Vaporware 64-Bit ARM Server Chips Close to Becoming a Reality: Applied Micro Upends AMD

Advanced Micro Devices (NYSE: AMD  ) has been touting the immense possibilities of ARM 64-bit chips, commonly used in tablets and smartphones, for use in servers and data centers. But, all that talk about using the chips in servers has remained mere vaporware, until now. Apparently, it's not AMD that will receive the honor of being the first to deploy the chips for data centers. Rather, the two companies that look most likely take this prize are Applied Micro Circuits (NASDAQ: AMCC  ) , and Canonical, the parent company of Ubuntu Linux.

The two are planning to soon demonstrate their X-Gene Server-on-a-Chip. X-Gene is an ARMv8 64-bit Server-on-a-Chip package that runs up to 2.4GHz. The chip combines a 10/40 GB mixed signal I/O with what Applied Micro Devices calls ''enterprise-class memory subsystem.'' Applied Micro Devices says the X-Gene delivers four times the processor density of x86 architectures, while consuming only 50% as much power to deliver comparable, or better, performance.

AMD has hoped to replace Intel's (NASDAQ: INTC  ) x86 server chips with its 64-bit ARM processors, code named ''Seattle.'' The chipmaker revealed its roadmap for the revolutionary server chips last year, with the launch slated to take place in the first quarter of 2014. But, the company later pushed back the planned launch to the fourth quarter of the current fiscal year.

Meanwhile, Intel plans to stick to the x86 architecture and is betting that its Atom processor will win in the mobile and hyperscale server battle. HP's Moonshot server started with Atom, but plans to offer ARM, too.

Can Applied Micro Circuits gain meaningful traction?
The market for ARM server chips is still growing and will bring a fresh change from the highly dominant x86 server chips. Meanwhile, AMD expects to not only become the market leader in 64-bit ARM server chips, but grab 25% of the overall server chip market as well. Applied Micro looks like a wildcard at the moment, but it will be interesting to see how the space plays out.

But, if past attempts by AMD to challenge Intel's dominance in server chips are any indication, don't count on the two companies making a big dent on Intel's market share. Intel remains the market leader in x86 server chips by a wide margin. The company commands an overwhelming 97% share of the market, compared to AMD's 3%. AMD had a peak market share of 25% in 2006, but its share has been steadily declining since then. Intel and AMD are the only companies that manufacture x86 server chips. Moreover, Intel still rules the portable computer chip and desktop chip markets with a 90% and 83% market share, respectively.

A number of large chip players such as NVIDIA, Cavium, and Marvell are all lining up their own offerings. Intel is still working on its line of ARM server chips, which will muddy the waters even further for Applied Micro Circuits and AMD.

Intel server chip ASP rising
x86 server chips are extremely lucrative compared to chips used in personal computers, and sell for an average of ten times as much. The average selling price, or ASP, of Intel's server chips has actually been rising over the years, a trend that contrasts sharply with the normal product cycle for chips. Intel has seen its server chips ASP increase by 47% since 2007, from $429 to $629 currently.

Chip prices tend to gradually fall due to gains in manufacturing efficiency and competition. For instance, the ASP of Intel's chips for mobile computers has fallen 33% over the same period. However, Intel says it has not been increasing server chip prices, but rather the increase in ASP has been a result of customers opting for higher-end models.

Stabilizing market share
Although the market share of x86 server chips has been gradually coming down to the current 40%, AMD says that the share will stabilize in 2015 around 39%. Mercury Research estimates that the x86 server chip market is worth about $12 billion this year. Meanwhile, the market share of 64-bit ARM chips is expected to gradually grow through 2016, and hit a plateau with a 38% market share.

The chart below shows how the total addressable market for processors across mobile, embedded, PCs, servers, and consoles is expected to grow in the coming years. The gray bars represent Power, MIPS, Sparc, mainframe, and other proprietary chips, all lumped together.

Source: AMD

The future, therefore, seems to belong to x86 and ARM chips.

Foolish bottom line
Applied Micro Circuits, together with Canonical, is likely to become the first company to launch the much-awaited 64-bit ARM server chips for data centers ahead of AMD. ARM server chips are likely to gain a respectable market share, but probably not enough to unsettle Intel, which commands an overwhelming share of the sever chip market.

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Read/Post Comments (6) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On June 09, 2014, at 12:52 PM, bugsy1339 wrote:

    " ARM server chips are likely to gain a respectable market share, but probably not enough to unsettle Intel"

    you can take my word for it - if respectable means 20% share Intel will not be feeling so well at all. Also, AMD is the only ARM player that has Server Chip making experience so they will likely be the winner out of the ARM players. AMD is also the only player to bring x86, ARM, and dGPU into the server market in an ambidextrous way.

    lets make our bets

  • Report this Comment On June 09, 2014, at 5:30 PM, Colin1497a wrote:

    I'm reading this trying to figure out how this is beating AMD to the punch since they were demoing Seattle serving web pages over a month ago on Redhat? Is it because Ubuntu's software is a release version and the Redhat software was not? The schedules I see that surrounded the press event they did call for the actual availability of x-gene "by the end of the year," which seems to, at best, be about the same time that we'll see Seattle.

    I'm not saying they're not doing great things, but the entire premise of this article seems to be inaccurate and based upon misreading a headline.

  • Report this Comment On June 09, 2014, at 6:15 PM, fearandgreed2005 wrote:

    Applied Micro Devices says the X-Gene delivers four times the processor density of x86 architectures, while consuming only 50% as much power to deliver comparable, or better, performance.

    Hope the silicon is as good as the marketing department. The above statement is just nonsense and I'd love to see data that supports it.

  • Report this Comment On June 09, 2014, at 6:43 PM, gibbga wrote:

    "Intel is still working on its line of ARM server chips, which will muddy the waters even further for Applied Micro Circuits and AMD."

    Intel is what????? If this is anywhere near an accurate statement, then I must have been asleep for the last 10 years.

  • Report this Comment On June 09, 2014, at 8:07 PM, TEBuddy wrote:

    Hello, if you did not know about X-Gene, there are many articles you could have read about it. Its nothing new for you to try to present it as some surprise that could embarrass AMD. I'd say this article is an embarrassment.

    Just because they say there will demo something doesn't mean they have the same design skills to support the chip on motherboards and channel partners, and they do not have the freedom fabric that AMD has. AMD will legitimize the ARM server market.

  • Report this Comment On June 10, 2014, at 1:35 AM, rav55 wrote:

    @Joseph Gacinga

    "Advanced Micro Devices (NYSE: AMD ) has been touting the immense possibilities of ARM 64-bit chips, commonly used in tablets and smartphones, for use in servers and data centers. But, all that talk about using the chips in servers has remained mere vaporware, until now"

    Again you are wrong. Let’s have a peek at the timeline shall we? The one that you so conveniently ignored. In fact this storey is a year old. Are you just finding out about this now?

    Dec 20, 2013

    “AppliedMicro’s X-Gene: 2013 Year in Review

    Mike Major on Dec 20, 2013

    X-Gene silicon started sampling to customers and partners in March. Shipments ramped steadily throughout the year, as did the number of organizations conducting evaluations and developing systems. In fact, more than 30 evaluation and user license agreements have been implemented, with a similar number in process.”

    Joseph your “Vaporware” began to appear last year!

    January 28,2014

    “It Begins: AMD Announces Its First ARM Based Server SoC, 64-bit/8-core Opteron A1100.

    by Anand Lal Shimpi on January 28, 2014 6:35 PM EST

    Around 15 months ago, AMD announced that it would be building 64-bit ARM based SoCs for servers in 2014. Less than a month into 2014, AMD made good on its promise and officially announced the Opteron A1100: a 64-bit ARM Cortex A57 based SoC.

    AMD will be making a reference board available to interested parties starting in March, with server and OEM announcements to come in Q4 of this year. “

    http://www.anandtech.com/show/7724/it-begins-amd-announces-i...

    April 18, 2014

    “"AMD's 'Seattle' 64-bit ARM server chips now sampling, set to launch in late 2014

    Rik Myslewski, 18 Apr 2014

    We have introduced Seattle, our first 64-bit ARM server processor and the industry's first at 28nm technology, positioning AMD as the only SoC provider to bridge the x86 and ARM ecosystems for server applications," he said. "We are excited to announce that we have started sampling Seattle last quarter and plan to ship in the fourth quarter of 2014."

    http://www.theregister.co.uk/2014/04/18/amds_seattle_28nm_64...

    May 7, 2014

    “AMD shows off new “Seattle” server processor

    Andrew Brooks

    @AndrewITWC

    Published: May 7th, 2014

    Advanced Micro Devices (AMD) highlighted its new ARM-based server chip, codenamed Seattle, this week as it laid out the company’s “ambidextrous computing” roadmap and its forthcoming Project Skybridge design environment.

    It was the first public demonstration of Seattle, a 64-bit ARM-based Opteron A-Series processor. The CPU started shipping to customers in January and runs a Linux environment derived from the Fedora Project Linux distribution.”

    http://www.itworldcanada.com/post/amd-shows-off-new-seattle-...

    The relevant information is the “CPU started shipping to customers in JANUARY”.

    June 4, 2014

    “Cavium Launches Line of Workload-Optimized 64-bit ARM Server SoCs

    by John Rath on June 4, 2014

    At the Computex conference in Taipei this week semiconductor company Cavium launched ThunderX, a 2.5 GHz 48-core, 64-bit ARMv8 System-on-Chip (SoC) family of workload- and power-optimized processors tailored for high-performance volume compute, storage, secure compute and networking-specific workloads.

    The ThunderX family of processors along with a range of hardware reference platforms will be available for general sampling in the fourth quarter of 2014.”

    http://www.datacenterknowledge.com/archives/2014/06/04/caviu...

    The relevant information here is to quote you Joseph, is this Cavium offering is indeed vaporware as “general samples” will NOT be available until fourth quarter 2014. That is when AMD should be deployed.

    June 9, 2014”

    “Applied Micro lifted the curtain on its 64-bit ARM-based server platform at the Hot Chips conference this week and ignited a debate about whether ARM is the right architecture for the data center.Applied said it's on track to ship samples of its system-on-chip, called X-Gene, in the second half of the year. It will eventually be offered in servers with 128, 256 and 512 processor cores, President and CEO Paramesh Gopi said in a presentation Wednesday.”

    http://www.channelworld.in/channel_news/applied-micro-shows-...

    AMD is already shipping samples:

    “Advanced Micro Devices (AMD) highlighted its new ARM-based server chip, codenamed Seattle, this week as it laid out the company’s “ambidextrous computing” roadmap and its forthcoming Project Skybridge design environment.It was the first public demonstration of Seattle, a 64-bit ARM-based Opteron A-Series processor. The CPU started shipping to customers in January and runs a Linux environment derived from the Fedora Project Linux distribution.”

    http://www.itworldcanada.com/post/amd-shows-off-new-seattle-...

    But the piece that I really like:

    “Applied Micro, Cavium Rise: ‘X-Gene,’ ‘Thunder’ To Rock Server Market, Say Bulls

    Tiernan Ray June 9, 2014, 6:00 P.M. ET

    Shares of Applied Micro Circuits (AMCC) and Cavium (CAVM) rose 4% and 1%, respectively, following a slew of positive mentions from the Street today regarding their role in chips for server computers using ARM Holdings (ARMH) technology.

    Canaccord Genuity‘s Matthew Ramsay initiated coverage of both stocks with Buy ratings, as part of a broad initiation of coverage, opining they will bring competition to Intel‘s (INTC) traditional dominance of the server market:

    Also today, Roth Capital‘s Krishna Shankar reiterated Buy ratings on Applied and Cavium, writing that they will both “gain market-share in the $12 billion server processor market dominated by Intel with 95% marketshare.”

    http://blogs.barrons.com/techtraderdaily/2014/06/09/applied-...

    What I particularly find interesting is how Barrons can be Bullish on two ARM Server NEWBIES gaining market share against Intel while completely ignoring AMD who has been building servers for years and is also bringing a 64 bit ARM core to market in 2014.

    Intel is going to get bloodied.

    Your entire piece is nothing but hyperbole and yellow journalism. You haven’’t checked your facts. You write innuendo and outright lies.

    Joseph you appear to be nothing more than Ashraf Eassa’s understudy.

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