Intel pulls plug on server system design division

Blueprints flogged off to Taiwan's MiTAC

An Intel division responsible for designing and planning out server-grade systems is the latest victim on CEO Pat Gelsinger's chopping block.

This week the x86 giant confirmed it is shuttering its Data Center Solutions Group (DSG) and will sell the rights to its blueprints to computer maker MiTAC. This group produces server designs and reference architectures for datacenter customers; Intel's Xeon processor family is separate and unaffected by the closure.

"In line with Intel's continued efforts to prioritize investments in its IDM 2.0 strategy, we have made the difficult decision to exit our Data Center Solutions Group," an Intel spokesperson told The Register.

Under the plan, MiTAC would "have the right to manufacture and sell products based on our designs."

While MiTAC, and its subsidiary Tyan, may benefit from the sale, it's right to put this into more context. According to Counterpoint's most recent Global Server Revenue report, MiTAC was the smallest ODM-direct player — a group that includes the likes of Quanta, Wiwynn, and Foxconn — to make the list, with server revenues of about $75 million in 2021. Counterpoint reports that Foxconn recorded server revenues of roughly $12 billion by contrast.

Intel didn't address The Register's questions for specifics regarding ongoing support for its server platforms, stating only that the company was committed to ensuring the DSG team and stakeholders were supported during the transition. Whether that means they'll continue to honor the "standard three-year warranty" on its systems, or whether that will now fall on MiTAC, remains to be seen.

Speaking of systems, Intel's decision to kill off its server design division comes just three months after the corporation rolled out its 4th-gen Xeon Scalable processors — codenamed Sapphire Rapids — and a number of new single-and multi-node systems based on the platform.

Intel's decision to exit the server system design space shouldn't come as much of a surprise. While the chip giant once produced a number of server components ranging from motherboards, Optane memory, flash storage, and networking, the microprocessor goliath has moved away from these markets over the past few years.

In 2020, Intl announced it would exit the NAND flash space and sell its factories in China to South Korean memory slinger SK hynix. Meanwhile, last fall, Intel announced it was killing off its Optane memory and storage unit after Micron ended production of the 3D XPoint memory used in the product.

That just left motherboards and NICs. A glance at Intel's most recent earnings report reveals that while the Xeon giant's Networking and Edge Group fared better than most other departments, sliding just one percent year-over-year in Q4, its Datacenter and AI Group (DCAI) took an absolute beating, down 33 percent from the year prior.

With Intel trying to curb spending by $10 billion a year by 2025, the company has already said it'll be making strategic cuts to secure its IDM 2.0 strategy. To date, Intel has axed two research and development projects valued at roughly $1 billion, slashed investments in RISC-V development, restructured its Accelerated Computing Group (AXG), and killed off a decent chunk of its GPU roadmap.

And with Intel forecasting a 37-43 percent revenue drop in the first quarter of 2023, it's unlikely its now ex-server design division will be the last product line to face the chop. ®