Bloomberg reports that Microsoft is working to cut out Intel from their supply chain and design its own ARM-based chipsets for their Azure server farms and possibly Surface computers.

“Because silicon is a foundational building block for technology, we’re continuing to invest in our own capabilities in areas like design, manufacturing and tools, while also fostering and strengthening partnerships with a wide range of chip providers,” Microsoft spokesman Frank Shaw said.

Microsoft’s efforts are reportedly led by Jason Zander, head of the Azure cloud business, and the company has stepped up its hiring of processor designers in recent years. Microsoft has reportedly been disappointed when Qualcomm abandoned its own plans for ARM-based servers chipsets.

The chips are primarily heading to servers, but there is some potential for the chips to also end up in some Surface devices.  The performance of the Microsoft-branded Qualcomm chip in the Surface Pro X has been disappointing compared to the performance of Apple’s new M1 ARM-based processor.

Microsoft’s new ARM chips will displace Intel’s Xeon powerhouses, with power efficiency the main motivation. Intel’s share price dropped 6.3% on the news.

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