Amazon enters WiFi chip business

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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