“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.]
pocket change.
$999 million to steal the technology from Microsoft’s Hardware Division.
$1 million to reproduce in China.
(Filling in for Zune Tang today.)
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Just curious: since when have “Fabs” (short for fabricators) become “Foundries”. PA Semi was a “fabless” chip designer. I’ve always known chip manufacturers as “fabs”.
Isn’t a foundry where you cast metal, not produce silicon chips?
couch change.
Good thing those Apple product teardowns always take factors like this into consideration when estimating component costs.
…oh, wait, they don’t?
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.
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.
the original 128K Mac was (at the time) a “really aspirational device” and it wasn’t based on either intel chips or microsoft windows.
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!
@ 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).
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.
@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.
A Billion Dollars! You say that like it was a lot of money.
A billion dollars just doesn’t buy what it used to.
Well, they didn’t build it from scratch.
Give me a break — 1 Billion was just to make a headline.
Typically, 8% of a business budget is spent on development. To recoup that investment it would require the selling of $12 Billion worth of A4 chips, At $50 each that would be 240,000,000 chips.
How many years would that take? $50 may be too high which means it would even take longer. Let’s see, iPad is projected to sell a couple million the first year. Maybe 10M the next year. OK, breakeven is 24 years. No company would venture that much money for such lousey ROI.
Look at it another way, cost of anything is labor plus taxes. Raw material is free. Assuming ave. pay at $75K that would be 13,000 people-years- I dont think so.
A little common sense can go a long way to dispell wive’s tales and exaggerated claims.
Apple then has only 38 billion left in cash, no debt.
LOL!
@Brian
While printing newspapers is expensive, keep in mind that (last I heard) newspapers get 90% of their income from newspapers and only 10% from the web. That will change, every newspaper in the country produces a web site. But if they shutdown their press today, they themselves would shutdown within a week.
Just as producing your own chip cost a boatload of money, it cost a lot of money to produce your own news content instead of just linking to it.
Yes, the iPad will change everything, but it won’t replace paper till the numbers say it is time to do so.
Disclaimer – I work for a newspaper, and news website.
This is bigger than you can imagine. Publishing has been an ink-on-paper enterprise for about 600 years. Apple may have its replacement in the iPad.
Looking ahead, Apple looks more and more like a TV Network/Cable Provider/Publisher/Production Company. In short, an entertainment company. Imagine a world where your city is covered by wireless WiMax at 10 gbps and every movie, video game, newspaper, magazine, book, or TV show is available on demand or by subscription through iTunes on your iPad, your laptop, or your AppleTV.
Do you think Jobs learned anything about production and distribution at Pixar? Do you think Apple is on its way to amassing a $100 Billion war chest for nothing? Do you think they bought massive amounts of as yet idle server farm space for nothing? The puck is on the move.
“And the Award for Redundancy Award goes to…”
Pretty pointless article. Slow news day so let’s write-in some companies, do a little digging, and throw up an article. Sorry, Ashlee Vance but until you can cite a source that $1 billion is hard to believe.
Apple SoC is just a rebranded ARM design with a gpu… likely the Cortex a9 cpu and probably the nvidia tegra gpu… PA Semi had little or nothing to do with its design.
You need a copy editor.
‘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.
Right you are, Fred… the Newton wasn’t based on Intel chips at all. Come to think of it, neither was the original Mac, nor the Apple ][.
@Source
Although there is little doubt that the A4 is based on current ARM reference designs, it may be premature to state that it is simply a “rebranded” chip, implying that there is nothing unique about it. I don’t think Apple has made its architecture public. I have read, as you state that PA Semi had little to do with the A4. That begs the question, what are those guys up to?
Yeah— let’s see custom chips in the i-mac !
3d is what will be happening in the future. I hope Apple gets into this.
Both Sony, and Panasonic, will be coming out with 3d Tvs and 3d blue-ray.
Of course with 4g, you could download 3d HD. I want to be able to edit 3d HD. But is Apple giving up on FCP?
Can you TODAY download HD with the SAME quality as blu-ray?
Maybe you can, in the future download 4,000*2,000 res 3d over 4g?