Finance

Why Apple, Facebook and Tesla are designing their own chips

If smartphone makers want to sell more phones, they need to innovate. The latest smartphone must be better than the competition. And it is precisely this urge that makes tech companies more often design their own chips.

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“You can distinguish yourself by not buying your chips from a home, garden and kitchen chip maker, but by designing them yourself. Then you can make exactly what you need to make your product right,” says Bram Nauta, professor of electrical engineering at the University of Twente.

“And the big advantage is: competitors cannot buy or imitate that chip. Because you own that technology and prevent someone else from buying it,” he explains.

Airpods or speaker? World of difference

The specially designed chips are in smartphones, cars, but also in AirPods, for example. “A chip that controls a speaker must deliver more power than a chip in headphones. Because the sound doesn’t have to be so loud. So you can leave out all the nonsense that you don’t need. By making those choices, such a chip becomes cheaper and more economical,” says the professor.

Apple does this structurally, says analyst Jos Versteeg of InsingerGilissen. “They want to have cheaper elements. They pack some of the chips into their equipment, see how they can do it better themselves, and then subdue it themselves. It’s a specialization.”

And Apple has been doing that for a long time. It started with the chips in the iPhone, which Apple would design itself. And they’ve applied the same trick to the main processor in their latest computers. Intel went out, Apple’s own processor in.

Tesla, Amazon and Facebook are also participating

Another example is Tesla. The maker of electric cars is developing its own chip aimed at artificial intelligence. These chips can be found in the computer that controls the autonomous driving functions. And thanks to that chip can the software make decisions and react to what happens on the road and is recorded by the sensors in the car.

What about Facebook. The company has also been working on its own designed chips for some time. Potato chips specially designed for machine learning, which should help the company identify and remove malicious messages, photos and videos on Facebook and Instagram.

But it is also working on smart augmented reality glasses. “Imagine seeing a house through those glasses. Then you could immediately see what the house looks like from the inside. But those glasses are not there yet and the chips you need for them are not yet available. So they’ve hired people to design and develop it. They employ a lot of chip designers when it’s just an advertising company,” says Nauta.

Amazon mainly designs its own chips to make the servers on which the cloud services run more efficiently. The idea is that if those data centers consume less power, this will ultimately save costs.

‘Chip manufacturer is like a photo printing company’

With the global chip shortage, you would think it would also be a way out of the scarcity. But that kite won’t fly. Because after designing their own chip, all those tech companies still have to knock on the door of one and the same company. TSMC in Taiwan; the largest chip maker in the world.

That company specializes in building the smallest and most advanced chips. “It is very easy to design a chip. Once you’ve done that, you can just send it to TSMC,” explains Nauta.

“Think of it as a photo book printing service that you send photos to. You can also publish or make a photo book without having a print shop. And in this case, TSMC, or a competitor like Samsung, make your chips based on what you’ve come up with.” .” The chip shortage is increasing rather than decreasing, says Nauta.

With deep pockets you build a factory yourself

Why don’t Facebook, Apple or Tesla build their own chip factory if the shortage increases? That is not inconceivable at all. “But it is far from that. It is speculative. But if TSMC cannot deliver and you have a lot of money, I can see that happening,” says Nauta.

Analyst Jos Versteeg thinks it won’t go that fast. “TSMC is the only company in the world that can make those very small chips of 3 nanometers. It is impossible for Apple to come up with such a factory itself. It costs tens of billions of dollars. Plus you are also at least five to twenty years later.”

It’s a gigantic if, says Nauta. But then it should indeed be in the long term. “It is possible with a long-term vision. But also remember: we didn’t think of Facebook that they would design chips and hire designers. Things change.”

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