As rumors go, it doesn’t get more shocking than the whisperings Wednesday night, that gadget maker Apple Inc. was mulling a move to buy British chip shop ARM Ltd., the logic designer for the microprocessors and microcontrollers used in most of today’s cellphones and upcoming tablets.
London’s Evening Standard kicked off the slew of speculation, citing sources from London’s financial district, as ARM shares suddenly shot up a whopping 8.1 points.
ARM, seen as a huge threat to chip goliath, Intel Corp., has long licensed its technology to a plethora of chipmaking firms, including Nvidia Corp., Qualcomm Inc., Samsung Electronics Co. Ltd., Marvell Technology Group Ltd., Broadcom Corp., NEC Corp., STMicroelectronics Inc., Texas Instruments Inc., Toshiba Corp., Infineon Technologies AG, Freescale Semiconductor Inc., Fujitsu Corp., NXP Semiconductor and more.
Therefore, if the rumor pans out, the mobile chip industry would be left reeling and in utter disarray. After all, Apple is a huge competitor not only to phone makers who use ARM technology in almost all smartphones, but also to handheld console makers, like Nintendo and Sony Corp.
Apple’s iPhone and iPod Touch are in direct competition with both the Nintendo DS and Sony’s PSP, both of which use ARM designs for their innards.
Indeed, if true, it might mean firms would have to find another company to supply their chip designs, as Apple would then have its hand [ARM?] in every competitor’s technology.
Adding insult to injury, corporations would have to pay Apple for the privilege of using ARM’s technology, allowing the Jobs mob to throw competitors the chip scraps while keeping the choicest chips to itself for its own products.
Sound scary and impossible? On paper, the move is actually not at all far-fetched. After all, Apple is ARM’s largest and most lucrative customer, and the Cupertino, Calif., gadget maker has already snapped up its own semiconductor team, PA Semi, purchased back in 2008.
Incidentally, the buyout wasn’t popular with all PA Semi staff, with many of the top people splitting off into a separate firm, Agnilux, which was almost immediately snapped up by Google Inc. Yes, the tangled web grows thicker yet.
Apple also has plenty of cash to buy ARM. In a recent earnings call, Apple admitted to having some $41.7 billion in the bank, with the Standard estimating ARM would only cost around $8 billion. So, hardly an arm and a leg.
Apple’s A4 chip, made by its PA Semi team, uses the ARM design and Apple seems keen to expand its in-house chip making capabilities, poaching semiconductor executives left, right and center.
Adding ARM to Apple’s arsenal would be tantamount to buying the entire mobile industry, affecting the entire ecosystem in a stifling, and dare we say it, anti-competitive way. In fact, it is exactly such a move that governments and anti-trust regulators should bend over backwards to try and prevent.
It’s also hard to imagine that Google wouldn’t attempt to counterbid, a move which could end up as the lesser of two evils. Google’s Android platform currently runs on a multitude of devices sporting ARM’s designs, so it’s unlikely the search engine giant would relinquish ARM to Apple without a fight. An arm wrestle of sorts.
Meanwhile, an Nvidia source told RCR the move “won’t happen,” although, we can’t help thinking that his assessment comes more from wishful thinking than firm conviction.
Whatever happens, this is one to watch, and if you already have shares in the British fish n’ chipper, hold onto your seats and fasten your seatbelts, because this promises to be a wild ride.
