Apple Buys second chip company

The New York Times reported Tuesday that Apple in March acquired Austin-based Intrinsity, known for its low-power static design techniques and most recently applauded for its 1-GHz Hummingbird processor, a supped up version of the 650-MHz ARM Cortex-A8.

As reported by EDN on April 1 — hours before Apple’s long-awaited iPad hit retail shelves — such an acquisition would make sense for the consumer electronics leader, as Intrinsity was suspected to be the CPU core technology provider for the Apple-custom A4 microprocessor found in the popular tablet.

Linley Gwennap, founder and principal analyst of The Linley Group, told EDN this morning that at this point it is his best understanding that Intrinsity is behind the A4 CPU.

“The Hummingbird processor was designed by Intrinsity engineers under contract to Samsung. The Hummingbird processor was designed to run at 1 GHz and we know that the A4 is manufactured by Samsung and that it runs at 1 GHz. So it seems almost certain that the CPU in the A4 is the Hummingbird CPU designed by Intrinsity,” he said. “No one has announced a 1 GHz Cortex-A8 CPU other than Samsung with the Hummingbird.”

The Times did not confirm Intrinsity’s rumored $121 million purchase price, but Gwennap estimated such an amount would be a reasonable price for the design team that Intrinsity has, as well as its broad patent portfolio and underlying tools.

The Intrinsity buy follows Apple’s 2008 purchase of PA Semi, a fabless chip designer that specialized in low-power PowerPC microprocessors, for $278 million. Initial thoughts on the iPad’s A4 were that Apple relied on the acquired PA Semi team to build the processor. Gwennap noted, however, that the PA Semi team was unlikely to be behind the A4, as a new CPU usually takes some three years to design, integrate, and validate before it moves out the door in product. Given that time allowance, PA Semi’s technology had not been part of Apple long enough to be a design factor in the iPad, officially announced on January 27, less than two years after Apple’s PA Semi buy. Indeed, Gwennap in February instead suggested that the super speedy Hummingbird was behind the iPad’s A4. Since then, several industry analysts have pointed to Intrinsity as the key to the A4.

Still, Apple may have had its PA Semi buy in mind when purchasing Intrinsity. “Intrinsity’s real expertise is more in the circuit design. They have spent years developing and patenting some very unique techniques that they use to achieve high clock speeds at low power, whereas PA Semi’s expertise is in more of the CPU architecture and CPU logic design. I think the two teams are very complementary. [Apple] could use the Intrinsity circuit techniques to accelerate whatever CPU architecture the PA Semi guys have been working on. They could actually fit together pretty well,” Gwennap said.

Apple also likely had future A4 design plans beyond the iPad in mind when making the buy. “It doesn’t really make sense for Apple to invest this much money to develop CPUs for the iPad,” Gwennap said. “The product sales are supposed to be in the millions this year, but they have a large and thriving iPhone business so I would fully expect the A4 to be in the next generation iPhone and potentially in the iPod touch, as well. When you put the three products – the iPad, iPhone, and iPod touch – together, you’re looking at a 50 million run rate. That’s the kind of run rate that makes sense to design a custom processor for.”

Apple reaching for ARM?

Meanwhile, rumors suggesting a possible Apple acquisition of IP giant ARM Holdings seem unlikely, Gwennap said, noting the high price such an acquisition would fetch, the minimal value to Apple ARM would provide, and, given ARM’s broad customer list, possible antitrust issues such an acquisition would raise.

Such rumors were first trenched up on April 21, encouraging ARM shares to climb about 7%. But ARM CEO Warren East immediately disputed the possibility in The Guardian. “Apple does not need to buy the company, they can just license technologies for less,” he told the UK newspaper.

While ARM’s IP plays in Apple’s iPhone, iPod touch, and iPad, analysts at iSuppli Corp note that that alone does not make such an acquisition smart. “Just because ARM’s IP plays an important role in mobile devices, that doesn’t necessarily mean ARM is of strategic value to Apple,” said William Kidd, director and principal analyst, financial services for iSuppli, in a statement. “ISuppli thinks ARM would represent a costly acquisition with little in the way of true strategic benefits. The acquisition would not give Apple’s products a competitive edge/differentiating value. ISuppli also doesn’t buy into prevailing speculation that there could be significant value in denying other competitors access to ARM’s IP, since the majority of the impact would be felt by companies like Broadcom, Samsung, and Texas Instruments, which are not exactly Apple’s biggest rivals. In any case, there would be no visible end-market impact seen for two years at a minimum.”

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