Apple's iPad Chip Development Cost Estimated in $1 Billion Range

MacRumors

macrumors bot
Original poster
Apr 12, 2001
49,625
10,917
https://www.macrumors.com/images/macrumorsthreadlogodarkd.png




In an article from The New York Times, the cost for a company like Apple to develop an ARM-based mobile chip such as the A4 used in its forthcoming iPad tablet is estimated at approximately $1 billion, even without the need to invest in manufacturing facilities for the chips due to agreements with existing chip foundries for production.
At the same time, Apple, Nvidia and Qualcomm are designing their own takes on ARM-based mobile chips that will be made by the contract foundries. Even without the direct investment of a factory, it can cost these companies about $1 billion to create a smartphone chip from scratch.
Chip industry expert Fred Weber notes in the report that Apple's iPhone was the first "really aspirational device" not based on Intel chips, demonstrating the power and versatility of ARM-based chip designs. The iPhone's success has consequently driven a surge of interest in the platform from other mobile vendors and even more traditional notebook vendors like HP and Lenovo looking to incorporate the power-saving yet capable chips into their products.
"Apple was the first company to make a really aspirational device that wasn't based on Intel chips and Microsoft's Windows," said Fred Weber, a chip industry veteran. "The iPhone broke some psychological barriers people had about trying new products and helped drive this consumer electronics push."
Apple acquired chip design firm P.A. Semi in early 2008, reportedly enabling Apple to pursue in-house ARM-based designs for system-on-chip platforms for the iPad and iPhone.

Article Link: Apple's iPad Chip Development Cost Estimated in $1 Billion Range
 

stridemat

Moderator
Staff member
Apr 2, 2008
11,223
648
UK
Well for that much money Apple either think the iPad is going to be a phenomenal success or they plan to use the technologies they have developed in other Apple products (iPhone)
 

entatlrg

macrumors 68040
Mar 2, 2009
3,376
3
Waterloo & Georgian Bay, Canada
Apple spends a ton of money on R & D while other other low-life companies sit in the sidelines waiting to see what they come up with ...

Then they copy Apples products leaving out the quality ... nice eh?

Rock on Apple!
 

Veri

macrumors 6502a
Sep 23, 2007
611
0
$1,000,000,000 for an incremental tweaking of an ARM design?

No. [edit: indeed. Misreported.]

Though it's never a bad idea to inflate the R&D budget claims, especially when you're one of the few major computing firms which publishes (almost?) no research whatsoever.
 

BaronStein

macrumors regular
Feb 11, 2010
135
0
NY
I believe that it's worth it. The biggest problem with intel equivalent chips is that they are just crippled, low quality garbage pieces, not like the ones that we can find in real computers. ARM is doing a good job with their chips and most probably Apple modified these for more efficiency.

I can't wait for the next gen iPhone, with the probability of such implementation of this kind of customized hardware.
 

Speedy2

macrumors 65816
Nov 19, 2008
1,150
230
<random clueless idiot>
...but, but.... iSuppli said it's only 17 dollars per chip?! They would have to sell 60 million iPads and still make zero profit?! :confused:
</random clueless idiot>

That should make it clear that iSuppli numbers are in no way a reliable way to find out how much money Apple is making with their hardware products...
 

SwiftLives

macrumors 65816
Dec 7, 2001
1,340
306
Charleston, SC
I'm guessing that the next incarnation of the iPhone and iPod Touch are going to use a smaller/slower/cooler version of the A4 processor. And I'm even willing to bet they're going to call it the A2.
 

lincolntran

macrumors 6502a
Jan 18, 2010
843
471
Apple spends a ton of money on R & D while other other low-life companies sit in the sidelines waiting to see what they come up with ...

Then they copy Apples products leaving out the quality ... nice eh?

Rock on Apple!
And then the customers who bought products from those low life companies turn back and bash Apple for making expensive products..."with quality".

Edit: By quality I did NOT mean a box of shinny metal but also user experiences, support, services, software, warranty, etc.....
 

cmaier

macrumors P6
Jul 25, 2007
18,956
18,050
California
I call ********. I used to work for Fred Weber, btw. No way it costs $1B without a fab. Exponential Technology developed a powerpc for $20M, starting from scratch. The first transmeta chip cost tens of millions of dollars.

Nonsense.
 

Eidorian

macrumors Penryn
Mar 23, 2005
29,085
291
Indianapolis
$1,000,000,000 for an incremental tweaking of an ARM design?

No. [edit: indeed. Misreported.]

Though it's never a bad idea to inflate the R&D budget claims, especially when you're one of the few major computing firms which publishes (almost?) no research whatsoever.
I call ********. I used to work for Fred Weber, btw. No way it costs $1B without a fab. Exponential Technology developed a powerpc for $20M, starting from scratch. The first transmeta chip cost tens of millions of dollars.

Nonsense.
Makes me wonder what the did spend it on...

...low quality garbage pieces...
Is it because it doesn't have an Apple logo on it? :D
 

Rocketman

macrumors 603
R&D is still one of the better tax deductions.

The takeaway I get from the article is that Apple repeatedly takes a relatively well established market and do some form of ecosystem and GUI and turn it into something barely distinguishable from magic.

The Apple II
The Mac
The PowerBook
The Newton
The iPod
The iPhone and now
the iPad.

Even the EOL "Quicktake". There's a product that would have been a bunch better with a SDK so all the many cameras out there could reliably talk to computers and have interoperable files.

Apple changes minds. That's what it does.

The retail experience
The service experience

None of these are price pitches. They are service and value pitches. Buy them "only if" you can afford them. Aspirational, all. "Why pay less?"

Rocketman
 

PsudoPowerPoint

macrumors regular
Sep 18, 2008
124
0
San Diego CA, USA
Was it worth it?

I'd be very interested in what custom capabilities the chip had to have to justify such a large expenditure. Apple needs to sell tens of millions of these chips to break even.

I suspect that the A4 is just the "tip of the iceberg" on chip development, and that within a few years we may see something very different out of Apple. Something that allows them to take grater advantage of OpenCL and Grand Central Dispatch to achieve a new level of power efficiency and performance in a mobile device.
 

ghostface147

macrumors 68040
May 28, 2008
3,179
2,720
No way it costs $1B without a fab. Exponential Technology developed a powerpc for $20M, starting from scratch. The first transmeta chip cost tens of millions of dollars.

Nonsense.
I am sure it was easier and cheaper to build a Transmeta chip. Where is that chip now? Billion may be overexaggerated, but I don't think they are off by as much as you may think they are.
 

reallynotnick

macrumors 6502a
Oct 21, 2005
940
459
It says to make a smart phone chip from SCRATCH, Apple did not make it from scratch. I call BS on this whole article.
 

Speedy2

macrumors 65816
Nov 19, 2008
1,150
230
This 1 billion dollar "estimate" is probably even more of a WAG than the iSuppli guesstimates. If nothing else, on a grander scale. LOL!
My take is that the 1b is much, much closer to reality than anything iSuppli has ever put out. It is not very hard to make an educated guess about R&D costs when a lot of companies design ARM chips.
 

xIGmanIx

macrumors 6502a
Dec 21, 2008
835
0
to me this seems like direct labor costs and thus would make sense that a team of engineers have worked on this 2-3 years, however its still a billion dollars
 

gwangung

macrumors 65816
Apr 9, 2003
1,106
19
I am sure it was easier and cheaper to build a Transmeta chip. Where is that chip now? Billion may be overexaggerated, but I don't think they are off by as much as you may think they are.
I would think you'd have to include dead ends in those research costs. Those are inevitable, no matter how good your R&D people are.
 
Register on MacRumors! This sidebar will go away, and you'll see fewer ads.