Financial Times: Google, Amazon and other Internet companies are increasing their investment in chips

Even though Steve Jobs died more than a decade ago, his genius still permeates the tech industry, according to the Financial Times. Forget the technology, the Apple co-founder told other executives that no matter what happens inside a smartphone case or under the hood of a computer, the only thing that matters to consumers is what he likes to call "magical products and experiences." 

It was therefore surprising to see Apple place so much emphasis on the technical performance of its in-house chips at its recent event. The company first came up with its own processor designs for the original iPad more than a decade ago, but its chip prowess really came to the fore in 2020 when it began replacing Intel processors in Macs with its M1 chip.

Since then, it has delivered performance gains that rivals have left in the dust.

Chip specs leave ordinary consumers speechless, but now in-house designed processors are at the heart of the ambitions of the largest tech companies. These include Google's artificial intelligence processors, known as TPUs, and Amazon Web Services' Graviton data center chips. Given the scale at which such companies operate, their in-house chips could foreshadow a broader industry shakeup.

There’s a saying that a new focus on internal chip design is the number of chips consumed by the largest tech companies. Another is that for the most demanding applications, even small improvements in price/performance can yield big gains. Google’s TPU, developed to handle data-intensive machine learning, has become the king of ASICs—chips designed for specific tasks. Similarly, Tesla’s big investments in its AI chips could one day make it a big player in self-driving cars.

The chip industry’s complex supply chain has evolved to make it easier for these companies to step in. For Apple, that means using Arm’s designs as the basic building blocks for its chips, while at the other end of the process leveraging TSMC’s state-of-the-art production lines to produce processors with world-leading specifications.

The ability to integrate chip design into broader technology development plans provides the biggest advantage for large technology companies while posing the biggest challenge to traditional chipmakers.

Integration can take many forms. AWS is able to put new chips from its Annapurna design lab into production immediately. Apple says all of its apps run faster on its own chips because it tunes the software and chips to work together.

Google recently demonstrated the many advantages of its in-house chip design, laying out 10 lessons it has learned from building the TPU since 2015. These lessons range from the economic (it’s the total cost of the system that matters, not just the chip) to the high-tech (the chips can be optimized for the latest techniques in neural network design).

Google researchers say that simply shrinking chip features will yield fewer gains, and that the best hope for new leaps in speed and performance lies in the co-design of hardware, software and neural networks — precisely the advantage of a company that does all this work under one roof.

Until now, much of the chip industry's attention has been focused on CPUs, or central processing units, accelerating the penetration of Arm designs into markets long reserved for Intel's X86 architecture.

A close second might be Nvidia, which has become the world’s most valuable chip company thanks to its graphics processing units — originally developed for video games but now widely used in “accelerated computing” applications like machine learning. Apple has compared its latest M1 chip to Nvidia’s most advanced GPUs, or graphics processing units. AWS also recently claimed a huge performance boost over Nvidia with its second-generation Trainium chip.

Ultimately, the acid test will be how well these new chips carry big tech companies into new markets. For Apple, that could include self-driving cars and headsets for virtual and augmented reality. Those products will require huge leaps in processing power. But if the spirit of Steve Jobs is still alive at Apple headquarters, chips will be the last thing on people’s minds when those products are finally unveiled to the world.