There was an interesting panel at the Silicon Summit sponsored by the Global Semiconductor Alliance (GSA) on “Designing for the Cloud.” It was led by Linley Gwennap (The Linley Group) with Ivo Bolsons (Xilinx), Ian Ferguson (ARM), and Steve Pawloski (Micron). Missing of course was Intel which derives close to 30% of its revenue from their Data Center Group (DCG), also known as their cash cow. There were however quite a few Intel people in attendance who were willing to talk, off the record of course.
Unfortunately the presentation slides are behind a firewall on the GSA site but I have them in front of me so I will give you a quick summary. But first, let’s talk about the Intel DCG and the changing cloud landscape.
DCG is recognized as one of the primary Intel growth engines along with IoT (which is a joke that I will cover another time). Unfortunately growth is decelerating from 18% in 2014 to 11% in 2015 and in the first quarter of 2016 DCG revenue growth is down to 8%. DCG revenue growth should still hit double digits this year but after that it is a little bit cloudy.
ARM based servers are definitely a threat. Ian Ferguson admitted that it has been 8 years since ARM entered the server business with little success (1% market share). The same could be said about ARM entering the mobile business many years ago with little success but they of course prevailed (99% market share). ARM has publicly stated that they are still aiming for 25% market share by 2020 and Ian shared the ARM Server Core Beliefs:
According to Ian, boxes are being deployed worldwide with China leading the effort. Why China you ask? Because China, the most populous country in the world, consumes almost half of the semiconductors made and will have the single largest cloud demand in the world, absolutely. And China wants control over the silicon for security reasons to “avoid the perils of reliance on American technology.” This alone will maim the Intel cash cow.
Qualcomm is the largest ARM licensee to announce a China JV (joint venture with Guizhou Huaxintong Semi-Conductor Technology) which will start by selling Qualcomm’s own server designs this year. This will be followed by new versions designed by the JV specifically for the China cloud and finally a completely new chip aimed directly at Intel.
In addition to the ARM threat there is also a joint development agreement between China and the IBM OpenPOWER foundation for server chips. IBM was at the Design Automation Conference last week openly recruiting people in Austin for the China JV.
AMD also announced a joint venture with China which includes x86 processor technology for server chip development. Again, China wants to make their own chips, which is also why China is allowing TSMC, GlobalFoundries, and others to build fabs in China.
Given all that, plus Intel losing the process lead at 10nm and 7nm to TSMC and Samsung, continued double digit growth for Intel’s primary growth engine (DCG) is very hard to believe, just my opinion of course.