Google is considering designing its own server processors, a move that could threaten Intel Corp’s market dominance, using technology from ARM Holdings Plc (ARM) according to a Bloomberg report.

By using its own designs, said Bloomberg, Google could “better manage” the interactions between hardware and software, however no plans are final and Google’s stance could yet change.

A spokesperson for Google said the company is “actively engaged” in designing the “world’s best infrastructure”, which includes both hardware design (at all levels) and software design. It is unclear whether the company will develop its own chips.

Google, which opened its first Asia data centers last week, has been designing its own data centers around the world with servers to power search, video, online communications and other features. Moving into chip design could take away revenue from Intel, which has counted on internet companies to help drive processor sales.

Google is Intel’s fifth largest customer, accounting for about 4.3% of its revenue, according to Bloomberg supply chain analysis.

ARM based chips dominate in mobile phones and tablets where companies such as Qualcomm and Samsung have fended off Intel’s attempts to expand. Intel controls more than 95% of the market for chips for servers that use personal-computer processors, with Advanced Micro Devices Inc. (AMD) making up the rest. AMD and other companies have announced plans to use ARM based designs for the server-chip market.

Intel Drops
Bloomberg said the shares of Intel declined as much as 3.1% in extended trading, after closing at US$24.47 in New York.

In August Google, based in Mountain View, California, joined a group started by International Business Machines Corp. that licenses technology used in data centers, including chips for servers. Other members of the alliance include chipmaker Nvidia Corp. and Mellanox Technologies Ltd., the maker of equipment that speeds data transfers.

Job openings at Google include one for a “digital design engineer” with qualifications in application-specific integrated circuits (ASICs), a commonly-used chip.

Intel, based in Santa Clara, California, forecast sales will be little changed next year amid the PC market slump. CEO Brian Krzanich, who was promoted to the top job in May, is counting on increasing demand for its server chips to help make up for the loss.