Will Apple Fab?

One wonders how far Apple’s verticalisation will go in a week when it’s kicked its GPU supplier into touch and, allegedly, made a bid for Toshiba’s semiconductor business.

Adding GPUs to its in-house CPU development seems a reasonable thing to do if Apple believes it can do a better design job than Imagination.

Furthermore Imagination, with all its recent woes, must have given Apple a few recent colly-wobbles about its status as a stable future supplier of a key component.

The Toshiba thing is much more significant because it would mean that Apple would be operating fabs.

For years the received industry wisdom has been that operating capital-gobbling fabs is something best left to the foundries.

For Apple to move into fabbing its own chips would be a blow for its foundry partner and its memory suppliers, but it would eliminate the foundry margin and the memory suppliers’ margins and give Apple tighter control of its costs.

And this seems to be, in the absence of significant innovation, where Apple sees its future.

Moreover Apple’s main competitor is almost completely vertically integrated – it can make its products from in-house produced components – and Apple may have realised it needs to be able to move in that direction if it is to be able to compete.

So is this back to the 80s when the great vertically integrated companies of Japan: Hitachi, Toshiba, NEC, Matsushita, Mitsubishi, Fujitsu, Sony etc could make their products from the ground up using all their own components?

Could be.


Comments

8 comments

  1. Good point DontAgree, it must always be tricky for end product designers in a vertically integrated company to design out one of their in-house components.

    • Definitely tricky to do if there isn’t some sort of ASSP or other off-the-shelf replacement (quite unlikely for custom analogue chips) and a release deadline looming.

  2. Vertical means optimized design for the application, which is good. It also means that the consumer has no choice but the use the internal product, which can be bad if that product is non competitive.

    After a while complacency is very likely to set in and then non competitiveness is assured …

  3. SecretEuroPatentAgentMan

    > Furthermore Imagination, with all its recent woes, must have given Apple a few recent colly-wobbles about its status as a stable future supplier of a key component.

    Considering the key component here is the IP I am not sure how this could be a problem. Apple most likely have contingencies in the case Imagination were to go belly up.

    > And this seems to be, in the absence of significant innovation, where Apple sees its future.

    This, rather than foundry margin, is probably closer to the truth. After all Apple famously pressures supplies into low margin contracts. Imagination has been quiet on the patenting front suggesting less innovation than Apple need since they have to maintain an edge over Qualcomm and Samsung at all times. And if Imagination is resting on past greatness Apple is sure to move on without them.

  4. It’s also interesting to take a look at Apple’s job site. There are an awful lot of chip design jobs listed – at least 150. That number includes enough junior physical designers to double the capacity of two or three soc physical design teams (there is only one principal/lead listed so I guess they already have enough of us). Also lots of jobs with integration in the name. Just what you’d need to take existing up and target it at a similar chip for another product line. All that extra design capacity would go a long way to filling a fab.

  5. A massive, vertically integrated company making a mint from just a handful of products all focused in the non-essentials luxury consumer electronics sphere (ok, there’s also iTunes)?

    That’s a helluva game of Jenga!

    The Baron

  6. Ah Yes thanks Jamo, there may be some mileage in this.

  7. David, IBM, one of the historical masters of vertical integration. Remember Tim Cook is ex IBM, and an operations guy to boot.

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