Qualcomm Advantageously Positioned To Compete In The Server Chip Market
Qualcomm (NYSE:QCOM) recently announced the commercial sampling and the live demonstration of the world’s first 10nm server processors. The company seems to be on track to deliver its chips for the server processor market. Earlier this year, the company had announced plans to enter into a joint-venture with a Chinese province to enter into the server chip market. Coupled with the other announcement about Qualcomm’s collaboration with Microsoft to make Windows 10 compatible on mobile computing platforms, this announcement is a significant development for the company. This comes from the fact that it provides Qualcomm with an opportunity to gain a foothold in alternate growth markets such as the data center market and the PC market.
Currently, the data-center processor market is dominated by Intel, which commands approximately 96% of the market share. Further, a handful of ARM licensees that have tried venturing into this market and have not been successful in the past. However, we believe Qualcomm is advantageously positioned to enter this market. In this analysis, we discuss this in detail.
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Intel has been dominating the server chipset market for years. However, the top five companies that drive the data center market are encouraging the rise of alternate sources. Earlier this year, when Qualcomm hosted its annual analyst day presentation, Google was rumored to endorse its server-chip efforts. One primary reason for this is that more vendors will drive prices lower and boost innovation.
Power Efficient ARM Chipsets
With the growth in the number of data-centers, there is an increasing requirement to manage the energy consumption from these data centers. According to a study, data centers used approximately 2% of the total electricity usage of the U.S in 2010. One key method to reduce power consumption of these data centers is to use power-efficient processors.
Qualcomm seems to be advantageously positioned to capture this market as it can utilize its experience in making power efficient mobile phone chipsets in designing power efficient server chipsets too. The company is one among the few of the top-tier ARM licensees that hold both architectural and core licenses from ARM. It is worth noting that Qualcomm lost a socket on the Samsung Galaxy 6 due to performance issues associated with the Snapdragon 810 processor, when it used an off-the-shelf ARM core instead of a custom core to build it.
Server Chips Business Goes Hand-in-hand With Qualcomm’s Core Business
Just as Intel gained a dominant position in the data center space with its experience in designing and manufacturing microprocessors, Qualcomm can utilize a decade of its experience in making smartphone chipset to enter the large server chip market. The company held approximately 52% market share of smartphone application processor in 2015. Furthermore, Qualcomm has the experience of integrating all essential components required in a smartphone into a single system-on-chip. More importantly, this is something where Intel’s lags and Qualcomm can use it to its advantage.
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