How Intel Lost the Sony PlayStation 6 Deal to​ AMD

Intel’s failure to secure the Sony ​PlayStation 6 chip design and manufacturing contract has dealt a ​significant blow to the company’s foundry business. The contract, worth billions of dollars in revenue, was awarded to AMD and TSMC in 2022.

A Big Hit to Intel’s Foundry ⁤Business

Winning ⁢the PlayStation ⁢6 chip design contract could have been a huge win for Intel’s design⁤ division and foundry business. Intel CEO​ Pat Gelsinger announced the company’s foundry business plan in 2021, with a formal launch in February 2023 in San Jose, California. However, the loss of⁢ the ‌contract has raised concerns about the financial performance of ‍the foundry business.

Details ​of Intel’s Lost Deal with Sony

Intel failed to negotiate a price with Sony over profit-sharing issues for each ​chip sold. AMD eventually won the contract, beating out competitors like Broadcom. Negotiations between Sony and Intel lasted for several months in 2022, involving dozens of engineers and executives, including the CEOs of both companies.

PlayStation Backward Compatibility Issues

Current-generation PlayStation consoles are powered by custom chips designed by AMD. Sony announced the PlayStation 5 Pro, but hasn’t⁤ revealed the next-generation model yet. Ensuring compatibility with previous versions is a key feature Sony is including in the next-generation system. Switching from AMD to Intel ‍may risk backward compatibility, ⁤which could have been a major concern for Sony.

Intel’s Difficult Situation

Intel ​missed the first wave of the AI boom led by Nvidia and AMD. The company reported disappointing second-quarter results in⁢ August. While products like AI chips have gross margins⁤ of more than 50%, the console business brings in lower profits. However, the ‌console business is a stable business that can ⁤generate profits with already developed technology.

Intel’s Foundry‍ Business Struggles

Intel ​separated its design and‍ manufacturing businesses during‌ Gelsinger’s tenure. The company reported a $7 billion‍ operating loss in its manufacturing business⁢ in⁣ April. Finding major customers who ⁤will publicly comment on​ the 18A process has been a challenge. If Intel had ‍received the PlayStation 6 ‍chip order, it ⁣could have sustained the foundry business for more than 5 years.

AMD’s Growing‌ Dominance

AMD has further ⁣solidified its position in the market​ by monopolizing⁤ the supply of chips for major game consoles like Xbox and PlayStation. The company’s growth in the high-performance computing market is expected to become more prominent in the future. Intel needs⁤ to make‌ strategic efforts ‌to enhance its design capabilities and find competitiveness.

Conclusion

The loss of the Sony PlayStation 6 chip design and manufacturing ​contract is a significant blow to Intel’s foundry business. The company needs to focus on developing differentiated process technology compared to competitors like Samsung Electronics and TSMC. AMD’s growing dominance in the market is a major concern⁣ for Intel, and the company needs to make strategic efforts to ‍stay competitive.