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Apr. 23, 2010

Since late yesterday, there's a new rumor out, this time from London's financial district that Apple is planning to acquire British chip maker ARM Ltd.

ARM designs microprocessors and microcontrollers used in most of today's mobile phones, smartphones and upcoming tablets similar to but different than the iPhone and the iPad.

ARM is seen as a big threat to chip giant Intel and has long licensed its technology to a whole slew of chip making companies.

Some of those companies include Nvidia, Qualcomm, Samsung, Marvell Technology, Broadcom, NEC Corp., S.T. Micro Electronics, Texas Instruments, Toshiba, Infineon Technologies, Freescale Semiconductor, Fujitsu, NXP Semiconductor and a lot more.

London's Evening Standard newspaper started the rumor, citing sources from London's financial district, as ARM shares suddenly shot up over $8.

If the rumor is true, the mobile chip industry is in for a big jolt. Apple is already a big competitor not only to smartphone makers who use ARM technology in almost all their phones, but also to handheld console makers, like Nintendo and Sony.

Apple's iPhone and iPod Touch are also in direct competition with both the Nintendo DS and Sony's PSP, both of which use ARM designs.

It might also mean that companies would have to find another chip maker to supply their designs, as Apple would then have its hand in every competitor's technology.

And to make matters worse, device makers would have to pay Apple for the privilege of using ARM's technology, forcing them to acquire licenses from Apple in order to have the right to use ARM technology in their products.

This would make Apple an even stronger company, and for the first time in its history, would start being an even greater threat to Microsoft.

In practice, Apple's planned acquisition wouldn't be that far-fetched. After all, Apple is ARM's largest and most lucrative customer, and the maker of the iPad and iPhone has already snapped up its own semiconductor team, P.A. Semiconductors, acquired almost two years ago.

Of course, that acquisition wasn't popular with all P.A. Semi staff, with many of the top people splitting off into a separate company, Agnilux, which was almost immediately snapped up by Google.

And Apple also has lots of cash on its books to acquire a company the size of ARM.

In a recent earnings call, Apple admitted to having almost $42 billion in the bank, with the Standard estimating ARM would only cost around $7 or $8 billion, maximum.

Adding ARM to Apple's corporate assets would be similar to buying all of the global mobile industry, affecting the entire wireless ecosystem. It's exactly such a move that governments and anti-trust regulators should bend over backwards to try and prevent.

So the question is: will it go through? Remember that this is just a rumor, nothing more!

Apple's A4 chip, made by its P.A. Semiconductors team, uses the ARM design and Apple wishes to expand its in-house chip making capabilities, so in deed such an acquisition certainly would make sense.

It's also difficult to imagine that Google wouldn't attempt to counterbid as well, a move which could end up as the lesser of two evils.

Google's Android platform currently runs on a multitude of devices sporting ARM's designs, so it's unlikely the search giant would relinquish ARM to Apple without a fight.

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Source: London Evening Standard.