Apple Buys Chip Designer
Apple has agreed to spend $278 million in cash to buy a boutique microprocessor design company that could create a chip for its flagship iPhone, and possibly iPod products as well. — The 150-person chip company, P.A. Semi, was founded in 2003 by Dan Dobberpuhl …
Context & Ripple Effects
Apple is paying $278 million in cash for P.A. Semi, a 150-person microprocessor design company founded in 2003 by Dan Dobberpuhl. The stated product rationale is potential chip development for the iPhone and iPod, bringing processor-design expertise closer to Apple’s device planning.
First-order effects
- Apple gains P.A. Semi’s engineering team and microprocessor-design capability, rather than relying solely on outside chip designs for potential iPhone and iPod use.
- P.A. Semi’s work becomes aligned with Apple’s handset and media-player product priorities under the acquisition.
Second-order effects
- Merchant chip suppliers pursuing iPhone and iPod opportunities face a customer with greater ability to define or develop its own processor requirements.
- Apple can more closely coordinate chip design with device hardware and software choices, making performance and power targets part of a single product-development process.
Third-order effects
- If Apple applies the acquired capability across products, device makers’ control over key silicon design becomes a source of systems-level differentiation rather than a purely component-procurement decision.
The trend: The acquisition is an early example of device companies treating specialized silicon expertise as a strategic capability to bring in-house.