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The cloud is at the forefront of the chip wars

Meit’s simple Think of your computing cloud as a placeless place for the latest Netflix series, Spotify playlists, countless selfies, and digital assistants. At least until Alexa warns you that your storage space is full and offers to rent an extra room, it’s easier to ignore it completely. Necessary, insubstantial, $9.99 per month, unlimited for all intents and purposes. It is the ether of the digital age. But this ether has a very unreal side. In other words, vast data centers where all this information is physically stored and increasingly processed by powerful computers known as servers. The semiconductor hardware that powers servers is becoming the front line of the fiercest battle in the battle for his $600 billion global market for computer chips.

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Server rooms began replacing computer mainframes in the 1990s. At the time, they were owned by companies and installed on the premises.They were mostly run on chips made by IBM When horsepower, Big Tech of the day.These were superseded by Intel processors, and by the mid-2000s their dominance was computer Make semiconductors a near monopoly in the server market. About ten years ago, things started to change again when Amazon started selling some of its spare server capacity. Microsoft and Google followed suit, forming the cloud computing industry. As the cloud grew, so did Intel’s competition.

Today’s market for server processors is getting bigger, more crowded, and more complex. (The business of memory chips, which store data rather than process it, is a different, more commoditized, and less profitable business.) Intel, which both designs and manufactures semiconductors, is a profitable 33% comes from server chips, up from 29% in 2016. Professional chip designers who don’t do their own manufacturing are expanding their server chip business even more rapidly. Data centers now account for 39% of Nvidia’s sales, up from 7% for him six years ago.for AMDThat number jumped from 17% to 23% between 2020 and 2021, according to another American chip designer. A Japanese owned company that licenses off-the-shelf designs that clients can tailor to their needs. Designs are etched into the silicon by a contract manufacturer. tsmc Taiwan is also increasing the capacity of server chips.

There are two factors that explain the competitive storm. The first is market size and growth. Data center chips are a bright spot in an otherwise dark year for the semiconductor industry, which has been hit by periodic recessions that have wiped out two-fifths of the market value of global chipmakers this year. I’m here. on the other hand, computers Smartphones and the chips in them are expected to decline this year, while demand for servers is projected to increase. His Synergy Research Group, an analyst firm, expects the cloud giant to build more than his 300 new data centers around the world by 2024. The largest of these can accommodate at least 100,000 servers. That would require a lot of chips.according to IDC, another research firm, cloud and on-premises data centers, plans to buy $71 billion worth of semiconductors in 2022, up from $42 billion in 2019. Sales could almost halve over the next five years and grow twice as fast as he did in chips. the entire industry. Most of that growth comes from processors, not memory chips.

The second reason for the upheaval is the increasing sophistication of cloud capabilities. It doesn’t work like a mere large external hard drive. New features abound that require different chip architectures. In some cases, that means repurposing existing technology. Nvidia’s cloud business is based on its graphics processing units (GPUss) is a special chip used to bring computer animation to life.it turned out to be GPUsFirst designed in the 1990s to improve video games, s is also good at running artificial intelligence (AI) model.Intel recently launched the first set of standalone GPUsNot only does it compete with Nvidia, AMDit also makes them.


A completely new design is also available. Looking to improve performance and reduce costs, the cloud giant is busy adopting Arm’s energy-efficient designs. His Graviton chips from Amazon’s Arm have seeded many server farms. Google does the same with Tensor Processing Units. Microsoft is committed to custom designing the Azure cloud. In 2020, Nvidia proposed to buy Arm for his $40 billion, mostly to bolster its cloud services. The deal he collapsed in February amid antitrust scrutiny, but the company nonetheless plans to launch general-purpose server chips next year to compete more directly with Intel.

One of the clear winners of the cloud boom is TSMCToday, we are the only company that can manufacture the most advanced processors that cloud providers want. Intel’s recent advances in technology and its entry into the contract manufacturing business, combined with new $52 billion US subsidies for domestic chip manufacturing, have helped Intel close the gap with Taiwanese companies, and part of its habit of Hope it helps bring back the stock price, which suggests investors have their doubts).

Ironically for the hardware business, another big chunk of the cloud chip loss could go to the companies with the best software. Nvidia’s popular programming language, Cuda, already making it easier for developers to improve chip performance. For now, the cloud giant seems more comfortable working with Nvidia than trying to compete with proprietary software. But they are software companies first and foremost, so this peaceful coexistence won’t last forever. All of this should worry incumbents like Intel and his Nvidia. Cloud For his users, it arguably means better, cheaper, and increasingly invisible services.

Read the article by Schumpeter, a columnist on global business.
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https://www.economist.com/business/2022/10/06/the-cloud-is-the-fiercest-front-in-the-chip-wars The cloud is at the forefront of the chip wars

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