Before we delve deeper into this story, let’s look at what happened in 2020. You see, in April of 2020, chip manufacturers warned customers that they would need to place their orders six months upfront, instead of the usual two or three-month interval.
In fact, Broadcom’s VP of sales known as Nelish Mistry said that this was due to the unreliable transport options as a result of the COVID-19 pandemic.
In face of the global shortage in terms of chips around the globe, Amazon has plans of developing its own custom networking chips.
This in-house developed chip can be used for Amazon’s Internal IT infrastructure as well as AWS, which has the eventual goal of speeding up the cloud division’s data center servers as well as enhancing the artificial intelligence or AI services. This is based on the information obtained from the official publication.
This move would essentially diminish any need for the company to outsource its production. Keep in mind that throughout history, this has proven to be unreliable. Amazon already manufactures its semiconductor switches in-house, and their production is reliant on silicon which is supplied by San Jose, which is a California-based company Broadcom.
It isn’t quite sure if Amazon’s decision to develop custom silicon chips for its hardware network switches was influenced by this issue, however, this move will make it easier for the tech giant to avoid any supply chain disruptions and have more control over its infrastructure.
This in-house chip development is made possible due to the 2015 acquisition of an Israeli chip manufacturer known as Annapurna Labs, which Amazon purchased for approximately $350 million.
Israel is also set to be the base of Google’s Server Chip Design division.
By comparison, Google actually hired Uri Frank as their Vice President of Engineering for Server Chip Design, who used to work at Intel. The technology giant said the following: “We are excited to welcome Uri Frank as Vice President of Engineering for Server Chip Design.”
Keep in mind that even if we look at Apple, they also recently developed their own chip for their MacBooks, which is ARM-based and known as the M1 chip, to reduce its reliance on Intel.
It is clear that a lot of large corporations and tech giants are starting to develop their own chips in order to reduce their reliance on third-party companies, due to the fact that throughout these hard times, they might not be sufficient enough to live up to the market demands.
As more and more people are switching to online services, the servers are overloaded, and more chips are required. Only time will tell how well this decision will pay off for Amazon, alongside other tech giants including Google and Apple.