In a surprise announcement, Amazon revealed that it is making its own chips, dubbed Graviton, for its cloud computing division. Similarly, Google also recently stated its plans to create chips for artificial intelligence algorithms in its data center. Amazon’s chips are likewise targeting its data centers, where the company hopes to better integrate software and hardware, resulting in less expensive services for customers. Typically, companies like Amazon and Google would use AMD or Intel’s off-the-shelf chips.

Wired reports that, according to Amazon vice president Matt Garman, who is involved with the project, “customers with early access to Graviton-powered servers cut their bills for some services” as much as 45 percent.

“We can do some very specific things that make sure the processor runs very efficiently in our environment,” he said. “That leads to lower costs.” SmugMug chief executive Don MacAskill reported that his company had a “40 percent cost reduction by migrating some software to servers with the new chips.”

Amazon’s news that it is creating its own chips “caught semiconductor experts unaware.” Tirias Research principal analyst Kevin Krewell noted that, “designing a processor for servers is a complex project that likely took several years.” Amazon said work on the chips began with the acquisition of Annapurna Labs in 2015; that startup’s members “had previously created small accessory chips for Amazon’s servers.”

Krewel said that Amazon’s effort makes sense given the company’s scale and the fact that chip supplier Intel customizes chips “but only in limited ways.” “By building their own chip, Amazon has more control over its fate,” he added. “I would expect them to continue.”

Apple has been building its own processors for the iPhone since 2010, “paving the way for new features such as Face ID and support for augmented reality,” and Google’s third generation chips “power machine learning algorithms, making it cheaper to operate services such as voice recognition.”

For Graviton, Amazon, which worked with Apple’s Taiwanese manufacturer TSMC, has been able to build “on the ARM architecture used in smartphone processors, but not previously widespread inside data centers.” ARM, acquired for $32 billion in 2016 by SoftBank, offers chips that “are less powerful than top-end Intel processors, but typically cheaper, and more power efficient.”

Krewel pointed out that, “at Amazon’s scale, even small efficiency and cost savings can add up.” Amazon’s Garman said the company “probably will” build out the next-gen Graviton chips, and Moor Insights & Strategy principal analyst Patrick Moorhead predicted that, “the company’s project could finally make ARM servers mainstream” and that Microsoft will also “ramp up its own ARM project before long.”

Related:
Taiwan’s TSMC Could Be About to Dethrone Intel, Bloomberg, 11/28/18