Apple Buys Semiconductor Maker


Source: Reuters

On Wednesday Apple Computer did something it almost never does: make an acquisition. The strategy behind it, though, is baffling.

Apple (NASDAQ: AAPL) spent $278 million for PA Semiconductor, a developer of processors based on IBM’s (NYSE: IBM) PowerPC line, according to a report in

Meanwhile, Apple confirmed the purchase and price to Forbes, and a spokeswoman at PA confirmed the deal to

Apple (NASDAQ: AAPL) is not known for making acquisitions, least of all in the nine-figure range, and goes against most business models of bringing a chip designer in-house.

Many hardware companies have jettisoned their semiconductor manufacturing in favor of licensing from Intel (NASDAQ: INTC), AMD (NYSE: AMD) and other chipmakers.

P.A. Semi is the creation of Dan Dobberpuhl, a veteran chip designer who developed the Alpha and StrongARM processors for Digital Equipment in the 1990s. Both chips were well-regarded by technologists, but DEC was an ailing, clumsy giant in decline and never was able to get very far with either.

Intel bought StrongArm in 1997, and Compaq bought DEC in 1998, discontinuing the Alpha line.

The “P” in P.A. Semi’s name stands for PowerPC, as it has a license to develop chips based on Intel’s Power architecture. IBM declined to comment on the implications of this acquisition.

So what would Apple, which moved to Intel’s x86 processor from the PowerPC design three years ago, want with this company? Depends on whom you ask.

Apple had not responded to requests for comment by

“P.A. has a low-cost PowerPC design. I don’t think [Apple] is going back to PowerPC for desktop and notebook, but there has been speculation they would rather have PowerPC than ARM for the iPhones,” speculated Nathan Brookwood, research fellow with Insight 64.

In the end, Brookwood admitted he was baffled by the move. “Why buy the cow when you can go to the supermarket and buy the gallon?” he said. “There must be something going on, but it’s totally opaque to me.”

Tony Massimini, chief of technology for Semico Research, thinks Apple’s plans are on the other end from the iPod. That is, server designs. “Not the consumer end of the pipeline, the supplier end of the pipeline,” he told

P.A. Semi’s most recent work has been around a power-efficient chip called PA6T, a 64-bit, 2GHz dual-core chip that only consumed 5 watts to 13 watts. That would be too much for the iPhone but not its initial target market — high-end networking and communications.

In the end, Massimini was equally flummoxed. “They could be working on stuff not publicly discussed. Maybe they want the license, maybe they want the design team. It could be a number of things,” he said.

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