Intel falls within the report Microsoft will design its own chips for PCs, servers

Satya Nadella, CEO of Microsoft Corp., speaks at the company’s annual shareholders’ meeting in Bellevue, Washington, on November 29, 2017.

David Ryder | Bloomberg | Getty Images

Intel fell 6.3 percent on Friday following a Bloomberg report that Microsoft plans to design its own chips for its Surface computers as well as servers.

Intel has a long-standing partnership with Microsoft as a leading processor for Windows computers.

The report comes a month after Apple began selling PCs using its own M1 processor, instead of Intel chips. Microsoft chips are based on Arm technology, which Nvidia acquires from Softbank.

Apple chips for its iPhones and Amazon server chips are also based on the Arm instruction set, which is distinct from the x86 technology that Intel uses primarily.

Earlier this month, a senior Microsoft manager did not reject the idea that Microsoft would build its own “first party” chips at a conference.

“The partnerships we have in this area, from the OpenAI efforts we have to our relationship with Intel and Arm developments, have certainly underscored the need to have advanced capabilities here, whether we build it in the first place or if we have an ecosystem of third-party partners is still somewhat revealed, “said Judson Althoff, executive vice president of global business at Microsoft, at an appearance at the December 8 UBS Global Conference on Technology, Media and Telecommunications.

Microsoft said in 2017 that it is working with Arm server manufacturers to optimize silicon for use in its own data centers. Windows currently runs on Arm-based PCs, usually with chips produced by Qualcomm. Microsoft wants to ensure that more applications can be run on machines running Arm chips. He began testing software that could allow people to run applications that were originally built for 64-bit chips from AMD and Intel.

Intel reported revenue of $ 9.85 billion from its group that sells PC chips in the September quarter. Server chips are also a major business for Intel. In the quarter ended in September, Intel reported revenue of $ 5.91 billion for its Data Center group that sells server chips.

Intel has had challenges in making its chips in recent years. Intel controls its own chip factories, called “fabs”, compared to other chip designers, which contract with Asian companies to manufacture chips according to customer specifications.

The more transistors a chip maker can fit in the same space, the more efficient a chip is. Intel currently delivers chips with 10-nanometer transistors, but dedicated foundries, such as TSMC, now produce 5-nanometer chips that are technically superior.

Earlier this year, Intel CEO Bob Swan said he plans to outsource its production, just as Apple does.

Intel and Microsoft did not immediately return comments.

“Jordan Novet contributed to this story.”