In episode 30 of Acquired, hosts Ben Gilbert and David Rosenthal discuss Apple's strategic acquisitions of PA Semi and AuthenTec, marking the 10th anniversary of the iPhone. PA Semi's acquisition brought in-house the expertise for Apple's A-series chips, while AuthenTec provided the Touch ID sensor—both pivotal for iPhone's hardware innovation. The hosts highlight how these acquisitions were crucial in differentiating Apple's products in terms of performance and security, reflecting on the broader impact and future implications of such tech integrations. They also touch on the company's approach to talent acquisition, product development, and maintaining a competitive edge in the mobile device market.
"Today's episode, we're covering two acquisitions that we believe go together nicely. Apple's acquisition of PA Semi and AuthenTec. We think it's a really nice way to mark the 10th anniversary of the iPhone."
The quote highlights the main topic of the podcast episode, which is the discussion of Apple's strategic acquisitions that contributed to the iPhone's technology.
"Pilot both sets up and operates your company's entire financial stack... Pilot takes care of all that. And they've been doing this now for years across thousands of startups in Silicon Valley and beyond."
This quote explains Pilot's role in handling the financial operations of startups, underscoring the sponsor's relevance to the podcast's entrepreneurial audience.
"So at this point, this was 2005. Apple doesn't end up acquiring PA Semi until 2008... a lot of people think PA Semi is kind of left for dead at this point."
The quote captures the uncertainty surrounding PA Semi's future before its acquisition by Apple, highlighting the company's precarious position after Apple's switch to Intel.
"Typically computers as we know them, desktop computers, laptops and servers, use x86 architecture from Intel... ARM chips in our iPhones... have come to be extremely popular in the last few years is because as we move to mobile devices, we have stricter power requirements."
This quote explains the difference between ARM and x86 architectures, setting the stage for understanding PA Semi's value to Apple in developing low-power chips for mobile devices.
"We would love a review on iTunes... It's how we grow the show and it's how we get new listeners."
The quote is a direct appeal to listeners to support the podcast by leaving reviews and sharing it with others, emphasizing the importance of community in the show's growth.
"But people didn't really realize yet that the iPhone was about to become Apple and that the Mac was going to take a backseat."
This quote highlights the market's underestimation of the iPhone's potential impact on Apple's product hierarchy and the subsequent shift in focus from the Mac and iPod to the iPhone.
"Apple already had an existing project working on an arm design, working on what would become the a four, the first Apple chip that they would put out, which actually launched with the iPad."
This quote explains that PA Semi's team was integrated into an existing Apple project that was focused on creating the A4 chip, marking a significant move towards Apple's own silicon for mobile devices.
"And now it looks like a dinosaur, right?"
This quote underlines the rapid progression of technology and how devices that were once cutting-edge can quickly become obsolete.
"So authentic works on this technology for a long time."
This quote indicates the extensive R&D that went into developing the Touch ID technology, which was a key factor in Apple's acquisition of Authentic.
"The ability of Apple to integrate these two products creates an advantage that other manufacturers don't have."
This quote emphasizes the strategic value of Apple's acquisitions in giving them a competitive edge through the integration of hardware and software.
"They really are able to say that all the security vectors that people would normally do to get into devices by routing it or having direct hardware access, those fingerprints and the ghosts in memory of those fingerprints don't even ever exist to be able to go and get them later."
This quote highlights Apple's technical capability to ensure the security of biometric data on its devices, which is critical in the context of privacy and security debates.
ntiC is a spin out from a major defense contractor ranked by Wired magazine as right behind the NSA in terms know decreasing privacy on the Internet and then becomes a cornerstone of Apple's privacy strategy.
The quote highlights the ironic transition of ntiC from being associated with reduced privacy to being an integral part of Apple's privacy framework. It underscores the contradiction between the company's origin and its eventual role at Apple.
Our sponsor for this episode is a brand new one for us, Statsig.
This quote marks the introduction of Statsig as the episode's sponsor, setting the stage for further discussion about the company and its services.
Before founding Statsig, Vijay spent ten years at Facebook where he led the development of their mobile app ad product.
This quote provides background on Vijay's expertise and experience, which informs the capabilities and promise of Statsig as a platform for product development and experimentation.
Statsig is a feature management and experimentation platform that helps product teams ship faster, automate a b testing, and see the impact every feature is having on the core business metrics.
This quote explains the core functionality of Statsig, emphasizing its ability to streamline product development and directly measure the impact of new features on business performance.
Also, Statsig is a great platform for rolling out and testing AI product features.
The quote underscores Statsig's utility in managing and evaluating AI features within products, highlighting its role in the fast-paced evolution of AI-driven applications.
It was basically a builder buy decision for Apple and clearly they were working on building anyway, but this just rapidly accelerated their pace.
The quote reflects on Apple's strategic decision to acquire Pa semi, which significantly sped up their development process, illustrating the importance of acquisitions in Apple's growth strategy.
Apple really think about products from a whole product sense and from a user centric and compellingness to a user perspective.
This quote emphasizes Apple's holistic approach to product development, focusing on user experience, which sets them apart from competitors, particularly in the integration of security and privacy features.
And yet intel, their partner for all their Mac computers, had a low power chip they were developing called the Atom.
The quote points out the choice Apple made to go with ARM processors for the iPhone, which was a strategic decision that diverged from their use of Intel chips in Mac computers.
It's incredible that Apple's been able to so finely tune their products because they've been able to control the underlying chip and surrounding pieces of that rather than buying it from a third party.
This quote highlights the strategic advantage Apple gained by developing its own chips, allowing for greater control and customization of its products, which is a cornerstone of their tech theme of hardware differentiation.
The key to startup and venture capital is targeting the big market at the right time and the right time of the wave.
The quote stresses the importance of market timing for startups and investors, using Apple's well-timed entry into the smartphone market as an example of successful alignment with market waves.
Both of these acquisitions are total Clayton Christensen sustaining innovations, not disruptive innovations.
This quote categorizes Apple's acquisitions as sustaining innovations, which are aimed at improving and extending the existing market wave rather than disrupting it with entirely new technologies.
How much does all this matter going forward? It's clearly been super important in the last decade to have all this power on our phones.
The quote prompts reflection on the future significance of powerful client-side processors in a computing landscape increasingly dominated by cloud-based services and machine learning.
Apple is taking the position that they can do a lot of this really advanced machine learning and cool applications that you're seeing from Google and others, that they can do it on the device and they can do it without sending your identifiable information into the cloud.
This quote captures Apple's philosophy of balancing advanced machine learning capabilities with user privacy by processing data on the device, a key point in the discussion on the future of computing and data handling.
For know, this really is kind of, as we were talking about sort of a tale of two cities, a tale of two acquisitions was the best of acquisitions, was the worst of acquisitions for Apple.
The quote introduces the grading discussion by framing Apple's acquisitions as a dichotomy, reflecting on their successes and potential shortcomings in the context of Apple's long-term strategy.
"Just those generations of iPhones sold about 720,000,000 ish units at roughly a $600 average selling price... that's over $400 billion of revenue... You're at sort of $170,000,000,000 of gross margin generated by units during that time... That's still almost $10 billion in incremental sort of contribution margin from these acquisitions." This quote breaks down the financial success of Apple's iPhone sales and the estimated gross margin generated, highlighting the substantial contribution margin from the features added through acquisitions.
"I compare them versus our benchmarks of what great acquisitions are in Instagram and in next. Those are acquisitions that generated entirely new business lines and categories for their companies." This quote establishes a benchmark for evaluating acquisitions, noting that while Apple's acquisitions were successful, they did not create new business lines like Instagram and Next did for their respective companies.
"Even though a lot of that intelligence is going to be done in the cloud, we still live in a world that's more bandwidth constrained than it is compute constrained or storage constrained." This quote emphasizes the current technological limitations due to bandwidth constraints and how Apple's strategy of in-house silicon design may provide an advantage in a decentralized computing future.
"All the flight attendants were wearing these really well designed shirts that blend the Virgin brand into the Alaska brand and extremely informative information on how all the point stuff gets combined." This quote describes the visible efforts to communicate the merger between Alaska Airlines and Virgin America to passengers, highlighting the attention to detail in blending the brands and informing customers about loyalty program changes.
"News just came out in a memo from Mark Lori basically reorgang most of the e-commerce operations@walmart.com. And unsurprisingly, it's mostly jet folks who are taking over." This quote informs about the recent organizational changes at Walmart's e-commerce division, indicating that personnel from the acquired company Jet are taking on leadership roles, suggesting a talent-focused acquisition strategy.
"One theme that we immediately identified that Facebook does very well is this keep the team separate mantra where you let teams exist on their own for a long time." This quote identifies a key strategy used by Facebook in managing acquisitions, which involves allowing acquired teams to operate independently to preserve their successful dynamics and culture.
"There was an article, a series of articles, I believe, right at the end of 2016 about potential fraud at the company and overstating their growth numbers. And then news just came out this week that, unsurprisingly, Evan Spiegel and Bobby Murphy are going to have super voting shares and control the vast majority of the voting shares of the company." This quote discusses the controversies surrounding Snap Inc. leading up to its IPO, including concerns over the company's growth numbers and the founders' decision to retain control through super voting shares.
"There's a guy named Michael Lopp who was a longtime engineering manager at Apple and then Pinterest, and now I believe he runs engineering at Slack and he writes under the pseudonym rans." This quote provides a recommendation for Michael Lopp's blog, which offers valuable insights and advice for leaders in the tech and engineering fields, drawing from Lopp's experience at notable companies like Apple, Pinterest, and Slack.