Intel Hits Report Microsoft To Design Its Own Chips For PCs And Servers

Intel fell 6.3% on Friday following a Bloomberg report that Microsoft plans to design its own chips for its Surface PCs as well as its servers.

Intel has had a long-standing partnership with Microsoft as the leading manufacturer of processors for Windows PCs.

The report comes a month after Apple started selling PCs using its own M1 processor, instead of Intel chips. The Microsoft chips are said to be based on Arm’s technology, which Nvidia is in the process of acquiring from Softbank.

Apple’s chips for its iPhones and Amazon’s server chips are also based on Arm’s instruction set, which is separate from the x86 technology primarily used by Intel.

Earlier this month, a senior Microsoft executive didn’t dismiss the idea that Microsoft would build its own “first-party” chips at a conference.

“The partnerships that we have in this area, from the OpenAI efforts that we have to our relationship with Intel and the Arm developments that we have, certainly underscore the need for advanced capabilities here, whether we are building them first-party or Whether we have an ecosystem of third-party partners, it sort of remains to be disclosed, ”said Judson Althoff, executive vice president of global business at Microsoft, in an appearance at UBS Global, Technology, Media and Telecommunications on December 8.

Microsoft said in 2017 that it was working with server makers Arm to optimize silicon for use in its own data centers. Windows currently runs on Arm-based PCs, usually with chips made by Qualcomm. Microsoft wants to make sure that more applications can be run on machines running Arm chips. He began testing software that allowed users to run applications originally designed for machines with 64-bit chips like AMD and Intel.

Intel reported $ 9.85 billion in revenue from its group that sells PC chips in the quarter ending September. Server chips are also a big business for Intel. In the quarter ending September, Intel reported $ 5.91 billion in revenue for its data center group that sells server chips.

Intel has struggled to manufacture its chips in recent years. Intel controls its own chip factories, called “fabs”, against other chip designers, who contract with Asian companies to manufacture chips to customer specifications.

The more transistors a chipmaker can hold in the same space, the more efficient a chip is. Currently Intel ships chips with 10-nanometer transistors, but dedicated foundries, like TSMC, are now making 5-nanometer chips, which are technically superior.

Earlier this year, Intel CEO Bob Swan said he was considering outsourcing its manufacturing, as Apple is doing.

Representatives for Intel and Microsoft did not immediately return requests for comment.

—Jordan Novet contributed to this story.