Upcoming Changes to Original Chip Manufacturers

Upcoming Changes to Original Chip Manufacturers

Soon, you will be able to buy an ARM-based chip called Alpine, manufactured by Annapurna Labs, an Amazon company.  This is Amazon’s first venture into the chip making market, which is estimated to worth $12 billion. The chip is designed for Wi-Fi routers, media streaming devices, connected home products, and data storage gear. Commercial products from Asus, Netgear, and Synology have already installed these chips on their motherboards. Amazon already offers cloud-computing services; analysts expect that these new chips will help Amazon gain leverage in the upcoming Internet-of-Things (IoT) market.

This strategy is not new. Back in 2007, Google acquired PeakStream to develop programmable multi-core chips, graphics processor units, and Cell processors. And in 2010, Google bought stealth semiconductor Agnilux, experts in having efficient processors for servers. Last year, Gecko Design, which focuses on hardware projects, became a part of Google (X) to support its hardware ventures. Another tech giant, Apple, has established the second largest research and development hub outside of the U.S., which is in Israel, and bought two local microprocessor chip design companies Anobit Technologies Ltd. and PrimeSense Ltd. “Apple’s Israeli acquisitions and its expanding local workforce show that the company is becoming more and more independent on the chip level”, said Shlomo Gradman, chairman of the Israeli Semiconductor Club.

Developing or even manufacturing chips in-house seems to be costly in the beginning. However, it also brings many benefits to those original equipment manufacturers (OEM):

1. Design product fit needs from the beginning

There are thousands of chips available on the market, but it’s still hard to find just one that fits all the design needs, especially when it comes to the data center or system level. In 2011, Facebook decided to build its own hardware system for data centers because they couldn’t find what they were looking for in Dell’s product line. For Google, the disappointing performance of the Qualcomm chip is another driving cause for them to develop their own chips.

2. More independence, more competitive advantages

Being able to design and manufacturing chip in-house will help OEM to be become more independent from the original chip manufactures (OCM) on product capacity, lead time and product availability.  Meanwhile, the hard-to-replicate feature of in-house developed chip give ODM more competitive advantage over their competitors.

3. Save on collaboration cost and license fee

Having full control over the chip development process and eventually the intellectual property of the chip could save millions of dollars for OEMs, which will significantly lower their costs in the long run.

With the financial resources these tech giants have and their strategy to increase capabilities in processors, modems, connectivity, and power-management design, they might also be joining the merger and acquisition wave in the semiconductor industry. With these promising new players, the semiconductor industry is looking to have an interesting year ahead.

As a value-added service provider in the electronic supply chain, Advanced MP Technology is keeping a close look at the changes in industry trend, new technology, and development, to stay ahead of the market curve and to ensure we respond to rapid market change with the best customer service.