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Only insanity would lead Apple to make a mobile chip play

Forget the iPhone. PA Semi's an embedded affair

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Bad Grief

Why would Apple pay $278m, as reported, for the right to inherit all of this grief when it could continue on grabbing established, always improving gear from the ARM crowd or turn to the machine that is Intel?

What's amusing is that Apple has been through this situation with PA Semi before and decided against the grief. Apple once considered PA Semi as a desktop and laptop replacement for its aging PowerPC chips, but shocked the start-up by revealing a deal with Intel. Apple had already invested in substantial software work with PA Semi and even had a number of employees working at the company. PA Semi's CEO Dan Dobberpuhl was furious to learn about the Intel pact in the press. But Apple was willing to burn that bridge in order to buy into Intel's reliability and economics.

It would be easy enough to argue that Steve Jobs, now fueled by billions of dollars in iPod gains, has attained a new level of arrogance, which makes the prospect of a few glitches worth the risk this time around. Perhaps he figures that PA Semi's technology is so damned impressive that it will give Apple a unique edge in the mobile device game.

Funny enough, however, not even PA Semi seems to believe this.

The company has churned through more than $100m in funding to establish a roadmap which stretches out to 16-core parts that would have nestled inside data center hardware. To date, PA Semi has secured a handful of significant wins, including NEC's storage group and Mercury Computer Systems (a server maker). The company would brag about these deals, saying that many, many more similar arrangements were on the way.

But selling out for $278m indicates to us that PA Semi did not view itself as a viable long-term concern. Its technology was not wonderful enough to make major suppliers pass on the mainstream processor makers, who have also turned to focus on low-power chips.

Er, but maybe Apple figures it can work past the muscle of ARM and Intel and out do them in the end?

Rather, I think Apple is up to something rather different than what it's letting on so far.

Outside of the server and storage space, PA Semi did have a path into the embedded market. So, perhaps Apple is actually looking to go after a rather broad new fleet of devices to round out the Apple TV play. It could dabble with a variety of consoles and media delivery systems or even expand into gaming units with some Cell help.

This strategy makes more sense than the mobile line being peddled elsewhere. After all, Apple's not really the engineering genius that it claims. Intel, for example, did the majority of the work around the MacBook Air, which is why you saw Lenovo, another Intel customer, release the very similar X300 just a couple of weeks after Apple's grand launch. Apple did little more than excise an Ethernet port and slap a white case on the unit. Apple is not an innards expert, so the idea of it getting into the microprocessor business simply to "gain a competitive design edge" is ludicrous.

No, $278m fails to buy a world-class mobile chip arsenal in this day and age. It does, however, buy some expertise and possible new consumer electronics avenues.

After all, if PA Semi really had the making of a mobile processor empire in the works, it would have stayed independent or demanded an insanely greater pay out.

Should Apple really think it can perform magic and turn the PA Semi gear into the base of future iPhones, then we're rather worried for the company. You can guarantee that such a charge would have enough bumps along the way to wreck Apple's rather impressive mobile momentum. ®

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