Mega-etailer Amazon is reportedly in talks to buy a mobile chip business from Texas Instruments. TI's mobile chips, which are used in Amazon's Kindle Fire fondleslab, could be in the market as the company moves away from smartphones and other mobile devices and into industrial clients like carmakers. If the talks lead to a deal …
It's called vertical integration. You can cut out the profits made by the chip maker.
It worked great for Commodore in the 80s. They slaughtered TI back then.
You're right it's called vertical integration. And you're right that it cuts out the chip maker's profits; but it doesn't stop those assets having to earn a return, so you still need to earn a profit equal to or usually greater than the chipmaker, and the costs of building a Kindle are likely to go up not down.
That's because when you buy any asset, (ignoring BillG's very valid observations about commercial risks in another comment) a commercial business still needs to make a profit on the capital invested in buying it, and that invariably includes a lot of "good will", or the amount you paid that is greater than the book value of the acquired business. You centainly get to "keep" the profits rather than somebody else, but with that comes all the complexity, risk and capital required for that business. Who will be better at baking wafers, Amazon or TI?
Moving away from mobile into the car biz. Are they nuts ?
They may be thinking about hardware solutions for self-driven cars.
It's going to happen..
Current rumor down here (Nice, where the design center for OMAP stuff is based) is that its going to happen....certainly makes a lot of sense.
Tips from a Pro
I've been in Semiconductors for over 20 years. Amazon is blindly walking into dangerous territory.
They can't own a chipmaking business that sells to itself and then expect their Kindle competitors to buy chips from them. Amazon will be seen as competing with their own customers. Plus, other Amazon Semiconductor customers will be afraid that if there is a shortage, Amazon products will suck up all the supply leaving Amazon Semiconductor's chip customers with inactive factories.
Re: Tips from a Pro
ARM SOC is almost a commodity market, Amazon is a large buyer which can achieve prices not far above cost, no need to get entwined in an industry you know jack about which is even more cut-throat and fast moving than the one your already in.
Re: Tips from a Pro
Your statement makes no sense.
It's called vertical integration. Apple do it. Samsung do it. They both seem to be enjoying moderate success.
Amazon will be buying a "design centre" i.e. a team of Engineers - the chips will be fabricated elsewhere...probably TSMC.
If they go ahead, probably may see an Amazon phone as well.