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The author is an analyst at NH Investment & Securities. He can be reached at [email protected]. – Ed.
The media reports that Microsoft is developing its own processor. The current trend toward major IT players developing their own chips is negative for Intel and AMD, but positive for TSMC, Cadence and SEC.
Microsoft is developing its own processor for PC
On December 18, US media reported that Microsoft is developing its own processors for use on the Surface PC and Azure Cloud. In fact, Microsoft has already been using its own processor for some products. In 2019, it adopted a custom Qualcomm SQ1 chip processor in its Surface Pro X products.
Of course, Microsoft still uses Intel processors in most of its products. From the 1980s to the mid-2010s, Microsoft and Intel had a strong business alliance called Wintel. Building on this relationship, the two companies dominated the PC and server market for nearly 30 years.
X86 exhaust for speed
Recent consumer evaluations have been quite favorable towards the Apple MacBook series, which comes equipped with its own ARM processor, the M1. In response to this development, Microsoft is expected to increase its share of internally developed processors. Notably, unlike the SQ1, which is based on Qualcomm technology, its newly developed processors are completely self-designed products.
Moving forward, major IT players like Microsoft, Apple, and Amazon are expected to accelerate the trend toward in-house developed processors. This direction is negative for existing Intel and AMD processor powers.
Companies that are well placed to benefit from the in-house chip development trend include Cadence and Synopsis, which develop and sell semiconductor design tools (EDA). Other beneficiaries should be chipmakers TSMC and Samsung Electronics (SEC), and also Nvidia, which is in the process of acquiring ARM Holdings (which provides a basic chip architecture).
