Could Apple loss be IBM's gain?

Could Apple loss be IBM's gain?

Summary: A lot has been written this week about Apple's switch from IBM to Intel chips.Not a lot has been written about what IBM might do now.

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TOPICS: IBM
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IBM logoA lot has been written this week about Apple's switch from IBM to Intel chips.

Not a lot has been written about what IBM might do now.

According to John Spooner of eWeek the answer is open source.

The chip business is moving in two directions at once, toward mass production and mass customization.

A Microsoft order for XBox chips means mass production. Orders for FPGA chips onto which a process may be programmed represent  mass customization.

An order for Mac chips falls somewhere between the two. Extensive development is needed for one customer, but is production really high enough to beat Moore's Second Law, the idea that costs rise with complexity, and grow exponentially?

It's possible that IBM concluded, not any more. Given Apple's proprietary model, the contract may not have been worth fighting for.

We usually think of mass customization in terms of gate arrays, like FPGAs. But Spooner writes that Power.Org, which makes those Power processors Apple is abandoning, is becoming a sizable community, with about 6,000 developers as members.

IBM wants to harness the power of this community, allowing members to work together in hardware, software and tuning, sharing the resulting breakthroughs. As with Linux IBM is looking to build service revenues here, in this case design and manufacturing service revenues.

I have said before that IBM is the leader in monetizing the open source model. But open source should not be confused with Linux. It's a business process, not an operating system, in which innovations are shared from a common pool, and costs are spread out among many different companies.

The short form. It's not communism, it's a co-op.  

As hardware becomes software, and as Moore's Second Law bites, the open source business model is moving into the vacuum.

Topic: IBM

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  • Question:

    Will Intel have to devote a great deal of expense to create chips for Apple?

    If this is true for IBM:

    An order for Mac chips falls somewhere between the two. Extensive development is needed for one customer, but is production really high enough to beat Moore's Second Law, the idea that costs rise with complexity, and grow exponentially?
    It's possible that IBM concluded, not any more. Given Apple's proprietary model, the contract may not have been worth fighting for.

    then why wouldn't it be true for Intel?

    But my impression is that Apple will be using off-the-shelf Intel chips.

    If IBM could have worked for Apple without small production runs and expensive design work, would IBM have kept the contract?

    Seems a contradiction.
    Anton Philidor
    • Quetions to

      How do you think IBM can keep up with MS's demand when it couldn't even keep up with Apple's orders? A Million chips a years or so. What will IBM do with a quarter billion orders? Have AMD produce them. Solid reports said that IBM had to hand pick most of them.

      970/fx is a great chip. I still want one, but if I was MS I would be concerned about IBM's ability to supply waffers. When evidence appears to be, IBM not being able to keep up with demand.

      Current XBox 360's were powered by PowerMacs at E3. That alone should tell you something. Why wasn't a prototype chip used?

      Makes me wonder.
      sp29
      • Economies of scale

        Both the chips for the Xbox 360 and the PS3 will be standardized, and probably for the entire production run of the models. And both will probably run into higher number of units sold than Apple would ever have been able to want.

        And I wouldn't be at all suprised if the chipsets have a built in throttle - the clock and voltage setting is probably set so that there would be fewer culls.

        Therefore it makes it easier to either buy or lease larger production space as the lines will have more than enough work.

        Apple probably could not commit to the numbers that MS and Sony are looking forwad to.
        quietLee
      • Microsoft is not using IBM to produce the chips.

        Microsoft is licensing the design and using third party fab houses to produce them.
        ShadeTree
        • Wrong

          The chips are being manufactured in East Fishkill, NY.
          GoPower
  • And apple is not abandoning the power PC chip, either

    Jobs said his overiding policy is that he likes to have options.
    The system they have developed encourage programmers to
    create software that can work on either powerpc or intel chips.
    One of the quesitons not really answered is how much of the
    softwware will eventually be intel only. Its not beyond the realm
    of possibility that one day, apple OS products could live once
    again in a power PC chip device, even after the last PPC Mac
    roles off the line. Windows is now the only major OS that is X86
    only (depending of course, on whats under the xbox360 OS)
    paul@...
  • this article at eweek is one...

    worth mentioning. ;-)

    http://www.eweek.com/article2/0,1759,1824810,00.asp

    here's a couple of articles you might want to read too...

    http://www.theinquirer.net/?article=23769

    http://www.pbs.org/cringely/pulpit/pulpit20050609.html

    gnu/linux...giving choice to the neX(11)t generation.
    Arm A. Geddon
  • But what happens to the AIM coalition

    Isn't Apple (along with IBM and Motorola) one of the founders and
    developers of the PowerPC chip (they were grouped together as the
    AIM coalition)? Does Apple still own their share of the rights? Is
    Apple getting paid for every chip IBM makes for the Xbox? Could
    Apple bring those rights over to another manufacturer like Intel/
    AMD?
    tic swayback
  • the real stroy

    BOSTON - Although Apple Computer Inc.'s new embrace of Intel Corp. microprocessors leaves International Business Machines Corp. in the cold, the news really isn't bad for Big Blue, which might have found the Apple account more trouble than it was worth.

    IBM derived relatively little revenue from making its Power brand of chips for Apple's Macintosh personal computers, which account for about 2 percent of the PC market.

    In addition, IBM's chip plans are focused elsewhere, notably on the next generation of video game consoles made by Microsoft Corp., Sony Corp. and Nintendo Co. IBM's chips also power several kinds of IBM server computers, which account for a huge portion of the company's hardware revenue.

    Both kinds of machines require such high levels of performance that it becomes expensive and challenging to adapt their chips for personal computers, especially mobile devices with stricter energy and cooling requirements.

    So, although winning Apple's business gives Intel bragging rights, ceasing to make chips for Macs will let IBM focus on markets that it thinks can be much bigger.

    "It's never a happy time when you lose a customer, no matter how large they are, but Apple's impact on the PC market is marginal at best these days," said Charles King, principal analyst at Pund-IT Research. "It will have more of a PR impact than a financial impact."

    SG Cowen Co. analyst Steve Weber said, "This move will likely have indiscernible impact."

    IBM shares slipped 79 cents, 1 percent, to close at $75 yesterday on the New York Stock Exchange.

    IBM declined to comment on Apple's announcement other than to release a statement reaffirming its chip strategy. "IBM is aggressively moving the Power architecture beyond the PC," the statement said.

    Most computer companies long ago abandoned manufacturing chips to industry-standard suppliers such as Intel and Advanced Micro Devices Inc., IBM has stayed with it as part of a broader strategy to distinguish the company as an innovative, high-end technology provider. That desire to focus on top-tier markets motivated the recent spinoff of IBM's PC business to China's Lenovo Group Ltd.

    With IBM's internal chip needs falling short of the company's manufacturing capacity - and demand from outside companies such as Apple tepid - IBM's microelectronics division lost $252 million in 2003, the last year for which IBM released detailed figures. The segment grew 0.6 percent last year, while IBM's overall sales increased 8.3 percent to $96 billion.

    IBM's long-term microprocessor bet lies in a new breed of chips, code-named Cell, being developed with Sony and Toshiba Corp. Promising blazing speeds and the ability to carry out 10 sets of computing instructions at once, Cell is scheduled for introduction next year.

    Hopes for Cell are so high that Sony, which plans to use Cell chips in the next generation of PlayStation game consoles, has invested $325 million in improvements to IBM's semiconductor plant in East Fishkill, N.Y.

    IBM's production of chips for Apple accounted for about 2 percent of Fishkill's capacity.
    winchester_z
  • Sony to let custom OS run on PS3

    Linux is said to come with the optional HD for PS3. Sony mentions that PS3 can also run Windows or OS X if either MS or Apple wants to. That will open a new paradigm to the PC market.
    IBM wants to open-source Cell's development to provide better tools... so what could happen is the following:
    -Hackers provide glue code to run PowerPC-based OS X on the PS3
    -a developer group creates a small set of tools to make use of the massive GFLOPS Cell's capacity for scientific work
    -complex simulation tools show on PS3, not only for entertainment (weather, astronomy, particle dynamics, heath and fluids...)
    -a paradox: a gaming machine used for serious applications
    -and yet more than a few simple open-source games downloadable to the PS3
    I think I'm just dreaming too much...
    oortizsilva