Thursday, February 4, 2010

Apple starts making its own chips

Lost in all the hoopla surrounding the introduction of the iPad, was the decision of Apple to make the A4 chip that powers it:

The iPad is a relatively high-end device, yet Apple believed it didn't need to look outside its own walls for a CPU, and thus could forgo paying any form of "Intel tax." By contrast, the iPhones and iPods tend to use a chip called ARM that Apple, like many other ARM customers, need to license.

Of course, Apple is a very big company and, especially for the sort of high-volume product it hopes the iPad to be, it can afford the sorts of up-front engineering expenses that would make smaller companies reel. But if it can afford to make an in-house chip good enough for the iPad in 2010, might it not also be able to make one good enough for the Macintosh in 2013? And if it can do so by then, why couldn't Hewlett-Packard ( HPQ - news - people ) and Dell also?


  1. Semiconductor industry has huge amount of initial investement such as entrance barrier. It is impossible that Apple start to produce chips for iPad within couple years. Although there would be economic of scale after investing for chips, fixed cost will be much higher than economic of scale.

  2. Apple’s incredible success can be greatly attributed to its economies of scale. As stated by Lloyd (2013), it’s not for one to say that Samsung and Microsoft don’t have economies of scale, it’s just that Apple’s is substantially superior. Apple also greatly benefits from its learning curve. By being a first-mover, Apple takes full advantage of technology by both appealing to users and producing products in a way that lowers long-run average costs. Innovation is at the heart of Apple’s values and this has been imperative for their success as far as cost and profit goes.

    In the specific case mentioned here, Apple’s decision to make its own chip for the iPad may not only contribute to economies of scope, but would also offer consumers a more intuitive device. Furthermore, the mention here of the company creating their own chip for the Mac is exactly what the company is currently working towards ( As the company continues to grow and evolve towards new products, the law of diminishing marginal returns will continue to bear true as they have discovered how to reduce output associated with extra input. When we talk about economies of scale, economies of scope and learning curves, Apple is an excellent example of all of these, driven by their first-mover, innovative nature.

    Lloyd, Alex. (2013 February 24). Apple’s Cost Advantage: Learning Curves and Economies of Scale. Retrieved from