Freescale’s decision to give up trying to sell its cellular handset chip unit after a year of trying, shows just how commoditised the handset chip business has become.
On the one hand you have to spend, so it is said, a billion dollars a year on R&D to stay in the wireless business but, in the absence of a special customer relationship, profits from handset chips are as difficult to come by as from the hopelessly commoditised memory market.
“We’re creating a small group of people to support existing products and existing customers, but there will be no future product development and no market development,” Rich Beyer, CEO of Freescale, told me yesterday, “we’ve transferred a fair number of people from the cellular product group to other parts of Freescale and are letting the remainder of the people go.”
It’s amazing to think that Freescale are the people who provided the innards for the RAZR, launched just before Christmas 2004, which became the then fastest selling cellphone in history with 50 million units shipped in two years which drove Motorola to a 20 per cent share of the cellphone market.
How times change. And how quickly. Freescale fell foul of the oldest and harshest rule of the chip industry that commoditisation happens fast and, when it has set in, there is no way back.
The iPhone people appear to be moving cleverly away from commoditised wireless chip supplies by looking to highly specialized and customised IC supply.
Samsung is integrating the cores of ARM and Imagination Technologies into proprietary SoCs for Apple, while P A Semi, which Apple bought, is thought to be developing proprietary CPUs and GPUs for the iPhone.
That way Apple can ensure that none of its competitors can replicate the innards of its iPhone.
Just as no one is ever likely to be able to replicate the scope of the Apple iPhone Apps Store.
This looks like the way to build an unassailable Empire.
Just as Motorola looked unassailable in wireless until a certain pesky little blighter from, of all places, Finland, caught the digital wave before Motorola had even seen it coming.