Intel Worried About Google's Plan to Make Server Processors

Speculation that Google (NASDAQ: GOOG) is considering a plan to design to its own server processor chips has Intel Corp (NASDAQ: INTC) worried, according to Bloomberg.

Google, which is currently Intel's fifth largest customer, is reportedly examining the possibility of designing its own server processors with help from ARM Holdings plc (NASDAQ: ARMH).

The chips themselves would presumably be manufactured by Samsung (OTC: SSNLF), which makes the ARM processors used in Apple Inc.'s iPhones and iPads.

It would take around three years for Google to design and build its own server chips, FBR Capital Markets Analyst Christopher Rolland told Bloomberg. The process could be faster if Google turns to partners such as ARM, IBM (NYSE: IBM), Nvidia Corp (NASDAQ: NVDA) and Mellanox Technologies Ltd (NASDAQ: MLNX). Google is part of a chip design alliance that IBM has organized.

Danger for Intel

It isn't clear why Google's management thinks going into server processor design would be a good idea. One strong possibility is that Google is dissatisfied with Intel's current offerings. Another is that Google is planning a server processor designed to work with its Chrome or Android devices.

Google's entry into the server processor business could be bad news for Intel -- which has been losing market share as consumers switch from desktop and laptop computers to mobile devices. Intel is struggling to adapt to new technologies such as cloud infrastructure.