Should Apple Buy ARM?

37 Comments

The mobile space sometimes seems to generate more rumors than other segments, and a big one has surfaced recently with far-reaching ramifications should it come to fruition. The London Evening Standard reported that Apple (s aapl) is considering a bid to acquire ARM Holdings (s armh). ARM is the tech company inside many mobile products — Apple licenses it for the iPad as a matter of fact. Just about every Android-based tablet (s goog) and top smartphone on the market uses ARM technology. Should Apple buy ARM it would push the entire mobile space, Android in particular, into utter chaos.

I’m not sure the anti-trust folks would like Apple to absorb ARM, but it’s not clear if that would be the case. ARM has stiff competition, so it’s not a given that Apple would be unfairly stifling anything by the acquisition. Should Apple grab ARM, it might be in the company’s best interest to stop licensing ARM technology to others. That would set things into a free fall, particularly in the smartphone space as ARM technology is inside most superphones produced currently.

Apple definitely has plenty of cash laying around, more than enough to buy ARM. I believe it would be a great business move on Apple’s part to do so, even though as a consumer I likely wouldn’t like the results. What do you think? Should Apple buy ARM?

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37 Comments

Lawyer Up

If you think the Govt had a difficult time stopping Microsoft and Oracle, well they are in for a super rude awakening if they even think about taking on Apple. They have no clue what awaits them. This is NOT MS or Oracle CEO you would be dealing with. NO SIR. This is STEVE “effing” JOBS for gods sake.

In the end if Steve wants ARM then Steve gets ARM, period, end of sentence. That is just they way it is….deal with it fellas you’ll just have to find something else to whine about. :-)

Mobile Engineer

Why would it be so bad if Apple buys ARM. It would be a great move as Apple has become the worldwide leader in Mobile Technology and would take ARM boldly where no man has gone before. As Apple continues to build a workforce of superior mobile engineering experts it makes sense that ARM should attach itself to the unstoppable bullet train called Apple.

The only group who is afraid of this union are the Apple haters who should be rightfully ignored. You can do this Apple. Git it done.

BTW, Google and Adobe should be afraid…very afraid [shifty eyes]

Sam

I seriously hope they don’t.

If I had the power, I’d prevent them from doing so for Monopoly reasons. Personally I won’t buy Apple products because of their Monopolistic lock down approach.

Ray

First of all, there would be no immediate impact. All users or ARM technology would continue under their licenses. Apple couldn’t unilaterally terminate the licenses without incurring a costly legal liability.

If Apple did purchase ARM, it would pass antitrust review. The Feds only block such moves in extreme cases if no alternatives exist. At worst, Apple might by required to continue to license ARM for a number of years.

So what would Apple gain by acquiring ARM? Two things I believe. First, Apple may just be sending a message in the current patent wars that its ready and willing to acquire key technologies and patents if necessary – just another front of legal intimidation. Second, if Apple is serious about ARM and goes through with a buyout, it gains control of the future direction and development of a key technology. If that development can be made to better align with Apple’s long-term strategic goals, it may be worth the price even if Apple must share.

Attorney At Law

I doubt anyone could stop Apple voiding ALL existing contracts once they take total control of ARM. They can and should force price re-negotiation from all licensees. Apple would effective increase fees to cover all the advanced engineering they would bring to the table. In the end its a win-win for everybody. ARM gets to the next level via Apple Engineering empire in Cupertino and Vendors continue to sell relevant ARM chips to the masses. An Apple-owned-ARM would create mind-blowing chip designs of a kind this world has never seen before. I cannot see why anyone in their right mind would be against such a union.

Josh

ARM has licensed out their chip designs for several years forward. Apple could buy ARM, cancel any further licensing, and the mobile world would barely blink. Devices would just shift to MIPS or give the opportunity for Intel to move into the low power x86 market. In fact, if Apple bought ARM to stiff out competitors, the only company it would effect would be Intel.

Karthik Prabhu

Apple will rule the Smartphone industry, if they buy ARM. Other smartphone manufacturers will lose out in competition. They will really need to look for alternatives, which is really difficult. So, Apple acquiring ARM is really a good option for them, but a very huge disadvantage to other manufacturers.

Brent Gairy

If Apple were to buy ARM, in several years the industry would switch to MIPS cpus or low end Atom chips from Intel.

Personally, I see this rumor as nothing more than stock market manipulation.

Lukas

i doubt Apple would be able to get away with that sort of anti-competitive behavior

John

Such a move would make no sense whatsoever. First, as many have pointed out, it is financially irrational. Second, it would push the whole industry (other than Apple that is…) into the hands of alternative chip makers (different architecture of course). The biggest beneficiary I think would be someone like Intel who would love to enter the mobile market. It would make sense though for Apple to become a major shareholder…

James Katt

Apple already has a license for all of ARM’s technology. It makes no sense to buy Arm. It would be a money loser. Apple would be spending $80 for every $1 that Arm earns. That is a poor investment.

Apple could do far better, for example, by spending $19 billion to purchase controlling interest in Sony.

Sam

It’s pretty hard to see any benefits for Apple to acquire ARM (I originally wrote “acquire the rest of ARM”, but I checked and found that Apple sold its shares of ARM back in 2003-2004). It seems unlikely they’d be able to break the licensing contracts immediately, and attempts to do so would likely bring down a lot of regulatory scrutiny in the EU especially. ARM’s competitors surely would like a crack at dethroning them from the high performance embedded markets, and being slowed down by ongoing government investigations would create a big opening.

BaDZeD

Hell no!
This move would be monopolistic and anti competitive to other smartphone makers out there. FTC should do everything possible to prevent this from happening.

CTSLICK

I won’t pretend that I understand enough to speak to the business merits of this. But I will say that I cannot see this making past any sort of anti-trust review. It just seems wrong for consumers in my opinion.

fazz33

Umm, Arm doesn’t just have its feet in smartphone technology. They’re in 90% of ALL Mobile phones, that number maybe more, this is info I have from 2008. Not to mention they’re used in practically every other device that requires semi-advance computing power. Crack open your calculator there’s likely a ARM based chip made by one of the many licensees there, got an ipod/ipod touch, or ANY other media player, it’s got ARM technology in it. Oh and Nintendo’s DS also use ARM based chips to run it. Hell my Canon DSLRs use ARM chips as part of DIGIC.

If Apple got this in their iPants it could be a bad day for everyone. Alternatively they could just buy it and do nothing, if so good for them.

Tea Party

Apple is hauling in more than $3 billion per quarter, so buying ARM is about 6 months of work. They could make back some of this premium price by upping royalty fees until the desired sweet spot is reached. In other words high enough to get some vendors to move to Atom or other lesser chips. Or they could just jack up the rates for anything related to a Google phone.
All is fair in bidness. The govt needs to stay out of this and focus on fixing the banking speculator mess and just leave Apple alone.

Patrick Perez

Even if Apple did buy ARM, I don’t see them shutting down licensing (ARM’s actuall business) as it isn’t as if Apple products could hope to fill the void of an ARM-less world. Apple simply couldn’t build enough stuff at their prefered price points. ARM tech is in the cheapest phones and I’m sure that’s the lion’s share of licensing revenue… low cost SoC licenses. I also don’t see what Apple would get out of the bargain other than (an admittedly nice) revenue stream. ARM licensees are already free to adapt the tech that they license from ARM, so with the PA Semi acquisition from a few years ago, I just don’t see this as a strategic fit. Of course, I sit in a cubicle, not in a board room, so…

Patrick

James Kendrick

Most superphones today have ARM tech inside. It’s not just the cheap phones. Virtually all cool Android and upcoming Windows Phone 7 phones use ARM tech.

gadgetmerc

All mobile phones have plastic in it but i don’t see them trying to corner the market…. yet :)

Patrick Perez

I brought up the low end phones to highlight the fact that the volume is there. Nokia, as we all know, sells zillions of phones worldwide that readers of this site would scoff at. And Apple has no interest in that business.

Personally, I’m looking forward to Coretex A9 processor based superphones.

gadgetmerc

After reading the ARM wiki I don’t think it would be possible. They license ARM processors to the world. There is no way that any regulatory committee would let it pass.

Yacko

And by the same token, any other firm using ARM IP and looking to acquire ARM will have the same problem with US and European regulators. Google might have had an unimpeded route had they not decided to have their own branded phone, ha ha. BTW, Apple already owns a part of ARM anyway, at least they did when they helped found it, unless all stake in the company was sold in earlier years, particularly the lean late 90s.

Kevin C. Tofel

Not sure it would be a great business move at all. ARM’s market cap is $6b and anyone buying it would likely pay a premium. Apple could build their own chip fabrication plant for less and not face as much (if any) regulatory scrutiny.

James Kendrick

I don’t believe ARM makes chips at all, simply licenses the technology to chipmakers. The Apple A4 chip used in the iPad has ARM technology inside.

Kevin C. Tofel

I understand that. I’m not saying that buying ARM equates to building chips. ;) Apple would only buy ARM to do one of three things – earn licensing fees, something they historically don’t do, control the mobile chip market, which I don’t think would be allowed, or stop paying licensing fees to build their chips. In the third case (also unlikely) I’d have to wonder why spend $6b plus a premium to get that?

James Kendrick

Or four- take ARM technology inhouse and off the market. Agreed they’d be paying a big premium for that but oh the chaos that would ensue. Jobs likes chaos in other companies. :)

Kevin C. Tofel

That was point 2 in my reply: control the chip market. ;) It’s not worth $6b plus premium as there’s no guarantee it would pan out from a regulatory standpoint. That’s a big bet on a high risk – not smart business for a well established company.

Jake Fuentes

Agree completely. Apple could build an ARM technology equivalent at a cost much less than what it would take to buy ARM. It would take longer, but it would be cheaper. The delta in cost there would be for exclusivity of the technology. Regulators (hopefully) will recognize that, and would never allow the deal to occur.

Marco A.

The industry player most threatened by ARM is Intel. Apple buying ARM and reducing its customer base to themselves would only be doing Intel a huge favor – possibly handing the bulk of the mobile phone space to Atom. Ultimately it’d only boil down to the iPhone having somewhat better battery life than competitors. Meanwhile Apple would have to front all the development costs for next-gen ARM designs and possibly face higher fab costs as well.

The most sensible buyer for ARM would be Intel (if they could get away with it) or possibly GlobalFoundries.

Dave

No. Apple is a huge monopoly in the way they run things. If they buy ARM, other smart phone manufacturers will be in serious trouble as they would have to reprogram their phones to work with different chips.

Rich

James, if ARM has stiff competition, how would Apple buying ARM push the entire mobile space into utter chaos?

James Kendrick

ARM is the hot ticket in smartphones right now, and if Apple took it off the market it would force a lot of scrambling, I think. Most major phones today, especially Android phones, have ARM tech onboard.

Marco A.

ARM is a CPU architecture, which has majority market share in the mobile phone space. Not just smartphones – all phones. Taking ARM out of circulation would be like Apple buying Intel and taking x86 off the market except in Macs. What would Dell or HP put inside their computers? They couldn’t use AMD chips, because they’re also x86, so they’d have to use, what, Itanium? It’d be a disaster for the whole PC industry. It’d take years to develop a new architecture to rally around and bring chips to market. Same in the phone space.

The FTC would probably not let them get away with blocking out competitors, although certainly keeping the most cutting edge designs for themselves and overcharging for weak old designs would be a gigantic advantage. Also, as ARM is a U.K. company, a deal would have to pass muster with more than one government.

The same advantages would go to anyone besides Apple who might also be considering a bid for ARM. There aren’t many industry players that would make a good steward for the company. Any buyout offer would completely reshape the phone industry and other industries also.

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