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Amazon (NASDAQ: AMZN) has dealt a new blow to Intel's (NASDAQ: INTC) control of the server processor market. Taking advantage of its acquisition of Annapurna Labs several years ago, Amazon is quietly working on creating its own ARM-based processor (called "Graviton") for its cloud environment.
Of course, chip design is an expensive activity and should not be taken lightly, but the SoftBank ARM license model (TYO: 9984) allows the ubiquitous design house to give a first foothold to Anyone who wants to design a chip without having to scratch or have something do the particularly heavy tasks for which the Xeon Intel excels.
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The other side of the equation is that Amazon does not really need to gain ground for its chips, because it is the largest cloud provider, it can transfer all savings to itself and on its customers, by pursuing its general reduction strategy. This has earned it such an important share of the cloud market and a clearly envisioned strategy because Amazon has said its Graviton cloud servers would be offered at a fraction of the cost of its Intel chipset offerings.
Amazon Anti-Intel?
This is the second setback that Amazon has undergone with Intel in recent weeks. On November 6, she announced that she would also propose AMD EPYC chips in AWS. Amazon has always claimed that Intel would continue to be a major supplier, but diversification and risk reduction resulting from excessive reliance on a sole source would obviously be an important factor for the largest provider of cloud computing.
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These changes also make Amazon the first major cloud provider to offer an ARM-based offering, critical to keeping its AWS growth on track. Although retail is obviously the main driver of Amazon's revenue, it struggled to maintain the stellar growth rates it had experienced in previous years, and AWS has become a jewel in the crown of declarations. Amazon's results recently, contributing 46% revenue growth in the third quarter and more than half of the company's operating profit. The Graviton chip will also likely drive energy costs into the data center, creating a virtuous circle of lower costs that it can pbad on to consumers who, in turn, can buy more and generate more growth for the division. .
Initial comments from Amazon indicate that for some workloads, such as web servers, costs could be up to 45% lower than those related to existing Intel Xeon AWS offerings. It is highly likely that Amazon uses such title numbers to attract attention and it is clear that everything in AWS does not do things as simple as running a web server. For those who need serious computing capabilities, there are probably many workloads for which Intel / AMD offers will probably still be needed, but that pushes them to a smaller piece of the pie. Will that hit Intel in the pocket? The only conclusion that can be drawn is that yes, how much remains to be seen.
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