For all the discussion of the higher-level technologies that power the modern data center, the processor remains the most fundamental element of a server. One company controls the market for those processors, and that’s not enough.
Last week Bloomberg reported that Qualcomm was thinking about shutting down its Centriq server processor division just six months after it introduced the chip last November, and over the weekend Axios reported that the leader of that group, former Intel executive Anand Chandrasekher, was leaving the company. Should Qualcomm follow through and decide to focus on its core business amid the broader strategic chaos surrounding the company, one of the more promising attempts to dent Intel’s near-total grasp of the data center processor market will come to a sudden end.
Estimates of Intel’s market share for server processors vary between 95 percent and 99 percent, which is to say nobody really bothers counting too closely because everyone knows the score. The processors are used in nearly every server at Amazon Web Services, Microsoft Azure, and Google Cloud Platform, as well as the servers sold to companies running their own data centers by vendors such as Dell EMC and HPE.
This gives Intel immense power over the market for cloud computing; after the revelation of the Meltdown and Spectre design flaws to Intel’s main server customers last summer, those companies had nowhere else to go when buying servers in the fourth quarter of last year and the first quarter of this year, lifting Intel’s Data Center Group to new revenue heights.
There don’t seem to be many complaints about the performance or quality of Intel’s processors, but a healthier market for server processors would be in the best interests of cloud vendors, server makers, and end users alike. After years of rapid decreases in cloud computing prices, the pricing situation has stabilized over the last year or so, and a competitive market could allow cloud vendors to pass new price cuts along to their customers while preserving their (quite healthy) margins.
And beyond pricing, competitive markets draw new capabilities and new talents out of chip designers and companies. There’s little incentive for a company with 99 percent of a market to take product-development risks that could have outsized payoffs should they work out.
Fortunately, there are companies other than Qualcomm that are trying to change this situation.
AMD, the only company to ever really threaten Intel in the server market over the last couple of decades, is back with a new processor that is getting some looks from chip buyers. Former Intel executive Renee James launched a new startup earlier this year with deep pockets that hopes to follow Qualcomm’s lead by designing a server processor around the energy-friendly Arm core design. And if Qualcomm exits the server processor business it could sell the group and the intellectual property to another company, according to Bloomberg.
The action in the data center market is also shifting slightly as artificial intelligence gains steam. Nvidia has shed its reputation as a chip maker for gamers with its successful AI-focused data center push, and several cloud vendors are also designing their own chips for AI and machine-learning tasks. Those chips aren’t going to displace general-purpose server processors, but they keep Intel on its toes and could one day morph into something that is equipped to handle more than machine learning.
For years, industry scuttlebutt over drinks at cloud conferences has suggested that cloud vendors have looked into building their own general-purpose processors around Arm designs, similar to how Apple decided to design its own chips for the iPhone. If anything has come of those efforts, it doesn’t seem like it has made its way to production, but Qualcomm’s decision might spur new interest in the idea.
The last time Intel was truly on the defensive in the server chip market, after the launch of AMD’s innovative multicore design in 2003, a beleaguered Intel spokesperson used to respond to inquires about the gap in performance by saying “competition is good for the soul.” It’s been far too long since Intel faced strong competition in the server processor market, and if Qualcomm isn’t willing to make the effort, it’s time for someone else to step up.