Chips for server systems are an extremely lucrative business for Intel INTC +1.23%, one that has drawn a crowd of competitors. But some are choosing to pick other battles.

The latest is Samsung Electronics 005930.SE +0.38%, one of the most prominent makers of mobile phone chips based on technology licensed from ARM Holdings ARM.LN -0.85%. The South Korean company hired a number of server-chip specialists from Advanced Micro Devices AMD +0.51%and other companies, though it never publicly announced plans to try to enter the market.

But Samsung recently decided to drop the server chip effort and discontinue work being carried out by a team in Milpitas, Calif., a person familiar with the situation said.

That’s not far from a longtime outpost for Samsung’s chip unit in San Jose, where the company is building a new research and development center.

“In response to recent changes in the business environment and the emergence of new R&D opportunities,  Samsung Semiconductor has refocused some of its R&D efforts,” a spokeswoman for the company said. “The scope of the new campus project will not be affected.”

Another company leaving the server-chip push to others, at least for the moment, is Nvidia NVDA +1.02%.

The well-known maker of graphics chips, which developed a line of ARM chips called Tegra that is aimed at tablets and smartphones, used the 2011 Consumer Electronics Show to announce an effort to develop a more powerful offering in an effort called Project Denver. A company blog post at the time said the future product would extend “the range of ARM systems upward to PCs, data center servers, and supercomputers.”

That mission apparently changed, though it’s not clear exactly when. An Nvidia spokesman stressed that Project Denver will still be a high-performance chip, but will initially be part of the Tegra line focusing on mobile devices. He said the company is keeping its options open about pursuing servers at some point in the future.

“We expect great things from Project Denver,” the spokesman said.

In a blog post Tuesday, Nvidia also pointed out that it is also betting on using its graphics chips to help accelerate computing chores run on ARM chips by other vendors.

Meanwhile, the biggest maker of chips for smartphones, Qualcomm, has been working on server chips but has not announced any plans to introduce them, one person familiar with the matter said.

Other companies have not been so hesitant. Companies that have announced plans for ARM-based chips for servers include Applied Micro Circuits, AMD, Broadcom, Cavium, Texas Instruments and Marvell Technology Group.

Paramesh Gopi, Applied Micro’s chief executive, has been working on the effort since 2009. The first version of its products are now hitting the market, he says, and a second generation will be ready soon.

“There has been a lot of noise but there has been no proof points,” he said. “Reality is here, finally.”

But such a crowd of competitors reduces the potential profit pool available to individual companies. And Intel, which has 97% of the market for the most popular variety of server chip, has ample ability to reduce prices on server chips, if necessary, to further reduce the attractions to competitors, said Linley Gwennap, a market researcher who heads a firm called Linley Group.

Pricing of some Intel chips, he said, appeared to be a factor when server-chip startup Calxeda failed to attract more funding and went out of business last year, Gwennap said.

In the meantime, Intel keeps introducing additional models with features that are comparable to those of some new ARM-based offerings.

“It’s making it a lot tougher for the new competitors,” Gwennap said. “There seems to be some fallout going on.”

Samsung’s cancellation of the server chip effort was reported earlier this month by SemiAccurate.

By: DocMemory
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