Apple's Purchase of PA Semi Under Review by DoD

by , 2:50 PM EDT, May 21st, 2008

Apple's purchase of semiconductor company PA Semi is under review by the U.S. Department of Defense (DoD). PA Semi makes a key chip used in some defense systems, and to maintain that supply, and Apple could end up becoming a defense contractor.

"The [PA Semi] 1682 is a very important and unique component required to meet performance requirements on a wide variety of defense applications," said an investigator who works for the Deputy Under Secretary of Defense, according to EETimes.

The continuity of defense related parts appears to be the source of concern.

Apple first reported the purchase in April, but an Apple spokesperson, Steve Dowling, declined to comment on Apple's purpose or plans. Some observers think that Apple is after the low power designs that PA Semi has developed. Others believe that Apple wants to also put subtle pricing pressure on Intel with respect to future Mobile Internet Device (MID) CPUs.

These low power chips are widely used in military systems, and a potential disruption of supply for a new Apple commercial venture is being discussed with Apple by the DoD.

Apple may have to make concessions about the continued supply of the chips, and that would put Apple in the interesting business of being a defense contractor. However, if that doesn't work and the deal is blocked, there could still be problems for PA Semi. Kent Dahlgren, the CEO of Praesum Communications, who has worked with PA Semi noted that, "Even if the Defense Department blocks the deal, the circle of trust between PA Semi and its customers is gone." That could result in cancelled contracts and serious problems for PA Semi if Apple backs out.