Any market in which one company controls nearly 100% of sales is probably ripe for a competitive attack. So Antonio Neri, executive vice president at Hewlett Packard Enterprise, was really stating the obvious on Tuesday when he described the market for server chips as being "ready for disruption."
After all, Intel controls over 99% of the market for so-called x86 server chips that are used by companies and big data centers to run common tasks like storing files, sorting data or sending and receiving email. Revenue in Intel's server chip business rose 8% to $17.2 billion last year, outpacing the modest 2% growth in its larger $32.9 billion PC chip unit. But the big question is whether Intel's dominance has left it vulnerable to attacks from other chipmakers.
Neri was speaking in Austin, Tex., at the unveiling of some brand new competition for Intel in servers. At a presentation for analysts, media and customers, Advanced Micro Devices showed off details of its new Epyc chip, based on a similar new design used in its Ryzen desktop chip introduced in February. Other kinds of server chips are coming this year from Qualcomm (qcom), Nvidia (nvda) and even some of the cloud datacenter owners themselves, like Google (googl).
Investors are getting excited, too. Shares of AMD (amd) gained 10% over the last three days, while Intel (intc) shares dropped 1%. Some of AMD's gains probably had to do with Intel announcing that a new top-end desktop chip, the Core i9 Extreme Edition, would not reach the market until October, months behind AMD's competing top-end chip, called Ryzen Threadripper.
But Wall Street is also stoked about Epyc's potential in the server market. At the chip's Austin unveiling, AMD said its tests showed Epyc outperformed Intel Xeon chips. A basic Epyc 7251 chip costing about $400 beat Intel's Xeon E5-2620 by about 23%, AMD said. At the most expensive end, AMD said a $4,000 two-chip set up of the 7601 outperformed a similar but pricier Intel Xeon E5-2699A by 47%.
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AMD CEO Lisa Su has bet the company on a radical redesign of its core desktop, server, and graphics chips. Up to five years in the making, the new chips are intended to outperform products from Intel and Nvidia, not just compete with lower prices.
With all the details about Ryzen and Epyc now out in the open, Su's last card—the Vega graphics chip—will come later in the summer. It's designed to compete for video gamers' dollars, as well as meet the needs of some data centers that are using graphics processors to run artificial intelligence programs.
One key to AMD's Epyc server chip strategy is that Intel has been holding out of its lower-end Xeon line of server chips some features that big companies and cloud data center operators highly desire. AMD is including those features, which help the chips use memory and storage more efficiently and quickly, in its entire line, even the lowest priced Epyc chips.
For compatibility with the fastest kinds of memory chips for servers or to be able to send the largest amounts of information quickly between the central processing chip and memory or storage, Intel requires that customers buy a package that includes two chips, known as a dual socket design, even if they don't need the extra processing power of two chips. That raises costs and uses more electricity.
AMD is putting those kinds of features in single chip variations, so customers don't have to buy the two-chip package.
"One size does not fit all," CEO Su said at the announcement event. She's hoping Epyc can rebuild AMD's market share in server chips—it had 10% of the market as recently as 2009, but just 0.4% last year, according to IDC.
"AMD knows some customers are only buying dual socket because they must to get the full feature set in Xeons," Patrick Moorhead, president of Moor Insights & Strategy, said. "I like this strategy as it is truly different, for now."
Still, Intel isn't standing still. CEO Brian Krzanich has pivoted the company to focus more on chips for data centers over its PC chips business. And Intel is overhauling its own server chip line with improved designs. After AMD's event, Intel said its Xeon line of chips "is proven and battle tested, delivering outstanding performance on a wide range of workloads and specifically designed to maximize data center performance, capabilities, reliability, and manageability." The company also said AMD's designs might have problems with "inconsistent performance and other deployment complexities in the data center.”
But it's going to be a fierce battle. In addition to HP Enterprise, Su also collected endorsements on Tuesday from Dell, Lenovo, Microsoft's (msft) Azure cloud data center group, and Chinese search giant Baidu's (bidu) big data team, who all said they would be using the Epyc chip.
If lots more server customers agree, Su should finally reap the rewards of her radical redesign plan.