Intel (INTC +0.32%), the chip giant well known for its dominant positions in the PC and server microprocessor markets, has aggressively attempted to move its designs into new corners of the data center. One such area, networking, has traditionally been dominated by processors based on the Imagination MIPS and IBM POWER architectures.
Though Imagination Technologies and IBM have been trying to stabilize the market share of their respective architectures in the networking chip space, Intel's x86 and the ARM Holdings architecture have been building real momentum in this market. In what initially came off as a surprise move -- but upon further reflection makes strategic sense -- Intel acquired Avago's (formerly LSI's) network chip group.
Understanding the market
At Intel's investor meeting, Diane Bryant, general manager of the company's Data Center Group, presented the following slide illustrating Intel's position and strategy in the networking chip space today:
Source: Intel.
According to the slide, Intel has 5% of the networking chip market with its Xeon processors. Interestingly enough, Intel has traditionally attacked this market with its standard Xeon processors paired with specialized accompanying external chipsets, which, according to Intel's datasheets, include specialized functionality like cryptography acceleration and compression/decompression blocks.
The idea behind offering a specialized accompanying chipset with these functions built in is that, generally speaking, it's more power efficient to build dedicated hardware to perform a task than to do it on general-purpose hardware. This principle has guided the development of the various network processor offerings from the likes of LSI/Avago, Cavium Networks, Freescale Semiconductor, and Broadcom -- and is something that Intel now appears to be embracing with more vigor.
The Avago networking chip acquisition: What's Intel buying?
While Intel has dabbled with integrating dedicated networking functionality onto its processors, it is well behind what its competitors currently offer. To see what Intel's chips are currently missing, and what it's now getting, let's look at the Axxia 5500 series networking processor from LSI/Avago.
The following diagram illustrates LSI/Avago's latest and greatest Axxia 5500 processor:
Axxia 5500 block diagram. Source: LSI.
While the 16 ARM Cortex A15 processors are interesting, the more important things to notice here are all of the dedicated acceleration engines. In particular, note that this chip contains a dedicated packet processor, traffic manager, security processor, deep packet inspection engine, and a packet switch built directly into the chip. It also, according to LSI's datasheet, supports 16 10GbE connections.
Now, compare this with Intel's Atom processor, also intended for networking workloads, codenamed "Rangeley":
Source: Intel.
The Intel chip looks a bit bare, doesn't it? The QuickAssist block includes a cryptography acceleration engine as well as compression/decompression accelerators, but notably missing are the more specialized networking-oriented blocks found in the LSI Axxia 5500 product.
Intel is unlikely to be interested in selling ARM-based Axxia chips over the long haul, but it is likely very interested in assimilating the IP blocks that it doesn't have in-house. Over time, Intel is likely to offer Axxia-like chips, but with Intel-designed processor cores. It also goes without saying that Intel will probably build these future network chips in its own factories, taking advantage of its manufacturing lead over its foundry and fabless peers.
Foolish bottom line
With Intel's acquisition of LSI's networking business, it's apparent that the company wants to make a pass at grabbing more content share in the data center, and in particular the network infrastructure market. Given that Intel has just 5% of a purported $16 billion total addressable market, there seems to be quite a bit of room for share gains on the part of the chip giant.
Time will tell just how much share it will be able to grab, but in any event, it will be interesting to watch.
