In Major Shift, Apple Builds Its Own Team to Design Chips by Yukari Iwatani and Don Clark

Apple Inc. is building a significant capability to design its own computer chips, a strategy shift that the company hopes will create exclusive features for its gadgets and shield Apple’s work from rivals.


The Silicon Valley trend-setter has been hiring people from many different segments of the semiconductor industry, including engineers to create multifunction chips that are used in cellphones to run software and carry out other chores.

Apple could use the internally developed chips to sharply reduce the power consumption of its hit iPhone and iPod touch devices, and possibly add graphics circuitry to help its hardware play realistic game software and high-definition videos, people familiar with its plans say.

In one sign of the new focus, Apple recently hired Raja Koduri, who was formerly the chief technology officer of the graphics products group at chip maker Advanced Micro Devices Inc. Mr. Koduri started at Apple this week, following in the footsteps of Bob Drebin, who had held the same title at AMD and is also now working for Apple. Online job postings from Apple describe dozens of chip-related positions it is trying to fill, some with partial descriptions like “testing the functional correctness of Apple developed silicon.”

Besides a desire to beat rivals to market with new features, Apple’s shift is also an effort to share fewer details about its technology plans with external chip suppliers, say people familiar with the moves.

An Apple spokesman declined to comment.

The new effort faces plenty of hurdles, and people familiar with Apple’s plans don’t expect internally designed chips to emerge until next year at the earliest. Still, Apple’s aggressive hiring is another sign of how the company’s recent success has allowed it to expand while other tech giants have trimmed their work forces in the recession.

Apple’s strategy also marks a break from a long-term trend among most big electronics companies to outsource the development of chips and other components to external suppliers.

Last spring, Apple Chief Executive Steve Jobs explained the purchase of Silicon Valley start-up P.A. Semi as a way to acquire expertise and technology to help run increasingly sophisticated software on iPhones and iPods. “You can’t just go out and buy the chips off the shelf to do that,” said Mr. Jobs in an interview.

Most cellphones are based on chip designs licensed by ARM Holdings PLC to others. For the iPhone, Samsung Electronics Co. supplies an ARM-based microprocessor with custom features developed by Apple, analysts say.

People familiar with Apple’s thinking say executives have expressed concern that some information shared with outside vendors could find its way into chips sold to Apple competitors. A Samsung spokeswoman declined comment.

People familiar with the situation say Mr. Jobs told P.A. Semi engineers last April that he wanted to develop chips internally and didn’t want knowledge about the technology to leave Apple. Mr. Jobs is on medical leave and was unavailable for comment.

People familiar with Apple’s plans expect former P.A. Semi engineers to help create ARM-based chips that could improve the performance and battery life of future iPhones.

Apple’s hiring spree in semiconductors started well before the acquisition and has continued through the past few months, according to postings on the networking site LinkedIn. The site contains more than 100 people listing current Apple job titles and past expertise in chips, including veterans of Intel Corp., Samsung and Qualcomm Inc.

Apple’s own job postings, some aggregated by the site Indeed.com, provide clues about possible features to come. Two recent postings involve handwriting recognition technology; several others seek expertise in chips for managing displays.

Apple participated in a job fair earlier this month for soon-to-be-unemployed engineers at memory chip company Spansion Inc., which sought bankruptcy protection in March, people familiar with the situation said.
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