IBM, AMD Plan Assault on Intel's Chip Dominance

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AMD Chief Executive Lisa Su at an event in San Francisco last week discussing a chip dubbed ‘Summit Ridge’ that uses the company’s new Zen technology. ENLARGE
AMD Chief Executive Lisa Su at an event in San Francisco last week discussing a chip dubbed ‘Summit Ridge’ that uses the company’s new Zen technology. Photo: Advanced Micro Devices

Few companies enjoy the kind of dominance Intel Corp. INTC 0.11 % does in chips for the computers found in data centers. But competitors keep trying to pry open its server stronghold, with International Business Machines Corp. IBM 0.16 % the latest to brandish a new tool.

IBM, at a Silicon Valley technical conference on Tuesday, plans to reveal new details of Power9, the next addition to the line of microprocessors the technology giant uses in its own servers and—in a recent strategy shift—offers to other hardware companies.

Advanced Micro Devices Inc., AMD 1.19 % meanwhile, is using the same event to discuss the inner workings of processor technology called Zen that it plans to use in chips targeting servers and other hardware. AMD, which uses the same x86 design as Intel, last week at a company event demonstrated a chip using Zen processor cores outpacing its larger rival’s chips in one speed test.

“We had let our performance slip versus the competition,” said Mark Papermaster, AMD’s senior vice president and chief technology officer. “This really is quite a statement to the industry that AMD is back in high-performance processors.”

ARM Holdings ARMH 0.54 % PLC, which licenses chip technology used in most mobile phones, is also discussing plans at the Hot Chips conference to add features for use in supercomputers and other scientific applications. The British company estimates that 13 companies already are using its technology in chips for servers and other data-center hardware, which are expected to compete with Intel products.

Of 9.81 million servers shipped last year, x86 chips were used in 9.6 million of them—a 98% share, International Data Corp. estimates. Intel in the second quarter accounted for 99.7% of x86 server-chip shipments to just 0.3% for AMD, according to Mercury Research.

Server chips command much higher prices and profit margins than Intel’s other products. The company’s data center group in 2015 posted $7.8 billion in operating profit on revenue of nearly $16 billion—a margin of 49%, compared with just under 30% for the unit that sells chips for PCs.

“There is an awful lot of margin going to Intel,” said Matthew Eastwood, an IDC analyst. “Customers want alternate suppliers.”

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That is particularly true of large Web services such as Google Inc. and Facebook Inc., FB 0.18 % major Intel customers that nonetheless have encouraged other suppliers. Google, for instance, was one of the original members of OpenPower.org, a group IBM helped establish in 2013 to promote use of its chip technology by other companies.

Big Blue hopes to accelerate that push with Power9, which comes in two basic designs. One chip, with 24 processor cores, is targeted for Web-type companies that break up jobs to be handled by hundreds or thousands of machines. Another, with 12 cores, is aimed at larger systems designed for running applications like corporate databases.

IBM and others are partly motivated by the increasing popularity of deep learning, a trend helping to fuel sales of servers and server chips lately. The technique, a branch of a broader field called artificial intelligence, allows computers to handle tasks such as recognizing faces and speech by analyzing vast troves of data rather than explicitly programming them to do so.

The Power9 chips, expected to begin arriving in the second half of 2017, have communication links that are especially designed to exchange data with graphics processing units sold by Nvidia Corp. NVDA 0.81 % That company’s chips are now used mainly with Intel processors for deep-learning applications.

“The hot space is on these workloads,” said Brad McCredie, chief technology officer for IBM’s Power line who also holds the title of fellow.

The point hasn’t been lost on Intel, which has moved to add technology to satisfy server buyers. It paid $16.7 billion last year for Altera Corp., whose programmable chips can be used alongside Intel processors to accelerate particular computing chores.

Intel earlier this month purchased Nervana Systems Inc., a startup making artificial-intelligence chips and software. It also used an annual developer conference last week to discuss plans to use an existing chip line called Xeon Phi for deep-learning applications.

“We take all competition very seriously,” said an Intel spokesman on Monday.

AMD expects to deliver a 32-core server chip based on its Zen technology in the second quarter of 2017. Lisa Su, its chief executive, estimated the company had spent nearly four years and hundreds of millions of dollars on the development effort.

Analysts said the company still has to prove the final product can perform in the field as well as in tests, but initial results seem promising.

“They don’t have to be faster than Intel,” said Linley Gwennap, an analyst with the Linley Group. “They just have to be close enough so they can compete on price.”

Don Clark at Don.Clark@wsj.com



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