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Google Looking To Tap Qualcomm To Replace Intel As Chip Supplier For Its Data Centers: Report

7 February 2016, 3:49 am EST By Sumit Passary Tech Times
Google currently procures data center server chips from Intel but the company may soon get its supplies from Qualcomm. The move could adversely affect Intel's revenue and profitability.  ( Maurizio Pesce | Flickr )

Google currently buys data center server chips from Intel. However, it may replace Intel with chipmaker Qualcomm if the latter's chips meet performance standards.

A report cites sources familiar with the matter and says that Google may publicly confirm support for Qualcomm chips soon.

"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," says the publication.

The demand for personal computers has been decreasing in the last few years, adversely affecting Intel's revenues. Loss of business to Qualcomm may damage the company even more.

Qualcomm is the biggest mobile phone chip provider in the world. Qualcomm currently produces chips used in most of the non-Apple smartphones. Smartphone sales have been constantly increasingly in the last decade and analysts suggest that by 2018 the smartphone market will witness sales of up to 1.8 billion units.

Qualcomm's entry in the in the data-center market will open new business prospects for the company. Analysts estimate that Google's decision in choosing a new chip-maker for its data centers will have a significant impact on both Qualcomm and Intel.

Google has been making investments in its data centers and 2016 will be nothing different. Analysts predict that Google could purchase up to 1 million server units in 2016, with each server containing two processors. However, it is highly unlikely that Google will use Qualcomm's chips in all its servers.

Currently, Intel supplies over 99 percent of all processors used in servers. Entry of new players such as Qualcomm will result in lost sales for Intel. Google opting for San Diego based-Qualcomm chips will have an adverse effect on Intel's business and analysts forecast the chipmaker's revenue to decrease by up to $1.3 billion or about 10 cents per share.

Half of Intel's operating income comes from the server business. Bloomberg cites IDC data and reports that Google purchases about 300,000 computer chipsets every quarter from Intel, making it the biggest customer to Intel after Hewlett Packard and Dell.

Although competition between Intel and Qualcomm is expected to increase in the near term, Google may benefit from nurturing rivals and keep its expenses down.

Google has not yet officially confirmed if it will start procuring data center server chips from Qualcomm, so such rumors should be treated with a pinch of salt.

Photo: Maurizio Pesce | Flickr

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