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IBM Inks Deal With Samsung to Build its Latest Chip Processor

Zacks Equity Research
·4 mins read

International Business Machines Corporation IBM recently unveiled its latest chip processor — IBM POWER 10 — which will be manufactured by Samsung Electronics.

The chip is primarily meant for use across data center operations and will be based on Samsung’s 7-nanometer (nm) process technology.

IBM POWER 10 boasts of three times enhanced performance than its predecessor, IBM POWER 9. This will help data centres achieve greater operational efficiency.

Also, the improved capacity will help IBM POWER 10-based systems to support more workloads and higher Red Hat OpenShift container density for hybrid clouds. It also has a four times faster encryption processing ability compared with IBM POWER 9 to meet encryption standards like homomorphic encryption and quantum-safe cryptography.

IBM POWER10 processor is also embedded with Matrix Math Accelerator. When extrapolated, it can provide significantly faster AI inference for complex calculations compared with IBM POWER 9.

 

International Business Machines Corporation Price and Consensus

 

International Business Machines Corporation Price and Consensus
International Business Machines Corporation Price and Consensus

International Business Machines Corporation price-consensus-chart | International Business Machines Corporation Quote

This will lead to better infusion of AI and accelerate business insights, and enhance decision making capability. It will enable customers boost efficiency level and expedite business transformation journey.

We believe that these robust features will boost adoption of the chip in quantum and supercomputing domains, on growing need for AI-enabled automation offerings.

Growth Prospects Hold Promise

Enterprises are endeavoring to digitally transform their business methods by leveraging AI and exploring ways to implement hybrid cloud strategies.  Per IDC data, 50% of enterprise applications will be deployed in a containerized hybrid cloud/multicloud environment, to give agility and deliver a seamless deployment and management experience, by 2023.

IBM is leaving no stone unturned to constantly enhance its solutions, in a bid to provide better business insights and accelerate mission critical and data-oriented workloads in hybrid cloud environment. Synergies from acquisition of Red Hat are enabling IBM to bolster its Open Hybrid Architecture Initiative.

Further, rapid proliferation of AI into hardware system is becoming mainstream as secular growth in data calls for effective systems to support processing of workloads. With the new chip, IBM is expected to strengthen its competitive position in quantum computing space against the likes of Google, Amazon, and Microsoft. Per a report from MarketsandMarkets, this particular market is expected to grow at a CAGR of 24.9% from 2019 to 2024, driven by the growing need for model capability boost and simulation of complex data.

Also, IBM is the top recipient of U.S. patents, in 2019. IBM maintained the lead spot for the 27th year, with 9,262 patents, reflecting a 2% rise year over year. IBM’s record patent grants make it well poised to attain breakthroughs in emerging technologies, involving blockchain, quantum computing, security, AI and cloud computing.

Moreover, IBM is expected to capitalize on the rapid adoption of supercomputing systems, with the roll out of the latest chip. Three out of the top ten largest supercomputers in the world, Summit, Sierra and Marconi-100, are powered by IBM’s POWER 9 chip, per latest edition of TOP500 supercomputers.

Notably, per Technavio data, the global supercomputer market is anticipated to witness a CAGR of around 28% between 2020 and 2024. IBM’s latest and more efficient processor can help it capture a larger share of the market.

Competitive Scenario

Nevertheless, stiff competition is a persistent concern.

Advanced Micro Devices AMD is leaving no stone unturned to strengthen presence in the supercomputing market with its high-performance second generation EPYC processors.

Markedly, Advanced Micro Devices is currently leveraging Taiwan Semiconductor Manufacturing Company’s TSM 7 nm process technology that enables it to deliver advanced 7 nm chips faster to market.

Notably, Intel INTC is yet to launch chips based on 7 nm process. Intel recently announced that it had detected a major defect mode in 7 nm process, which caused yield degradation and caused delay. IBM’s decision to develop POWER 10 utilizing Samsung’s 7 nm process appears prudent in this scenario.

Zacks Rank

IBM currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank stocks here.

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