Usually when two companies initiate a joint venture or work together, it is often casually referred to as the two companies getting in bed together. Last week, a veritable orgy was announced. ARM, Freescale, IBM, Samsung, ST-Ericsson and Texas Instruments announced that they are creating a company, Linaro, to provide better distribution and tools for Linux.
Reading between the lines, this looks like it is all going to be ARM-based. The first release is optimized for ARM’s Cortex-A family, the quote in the release is from ARM’s VP of corporate development, and all the companies in the announcement have significant investment in ARM-based products.
Traditionally Linux has been developed to run on Intel processors. It was originally “Unix for the PC.” Because of architectural compatibility this meant that Linux ran on Intel’s Atom core too. This consortium is going to try to make sure that Linux runs even better on ARM-based platforms. None of these semiconductor manufacturers can ship products for smartphones and netbooks without a good Linux release. On the other hand, by pooling their resources they will end up with a software stack at a fairly low cost and zero marginal cost. They are not going to compete on the OS level of the software stack.
But therein lies a problem for them. If the software stack is the same for everyone, it is very hard to differentiate much on the hardware level underneath either. Yes, performance and power consumption will be differentiators but using the same ARM cores on similar silicon means the differences will be minor. Which leaves price.
First Apple and then Google’s strategy in wireless has been to put all the differentiation in application software and industrial design, reduce the wireless network operators to dumb pipes (no more walled gardens) and reduce the hardware suppliers to commodities (all Android phones are pretty much the same).
On the same day, AT&T announced that it was ending unlimited data plans that has been one of the big drivers of mobile Internet. But they obviously don’t think that they are making enough money as a dumb pipe to justify the infrastructure costs. Apparently a tiny handful of users generate almost half the data traffic, although the limits of 2 GB seem unnecessarily low if there really are such a small number of superusers who are overloading the network.
So this is the future: commodity chips going into commodity phones running a commodity operating system on a commodity wireless network. The money is in what you do with your phone, just as it is in the non-mobile world.
I think that for the time being, Apple will be able to command a higher price point and some differentiation but their costs will be much higher and that might eventually become a big problem. But in the meantime they will make all the money.