Explained: Why tech giants are making customised chips

The tech companies are finding it more lucrative to integrate their software with their tailor-made semiconductors rather than use the same generic chips that are being used by their competitors, a CNBC report added.

Custom-designed chips can perform better and work out cheaper for these companies, Russ Shaw, a former non-executive director at UK-based Dialog Semiconductor, told CNBC. “These specifically designed chips can help to reduce energy consumption for devices and products from the specific tech company, whether it relates to smartphones or cloud services,” Shaw explained.

The global chip shortage has slowed down production and these firms are iffy about relying on semiconductor makers anymore. “The pandemic threw a big wrench in these supply chains, which accelerated efforts to do their own chips…Many already felt limited in their innovation pace being locked into chipmaker timelines,” Glenn O’Donnell, Research Director at analyst firm Forrester, was quoted as saying in the report.

One prime example of a large tech company producing its own chips is Apple’s M1 processors, which it launched recently for its latest generation of Macbooks and iPads, moving away from Intel’s x86 architecture-based processors.

Tesla also moved in that direction when it started producing cars with custom AI chips in 2019 that aid software in making quick-response decisions based on the movement on the roads. The company has recently announced its plans to make its own ‘Dojo’ chips, reported CNBC.

Google too is reportedly nearer to fabricating its own CPUs for its Chromebook line of laptops, which use its custom-designed Chrome operating systems. Amazon, Facebook and Baidu are two other companies that are also working in this direction.

The report added that at this stage none of the tech giants is looking to do all the chip development themselves, since setting up an advanced chip factory costs billions of dollars and takes several years.