Reports of Amazon acquiring TI's mobile processor business are just rumors.
News about Amazon’s supposedly pending multi-billion-dollar acquisition of the Texas Instruments mobile processor business is just rumor. It would be a bad decision for Amazon. Jeff Bezos can succeed at almost anything he tries. Whether it is selling books, changing online consumer behavior, creating one of the leading IaaS companies or building space vehicles, one would be foolish to bet against him. But Bezos would do well to avoid the dreary, capital-intensive, low-growth and hyper-competitive semiconductor business. He has too many more profitable alternatives.
Neither Amazon nor TI has issued a press release yet, so the intentions of these companies are not known at this time.
Amazon uses the TI OMAP4470 and TI OMAP4460 System on a Chip (SoC) in the Kindle Fire HD 8.9-inch and 7-inch tablets, respectively. The core processor incorporated in these devices is licensed from ARM, which is tightly integrated with Android and widely licensed to many semiconductor and systems companies.
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TI has made the decision that it wants to leave this business and stated that the mobile processor business will be wound down.
This leaves Amazon with a problem. The latest versions of its Kindles are based on the TI SoC. It is not an insurmountable problem, because other ARM licensees are available, such as AMD, Qualcomm and STMicroelectronics, that would be competent suppliers to Amazon.
But Amazon is not in the semiconductor business, nor is it really in the hardware business. Amazon is in the digital content delivery business, delivering digital books, video and audio. Kindles are optimized for this job and are market enablers. Amazon has designed the Fire based on many open and merchant components such as ARM and Android to serve its specific customer-centric use case. The company made this choice to reduce both time-to-market and investment in creating and building the Kindle Fire. Given this decision, why would Amazon change course and buy a semiconductor business?
When Amazon and TI agreed that TI would supply the OMAP44X0 for the Kindle Fire, it no doubt considered the possibility that TI could one day change its direction. Amazon likely contributed to the design of these chips by sharing its use case with TI so it is a better fit for Amazon’s application than other ARM SoCs currently available. That the OMAP44X0 is used in both the Barnes and Nobel Nook and the Kindle Fire would indicate that it is optimized for tablet content applications, so a change would require a new spin on another semiconductor company’s mobile ARM chip.
It is more likely that the discussions between Amazon and TI involve securing TI’s cooperation in the interim development of the OMAP44X0 SoC to meet Amazon’s product roadmap and allow for a graceful change to another SoC manufacturer, if necessary. Amazon likely has the right in the case of TI’s departure from the business to license TI’s technology on the OMAP44X0 and could license the ARM core and seek a manufacturing partner such as TI or TSMC to build future chips.
This is a smooth transition, as smooth a transition as a high-society couple separating with a well-written prenuptial agreement. No arguments, just a division of rights, capital and money.
