Microsoft acquires data center chip startup Fungible to power its Azure cloud platform using Fungible DPUs

Microsoft today announced it has acquired Silicon Valley-based data center chip startup Fungible to bolster its Azure data center infrastructure using the Fungible data processing units (DPUs). However, Blocks and Files reported that the deal was valued at $190 million.

Reports about the acquisition first emerged in 2020 after TechNet reported that the Redmond-based tech giant was seeking to develop custom processors for its Azure Cloud platform. Microsoft confirmed the acquisition today but declined to disclose the financial terms of the deal.

As part of the acquisition agreement, the Fungible team will join Microsoft’s data center infrastructure engineering teams. Microsoft added it plans to use Fungible’s technology and chip design expertise to deliver “multiple DPU solutions, network innovation, and hardware systems advancements.”

“Today’s announcement further signals Microsoft’s commitment to long-term differentiated investments in our datacenter infrastructure, which enhances our broad range of technologies and offerings including offloading, improving latency, increasing datacenter server density, optimizing energy efficiency and reducing costs,” Microsoft said in a statement.

Founded in 2015 by Bertrand Serlet, Krishna Yarlagadda, and Pradeep Sindhu, the Santa Clara, California-based Fungible fabricates a type of data center hardware chip known as a data processing unit (DPU) for data centers. According to the company, the Fungible DPU was invented in 2016 to address two of the biggest challenges in scale-out data centers – inefficient data interchange between nodes and inefficient execution of data-centric computation.

In a statement, Fungible Co-Founder and CEO Pradeep Sindhu said: “Data-centric computations are increasingly prevalent in data centers, with important examples being the computations performed in the network, storage, security and virtualization data paths. Today, these computations are performed inefficiently by existing processor architectures. These inefficiencies cause overprovisioning and underutilization of resources, resulting in data centers that are significantly more expensive to build and operate. Eliminating these inefficiencies will also accelerate the proliferation of modern applications, such as AI and analytics.”

The chip can offload such supporting tasks from a server’s central processing unit (CPU) to the DPU. Fungible also explains that offloading encryption operations and other supporting tasks from a server’s CPU to a DPU makes more computing capacity available for applications.

“Fungible’s technologies help enable high-performance, scalable, disaggregated, scaled-out data center infrastructure with reliability and security,” Girish Bablani, the CVP of Microsoft’s Azure Core division, wrote in a blog post. “Today’s announcement further signals Microsoft’s commitment to long-term differentiated investments in our data center infrastructure, which enhances our broad range of technologies and offerings including offloading, improving latency, increasing data center server density, optimizing energy efficiency and reducing costs.”

According to Fungible, its F1 DPU enables increased efficiencies and utilization across compute, network, and storage – delivering 3X total cost of ownership, and savings across data center scales while improving reliability, security and agility of infrastructure management.

“We are proud to be part of a company that shares Fungible’s vision and will leverage the Fungible DPU and software to enhance its storage and networking offerings, Fungible said in a blog post.