Intel Partners: Possible Qualcomm-Google Venture Could Drive Innovation In Intel-Dominated Server Space

If it is true that Google is adopting Qualcomm's server processors -- as suggested in a Bloomberg report this week -- it could create competition for Intel’s prized server chip business and even open a new niche in the data center segment, Intel partners told CRN on Friday.

"This is a very interesting time for the data center and [high-performance computing]," said Jon Bach, president of Puget Systems, a Kent, Wash.-based Intel system builder partner. "Intel has two platforms to watch -- ARM and OpenPower. Qualcomm and IBM certainly have the resources for this fight. The biggest question will be whether they can build out enough of an ecosystem to allow mass adoption. Focusing on the big rollouts by companies like Facebook and Google is a great approach to start with. Will it stop there, or will it filter down into the rest of the market?"

According to the Bloomberg Business report, Google is planning to give its support at a Qualcomm investor event next week to early versions of Qualcomm’s ARM server chips for its data centers.

[Related: Google Partners Aren't Concerned About Search Leader's Departure]

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Qualcomm did not respond to an email from CRN asking about a possible joint venture by publication time. "We don't comment on rumor or speculation," said a Google spokesperson.

Google, the biggest buyer of processors that run server computers and the operator of one of the most extensive networks of data centers, is reportedly cooperating on design work for Qualcomm chips. Google could serve as a major customer for Qualcomm, as the Mountain View, Calif.-based giant buys 300,000 processors every quarter for its data centers from Intel, according to market research firm IDC.

Kent Tibbils, vice president of marketing at ASI, a Fremont, Calif.-based Intel system builder, said he "would expect Intel to take this very seriously," although he speculated that the Qualcomm processors may be built for a specific application for Google.

"I think there is still too many unknowns about this processor, but it sounds like it was built for a specific purpose or application for Google," he said. "Having said that, it will certainly help Qualcomm develop more expertise in the server space or could even result in the creation of a new niche within the data center segment."

Intel supplies more than 99 percent of processors used in servers. The Santa Clara, Calif.-based company's data center group, which includes high-price chips and server chips like Ivy Bridge and Haswell Xeon, rose in revenue 5 percent in the fourth quarter of 2015 from the previous year's quarter.

If Google were to use Qualcomm's 64-bit ARM-based server chips, that could upend this market dominance, which has also immensely helped Intel survive the struggling PC market -- the company gets about 60 percent of its revenue from its PC chips.

Qualcomm's expansion in the Intel-dominated server space could be a plus for customers, as new competition could drive even more innovation, one system builder suggested.

"Intel has run unopposed in this expanding and very lucrative space," said Andrew Kretzer, director of sales and marketing at Bold Data Technology, a Fremont, Calif.-based system builder. "The industry has been craving competition to help crack Intel's unhealthy server hegemony. Hopefully this deal with Qualcomm, and the impending Zen-based Opterons from AMD, will be a catalyst for innovation in what has become a rather stagnant space."

While Qualcomm does not yet have a large stake in the server chip market, it dominates the smartphone market -- an opportunity which Intel has widely been criticized for missing. The San Diego-based company currently makes chips used in most non-Apple smartphones.