The hottest topic in semis nowadays is the way that big tech companies are building their own silicon. We wrote about some of the motivations behind this here and explored the economics of them here. The quick summary of all that is non-semis companies do not build chips to save money, they build them for strategic advantage (which may include saving money).
So it should come as no surprise that one of Google’s key strategic assets, YouTube quietly unveiled a new chip last month, but for some reason no one is really talking about it. Maybe this is the new normal and we are used to it, or maybe no one is talking about it because it scares the chip companies badly.
Google quietly unveiled it’s new Video Coding Unit (VCU) in a blog post from the YouTube Engineering team. The team also published an academic paper on this project, (a paper which is hard to find in Google search results). The blog piece is filled with some really interesting background on how YouTube runs, as well as the usual mind-blowing statistics – every minute people upload 500 hours of video content. The problem they were trying to solve is both fairly straightforward and staggeringly difficult. Users upload video of a certain quality, but then YouTube has to play that video back with a different quality depending on the viewer’s device – 4K for a wired TV, lower-res for a mobile device on a shaky network. The process of altering that quality level is called transcoding, and it is very compute intensive. Google had some some key trade-offs here. By using a new encoding scheme they could greatly reduce their bandwidth costs (which must be massive), but this came at cost of requiring a lot more compute. The VCU solved that problem.
A few things stood out for us about the VCU.
First, it is fast. They claim it delivers 20x-33x improvement in compute efficiency. By comparison, a new generation CPU can expect roughly double (2x) the speed of its prior generation, and that result is usually mostly driven by Moore’s Law improvement. When Google announced it’s machine learning chip, the TPU, six years ago, they talked about 30x-80x better performance, and that allowed them to halve the number of data centers they would need to build. So the VCU is not quite as powerful (the math it is doing is a lot more complex), but would clearly still have a big impact on YouTube’s data center needs.
Secondly, and more importantly, the team that built the chip was largely comprised of software engineers, and not that many of them. This demonstrates how ‘easy’ it has become to design a chip. The academic paper has 52 co-authors, and we are guessing that comprises the whole team. The article makes it sounds as if these are the same people who are building YouTube’s software platform. So the team has an in-built advantage against any merchant chip company who wants to compete in this space. The big processor vendors (e.g. Nvidia, AMD, Intel, Qualcomm) usually have several hundred designers working on their core products, and then they have at least as many building software for those chips. Google’s approach is much more efficient, the benefit of vertical integration.
Admittedly, it takes many more people to bring a chip to production. Google probably worked with one of the big chip companies’ “ASIC” team to do the back-end work. (Our guess is Broadcom). But there is a more disturbing possibility, does Google have a chip operations team? They would only do this if they have several chips in production. If true, that should really worry the big chip companies. It is not clear who did the ASIC work for Google, the article is unclear and the job listing on Google are ambiguous, but it is definitely a possibility.
There is a lot for the chip industry to take in here. We mentioned the design advantage and efficiency Google enjoyed. But there is also the fact that Google essentially just invented a new category of chip, again. As far as we know, no one is really building anything directly comparable to a VCU. So Google, in need of a solution to their specific problem, went out and built it themselves. And we are not sure any chip company will go out and build a competitive product. The market for this chip has a fairly small customer pool. There is only Google maybe Facebook, and a couple companies in China. By the same token, this is just one more insurmountable barrier to entry for YouTube’s market. No one will be able to compete with YouTube unless they can build a chip too.