Sale of Data Center Solutions Group Highlights Strategic Shift at Intel

April 26, 2023
The sale of Intel’s Data Center Solutions Group is part of a strategic shift to focus on the chipmaker's integrated device manufacturing model, known as IDM 2.0.

If you aren’t all that familiar with the Intel Data Center Solutions Group (DSG), it’s not that surprising. This division of Intel was focused on pre-built server solutions and made its biggest impact outside the US. The assets of the DSG are being sold to an existing partner, MiTAC, parent company of the well-known server manufacturer Tyan.

These assets consist of the blueprints, designs, and reference architectures for the line of servers offered to customers, which included general purpose, HPC, and GPU servers sold under the DSG banner. As of today, you can still find the product information on Intel’s website.

The sale reflects Intel’s strategy to focus on the evolution of the company’s integrated device manufacturing model, known as IDM 2.0. This consists of a three-pronged model for Intel to grow their business: upgrading their in-house manufacturing capabilities, expand their use of third-party foundries starting this year, and expanding the Intel Foundry Service (IFS).

IFS was announced two years ago as a standalone business unit that was in the business of proving fabrication facilities for other chipmakers. Intel hasn’t released a list of the fabless chipmakers that have chosen to use IFS but it is known to include well-known customers Qualcomm and Amazon Web Services.

Intel has not been exceptionally forthcoming with its motivations behind the sale of DSG, giving the same statement to multiple media outlets: "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 (DSG). As part of this plan, MiTAC, an edge-to-cloud IT solutions provider and longstanding ODM partner of DSG, will have the right to manufacture and sell products based on our designs. We are focused on ensuring the DSG team and its stakeholders are supported during this transition."

Starting a decade ago a number of the DSG server products had achieved a decent level of popularity and showed some interesting design elements. This indicated that Intel was putting some serious effort behind these pre-built servers, an effort that appears to have peaked in 2019 with products the Intel Server System S9200WK, a purpose built HPC and AI server, that has since been discontinued.

Intel Never Got the Traction It Expected

Intel has clearly not met its revenue expectations in this part of their business, with its end of year financials for 2022 showing an almost 33% drop in revenue for the DSG year over year. With their overall financial issues and CEO Pat Gelsinger’s restructuring and reorganization efforts, along with new efforts being made to improve their performance in the now critical AI market with the latest generation of Xeon CPU and their newest introductions in the GPU market, it was clear that minimally performing assets were likely on the block.

Intel is clearly moving to focus on its core markets. 2022 gave us the closure of the Intel Optane memory product, a number of programs announced in late 2021 and early 2022, ranging from networking to RISC efforts, have all been announced and already closed down.

The focus on Intel's core busines included moves such as its $20 billion investment in new fab facilities, and expanding its Ocotillo facility in Arizona with state of the art Extreme Ultraviolet Lithography (EUV) machines, which are used in advanced fabs to shrink different chip functions at each node and pack them on a monolithic die. This  will give Intel significant abilities in the manufacture of and state of the art SoC products. With the importance of chip scaling in next generation CPU/GPU technologies, these new fabs should help Intel keep a competitive edge.

Overall, the data center industry is not likely to be significantly impacted in the short term by the sale of the DSG. Realistically, a leaner, more focused Intel is a win for the server market as it focuses on core competencies and becomes a stronger competitors in the general purpose and AI computing markets, while letting companies like Tyan handle the actual production of server hardware. 

About the Author

David Chernicoff

David Chernicoff is an experienced technologist and editorial content creator with the ability to see the connections between technology and business while figuring out how to get the most from both and to explain the needs of business to IT and IT to business.

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