The report affected Intel’s shares as it dropped 6.3% on Friday.
Bloomberg reported on Friday that Microsoft is planning to design its own chips for its Surface PCs and servers for Azure cloud services. The report also stated that the company is also exploring another chip to use on some of its Surface line of PCs.
Because of that, Intel’s shares dropped to 6.3% at $47.46.
This is part of the tech companies’ effort in reducing their dependence on Intel Corp.
Amazon Inc. and other cloud-computing rivals are already making their own chips to suit some of their needs. For instance, Amazon launched its ARM-based Graviton2 processor last year.
To Lower Overall Cost
For them, designing their own chips can bring the overall cost down while improving performance over third-party chips that Intel provides.
However, ARM-based servers offer better performance and cost benefits. But they are still a small part of the market.
Apple, too, started selling its personal computers with its own M1 processor. The chips for iPhones are based on Arm’s instruction set. They are different from the x86 technology that Intel uses.
Going back to Microsoft, the company is likely to use its own chips for its servers.
Not Rejecting Idea to Create Own Chips
In a conference earlier this month, Microsoft’s executive said that the company isn’t discarding the idea that it would create and build its own chips.
“The partnerships that we have though in this realm, from the OpenAI efforts that we have to our relationship with Intel and Arm developments that we have certainly point to the need to have advanced capabilities here, whether we build it first party or have an ecosystem of third-party partners, it’s sort of yet to be disclosed.” – Microsoft
Currently, Windows computers are using chips that Qualcomm made. In 2012, Microsoft launched the Surface RT tablet that uses an Arm chip from Nvidia. However, the company discontinued it in 2013.
In 2019, it introduced Surface Pro X with a Qualcomm Arm chip. It released an updated version of the said device this year.
Intel’s major business is to sell server chips. It reported $9.85 billion in revenue from selling PC chips.
In recent years, the company faces many challenges in manufacturing its chips.
It has its own chip factories, unlike other chip designers. Intel doesn’t contract with other companies in Asia to manufacture chips based on their client’s specs.
However, in a statement earlier this year, Intel said that it may outsource its manufacturing.
Microsoft, on the other hand, has been increasing its efforts in hiring processor engineers. Its recruiting people from other chipmakers like Intel and Nvidia.
In addition to Intel, another big player in making chips is AMD. For the last decade, Intel shut out AMD but the latter is making a comeback in the market.
However, on Friday, AMD shares declined. Another chipmaker that AMD is in the process of acquiring also slipped.
Customers are looking into alternative solutions to resolve the mountain of data that cloud computing generates. One of the biggest issues for giant data center owners is the cost of electricity. But Arm-based chips may resolve this issue as they’re more energy-efficient.