Google Said to Mull Designing Chips in Threat to Intel

Photographer: Connie Zhou/AP Photo

Hundreds of fans funnel hot air from Google's computer servers into a cooling unit to be recirculated at a Google data center in Mayes County. Okla. By using its own server processor designs, Google could better manage the interactions between hardware and software. Close

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Photographer: Connie Zhou/AP Photo

Hundreds of fans funnel hot air from Google's computer servers into a cooling unit to be recirculated at a Google data center in Mayes County. Okla. By using its own server processor designs, Google could better manage the interactions between hardware and software.

Google Inc. (GOOG) is considering designing its own server processors using technology from ARM Holdings Plc (ARM), said a person with knowledge of the matter, a move that could threaten Intel Corp. (INTC)’s market dominance.

By using its own designs, Google could better manage the interactions between hardware and software, said the person, who asked not to be identified because the matter is private. Google, among the largest buyers of server processors, has made no decision and plans could change, said the person.

“We are actively engaged in designing the world’s best infrastructure,” said Liz Markman, a spokeswoman for Google. “This includes both hardware design (at all levels) and software design.” Markman declined to say whether the company may develop its own chips.

Google has been designing its own data centers around the world with servers to power search, video, online communications and other features. Moving into chip design could take away revenue from Intel, which has counted on Internet companies to help drive processor sales. Google is Intel’s fifth largest customer, accounting for about 4.3 percent of its revenue, according to Bloomberg supply chain analysis.

ARM-based chips dominate in mobile phones and tablets where companies such as Qualcomm Inc. (QCOM) and Samsung Electronics Co. (005930) have fended off Intel’s attempts to expand. Intel controls more than 95 percent of the market for chips for servers that use personal-computer processors, with Advanced Micro Devices Inc. making up the rest. AMD and other companies have announced plans to use ARM-based designs for the server-chip market.

Photographer: Ashley Pon/Bloomberg

A server is displayed for a photograph at the opening ceremony of the Google data center in Changhua, Taiwan Close

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Photographer: Ashley Pon/Bloomberg

A server is displayed for a photograph at the opening ceremony of the Google data center in Changhua, Taiwan

Intel Drops

The shares of Intel declined as much as 3.1 percent in extended trading, after closing at $24.47 in New York.

Mark Miller, a spokesman for Intel, and Phil Hughes, a U.S.-based spokesman for ARM, declined to comment.

Google, based in Mountain View, California, already has signaled more interest in the chip industry. In August, the company joined a group started by International Business Machines Corp. that licenses technology used in data centers, including chips for servers. Other members of the alliance include chipmaker Nvidia Corp. (NVDA) and Mellanox Technologies Ltd. (MLNX), the maker of equipment that speeds data transfers.

Job openings at Google include one for a “digital design engineer” with qualifications in ASICs, or application-specific integrated circuits, a commonly-used chip.

Photographer: Ashley Pon/Bloomberg

Pipes and water tanks for the chiller system stand at the Google Inc. data center in Changhua, Taiwan. Close

Pipes and water tanks for the chiller system stand at the Google Inc. data center in Changhua, Taiwan.

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Photographer: Ashley Pon/Bloomberg

Pipes and water tanks for the chiller system stand at the Google Inc. data center in Changhua, Taiwan.

Intel, based in Santa Clara, California, forecast sales that will be little changed next year amid the PC market slump. Chief Executive Officer Brian Krzanich, who was promoted to the top job in May, is counting on increasing demand for its server chips to help make up for the loss.

To contact the reporters on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net; Ian King in San Francisco at ianking@bloomberg.net; Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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