Among investors in Advanced Micro Devices (AMD 1.33%), there is a pretty continual discussion of Apple (AAPL 0.52%) either using AMD's technology more broadly -- Apple already uses AMD's workstation graphics cards in the Mac Pro -- or outright purchasing AMD. The question, then, is whether AMD would be a likely take-out candidate for Apple.

What could Apple gain?
AMD's core competency is in the design of CPU cores, graphics IP, and system-on-chip products that implement that IP, among others. This is a competency that appears to be serving the company quite well in landing semi-custom design contracts such as the processors for both the Xbox One and the PlayStation 4 game consoles.

That said, Apple has demonstrated exceptional competency in designing its own CPU cores, as well as the system-on-chip that surrounds it. Indeed, it is arguable that Apple's latest mobile CPU is the most advanced smartphone/tablet core in production today. However, two "gaps" in Apple's silicon capabilities to date have been the lack of communications/connectivity IP and an in-house GPU IP team. Since Apple already has hired many ex-AMD CPU engineers, there could be an argument for the graphics portion of the equation.

Apple is building up its own graphics team
In searching the LinkedIn profiles of various Apple employees, as well as some of Apple's job listings, it's clear that Apple is staffing up a graphics IP development team that seems to be based in Orlando, Florida. Now, one could conceivably make the case that, in order to really bolster its GPU efforts, Apple could simply buy out AMD. However, this seems to be a sub-optimal allocation of capital for a number of reasons:

  • AMD would bring with it a net debt position of about $1 billion.
  • In addition to the debt, Apple would end up with a redundant CPU team; plus, Apple seems to have no problem luring talent from AMD.
  • Apple could buy a top-notch graphics IP vendor for cheaper,

Indeed, while (1) and (2) would be enough to stop the show, it's (3) that really breaks this thesis. Apple already owns roughly 10% of Imagination Technologies (NASDAQOTH: IGNMF), which is the supplier for the GPU IP in Apple's A-series chips, as well as many other SoCs. Picking up the rest of the company – which is valued at $877 million – would be significantly cheaper and more useful to Apple than purchasing AMD would be. Also, as Imagination is part of the AMD "HSA Foundation," buying AMD would not give Apple any "dibs" on this more powerful programming paradigm.

Foolish bottom line
While the idea of Apple picking up AMD would have made more sense if Apple hadn't already demonstrated exceptional CPU/SoC design capability, today it seems extremely unlikely. While Apple is unlikely to acquire a major, publicly traded semiconductor in order to bolster its in-house IP teams, it would be more likely to pick up the rest of Imagination than to buy AMD if it were to do so.