Dubbed the X-Gene server on a chip, the product has been touted by Applied as the first 64-bit-capable ARM-based server in existence, the ideal part for webscale users (check out the pic of Facebook’s Frank Frankovsky holding one up) and also the future of Applied Micro. It’s the first chip to contain a software-defined network (SDN) controller on the die that will offer network services such as load balancing and ensuring service-level agreements on the chip. It’s like shoving the networking and computing vision of the Cisco Unified Computing System on a chip.

This is a big deal. Although the first generation won’t have enough bandwidth to eliminate the need for a switch at the top of a rack, the following generation will.

Paramesh Gopi, president and CEO of Applied Micro, said that these new chips have now made it past the prototype stage (the board in the picture uses an FPGA instead of a production silicon) AND are now in the hands of several customers, including Dell and Red Hat. Gopi expects physical servers containing the X-Gene to hit the market by the end of this year.

Gopi’s big bet

The chip is manufactured at 40 nanometers and contains eight 2.4 GHz ARM cores that Applied has designed, four smaller ARM Cortex A5 cores running the SDN controller software (the pink bit on the block diagram below), four 10-gigabit ethernet ports, and various ports that can support more Ethernet, SSDs, accelerator cards such as those from Fusion-io or SATA drives. In short, this a chip that combines networking and computing in one package.

When about asked about the power consumption of the chip, Gopi said it will run at 50 percent of the total cost of ownership of a comparable x86 product, but wouldn’t discuss actual power consumption.

“We’ll be able to run your LAMP stack and SQL jobs on Xeon-class ARM cores, and the routing protocols and such will be running on the Atom-class ARMs,” Gopi said. “It’s the fundamentals of a rack on a single chip.”

Building this chip has taken four years. It required Gopi to visit ARM at its U.K. headquarters to convince them to give him an architecture license to build a chip for servers. In an interview with me at the Open Compute Summit in January, Gopi explained that he saw the flexibility and the architecture that ARM offered could become an asset for webscale computing, so he embarked on turning Applied Micro, a public company with a few hundred million in revenue, into a startup.

Like others, such as Barry Evans of Calxeda or Andrew Feldman of Sea Micro, he saw that power issues were raising the cost of operating data centers — and cutting into the bottom line at web businesses — and he thought he had a solution. His solution was to get an architectural license from ARM, so he could make a 64-bit-capable chip ahead of ARM’s plans to introduce that powerful a core. ARM introduced that core last year, and vendors of ARM-based server chips such as AMD and Calxeda expect to have 64-bit-capable chips next year. But Applied is shipping those machines today.

“We’ll end this wimpy core vs. brawny core debate once and for all,” Gopi said.

The new hardware mindset

Applied Micro CEO Paramesh Gopi.

The mobile industry has relied upon the common ARM architecture to build a wide variety of chips that give each vendor a slightly different set of features. Both Nvidia and Qualcomm start with ARM cores (hell, even Apple has an ARM architectural license) to build their application processors. This lowers the cost of designing chips, because engineers can start from a higher level when solving problems.

And the modularity of the ARM cores combined with an architecture license also means firms can customize their designs for a certain market without spending a huge amount of time or dollars. Gopi will actually address some of this at our Structure event June 19 and 20, in a presentation on designing hardware at the speed of software.

For Applied, this dynamic plays out in the existence of a new type of chip for the data center, but also in the fact that in nine or 12 months Applied plans to test the second-generation X-Gene chip, one that will support 100-Gigabit Ethernet and will obviate the need for a top-of-rack switch. Ironically, this architecture probably won’t be a welcome development for Applied’s existing networking clients like Cisco and Juniper.

But it’s clearly the direction that large webscale customers want to go. And the second-generation architecture is also important for the first-generation X-Gene products, because without it, Applied may not have a chance at getting technically savvy and forward-looking potential customers that need not just a single interesting product, but a real understanding of the roadmap before they commit to a new architecture.

So even as Applied ships these first products to customers for use in devices that hit the market at the end of this year, it’s already developing its production of the next generation 28-nanometer versions of the heavy-duty ARM cores and 100-Gigabit-capable networking while prepping for later versions that may include photonics and other elements that data center customers are already discussing as tomorrow’s technology.

It took a bold vision — and that trip to ARM — for Gopi to get Applied Micro to the table as these discussions about the next generation data center are playing out. But with this design, it has earned a seat. Now all it has to do is earn the business.

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I got thinking about this because I was recently on a panel where someone pointed out that a large portion of server revenue is in alternative Instruction Set Architectures (ISAs) i.e. anything non-x86 such as Power, IA-64/Itamium, SPARC, etc. This seemed like an interesting factoid so I looked into the data, which is indeed shocking. Although non-x86 serves, which I categorized as Everything Else in the chart below account for 1.8 percent of the volume of units, they are over 28 percent of the revenue in 2012!

In fairness, much part of this is due to the much higher average selling price of Everything Else servers like mainframes and SPARC, and of course in those business lines, the percentage of both units and revenue is decrease rapidly, but why are people still buying those machines? No one sets out today to build an application on Itanium yet $3 billion was spent last year on the systems.

But the answer isn’t that surprising when you understand big companies. Someone built an application that works fine and is sitting in the corner. The guy who wrote the application left the company seven years ago, the documentation sucks, and people are afraid to touch it. So the care and feeding of these applications drives this revenue.

But I just don’t want to pick on servers and chips vendors here. There are plenty of anecdotal and hopefully humorous data points from up and down the stack I can offer:

• A major financial institution that still has a few VAX machines running in the basement. That’s a 35-year-old architecture.
• A major media company that still has servers running Windows NT 3.5 This version of the operating system was released in 1994.
• A global financial firm running Internet Explorer 6. Yup, that’s circa 2001 technology.

These companies are dramatic example to prove a point about inertia. Over a beer, ask anyone working in technology at a large company and you are likely to hear the same types of stories. Inertia in the enterprise is high, otherwise these technologies would be long gone. Further, in an environment with flat-to-moderately-growing IT budgets, it’s a zero sum game. Budget for your new widget is taking food off someone else’s table. There are no overnight successes in the enterprise. Splunk, which went public in April, was founded in 2003; Palo Alto Networks, which went public in July, was formed in 2007; and even Nicira, which burst into the public’s mind in 2012 after selling to VMware for $1.26 billion, had been working away since 2007.

Sometimes the money isn’t in the bleeding edge. When you step out of the Silicon Valley echo chamber and the industry conferences with all the smartest speakers you quickly realize that most enterprises don’t see technology as providing them with competitive advantage. This is a debatable point in the long run but in the short term they have a business problem they are trying to solve and want to do so for the least amount of money possible. They are short on IT staff and more than willing to let the big vendors tell them what they need. Your OpenStack-Bigdata-NoSQL-Cloud-Openflow-distributed-real-time-anltyics-quantum-flux capacitor may be cool, and buzz word compliant but may fall on deaf ears in the mass markets.

But don’t despair, there are leading edge end-users out there who are willing to take a chance as early adopters of compelling new start-up technology. Plus, these are not just the big web companies and Wall Street banks. Sometimes you will find them in the most unusual places and it’s my New year’s resolution to spend more time with these folks in the coming year.

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From the release sharing the news:

“I’ve been privileged to lead one of the world’s greatest companies,” Otellini said. “After almost four decades with the company and eight years as CEO, it’s time to move on and transfer Intel’s helm to a new generation of leadership. I look forward to working with Andy, the board and the management team during the six-month transition period, and to being available as an advisor to management after retiring as CEO.”

Intel CEO Paul Otellini

It’s worth noting that Otellini is retiring at age 62 ahead of Intel’s general retirement age of 65. Otellini has had several roles inside Intel, and was only the fifth CEO at Intel since the chip firm was founded in 1968. While at Intel Otellini helped convince Apple to replace the Power PC chips inside its MacBooks with Intel processors. He also presided over Intel’s $1.25 billion settlement with AMD over allegations that Intel was abusing its power in the marketplace.

However, as the world increasingly went mobile, Intel has seen some of its power recede. It has adopted new form factors — remember the ultrabook? — but not new processor architectures. Instead, it tried to force the x86 architecture into a lower-power chip, which gave us the Atom chips. It also bought the wireless business of Infineon with the hopes of creating an integrated application processor and radio chips similar to what Qualcomm offers in the mobile space.

Currently the Motorola Razr i has an Intel-based application processor, the first mass market smartphone to have such silicon. But its success in this area is not assured.

The changing chip ecosystem

Earlier this month Qualcomm’s market cap surpassed Intel’s in what many people saw as an example of the mobile dominance over PC. But Intel is facing threats in the data center and high performance computing worlds as well. As far back as 2008 Intel tried to develop an x86-based graphics processor aimed at high performance computing, but its Larrabee efforts failed. It went back to the drawing board and is seeing some success with its new Xeon: Phi architecture, which is in a few of the Top 500 supercomputers and has the potential to keep Intel competitive in the market for massively parallel computing.

But at the other end of the data center spectrum Intel may have already lost. Efforts to use so-called “wimpy cores” — which offer less performance but sip very little energy — inside servers has opened up the data center to ARM-based chips. Even AMD, the only other holder to the x86 license, has taken an ARM license to make servers using ARM-based chips. That’s not to say Intel’s market share in the enterprise computing market will go away, just that there’s a much wider array of processors out there that infrastructure architects are eyeing for their computing jobs.

And that will change the economics of the chip business for Intel. Where it was once the keeper of the only game in town for mainstream corporate and consumer compute (yes, Sun and IBM have alternative architectures, but x86 was the mainstream) there are now multiple options for server makers and their end-customers. Many of those end-customers are even bypassing the server makers and have crazy ideas about renting CPUs and changing up board designs, that Intel will have to listen to.

What is core to the business?

So as Otellini leaves, his successor will have to adapt not only to more competition but also a different style of competition. ARM licenses its IP and thus, many different companies are innovating on that architecture competing on both price and features. Intel has some of the smartest software and hardware designers in the world but they will be competing more closely against outside firms on features, and Intel’s sales staff will have far more competition on price. They will also have different customers — both server makers and end users.

Aside from the competition angle, there’s Intel’s business model at the moment. Intel makes its own chips, conducts billions of dollars in R&D to keep Moore’s Law (named after Intel’s founder Gordon Moore) going and has to sell enough products at a high enough price to support its multi-billion manufacturing operation. Unlike Samsung, it doesn’t make chips for other companies, but that may be changing. In February Intel began a pilot effort to open up its manufacturing facilities for other types of chips

The opportunities presented by the changes in the chip world are incredible, and Intel has resources that few other competitors possess, which means that the right leader could take this role and use it to remake a chip powerhouse for the next decade. Our need for computing is only expanding, it’s just that the nature of our computing has become both more varied and the competition more fierce. The next big opportunities in chips aren’t in general purpose anything, so where will that leave Intel and x86?

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Imagination, the graphics processor IP company, has said it will acquire MIPS, the creator of an alternative architecture for the chips inside computers and embedded devices, in a deal worth $60 million. MIPS ALSO sold 580 patents to a consortium led by ARM, the company whose ARM architecture is inside many of today’s top mobile phones, for $350 million.

Together the two deals mean the end of MIPS as a standalone company, but they keep the MIPS architecture alive as a potential rival to both ARM and the low-power x86 chips that Intel has on offer for the mobile and embedded markets. Imagination, whose graphics processor cores are found in Apple’s iPhone products, plans to use the MIPS buy to move upmarket into the application processor and controller market, where it could provide the brains inside mobile devices and compete against ARM-based chips from firms like Qualcomm and Texas Instruments.

The deals are an example of the overall upheaval in the chip market that I’ve been writing about lately, as the design focus switches to greater energy efficiency in both the server and the device side. The stresses of building out a webscale infrastructure that supports our demand for online services at prices that the online ad market can support are driving the adoption of new architectures in the data center. Meanwhile, the need for better battery life over improved performance has led to ARM-based processors gaining ground in higher-end computing platforms. As I wrote last month:

So while an overall decline is sales is occurring, and the PC market is clearly hurting as numbers from Gartner and iSuppli yesterday show, the big picture is that we’re going from two separate architectures locked into a defined space to more architectures and many vendors in a free-for-all.

These deals keep the MIPS architecture in the picture, which is important for the vendors such as Cavium, MediaTek or Broadcom that are building out gear for networking or in the digital home and use MIPS cores.

It may even take the architecture into higher-level computers that use the Android operating system. MIPS-based processors are already used in some low-end Android phones and the architecture runs Android for use in embedded applications.

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With the PC market dwindling, AMD has little choice but to look elsewhere, and servers might be its saving grace. While it’s a tough overall economic environment for chipmakers, Intel’s third quarter financial results from last week show that the data center is at least still a growing market. Intel reported that its PC revenue was $8.6 billion, down 8 percent year-over-year while its data center group revenue was $2.7 billion up 6 percent year-over-year. Yes, that’s a smaller base compared with PCs, but it’s still growing.

On Monday afternoon, AMD sent out an email inviting reporters to an event featuring CEO Rory Read, Lisa Su, senior vice president and head of AMD’s global business units, and a “special guest.” Given that ARM is hosting is developer conference in Santa Clara, Calif. that week, and that AMD’s invite notes that this meeting will involve discussion of its “ambidextrous strategy,” I’m hoping that it is finally biting the bullet and taking a higher-level ARM license that will give it the ability to design chips for servers — something I predicted it would do back in February when it purchased SeaMicro.

AMD’s big, fat strategic shift

AMD has already started tiptoeing down this path with the creation of the Heterogeneous Systems Architecture Foundation back in June. It joined up with ARM to create an organization that will bring heterogeneous computing — i.e., computing that doesn’t just use x86-based chips — to the mainstream. It also has licensed a lower-end ARM-based core for use in security. So taking it further with the license of a Cortex A15, or higher-end server-capable chip, isn’t going to shock investors at this point. It may even hearten them.

AMD data by YCharts

AMD has a history of innovation that has been stymied by Intel and its own execution troubles; sometimes both. AMD brought 64-bit computing to the x86-based architecture in desktops and servers, introduced its HyperTransport technology to improve scaling of multiple cores ahead of Intel and even foresaw the importance of graphics chips for both consumer and corporate computing back in 2006 when it purchased ATI. Unfortunately it also failed to go big in mobile. AMD did purchase Alchemy, a low-power MIPS-based chip company back in 2002 as part of mobile bid, but in 2006, it got out of that business.

In a similar vein, Intel has its own ARM-based Xscale unit during that time that it later sold to Marvel. But even after the launch of the iPhone and netbooks (remember netbooks?) AMD stuck to its plan to steer clear of mobile computing. And that was a huge mistake. AMD recently said it would lay off about 15 percent of its staff, and also reported lower-than-expected sales.

Some of the blame can be laid on AMD for not embracing mobile, but there’s a larger upheaval occurring in the chip sector where industry segments that were once clearly delineated have begun to merge (like smartphones and computers) while the hegemony of the x86 architecture with its two primary competitors has waned. So there’s competition between more players and more architectures across a wider spectrum of devices. It’s happening clearly in consumer devices, but it is about to happen in servers.

The ARM servers are coming!

Calxeda’s ARM-based server chip.

At this point, AMD has — with its SeaMicro purchase — systems design expertise and IP to use an ARM-based chip inside a server built for cloud computing and big data jobs. It has credible x86-based processors as well as GPU-based systems designed for high performance computing. Bringing in an ARM license and experienced ARM engineers means AMD could build machines that mix and match the most popular architectures for different styles of computing. Yes, it will compete with many more players than Intel: already Marvell, Cavium, Calxeda and other chip companies are targeting specialized chips for the server market.

Just last week Calxeda launched a roadmap that brings 64-bit ARM-based computing to servers in 2014, and says it will have ARM servers in production environments by the end of the year, while other vendors such as HP and Dell are launching ARM-based servers. I expect more news at the ARM conference next week, but the momentum around the technology is clear. After years of dithering, it’s time for AMD to bet it all on heterogeneous compute, even when it comes to its server business. Will it be enough?

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