SAN FRANCISCO (MarketWatch) -- A =
brewing battle=20
between Apple Inc. and its frenemy, IBM Corp., over the role of an =
executive who=20
at one time managed Big Blue's PowerPC chip business may be an early =
sign that=20
the Silicon Valley wunderkind is considering designing some of its own=20
semiconductors.
On Tuesday, Apple
(AAPL:
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,
,
) =
said it=20
was hiring Mark Papermaster from IBM as a senior vice president of =
devices=20
hardware engineering. Apple made the hire despite a lawsuit last week by =
Big=20
Blue against Papermaster. IBM wants to keep him from working at Apple =
for a=20
year, because of the sensitive information Papermaster is believed to =
have on=20
its chip business, especially the PowerPC processor, which the companies =
developed together nearly 20 years ago.
See=20
full story. Apple's move rubs salt into old wounds for IBM
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. Two=20
years ago, Apple unceremoniously abandoned the PowerPC chip in favor of =
Intel=20
for its Macintosh computers. The chip was the result of a partnership, =
first=20
formed in 1991 with the idea of creating a new chip design that would =
unseat the=20
duopoly power of Intel Corp. (INTC:
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Microsoft Corp. (MSFT:
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in the PC=20
industry. But even more than dredging up the bad blood between the =
two=20
companies, Apple is now raising fears at IBM -- and probably at its =
current=20
partner Intel -- that its control-freak chief executive Steve Jobs wants =
the=20
company to develop its own chips for the iPhone. The newest 3G iPhone =
had some=20
initial reception issues attributed by some analysts to its chipsets. =
"Apple doesn't like to be tied to anyone, if they can =
help it,"=20
said Rob Enderle, principal analyst at the Enderle Group in San Jose. =
"They=20
could take the ARM (chip) and tweak the processor," he added, referring =
to the=20
main chip that is currently the brains of the iPhone.
ARM Holdings PLC
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of the=20
United Kingdom licenses its chip designs to its customers, who can =
customize=20
them as needed. The ARM processor has always been one of the biggest =
rivals to=20
the PowerPC, first developed by IBM, Apple and Motorola Inc.
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. Outside=20
of IBM, the PowerPC is mostly found running so-called embedded, or =
dedicated,=20
applications. Within IBM, though, the PowerPC remains the heart of its =
high-end=20
servers and supercomputers. So, the theory is that Apple will have Papermaster lead =
development=20
of a new line of chips, tweaked more specifically to run handheld =
devices like=20
the iPhone and the iPod, based on the ARM designs. Chips based on ARM =
already=20
are the heart of the iPhone but Apple buys them from Samsung. Ideally, =
these new=20
chips would not consume too much power but would also be able to run a =
wide=20
variety of applications that developers are creating by the hour for the =
popular=20
smart phone, thanks to Apple's fostering of such development.
That may seem to be a stretch, given Apple's ostensible =
lack of=20
current experience in the semiconductor field. But the company has been =
building=20
up its capabilities in chip design. Earlier this year, Apple spent $278 =
million=20
to buy a chip design firm called P.A. Semi, a once-secretive startup in =
Silicon=20
Valley with an expertise in low-wattage chips, started by the former =
lead=20
designer of Digital Equipment Corp.'s highly-regarded Alpha chip.
The deal to buy P.A. Semi may have seemed small, but it =
ranked as=20
the second largest acquisition ever for the notoriously tight-fisted =
Apple,=20
second only to its $400 million purchase of NeXT in 1996, which now =
looks like=20
the bargain of the century. In that deal, Apple got NeXT's software, now =
core in=20
the Mac operating system and Jobs returned in triumph to the company =
from which=20
he had been he had been ousted.
"Having bought a fab-less semi company, they are =
basically in the=20
semi business," said Roger Kay, an analyst with Endpoint Technologies, =
referring=20
to a company that designs chips, but has no semiconductor fabrication =
facility.=20
So investors might be asking, why not just use chips from =
its=20
current provider Intel? Intel has also recently developed its own =
low-cost,=20
low-power consuming chip, the Atom. Intel is selling the Atom in big =
quantities=20
to a new emerging market of smaller, cheaper notebooks and has high =
hopes that=20
it will expand into other markets like smart phones.
S=
ee=20
full story. Though Apple and Intel are now partners, there appears to =
be=20
tension behind the scenes. Recently, an Intel executive publicly dissed =
the ARM=20
chip as the cause of the iPhone's "shortcomings." Those his comments =
were=20
focused on the processor, Apple likely did not appreciate a public =
drubbing of=20
its latest hot gadget.
See full story here. Plus, if Apple designs its own version of the ARM chip, =
it will=20
have complete control over the design and its features. Manufacturing =
would=20
likely be shipped out to a contract semiconductor manufacturer, now =
eager for=20
new business amid a serious industry downturn. That is where =
Papermaster'e=20
expertise would come in, to tweak the work of the P.A. Semi designers to =
fit the=20
growing needs of the iPhone and its growing application ecosystem. =
Apple spokesman Steve Dowling declined to comment on =
speculation=20
that the company may be looking at developing its own chips.
But you can bet that Jobs has been planning this move all =
along. As=20
the iPhone has taken off, Jobs probably wants to supervise as many parts =
of the=20
phone as he can. It may be a bit costly, but the cash-rich company, =
which=20
currently has $25 billion in the bank, can afford such a strategic move, =
and=20
perhaps even get bargaining leverage with Intel in the process.
![3D"End](3D"http://i.mktw.net/mw3/News/greendot.gif")
=20
Therese Poletti is a senior =
columnist for=20
MarketWatch in San Francisco.