Richard Cownie (tich.delete@this.pobox.com) on January 29, 2013 4:42 am wrote:
> Very interesting analysis, thanks.
>
> I think the argument about area and cost - and Intel's processing advantage -
> is all correct. What may be missing is the impact of the different business
> strategies: Intel really wants to sell those server cpus at very high margins -
> say 300mm2 of silicon for $1500. But it's going to be facing a lot of competitors
> from the ARM/cellphone world, e.g. Qualcomm, who would be very happy to sell
> 10M server cpu's at dramatically lower margins. Intel's technical advantages
> alone won't allow them to preserve their high margins on server products (just
> as the advantages of RISC servers couldn't protect them against Intel's high-volume
> good-enough-and-much-cheaper P6). The future may still be predominantly x86 -
> but the business will look very different.


I agree 100%. People think that Intel can't be beat on cost because their CPUs aren't that expensive, but that's anchor pricing. It seems cheap because there isn't anything cheaper. I'm sure 20 years ago when RISC servers with $10K CPUs were selling and Intel didn't have any CPUs designed expressly for servers, Microsoft was still only talking about NT, and Linux was just a hobby project, those $10K CPUs seemed cheap. Because there wasn't anything cheaper. Hell, 50 years ago when you paid several million for a single computer, that seemed cheap, because there wasn't anything cheaper.

ARM can't take the x86 market, because it won't compete on RAS at the high end. Just like x86 didn't take the RISC market because it couldn't compete with RISC RAS on the high end. Just like RISC didn't take the mainframe market because it couldn't compete with IBM mainframe RAS on the high end. ARM doesn't need to provide a replacement for x86 server CPUs, just something that is "good enough" and significantly cheaper. It won't sell because ARM is better than x86 - x86 was certainly worse than RISC but it won. It won because it was cheaper. If Intel sacrifices enough profit it can keep ARM at bay, but if it doesn't sacrifice profit, that profit will be taken from them.

It would be quite reasonable to sell ARM (or Intel) server CPUs for $100, if you don't care about using them in high RAS situations and compete on throughput jobs like web serving, batch processing, and the client side of client/server software like SAP where high single thread performance is not important. That $100 could still leave a very nice margin, but would cost so much less it would be attractive to a lot of people.

It makes the most sense for cloud computing, which is why Facebook is already going ARM. I wouldn't be surprised if Google already has some infrastructure running on it too, but they don't talk about that very much. Perhaps Apple's $1 billion datacenter in NC will have a lot of ARM...we'll probably never know.

Obviously Intel can compete with $100 low-RAS server CPUs, and still be profitable. Probably come close to their current overall margin. But that will still lower their overall margin, since server CPUs have the biggest profit margin of anything for Intel. And more importantly, lower their overall dollar profit. Even if they were able to sell $100 CPUs with a 70% margin instead of $1000 CPUs with a 70% margin, they still lose out big time unless they sell 10x more of the $100 CPUs.