OpenAI’s recent decision to develop custom AI chips in partnership with Broadcom marks a significant moment. With a reported investment of $10 billion, the move aims to reduce reliance on Nvidia’s GPUs and tailor hardware to OpenAI’s specific needs. The strategy mirrors similar decisions by Apple, Tesla, Google, and Amazon, which have all invested in proprietary chips to gain performance, efficiency, and integration advantages.
IP risk: in-house vs. partnered development
When companies purchase standard chips from vendors like Nvidia or Intel, they typically avoid direct IP risks. The supplier bears the burden of patent protection and trade secret management. Developing custom silicon introduces challenges, as companies must navigate existing patents, protect proprietary know-how, and ensure their designs do not infringe on others’ IP.
Patent infringement is a major concern. Designing a chip from scratch, especially without a large defensive portfolio, risks overlapping with existing patents. Companies may need to license processor cores, interface technologies, or other IP blocks, adding complexity and cost. In contrast, working with an established partner can mitigate this risk. Broadcom’s XPU program allows customers to contribute their own IP while relying on Broadcom’s extensive patent portfolio and pre-licensed components, reducing exposure to infringement claims.
Trade secret protection is another consideration. In-house development often requires hiring specialized engineers, sometimes from competitors—a practice that can lead to legal disputes over alleged knowledge transfer. By partnering with Broadcom, OpenAI can access experienced teams without the risk of poaching and can benefit from established processes that safeguard sensitive information.
Strategic drivers behind custom silicon
Beyond IP considerations, custom chips offer strategic advantages in performance, cost, and differentiation.
Performance is a key motivator. Tesla’s Full Self-Driving (FSD) chip, developed in-house, delivered improved performance over the Nvidia chip it replaced, at a reduced cost. Chip architect Ganesh Venkataramana, who was with Tesla at the time, recalled that the team “had to design something of our own” to meet the power and performance targets for the FSD chip. Apple’s M-series chips similarly outperform competitors in efficiency and speed, thanks to tight integration between hardware and software.
Cost and supply chain control are also important. For companies operating at scale, the upfront investment in custom silicon can be offset by long-term savings. Tesla’s FSD chip reduced per-unit costs, while Amazon’s Graviton CPUs allow AWS to offer lower-cost cloud services. Custom chips also reduce dependency on external suppliers, providing leverage in negotiations and resilience against shortages.
Competitive differentiation is another benefit. Proprietary chips enable unique capabilities that are difficult for rivals to replicate. Apple’s seamless integration across devices, Google’s tensor processing units, and Amazon’s Trainium accelerators all serve as strategic moats, enhancing brand value and customer experience.
Europe’s role in the custom silicon ecosystem
While the U.S. and Asia dominate custom chip development, Europe plays a vital role as both a consumer and a contributor.
European industries such as automotive, aerospace, and telecom depend heavily on semiconductors, particularly specialized chips at mature process nodes. The 2021 chip shortage exposed vulnerabilities in Europe’s supply chain, prompting policy action to secure access to critical components.
Europe also contributes significantly to global semiconductor IP and manufacturing. In the U.K., Arm designs processor architectures used in Apple, Amazon, and others. Netherlands-based ASML supplies the world’s most advanced lithography machines. Companies such as Infineon, STMicroelectronics, and NXP have deep expertise in chip design and production.
To strengthen its position, the European Union launched the EU Chips Act, allocating €43 billion to support R&D, pilot lines, and new fabs. The goal is to double Europe’s share of global chip production to 20% by 2030. Silicon Box, TSMC, and others have announced or are implementing plans to build European facilities, while local companies are expanding capacity with public support.
The U.K., post-Brexit, has launched its own £1 billion semiconductor strategy, focusing on strengths in design and compound semiconductors. While the U.K. may not develop a full supply chain, it seeks to secure a seat at the table by offering valuable IP and specialized capabilities. The U.K. has numerous chip design startups, capable of moving fast and innovating in areas where large technology companies struggle.
European research institutions such as CEA-Leti, imec, and Fraunhofer are also driving innovation in chip design and manufacturing. Projects including SiPearl’s EuroHPC processor and open-source initiatives around RISC-V demonstrate Europe’s commitment to custom silicon where it aligns with strategic goals.
OpenAI’s partnership with Broadcom reflects a broader industry shift toward custom silicon as a means of achieving performance, autonomy, and strategic advantage. While the path involves navigating complex IP landscapes, working with established partners can mitigate risks and accelerate development.
Europe, though not yet a dominant force in custom chip production, offers critical assets in IP, manufacturing, and policy support. Through coordinated investment and innovation, the continent is positioning itself as a trusted contributor to the global semiconductor ecosystem.
In the race for computing power, those with the right silicon, and the rights to that silicon, will have the strategic advantage.
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