Microsoft’s New Chip Could Transform the World (MSFT)

Microsoft Corporation (NASDAQ:MSFT) continues to invest big on the cloud computing segment. The Redmond, Wa.-based tech giant has introduced a new type of programmable microchip – called field-programmable gate arrays (FPGAs) in its data centers. The move was meant to make its cloud computing service even more competitive than its rivals.

The chips are faster, cheaper, energy-efficient, and they can be programmed to power up new services. FPGAs are also able to take on new problems in the changing technologies and business models. They have the ability to execute various orders faster than an ordinary chip.

Using FPGAs is not new for Microsoft. The chips are actually being used on Bing, Microsoft’s search engine to drive new search algorithms. They utilize artificial intelligence [AI] that mimics how the human brain works. An interesting fact here is that the chips have an AI executing capability which is “several orders of magnitude faster than ordinary chips could. As in, 23 milliseconds instead of four seconds of nothing on your screen.” FPGAs are also used to drive Azure, the company’s cloud computing business.

In an interview by Wired, computer chip researcher Doug Burger said the chips give Microsoft “massive capacity and enormous flexibility, and the economics work.” He added that the FPGAs are set to become Microsoft’s standard, worldwide.

Programmable chips are not exactly new and they have been around for decades. In fact, it was in 2009 when Burger, along with researcher Andrew Putnam, started thinking about using the chips online to provide new services.

However, since FPGAs were not widely used then, it was not easy integrating them into Microsoft’s system. According to Burger, it took a while for former CEO Steve Ballmer to warm up to the idea of using FPGAs to develop new online services for its then-growing cloud computing business, pitching the idea in 2012. It was Microsoft executive Qi Lu who believed in the project and in the idea that the chips would transform the world, thus giving the green light to use FPGAs in the company’s search engine.

Burger and Putnam worked on several prototypes under Project Catapult. The prototypes were meant to be used on Azure and Office 365 business productivity suite. According to a source that Wired did not name, the FPGAs will be used to “deliver encryption, compression, and machine learning to all of its users” on Office 365.

CEO Satya Nadella announced Monday that Project Catapult is no longer a research-based project. The executive said the chips are now part of the company’s top priority, pouring $5 to $6 billion to fund the project.

Using FPGAs may have an effect on the global chip market, particularly on Microsoft’s partner Altera (NASDAQ:ALTR), which is owned by Intel Corporation (NASDAQ:INTC). At the moment, the Redmond tech conglomerate is purchasing chips from Altera. The introduction of Microsoft’s own chips could affect Altera’s business. According to an Intel executive, she expects FPGAs to become one of the most widely used chips by major cloud computing companies by 2020.

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