ARM Challenging Intel in the Server Market: An Overview

More Competition

There is no doubt that customers would benefit from Intel being challenged in the server market. There have been people arguing that the server market is healthy even with only one dominant player, since Intel is doomed to compete with previous Intel CPUs and cannot afford to slow down its update cycle. We disagree, as it is clear that the lack of competition is causing Intel to price its top Xeon EP quite a bit higher. In the midrange, there is no pressure to offer much better performance per dollar: a small increase is what we get. The recently launched Xeon E5 v3 is barely 15% faster at the same price than the Xeon E5 v2. So we would definitely like to see some healthy competition.

Are Economies of Scale and Volume Enough?

Yes, economies of scale is one of the reasons that Intel was able to overtake the RISC competition. However, simply accounting Intel's success back at the end of previous century to being the player with the highest unit sales is short sighted. Look at the table below, which describes the situation back in late 1995:

There are three things you should note. First, excluding the Alpha 21164, Intel managed to outperform every RISC competitor out there with their first server chip in integer performance. Intel managed this by excellent execution and innovative micro-architecture features (such as the 256KB SRAM + core MCM package and out-of-order micro-ops back-end). Intel also had a process technology lead and used 350nm while the rest of the competition was still stuck at 500nm.

Second, Intel was lucky that the top performer – Alpha – had the lowest marketshare, software base, and marketing power. Third, the server and workstation market was divided between the RISC Players. Software development was very fragmented among the RISC platforms.

So in a nutshell, there were several reasons why Intel succeeded at breaking into the server market besides their larger user base in the desktop world:

1. Focused investments in a vertical production line and excellent execution, and as a result the best process technology in the world
2. The performance and technology leader was not the strongest player in the market
3. The market was fragmented, so divide and conquer was much easier

Currently, the ARM SoC challengers do not have those advantages. As far as we know, Intel's process is still the most advanced process technology on the planet. Samsung is probably close but at the moment their next generation process is not available to the Intel competitors.

Right now, Intel dominates - or more accurately owns - the server market. Every possible piece of expensive software runs on Intel, which is a very different situation from back in the RISC world of the nineties, where many pieces of important software only ran on certain RISC CPUs. Today, the server market is anything but fragmented. That makes the scale advantage of the ARM competitors a very weak argument. Intel's user base – the growing server market and declining desktop market – is large enough to sustain heavy R&D investments for a long time, contrary to the RISC vendors in the nineties which had to share a very profitable but again fragmented market.

If you're not convinced, just imagine the Alpha 21164 was the dominant RISC Server CPU, with 90-95% server market share. Just imagine that instead of having some server applications running only on SPARC or on HP PA-RISC, that every server software ran on Alpha. Now combine this with the fact that Windows on Alpha was available. It is pretty obvious that it would be have been a lot harder for Intel to break into the server and workstation market had this been the case.

So just because ARM SoCs are sold in the billions does not mean they will automatically overtake Intel server CPUs. Intel beat the RISC players because the market was fragmented, and because none of them were executing as well as Intel. For ARM alternatives to really gain traction, they need to do a lot more than simply compete in a few niche markets, as Calxeda has shown.