Acquisition Strategy of Apple: GCG Analysis

Largest Acquisition by Big Fives (in millions USD)

Just a year after the launching of the first-generation iPhone, Apple has set its way to developing homegrown chips. Our article about the acquisition strategy of Apple will cover this management policy from the investor’s point of view.

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One element of GCG (Good Corporate Governance) is how management could add value for the company and shareholders through acquisition. This matters more especially for a company that is too big to grow more organically.

In This Issue

Intrisity Value, Palo Alto: The First Acquisition Strategy of Apple in Chip

In June 2007, Apple introduced the iPhone – a PC with internet in pocket-sized. This historical device is powered by a third-party SOC (System on Chip): Samsung 32-bit RISC with ARM architecture. 3 years later, Apple launched its own SOC which is embedded in the first-generation iPad1.

This marked the beginning of the new era.

This quantum leap can’t be reached without management excellence in acquisition. Everyone knows that Apple isn’t a chip company, so, how could it make a SOC with mouthwatering performance?

The story about Apple in house chip begin In 2008. At that time, Apple bought Palo Alto Semiconductor that possesses the skill to design powerful yet low-power processors. The deal cost only $278 million in cash. Much cheaper than what Apple gets. This corporate action was then followed by the acquisition of Intrinsity in 2010. Intrinsity is a company specializing in packaging more power from fewer transistors.

Today, iPhone SOC is one of the best processors in the world. It allows iOS to run smoothly with fewer memory resources. As an old say from Apple, what is RAM?

5 nanometers: Acquisition Strategy of Apple is Fruitful for Another Segment

In November 2020, Apple unleashed another beast. M1 – the most efficient CPU for laptop in that time2.

The M1 exploits the new 5-nanometer technology. This figure indicates the space between two transistors located in a single chip. As you guess, the smaller, the better. Technically, a smaller distance gives more efficiency since it packed more transistors in the same chip. For M1, the CPU, GPU, Memory, and I/O are soldered in a single chip instead of dispersed in several.

As consequence, M1 has a much faster computing capability that consumes much lower power consumption.

5 nm tech has sent a fear signal to Intel and maybe AMD. This breakthrough is the sequel of company vertical integration when embedding its own chip in its own devices – running its own OS3

What happened in 2020 is actually a déjà vu. If in 2010, Apple Silicon means a threat for smartphone processor makers like Samsung and Qualcomm. In 2020, Apple did it again, now for the larger devices, laptop-sized, and different prey: Intel and AMD.

When Apple launched its M1, as usual, the Qualcomm side can only make excuses -saying that Apple’s SOC is just marketing Gimmick. Ironically, Qualcomm employees then admit that “The 64-bit Apple chip hit us in the gut,”

Another Try

Due to its stellar financial performance, another vendor tries to replicate Apple’s excellence in hardware-software harmony. Samsung tries with its Exynos – One UI and Huawei with Kirin – EMUI, but nothing close with A series processor – iOS combination. At this point, We just want to admit that Apple’s Silicon designer is at another level compared to Samsung and Huawei, even Qualcomm.

Smart Acquisition

What makes us impressed isn’t only the performance delivered through acquisition, but also how and how much acquisition was delivered. Apple never made a high-profile deal like Disney and 21st Century Fox or when Verizon purchased Vodafone. Yet they made it very cost-efficient, far more intelligent than Facebook with WhatsApp or Microsoft with LinkedIn.

No, it is not because Apple has no money, The Cupertino side used to have a large amount of cash in its account. It’s more about Apple policy. The Tim Cook-led company is extremely selective in choosing its acquisition target. For instance, The CEO didn’t respond to Elon Musk’s offer in EV acquisition.

Vertical Integration Final Thought on Acquisition Strategy of Apple

The cost of acquisition and its effect become our most important factor when composing an article about the Acquisition Strategy of Apple
Breakdown Acquisition by Big Fives

Without deeper dive into gadget material, here are our key points from a business perspective. To summarize, it is about growth:

  1. For companies with large size, acquisition become crucial since they can’t rely on organic growth forever. For example, to boost growth, Microsoft couldn’t rely on its Office software forever and Amazon can’t depend on its e-commerce segment forever. They need something outside that can spark growth. Apple is a perfect example of how it has another weapon besides iPhone segments. The M1 MacBook if executed well will become another apple growth engine, and it has a lot of potentials.
  2. Amazon has Amazon cloud and Microsoft has Azure, so we can say that they have another machine to spur the growth. Ok, but Apple is at another level. It has had a vertical integration concept since the beginning. We say once again, just a year after the launching of the iPhone, Apple acquires the chipmaker. It is really great for shareholders to have management that has a long-term concept about their business.
  3. The first iPhone is powered by Samsung, so The Korean has more steps ahead than the Cupertino side, but, we all know what happens next. It is worth noting that Intrinsity, Apple acquired company, was a Samsung partner in chip manufacturing. By acquiring Intrinsity, Apple has prevented Samsung to gain upper hand in the chip business. If Intrinsity is acquired by Samsung, it is not impossible that Exynos become the most powerful chip right now.
  4. Apple’s acquisition strategy tells us that smart acquisition doesn’t always require to be executed at a high cost. To see another way, Apple has a great Research and Development Team – something crucial in the age of tech companies.
  5. As downside, The investor needs to always stay alert on Apple’s acquisition strategy in the upcoming future. If Apple acquires a certain company, especially with a billion costs like Beat, an investor should as whether the acquisition is compatible with the Apple ecosystem or it is just way too expensive.
  1. and then used in fourth generations iPhone []
  2. measured in performance per watt []
  3. sold in its own retail store []