Apple

Apple on Friday upped its stake in U.K. chip company, Imagination Technologies.

The company purchased 2.2 million shares at 1.43 British pounds ($2.36), for a total cost of 3.14 million pounds ($5.19 million). The purchase brings Apple's stake in the company to 9.5 percent, effectively tripling its ownership in Imagination, according to a report on MocoNews.

Apple uses Imagination's SGX GPU in the recently released iPhone 3G S, allowing it to have much better graphics using Apple's OpenGL ES 2.0, according to AppleInsider. Samsung is reportedly integrating Imagination's technology into system-on-a-chip devices.

OpenGL ES 2.0 is a cross-platform API that allows for 2D and 3D graphics on embedded systems. IT essentially creates a low-level interface between the software and graphics hardware system.

Getting chippy: Some bloggers think that the iPod Shuffle's accessory situation is a nightmare scenario for iPod fans.

(Credit: CNET)

In not-so-shocking news, iLounge is reporting that third-party headphones and headphone adapters for the new buttonless iPod Shuffle will require an Apple-licensed authentication chip.

This doesn't come as any great surprise to us because exacting licensing revenue from iPod accessory makers has become a brilliant way for Apple to add to the company's bottom line. But that "Apple tax," so to speak, does get passed on to consumers, and iLounge and others are now assuming that Apple headphone adapters will cost a minimum of $19 and possibly as much as $29. The handful of VoiceOver-compatible headphones that have been announced carry a starting price of $49.99.

The question, of course, is whether Apple has gone too far in requiring you to use only its headphones--or some sort of Apple-approved adapter or headphones for the device. (You can plug third-party headphones into the new Shuffle, and it will play music, but you can't control the volume or navigate songs).

iLounge is calling it a "nightmare scenario" for longtime iPod fans. "Are we entering a world in which Apple controls and taxes literally every piece of the iPod purchase, from headphones to chargers, jacking up their prices, forcing customers to repurchase things they already own, while making only marginal improvements in their functionality?" iLounge Editor in Chief Jeremy Horwitz asks in his review of the new iPod Shuffle. "It's a shame, and one that consumers should feel empowered to fight."

Meanwhile, over at Engadget, Nilay Patel is calling Apple's attempts to "lock down headphones" a sad new low that "makes the lack of physical controls on the Shuffle seem even more ridiculous."

What do you guys think? If the report is correct, is Apple going too far, or is this just a smart business move?

(Source: iLounge via Engadget)

Update: Gizmodo's posted a story going back and forth on whether the chip is an "authentication" chip or a "control" chip that's required for approval as part of Apple's "made for iPod program." It appears "control" is the correct description, but that hasn't been confirmed by Apple.

Despite the fact that Apple has yet to produce an iPhone chip based on its own design, and that IBM doesn't design smartphone chips, the judge overseeing the Mark Papermaster noncompete case views the two companies as chip competitors.

Judge Kenneth Karas of the U.S. District Court for the Southern District of New York filed his opinion Monday (click here for PDF) on why former IBM executive Papermaster should not be allowed to join Apple as head of the iPhone and iPod hardware engineering team. Karas' decision to grant a preliminary injunction preventing Papermaster from working at Apple was revealed a few weeks ago, but the reasoning behind the opinion was delayed until IBM and Apple had a chance to review the opinion to make sure it did not disclose any confidential information.

There's no dispute that Papermaster signed a noncompete agreement in 2006 that would forbid him from working at any company deemed a competitor of IBM's for a year following his departure from Big Blue. Papermaster's lawyers are attempting to argue that since the only overlapping product between Apple and IBM--servers--is one that wouldn't be part of his official duties at Apple, and since he won't be running Apple's P.A. Semi chip design team, the noncompete shouldn't apply.

Judge Karas appeared to agree that since Apple's server business is such a small portion of its business and Papermaster will have nothing to do with that group, that experience isn't really at issue. But in his opinion, IBM and Apple are competitors in the chip market because both companies produce or will soon produce chips that wind up in mobile phones--regardless of whether those chips are similar or even whether those chips were designed by company employees.

Of course, the court recognizes that IBM does not sell MP3 players or cell phones that compete with the iPod or iPhone. But, IBM does sell the microprocessor technology that provides the electronic brains for those products and competes for that business. To profit from the manufacture and sale of such products, IBM relies heavily on its "Power" architecture, and has employed Mr. Papermaster as its top expert in the development and application of that technology.

Karas leans on a declaration filed by Rodney Adkins, IBM's senior chip executive, in forming his opinion that IBM's chip group competes for design wins in products like the iPhone and iPod Touch. Adkins wrote, "Steven Jobs, Apple's CEO, told the press recently that 'P.A. Semi is going to do system-on-chips for iPhones and iPods.' IBM designs and manufactures microprocessors suitable for each of those applications." System-on-chip, or SoC, is a term used to describe a single chip that comes with all the technology needed to run a system, such as the applications processor, communications hardware, and other vital parts.

That led Karas to believe that IBM has a healthy business selling similar SoCs for mobile phones or iPods. "Apple announced its intention to have P.A. Semi develop the very type of product that IBM sells to the market generally, and would like to sell to companies like Apple," Karas wrote in his opinion, referring to Adkins' statements.

But IBM doesn't appear to have any customers for those mystery microprocessors referred to by Adkins as potential products for the smartphone market. An IBM representative was unable to provide the names of IBM-designed microprocessors or SoCs for smartphones or handheld computers.

And the Power architecture--where Papermaster's expertise lies--is not a serious player in smartphones or handheld mobile computers like the iPod Touch; the ARM architecture dominates this market. No major smartphone maker uses a Power-architecture applications processor in its phone, and as far as I can tell, none is really considering it.

Power-architecture processors are generally used in products other than modern smartphones or handheld computers.

(Credit: Power.org)

Power.org, the industry organization dedicated to advancing the Power architecture, doesn't even consider mobile phones as potential applications for that architecture. Power-architecture chips these days are found in gaming consoles, telecommunications equipment, and other embedded applications, according to an IBM developer page linked from the Power.org site.

The only way IBM currently participates in the mobile phone market is by making chips for other companies that design the inner workings of the chip themselves. IBM runs a chip-manufacturing business (known as a foundry) for companies that design chips but don't have the billions of dollars required to build and maintain a modern semiconductor factory.

"We manufacture and sell customized chips to specific customers who make products that compete with the Apple iPhone. We do not 'advertise' these specific customized chips since we are dealing with a specific customer. Chips are made to the customer's specification," wrote Fred McNeese, an IBM representative, in an e-mail message.

Those chips do not appear to be the SoCs that P.A. Semi is developing; rather, they appear to be lower-level components that are needed to run modern mobile phones, such as controllers and digital television chips.

It's possible that IBM is worried about Papermaster's knowledge of IBM products or technologies that have not yet come to light. Likewise, power-management techniques that are used in the design of Power-based server processors or the components IBM manufactures could have some applications for P.A. Semi's group.

But the issue here is competition. IBM's position seems to be that even though it doesn't appear to have a single customer for the unspecified processors suitable for mobile computers, IBM is a potential SoC supplier for Apple's iPhone who could be shut out because Papermaster could improve Apple's P.A. Semi team by sharing trade secrets regarding an architecture that Apple does not appear to be planning to use.

It's a bit surprising that Apple waived its right to an evidentiary hearing that would have allowed it to challenge certain parts of the declarations filed by IBM, said John Siegal, a partner with Baker Hostetler in New York. However, that would have probably involved having to put several Apple executives on the witness stand to explain Papermaster's role and the plans of the P.A. Semi organization, and Apple is not known for its willingness to speak publicly about its future plans.

The two parties were to have discussed a schedule for "expedited discovery" and a trial at a status conference last week. It's not known what emerged from that conference; Papermaster's lawyers have declined multiple requests for comment, and IBM representatives have not commented on the conference.

AMD could finally be getting ready to explain how it intends to build chips in the future, almost a year after dropping hints that it would revamp its manufacturing strategy.

Hans Mosesmann, an analyst with Raymond James, believes AMD is about to reveal a new manufacturing strategy that will attempt to take some of the formidable costs out of making chips. Mosesmann thinks that AMD is considering spinning out its manufacturing operations as part of a joint venture with another company, making greater use of partners such as IBM and Chartered Semiconductor, or some such combination.

An AMD representative declined to comment specifically on any actions it might be considering, but said even though the company has been working on this issue for a year, no decisions have been made.

Company executives have steadily refused to explain what "asset-light" (which soon morphed into "asset-smart") actually means, but have hinted that it involves a rethinking of the way AMD develops chips. The term first surfaced during an earnings conference call in April as Chief Executive Hector Ruiz described vague, tentative plans to reduce costs by thinking of new ways to get chips built and out to customers.

There might not be a more costly undertaking in the modern technology industry than the process of designing and manufacturing high-end PC and server processors. Only six or so companies really do it in high volumes (Intel, AMD, IBM, Sun, Fujitsu, and Via). Modern chip plants cost billions of dollars to construct and maintain, and researching new leading-edge transistor designs is enormously complicated and time-consuming, and therefore expensive.

That equipment--and those suits--cost an awful lot of money, and AMD is looking to cut costs.

(Credit: Sven Doering/AMD)

Even in boom times, AMD's pockets are not nearly as deep as Intel's, yet it has to spend the money to keep up. To date, it has gotten around some of the need for huge outlays by working on advanced research and development in a facility owned by IBM, using third-party chip foundries like Chartered Semiconductor and TSMC, and making the most of what capacity it does have in Dresden, Germany.

But AMD's pockets are even lighter right now. Intel has recovered from its mid-decade swoon and is chugging along without incident, while AMD has watched its fortunes spin completely around in about a year. AMD can't continue to lose money forever, and one way to cut costs is to embrace that tried-and-true 21st century management strategy: outsourcing.

Expect AMD to line up a new partner for manufacturing and/or research, expand its relationship with IBM, or accept another cash infusion from its new investor, Abu Dhabi, Mosesmann said in an interview. "They have to be competitive without having to spend billions each year to keep up with Intel," he said.

Don't expect AMD to get out of the chip manufacturing business entirely. After all, "real men have fabs." All bravado aside, there are plenty of good reasons to keep a great deal of manufacturing in-house, everything from quality control to customer flexibility.

And the thing is, AMD can only go so far. Under the terms of a licensing agreement it signed in the early 1990s (AMD licenses the x86 instruction set from Intel), AMD is prohibited from outsourcing more than 20 percent of its production.

That might not necessarily hold AMD back, Mosesmann said.

"There are some issues that have to be overcome, and AMD might be able to overcome them by saying we don't care," he said. In essence, AMD could dare Intel to sue it for violating the agreement, hoping to work out some sort of settlement further down the line when it's in better economic shape. Their lawyers talk on a regular basis already.

This is a huge, huge year for AMD's current management team. After the debacle that was 2007, Ruiz has pledged to make AMD a profitable company in the second half of 2008.

If the company has trouble making the revenue side of the ledger increase amid tough economic conditions, it's going to have to do something about the cost side, which could involve layoffs, a new manufacturing strategy, or both.

The basic design of AMD's forthcoming Griffin processor isn't all that different from its predecessor, according to a company engineer.

Griffin has been billed as AMD's "next-generation" mobile processor, with significant changes designed to make AMD's chip design more suitable for power-sensitive notebook PCs. But those changes are mostly implemented in things like the memory controller; the cores themselves are almost identical, said AMD's Jonathan Owen, speaking at the Hot Chips conference.

AMD's first Turion mobile chips was essentially a power-optimized version of its Opteron server processor. AMD and Intel took different paths with their current chip designs; AMD designed a server chip, and tweaked it for other applications, while Intel designed a notebook chip and tweaked it for other applications.

AMD does fairly well in the notebook market, but it hasn't made nearly as much headway against Intel among the more expensive (read: profitable) notebooks. Griffin is supposed to help change that, but it won't be because of any changes AMD made to the basic core design, Owen said. "Griffin is largely a northbridge project built on an existing processor core design," he said.

The northbridge, which connects the processor to memory, underwent the most radical changes with the Griffin processor. AMD's chips use a northbridge integrated directly onto the processor, unlike Intel's, which use memory controllers outside the chip.

The Griffin memory controller will be more power-friendly because it will run at the speed of the memory, not the speed of the processor, Owen said. It sits on a separate power plane from the processor, which means it runs at a lower voltage and a lower clock speed. The company also built thermal monitors directly onto the Griffin processor that can throttle the chip back to more respectable speeds if things start to get a little hot. That used to be done by a thermal monitor outside the chip.

Griffin notebooks will be available in the middle of next year. Because it's basically the same chip as AMD's current Turion chips, Owen estimated that the clock speeds of Turion and Griffin will be about the same, but with a few ticks up the speed ladder.