Amazon is not the only game in town. They are competing not on cost but on feature set. However, for them running their own chips is mainly a way to optimize cost. Open source hardware is going to be a key enabler for them. Right now both Apple and Amazon are still using arm based processors, which are not open sourced but very common. The whole point of that is that it allows them to leverage open source compiler tool chains, open source kernels, etc. Replicating that stuff internally as a proprietary me-too style implementation is stupendously expensive. Neither Amazon nor Apple do that.
Instead they roll their own chips optimized for their own use case. As open source chipsets based on e.g. risc-v become more popular, tool support for that will become more popular and it will become a natural choice for building custom hardware. Breaking apart the near monopoly that Intel has had on this since the nineteen seventies is a good thing IMHO. Having a not so benevolent dictator (Intel) that has arguably been asleep at the wheel for a while now is slowing everybody down. This is what is driving people to do their own chips: they think they can do better.
The flip side is that companies building their own custom chipsets need to maintain interoperability. If they diverge too much from what the rest of the world is doing, they risk isolating themselves at great cost because it makes integrating upstream changes harder and it requires modifying standard tool chains and maintaining those modifications. Creating your own chip is one thing. Forking, e.g. llvm or the linux kernel is another thing. You need some damn good reasons to do that and opt out of all the work others are doing continually on that. Some people do of course (e.g. Google forked the linux kernel a few years back) but it buys them a lot of hassle mostly and not a whole lot of differentiation. They seem to be gradually trying to get back to running main line kernels now.
If Amazon, Apple, MS, Google, Nvidia, etc. each start doing their own chip designs, they'll either create a lot of work for themselves reinventing a lot of wheels or they get smart about collaborating on designs, code, and standardized tool chains. My guess is the latter is already happening and is exactly what enables this to begin with. Standard tool chains, open chip designs, an open market of chip manufacturers, etc. are what is enabling this. Embedded development was locked up in completely proprietary tool and hardware stacks for decades. That is now changing. You are describing the past few decades not the future.
Instead they roll their own chips optimized for their own use case. As open source chipsets based on e.g. risc-v become more popular, tool support for that will become more popular and it will become a natural choice for building custom hardware. Breaking apart the near monopoly that Intel has had on this since the nineteen seventies is a good thing IMHO. Having a not so benevolent dictator (Intel) that has arguably been asleep at the wheel for a while now is slowing everybody down. This is what is driving people to do their own chips: they think they can do better.
The flip side is that companies building their own custom chipsets need to maintain interoperability. If they diverge too much from what the rest of the world is doing, they risk isolating themselves at great cost because it makes integrating upstream changes harder and it requires modifying standard tool chains and maintaining those modifications. Creating your own chip is one thing. Forking, e.g. llvm or the linux kernel is another thing. You need some damn good reasons to do that and opt out of all the work others are doing continually on that. Some people do of course (e.g. Google forked the linux kernel a few years back) but it buys them a lot of hassle mostly and not a whole lot of differentiation. They seem to be gradually trying to get back to running main line kernels now.
If Amazon, Apple, MS, Google, Nvidia, etc. each start doing their own chip designs, they'll either create a lot of work for themselves reinventing a lot of wheels or they get smart about collaborating on designs, code, and standardized tool chains. My guess is the latter is already happening and is exactly what enables this to begin with. Standard tool chains, open chip designs, an open market of chip manufacturers, etc. are what is enabling this. Embedded development was locked up in completely proprietary tool and hardware stacks for decades. That is now changing. You are describing the past few decades not the future.