Microsoft redesigns ARM chip pact

Microsoft has updated its agreement with chip design firm ARM, making the software giant capable of designing its own chips--in theory, at least.

The new pact is an architecture license, which allows Microsoft to design its own ARM chips, much like Qualcomm does with its Snapdragon processors used in products such as the Dell Streak tablet and Google's Nexus One smartphone.

ARM is one of the most prolific chip designers in the world, with its designs used in everything from Apple's iPhone and iPad to high-tech toys and handheld calculators.

"ARM is an important partner for Microsoft, and we deliver multiple operating systems on the company's architecture, most notably Windows Embedded and Windows Phone," KD Hallman, general manager of strategic software and silicon architectures at Microsoft, said in a statement. "With closer access to the ARM technology, we will be able to enhance our research and development activities for ARM-based products."

Microsoft is not commenting further on the agreement, and details will remain confidential.

There are a couple of interesting possibilities, according to Nathan Brookwood, the principal analyst at Insight 64. "If you're going to build your own (processing) cores, that's expensive and time-consuming. You really need to think that you can outdesign the group of designers at ARM," Brookwood said. "On the other hand, taking the ARM cores and incorporating them into a system-on-chip with your own selection of graphics, etc.--that makes huge amounts of sense."

Brookwood points out that ARM-licensing terms have this distinct advantage, which Intel cannot duplicate with its Atom processor. In short, it's more difficult for a third party--such as Microsoft--to take an Atom design and make it their own. "It's really hard for a third party to create a system-on-chip that uses Atom cores with (their own) peripheral technology. Whereas, it's easy to do that using the ARM architecture," he said.

Apple stands out as the most conspicuous example of what a product company can do with an ARM chip design. "If you look at what Apple did with (its) A4 (chip), they were more or less able to craft their own system-on-a-chip using the ARM Cortex core with their own choice of graphics and so forth. That makes a lot of sense, and when you're going to sell tens of millions of something, as they're obviously doing with iPhones and iPads, you have the volume to justify that kind of R&D effort," he said.

Also of note is that Microsoft participated in the design of the Xbox chip, Brookwood said. So, generally speaking, Microsoft already has a strong resume in chip design.

Linley Gwennap of the Linley Group, a chip-consulting firm, said Microsoft's intentions are a big mystery.

"You don't take an architecture license, unless you're going to design a chip. The one place now where they're developing their own chip is Xbox," he said. "So it's possible that [Microsoft is] going to use this license to develop a next-generation Xbox processor."

Microsoft may also want to design an ARM chip for data centers, Gwennap said. "Microsoft is certainly a very big data center operator. Maybe they would design their own processor for servers and use it internally for those data centers."

Update, 1 p.m. PDT Added comment from Linley Gwennap.