Author: Maria Deutscher
Updated: February 9, 2024 at 17:43 ET
Nvidia is believed to be forming a new business unit to develop custom chip designs for cloud providers and other customers.
Reuters reported the news today, citing nine people familiar with the matter. This move will help Nvidia build a greater presence in a market worth about $30 billion a year. Several other major chipmakers, including Marvel and AMD, are already offering custom or semi-custom processor designs to their customers.
NVIDIA is a leading provider of graphics processing units in data centers. In the infrastructure-as-a-service marketplace, Amazon Web Services Incand Google LLC's cloud division offers instances powered by NVIDIA GPUs and in-house developed AI accelerators. The graphics card maker's chip design department, which is reportedly being formed, is part of the company's efforts to find alternatives to its products to protect itself.
Supporting a company's custom chip design efforts, Nvidia can earn revenue even if the business doesn't end up buying its GPU. This income can take the form of chip design fees or, more notably, licensing revenue.
When semiconductor manufacturers help customers create custom processors, they often bring not only technical expertise, but also pre-packaged chip assembly blueprints. Blueprints make it impossible to build everything from scratch, speeding up development. In exchange, the customer pays the semiconductor manufacturer a fee for the licensing of the intellectual property.
According to reports, Broadcom Inc) provided Google with an interconnection blueprint for the search giant's TPU series of AI accelerators on cloud platforms. In May last year, JPMorgan Chase & CoAnalysts estimate that the chipmaker is on track to generate $3 billion in revenue through partners in 2023. In addition to providing interconnect-related intellectual property, Broadcom reportedly helped Google optimize the design of its TPU for mass production.
Nvidia may be looking to form similar partnerships with cloud customers. Today's report doesn't specify whether the company's chip design division will focus on AI accelerators or develop other types of processors as well. The latter option could lead to additional revenue opportunities for NVIDIA.
In addition to GPUs, the company also manufactures ** processors for data centers. In 2021, Nvidia launched a server CPU called Grace, which is based on Arm Holdings PLCblueprints, equipped with dozens of cores. At the end of last year, Reuters reported that the company also planned to launch Arm-based processors for personal computers.
Nvidia's entry into the chip design market could bring more competition to existing players such as Marvel. Over the past twenty-five years, the latter has delivered more than 2,000 custom processors to its customers. In addition to design services, it provides pre-packaged blueprints of chip components that make it easier to implement the storage, networking, and network security features of new processors.