Amazon, in the chip business? That's the rumor that's zinging around the Internet this week.
Specifically, Israeli financial news site Calcalist reported on October 15 that Amazon was talking with Texas Instruments about acquiring TI's mobile phone chip division.
That follows TI's announcement in late September that it plans to stop developing OMAP chips for smartphones and tablets. TI thinks the chance of selling large volumes of such chips in the future are limited, reports the
Wall Street Journal: "We believe that that opportunity is less attractive as we move forward," said Greg Delagi, a TI senior vice president, in a meeting with analysts, adding that "vertical integration has become a significant factor in the marketplace."
Translation: Apple and Samsung both make their own processors for their smartphones and tablets. Apple, you may recall, acquired P.A. Semi in 2008. Owning their own microprocessor design teams and controlling manufacturing has surely helped the companies to embed more features and improve performance while at the same time driving down costs.
That could be the motivation behind Amazon's purported interest. "Amazon interest in Texas Instruments' chip business is bigger than smartphones," tweeted Brian Sozzi, an analyst with NBG Productions. "It's about owning the supply chain to drive down costs."
Where does this leave the other major design force in tablets and smartphones -- Google? Well, it did purchase Motorola Mobility last year. The buzz at the time was that the acquisition was all about patents. But I wonder: Did Google get semiconductor design expertise as part of the package?
I couldn't find any details on the extent of Motorola Mobility's chip business, and would love to hear from readers on this question. But Google's press release announcing the closing of the acquisition in May quoted the new CEO of Motorola Mobility, Dennis Woodside:
Motorola literally invented the entire mobile industry with the first-ever commercial cell phone in 1983. Thirty years later, mobile devices are at the center of the computing revolution. Our aim is simple: to focus Motorola Mobility's remarkable talent on fewer, bigger bets, and create wonderful devices that are used by people around the world.
The release also named the new executive team at Motorola Mobility. One was Mark Randall, a former supply chain vice president at Amazon and Nokia.
As the makers of mobile platforms become more vertically integrated, microprocessor vendors may need to rely more on more industrial applications like the smart grid for their sales and profits. TI's Delagi said the company would target more embedded applications with its OMAP technology. TI already has about 4,000 customers for such embedded products, generating about $400 million in annual revenue, he said.
Do these trends make Intel's continual quest to get the Atom processor into the mobile space a bad move? There will certainly be plenty of phone and tablet suppliers out there who will need a third-party microprocessor supplier. At least, let's hope there will be. Or maybe we'll be down to two or three mobile platform OEMs, all controlling their own supply chains.
are called SoCs or System on Chip because they contain on that single 10 mm or so sq. chip many different functional block e,g. the CPU ( frequently from ARM ), GPU, control & interface with Baseband & Camera , cache memory, I/O interfaces, .. Well you get the idea. To increase the capablity of any particular function e,g. Graphics more blocks for it can be added on the same chip.
Having this flexibility gives system vendors to mix and match functions to make their product unique. Design houses do it for them.
But when it comes to manufacturing these chips there are some fixed Tooling costs like Masks for Wafer Fabs that may run into $ 20 million per chip Design.
The industry is trying to figure out these conflicting trends
In fact If the quantity is not huge enough, going for off the shelf solution like Intel's is more cost effective. Vertical integration is only for big and big quantity player.
Sometime back major phone makers seemed to consider processor as commodity and focused mainly on OS and software apps. Now it's no longer the case. They have to differentiate themselves from grounds up.
It will be interesting to see how/whether Intel and other processor vendors handle the shifts in the industry. We should keep our eyes on Intel, AMD, Qualcomm, Broadcom. Others?
With the kind of vertical integration that the companies like Google are adopting, may be the processor vendors will have to follow the same suit by building products around their processors, themselves.
Microsoft has already taken the cue with Surface , not wanting to remain just a software company.
I found this blog fascinating. It capped off a trend tht I've been noticing of companies really busting out of their traditional business models. Amazon got into hardware with the Kindle, but at an arm's-length. It outsourced everything, correct? (I may be wrong about that). Buying a chip business is a big leap, but logical if you follow the vertical integration model...start with a great chip and work your way up. It will take too long to recreate the wheeel--I don't think amazon will go full-factory--but I do think vertical integration has some IP and cost-related advantages.
Qualcomm has launched a big push to spread its cellular technology, and thus increase its royalty income, not to mention chip sales, beyond mobile phones.
EBN Dialogue enables and encourages you to participate in live chats with notable leaders and luminaries. Not only editors and journalists, but the entire EBN community is able to comment and ask questions. Listed below are upcoming and archived chats.
Archived Dialogues
Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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