After year of making consumer electronics and a series of acquisition, Apple may become a serious maker of chips designed for its own products. Eventually, the company will reduce acquisition of chips from third parties and will design custom chips to provide its products exclusive functionality.

Apple has been building up its chip design unit for over three years now by acquiring small companies or startups and by hiring professionals from other companies. The first signs of Apple's chip activities showed up in 2008, when the company took over PA Semi chip design startup and started to hire chip designers from various big companies, including such major designers as Advanced Micro Devices and some others. In 2010, the company introduced its first own-brand A4 chip that powers iPad, iPhone 4 and iPod touch devices.

"Apple has built a real CPU design trust through its acquisitions of PA Semi and Intrinsity, but their efforts have been focused on chips Apple can use in its own systems. This enables them to differentiate their own products, for example with superior battery life in the iPad 2, or the Siri feature in the recently announced iPhone 4S," said Nathan Brookwood, the principal analyst at Insight 64.

At present, Apple reportedly hires about a thousand of engineers developing chips, but while the number is considerably lower if compare to a dedicated chip company (AMD has thousands of chip engineers), Apple may still become a formidable force on the market of various multimedia processors, according to analysts.

The biggest question about Apple's chip efforts is whether the company wants to create exclusive hardware that will help it to enable currently impossible software technologies exclusive to its products, or it wants to reduce its dependence on Intel's x86 or other chips it uses inside its devices. What is clear, though, is that it will barely sell its chips to others.

"Apple will not be a merchant chip supplier like Samsung, Intel, or AMD, but will (and has for years) design its own ICs. Whether they use Samsung, TSMC, or GF as the fab determines which design rules they will follow and what libraries they use. Since they've been using Samsung, there is strong incentive for them to stay with Samsung," said Jon Peddie, principal analyst at Jon Peddie Research.

"There's a long history of system companies refraining from selling the chips they develop for use in their own systems off the chip-only market. You can't buyPower 7 chips or SPARC T4 chips unless you want them delivered inside a complete system. They don't want to enable their competitors to purchase technology that would help those competitors compete with their own systems. To twist an old joke, why would they want to sell the milk, when they can get customers to buy the cow?" - added Mr. Brookwood.

Late last year it transpired that Apple wants to design its own processor micro-architecture, something that may potentially give its products tangible performance advantages over competitors. A micro-architecture is an implementation of particular CPU architecture that may or may not include enhancements, special instructions or special-purpose accelerators. For example, AMD Bulldozer and Intel Sandy Bridge are two x86 micro-architectures, whereas Intel/Marvell Xscale were micro-architectures based on ARMv5 architecture.

Apple's wish to design a micro-architecture practically indicates a plan to develop its own chips from the ground up, something, the company has never done before.  It is presently unclear which architecture Apple plans to take to create its own micro-architecture, but one of the natural choices could be ARM as the company has a lot of experience with a variety of ARM-based designs and implementations. Less likely scenarios for Apple are x86 or PowerPC, which will ensure truly high performance levels, but which development costs are extremely high.

Since Apple does not sell chips, it is highly likely that its micro-architecture (based on whatever architecture) will remain exclusive for its own devices, such as iPad tablet, iPhone smartphone or whatever other low-power products the company may introduce in the future, including special laptops powered by ARM.

With its own chips and own micro-architecture Apple will be able not only offer exclusive features and unique levels of performance, but its devices may obtain capabilities truly not available on products from other companies. Besides, Apple will further tie its hardware with its software, something that it has been trying to do historically.

Tags: Apple, Semiconductor, ARM, Power, JPR, Insight 64, AMD, Intel, x86