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This article says a lot more about Arm than it does about Intel. A couple of sentences stood out: > Arm is also rumored to be eyeing an expansion into buildin

by rwmj 2y ago

This article says a lot more about Arm than it does about Intel. A couple of sentences stood out: > Arm is also rumored to be eyeing an expansion into building its own chips and not just licensing its designs > if you’re a vertically integrated company and the power of your strategy is in the fact that you have a product and you have fabs, inherently, you have a potential huge advantage in terms of cost versus the competition I don't get this strategy at all. Why is vertical integration of the designs and the fabs any advantage? Sure, there are probably small savings here and there from changing the design to suit the process. But like Intel you'd get fat and lazy and end up with weird tooling that only your one company uses. And you can't concentrate on being the best at one thing with huge volumes like TSMC. Arm is way overvalued as it is, and now the CEO is going to try something stupid.

sgt101 2y ago
Having visibility across the value chain should be very helpful - you can avoid committing to undeliverable products and at the same time anticipate demand from your customers. Overall you should be able to run the same thing on much lower margins and be in a position to out compete anyone who doesn't have the same advantage. Unfortunately I think that the temptation is to give in to the "faster horse that eats less" requests and to accept "we just can't do that boz" on the other end. China seems to be moving to a model that couples integration with bouts of intimidatory violence and so far that seems to be working well, but it does have costs.
imtringued 2y ago
Yeah that CEO doesn't understand the benefits of vertical integration. The point of specialization and outsourcing is to amortize fixed costs among a larger customer base. If fixed costs were zero, then it would never make sense to outsource, since the effective marginal cost is identical in the non specialized company versus the specialized company. Every company would produce everything they need in house. Fabs have enormous fixed costs. Any form of vertical integration is going to make your products more expensive, unless you specialize in some kind of underserved niche with no competition. TSMC will always have the lowest marginal cost. What Arm should be doing is partnering with TSMC and other fabs to build optimized cell libraries for Arm designs and investing into software tools for SoC integrators and become a one stop shop for proprietary IP cores and custom ASIPs so people don't even think of talking with Cadence or Synopsys.

by rwmj 2y ago

sgt101 2y ago

Having visibility across the value chain should be very helpful - you can avoid committing to undeliverable products and at the same time anticipate demand from your customers. Overall you should be able to run the same thing on much lower margins and be in a position to out compete anyone who doesn't have the same advantage. Unfortunately I think that the temptation is to give in to the "faster horse that eats less" requests and to accept "we just can't do that boz" on the other end. China seems to be moving to a model that couples integration with bouts of intimidatory violence and so far that seems to be working well, but it does have costs.

imtringued 2y ago

Yeah that CEO doesn't understand the benefits of vertical integration. The point of specialization and outsourcing is to amortize fixed costs among a larger customer base. If fixed costs were zero, then it would never make sense to outsource, since the effective marginal cost is identical in the non specialized company versus the specialized company. Every company would produce everything they need in house. Fabs have enormous fixed costs. Any form of vertical integration is going to make your products more expensive, unless you specialize in some kind of underserved niche with no competition. TSMC will always have the lowest marginal cost. What Arm should be doing is partnering with TSMC and other fabs to build optimized cell libraries for Arm designs and investing into software tools for SoC integrators and become a one stop shop for proprietary IP cores and custom ASIPs so people don't even think of talking with Cadence or Synopsys.