BusinessWeek Says IBM's Chip Problems May Be Over Soon

by , 8:00 AM EDT, April 29th, 2004

Sometimes it seems that Apple couldn't get a break if it paid top dollar for it. Not long ago, Apple's fortunes, and misfortunes, were tied to the ability of Motorola to produce the CPUs that were the heart of Apple's computers. Many complained bitterly that Motorola's inability to produce faster chips in large enough quantities was strangling Apple, and that all Apple needed to do was to drop Motorola and pick up IBM as the supplier of its processors.

The reasoning seemed simple enough: IBM had demonstrated several times that it could produce the chips Apple needed, and IBM was also intimately familiar with the RISC architecture used in the G4. If Apple bought from IBM, Apple's worries would be over.

Well, maybe.

Lately, IBM has had problems manufacturing the very same CPUs that Apple needs, as have other chipmakers. Big Blue has found itself scrambling to work out whatever gremlins were plaguing its East Fishkill NY plant, where Apple's G5 processors are made. A new report from BusinessWeek Online says that IBM's gremlin hunt may be coming to an end, and that the outlook for IBM chip production looks as rosy as ever. From the BusinessWeek Online article:

These days, IBM is the goat, as Apple clearly indicated in its Apr. 14 conference call. It's counting heavily on Big Blue for rapid improvements to G5 chips that could drive sales of the high-end PowerMac line. So IBM's troubles at Fishkill could hit Apple's bottom line hard because the high-range Macs are disproportionately profitable.

[...]

Some experts still hold the view that in the long run, the IBM chip production problem is a blip and that Apple still looks smart for having thrown in with Big Blue. Fears that IBM's chip production problems are serious are seriously overblown, IBM Senior Vice-President and Chief Financial Officer John Joyce said in a recent conference call. And IBM has started to see much higher yields at its Fishkill plant lately, which means IBM's engineers are pretty close to ironing out the kinks, Joyce suggested.

If anyone can figure this mess out, it's IBM, which has a hard-won reputation for bleeding-edge research in chip fabrication. "IBM is in a better position to develop this technology because they have been doing more theoretical work in process technology. I'm reasonably confident they will solve these problems in the next several months," says Peter Glaskowsky, an independent chip analyst.

There's more information in the full article at BusinessWeek Online, which we recommend as a good read.

The Mac Observer Spin:

We agree with the analysts in the article; Apple and IBM are a good team, and if anyone can solve the problems that plague chip production, IBM can.

That said, it is nonetheless frustrating, and at the same time heartening, to learn that the upgrade path for processors from IBM include some really big speed improvements over today's G5s (read the full article for those comments). It's frustrating because we'll have to wait until the technology gets incorporated into processors slated for Apple, and we have no clue when that will be; it's heartening because we know it's coming, which is something we couldn't say when Apple bought exclusively from Motorola.

In the meantime, we look forward to IBM banishing the processor plant gremlins for good. Apple needs some consistency and reliability from its chip maker.

Apple's Chip Pain Will Ease -- Later