Chips-as-a-Service on Startup’s Menu

SAN JOSE, Calif. — High-end processors and accelerators need to be sold as a service, said the head of a startup who wants to do it. He also described work on a class of small data centers emerging on the edge of the internet and specs from the Open19 Foundation.

The good news is that “it’s a golden age of silicon again … we see a lot of hardware innovation happening,” said Zac Smith, founder and chief executive of Packet, a startup that provides cloud services running at its own data centers.

The bad news is that “enterprises don’t want to buy hardware; they don’t even want to rack-and-stack Intel CPUs, let alone something they haven’t tried,” said Smith, whose first startup, Voxel, helped pioneer the infrastructure-as-a-service business at the same time as Amazon’s AWS.

Voxel was acquired in 2011. Smith’s new startup, Packet, focuses on small and medium customers that have a variety of needs and special requests, especially in emerging areas like machine learning.

Companies are increasingly run by millennials who “don’t want to own a car or a house, so they probably don’t want to buy an AI accelerator that will depreciate over 18 months,” he said. Rather, they want chips-as-a-service that will get upgraded over time like consumer products, he claimed.

The success of public cloud giants such as AWS and Google present a challenge for semiconductor companies. “Most put all their money in R&D and then have a distribution problem” because the traditional use of reference designs and OEM channels is too slow and inflexible for public cloud providers and users, he said.

Cloud services, including a second tier of data center operators such as Equinix and Packet, represent a new distribution channel with faster time to market. “Today, hardware doesn’t move at the pace of software, but it needs to,” Smith said.

Cloud giants are already pioneering chips-as-a-service. AWS offers an increasingly wide variety of services based on FPGAs, GPUs, x86, and its own custom chips.

So far, Packet raised $40 million in venture capital from the likes of Dell, Samsung, and Softbank in its three-and-a-half years in business. It now runs 19 data centers for some 800 customers while employing only about 100 people but has yet to break into the black.