Analyst(s): Richard Gordon
Publication Date: February 21, 2025
OpenAI is rumored to be finalizing its first in-house designed chip to support its AI systems. The move reflects a broader trend among tech giants such as Amazon, Meta, Google, and Microsoft who have increasingly turned to custom-designed chips to address their unique application needs. OpenAI’s foray into chip development signals its intent to gain more control over its technology stack and reduce dependence on suppliers such as NVIDIA.
Key Points:
- According to a recent Reuters report, OpenAI is set to finalize its first in-house artificial intelligence (AI) chip this year.
- While the chip will initially be used in a limited capacity within OpenAI’s infrastructure, it could potentially serve as an alternative to NVIDIA’s chips in the future.
- The move is part of a broader trend among tech giants such as Amazon, Meta, Google, and Microsoft who have increasingly turned to custom-designed chips to address their unique application needs.
Overview:
OpenAI Rumored to be Finalizing the Design of its First In-house Chip
In October 2024, Reuters reported that OpenAI was collaborating with Broadcom and TSMC to design its first in-house chip to support its artificial intelligence (AI) systems. The move was said to be part of OpenAI’s strategy to reduce reliance on major semiconductor suppliers. Initially, OpenAI considered building its own chip manufacturing foundries but abandoned the idea due to the high costs and time required. Instead, the company decided to focus on designing custom chips while partnering with established industry players.
Fast forward to early 2025 and according to a new Reuters report, OpenAI is finalizing the design of its first in-house chip and planning to send it to TSMC for initial fabrication in the coming months. Full-scale production is expected to begin by 2026. OpenAI’s design team, consisting of just 40 people led by Richard Ho (a former Google AI chip expert), has made impressive strides in a short time, considering that large tech companies typically take much longer to complete similar projects. The chip will be manufactured using TSMC’s cutting-edge 3-nanometer process. This process, introduced in 2022, offers top-tier performance, power efficiency, and scalability, which are crucial for AI applications. Additionally, its stability and high-volume production capacity make it a reliable choice for new advanced chip designs.
Tech Giants Turning to Custom Designed Chips
Despite the challenges in ramping up production, especially for a new company such as OpenAI in the semiconductor space, the move is part of a broader trend among tech giants such as Amazon, Meta, Google, and Microsoft. These companies have increasingly turned to custom-designed chips to address their unique application needs, such as energy efficiency, low-latency processing, and enhanced AI/ML capabilities. The fabless-foundry model, which allows companies to design chips without owning the manufacturing plants, has reduced financial risks, making it a more viable option.
Advantages of In-house Chip Development
In-house chip development offers several advantages, including control over the design roadmap, ownership of intellectual property (IP), and reduced reliance on external semiconductor suppliers. It also lowers the exposure to semiconductor price fluctuations, providing these companies with greater stability and flexibility. OpenAI’s foray into chip development signals its intent to gain more control over its technology stack and reduce dependence on suppliers such as NVIDIA, despite their symbiotic relationship. This move also enhances OpenAI’s negotiating position with NVIDIA and could be seen as part of a longer-term strategy to develop increasingly advanced processors tailored to its growing AI needs.
Trend Toward Vertical Integration
Ultimately, OpenAI’s push into chip development reflects a broader industry shift toward vertical integration. Companies are seeking to optimize hardware and software performance while mitigating risks associated with supply chain disruptions and reliance on third-party suppliers. OpenAI’s efforts indicate its ambition to remain competitive in the rapidly evolving AI landscape and to build more specialized chips that can better meet its specific demands.
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For more details on the news, see OpenAI Finalises AI Chip Design.
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Author Information
Richard Gordon is Vice President & Practice Lead, Semiconductors for The Futurum Group. He has been involved in the semiconductor industry for more than 30 years, first in engineering and then in technology and market research, industry analysis, and business advisory.
For many years, Richard led Gartner's Semiconductor and Electronics practice, building a 20-person global team covering all aspects of semiconductor industry research, from manufacturing to chip markets and end applications. Having served on Gartner's Senior Research Board and as Gartner's Chief Forecaster, Richard has extensive experience in developing and implementing methodologies for market sizing, share and forecasting, to deliver data, analysis and insights about the competitive landscape, technology roadmaps, and market growth drivers.
Richard is a sought-after technology industry analyst, both as a trusted advisor to clients and also as an expert commentator speaking at industry events and appearing on live TV shows such as CNBC.
