Qualcomm's opportunity to enter the server chip market

Qualcomm's business model in the mobile phone chip market is facing challenges, which has forced Qualcomm to explore new areas. Recently, its CEO Steve Mollenkopf disclosed plans to enter the server chip market.

Qualcomm's existing business model is challenged

Qualcomm made a fortune in the 2G and 3G eras by relying on its monopoly on CDMA patents and forcing mobile phone companies to pay patent licensing fees of about 5% of the unit price of mobile phones (commonly known as Qualcomm tax). However, after China and Europe excluded American companies from formulating 4G standards, Qualcomm's share of patents in 4G standards dropped significantly. The China-dominated TD-SCDMA and TD-LTE standards have forced Qualcomm to agree to be exempted from patent fees. The Chinese government has launched an antitrust investigation into Qualcomm, and Qualcomm's existing patent fee licensing model is about to collapse.

Qualcomm's monopoly in the chip market is being challenged, and MediaTek is becoming a strong competitor to Qualcomm. In 2011, MediaTek launched WCDMA chips with excellent performance, which increased 10 times in volume in 2012. In order to cope with the challenge of MediaTek, Qualcomm has launched a price war against MediaTek in the 4G chip market this year. Currently, the price of its 4G chips is as low as US$9. The fierce price war not only hits its competitors but also causes trouble for Qualcomm itself. It is expected that Qualcomm's revenue this year will only increase by about 5%.

Faced with such an unfavorable situation, it becomes an inevitable choice for Qualcomm to enter new fields, and the server chip market may be a good choice for Qualcomm.

ARM can help data centers effectively reduce energy consumption

Google pointed out that data center energy consumption accounts for 80%-90% of Google's total energy consumption; in 2009, a research report from the Beijing Guorui World Low Carbon Economy Research Center pointed out that 40% of data center energy consumption is used on servers, and air-conditioning systems account for 40%, and the energy consumption of air-conditioning systems is mainly used to remove the heat generated by servers.

IDC's survey shows that 50% to 70% of server costs are spent on power and cooling, which means that power and cooling are becoming a heavy cost for data centers. It is understood that data centers are becoming an important source of greenhouse gas carbon dioxide emissions, and the waste gas emissions caused by their energy consumption account for 25% of global carbon dioxide emissions.

Compared with the existing X86 architecture servers, ARM architecture can effectively reduce power consumption. In 2012, Boston, a British IT manufacturer, launched Viridis, an ARM server for high-performance computing and large-scale clusters. Theoretically, the power consumption of a single server is 6W, and the actual power consumption is only 8W. ARM architecture server chips help improve energy efficiency and save data center operating costs.

Qualcomm helps ARM expand server chip market

Server chips have been using 64-bit since the 1990s. In 2012, ARM released the Cortex-A53 core, which is said to be the 64-bit processor with the highest power efficiency. In 2013, ARM server chip manufacturer Calxeda went bankrupt partly because it did not have the funds to invest in the research and development of 64-bit processors. In 2013, AMD and Applied Micro began to develop ARM architecture 64-bit server processors. However, it is not known when AMD's ARM architecture 64-bit server processor A1100 will be put into production, while HP's servers using Applied Micro's ARM architecture 64-bit processors are already on the market.

With the launch of HP's servers using ARM-based 64-bit processors, the ARM camp may be able to get out of the shadow of Calxeda's bankruptcy. It may be the right time for Qualcomm to announce its involvement in the ARM-based server chip market. The ARM-based server chip ecosystem has begun to improve, and some analysts believe that the ARM-based server chip ecosystem will be improved in the next two years or so. ARM also needs a strong player like Qualcomm to join in if it wants to make a difference in the server market. Hamilton, vice president of Amazon AWS, believes that ARM-based server chips are not innovative enough. Qualcomm's entry into the server chip market will dispel their concerns about the lack of innovation in ARM-based server chips, and will help to quickly launch innovative ARM-based server chips.

In the mobile phone chip market, Qualcomm is undoubtedly the king with strong technical strength. It was the first to launch 64-bit mobile phone chips, far ahead of its rival MediaTek in technology. Qualcomm has strong technical strength and strong channel capabilities. Entering the server chip market will undoubtedly help promote more server manufacturers to adopt ARM architecture server chips and accelerate the ARM camp to expand the service market.

Monopolized server chip market welcomes new entrants

Intel currently monopolizes the server chip market and is making huge profits. According to data from market research firm Mercury Research, Intel accounted for 97% of the server chip market in the first quarter of this year. In the third quarter of this year, Intel's data center division had revenue of $3.7 billion, which was only 40% of the $9.2 billion of the PC client division, but it contributed most of Intel's profits.

The huge profits are also what attracted Qualcomm to enter the server chip market. As competition in the mobile phone chip market becomes increasingly fierce and profits continue to decline, if Qualcomm can get a share of the server chip market, it will be able to make up for the low profits caused by the fierce competition in the mobile phone chip market.

The lack of competition in the server chip market provides opportunities for Qualcomm, and the high prices make server manufacturers and users welcome new entrants to challenge Intel. The average price of Intel's server chips rose from $429 in 2007 to $629 in 2014, an increase of 47%; while in the highly competitive mobile market, the unit price of Intel's mobile chips fell by 33% from 2007 to 2014, and the current unit price is only $88.

Dell did not comment on the price of INTEL's server chips but said that users have more chips to choose from, while another server manufacturer HP has already launched servers using ARM architecture and this year launched servers using 64-bit ARM architecture for the first time. Users such as Amazon and Google, which have large-scale demand for server chips, are trying to define chip solutions themselves. Although Amazon executives have expressed concerns about the lack of innovation in ARM architecture, they have already recruited a group of engineers with ARM technology experience. In May this year, Google demonstrated a server motherboard using IBM POWER processors, which means that they are building servers using POWER processors for themselves.

In summary, the author believes that although Qualcomm entered the server chip market when its own strong field - the mobile phone chip market was challenged, it should be able to win a chance to get a share from INTEL by relying on ARM's low power consumption and Qualcomm's technological advantages.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.