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In Apple-Intel-Samsung Menage a Trois, Intel May Not Be On Top, Gassée Says

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In an analysis of the interplay between Apple, Intel and Samsung, Jean-Louis Gassée, who served as president of Apple's product division in the mid-1980s, argues that Intel's x86 processors might not cut it in the post-PC world.

Describing Intel CEO Paul Ottellini as a "spurned suitor" for saying Intel's  job was to do everything it could to make its silicon compelling enough for Apple's Mac computers and iOS devices including the iPad, Gassée argues that Apple could go it alone — funding all or part of a  foundry for one of Samsung's competitors, eliminating the need to buy ARM-based chips from Samsung, with whom it competes in the smartphone market and with whom it is currently involved in a patent war.

At its annual investor day last week, Intel CEO Paul Otellini sounded a bit like a spurned suitor as he made yet another bid for Apple’s iDevices business [emphasis mine]: “Our job is to insure our silicon is so compelling, in terms off running the Mac better or being a better iPad device, that […] they can’t ignore us.” This is a bit odd. Intel is Apple’s only supplier of x86 microprocessors; AMD, Intel’s main competitor, isn’t in the picture. How could Apple ‘‘ignore’’ Intel? Au contraire, many, yours truly included, have wondered: Why has Intel ignored Apple’s huge iDevices business?...

Otellini’s ‘‘they can’t ignore us’’ could be decoded as ‘‘they won’t be able to ignore our prices’’. Once concerned about what ARM-like prices would do to its business model, Intel appears to have seen the Post-PC light: Traditional PCs will continue to make technical progress, but the go-go days of ever-increasing volumes are gone. It now sounds like Intel has decided to cannibalize parts of its PC business in order to gain a seat at the smartphone and tablet table....

As for Apple, which has more than $110 billion in cash, Gassée argues:

The company keeps investing in silicon design teams, it has plenty of money, some of which could go into financing parts or the entirety of a foundry for one of  Samsung’s competitors in Taiwan (TSMC) or elsewhere in the US, Europe, or Israel. If it’s a strategic move and not just an empty boast on PowerPoint slides, $10B for a foundry is within Apple's budget...I don’t see Apple losing its appetite for customization and ownership, for making its products more competitive by incorporating new functions, such as voice processing and advanced graphics on their SOCs. For this reason alone, I don’t see Apple joining the x86 camp for iDevices. (Nor do I see competitive smartphone makers dropping their SOCs in favor of an Intel chip or chipset.)...Intel isn’t completely out of the game, but to truly play they would need to join the ARM camp, either as a full licensee designing SOCs or as a founder for SOCs engineered by Apple and its competitors.

The full post by Gassée, now a venture capitalist at Allegis Capital, is  here.