Qualcomm prepares a return to the server market with a new chip

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Qualcomm Inc. is re-entering the server processor market, according to people familiar with its plans, betting it can tap into a $28 billion industry and reduce its reliance on smartphones.

The company is seeking customers for a product stemming from last year’s purchase of chip startup Nuvia, according to the people, who asked not to be identified because the discussions are private. Amazon.com Inc.’s AWS business, one of the biggest buyers of server chips, has agreed to take a look at Qualcomm’s offerings, they said.

Representatives for Qualcomm and Amazon declined to comment.

Qualcomm gained as much as 2.9% to $152.91 in New York trading after Bloomberg reported the news. Shares had fallen 19% this year through Wednesday, part of a broader decline in chip stocks.

CEO Cristiano Amon is trying to make Qualcomm a broader semiconductor supplier, rather than just the top smartphone chipmaker. But an earlier push into the server market was abandoned four years ago under its predecessor. At the time, the company was trying to cut costs and appease investors after fending off a hostile takeover by Broadcom Inc.

This time around, Qualcomm has Nuvia, made up of chip designers from companies including Apple Inc. Amon, which acquired the company for about $1.4 billion in 2021, said his work will help revitalize Qualcomm’s high-end offerings for smartphones and personal computers. . But Nuvia was founded as a technology provider for the server industry.

Qualcomm’s return to the server market will require restoring trust among the potential customers it last courted. The industry has also changed a lot over the past few years. Amazon has developed in-house processors for servers, although it also buys chips from other vendors. And startups like Ampere Computing LLC have made inroads, winning deals with clients like Microsoft Corp.

Still, the potential rewards could be significant. A successful push into server chips would mean Qualcomm has a much more expensive item to sell. The company’s phone plans typically cost tens of dollars. The highest end server CPUs have prices over $10,000 per chip.

Spending on cloud computing infrastructure — the type of equipment Amazon, Google and Microsoft use to transport data around the world — totaled $73.9 billion last year, according to research firm IDC. . That was up 8.8% from 2020.

Data center processors alone generate $28 billion a year, according to Bloomberg Intelligence analyst Mandeep Singh. “Qualcomm’s return to the Arm server market expands its reach into one of semiconductor’s strengths,” it said in a note Thursday.

Owners of giant cloud data centers have long relied on chip technology from Intel Corp. for their servers. But they are increasingly adopting processors that use designs from Arm Ltd., a key partner in phone chips for San Diego-based Qualcomm.

Arm designs are already dominant in mobile phones, where they are appreciated for not draining battery life. Today, power consumption has also become a more pressing issue in the data center world. As server farms spread and absorb staggering amounts of electricity, companies want more efficient chips.

Amazon responded to this need by building its own chips based on Arm designs. The e-commerce giant has created several generations of its Graviton line of processors and touts its performance to its customers.

But Amazon still uses chips from Intel, Advanced Micro Devices Inc. and Nvidia Corp. – and Qualcomm sees an opportunity to carve out a place among these suppliers.

The last time it made such an attempt was in 2017, when Qualcomm started selling an Arm-based server chip called Centriq 2400. It relied on Samsung Electronics Co. to manufacture the products and said they outperform Intel’s Xeon processors in power efficiency and cost. During the public introduction of the line of server chips in November of that year, potential customers such as Microsoft took the stage to express their interest in the offering.

But less than a year later, the company’s management began to shut down the project. Former Intel executive Anand Chandrasekher, who led the effort, left Qualcomm.

For Intel, Qualcomm’s latest move would bring even more competition to an industry it once dominated. The company has been scrambling to strengthen its technology and manufacturing after losing market share to AMD and homegrown chips like those from Amazon.

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