• by Laurie Sullivan  @lauriesullivan, December 13, 2013

Google is contemplating designing its own server chips based on the ARM processor design, replacing the Intel chips used today in its server farms. Reports focus on the 4% revenue that Intel would lose as its fifth-largest customer, but the real change would be a significant impact in the digital advertising industry if the company builds systems on chips for its hardware business.

Worldwide, Google designs its own data centers to power search, video, social, online cloud and communication services. Moving into ARM-based chip design that dominates features in mobile phones and tablets would give the company control of functions and data on its mobile devices.

Google will need to determine whether it can design chips with better performance, power and processing speeds, and then decide who will build it. Earlier this year, Google made a 6.3% investment in the Taiwanese semiconductor subsidiary of Himax Technologies, with an option to make an additional investment of preferred shares in the manufacturer at the same price within one year from closing.

The industry-changing investment gave Google a taste of semiconductor manufacturing and the ability to contribute to the design of chips, which will influence the future of online advertising through hardware, rather than Web-based systems.

Systems or tiny applications sit on semiconductor chips, allowing companies like Google to add any legal software function it wants. Geeky techies call the system on chip an application-specific integrated circuit (ASIC) design. SoC design is one way for Google to gain more control over collecting and processing the data.

"Circuit board" photo from Shutterstock.