Qualcomm Eyes Server Market in Possible Intel Challenge

Mobile chip giant Qualcomm (QCOM) is eyeing the server market and plans to co-develop low-power chips for the data center with Chinese companies, according to an executive speaking at the World Internet Conference in Wuzhen, China.

“We’re going to work with Chinese companies to bring that technology and in fact co-develop that technology with Chinese companies,” said Paul Jacobs, Qualcomm executive chairman, during the conference Nov. 20. He didn’t name any Chinese chip developers Qualcomm currently is engaging, according to an ITNews account.

“[Data centers] are built with chipsets basically from one company, Intel, and they are quite high priced and they use tremendous amounts of power,” he said. “We’re going to change that.”

With Qualcomm facing an extended anti-monopoly probe in China and other issues with no resolutions in sight, the timing of Jacobs’ comments seems a bit off-kilter.

But Qualcomm’s clearly on a campaign to serve notice to Intel (INTC) it’s coming for some of the PC chip maker’s 95 percent server market share. Two days prior to Jacobs’ remarks, Qualcomm chief executive Steve Mollenkopf told Wall Street analysts at the company’s annual meeting in New York that the vendor is in discussions with possible server customers, according to a San Diego Union-Tribune report.

Qualcomm has avoided the server market until now because its mobile chips lacked the raw computing power to suit the data center. However, 64-bit architecture and improved computing performance have prompted Qualcomm to rethink its strategy and it now believes that entering the server market would enable it to extend its business to the data center and the cloud.

“It will take us a while to build this business,” said Mollenkopf. “But we think it is an interesting opportunity going forward.”

Qualcomm’s move into servers could pose a direct challenge to Intel, which operates largely unopposed in the server chip market—a mirror of Qualcomm’s dominance in smartphone chipsets.

On the other hand, despite Intel’s overhauled strategy to concentrate on building its mobile business, the chip maker’s mobile unit generated a mere $1 million in sales for Q3 2014. The group posted an operating loss of $1.04 billion, bringing its nine-month losses to more than $3 billion, some of which it blamed on its willingness to pack the tablet market with low-priced Bay Trail chips, taking the clear position of loss leader in the category.