I don't think that this is all that bad an idea, even though Apple's not much of a silicon design shop. Microsoft isn't either, and yet they were able to REDUCE

I don't think that this is all that bad an idea, even though Apple's not much of a silicon design shop. Microsoft isn't either, and yet they were able to REDUCE costs by getting a custom-designed processor for the XBox360 (yes, I know that had its share of flaws). Intel doesn't do custom designs, that isn't their business model. There are some companies that specialize in that sort of thing, like IBM. There are a number of fabless semiconductor developers that have been quite successful this way, including nVidia. Even SUN doesn't do its own semiconductor manufacturing, for years they relied on TI for that part. Also, Apple acquired the company PA Semiconductor, which includes several folks with a lot of experience in designing processors (some of their products were among the best in the business, like the Alpha series), so it's not like Apple would be starting from ground zero here. I'm not sure that it's necessary, but if Apple wants custom functionality for upcoming mobile products, it might be worth it in the long run. If they just wanted inexpensive, high-performance, general-purpose processors, the best route for the foreseeable future is probably to stick with x86. I don't think it's likely however that x86 will be able to compete with the ARM in the ARM's niche anytime soon though.