Ashlee Vance and Brad Stone co-wrote a story about Apple's A4 chip, that powers the iPad. They didn't find anything special about it.

In the iPad, Apple Is Betting on Its Own Microchip - NYTimes.com

"I don't see anything that looks that compelling," said Linley Gwennap, a chip analyst at the Linley Group. "It doesn't seem like something all that new, and, if it is, they are not getting far with it."

..."From what we have seen so far, Apple's product seems to stack up evenly with the competition," said Dean McCarron, a chip analyst with Mercury Research. "Clearly, Apple is using their own metric for whatever 'best' is."

They noted that 6 chip designers had left PA Semi, the company that Apple bought, that designed the chip. But that's from a team of more than 150 people.

They also pointed out that, "Designing its own processors burdens Apple with additional engineering costs and potential product delays."

They found nothing special about the A4.

But this is the question they should have asked: Why would Apple spend $278 million, then fund development for another two years, probably investing half-a-billion dollars in creating the A4, if it seems to be similar to what else is on the market?!

Clearly, there is something else in the A4 that is not evident.

Clearly, Apple has big plans to use its own chips as a competitive strategy.

What competitive strategy is gained by having your own chip design capability?

DRM hard wired...

My analysis was that the A4, most probably, has a built-in digital rights management (DRM) system built-in. It's a security dongle with its own processor and graphics processor.

By building all of this into the chip, it makes it very difficult to break the security.

If Apple can show it has the strongest DRM around, an unhackable system, then that gives it a competitive advantage. Many media producers want strong DRM.

What if Apple then sold the A4 to others so that they could build devices that contain Apple's DRM technology? Some 'Apple Inside' alongside 'Intel Inside.'

What if it provided the chip for free, or very low cost, subsidized by media sales?

That's a killer competitive advantage.

You can read my analysis here: The Mysterious Apple A4 Chip - Where's MSFT's and GOOG's Chip? - SVW

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Chip supplier to the military...

Ashlee Vance wrote an interesting article in NYTimes about PA Semi in September 2008, six months after the Apple acquisition.

He uncovered an interesting fact about PA Semi, that it's chip designs were popular with the military because of their very low power consumption. When Apple acquired PA Semi, the Pentagon pressured Apple to keep supplying PA's military system builders.

New iPhone Chip Will Cost an ARM and a Missile - Bits Blog - NYTimes.com

These equipment makers urged the Pentagon to pressure Apple into continuing to supply PA Semi's chips for several years, according to people familiar with the negotiations, who declined to comment on the record because of Pentagon restrictions. Apple eventually caved.

"We are extremely confident and pleased with the direction of PA Semi's silicon availability," said Bret Farnum, a vice president at Extreme Engineering Solutions, which makes specialized computing systems, some of which go to military suppliers. "We have many customers that are going to continue to deploy it for the next four to five years."

Apple declined to comment on matters related to PA Semi, which it operates as a subsidiary.

It's unclear how many of the PA Semi processors will make their way into military systems. Some people I interviewed suggested that Apple could well sell enough of the chips over the next five years to cover the cost of the PA Semi acquisition.