Intel has a near-monopoly in the server industry, with its own ads proclaiming that “98 percent of the cloud runs on Intel.” That’s why Microsoft’s pledge to use ARM chips in its severs — hinted at for a while and outlined more fully at the Open Compute Summit this week — is such a big deal. Microsoft is the second biggest cloud company in the US after Amazon, and if it moves even a small bit of its business away from Intel’s products, it threatens the veteran chipmaker’s most lucrative revenue stream, responsible for $7.5 billion operating profit last year.
Speaking to Bloomberg, Microsoft’s vice president of cloud computing, Jason Zander, said the company had made a “significant commitment” to ARM servers — porting its Windows Server operating system onto ARM-powered designs by Qualcomm and Cavium, which were unveiled at Open Compute. The company won’t say how widely it plans on deploying ARM’s chips, and notes that these systems haven’t been integrated into consumer-facing services. Nevertheless, its intentions are clear.
“We wouldn’t even bring something to a conference if we didn’t think this was a committed project and something that’s part of our road map,” Zander told Bloomberg. “It’s not deployed into production yet, but that is the next logical step.”
These ARM design are part of Microsoft’s next generation of server hardware, intended to cut operational costs. New hardware is being developed with a number of companies under the name Project Olympus. Other designs include systems running on AMD’s Naples processor, and on a variant of Intel’s own Skylake chips. Bloomberg reports that some of this new hardware will make its way into Microsoft’s data centers “later this year.” However, it’s not clear if this refers to the designs using ARM processors.
This is a seismic change in the chip industry, but not an unexpected one. Microsoft has been slowly pivoting away from Intel’s products for years, and the switch will affect consumers too. Last December, for example, Microsoft announced that a new generation of Windows 10 machines running on ARM chips were in the pipeline. The change in underlying hardware could mean devices that are more energy-efficient, and that offer cellular connectivity for less.
This move could also hurt Intel, which is suffering as the PC market continues to shrink year after year. However, the sheer scale of Intel’s business (it’s the biggest chip maker on the planet) means any change in the industry will be slow. When talking about ARM-powered Windows 10 machines, Microsoft admitted that Intel chips would still provide a more powerful experience, and Intel is confident the same is true when it comes to servers. A little more diversity in the market won’t mean Intel isn’t still a force to be reckoned with.