Intel’s custom designs are going to be a significant part of the 18 million chips sold by the company’s data center business annually. Next year custom designs will account for almost half of the chips Intel sells to public clouds, according to The NY Times.
Betting big on custom solutions
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Diane Bryant, head of Intel’s data center business, said the company never denied custom solutions and that Intel gets orders from the “tens of thousands to the hundreds of thousands” for special chips.
Public clouds are those computer systems that can be used by any individual. Big players such as Amazon Web Services, Google Compute or Microsoft Azure sell computing power or data storage indigenously. On the other hand, players like Facebook or China’s Baidu are doing various things for a large amount of consumers.
Intel thinks companies like Twitter and eBay are second-tier and still cater to the needs of hundreds of millions of people. This is the reason they want specialized chips for themselves. Companies like A.W.S. “are running a million servers, so floor space, power, cooling, people — you want to optimize everything,” Ms. Bryant said. “The name of the game is customization.”
Growing segment for Intel
Intel has been running an internal program dubbed “Just say Yes” to look for targeted workloads requiring custom chips. The chip maker is gaining more and more revenues from custom build chips, and this is reflected in the company’s results. Even though the maximum number of chips from Intel are packed into PCs, almost one-quarter of Intel’s revenue (a bigger of share profits) comes from semiconductors for data centers. The average selling price of PC chips dropped 4% during the first nine months of the year. However, the average price for data center chips surged 10% compared with the same period in 2013.
This trend might prove problematic in the longer term, as the market of individual chips will likely become big enough to take the shape of a commodity. Also the increasing size and clout of the big players could result in consolidation in the time ahead. If this proves to be true, then Intel could find itself dependent on a few customers which would have pricing power over the chip maker, says the report.