With iPhone In Mind, Apple Buys Chip Maker

Apple has acquired PA Semi, microprocessor design firm for $278 million in cash, reports Forbes’ Erika Brown. PA Semi was started by Dan Dobberpuhl, a chip designer closely associated with Alpha and StrongARM chips developed by Digital Equipment.

The decision to center the iPhone design around a chip that Apple could own marks a significant strategic choice by Apple Chief Executive Steve Jobs, and is aimed at ensuring Apple can continue to differentiate its flagship phone as a raft of competitors flood the market. According to a source affiliated with the chip company, Jobs and Senior Vice President Tony Fadell led the tiny group of executives who spearheaded the acquisition, which included negotiations that took place in Jobs’ home.

Apple’s decision is going to post a problem for Intel Corp. and its newly announced Atom chip. It is unlikely that Intel’s chip was going to find room in the handsets made by some of the larger players. [digg=http://digg.com/apple/With_iPhone_In_Mind_Apple_Buys_ChipnMaker]

Chip industry insiders believe that Intel was betting on an Apple win to gain scale for Atom which in turn would allow it to dominate the “portable internet device” market. iPhone and iPod Touch are the early leaders in the PID category, and are unlikely to cede that spot for near foreseeable future.

PA Semi had designed a 64-bit dual core chip that consumer between 5-to-13 watts running at 2 gigahertz, making it a good chip for the PID category. So far, PA Semi has found takers in telecom equipment makers.

Beyond3D puts context on the news announcement. While they are mostly right about everything, I don’t think you can rule out the iPhone argument.