Amazon enters WiFi chip business

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Will sell Alpine processors, from its Annapurna acquisition, under its own brand for WiFi routers and other equipment

Ever since it broke out of its retail model to make its own mobile devices, there has been speculation that Amazon would go a step further and create its own chips, achieving Apple-style control over its designs and costs. However, the failure of the Fire Phone seemed to put paid to such plans – until now, with the news that Amazon will indeed sell its own processors, but to third parties rather than its inhouse gadgets.

The company will go up against Broadcom and others with chips for WiFi routers, as well as media streaming devices, low power servers and other portable or home electronics equipment. Its products are the result of the acquisition, a year ago, of Israeli fabless chip provider Annapurna Labs, for a reported $350m. That firm already has some commercial products, with customers including Asustek and consumer WiFi vendor Netgear.

Annapurna’s Alpine chips are ARM-based and fall neatly within Amazon’s philosophy of packing performance into a low cost package in order to drive market share, even at low margins. The chips integrate up to four processor cores and multiple networking options – though not currently cellular. They also come with hardware development kits so that customers can modify them for specific products.

Becoming a merchant chip provider is an unusual step for Amazon, which more commonly buys hardware firms in order to use their inventions inhouse, as it did when it bought warehouse robotics specialist Kiva Systems. The purchase of Annapurna was widely assumed to be connected to Amazon’s own cloud data centers, and a move to improve its performance and economics by controlling its own processor architecture – an approach also taken by Google and other web giants.

Of course, that may still be part of the plan for the acquisition, and the current plan may be a tactical move to generate revenues from the investment in order to sweeten the pill for investors, some of which have been critical of the way that Amazon’s huge technology developments hit its profits.

Annapurna Labs was founded in 2011 by Avigdor Willenz, previously founder of chip design company Galileo Technologies, which was acquired in 2000 by Marvell for $2.7bn.

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Caroline has been analyzing and reporting in the hi-tech industries since 1986 and has a huge wealth of experience of technology trends and how they impact on business models. She started her career as a journalist, specializing in enterprise and carrier networks and in silicon technologies. She spent much of her journalistic career at VNU Business Publishing, then Europe’s largest producer of technology publications and information services . She was publishing director for the launch of VNU’s pan-European online content services, and then European editorial director. She then made the move from publishing into technology market analysis and consulting, and in 2002 co-founded Rethink Technology Research with Peter White. Rethink specializes in trends and business models for wireless, converged and quad play operators round the world and the technologies that support them. Caroline’s role is to head up the wireless side of the business, leading the creation of research, newsletters and consulting services focused on mobile platforms and operator models. In this role, she has become a highly recognized authority on 4G systems such as LTE and WiMAX, and a prolific speaker at industry events. Consulting and research clients come from major mobile operators, the wireless supply chain and financial institutions.

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