Author: Cade Metz / Source: New York Times
Andy Jassy, chief executive officer of Amazon’s cloud computing service. Amazon is now building its own chip for its servers, giving the company new leverage over its longtime supplier, Intel. David Paul Morris/Bloomberg
Amazon, the world’s largest online retailer and largest cloud-computing company, is pushing into a new line of work: computer chips.
Late last month, the company, based in Seattle, revealed that it had spent the last few years building a new chip for use inside the millions of servers in its data centers around the world.
Amazon does not plan to sell this chip directly to customers, but the decision by one of the world’s biggest buyers of computer processors to go the do-it-yourself route is likely to have a major impact on Intel, the iconic Silicon Valley chip maker.
Intel has struggled to keep up with recent technology trends, from the increasing use of mobile devices to artificial intelligence, as influence over chip designs has been shifting to Amazon, Apple and Google, which already dominate much of the rest of the tech industry.
Amazon’s new chip arrives as market forces are rapidly undercutting chip makers and their $412 billion in yearly sales. Online operations like Amazon and Google have grown so large, they can save significant money by making chips tailored to their needs rather than buying them from longtime suppliers.
The homegrown chip also gives Amazon bargaining power with Intel, which hasn’t had much competition in the server market in recent years. The internet company will still buy from Intel because it would be difficult to build all the chips it needed on its own.
But now it will have options.Intel acknowledges that companies like Amazon want to reduce their dependency on one big chip supplier. “I am not unaware of the dynamic,” Lisa Spelman, an Intel vice president, said. “Our goal is to understand and respectfully acknowledge that desire.”
About 35 percent of the server chips sold around the world go to about 10 companies, including large internet companies like Amazon and a handful of telecommunication firms, said Shane Rau, a chip analyst with the research firm IDC. That just one of them is shifting its business is terrible news for Intel.
“Each one of these companies is so large, they represent a market unto themselves,” Mr. Rau said.
In recent years, Google has designed specialized chips for artificial intelligence technology. Facebook and Microsoft, which like most internet companies are major buyers of chips from Intel, have indicated that they are working on similar A.I. chips.
Apple beat the other tech giants to this cost-saving trend four years ago when it unveiled its first custom-built chip for the iPhone. Google and Microsoft are also building the chips that go into devices like smartphones and virtual-reality headsets.
Amazon has…
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