The next goal of Apple’s self-developed chips: to kick out Broadcom?

Tech giant Apple is moving forward with its plans to build a new wireless chip development team in Irvine, despite signs that the company's headcount elsewhere is slowing.

The company's plans for Irvine first became known in December, when Apple began advertising its chip development team there. Earlier this year, the Business Journal first reported that the company signed a full building lease at the Spectrum Terrace office park to house some of its local operations.

Industry speculation suggests that products reportedly made by Apple could one day replace Broadcom Inc. and locally-based Skyworks Solutions Inc. in supplying some of the chips. Wireless chip uses include phones, iPads and smartwatches made by Apple.

Skyworks generated 55% of its revenue from Apple last quarter, maintaining the Irvine-based company's reliance on the Cupertino behemoth. Financial analysts have long speculated that Apple may decide to develop these chips in-house.

As of August 19, 18 positions were posted on Apple's website, explicitly stating that they were part of the company's "growing wireless chip development team" in Irvine. Another dozen job postings are for wireless development.

Irvine's positions range from RFIC integration engineer to wireless SOC (system on chip) design verification engineer to IP design engineer.

The Business Journal sent multiple requests to an Apple spokesperson for information about the company's local expansion plans but did not receive a response.

Apple is relocating elsewhere in Southern California. It said last month it had acquired the seven-building Rancho Vista Corporate Center in San Diego as part of its ongoing plan to expand hardware and software engineering in Southern California. The price of the deal is $445 million.

In March, Apple released the M1 Ultra, which it calls "the world's most powerful PC chip." The question now is whether Irvine-based Apple will develop a different type of chip, this time for wireless use.

Meanwhile, other parts of Apple's business reflect the possibility of a hiring slowdown.

Bloomberg reported earlier this month that Apple will lay off 100 contract recruiters as part of its efforts to rein in hiring and spending. The new hires are responsible for hiring new employees for the company, and the layoffs underscore a slowdown at the iPhone maker. Workers who have been laid off have been told that the layoffs are due to changes in Apple's current business needs.

Bloomberg reported in July that the tech giant was slowing hiring after years of staffing cuts, joining several technology companies.

Apple CEO Tim Cook confirmed the hiring changes during the company's earnings call in July.

"We will continue to hire and invest in certain areas, but we will do so more carefully to recognize the realities of the environment," Cook told investors.

Apple encountered a problem a few years ago. At that time, their iPhone sales were soaring, but Mac computer sales were stagnant. The reason is that customers are not excited about their design or performance.

Five years later, Mac sales were skyrocketing. This shift benefits from the world's most famous manufacturer building the world's most advanced chips in-house.

Led by Johny Srouji, a former Intel Corp. engineer and IBM executive, Apple's semiconductor division has embarked on a risky project to design its own in-house chips to replace the Intel chips that have powered Apple laptops and desktops for 15 years. processor. These chips, which came to be known as M1, were more energy efficient than Intel's processors, allowing Macs to run faster and generate less heat, setting the stage for a renaissance in Apple's computer line. The company now controls an important component.

Apple's chip business, which Srouji presides over, has designed the chips that power iPhones, helping Apple improve the profitability of its smartphones and computers. It also gives Apple access to potential future products, such as cars or extended reality headsets.

The fourth and final version of the M1 series - the M1 Ultra - debuted last month, and based on this chip they created a high-end Mac designed for video and graphics professionals.

Other tech giants are now trying to follow Apple's lead. Tesla Inc., Amazon.com Inc. and Meta Platforms Inc. are developing their own chips as they seek more powerful computing needs for professional applications such as self-driving cars, data centers and virtual reality. Meanwhile, chip suppliers like Intel are investing heavily and scrambling to change their strategies in order to make chips designed by others.

The decision to "lay off" a key supplier and move its production in-house is a painful crossroads for any company. Mr. Srouji's efforts to build the M1 chip were also far from successful — especially with the coronavirus pandemic threatening to derail the 2020 rollout.

Launching the M1 chip requires Apple to rewrite how it operates to avoid delays due to the pandemic. Apple had to rely on Mr. Srouji's 14 years of behind-the-scenes work as he grew the chip team from 45 people to thousands around the world, including in his native Israel.

"Things I've learned in life: You think about all the things you can control, and then you have to be flexible and adaptable enough to redirect yourself when things don't go according to plan," said Apple senior vice president and head of technical hardware Srouji said in a rare interview. "For example, Covid is one of them."

Srouji, 57, joined Apple in 2008 and initially developed chips for the iPhone. His approach to designing chips for Apple's specific needs for devices has allowed the company to create a more powerful and efficient chip rather than using off-the-shelf chips from suppliers that must meet general-purpose requirements.

These things are important for a device that runs on battery and is used for hours at a time to run processor-intensive tasks like videos and games. The result: Apple started using its own chips in iPhones in 2010 — which helped extend battery life and allowed for better integration of software to push performance boundaries for other features, such as camera systems that run complex algorithms to improve the lighting in photos and focus.

Following this strategy, Apple has become a "semiconductor giant," said CCS Insight analyst Wayne Lam, who estimated that Apple's spending on its in-house semiconductors last year would have made it the world's 12th largest company by revenue. Chip companies. This huge change has caused Intel to shift some of its attention to making chips for companies that once bought Intel-designed chips.

"At first it seemed a little crazy that they could actually consider kicking Intel out," said Mike Demler, an independent analyst who has followed the semiconductor industry for nearly 50 years. Instead, he added: "It makes them a more dominant platform overall."

In 2017, as Apple reaped the fruits of success in chips that power iPhones and Apple Watches, it faced the risk of customers abandoning its Mac product line. Because in their view, Apple is lagging behind.

To that end, Apple executives convened a roundtable of tech bloggers and did something the company rarely does: publicly apologize for the shortcomings of its high-end Macs aimed at professionals and promise that better products are being developed. But the criticism extends beyond Apple's high-end computers. But months later, new laptops that still contained Intel chips were criticized for disappointing performance that included computing power that was throttled to prevent the machines from overheating. Apple later released a software update to address the issue. At the time, Mac sales were stagnant compared with the iPhone business, which accounted for nearly two-thirds of the company's revenue.

Some industry observers say Intel's own missteps could force Apple's hand. Intel's pace of innovation has slowed, causing the quality of Apple's Macs to suffer.

"It's incredibly bad," industry publication PC Gamer quoted former Intel engineer François Piednoël as saying in 2020. "Our friends at Apple become the first submitters of architectural issues. It's really, really bad. When your customers start finding out You find yourself wrong almost as much as you find yourself in the right place.”

Mr. Piednoël confirmed those comments, adding that Intel now benefits from new leadership and is making progress.

After initially dissing Apple's internal chip designs, Intel said it was taking competitive threats seriously. "They're doing a great job," Intel CEO Pat Gelsinger said in an interview on "Axios on HBO" last fall. "So what I have to do is create a better chip than what they make themselves. I hope to win their business."

Intel reiterated in a statement that the company is focused on developing and manufacturing processors that outperform its competitors. "No other chip supplier can match the combination of performance, software compatibility and form factor options that Intel-powered systems offer," the company said.

The transition to Apple's own chips could cause headaches for the company's software engineers, which have relied on Intel chips for its Mac computers for more than a decade. Now, those programmers must write software that runs on both older and newer chips—a problem the company has grappled with since 2006, when it switched from early PowerPC systems to Intel chips . The switch required multiple last-minute changes to the laptop's main circuit board, according to a person involved in the effort. "A lot of people are worried that we're going to have the same problem," the person said.

Mr Srouji admitted the change in strategy faced fierce debate within the company - the computer maker had not designed such a component in-house before. The stakes are high—any misstep would be embarrassing and costly.

Part of the challenge his team faces is meeting the range and needs of the computers the company offers, from $999 entry-level MacBook Airs to high-end desktops costing thousands of dollars.

As Apple's hardware engineers seek to design chips as efficiently as possible to meet their specific needs, the company's software designers tune computers to support the specifications they need most, such as smooth video game graphics.

"First of all, if we do this, can we provide a better product?" Mr. Srouji said of the debate. "That's the first issue. This has nothing to do with chips. Apple is not a chip company."

Next, he said, the team must figure out whether it can be delivered and executed, while building the ability to handle more products and anticipating where the technology is headed. Apple needs to produce hundreds of millions of devices every year while developing components for its next generation of products.

“I don’t do it once and call it a day,” Mr. Srouji said. "Year after year. It's a huge effort."

Finally, Apple decided to extend its iPhone chip strategy to Macs, building a scalable silicon architecture from the chips in iPhones to those used in computers and working to ensure its software runs natively on day one. A host of third-party software developers already familiar with its chips have helped make the transition possible, and Apple will develop technology that will allow Macs with M1 chips to use programs developed for Intel-powered Macs.

A former engineering manager said Mr. Srouji's team had become central to product development and his influence had quietly grown over the years, especially as he demonstrated an ability to balance engineering needs with business needs.

Over the years, Apple has spent billions of dollars between R&D investments and acquisitions of smaller companies to bolster its chip team, including Palo Alto Semiconductor, which is known for its ability to develop low-power microprocessors.

Mr. Srouji has been a member of Apple CEO Tim Cook's cadre of direct reports since 2015. In 2019, there were rumors that he would return to Intel as CEO at a time when Intel was in trouble.

Outside Apple's headquarters in Cupertino, Calif., Mr. Srouji describes himself as a car enthusiast with a passion for German engineering. He loves his cars as much as his chips, he says: "Fast and Furious."

In the eyes of his managers and third parties, Mr. Srouji was known as a demanding man whose axiom was that his meetings focused on problems, not successes.

Aart de Geus, chief executive of Synopsys Inc., which helps Apple and other companies improve chip performance, said that in every meeting he could recall with Mr. Srouji, the executive pushed participants to continue improving. “They are only interested in the best,” Mr. de Geus said.

One of the biggest concerns is the arrival of Covid-19, which threatens years of preparation leading up to the M1 chip's fall 2020 debut. U.S. companies implemented remote work mandates, just as Apple began painstaking testing to validate chips before going into production — a labor-intensive process that sees engineers huddle under microscopes to check the quality of early silicon wafers.

Delaying the development schedule for new chips is not an option. So Mr. Srouji worked hard to design a new testing process. The team set up cameras throughout the lab so engineers could examine the chips remotely, people familiar with the matter said. This is a change that was once unimaginable, and at Apple, secrecy and control are paramount.

The business was able to transition so seamlessly in part because Mr. Srouji's team, which is spread across the globe, was accustomed to conducting business via video calls and working across time zones as they coordinated work in remote locations like San Diego and San Diego. Munich, Germany, where the company is investing billions of dollars in chip design to expand its wireless technology capabilities.

As the chips pass final verification in 2020, production will likely begin at factories operated by TSMC, the silicon manufacturing giant that produces chips for Intel. Mr. Lin, an analyst at CCS Insight, said the arrangement allows Apple to reduce the cost of buying chips from suppliers such as Intel. "They're obviously saving money," he said.

At Apple's annual product event in November 2020, executives promoted the product via pre-recorded videos. Srouji introduced the M1, which was photographed in the company's labs, and previously provided details about the new chip's capabilities, declaring: "M1 is a breakthrough chip for the Mac."

The first computers equipped with the M1 chip were MacBook Air and Mac Mini models, which went on sale shortly thereafter, followed by higher-performance computers in 2021 with the M1 Pro and M1 Max. The first M1 chip had 16 billion transistors.

This number will only get bigger with more powerful versions of the M1. The M1 Ultra, launched in March in the $3,999 MacStudio computer, has 114 billion transistors and a graphics processing unit eight times the size of the original M1.

In classic Apple fashion, Mr. Srouji remained mum on what might happen in the future, including whether Apple would have developed its own powerful processor for self-driving cars, similar to those developed by Tesla.

“I’m not going to talk about that,” he said with a laugh.

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