Intel tried but failed to secure $30 billion PlayStation 6 contract

[Daniel Sims]

The big picture: Intel's processor and manufacturing businesses have encountered strong headwinds recently. The company tried to strengthen its revenue stream two years ago by breaking AMD's near-total dominance of the lucrative gaming console sector. Ultimately, Intel may have lost a deal worth tens of billions.

Anonymous sources revealed that Intel unsuccessfully bid to design and manufacture the chips for Sony's PlayStation 6 two years ago. Unsurprisingly, Sony will use an AMD-designed processor for the third time in a row with semiconductors from TSMC.

Reuters reports that Sony initially showed interest in using one of Intel's process nodes for the PlayStation 6 following the 2021 announcement of plans for a new fab that launched in February. So, Intel initially began negotiating with Sony over a next-generation chip design the following year.

Meetings between the companies' CEOs, executives, and engineers lasted months, indicating that Sony might have seriously considered Intel's proposal. However, the two couldn't agree on the profit margins for each chip sold. Ultimately, longtime PlayStation and Xbox partner AMD outbid Intel and Broadcom.

Backward compatibility was another primary concern. Designing the PlayStation 5 and Xbox Series consoles to support games from the older PlayStation 4 and Xbox One was relatively straightforward because both generations used AMD x86 hardware. However, making an Intel processor backward compatible with legacy software would have been significantly more expensive, though not impossible.

The deal could have generated around $30 billion in revenue for Intel's hardware and manufacturing sectors, and the company certainly could have used the extra cash given its ongoing troubles. Missing the AI boom, leaking data center CPU market share, and limited success in foundries have seriously diminished Intel's stock price, threatening to throw the company out of the Dow Jones. Intel responded by laying off thousands and is considering splitting off some of its divisions.

Console sales can decisively impact the companies that build chips for them. Sony's choice to use AMD's Jaguar processor for the PlayStation 4 might have rescued the chipmaker from bankruptcy. The PS4 eventually sold over 117 million units, likely becoming one of AMD's most successful products and providing an invaluable revenue stream during its darkest days before the Zen CPUs brought it back to competitiveness with Intel.

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Intel tried but failed to secure $30 billion PlayStation 6 contract

 

[kiwigraeme]

You sometimes get really stupid executives joining a company, and think they are so clever by changing suppliers to save 5%, suppliers the company has had an excellent working relationship for a long time. Knowing what the company wants, or getting a fix in record time.
AMD struggle to break some Intel markets, simply because of Intel relationships. This is probably what happened here.
Ie to break a relationship you probably need a compelling total package

You also see those stupid executive think employees are interchangeable. Also, swap out over payed experience guy for chip as chips newbie . Or that fellow over there seems to wonder around, chat with people , have a lot of time on his hands, get rid of him/her

Always amazed how many were fooled by perception of busy/efficient, walk fast, tidy desk, processed lots of files ( badly and chosen because the easiest , quick ones ) . Plus the usual talk with complete confidence BS

 

[The Talking Tech]

As I said before, the PS5 Pro is already irrelevant as it won't be out for another two months and here we are already talking about the PS6....

Plus there's word circulating around about the next Xbox being announced during the Video Game Awards in December will sure put pressure on Sony in releasing the PS6 even sooner.

 

[seeprime]

I bet the hurdle to replace AMD was pretty high and expensive to meet for Intel, who is currently squeezed financially.

 

[Skjorn]

As I said before, the PS5 Pro is already irrelevant as it won't be out for another two months and here we are already talking about the PS6....

Plus there's word circulating around about the next Xbox being announced during the Video Game Awards in December will sure put pressure on Sony in releasing the PS6 even sooner.

You're at least 2 years too soon.

 

[human7]

"However, making an Intel processor backward compatible with legacy software would have been significantly more expensive, though not impossible."

I am curious, since both are x64, what the challenges would have been.

 

[godrilla]

Hey at least Intel will make it time for the ai bubble to pop for the maximum facepalm!
They learned how to hit the market just at the right moment when the craze ends with 2 crypto mining booms.

 

[Kashim]

I bet the hurdle to replace AMD was pretty high and expensive to meet for Intel, who is currently squeezed financially.

That's one way to look at it. Another way to look at it is this; it's better to make SOME profit even if it's lower than you desire, rather than making NO profit by letting a good deal slip through your fingers. This is the same asinine strategy Intel used when negotiating with Apple some years back when Apple was switching to the x86 architecture. Apple wanted every chip at a certain price and Intel was not willing to go that low, so they missed out and made no profit at all.

Anyway, I'm glad AMD won out in the end. Intel had decades of dominance and squandered much of the good will and brand name recognition they built. They are getting exactly what they deserve. It's time for a new champion in the processor market!

 

[HardReset]

"However, making an Intel processor backward compatible with legacy software would have been significantly more expensive, though not impossible."

I am curious, since both are x64, what the challenges would have been.

Both Sony and MS use basically same AMD custom SOC. However there are some differences like more cache, some custom units etc. Also AMD has designed whole chip and surely have thought how to maintain backwards compatibility.

For Intel, first. GPU architecture is way different than AMD uses. Also they must think from scratch how to maintain compatibility with custom stuff. And since they have no experience or knowledge about that custon stuff, they must more or less reverse engineer all that.

Shortly, those chips are not CPU. Not even APU (CPU+GPU). They are SOCs (CPU+APU+custom stuff).

 

[Felusy]

The true winner is Sony. Not the chipmaker for making some low end chips.

Nvidia said no because of insanely low margins many many times.

Nintendo almost had to beg to get Tegra in Switch, and Nintendo wanted Nvidia again in Switch 2 because of DLSS too.

I highly doubt this deal is worth 30 billion dollars.

 

[SirDigby]

Remaining as the SOC in consoles is core to AMD's strategy, its why they're not competing with Nvidia in the high-end GPU market - there was a TS article the other day saying as much. I imagine they'd bid almost anything to stay in PS and Xbox, they'd be in almost every living room (or wherever people have consoles nowadays, bedrooms?)

 

[Badvok]

"However, making an Intel processor backward compatible with legacy software would have been significantly more expensive, though not impossible."

I am curious, since both are x64, what the challenges would have been.

While the core CPU is x64, it's more about the SOC with integrated GPU and UMA, and other stuff.

 

[Felusy]

Remaining as the SOC in consoles is core to AMD's strategy, its why they're not competing with Nvidia in the high-end GPU market - there was a TS article the other day saying as much. I imagine they'd bid almost anything to stay in PS and Xbox, they'd be in almost every living room (or wherever people have consoles nowadays, bedrooms?)

Console market is still a niche marked really, the hardware is cheap. Software sales, subscriptions and accesories is where Sony/MS/Nintendo earn money. The winner continues to be Sony/MS/Nintendo, however Xbox not so much, considering Xbox is not profitable.

Nintendo uses Nvidia and Switch is at like 150 million sold with Switch 2 incoming soon, using Nvidia again for DLSS.

A console is absolutely not in all living rooms. I know like 50 gamers and only 3 of them have a console.

A console is mostly a money sink, hence the cheap hardware.

It is like selling printers, they are cheap, then you are lured in.

 

[Lounds]

Sony was never going to leave AMD. They're all in on AMD as they need the compatibility for their older titles. Also AMD was clearly a big part of the PS5 having this power boost system where it directs power between the CPU and GPU for different situations. Microsoft going a more traditional root of fixed clock speeds. Either way Sony made some good decisions post PS3 era.