Apple's Intrinsity Acquisition: Winners and Losers

Apple and Intrinsity's Perspective

Historically, Apple has not had much luck with their semiconductor company acquisitions. In November 1999, they acquired Raycer Graphics for $15 million dollars, supposedly for the 3D graphics related patents that the company held. People continued to speculate for 2 or 3 years after this wondering when the products from this acquisition would replace Nvidia's role in Apple computers. Unfortunately, this never came to pass, and people from the Raycer acquisition just moved on to join companies like SGI and Nvidia. In April 2008, PA Semi was acquired for $278 million. Their claim to fame was a 64 bit dual core processor called the PWRficient. The analysts were greatly surprised at this acquisition since PA Semi's IP had no place in the roadmap of any of Apple's products (except, probably, the Apple TV) since its power consumption was too high at 25W. The consensus was that the purchase was made for the manpower with VLSI experience that PA Semi would provide to Apple's team for designing chips for future generation of products in the iPhone / iPod / iPad line. Then, again, most of the PA Semi engineers have since moved on from Apple to work in a startup named Agnilux (which was recently acquired by Google), and Apple has been forced to supplement the workforce with reputed chip engineers from other companies.

When seen in the above context, it is really easy to determine why Apple needed to acquire Intrinsity. Being the force behind the performance of the Cortex-A8 in the A4, it makes sense for them to acquire the engineering talent and the technology behind this. Not only would it improve the performance of the ARM cores in the future members of the A4 family (Intrinsity was supposedly working on hardening the FastCore version of Cortex-A9), it would also prevent the competition (read, Samsung) from utilizing this technology to make fast app processors for phones such as the Samsung Galaxy S.  As noted in the previous paragraph, Apple has never been able to retain the important employees from its semiconductor acquisitions. It remains to be seen how much of a leeway from the usual Apple work culture is given to Intrinsity after the acquisition, as this would probably decide how much of the talent actually continues to remain in Apple to contribute down the road.

From Intrinsity's perspective, the acquisition probably comes as a relief. As can be seen from the Intrinsity timeline on the previous page, the company has been reliant on a few big customers for revenue and had to get back to the venture capitalists for more and more funding every few years. A successful semiconductor company startup usually manages to become cash-flow positive after 4-5 years, and eschews further VC investment to prevent stock dilution unless their revenue stream fails to match up with their plans. Once a company goes past four or so rounds of funding, there is an increased pressure from the VCs to generate returns on their investment. There are two exit choices: one is to get acquired by a bigger company for the technology and patents, and the second is to go for an IPO. With Apple showing interest in the technology, and IPO not really looking like an option due to the lack of a sustained profit curve, there was only one way to go for Intrinsity. Now, with more than $100 million dollars invested, was it really a good exit for Intrinsity's investors? If MPR's sources (which Tom Halfhill stands by with conviction) are correct, at $121 million, the investors just about managed to get their cash back. Unfortunately, $20 - $30 million over 13 years is really not such a great return, particularly when the investment amounts are adjusted for inflation. On the other hand, if Apple managed to dictate terms, a purported purchase price of less than $50 mn would imply that the investors' money just went down the drain. However, the asset acquisition at least ensured that the current employees had their jobs saved by shifting to Apple. From Apple's perspective, $121 million or sub-$50 million really doesn't matter, since the amounts happen to be a drop in the bucket for a company with more than $40 billion in the bank.

From a technology perspective, domino logic has long been regarded with suspicion by many people because of the associated problems. Though speed and performance increase, the power consumption as well as integration with the rest of the design flow remains an issue. Fast14 technology doesn't advocate usage of the domino logic in all parts of the chip, but only in the critical path (slowest sequence of gates in the circuit which pulls down the operating frequency for the whole chip). This is done in order to minimize die area and power consumption penalties. As process geometries shrink, some engineers feel that leakage, noise and clock skew related issues become more and more difficult to surmount. Further, NDL technology (the traditional name given to Fast14) results in increased number of interconnects. Unfortunately, interconnects don't scale as well as transistors do when process geometries shrink. More time needs to be spent in fine tuning the layout to achieve timing closure and handling interconnect loads. So, it is quite possible that despite the automated methodology that Intrinsity possesses, getting a FastCore version of the Cortex-A9 in, say, the 32nm node, may take much more time, than, say, in the 45nm node.

Unlike the traditional processor market where Intel and AMD can take 2 years or more and use a lot of manpower to churn out a processor at a particular node, players in the application processor market often rely on being the first company to take advantage of a particular node. If the Intrinsity group's schedules slip, Apple might find itself in the back foot against competitors like Nvidia and TI with the Tegra and OMAP series respectively. Note that the A4 with Intrinsity's Cortex-A8 is actually up against Nvidia's Tegra 2 which already has the Cortex-A9 at the same 1 GHz (admittedly in TSMC's 40nm node). Samsung is expected to move towards the 32nm node around the same time that TSMC gets ready to implement 28nm, which Nvidia would presumably use. There is also the small matter of the difference in the manpower behind the Nvidia's Tegra group in charge of hardening the ARM processor and Intrinsity's. Then, again, Apple always has better software and marketing to paper over the cracks in the application processor. In that case, however, Intrinsity's purchase wouldn't have given them any more advantage than what they already possess.

Apple has long claimed that they needed to design their own CPU in the iPad series to decide where the exact performance push would go. With Intrinsity, they were able to get a fast core and split the hardening cost with Samsung. It is not exactly clear how Apple can customize the CPU any further than what Intrinsity would do as an outside job without holding an architecture license from ARM (MPR suggests that Apple also possesses an architecture license, though we are unable to confirm this from other sources). If Apple does go through the architecture license route, they are looking at a 4 year investment cycle (similar to what Qualcomm spent on the Scorpion core in Snapdragon). It is also not clear whether Intrinsity's knowhow includes architecture level manipulation of the Cortex implementations. It is definitely clear that the current Cortex FastCore versions didn't have any micro-architectural modifications, and was a cycle-accurate representation of ARM's original microarchitecture.

If Apple was hoping to cut down on the cost of hardening future CPU cores by purchasing Intrinsity, it doesn't seem like such a great decision keeping the above points in mind. On the other hand, if the aim was to prevent the competition from getting access to this technology, it may succeed to quite an extent. All in all, it can't be said that Apple's acquisition of Intrinsity is a slam dunk.