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Qualcomm's $1.4B Nuvia deal highlights chipmaker arms race, fueled by Apple, Arm

QUALCOMM Inc.'s pending $1.4 billion acquisition of startup Nuvia highlights the arms race touched off by Apple Inc.'s effort to sell its chips in laptops as well as smartphones.

Apple's decision to power its laptops with its own M1 chip gave it an immediate foothold in a laptop market in which other smartphone chipmakers have had little success. In the process, Apple has touched off an arms race among smartphone-makers eager to expand into the much larger market for other devices, analysts say.

With Nuvia, Qualcomm is getting a startup founded by former Apple semiconductor engineers working on chips designed to outperform all others in the market for high-performance data center servers, all while using lower levels of electricity. If Nuvia's high-power, efficient design can be adapted for use in smartphones, it could help Qualcomm boost the power of its smartphone products that compete with the A-series chips Apple puts in its iPhone as well as the M1 chips Apple is installing in its laptops and other Apple-branded products, analysts say.

The deal could also put Qualcomm in the company of a growing number of others, including Amazon.com Inc. and Microsoft Corp., using processor designs licensed from Arm Ltd.to build chips more tailored to their own requirements, at a lower cost than buying from third parties.

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A big performance boost could put Qualcomm near the front of the pack in smartphone chip performance and make it more credible as a competitor to Apple, Intel Corp. and Advanced Micro Devices Inc. in the market for PCs and possibly data center server processors as well, analysts say.

Qualcomm has never been successful in its efforts to break into the market for PC processors, despite a long-term partnership with Microsoft to bring Snapdragon CPUs to the PC, wrote James Sanders, semiconductor and cloud-technology analyst at 451 Research, in a Jan. 13 analysis of the Nuvia deal. 451 Research is a division of S&P Global Market Intelligence.

Meanwhile, Apple is poised to take more share of the PC processor market as it continues to replace Intel processors in new models of MacBook laptops with Apple's self-designed system-on-a-chip. That shift alone could land Apple a 7% share of the PC processor market, according to a Jan. 6 market analysis from TrendForce Corp.

Apple's new M1 chips deliver 40% better performance for native MacOS applications and extend the battery life of MacBooks by 70%, according to analysis from Linley Group analyst Aakash Jani. Some versions of the Apple chipset also support a separate deep learning accelerator, or DLA, chip to boost the performance of machine-learning applications, Jani wrote.

The increasing prominence of designs from Arm is fueling the market shift. Almost every smartphone has at least one bit of circuitry or other intellectual property from Arm, but until recently, not enough to be especially visible, Sanders said.

In addition to Apple and Amazon.com Inc., which used Arm designs to create a low-cost data center server chip for its Amazon Web Services cloud services, Microsoft has announced plans to build its own version. NVIDIA Corp., which is in the process of acquiring Arm, is encouraging the strategy as it adds its proprietary artificial technology functions into Arm CPUs.

All the activity, especially from Apple, has made clear to Qualcomm and other smartphone chipmakers that they will have to improve the performance of their chipsets and work harder to differentiate their products from the Arm-based chipsets out there, Sanders said.

Nuvia's technology could add a dramatic boost in power and greater PC/data center compatibility, Sanders said. But Qualcomm has a spotty record of success developing for the PC market and would have to work hard to build up enough credibility to be taken seriously as a server CPU vendor, the analyst added.