Apple’s ‘A4’ system-on-a-chip may have cost upwards of $1 billion to create

“Over the decades, legions of companies have found themselves reeling, even wiped out financially, from trying to produce some of the most complex objects made by humans for the lowest possible price,” Ashlee Vance reports for The New York Times.

“Now, the chip wars are about to become even more bloody,” Vance reports. “In this next phase, the manufacturers will be fighting to supply the silicon for one of the fastest-growing segments of computing: smartphones, tiny laptops and tablet-style devices.”

“Apple, Nvidia and Qualcomm are designing their own takes on ARM-based mobile chips that will be made by the contract foundries. Even without the direct investment of a factory, it can cost these companies about $1 billion to create a smartphone chip from scratch,” Vance reports. “Even without the direct investment of a factory, it can cost these companies about $1 billion to create a smartphone chip from scratch.”

“Recently, these types of chips have made their way from smartphones like the iPhone to other types of devices because of their low power consumption and cost,” Vance reports. “For example, Apple’s coming iPad tablet computer will run on an ARM chip… ‘Apple was the first company to make a really aspirational device that wasn’t based on Intel chips and Microsoft’s Windows,’ said Fred Weber, a chip industry veteran. ‘The iPhone broke some psychological barriers people had about trying new products and helped drive this consumer electronics push.'”

Read more in the full article here.

[Attribution: Different District. Thanks to MacDailyNews Reader “Judge Bork” for the heads up.]


  1. $999 million to steal the technology from Microsoft’s Hardware Division.

    $1 million to reproduce in China.

    (Filling in for Zune Tang today.) ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />

  2. This is the NY Times. They still think news delivered on paper is the way to go. So let’s not be so hard on them, and try not to poke fun at them as they pick up their buggy whips from the coat check on their way home.

  3. Apple purchased PA Semi because they already had the foundation of the A4 chip designed. Apple did not start from scratch. This is the 1st generation of the chip Apple’s smart devices will be running on. Remember those $75 to $150 watches and calculators that you can get for $10 now.

    Customizable OS X smart devices on a proprietary chip.

  4. Hi bizlaw. The only point to be discussed at the NY Times is, people can read a half to 2 day old news or the can get the news NOW on a paid for service on a iPad anywhere in the world before the cable talking heads can get around to discussing it after they finish what they are on now and the next few commercials are done!

  5. @ I Thought… – very good point, I’m guessing Fred Weber, “a chip industry veteran”, must be a fairly young veteran, if he can’t remember the original (and very aspirational) Mac. Or the aspirational Apple II. Or any other aspirational device from the years B.W. (Before Windows).

  6. Two thoughts today:

    1. Any estimate of what it cost to produce the A4 CPU was likely arrived at by anatomic extraction. The writer is speculating without hard facts of the true cost of the investment. Given Apple’s total cash, it’s a reasonable investment if it means that the company will have access to a CPU that puts Apple ahead of its competition.

    2. On the matter of the NY Times and other newspapers: it’s sad to see that the newspapers have no clue of what is their real asset: the content they create and own. While it’s been said that he who owns the printing press has true freedom of speech, today, the printing press is not the key asset.

    Ask Warren Buffet about the acrimonious printing strikes that affected the Buffalo News and the Washington Post. Printing a newspaper, both for the costs of printing and the cost of care and feeding of a union workforce of printers, is hideously expensive. Most city daily newspapers are on life support, and it’s painfully clear that something will need to change. While this won’t happen overnight, inevitably, the printed newspaper as we know it today will disappear.

    That the circulation side of the New York Times is throwing itself on the tracks to defend the status quo is absolutely ridiculous, and is indicative of the old-world thinking that pervades most newspapers. But watch as Rupert Murdoch and the Times likely will be the first birds off the fence. And if they show a profit from going electronic, expect the rest of the newspaper industry to follow suit quickly. Frankly, I have a hunch that if newspapers can turn a profit from electronic subscriptions (and if the micro-transactions can be worked out nicely via iTunes), even single issue sales might be possible. And if that happens, the demise of the printed newspaper could happen faster than we can all imagine.

    One stumbling block has to do with who controls access to the consumer. Obviously, newspapers and magazines want a direct relationship. But Apple has one of the largest credit card databases on Earth. There’s a wealth of demographic information that can be mined from this, which is exactly why Google developed Android and the Nexus phone, not to mention other offerings. If Apple and the publishers can come to terms over who gets to be the point of contact with consumers (or share the data from the transactions), I think we’ll see a rapid move to put their newspapers and magazines on the iPad.

    And not a moment too soon.

  7. @MediaXYZ

    You are correct. The term was appropriated to describe wafer fabs that produce other people’s designs. It is less prestigious, supposedly, and the term was, I think, meant to convey that. Also, metal foundries do the same thing–produce other’s designs.

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