Apple maximizes margins and control with Apple A4 chip; spurns Intel, Qualcomm

“Apple Inc.’s A4 chip, unveiled last week as part of its iPad, shows how Chief Executive Officer Steve Jobs is extending control over the company’s hardware at the expense of Qualcomm Inc. and Intel Corp.,” Ian King and Arik Hesseldahl report for Bloomberg.

“Instead of buying an off-the-shelf part, Jobs had Apple’s engineers design the A4 chip, giving them influence over its cost and functions, said Will Strauss, an analyst at Forward Concepts Co., a researcher in Tempe, Arizona,” King and Hesseldahl report. “‘He wants his own ecosystem and doesn’t want to be beholden to anyone,’ Strauss said in an interview. ‘It’s both maximizing his margins and maximizing his control.'”

“Apple’s decision to design its own part is a blow to Intel, which is trying to win a foothold in mobile devices with its Atom product, said Jim McGregor, an analyst at research firm In- Stat in Scottsdale, Arizona. Apple will probably use a version of the A4 in future models of the iPhone, he said,” King and Hesseldahl report. “‘Every step that Apple has taken, from the iPhone to the tablet, has been directly in the sights of Intel, and where it has been wanting to go with Atom,’ McGregor said. ‘Intel has been completely rebuffed.'”

“The iPad is a high-profile attempt to crack a market that Qualcomm and Intel have set their sights on, said Jagdish Rebello, an analyst at El Segundo, California-based research firm ISuppli Corp,” King and Hesseldahl report. “‘Intel would have wanted to get into this device, Qualcomm would have wanted to get into this device,’ Rebello said. He also expects Apple to use the A4 in future models of the iPhone.”

“The A4 processor costs about $15 to make, according to Broadpoint AmTech Inc. That would make it the most expensive semiconductor component in the iPad, behind memory chips. The total cost of the iPad’s parts is $188.50 for the cheapest model, which will retail for $499, Broadpoint said,” King and Hesseldahl report.

“In April 2008, Apple bought closely held semiconductor designer P.A. Semi Inc. That company’s expertise in low-power chips probably explains the iPad’s 10-hour battery life, said Strauss from Forward Concepts,” King and Hesseldahl report. “Making a processor run quickly without draining the battery is the biggest challenge Intel faces in cracking the mobile market, Strauss said.”

Read more in the full article here.

26 Comments

  1. I maintain that this was the really big news last week.

    We all figured out there would be an iPad. We figured it out 10 years ago when those Germans started making fake videos. And Apple have no doubt been working on it that long. It just takes time and patience to get it right.

    But the chip news is way bigger news.

  2. you go back a few years and Intel is onstage with Jobs and the relationship with Apple and Intel looked very very strong. Something must have happened to move Apple towards purchasing PA Semi and developing their own chip.

  3. Vertical integration is a powerful and important strategy if you are aiming for long-term market leadership.

    Other manufacturers, chasing short-term cost reductions, have outsourced themselves to the point where they hold no competitive advantage — they only assemble commodity components from the cheapest available providers.

    Cheers to Apple for continuing to demonstrate how innovative design and engineering create products that are far more than the sum of the parts.

  4. I am all for Apple prospering with the iPad, but their recent tactics (see what they did to Stanza with their iPhone app update just last night), just leave me with a bad taste in using Apple’s products. If Apple’s iBook store is as superior as I expect it will be, why do they bother going after Stanza and similar apps, when they had already been approved for the functions they were clearly stating they had?

  5. Not supporting Flash is another big reason the battery lasts 10 hours. Installing Clicktoflash has added about an hour to my Macbook battery life. Huge, pleasant surprise- flash is truly a bag of hurt.

  6. I have to agree that this news was pretty big and largely ignored. I believe Jobs told Mossberg in their brief, post-keynote interview that their chip was one of the keys to the power efficiency of the iPad.

    If the iPad functionally has the battery life Apple claims, and they are usually good about these, another topic not discussed much is the importance of Apple’s efforts on battery technology. As with the chips, their ability to customize it to their hardware is critical

  7. The isa is ARM. armv6 iirc.

    The removal of the “usb syncing feature” from Stanza makes sense given that this feature is obsolete on the iPad. The iPad includes a mechanism (according to reviews) that allows you to mount the device when you plug it in on the mac, and drag files onto apps.

    Premature for apple to force the removal, but maybe this is apple telling us this ability is endemic to the software and thus ALL iPhone apps will soon have a USB syncing feature via the finder.

    That would be big news.

  8. Apple will use their own chips in mobile devices. They have a good relationship with intel for their mac line where intel runs the show. Apple acknowledge mobile devices is the way of the future and now intel can’t hold them back. But they have a good relationship apple gave them light peak.

  9. If Intel of Qualcomm offered Apple “The CHIP”, then Apple would not have to take it’s development in house. The same thing happened with FCP. Once Microsoft invested and coaxed Avid to kill QuickTime, they had to develop there own video editing software. They sure could not depend on Adobe to do it.

    You know that these P.A. Semi folks had already designed a G5 Power PC chip with low enough energy consumption to be used on Apple’s lap tops. They were a bit late thou, and they never got used. But Apple did see the talent behind this effort and decided to make it part of Apple’s talent, now we see the result.

  10. <<“Apple’s decision to design its own part is a blow to Intel, which is trying to win a foothold in mobile devices with its Atom product, said Jim McGregor, an analyst at research firm In- Stat in Scottsdale, Arizona. Apple will probably use a version of the A4 in future models of the iPhone, he said,” King and Hesseldahl report. “‘Every step that Apple has taken, from the iPhone to the tablet, has been directly in the sights of Intel, and where it has been wanting to go with Atom,’ McGregor said. ‘Intel has been completely rebuffed.'”>>

    They write as if Intel was the incumbent mobile chip, and that using the A4 is a stick in Intel’s eye. It’s not. ARM is. And, the A4 is built around an ARM core, with extensions done by Apple’s PA Semi team.

    As far as I know, Intel has only just released an unproven Atom chip to go into mobile devices. I’m sure Apple tested prototypes and know Intel’s plans, and have decided it doesn’t meet their needs, yet. The great thing is that iPhone OS X is very flexible. It can run on Intel Core2Duo, as well as ARM, and probably runs on PowerPC, as well. They can pick and choose, whomever comes up with the best chip or SOC or whatever.

  11. <b>STUPID ARTICLE<b>

    Intel and Apple/Qualcomm are not competitors at all.

    Intel sold-off its ARM-related business long time ago and Atom has IA32 (x86) processor.

    Why would Apple want to run iPad (or iPhone, iPod Touch) on emulator of ARM processor?

  12. We know that Apple considered the Atom when Intel execs came out and condemned them for not using it a good while back and had to back track. Soon after Apple bought PA Semi. It is clear that they were not impressed with the Atom road map, which has been proved right. Equally there are more chips produced to the ARM design(s) than Intel and they dominate the mobile sector so it is logical to go with a design derived from that corner. Fact is mobile computing is THE future and this is Apples way of claiming the high ground in all aspects of that future, software, hardware and concept. iPhone is where phones are going to be, the Tablet is where mobile computing is going to be and with accessories replace much of non specialist desktops too. Desktop computing will shrink as those areas expand to be left eventually as a niche product for most purposes. A long road but a clear one and one where power efficient hardware along with a light specialist (but upwardly mobile) multi touch OS will be difficult to compete with for some years.

  13. @KenC
    I agree, the article is somewhat misleading. The last time that I checked Atom still had quite a ways to go to compete with the ARM in terms of low power consumption for mobile devices. But it also lacks the computational oomph to serve as a robust laptop CPU. That puts Atom in an awkward position relative to the market and explains why Intel has had difficulty gaining traction except with some netbooks.

    As far as I can tell, current versions of the Atom are not appropriate for the iPad or similar devices. People complain about battery life on iPhones and iPod touches not because it compares poorly with competing devices, but because these Apple devices are used more consistently throughout the day for multiple tasks. In my opinion, the single biggest drawback to the iPod touch is limited battery life (relative to people’s desire to use it for longer periods). The iPad joins the iPhone and the iPod touch in Apple’s multifunction ‘lifestyle device’ lineup, and Apple had to provide significant battery life on the iPad. Who wants an ebook reader that “folds up” after a couple of hours of use?

  14. > Apple’s expertise in low-power chips probably explains the iPad’s amazing 10-hour battery life…

    The battery life is the aggregation of many things, including, not not just the chip. Only providing the “push” mechanism rather than full multi-tasking also contributes to the battery life — for example if you are playing a game and a new MDN “breaking news” arrives, MDN only executes when the news actually arrives. Under traditional multitasking without “push”, many developers would just have their app sit in a loop polling “is there any breaking news yet? is there any breaking news yet? is there any breaking news yet?” which eats battery life with no benefit for the vast majority of the time with “no, there is no breaking news yet”.

    Engineering is about trade-offs. I would guess part of the trade-off Apple is making is that if they offered both push AND full multi-tasking, while *you* as a smart battery-conscious developer would use “push” when possible instead of polling, you know there would many “less smart” developers that would use polling, thereby reducing the battery life. If fact they would probably be polling every 2 seconds to make their app look responsive and fast, but killing the battery. Therefore, Apple chose to only offer “push” for general development, reserving full multitasking for apple-internal development and, by exception, external companies they can work closely with to ensure they are coding in battery-sensitive ways.

    As battery life becomes less of an issue maybe they will let the multi-task cat out of the bag. Or maybe they will come up with additional mechanisms like “push” to provide more aspects that we normally think of being part of multi-tasking.

  15. It’s not about power or margin, but about NEEDING to get the highest speed and the longest battery life out of it’s ultra portable devices.

    Don’t forget Steve has seen a long history of chip manufactures letting Apple down. From the Apple II, to Motorola multiple times with both 6800 and PPC, to IBM, most recently with it’s G5 chips.

    Steve/Apple couldn’t afford to just buying an off the shelf part, that would be lazy. The power-too-hungry Atom processor would have been easer, but everyone would have complained about the battery life.
    Steve’s ONLY choice was to custom design a streamline fast low power chip that did everything Apple need and nothing else!

    That’s – how you create a must have device.

  16. So, will future Macs use this chip, and make Intel run Macs obsolete?
    Damm. I hope so. What does AMD do? Don’t they make a RISC chip that runs ALL of the MS stuff? So, you DON’T NEED a Intel chip.
    I mean Apple could have picked AMD to run OS10. But what I want to see is:
    Custom chip that has the GPU on the chip. Remember Apple may have been able to go higher (2GHZ, 3GHZ), but you don’t want the thing to get too hot.

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