Google Said to Endorse Qualcomm's Fledgling Server-Chip Efforts

  • Companies have cooperated on design work, people familiar say
  • Qualcomm's push could pose threat to Intel's server dominance

Qualcomm Inc. is poised to get a crucial stamp of approval for its fledgling push into server chips, a market dominated by Intel Corp.

Google, the main unit of the world’s most valuable company and biggest buyer of processors that run server computers, is planning to publicly give its support to early versions of Qualcomm’s chips at an investor event next week, according to people familiar with the matter. The two have already cooperated on design work and Google will commit to using the processors if they meet performance goals, said the people, who asked not to be identified because the plans aren’t yet public. Representatives of both companies declined to comment.

Orders from Google, the operator of one of the most extensive networks of data centers, would represent the first potential threat to Intel’s total dominance of server chips in almost a decade. After crushing a challenge from Advanced Micro Devices Inc. that peaked in 2006, Intel now supplies more than 99 percent of processors used in servers, the machines that are the backbone of corporate networks and Internet data centers.

San Diego-based Qualcomm, the biggest maker of mobile-phone chips, is trying to encroach on Intel’s turf as it scouts out new markets for its silicon, a response to stiffer competition in smartphone processors. The company showed off a test chip last year and said it was working with multiple prospective customers. It will host an investor meeting on Feb. 11.

For Google, as well as other data-center operators, nurturing a rival to Intel may help keep down the growing expense of building infrastructure. Google parent Alphabet Inc. has almost tripled spending on equipment since 2011, as the owner of the most popular Web search engine tries to keep up with insatiable demand for computing services provided over the Internet.

Demand for server chips has helped Santa Clara, California-based Intel weather a four-year slide in sales of personal computers, the market that provides the company with most of its revenue. Any loss of server orders to rivals could dent the company’s ability to keep its promise to investors that the data-center group will grow at about 15 percent a year.

Intel’s enviable profits in servers -- a business unit that provided more than half of the chipmaker’s operating income yet less than a third of overall sales -- have made its products a target for data-center operators looking to cut costs. Still, these customers have had little in the way of alternatives to help them in price negotiations with Intel, as a string of would-be competitors such as AMD have failed to field powerful enough products.

Google, which purchases as many as 300,000 processors every quarter for servers it manufactures, has greater buying power than most. The Mountain View, California-based company accounts for more than 5 percent of shipments in the market, according to researcher IDC. Google also creates its own software, meaning the company can fine-tune its computing systems much more than corporations who rely on industry-standard equipment running Intel’s proven technology.

Google is only behind Hewlett-Packard Enterprise and Dell Inc. numbers of processors purchased, making it the largest end-user of Intel parts, according to IDC.

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