This is an interesting twist in the processor wars, here is the #1 cloud company that is turning its profits in providing cloud services in to processor R&D to build new CPUs. This is a much more important announcement than the press is giving it credit for. I have argued in the past the Intel "lost" the smartphone CPU war because Apple decided not to wait for them to come up with some high margin processor compromis…
These ARM CPU are made with ARM Core Design ( NEOVERSE N1 ) , which means there are no reason why Google or Microsoft, or even Apple and Facebook cant have their own N1. And they will because of the competitive advantage as you mentioned.
This solves the Chicken and Egg Problem where ARM CPU from Qualcomm and Ampere or other Vendors could not get into Server Market due to software compatibility. And no one was willing to invest porting and making sure every software runs well on these chip without Hardware. ( One of the reason why Qualcomm exit the Server Market ) Now Amazon is doing both, all the Open Source Web Stack AWS offers will support ARM, assuming Amazon upstream all those work.
And once those Software are ARM ready, other smaller Cloud Providers such as Digital Ocean, OVH, Linode etc.. will offer and switch to ARM once there are ARM CPU available.
On top of my head, the last estimate HyperScaler represent 50% of Intel's DC and Enterprise Revenue. Intel's yearly revenue from DC is roughly $20B, so we are talking about a potential lost of $10B+ over the next decade. And DC has been the most profitable segment for Intel.
Microsoft now also has new incentives to port Windows to work on ARM. ( A lot of Azure Customers runs out Windows VM ) They are also on their way with Windows on Snapdragon. Although I think it will be a few years before it becomes stable enough and mainstream.
So 5 years down the road, You now have the servers on AWS running on ARM, all mobile and Tablet are on ARM. Intel are selling less unit to amortise its cost of R&D in each leading node. AMD with better Node fighting for marketshare. If Windows on ARM worked, it is only a matter of time Apple moves its whole Mac line across to ARM as well, may be 2025+. ( Pro Application developers will have incentive to port their work to ARM on both platform )
If Andy Grove were still alive, or his apprentice Pat Gelsinger were still around at Intel, they would be facing the same dilemma half a century ago, -Should Intel invest more in protecting the memory business and fight Japanese manufacturers or should the company flee from memories market and create a new growth market?
And this time around, Should Intel invest more in protecting the x86 business and fight ARM or should the company flee from x86 and create new growth market?
It was nearly 5 years ago Intel announced Custom Foundry. They had a chance to take on and compete with TSMC. They were far too worried their best tech and IP would info would leak out. They would rather do it all by themselves. 5 years later, I doubt even if they are reopening Custom Foundry there will be any customer wanting to sign up.
Sorry if this is a grim outlook of Intel, I am sure they will stick around, just like any great companies once were, IBM, Sun, HP, they will have a long tail of decline until they become mostly irrelevant.