Intel Corporation (NASDAQ:INTC) could face a tough time in the future with competition getting tougher. According to a report from the Reuters, a new low-power server chip is being shipped by Applied Micro Circuits, which could challenge Intel, in terms of cutting-edge data centers.intel logo

Huge demand for X-Gene

The revenue for the first quarter of the fiscal year 2014, as well as the outlook for the second quarter revenue, was released by Applied Micro Circuits on Tuesday, and the results were way below the expectations of Wall Street. The legacy business is on the decline and the disappointing outcome also led to a decline of 4% in shares after-hours.

However, the company also gave positive news, which was concerned with the shipping of new X-Gene ‘micro-server’ chips. The company has licensed intellectual property from ARM Holdings for the manufacturing of these chips, and it is widely used in smartphones because of its low-power technology.

The company has been able to realize about $1 million worth of revenue from these chips in the first-quarter that ended in June. And, it is hopeful that these chips would make meaningful contributions to the company’s revenue generated in the quarters ending December and March.

“There is backlog today on the books for X-Gene, both in the September quarter and December quarter, as well as the March quarter,” Chief Executive Officer Paramesh Gopi told analysts on a conference call.

Intel sees no significant competition

Anticipating the shift of major Internet players like Facebook Inc (NASDAQ:FB) and Google Inc towards micro-servers, Intel has been developing its own low-power chips.

“While we don’t take any competition lightly, the much-hyped threat of ARM servers getting any significant market segment share any time soon has been vastly overplayed,” said Intel spokesman Bill Calder.

There are many small rivals, including Applied Micro Circuits and Advanced Micro Devices, who produce micro-servers, but Intel does not see them as potential competitors as their worth has not been proven yet.

Proponents of micro-servers are of the opinion that if such chips are used, then the cost-effectiveness and energy efficiency of data centers will get an enhancement. They suggest that Intel Corporation’s brawny server chips should be replaced with these. The micro-servers are not very much popular as of now, but if with the passage of time the rival’s architecture based chips make place for themselves in the market then they would pose a substantial threat to Intel, which dominates the server market at present.