Google Inc (GOOG) Considers Face-Off With Intel Corporation (INTC)

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Intel Corporation (NASDAQ:INTC) has long been a dominant player in the chip making market, but it has been struggling as the market has shifted from PCs to mobile devices. Now the company could be in even bigger trouble. According to Bloomberg, Google Inc (NASDAQ:GOOG) is considering a move into the chip making market.

Google weighs moving into ARM chips

Currently Intel holds over 95% of the chip market for PCs, and if Google enters the market, it would be at least a partial shift away from Intel. Google is said to be considering making its own chips using ARM-based technology.

Entering into the chip making market would be a major move for Google Inc (NASDAQ:GOOG), mainly because of how expensive endeavor it would be. The company makes most of its money through Internet advertising and online services. However, Google might be able to offer better pricing by making its own chips, and it could push competitors like, Inc. (NASDAQ:AMZN) and Facebook Inc (NASDAQ:FB) into doing the same, Evercore Partners analyst Patrick Wang told Bloomberg.

Why Google might want to make chips

The analyst also noted that Google doesn’t necessarily have to get into the chip market. It just has to talk about it in order to squeeze better prices out of suppliers. However, Bloomberg’s source said the search giant would be able to have more control over the interactions between software and hardware if it did use its own chip designs.

The source also said that Google Inc (NASDAQ:GOOG), which is one of the biggest purchasers of server chips, hasn’t made a final decision and that the plans could change.

Problems for Intel

Shares of Intel Corporation (NASDAQ:INTC) fell 3% in after-hours trading after the report about Google. Several analysts have begun to be more positive on Intel lately because of the company’s more realistic forecast for 2014 and signs that the PC market may be bottoming out. However, if Google would shift away from Intel, that would spell trouble for the company.

Bloomberg’s supply chain analysis indicates that Google Inc (NASDAQ:GOOG) is Intel’s fifth biggest customer, spending at $500 million or more on chips from Intel every year. On the other hand, however, analysts estimate that it could take up to three years for Google to design and build its own server chips from scratch.


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About the Author

Michelle Jones
Michelle Jones was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Michelle has been with ValueWalk since 2012 and is now our editor-in-chief. Email her at [email protected]

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