How Will Intel Respond to This Dilemma?

While Intel (NASDAQ:INTC) has traditionally dominated the semiconductor market, the server industry’s decline and enterprise customers’ preference for cheap, low-power, densely-packed chips have left the company more susceptible to competition. To boost its competitive edge in the developing cloud computing market, Intel officially launched its first low-power system on a chip, the Centerton S1200, on Tuesday.

What are the Benefits of Intel’s New Chip?

“As public clouds continue to grow, the opportunity to transform companies providing dedicated hosting, content delivery or front-end Web servers are also growing,” stated the company in a press release announcing the chip’s debut. “High density servers based on low-power processors are able to deliver the desired performance while at the same time significantly reduce the energy consumption one of the biggest cost drivers in the data center.”

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With Intel’s four largest cloud customers, Google (NASDAQ:GOOG), Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), and Microsoft (NASDAQ:MSFT), choosing to use lower-margin CPUs, Intel has been forced to develop low-power processors to keep their business. This represents a marked change from the company’s position a few years ago; before 2011, Intel “actively denigrat[ed] the idea of lower performance but power efficient chips in the data center,” according to GigaOm…