Daily Management Review

Amazon Gears Up To Challenge Intel’s Hold On Chip Market


Amazon’s cloud unit to launch “more powerful” processor chips.

The cloud computing arm of Amazon has come up with a second “generation of data center processor chip” which is “more powerful” than before, reported two sources. The said step confirms that the company is investing in “custom silicon” to cater to its “fastest-growing business”.
The technology used in the “new Amazon Web Services chip” comes from “Softbank Group Corp-owned” Arm Holdings. As per reports of one of the sources, the new technology will hasten the process at least by twenty percent in comparison to Graviton, “Amazon’s first Arm-based chip” that was revealed last year under a low-cost solution for “easier computing tasks”. The success of the new efforts would mean that the unit could become more independent for server chips which it currently acquires from Intel Corp and Advanced Micro Devices Inc.
However, a spokesperson of Amazon refused to say anything regarding the company upcoming services and products with its cloud computing unit following suit.
IBES data estimates the cloud unit of Amazon’s 2019 sales to be around “$34.9 billion” as businesses take on rent Amazon servers whereby avoiding the hassle of “running their own data centers”. Data centre chip manufacturers have found big business opportunity in cloud computing. Over ninety percent of the “server processor market” is under Intel’s controls, while the rest in majority is under AMD. The data centre of Intel contributed to nearly 50% of its “overall operating profit last year”.
As per Intel’s executives, in 2018, sixty five percent chip sales of Intel took place from “cloud and communications service providers”. However, chip designers with Arm technology plans on confronting the dominance of Intel, as Arm chips are also used to power mobile phones these days. On the other hand, many companies want to turn these chips compatible for data centres.
Intel’s business of data centre shows a steady growth graph even after the Arm chip unit of Amazon made its entry in the market, said “Bernstein analyst Stacy Rasgon”. Talking about what Intel should be worried about, he added:
“Arm by itself I’m not worried about, but Arm in the hands of an Amazon or a Google who could potentially invest in it, that becomes potentially more problematic”.
Nevertheless, one of the sources reported that the Arm unit of Amazon is gathering momentum which already “sends a message to the market” about Amazon’s inclination towards “Arm-based chips”. Furthermore, both sources also confirmed that the “new chip” will be less powerful in comparison to “Intel’s ‘Cascade Lake’ or AMD’s ‘Rome’ chips”.
Even though, the new Arm chips might be “less powerful”, they will be “cheaper and consume less electricity” when compared to Intel’s “top-end chips”. Moreover, chip buyers’ preference is decided by a variety of factors such as “speed, chip size, power consumption and cooling costs”, in short termed as the “total cost of ownership”.