Ten years ago Steve Jobs gave his famous Digital Hub keynote. He said that if 1980-1994 was the Age of Productivity and if 1995-2000 was the Age of the Internet, then starting in 2001, the PC would enter a new age, the Age of the Digital Lifestyle. He argued that, over the next decade, the PC would evolve and transform in order to add value to other digital devices. In the following ten year period, we saw the popularization of digital cameras, portable music players, and cell phones. The PC, like Jobs predicted, became the hub for all of these devices.
But now Jobs says we’re entering a new, Post-PC era, and Intel isn’t prepared.
Right now they go to their customers and say:
We’ll sell you this chip for $130, take it or leave it.
Intel’s business model simply won’t work going forward. It leaves no room for device-specific performance enhancements or power optimization – two factors that can make or break a Post-PC device.
ARM’s business model is the exact opposite of Intel’s. They license their IP to companies like Qualcomm and NVIDIA who tweak it and add their own customizations. These companies then sell their chips – the Snapdragon and Tegra, respectively – to OEMs who design and sell products based around them.
ARM’s business model also lets a vertical company like Apple design their own chips in conjunction with their own OS, which makes for a finished product where all of the components work perfectly together. This holistic approach to product design is clearly the future.
Right now Apple is the only company that designs its products this way. But sooner or later – and for competition’s sake, I hope it’s sooner – other companies will realize that vertical integration is the key.
Maybe HP will acquire Qualcomm to go along with WebOS. Or maybe Motorola will end up buying NVIDIA. But to ARM, it doesn’t matter – because they’ll be around either way, collecting royalties on every device sold.