Apple&#8217;s Bet on In-House Technology: A Game-Changer in the Making?
Apple has been incrementally increasing its R&D expenditure over the years, in addition to keeping its acquisition game strong for purposes of technology and talent. A BBC report from 2021 read, “Apple buys a company every three to four weeks”. Some of its biggest acquisitions include Intel’s smartphone modem division, PA Semi, Dialog Semiconductor, and Anobit Technologies. The recent moves show that the company is serious about its plans to go as much native as possible to position itself well for the long run—giving them more control and less cost. Perhaps, this is why they are not particularly concerned about the time it takes to perfect the developmental process as long as they’re sure it will work and they can sustain it. Otherwise, at this level, only a few companies can sustain it – to keep up with product development and, at the same time, in-house design as well. When AIM asked Arun Mampazhy, a veteran semiconductor analyst, if many such companies will observe this trend, he said that there are two trends running simultaneously at the moment – the trend of in-house design, as well as, more and more foundry dependency. Besides, there are differences in approach between companies. Google, for example, has been emphasising a bit more on Risk-V and open-source methods, slightly different from what Apple has been doing with its x86. Samsung, on the other hand, is witnessing a slightly downward trend when it comes to their own processors, so they are depending more and more on Qualcomm. He adds, “I’m not sure if there is a 100% trend one way. Companies also look for practicality and tactics, what works for them in the short-term. Hence, it will be a mixed bag.” The Tim Cook Doctrine If recent reports are to go by, Apple will be looking to develop in-house chips, replacing Broadcom for its Bluetooth and Wi-Fi chip by 2025. The silicon valley giant will be developing an all-in-one chip that houses Wi-Fi, Bluetooth and cellular connectivity. The three together could greatly improve efficiency and significantly boost iPhone battery life. The integration of Wi-Fi, Bluetooth, and 6G connectivity will give birth to the Extended Reality (XR) dreams of Apple. To give context, Qualcomm’s Wireless AR Smart Viewer Reference Design which uses three different chips for each has a minute lag (<3ms latency) between the smartphone and AR glasses. In this light, Apple’s strategy with its all-in-one chip, as opposed to Qualcomm, will enable tighter integration between the three components, further reducing latency between Apple’s AR glasses and the surrounding product ecosystem. Thus, making it faster, and paving the way for real-time experience. In addition, Apple would use its own custom displays on mobile devices. High-end Apple watches will have these display screens by the end of 2024. Currently, the company sources the screens from Samsung (constituting 6.6% of its revenue), LG (constituting 36% of its revenue), and a range of other manufacturers, which include Japan Display Inc, Sharp Corp and BOE Technology Group Co. Apple’s in-house display systems can also benefit it in its AR/VR play. Last year reports emerged that Apple’s Reality headsets would consist of 3,500 pixels per inch (ppi) OLED silicon panels, which it will source from Samsung and LG. But, eventually, Apple will branch out its in-house custom displays across all its products. There are also updates to Apple’s long plans to introduce its own cellular modem, thereby decreasing its reliance on Qualcomm. Apple acquired Intel’s struggling cellular modem unit in 2019 for $1 billion. As part of the deal, it brought on key engineering talent and patents to develop crucial components more quickly. The latest news around it suggests that Apple will use its own modems “by the end of 2024 or early 2025”. However, there is a small hiccup. Analyst Ming-Chi Kuo explains that while Apple’s initial plans were to launch the modem chip in 2024 and let the low-end iPhone SE 4 adopt it first, it has retreated from it since, with concerns that the in-house chip may potentially not be up to par with Qualcomm’s. So while this is a sigh of relief for Qualcomm, it might not be long until Apple slowly embarks on its own. The above reports indicate that Apple is developing all the primary components in-house, in accordance with the ‘Tim Cook Doctrine’, his desire to cut out third-party components in Apple’s products wherever it makes sense to do so. We can see that the tech giant is playing the long game, aligning its investments with its AR/VR/MR technology plans. Apple’s R&D Investment The tech giant has spent almost $100 billion in R&D in the past five years, according to data acquired by Finbold. “The spending on research and development has been growing steadily in recent years. In 2019, the value stood at $16.22 billion, growing by over 15% to 2020’s $18.75 billion. In 2021, the spending surpassed the $20 billion market for the first to hit $21.91 billion,” said the report. Moreover, between 2018 and 2022, it saw an astounding 84.3% surge in expenditure. One would assume that 2022 would be a different story, as the tech giant’s dashboard was red with high inflation, spiking interest rates, and a tumultuous geo-political condition hampering Apple’s iPhone production and sales. But instead, the company continued to pour money into R&D, pausing hires for every other division except this. Apple has invested in new campuses in San Diego, US, and Jerusalem to keep up with the demanding market and find solutions through a focus on innovation. A local report claimed that the company plans to hire around 5,000 people in San Diego, mainly in engineering positions, for its wireless tech initiatives. Apple’s US plans – the commitment to $430 billion over five years – aim to advance cutting-edge technology from 5G to silicon architecture to Artificial Intelligence (AI). Jerusalem will host Apple’s development centre to focus on home-grown hardware and chip development for Mac computers, which relied on Intel processors until last year. Final Thoughts Apple’s bet, while touted game-changing by many, may as well be a huge gamble. Being a product company is one thing, but being ahead of the game for chip design and development takes a lot more capital, time, and talent. At the moment, Apple does seem to be advantageous in all three segments, but only time will tell where they reach with it. Conversely, companies like Qualcomm (which got 22% of its revenue from Apple in the last fiscal year), LG, and Samsung still have a significant amount of cash coming in from Apple. But with Apple dropping them as suppliers, and companies like Google moving to build its own chips (away from Qualcomm’s for its Pixel phones), it is yet to see what the future holds for these semiconductor companies. So, the question is, will we start seeing a spree of acquisitions—say, product companies acquiring chip companies—or will these chip companies move to develop their own products? All in all, the integration of products with in-house chips looks like the way forward for most companies today.
Apple is playing the long game, aligning its investments with its AR/VR/MR plans.
The recent moves show that Apple is serious about its plans to go as much native as possible to position itself well for the long run—giving them more control and less cost.
["Apple"]
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["AI", "artificial intelligence", "Aim", "R", "Go", "API", "ViT", "RPA", "innovation", "programming_languages:R"]
Ayush is interested in knowing how technology shapes and defines our culture, and our understanding of the world. He believes in exploring reality at the intersections of technology and art, science, and politics.