October 20, 2021: -On Monday, Chinese e-commerce giant Alibaba is launching a new server chip, as it looks to boost its cloud computing business and compete against U.S. rivals such as Amazon.

The processor, known as Yitian 710, will go into new servers called Panjim.

The chip and servers will not be sold to customers directly. Instead, Alibaba’s cloud computing clients will purchase services based on these latest technologies. These servers are designed for artificial intelligence applications and storage.

Alibaba will not manufacture the semiconductor but will be designing it instead.

That’s a trend among Chinese companies. Huawei designed its smartphone chips, and Baidu increased money this year for a standalone semiconductor business. U.S cloud computing rivals, which include Google and Amazon, have also done the same.

Alibaba sees cloud computing as a critical part of its future growth, but it currently accounts for 8% of its total revenue. The e-commerce giant’s cloud computing business saw lesser growth in the June quarter after losing a significant customer using its cloud services overseas.

However, Alibaba is China’s most significant cloud computing player, according to market analyst firm Canalys, but rivals do invest heavily to catch up.

As U.S. sanctions continue to hit Huawei’s smartphone business, the company is also looking to boost its revenue from the cloud.

Alibaba has been trying to expand its cloud business internationally but still trails Amazon and Microsoft in terms of global market share.

Companies are investing in their chips to have custom-designed silicon that can power specific applications as a way to differentiate from the competition.

“Customizing our server chips is consistent with our ongoing efforts toward boosting our computing capabilities with better performance and improved energy efficiency,” Jeff Zhang, president of Alibaba Cloud Intelligence, said in a press release.

Alibaba’s Yitian 710 chip is based on architecture from British semiconductor firm Arm and uses recent manufacturing processes. A spokesperson for the company declined to comment on which firm will be manufacturing the chip.

The Yitian 710 is not Alibaba’s first foray into custom-designed semiconductors. In the year 2019, Alibaba launched its first AI chip called Hanguang 800.