Our Semis Are From the Niagara Falls Area

If you had a deep connection to a particular product, but were afraid how the rest of the world would react to it, would you broadcast it loudly, or maybe shuffle it off to some lesser known corner of the world, beyond prying eyes? This seems to be the approach Apple sometimes takes to its internally developed silicon. We think it is worth revisiting this point in light of some recent news around the company.

In particular, there was a report last week that Apple is planning to start manufacturing its own micro LED screens. Apple acquired Luxvue in 2014 and this latest news seems to stem from work the company has done since then. Nikkei frames the move as part of an effort to reduce its reliance on Samsung. We are not convinced that is really what is happening here. As far as we can tell, Apple has no plans to replace OLED screens in the iPhone with its own micro LED both for technical reasons (OLED screens are ‘better’) and economic reasons (manufacturing screens at iPhone scale would require massive investments).

Instead, we think Apple is more likely to be dipping its toe into screen production. Maybe they do want to go down this path, or maybe they just want the threat of such a move to hang out there to ‘encourage’ their existing suppliers to innovate faster. So our best guess is that if Apple is really building this capacity, they will use their homegrown screens first in the Apple Watch. These are better suited to micro LED, chiefly around lower power usage.

This would not be the first time Apple employed this approach. Way back in 2012, Apple acquired the Bluetooth/Wi-Fi connectivity team from Texas Instruments. In the ensuing eleven years, the output from that team has, to our knowledge, only appeared in the Apple Watch. Apple has always struggled with connectivity issues, and it seems likely that their homegrown solution has never quite delivered.

Evidence of this was also on hand this week with Apple’s announcement that it had entered into a long-term supply agreement with Broadcom. Broadcom will provide Apple with fBAR filters and connectivity chips. The only thing new in this announcement is the fact the two companies have extended an existing relationship which has existed for years. Apple is not going to replace Broadcom Wi-Fi chips with its own any time soon. In this context, it is possible to view the TI acquisition all those years ago as a negotiating tactic, and we could possibly view the Luxvue rumors in a similar light.

Which of course brings us to modems. Apple has been working on its own cellular modem for years, going so far as to buy Intel’s modem business for $1 billion back in 2019. Is all of that just 3D Chess negotiations with Qualcomm? Most people assume that Apple is much more serious about parting ways entirely with Qualcomm as soon as possible. Building a modem is not easy, and is very different from the processors which Apple Silicon designs so well. There have been a string of rumors that Apple’s modem has been failing, especially around power usage, but at the same time, Apple Silicon is a very capable organization.

We do not know what will happen with the Apple modem, but if we had to guess, we suspect that we will see it show up in the Apple Watch first. This would allow Apple to put it through its paces and test the part out in the real world without risking the core iPhone franchise. Of course, that level of obscurity may also signal that Apple is not entirely happy with the results and wants to keep its relationship out of the world’s prying eyes.

2 responses to “Our Semis Are From the Niagara Falls Area

  1. I agree, but for different reasons. I think the biggest near term benefit to Apple having its own modem is to further goals of miniaturization for wearables. If they can’t do that, they can’t stay differentiated or produce new products. In other words, if they can’t make a modem they can’t long survive. Seems to me if the Apple Watch had a smaller modem and even if it weren’t more power efficient than the current Intel modem the result would be longer battery life if not thinner profile too. Smartphones have a relatively large form factor by current standards. Outside of the QCOMmie echo chamber –that thinks everything is about smartphones– I can’t see why it would be a priority for Apple to replace QCOM modems in iPhones before the QCOM contract extension expires. I’d think the payoff would be about nil. You’ve said Apple’s superpower is how it works with suppliers. QCOM is producing its only thin modem for Apple isn’t it? I don’t see the point of rushing to fix a problem that was largely fixed by the settlement.

    • Your argument makes sense, but I think Apple has a three motivations for ditching Apple.
      First, they may be able to create some interesting user features with their own modems – think blue bubbles vs. green bubbles. I have no idea what those would be, but it could be an interesting way to further tie users to Apple services.
      Second, power savings – unless Qualcomm designs an entirely custom chip for Apple, there will be ways to Apple to customize the chip, and tie it more closely to the OS.
      Three, the immovable object meets the irresistible force. Apple does not like to be dependent on anyone. From Day 0 they have sought to keep Qualcomm as far away as possible. Feels like they have a strong cultural mismatch that drives them to push Qualcomm out.

      In theory, all of those are solvable, but if they can, my guess is Apple would move away as soon as it can.

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