Designing the A4 processor that will power the iPad tablet could have cost Apple as much as US$1 billion, according to a report from The New York Times. In a piece looking at emerging processor designs and the contract manufacturers who actually make them, The Times said that designing the generation of chips being used in new devices costs as much as a billion dollars each, including Apple's A4.
The A4 was designed by the team of PA Semi, which Apple purchased in 2008. PA Semi is a fabless semiconductor design company, meaning the firm develops the design for processors - in this case processors based on the ARM processor - and then outsources the manufacturing of those processors to one of the companies who specialize on the fab end of the process.
The Times said it costs as much as $3 billion to build a modern fab, making this a game played by corporate giants. What The Times didn't note is that if its price tag guess is accurate, Apple's willingness to bet so big on entering this new phase of business means that it expects the rewards from sales of devices using the processor to be worth the risk.
With other companies like Intel, Nvidia, AMD, and newer, smaller processor firms, the return on investment (ROI) comes in the form of selling that processor to multiple companies for use in multiple products. For Apple, a company all about controlling the whole widget, the investment is on a processor that will only be used in its own products, which is roughly the opposite of spreading out risk.
Such a commitment, such a risk, hints at how big Apple expects the iPad, as well as future generations of the iPhone and iPod touch that will likely also use Apple processors, to be.
Apple's A4 processor inside the iPad