Reuters is reporting that Amazon’s cloud computing unit has designed a more powerful, second-generation chip for its Amazon Web Services (AWS) data centers.

The new chip is based on designs by Arm Holdings. Arm does not manufacture processors like Intel or AMD. Instead, the company designs chips and licenses their intellectual property (IP) to companies that want to use them. Client companies can even customize them, much as Apple has done, to meet specific needs or increase performance even more.

Sources told Reuters the new chip “will be at least 20% faster than Amazon’s first Arm-based chip, named Graviton, which was released last year as a low-cost option for easier computing tasks.

“The forthcoming Amazon chip is expected to use newer Arm technology, most likely Arm’s Neoverse N1 technology, one of the sources familiar with the matter told Reuters. Another source familiar with the matter said the chip is expected to have at least 32 cores versus the Graviton’s 16.

“The new chip will also use a technology called a ‘fabric’ that will allow it to connect with other chips to speed up tasks like image recognition, one of the people familiar with the matter said.

“To take advantage of the new chip, cloud customers likely will need to use software written for Arm-based chips, which is less common than software for Intel and AMD chips.”

While it may be a challenge for Amazon to get cloud customers to switch software, if successful the move could improve Amazon’s bottom line. While Arm processors are generally not as fast as traditional chips, such as Intel’s or AMD’s, they provide much better power consumption and run cooler. These qualities are especially important in a data center, where tens of thousands of servers are housed. An Arm-based server can also be several times cheaper than a single Intel chip.

As Amazon continues developing their own custom chips, based on Arm’s IP, they will likely be able to customize them even more to meet their needs, much as Apple as down with iPhones and iPads.