Satya Nadella, CEO of Microsoft Corp., speaks during the company’s annual general meeting on November 29, 2017 in Bellevue, Washington.
David Ryder | Bloomberg | Getty Images
Intel fell 6.3% on Friday after Bloomberg reported that Microsoft plans to develop its own chips, possibly for both its Surface PCs and servers.
Intel is known to have a longstanding partnership with Microsoft as the primary processor manufacturer for Windows PCs.
“Since silicon is a fundamental building block for technology, we continue to invest in our own capabilities in areas such as design, manufacture and tools and promote and strengthen partnerships with a large number of chip providers,” said Microsoft spokesman Frank Shaw in a statement.
The report comes a month after Apple started selling PCs with its own M1 processor instead of Intel chips. The Microsoft chips are reportedly based on Arm’s technology, which Nvidia is currently acquiring from Softbank.
Apple’s chips for its iPhones and Amazon server chips are also based on Arm’s instruction set, which differs from the x86 technology mainly used by Intel. According to Bloomberg, Microsoft is more likely to use its chips for servers than for its Surface PCs.
Earlier this month, a senior Microsoft executive didn’t reject the idea that Microsoft would build its own “first party” chips at a conference.
“The partnerships we have in this area, from the OpenAI efforts we have to our relationship with Intel and Arm developments, we certainly point out the need for advanced capabilities here, regardless whether we are building them as a first-party provider or have an ecosystem. This is not yet known by third-party partners, “said Judson Althoff, executive vice president of global retail at Microsoft, during an appearance at UBS Global, Technology, Media and Telecommunications conference on December 8th.
Windows currently runs on Arm-based PCs, usually with chips from Qualcomm. Microsoft introduced the Surface RT tablet in 2012, which contained an arm chip from Nvidia, although the device was discontinued in 2013. Last year, it introduced the Surface Pro X with a Qualcomm arm chip and brought out an updated version of the device this year.
Microsoft announced in 2017 that it was working with Arm server manufacturers to optimize silicon for use in its own data centers.
Intel reported $ 9.85 billion in revenue for its group, which sells PC chips, for the quarter through September. Server chips are also an important business for Intel. For the quarter ended September, Intel reported sales of $ 5.91 billion for its data center group, which sells server chips.
Intel has had problems manufacturing its chips in recent years. Intel controls its own chip factories, known as “fabs”, compared to other chip designers who contract with companies in Asia to make chips to customer specifications.
The more transistors a chip manufacturer can fit in the same space, the more efficient a chip is. Currently, Intel ships chips with 10-nanometer transistors, but special foundries like TSMC are now making 5-nanometer chips that are technically superior.
Earlier this year, Intel CEO Bob Swan said he was considering outsourcing its manufacturing, like Apple is doing.
Intel did not immediately return a request for comment.
– Jordan Novet contributed to this story.