Data centers open new front in tech war

October 30, 2012: 3:32 PM ET

ARM wants to eat Intel's lunch -- and it now has a plan to do just that.

FORTUNE -- ARM Holdings (ARMH) rules the smartphone market. Now the British firm is trying to get its processor designs into somewhat larger gadgets -- servers.

ARM has yet to make any significant inroads into lucrative data centers currently dominated by a different breed of chips that are manufactured by Intel (INTC). But the company hit a significant milestone Tuesday morning, when it announced two new 64-bit processor designs at a press event in San Francisco. According to ARM, the new technology can deliver triple the performance of its current chips while retaining its signature energy efficiency, and is better suited to meet enterprise needs because it can handle larger amounts of memory. While more efficient chips are a mainstay in tiny cell phones, they're new to data centers, where keeping energy -- and cost -- down is an increasing concern, especially to web companies with large server farms.

MORE: Microsoft tries again with Windows Phone 8

But unlike its rival Intel, ARM doesn't actually manufacture any chips, it simply licenses its technology and collects royalties. So its success in any market relies on the commitment from its customers, large chipmakers. Several companies have already signed on to make chips based on ARM's new architecture. On Monday, Advanced Micro Devices (AMD) announced it would start selling a new server products based on ARM's technology by 2014. While the Sunnyvale, Calif.-based chipmaker will continue to develop its traditional line of X86 processors (Intel's bread and butter), an AMD release issued Monday morning said that the "explosion of the data center has brought with it an opportunity to optimize compute with vastly different solutions."

"From our point of view AMD is significant because of the relationships they already have in the server world today," ARM's chief executive officer Warren East told Fortune. East had originally been scheduled to make an appearance at AMD's own press conference Monday in San Francisco, but was stuck in Europe due to Hurricane Sandy and instead issued this video from the back of a London cab.

MORE: Performance reviews remade

AMD's not the only company hoping to push ARM into the server world. Austin, Texas-based Calxeda recently closed a $55 million funding round to deliver "as much as a ten-fold improvement in energy efficiency compared to today's commodity X86-based servers," by using ARM's chip architecture. (ARM is one of Calxeda's original investors.) But even if ARM is successful, don't expect it to rake in significant market share in the server space anytime soon. According to CEO East, it will likely take until 2020 for the company to take in a 20% share. What's more, Intel won't be sitting still. It's already getting its butt kicked by ARM in smartphones, and it's not about to lose out on the lucrative data center market too.

"We take any new potential threats to our data center business seriously but feel very well positioned to continue our leadership in microservers moving forward," says Intel spokesperson Jon Carvill. "We have a strong low-power roadmap for with our Atom and Xeon product lines and 18 microserver designs that are shipping now or will be imminently."

Join the Conversation
About This Author
Michal Lev-Ram
Michal Lev-Ram
Writer, Fortune

Based in Silicon Valley, Michal Lev-Ram covers enterprise and mobile technologies for FORTUNE. Prior to joining FORTUNE, she wrote for CNNMoney, Fast Company, Popular Science and other business and technology publications. She was also a staff writer at Business 2.0 and holds a B.A. in journalism from San Francisco State University.

Email Michal
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.