Chip Giants Intel and Nvidia face new threats from Amazon to Google and Apple

Amazon unveiled a new chip this month that, it says, promises to accelerate the way algorithms that use artificial intelligence learn from data. The company has already designed other processors for its cloud computing arm, called Amazon Web Services, including the brains of computers known as central processing units.

The pandemic has accelerated the growth of cloud computing, as companies have generally adopted the kind of digital tools that use those remote servers. Amazon, Microsoft, Google and others enjoyed strong growth in the cloud during the remote work period.

Business customers also show an increased appetite for analyzing the data they collect about their products and customers, fueling the demand for artificial intelligence tools to make sense of all this information.

Google has been a primary engine among the tech giants, launching an AI processor in 2016 and has since updated the hardware several times. Software giant Microsoft, No. 2 in the cloud behind Amazon, has also invested in chip projects, including a programmable chip to manage AI and another that improves security. He is now working on a central processor, according to a person familiar with his plans. Bloomberg News previously reported Microsoft’s processor effort.

Leading the technology giant’s movements are changes in the way the semiconductor world works and a growing sense that Moore’s law – the industry’s fundamental assumption of constantly improving chip performance – is losing its relevance. As a result, companies are looking for new ways to achieve better performance, not always measured in speed, but sometimes lower energy consumption or heat production.

“Moore’s Law has been around for 55 years and is the first time it has slowed down materially,” said Partha Ranganathan, vice president and fellow engineer at Google’s cloud unit, which tracks specialty chips.

The huge size of the giants in the cloud is a challenge for traditional chip makers. In the past, semiconductor manufacturers have tended to design high-performance semiconductors for generic applications, leaving it up to customers to adapt and make the most of chips. Now, the biggest customers have the financial muscle to put pressure on more optimized models.

“While Intel in the 1990s was an order of magnitude larger than all their customers, now the customer has a higher scale than the supplier,” said James Wang, an analyst at ARK Investment Management, a New York money manager. “As a result, they have more capital and more expertise to take over the components inside.”

Nvidia, now the largest chip maker in the United States by market capitalization, has a value of $ 330 billion and Intel is $ 207 billion. Nemul behemoths, Amazon, Microsoft and Google-parent Alphabet Inc.,

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each worth $ 1 trillion in market valuation.

Customized efforts are partly possible due to the growth of contract chip manufacturers, which make semiconductors designed by other companies. This arrangement helps technology giants avoid the cost of billions of dollars to build their own chip factories. Taiwan Semiconductor Manufacturing Co.

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in particular, it has jumped to the forefront of chip production technology.

The changes benefited the chip design firm Arm Holdings Ltd., which sells circuit designs that anyone can use after paying a licensing fee. Apple is a big Arm customer, just like all the big tech companies that produce their own chips.

It is estimated that Amazon, Google and Microsoft operate millions of servers in data center networks around the globe for their own use and rent them out to millions of cloud computing customers. Even minor performance improvements and tiny reductions in chip power and cooling costs become efforts when they are spread across those vast technological empires. Facebook Inc.

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he also explored working on his own chips.

David Brown, vice president at AWS, said creating his own processors was an obvious choice for Amazon, given the performance gains it could make by giving up compatibility with older software and other standard chip features. Intel that large data center operators do not need.

“It simply came to our notice then [chip] this is optimized for the cloud, so we managed to eliminate a lot of things that just aren’t necessary, ”he said. Amazon’s chip-making efforts took off largely with the acquisition of an Israeli company called Annapurna Labs about five years ago.

Personalized chips are gaining favor in consumer products as well. Apple started using its own processors in Macs this year after 15 years since it got them from Intel. Google has incorporated its AI chip into its Pixel smartphones.

So far, the lost business for traditional chip makers has been modest, said Linley Gwennap, a chip industry analyst. The market share of all custom CPUs based on Armature is less than 1%, he said. Google’s AI chips are by far the largest processors designed by a technology company, he said, comprising at least 10 percent of all AI chips. Intel continues to supply the vast majority of processors that enter data centers.

Also, the holders are not idle in the race for cloud and AI chip supremacy. This year Nvidia has agreed to buy Arm in what would be the largest acquisition in the chip industry. And Ian Buck, who oversees Nvidia’s data center operations, said the company works closely with its largest customers to optimize the use of its chips in their hardware configurations.

Intel said about 60 percent of its central server processors sold to large data center operators are customized to customer needs, often by disabling chip features they don’t need.

And Intel invested in AI processors and other specialized hardware components, including the acquisition of Havana laboratories in Israel last year for about $ 2 billion. AWS recently agreed to introduce Havana’s AI training chips into its data centers, as Amazon is developing rival chips that it believes will work better when they appear next year.

Remi El-Ouazzane, strategy director for the Intel data platform group, said Habana chips at AWS could challenge Nvidia, the dominant player in an AI training market, which he said will be worth more than 25 billion by 2024. “It’s a big network a new opportunity for Intel and it’s a very big market,” he said.

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Write to Asa Fitch at [email protected]