Wednesday, April 23, 2008
Forbes.com reported late Tuesday that Apple (AAPL) has agreed to buy PA Semi, a 150-person microprocessor design company. Coming on the eve of its quarterly earnings announcement, the deal rumored to be worth $278 million has caught many chipset and handset vendors by surprise.
PA Semi was started in 2003 to design and develop high-performance low-power PWRficientTM processors targeting high-performance embedded computing and control markets. The team is headed by the visionary designer Dan Dobberpuhl and is backed by Bessemer Venture Partners, Highland Capital Partners, and Venrock Associates. The 64-bit multi-core processors, the company claims, is “three to four times lower power than other similar processor platforms available today.”
I will leave further details of this deal to the frenzy of articles you will find in the web tomorrow. To me there are two very interesting questions to be addressed. Why should Apple buy PA Semi? What are the industry ramifications? I will pen my thoughts on the first question here and leave the second to a sequel.
The Apple spokesperson declined to comment on the plans and purposes of the acquisition. But there are definitely some obvious angles that I can think of.
Firstly, Apple knows very well that the future is about mobility, future is about technology convergence. Mobility, in turn, is limited by power and battery life. Whether it is the iPhone, the iPod or the Air, Apple has pushed its vendors towards efficient power management. Moving into the future, the company is perhaps looking to use this as a further differentiator from the innumerous clones springing up in the market. It wants to be the only one to leverage the design superiority of these PWRficientTM processors for most, if not all its mobile platforms.
Secondly, PA Semi’s homepage proclaims the words ‘green computing’ in bold letters. Combine this with the timing of the announcement – Earth Day – and you get the message that Apple is trying to drive. It is committed to low-power, it is committed to going green.
Thirdly, an in-house application processor development unit, especially for Apple, will enable tighter and more efficient integration. This will also allow for further form-factor and power optimization. Customized software applications that enhance the user experience can be written. Furthermore, the internal development and optimization strategy will make it difficult for the copy-cats to reverse engineer. This certainly creates more value for any mobile product that comes from the Apple stable.
In summary, Apple has made this acquisition as a very well-thought out strategic initiative. While it is unlikely that we will see PA Semi-enabled products in the next year or two, you will likely find it as the application processor not just for the iPhone, but for most of Apple’s future convergence devices – mobile phones, music players and laptop replacement devices. In a sequel, I will look at what this means to the other chipset vendors sharing the luscious mobile pie.