According to reports, people familiar with the matter, Qualcomm is trying to re-enter the $ 28 billion server processor market, thus reducing reliance on the smartphone market.
The company is looking for customers for a product from Nuvia, a chip startup it acquired last year, sources said. Amazon AWS, one of the largest buyers in the server chip market, has agreed to research Qualcomm’s product.
Both Qualcomm and Amazon declined to comment.
Qualcomm shares rose 2.9 percent to $152.91 in U.S. stock market trading after the news was reported. Shares of chip industry companies have generally declined this year. As of Wednesday, Qualcomm shares are down 19 percent this year.
Qualcomm CEO Cristiano Amon (Cristiano Amon) is trying to transform Qualcomm into a broader business chip provider, rather than just providing smartphone chips. 4 years ago, Qualcomm tried to enter the server market, but then chose to give up. At the time, Qualcomm was trying to appease investors by cutting costs after fending off a hostile takeover bid from Broadcom.
Qualcomm’s Nuvia, which started as a technology provider for the server industry, included chip designers from Apple among its employees. Amon decided in 2021 to buy Nuvia for about $1.4 billion, saying at the time that Nuvia’s work would help develop Qualcomm’s high-end smartphone and PC chips.
Qualcomm will need to re-establish trust with potential customers if it hopes to re-enter the server chip industry. The server industry has also changed dramatically in the past few years. Amazon has developed its own server processors, but still continue to purchase chips from other suppliers. startups such as Ampere Computing have also made progress, winning contracts with major customers such as Microsoft.
However, Qualcomm may also get a big return. Successful entry into the server chip market means that Qualcomm will be able to sell more expensive products. Qualcomm’s cell phone processors are usually priced in the tens of dollars, but the top-end server processors cost more than $10,000 each.
Last year, the industry invested $73.9 billion in cloud computing infrastructure, up 8.8 percent from 2020, according to market research firm IDC. Companies such as Amazon, Google and Microsoft are developing these infrastructures to transfer data around the globe.
Bloomberg Intelligence analyst Mandeep Singh said data center processors alone could generate $28 billion a year in revenue. He noted in Thursday’s research note: “The ARM server market is one of the bright spots in the chip industry, and re-entering this market will expand Qualcomm’s market participation.”
Large cloud computing data centers have long relied on Intel’s processor technology to run their servers, but these companies are also beginning to gradually embrace ARM processors. ARM is a key partner for Qualcomm’s cell phone processors.
ARM processors have dominated the smartphone market due to their low power consumption. Now, power consumption is also becoming a pressing issue for the data center industry. As the number of servers grows, they consume more and more power, so companies are looking for more energy-efficient chips.
Amazon developed its own chips based on ARM designs to meet this demand. Amazon’s Graviton processors have evolved over several generations, and Amazon is pitching them to customers. However, Amazon is still using chips from Intel, AMD and Nvidia, and Qualcomm sees an opportunity to compete with these companies for the market.
Qualcomm last tried this in 2018, when it introduced the Centriq 2400, an ARM-based server chip designed by Qualcomm and launched foundry production through Samsung Electronics. Qualcomm said the processor outperformed Intel’s Xeon processor in terms of energy efficiency and cost. At a public presentation of the server chip in November of that year, Microsoft and other potential customers took the stage to express their interest in Qualcomm’s products.
However, less than a year later, Qualcomm’s management decided to stop the project. Anand Chandrasekher, an executive who once worked for Intel and led this effort, also left Qualcomm.
For Intel, Qualcomm’s latest move will bring more intense competition to the industry. After losing market share to companies like AMD and Amazon, Intel is also actively developing related technology and manufacturing capabilities.
