Apple to buy processor designer P.A. Semi, says report

Deal gives it more design control over next-gen ultramobile devices, adds analyst

Apple Inc. has agreed to buy P.A. Semi Inc. in Santa Clara, Calif., a microprocessor design company known for its high-end, low-power chips, according to a report today by Forbes. The deal is worth approximately $278 million, Forbes said.

"Apple is in the business of thinking up new devices that you can put an Apple operating system in," said Ezra Gottheil, an analyst at Technology Business Research Inc., "and this gives them the processor they can stick in those devices without letting the whole world know about what they're designing."

Although Apple did not immediately reply to an e-mail -- and P.A. Semi declined comment -- a spokeswoman for the chip-design firm said that "Apple has confirmed the acquisition."

P.A. Semi was founded in 2003 by, among others, Dan Dobberpuhl, a 20-year veteran of chip design at Digital Equipment Corp. Dobberpuhl is the company's current president and CEO. P.A. Semi counts 150 employees and includes engineers who have worked for Intel Corp., Advanced Micro Devices Inc. and Sun Microsystems Inc. The company's current processor line, dubbed "PWRficient," includes the PA6T-1682M, a low-power, 64-bit, dual-core chip that features two memory controllers and 2MB of L2 cache.

The company's processors are based on IBM's Power microprocessor architecture; that architecture was also used by the 1991 alliance dubbed "AIM" for Apple-IBM-Motorola, which produced the PowerPC line of CPUs. Apple relied on PowerPC chips for its personal computers until it abandoned them in early 2006 for Intel's microprocessors.

Because P.A. Semi licenses the Power instruction set from IBM, its processors are software-compatible with the PowerPC chips.

Gottheil rattled off reasons why Apple made the move.

"They don't want to go where everyone else is going," he said. "A standard mobile chip just doesn't do."

Most speculation, Gottheil's included, centered around using P.A. Semi to design processors for Apple's most mobile devices, the iPhone and iPod, not as a swap for Intel on the desktop and laptop sides. "There's zero probability that Apple will not be running Intel on their desktops and laptops," said Gottheil. "They're not going to go away from that.

"But at the same time, they would like to differentiate themselves from everybody else, if they can," he said.

Buying a processor-design company lets Apple do a number of things it loves to do: take control of as much of the design process as possible, keep secrets, and emphasize the difference between its products and generic versions of the same kind of devices, Gottheil continued.

"This is a big deal in the sense that Apple sees [itself] as a maker of unique things, and this gives them more control over what they make," he said.

Acquiring P.A. Semi rather than another boutique chip designer also has a built-in benefit for Apple, Gottheil noted. Apple's engineers are familiar with the Power architecture and have already written operating systems that work on both the PowerPC and Intel families, he said. "This takes ARM out of the equation," Gottheil said, referring to the processor architecture used by the chips which now drive the iPhone and Apple's iPods.

If P.A. Semi's high-performance processors -- or variants of the ones it's now selling -- won't end up in future iMacs and MacBook Pros, where will they go? "I think we're looking at the next generation of iPhones and iPods," said Gottheil. And it may be the way that Apple leaps into the lower-priced computer market that's been getting attention from ultralight, low-cost laptops running Windows or Linux.

"This is an opportunity for Apple," said Gottheil, talking about the lower-priced market, which is expected to grow in countries such as China and India much faster on average than in the rest of the world. "Who knows whether it fits their DNA, but this could be used by something like the iPhone or iPod touch, which I think Apple already sees as the computer substitutes for the 21st century."

Copyright © 2008 IDG Communications, Inc.

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