Apple Turning To Chip Design For Its Innovation

Apple's plans for all this design power are likely to revolve around video and power consumption, and will boost the company's desire for secrecy.

Apple appears to be turning to chip design to develop unique features for the iPhone, iPod Touch, and future mobile products, a strategy that experts say would play to the company's strength as an innovator.

Ever since Apple bought PA Semi, a maker of low-power chips, a year ago, experts have said the company is likely to become in time the designer of its own mobile processors, which could deliver capabilities that Apple rivals would have difficulty imitating. Today, Apple works with Samsung Electronics in customizing off-the-shelf ARM-based microprocessors for the iPhone and iPod Touch.

Other indications that Apple is moving deeper into chip design include the hiring spree the company has been on. A recent search of the networking site LinkedIn by The Wall Street Journal revealed more than 100 people working for Apple with past expertise in semiconductors. The employees include veterans of Intel, Samsung, and Qualcomm.

This week, Apple hired Raja Koduri, a CTO fresh from Advanced Micro Devices' graphics product group. It was the second such hire from AMD. Apple recently hired Bob Drebin, who held the same title. Both men had worked as engineer directors for graphics chipmaker ATI Technologies, which AMD acquired in 2006.

Apple's plans for all this design power are likely to revolve around video and power consumption, and will boost the company's desire for secrecy, experts say. Taking control of chip development would help avoid leaks on future products from Asian manufacturers. In addition, it makes it less likely the technology will be accessible to competitors.

"Apple has an extremely secretive culture and believes that secrecy serves it very well," Gartner analyst Van Baker told InformationWeek. "Clearly, if they're doing their own silicon development, then that would increase their secrecy."

Design, whether it's chips, computers, or smartphones, has always been Apple's strength, so its current expansion makes sense. "It's exactly the kind of business Apple likes to be in," said Ezra Gottheil, analyst for Technology Business Research. "It's an intellectual property business that's human intensive, not capital intensive."

Reducing power consumption and smoother playback of video games, movies, and other content would likely be a focus of Apple chip designers. "Video is important to them and that would certainly be a space that they could play in," Gottheil said.

For example, Apple could decide to build its own Adobe Flash-like player tied to its own hardware. Flash is a Web technology used today to play much of the video on Web sites, including YouTube. Apple, however, has never been happy with the technology's performance on mobile devices, Gottheil said.

However, it's hard to predict how successful Apple would be as a full-fledged chip designer, as opposed to a company that works with suppliers to make customized technology.

"We'll have to see how talented their design team is," Baker said. "It's a whole different skill set, so from that perspective, I'll have to take a wait-and-see attitude."

An Apple representative was not immediately available to comment on the company's future design plans.

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