For businesses needing central processor units, or CPUs, for servers, there is one dominant supplier of the market: Intel. To quantify Intel's dominance, the business supplies more than 99% of server processors. These processors are the computational engines behind today's Internet and cloud based system infrastructure and Intel have faced little
competition since AMD, Advanced Micro Designs, challenged them going back to 2006. The server processor market is a lucrative one for Intel: this division amounts for more than half of the company's profits but under one third of sales. True enough that Intel have marketed their server chips to data centres looking to reduce costs, but in the absence of a competitor, there is relatively little to stop Intel charging whatever they want for the technology. We have also seen how Intel is able to afford to invest a massive sum into chipset research.
Qualcomm, the mobile chipset designed, has been eyeing up the server market for some time now, presumably in light of Intel's profits in the market. Qualcomm's expertise in producing high performance, low power chipsets could stand them in good stead for the server market. However, with Intel capturing almost every customer, it would be difficult for Qualcomm to enter the mindset of potential customers without winning a significant contract. This is where the rumor kicks in, because undisclosed sources close to the matter have stated that Google is set to publically support Qualcomm's server chip venture. Google is the largest global customer of server chips and buys up to 300,000 per quarter as the business invests a considerable sum into the cloud computing platform and of course into keeping up with demand for its products and services. As it happens, Google is Intel's third largest customer behind Dell and HP. We understand from the rumor that Google and Qualcomm have worked together on Qualcomm's server processors and Google are committed to buying the chips should they meet performance goals. Naturally, neither Google nor Qualcomm would comment on the rumor.
Should Google place a significant order of Qualcomm hardware, this would be a direct threat to Intel's dominant position in the server market. Intel's commitment to investors that their server business will grow by 15% year on year would be under threat. For Google - and of course, other businesses needing to buy server chips - having a powerful and competitive rival to Intel would be good news as it could help contain the costs of the chips: a little bit of competition can go a long way. For Qualcomm, it would mean reducing the depence of the business on the fiercely competitive mobile chipset market. Qualcomm appear set to provide an update on the situation next Thursday at an investor briefing.