies have a lot of cash in hand. But they just wait for Apple to make things so they can copy it!!!!!

      Microsoft has been spending like $billions on R&D for over a decade. This is way MUCH MUCH more than Apple did. And you see what they've got? ABSOLUTELY NOTHING!!!

      I don't know what's happening here. But it's DEFINITELY NOT money that makes Apple the most innovative company in this industry.
      Dealing
      • Apple loves to copy

        Microsoft has nothing to show for it. Why don't you compare income statements?

        Apple is famous for copying.

        GUI, MP3 player..etc..etc.. Posted by: Googleisevil

        " they do it because they are appple" Yeah you are not a cult member...Feel free to become a PC and think for yourself.
        Googleisevil
        • HAHAHAH

          "Feel free to become a PC and think for yourself."

          Brought to you by your friendly neighborhood Borg.
          Kid Icarus-21097050858087920245213802267493
        • Compare income? Last quarter MS DOWN 32% Apple UP 15%

          Last quarter Apple's profits and gross margins up.

          MS four out of five divisions revenues lower.
          16% drop in core Windows business.

          9 years ago MSFT market cap was 586 billion and Apple was 17
          billion.
          Today MSFT is 186 billion and Apple is 111 billion!

          (I don't think MSFT stock holders are happy)

          Today MSFT cash position 25 billion. Apple 29 billion.
          Apple can in 'theory' buy Dell market cap 20 billion with CASH.
          Davewrite
        • MS innovation? like Zune a rebranded Toshiba Gigabeat player?

          After iPod was already out for a long time, MS decides to move into
          the music business (as usual following Apple's coattails) , but their
          'innovation' consisted of putting their brand on a warmed over
          Toshiba Gigabeat s player!

          Can you imagine Apple taking a Toshiba and putting an Apple logo
          over it?

          Before the iPod came out do you see any 'click wheel' music players?

          Anybody had a iPod Touch or an iPhone before Apple introduced
          them?

          Even the FOUNDATION of Microsoft's billions , MS Dos wasn't invented
          by them but bought from another company Seattle Computer
          Products!

          "DOS (Disk Operating System) was the operating system that brought
          the company its first real success. On August 12, 1981, after
          negotiations with Digital Research failed, IBM awarded a contract to
          Microsoft to provide a version of the CP/M operating system, which
          was set to be used in the upcoming IBM Personal Computer (PC). For
          this deal, Microsoft purchased a CP/M clone called 86-DOS from
          Seattle Computer Products, which IBM renamed to PC-DOS"

          i.e

          the morons of Seattle computer products sold the software to Bill for a
          small amount which in turn Bill eventually sold and sold for billions.

          Innovation is not part of MS culture even from the start.

          Davewrite
          • Good on Bill.

            So Bill is smart for seeing something and making into something that everyone uses? Is that the point of the post?

            And MS have trounced Apple in the home and business computing market while not being the fore-runner in it and by following Apple (hanging on their coat-tails). Why is this?

            Also:

            "Anybody had a iPod Touch or an iPhone before Apple introduced
            them?"

            Well...er...No...as the iPod touch and the iPhone are BY apple. Touch screen devices were around before then though. Long before. And there are better phones than the iPhone. Great gadget though. I just wish people would stop trying to say it's a gaming device. *sigh*

            MS didn't do as well in the MP3 player market I'll agree but I really don't rate the iPod. The sound quality is not all that, I find the touch well a pain to use and it's locked into iTunes. Far better products out there which work as MP3 players. And, as well, there probably were before they came along with the iPod.

            i would agree that MS are not the most innovative company but their products do what they are meant to do. They work. But I would say that Apple are these creative maestro's who lead the way in the industry either. You could say that their NEW OS is based on another OS anyway.

            Pointless argument really.

            Again. Apple want your money as much as Microsoft do and that's one thing the companies have in commen. You're nothing but revenue to them. Don't kid yourself otherwise.
            Average-IT-Guy
          • "I don't rate the iPod" Like so what? iPod 70% of market, raves

            reviewers and customer surveys unlike Zune, Win Mo and vista
            also give iPods and iPhones rave reviews,

            you say "And there are better phones than the iPhone."

            Your 'personal' opinions are well 'personal' and therefore on wider
            basis irrelevant. I could also say I think PC suck - broad basis it's not
            significant. What's more important is what the consumers in general
            think.

            Here:

            ChangeWave Survey of consumers of smartphones:

            March 2009

            Very Satisfied: Apple 80%, Rim (closest to Apple) 50%, Palm 31, HTC
            30%

            HTC builds the Win Mo Touch Diamond.

            So lots of consumers, the majority don't agree with you contention the
            iPhone is not a good phone, which emphatically puts lot of doubts
            about the validity of the rest of your arguments.
            ---
            The recent Forrester poll of mixed companies had the same result
            Apple dominating customer satisfaction for computer makers. On a
            list of 113 Apple was 41 positions higher than the nearest PC maker!

            ---
            Another ChangeWave survey of PCs gave Very Satisfied to Leopard at
            53% and Vista at a floor licking 8% !
            ----

            So you continued disparagement of Apple flies into the face of
            satisfaction polls and reviews. PC apologists fit better for people living
            in 'reality distortion fields'.
            Davewrite
          • Businessweek 2009 Most Innovative Co. : Apple No1 (5th year in a row)!

            Ever since Businessweek started it's Most Innovative Companies list
            Apple has dominated it every year.
            Davewrite
          • The Old Fashioned Way

            Apple should just innovate the old fashion way, like MS does, by
            stealing, hiring away talent and buying companies, to get their
            technology and/or kill their products (FoxBase). Gates bought the kernal
            for DOS (CP/M) for 20k (but he did write a basic interpreter for it). Then
            there was Stacker, which lead to the MS culture of theft and intimidation.
            john_gillespie
        • Actually there are bunch of worn knee pads in this lot - nt

          nt
          ItsTheBottomLine
        • Not COPYING.... IMPROVING!!!

          [i]Apple is famous for copying.

          GUI, MP3 player..etc..etc.. Posted by: Googleisevil[/i]

          Oh puhleeeeeeze... Before Apple came along, I had to suffer through a slew of piss-poor mp3s players and was baffled as to why no company could get something so simple as playing music right. When I got my hands on my first iPod, the clouds parted, angels sang, and I practically levitated off the ground. Apple may "copy" but they get things RIGHT!

          And Microsoft does NOT have anything to show for their efforts on Zune and the 7 other iterations of their music device technology. Even the successful X-Box bleeds money. Microsoft makes money on OPERATING SYSTEMS and OFFICE SUITES. Without those, they'd be NOTHING.
          frankz00
          • Actually

            Microsoft really doesn't make much money, if at all on OSes. For the
            most part, Windows serves as a vehicle for selling their true profit-
            garnering flagship, Office.
            This is not a platform argument. One merely needs look at their financial
            disclosures to see that profit from the Windows group is negligible.
            SpiritusInMachina
          • From what I've read MS makes almost as much on OSes as on Office. (nt)

            (nt)
            roaming
        • PCs think for themselves??

          Really?? Looks like Microshaft does all your thinking for you.

          Let compare shock prices instead! While Microshaft has gone nowhere since 2001 (hovering around $25).
          Apple in comparison has gone from around $7 in 2001 to $125 today, and this doesn't factor in stock splits.
          Good thing you bought Microshaft and I bought Apple.

          Hahahahahahaha!!!
          GoPower
          • Err... I'm for Apple but...

            .. Man you can't just simply compare it like that. --a.
            Dealing
      • You probably need to do something about that anger -

        and you might want to check your facts "ABSOLUTELY NOTHING!!!" pretty big statement from such a small mind - check the facts again.
        ItsTheBottomLine
        • Facts

          Please give us all of the pertinent facts. That will put all of those MS
          bashers in there place. Just show us the facts not just opinions.
          john_gillespie
  • In other news

    WWDC 2009 has sold out in a little over four weeks.

    http://developer.apple.com/wwdc/

    As a past attendee those attending will find it invaluable and
    great fun.

    The rest of us will will have the opportunity of getting the
    session videos earlier.
    Richard Flude
  • Apple already has unique components in some of their stuff ;)

    This chip thing is interesting and might be an expansion of
    Apple's policy of adding unique features in their products.

    Contrary the widespread belief (especially in PC circles)
    that Apple products are exactly the same as their PC and
    other competitors (just using off the shelf parts) Apple
    products already have proprietary Apple engineered
    features in them. The Macbook Pro 17 inch batteries come
    to mind. Apple says their scientists designed them giving
    the Pro a groundbreaking 8 hr charge. Apple's so proud of
    it they've got a video!

    For the chip designer issue, Apple might not build their
    own chips but work closely with manufacturers to build
    chips with unique features. Building a moat might be
    exactly right.

    Apple's profit margins allow them lee way to put a lot into
    R&D. (gross margins Apple is around 36% Dell 17%). I
    remember one time Dell was proud they only put 1% of
    their money into R&D! As PC makers head for the bottom
    of the price barrel turning computers into generic
    commodities it's going to be hard financially for them to
    put in unique features like Apple. Apple on the other hand
    has to keep ahead to justify their premium brand.

    Davewrite