Google bets a billion dollars on custom silicon in quest to – sort of – chase Apple

“Google officially closed its $1.1 billion deal with HTC Corp., adding more than 2,000 smartphone specialists in Taiwan to help the search giant chase Apple Inc. in the cut-throat premium handset market,” Shelly Banjo and Mark Bergen report for Bloomberg.

“The deal will help Google design more of its own consumer hardware and could set it up to wade deeper into special-purpose chips — like Apple,” Banjo and Bergen report. “Google’s most recent Pixel model came with a new image processor to improve the device’s camera. More of this ‘custom silicon’ will come in the future, Google’s hardware chief Rick Osterloh said in an interview. ”

“For Google, a bigger step would be to create its own ‘system-on-a-chip’ — the main processors inside phones that Apple now inserts into its devices. Qualcomm Inc. provides the bulk of these chips to Android phone makers, and Osterloh said Google will keep working with the supplier for the foreseeable future,” Banjo and Bergen report. “Still, by designing more silicon itself, Google could cut business for other suppliers.”

“The Pixel phone sold 1.5 million phones in 2017, up from 1 million the year before, according to Counterpoint Research,” Banjo and Bergen report. “If Android partners aren’t alienated by Google’s entrance, they are at least uneasy. After the Pixel arrived, some major Android manufacturers, like Samsung and Huawei Technologies Co., began to roll out more of their own services on their phones. Other Android manufacturers ‘know why we’re doing this,’ Osterloh said. ‘Quite honestly, Apple is doing really well in developed markets.'”

Read more in the full article here.

MacDailyNews Take: “Apple is doing really well in developed markets” because only Apple sells real iPhones, not a slew of knockoffs running an insecure kludge that Google originally intended to be a BlackBerry clone but hastily rejiggered to mimic iPhone once Steve Jobs showed them what to do.

With no plans, still, for their own SoC, Alphabet has already lost this race.

Thankfully for Apple, Steve Jobs had the wisdom and foresight to recognize the need for custom silicon and the advantages it would deliver.

Apple's A11 Bionic chip
Apple’s A11 Bionic chip
There’s no substitute for owning and controlling the primary technology.MacDailyNews, November 15, 2017

With each passing year, and especially with iPhone X, it becomes increasingly clear – even to the Android settlers – that the competition has no chance of even remotely keeping up against Apple’s unmatched vertically integrated one-two punch of custom software and custom hardware. The Android to iPhone upgrade train just turned onto a long straightaway, engines stoked, primed to barrel away! — MacDailyNews, September 13, 2017

Vertical integration – hardware + software – trumps off-the-shelf conglomerations every single time. See: Macintosh, iPod, iPhone, iPad, Apple Watch, etc.MacDailyNews, May 31, 2017

SEE ALSO:
Apple’s Johny Srouji: Silicon is ‘unforgiving’ – November 15, 2017
Android Central reviews Apple’s iPhone X – November 13, 2017
ZDNet reviews Apple’s iPhone X: The best smartphone – November 13, 2017
ZDNet’s Miller: After 10 days with Apple’s iPhone X, it’s clear its the best smartphone. Period. – November 13, 2017
Michael Gartenberg: iPhone X is the best smartphone you can buy today, and likely tomorrow; Apple is now a full generation ahead of their competitors – November 10, 2017
T3 reviews Apple’s iPhone X: Brilliant, five stars, 2017’s best smartphone – November 8, 2017
DisplayMate: Apple’s iPhone X has the most color accurate display we’ve ever measured; it is visually indistinguishable from perfect – November 8, 2017
Ars Technica reviews iPhone X: Easy to recommend if you want a glimpse at the future – November 3, 2017
iMore reviews iPhone X: The best damn product Apple has ever made – November 2, 2017
TechCrunch reviews Apple’s iPhone X: ‘Like using the future of smartphones, today’ – November 1, 2017
Tim Bajarin’s first impression of Apple’s iPhone X: Face ID worked flawlessly – November 1, 2017
The Verge reviews Apple’s iPhone X: Clearly the best iPhone ever made, despite being marred by its ugly notch – November 1, 2017
Above Avalon’s first impressions of Apple’s iPhone X: ‘An entirely new iPhone experience’ – October 31, 2017
The Independent reviews Apple’s iPhone X: ‘This feels like the future’ – October 31, 2017
David Pogue reviews Apple’s iPhone X: ‘The best thing is its size’ – October 31, 2017
Forbes reviews Apple’s iPhone X: Opulent, gorgeous, classy; the best iPhone yet – October 31, 2017
CNBC reviews Apple’s iPhone X: ‘The best smartphone on the market’ – October 31, 2017
iPhone 8’s Apple A11 Bionic chip so destroys Android phones that Geekbench creator can’t even believe it – September 30, 2017
Apple’s A11 Bionic chip is by far the highest-performing system on the market; totally destroys Android phones – September 19, 2017
Apple’s A11 Bionic chip in iPhone 8, 8 Plus, and iPhone X leaves Android phones choking in the dust – September 18, 2017
The inside story of Apple’s amazing A11 Bionic chip – September 18, 2017
Apple’s A11 Bionic obliterates top chips from Qualcomm, Samsung and Huawei – September 18, 2017
Apple accelerates mobile processor dominance with A11 Bionic; benchmarks faster than 13-inch MacBook Pro – September 15, 2017
Apple’s A11 Bionic chip in iPhone X and iPhone 8/Plus on par with 2017 MacBook Pro – September 14, 2017

33 Comments

      1. to build out the capability and implement it in products. Google cannot just buy it and catch up with Apple in a year. Not possible.

        You’re just trying to diss Apple, as usual.

          1. the expertise in custom silicon to the level it is at today most certainly did take a decade. If you want to believe Google can “buy it” and match Apple overnight, go ahead.

          2. misinformed if you think Apple is just “pushing out new products”. The level of integration Apple is achieving now with custom silicon is impressive and did take a decade to build to. You’re conflating off the shelf parts with what Apple is doing. Two different animals. Suffice to say you don’t know what you’re talking about.

        1. Don’t assume the Google does not also have over a decade’s worth of experience in custom silicon because you don’t see it in mobile products. How do you think they make their server farms so fast and efficient to run their Search?

          1. building their data centres with custom silicon. Google does not have anywhere close to the same kind of hardware experience that Apple does. It’s going to take many years and a lot of effort for Google to catch up. Apple is about five years ahead of the industry, and Apple is not going to stand still either.

          2. “nipping at A11’s heels” as you said. It looks good on paper but real world use is a different animal. Apple is easily five years ahead of the industry and that includes Samsung and Google. Google has done some good work with their Tensor Processing Unit but they are less than two years into implementation and it is a 28nm process. The good news might be that other companies are beginning to realize that Apple’s integrated approach was always right and the industry is moving towards how Apple does things. That will be good for everyone.

    1. Google has years of experience designing custom silicon, just not MOBILE silicon like Apple. They are not as far behind as you would imagine. One of the reasons for Google’s dominance in Search is the speed at which it is performed. Many years of silicon research and development has gone into creating the CPUs running in their server farms as well as in to far future concepts like quantum computing. Areas where Apple has either abandoned like servers and where Apple has not touched like QC. ‘Downgrading’ their chips to mobile use may take some effort but may result in leapfrogging Apple in some areas. AI may be one due to their deep work with TensorFlow which Qualcomm’s new Snapdragon 845 will be one of the first supporting in the mobile arena.

  1. Apple don’t have anything to worry about over this, but it could be worrisome for companies like Qualcomm and also for the manufacturers of Android phones.

    With Apple already believed to be working on it’s own modem chip, there won’t be many orders coming Qualcomm’s way from Apple in the future and if Google get anywhere with this project, it could reduce orders from the Android camp too.

    The worry for the Android manufacturers is that Google will be creating both the operating system and the chips, which gives them an opportunity to vertically integrate in such a manner that the only way to get optimum performance would be by using Google’s chips. We know how Google loves having a monopoly and if I were manufacturing Android phones, I would be very concerned if Google supplied both the operating system and the chips needed to use it. They might not charge for the Android operating system, but I would expect them to charge quite a significant price for any high-end custom chips.

    It will most likely be a few years before this project bears fruit, but the writing is already on the wall.

    Wherever Apple goes, Google always tries to follow. Vertical integration has given Apple massive advantages and Google now wants to try doing the same.

    1. “…if I were manufacturing Android phones, I would be very concerned if Google supplied both the operating system and the chips needed to use it. ”

      Yes, I would feel the same if I were manufacturing an iOS phone… /s

      One yardstick please.

      1. iOS to other OEMs you might have a point. They don’t though which means you don’t have a point. There have to be two yardsticks because there are two different models at work. Measuring or analyzing both in the same way isn’t very smart.

        1. That it doesn’t creates an iOS market monopoly.
          All you can argue now is whether they have a right to being a monopoly.

          But….the App market does consist of “software OEMs”, so I guess I might have point after all.

          1. channel conflict in Apple’s case (that refers to OEMs before you go off on tangential rants about software and monopolies and that aren’t monopolies). There is channel conflict in Google’s case. Two different models require two yardsticks. All you’re doing is trying to create whatever yardstick you can to support your idea that Apple is doing something bad.

            You don’t have a point in this case. One model has OEMs. The other does not. They are not the same and do not have the same challenges.

      2. “Yes, I would feel the same if I were manufacturing an iOS phone… /s

        One yardstick please.”

        Um, this is about OEMs. I suppose there could be one yardstick in this particular instance, if there was one business model, but there isn’t. Google and MS use OEM’s. Apple creates its own integrated product, no OEMs.

        Where are those that are manufacturing iOS phones that should feel concerned about it?

        Now, Google and MS want to get in on Apple’s success, and start to mix business models, competing with their OEMs (hence the “concern”).

        1. Good answer, worth exploring.

          There is nothing fundamentally wrong with competing with OEMs except when it violates anti-trust law. Anti-trust law exists to protect the CONSUMER, sometimes by protecting the OEMs.

          And I agree, that competing with people who depend on the product you supply is generally a bad thing. MS should have been broken up, and that was just software.

          Which begs a larger question. iOS developers are not APple employees, or contactors. They are “software OEMs” that supply Apps for the iOS market. That market consists of a singular mandatory store, that curates and excludes certain Apps according to it’s own (variable) criteria. It is certainly Apple Store’s right to sell what they choose. The problem lies in that, being a single store, some company’s products are forbidden from even existing.

          So which is worse, competing with OEMs, or excluding their existence?

    2. I agree that it may come to pass that to get optimal performance OEMs may have to buy and use Google’s silicon. However, when’s the last time Android devices relied on a single CPU OEM’s chipset? As for pricing, Google charging significantly higher than cost would be counterproductive to further ‘spreading’ the use of their Google suite of software products.

  2. This move is absolutely necessary for Google, even if they’ve tried before. The current state of Android is controlled by Samsung at this point, at least in the mind of the public at large. To them, Android = Samsung. So Google is faced with a two-headed monster: on one hand, they have to regain control of the platform from Samsung; and on the other, they have to somehow break their dependency on Apple’s iPhone- yes, the iPhone- for profitability. Google makes more money in the mobile market off of the iPhone ecosystem than from all of the mobile android offerings. Custom silicon and HTC, they’re betting, will allow them to take on Apple in the premium market and marginalize the Samsung effect.

    1. Dead on. In fact it’s profitable enough for Google to bribe Apple with billion to be default search on Apple devices.
      If the product is free, it’s said you are the product. What is it when it’s not free and they sell you?

        1. You realize Google’s payment to Apple is counted as ‘Service’ income right? Imagine the stock drop on seeing their now touted as successful Service income take such a massive drop.

          1. annual payment would not be a significant hit for service revenue, rather a temporary blip. Apple service revenue is now over $30 billion per year. Google’s payment is estimated at $3 billion per year. Annual growth of service revenue would wipe out that 10 percent difference easily. At best if Apple kicked Google to the curb you’d have one year of flat service revenue or only modest growth (more likely). There would be no “massive drop” as you said.

          2. So, everything shouldn’t be up for sale, one of them is giving default positions to Amazon, Google, Facebook, or Netflix, they are your competition in the general market as well as the stock market.

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