News & Insights for the AI Journey|Wednesday, March 27, 2019
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Is Amazon’s Plunge into Server Chips a Watershed Moment? 

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For several years now the big cloud providers – Amazon, Microsoft Azure, Google, et al – have been transforming from technology consumers into technology creators in hardware and software. The most recent example being Amazon’s announcement two weeks ago that it had developed its own Arm-based chips (Graviton) and was using them in select instances. Yesterday, the New York Times ran an article, "Amazon’s Homegrown Chips Threaten Silicon Valley Giant Intel."

The Times piece, written by Cade Metz, focuses largely on goliath Intel which currently owns about 96.6 percent share of server chip sales, according to IDC. That’s down from 98.6 percent in the last year or so due AMD’s re-emergence in the server chip business with its Epyc CPU line introduced in June 2017.

Intel is an easy target, having dominated the CPU market for years and earned a reputation as a tough-minded, tough-acting supplier. Here’s a brief excerpt from Metz’s article which is a good, fast read:

“Amazon’s new chip arrives as market forces are rapidly undercutting chip makers and their $412 billion in yearly sales. Online operations like Amazon and Google have grown so large, they can save significant money by making chips tailored to their needs rather than buying them from longtime suppliers…

“About 35 percent of the server chips sold around the world go to about 10 companies, including large internet companies like Amazon and a handful of telecommunication firms, said Shane Rau, a chip analyst with the research firm IDC. That just one of them is shifting its business is terrible news for Intel.

“Each one of these companies is so large, they represent a market unto themselves,” Mr. Rau said.

These days Intel is facing a wide range of challenges – CPU rivals, surging GPU use (Nvidia, AMD), emergence of specialty chips (e.g. AI-oriented such as Google’s TPU), and export restrictions. Yet the bigger threat may not be just to Intel, but to chip-makers more generally and perhaps other portions of the technology supply chain as big cloud providers take more control over their technology needs. The ramifications could ripple through HPC, enterprise, and PC markets.

According to Metz, “Amazon executives believe the new chip, which was designed to be more energy efficient, will help reduce the cost of electrical power in its data centers. It said it was offering a cloud-computing service that would allow business customers to use its new chip. The cost of the service could be 45 percent lower than other options…

“…Inside these cloud operations, the internet companies are also reinventing how computers are built. They are designing much of their own hardware, from the servers to the networking gear that connects servers. Facebook is doing similar work with the technology in its data centers.”

Metz ends the piece quoting a long-time semiconductor executive saying, “We will look back at this as a watershed moment.” We’ll see.

Link to full NYT article by Metz:

Link to EnterpriseTech coverage of Amazon’s announcement of the new chip:

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