Microsoft working on in-house processor designs to replace Intel’s chip technology

Microsoft is working on in-house processor designs for use in server computers that run the company’s cloud services, adding to an industrywide effort to reduce reliance on Intel’s chip technology.

The world’s largest software makers are using Arm Design to build a processor that will be used in its data centers, according to people familiar with the plans. It is also exploring using another chip that will power some of its computer’s surface line. People asked not to discuss private initiatives. Intel’s stock in New York fell 6.3 percent to close at $ 47.46 (about Rs 3,500), a 21 percent decrease this year.

The move is a major commitment by Microsoft to supplying itself with the most important piece of the hardware it uses. Cloud-computing rivals such as Amazon are already well down the road with similar efforts. They’ve argued their chips are better suited to some of their needs, bringing cost and performance advantages over off-the-shelf silicon primarily provided by Intel.

The server chip for Surface devices is likely to have more than one as a result of Microsoft’s efforts, though the latter is possible, one of the people said. The company reports to Jason Zander, head of the Azure Cloud business, the company’s chip design unit, instead of Panos Pan, which oversees Surface products. Representatives from Microsoft and ARM declined to comment on whether Microsoft was working on the server and PC processor.

“Because silicon is a foundational building block for technology, we’re continuing to invest in our own capabilities in areas like design, manufacturing and tools, while also fostering and strengthening partnerships with a wide range of chip providers,” Microsoft spokesman Frank Shaw said.

Microsoft has stepped up hiring of processor engineers in recent years, recruiting in the backyard of chipmakers such as Intel, Advanced Micro Devices, Nvidia and among those cut adrift when Qualcomm abandoned its server chip efforts.

AMD is the second-largest maker of chips that run PCs and it’s been staging a comeback in the server market after being largely shut out by Intel for most of the last decade. AMD stock declined 1 percent on Friday. Xilinx, another chipmaker that AMD is acquiring, slipped 1.8 percent.

Intel’s Xeon range of server chips currently power most of the machinery at the heart of the internet and corporate networks, generating the company’s most profitable source of revenue. It still has about 90 percent of this market, despite recent gains by AMD. Some Xeon models cost as much as a compact car.

“The incredible demand for computing fueled by new workloads like AI is driving more silicon experimentation in the cloud. Building on decades of x86 ecosystem innovation, we are committed to providing customers the world’s best CPUs and new products from GPUs to AI chips,” Intel said in a statement. “In this expanding market, we expect to gain share in many areas like AI training, 5G networks, graphics and autonomous driving.”

Customers such as Microsoft have increasingly turned to alternative solutions to make sense of the mountain of data that cloud computing and smartphones generate. The adoption of artificial intelligence to automate that process has sparked a flood of new chip designs. The biggest concern for owners of the giant data centers behind services like Office 365 has become the cost of providing electricity to their growing hardware footprint. Arm-based chips are often more energy efficient.

If Microsoft pushes forward with its own chip for PCs it will be following Apple which is moving its entire Mac line away from Intel processors. While neither Apple nor Microsoft devices own large chunks of the PC market, their offerings are positioned as premium products with slicker designs and more advanced capabilities. When announcing its first new Macs based on the M1 chip, Apple touted the performance boost compared to standard PCs.

Microsoft currently uses Arm-based chips from Qualcomm in some of its Surface PCs. It ported Windows to work on these types of chips, which have typically been used in smartphones. Apple also uses Arm technology in its processors. Other Surface models use Intel chips.