Can Amazon’s Alpine Initiative Create A New Revenue Stream?

  • Amazon’s Annapurna Labs launched a new product line of an ARM-based platform-on-chip named Alpine.
  • Alpine offers cost-efficient, low power solutions for a variety of electronics segments.
  • Amazon will probably not gather significant market share in data centers, but in other segments, it seems like a value-added alternative to existing players.

Amazon (NASDAQ:AMZN) hardware business drove many contradicting loud opinions about the benefits it brings to the company. Some analysts claimed that the Fire product line is a waste of resources while others claimed that this type of portfolio diversification could drive Amazon’s long-term growth.

Throughout the years, Amazon expanded its hardware portfolio to include the Fire phone, Fire tablet, Fire TV, Fire TV Stick, Amazon Echo, and classic Kindle E-readers. At the same time that Amazon expanded its premium self-developed hardware products, the company started offering small commoditized electronics under the brand Amazon Basics, which include a portable power bank, cables, chargers, headphones, Bluetooth products, and other small items.

Last week, Amazon added another piece to its hardware portfolio when Annapurna Labs, an Amazon subsidiary, announced a new ARM-based platform-on-chip (PoC) product line named Alpine that could be used in a broad range of cases like WiFi routers, storage machines, low-power servers, video display, wearables, and IoT. Alpine is using 32-bit ARMv7 or 64-bit ARMv8 architectures, providing up to four cores of CPU, storage interfaces, PCI Gen3, 10G Ethernet connection, DDR4 and 2MB L2 Cache.

Amazon’s AWS division acquired Annapurna Labs last year for $370M to improve the power consumption of its data centers while driving efficient computational and storage capabilities. Launching a new product line of low-power ARM-based POC with advanced capabilities is an interesting development for Amazon that is targeting the rising demand for such products in the emerging IoT, wearables, network communication devices and low-power servers markets.

Even though it’s clear that Amazon’s Alpine will not compete with Intel (NASDAQ:INTC) in the data center arena, the launch of the new product adds support to the ARM-based server ecosystem that Qualcomm (NASDAQ:QCOM) has been trying to push for a while. However, currently, I believe that the offering of ARM-based servers is just not good enough to break the Intel monopoly in this market, and even if Alpine succeeds to gather some insignificant market share in the data center market, its most prominent target market is the access points/routers market, IoT/Wearables and personal consumer electronic devices.

In the original announcement, Annapurna Labs presented existing agreements to include the Alpine PoC on future products in Netgear (NASDAQ:NTGR), Asus, QNAP Systems, and Synology. Annapurna Labs will introduce future products that will include the Alpine PoC in high-performance routers, NAS storage machines, and home media centers. These sectors will be part of Alpine's target sectors, and it will face fierce competition from other ARM-based chip providers that include many Chinese white-labels as well as Broadcom (NASDAQ:BRCM), NVIDIA (NASDAQ:NVDA), Marvell Technology (NASDAQ:MRVL), Samsung Electronics (OTC:SSNLF), etc.

At first glance, Alpine seems like another ball Amazon is throwing in the air to see whether it can succeed as it did with the phone and tablet products. Amazon’s Fire phones and tablets tried to penetrate saturated and overcrowded markets without offering real added-value to the end customer. In the Alpine product line, however, Amazon offers low-power, efficient processors with advanced specifications that could be used in a variety of devices. In my eyes, this is Alpine’s strength. As Amazon offers solutions for common problems in rapidly emerging markets, I’m carefully optimistic about this initiative. This could drive another successful revenue stream for AWS and position Amazon as a serious long-run player in the hardware market, something that should be taken into account. If Amazon could leverage the cost saving features of its new processors and sell them as an efficient alternative to the current ARM-based PoC, it could generate decent revenues in the future and would have a positive impact on the Amazon stock.

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