By Prince McLean

Published: 03:55 PM EST

Apple's clear interest in securing the rights to develop custom mobile processors based on the ARM platform appear to sync with comments made in financial reports published earlier today.

ARM Holdings plc, the group responsible for licensing ARM mobile microprocessor designs to hundreds of chip designers and manufacturers, disclosed in its Second Quarter earnings a deal with "a leading handset manufacturer," which many observers believe to be Apple.

The report noted that "Q2 also included four significant licenses with major OEMs," including "a leading handset OEM who bought a long-term architecture license to ARM's current and future technology for use in mobile computing." The report also included an aerospace OEM, a "leading consumer electronics OEM," and networking giant Cisco.

Apple and ARM

ARM outlined 11 new licensees for its various processor families, resulting in a grand total of 553 companies who use various ARM technologies. The vast majority of all mobile devices use ARM processors, and Apple is a key ARM customer with its high profile iPod and iPhone line. The real secret may be why Apple and ARM are keeping their licensing agreement quiet.

Apple developed ARM along with Acorn and design partner VLSI Technologies back in 1990, and became an initial user of ARM chips in the Newton MessagePad. After the Newton was discontinued in 1998, the company began selling off its investment in ARM to help finance its internal turnaround in the late 90s.

Apple again began using ARM processors in the iPod in 2001 and continues to use ARM-based chips in the iPhone, iPod touch, and its AirPort wireless base stations. These processors are currently designed and built by third parties, including Apple's close partner Samsung.

After Apple acquired chip designer PA Semi earlier this year, it became clear that the company wanted to expand its capacity to use specialized processors. In an interview with the New York Times, Steve Jobs later unequivocally said, "PA Semi is going to do system-on-chips for iPhones and iPods."

Apple moving back to custom designs

Such a move would return Apple back to the days before its 2005 partnership with Intel, which resulted in Macs from 2006 on being nearly identical under the skin to standard commodity Intel-based PCs. Throughout the 1990s, Apple designed various custom chipsets for Macs and other devices, as noted in the article How Apple’s PA Semi Acquisition Fits Into Its Chip History.

Having the resources and expertise to develop custom mobile chipset variants using standard ARM cores would enable the company to build more efficient mobile devices that are harder for competitors to clone with off the shelf parts. A CNET reviewer noted that Microsoft's Zune was a near exact copy of the iPod internally. That would no longer be possible once Apple developed its own custom processors and supporting chips.

It would also allow Apple to reinvest its blockbuster iPod and iPhone earnings into developing components perfectly suited to its own roadmap rather than being constrained to use more general purpose devices that include, for example, licensed support for Microsoft's Windows Media DRM, something that Apple has never used in the iPod line.

And Intel?

Apple's deal with PA Semi initially led some pundits to think that the company might abandon Intel to return to PowerPC processors, because PA Semi had been working with specialized PowerPC designs. However, Apple's relationship with Intel will more likely match its evolving relationship with ARM: increasing the use its own custom chips in conjunction with standard ARM or Intel processors or cores, thereby differentiating its offerings while retaining compatibility with existing software.

Combined with Mac OS X Snow Leopard's new Grand Central process management and hardware delegation in OpenCL, Apple will have the necessary software support ready just in time to take advantage of new desktop hardware developments that emerge from its PA Semi acquisition. That should result in a new crop of Intel Macs that advance beyond commodity PCs in features and performance.

Intel may also serve as Apple's specialized ARM manufacturer, since the company has no chip building capacity of its own. Alternatively, Apple could also return to Samsung to build its custom ARM processors, or work with Texas Instruments, which was an early investor in PA Semi and was widely rumored to be its components manufacturer.