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Summary:

• Intel lost PlayStation 6 chip contract to AMD in 2022, sources say
• Dispute over profit margins blocked Intel-Sony deal, sources say
• PlayStation deal could have generated $30 billion in revenue, sources say

SAN FRANCISCO, Sept 16 (Reuters) - Intel (INTC.O), lost out on a contract to design and fabricate Sony’s PlayStation 6 chip in 2022, which dealt a significant blow to its effort to build its fledgling contract manufacturing business, according to three sources with knowledge of the events.

The effort by Intel to win out over Advanced Micro Devices (AMD.O), in a competitive bidding process to supply the design for the forthcoming PlayStation 6 chip and Taiwan Semiconductor Manufacturing Co (2330.TW), as the contract manufacturer would have amounted to billions of dollars of revenue and fabricating thousands of silicon wafers a month, two sources said.

Intel and AMD were the final two contenders in the bidding process for the contract.

Winning the Sony (6758.T), PlayStation 6 chip design business would have been a victory for Intel's design segment and would have doubled as a win for the company's contract manufacturing effort, or foundry business, which was the centerpiece of Intel CEO Pat Gelsinger’s turnaround plan.

Gelsinger announced plans for Intel to create a foundry unit in 2021 and formally launched it at an event in San Jose, California, in February of this year. The PlayStation chip deal originated in Intel's design segment, but would have been a boon to the financial performance of the foundry business after this year's separation.

Details of the discussions and how Intel missed out on the contract for Sony’s as-yet-unannounced next-generation game console are reported here for the first time.

Typically, Sony consoles sell more than 100 million units across a half decade. For a chip designer, the console business delivers a lower profit than the gross margins of more than 50% for products like artificial intelligence chips, but nonetheless represents steady business that can profit from technology a company has already developed. Sony’s business also could have helped boost Intel's contract manufacturing business, which now struggles to find big new clients.

A dispute over how much profit Intel stood to take from each chip sold to the Japanese electronics giant blocked Intel from settling on the price with Sony, according to two of the sources. Instead, rival AMD landed the contract through a competitive bidding process that eliminated others such as Broadcom (AVGO.O), until only Intel and AMD remained.

Discussions between Sony and Intel took months in 2022, and included meetings between the two companies’ CEOs, dozens of engineers and executives.

In response to Reuters reporting about the PlayStation 6 talks and Intel's failure to win the business, an Intel spokesperson said: "We strongly disagree with this characterization but are not going to comment about any current or potential customer conversations. We have a very healthy customer pipeline across both our product and foundry business, and we are squarely focused on innovating to meet their needs."

Sony and Broadcom did not respond to requests for comment. AMD declined to comment.

BACKWARDS COMPATIBILITY​

The current generation of Sony’s PlayStation consoles are powered by custom chips with a design contract fulfilled by AMD.

Sony announced the PlayStation 5 Pro last week, but has not yet unveiled the next generation. Years after its 2020 launch, Sony said it sold 20.8 million of the first-generation PlayStation 5 systems in fiscal 2023.
Similar to how big tech companies like Google (GOOGL.O), and Amazon (AMZN.O), rely on outside vendors to help design and manufacture custom AI chips, Sony relies on experienced design contractors to make the processors for systems.

Console chip designs typically try to ensure compatibility with earlier versions of the system, to allow users to run older games on the new hardware. Moving from AMD, which made the PlayStation 5 chip, to Intel would have risked backwards compatibility, which was a subject of discussion between Intel and Sony engineers and executives, the sources said.

Ensuring backward compatibility with prior versions of the PlayStation would have been costly and taken engineering resources. Allowing PlayStation users to play games they have purchased for older systems is a feature Sony often includes in a next-generation system.

Having missed the first wave of the AI boom dominated by Nvidia (NVDA.O), and AMD, Intel reported a disastrous second quarter in August. Intel announced plans to cut 15% of its workforce to save $10 billion and has prepared a plan to reduce its capital spending on factory expansion that was a cornerstone to its foundry strategy.

SEEKING A MARQUEE CUSTOMER​

The sudden departure of Lip-Bu Tan, a high-profile board member, over differences in Intel's future, added to the company’s challenges as Gelsinger and other Intel executives presented plans to the board at a meeting last week, multiple sources said. Reuters reported early this month on the planned board meeting, citing a source familiar with the board discussions.

The potential plans include ideas on how to shave off businesses Intel can no longer afford to operate, Reuters reported. Executives are also expected to debate the future of Intel's programmable chip unit Altera, including a potential sale, and its manufacturing expansion in Germany.

Intel split its design and manufacturing operations under Gelsinger’s tenure, and has reported financial results separately since the first calendar quarter this year. In April, the company disclosed $7 billion in operating losses for the manufacturing businesses.
Intel has struggled to find a marquee customer it can publicly talk about for the first manufacturing process, known as 18A, open to other companies. If Intel had won the PlayStation 6 chip, it could have occupied its foundry unit for more than five years, two of the sources said.

Sony’s console business could have pumped roughly $30 billion into Intel over the course of the contract, according to Intel’s internal projections, two of the sources said. The PlayStation 2 sold roughly 150 million units since its launch in 2000.
A long-term Sony contract would have helped bring in big new clients for Intel's contract manufacturing effort, two sources said, as Intel continues to struggle with attracting customers to its advanced 18A process.

https://www.reuters.com/technology/how-intel-lost-sony-playstation-business-2024-09-16/

 

[Yoboman]

Why makes $30 billion when you can make $0

 

[Tsaki]

Switching to Intel would incur additional costs in engineering resources, both in hardware and software, to ensure backward compatibility with the PS5 and PS4. While not impossible, as they share the same ISA, it would still be a challenge. Intel’s foundries might have been cheaper than TSMC's and posed less risk in light of potential future geopolitical tensions in Taiwan (though TSMC is currently building new foundries in the US and EU). However, Intel's foundries would be less performant and less reliable. There's a reason everyone is keen to work with TSMC, and the company can safely raise wafer prices.

It’s possible Sony used Intel as a soft bargaining chip against AMD, in case AMD aimed to raise profit margins too high for the PS6 designs. The fact even Broadcom came into this discussion might support this theory.

 

[Astray]

Iirc, there were rumors that Xbox also turned down Intel at the last minute in favor of AMD.

If I'm correctly remembering that, I wonder if both console makers were using Intel as mere bidding pressure fodder to get AMD to drop prices.

 

[saintjules]

First official piece of information highlighting the existence of the PS6 I'm guessing?

 

[Silver Wattle]

There' is no way a playstation contract would be worth $30 billion in revenue.

AMD sees the benefits of the relationship beyond profits, it helps them in multiple ways, such as wafer costs, it removes a source of revenue from their competitors, promotes their architecture to a large amount of developers etc.

Hopefully Sony were able to use the threat of switching to Intel to get a better deal from AMD, such as using the latest architectures for the CPU/GPU/AI for the PS6.

 

[winjer]

There' is no way a playstation contract would be worth $30 billion in revenue.

AMD sees the benefits of the relationship beyond profits, it helps them in multiple ways, such as wafer costs, it removes a source of revenue from their competitors, promotes their architecture to a large amount of developers etc.

Hopefully Sony were able to use the threat of switching to Intel to get a better deal from AMD, such as using the latest architectures for the CPU/GPU/AI for the PS6.

It might also include game servers, devkits, AI training equipment, etc.

 

[Buggy Loop]

How the fuck Intel fumbled that, holy shit

Now US government is basically begging other chip designers to go to Intel foundry. And they are cutting coffee quality to save costs... LOL.

 

[Panajev2001a]

I find it scary Intel went so far considering they have nothing really in that space now and BC wise or GPU arch switch it still seems scary to have as a jump. I guess that as much as AMD and Sony are close as partners it is way too much money for Sony not to have competitive bidding on (even though the Architecture Design team may have their preference of course… like staying with AMD IMHO).

 

[Bartski]

https://www.reuters.com/technology/how-intel-lost-sony-playstation-business-2024-09-16/

SAN FRANCISCO, Sept 16 (Reuters) - Intel (INTC.O), opens new tab lost out on a contract to design and fabricate Sony’s PlayStation 6 chip in 2022, which dealt a significant blow to its effort to build its fledgling contract manufacturing business, according to three sources with knowledge of the events.
The effort by Intel to win out over Advanced Micro Devices (AMD.O), opens new tab in a competitive bidding process to supply the design for the forthcoming PlayStation 6 chip and Taiwan Semiconductor Manufacturing Co (2330.TW), opens new tab as the contract manufacturer would have amounted to billions of dollars of revenue and fabricating thousands of silicon wafers a month, two sources said.

Intel and AMD were the final two contenders in the bidding process for the contract.
Winning the Sony (6758.T), opens new tab PlayStation 6 chip design business would have been a victory for Intel's design segment and would have doubled as a win for the company's contract manufacturing effort, or foundry business, which was the centerpiece of Intel CEO Pat Gelsinger’s turnaround plan.
Gelsinger announced plans for Intel to create a foundry unit in 2021 and formally launched it at an event in San Jose, California, in February of this year. The PlayStation chip deal originated in Intel's design segment, but would have been a boon to the financial performance of the foundry business after this year's separation.

EDIT: nvm https://www.neogaf.com/threads/reuters-how-intel-lost-the-sony-playstation-business.1675023/

 

[Crispy Gamer]

Wow it's a ruthless business I didn't think there would be any chance Sony would leave AMD and Broadcom being in the mix is fascinating I wonder if Nvidia poked around

 

[M1chl]

Good, otherwise it would be nice room heater and probably really loud one at that.

 

[Beechos]

Eww is there anything Intel worth having nowadays?

 

[Justin9mm]

Intel would have just been too expensive.

 

[Gaiff]

First official piece of information highlighting the existence of the PS6 I'm guessing?

Nah, the PS5’s existence confirmed the existence of a PS6.

 

[asdasdasdbb]

Intel???

Did Sony not learn anything from Microsoft from the original XBox? Probally wasted a lot of time even entertaining the idea.

 

[BlackTron]

I mean we wouldn't want to be without that infallible Intel quality.

IMO Intel is at the point they should be trying to grab the guaranteed movement. Then again, maybe they did. AMD will always be willing to undercut Intel's price by an extra dollar.

 

[MMaRsu]

News - Business - Reuters: How Intel lost the Sony PlayStation business

Summary: Intel lost PlayStation 6 chip contract to AMD in 2022, sources say Dispute over profit margins blocked Intel-Sony deal, sources say PlayStation deal could have generated $30 billion in revenue, sources say SAN FRANCISCO, Sept 16 (Reuters) - Intel (INTC.O), lost out on a contract to...

www.neogaf.com

 

[Magic Carpet]

Maybe a BIOS update could have saved the deal.

 

[Astray]

It might also include game servers, devkits, AI training equipment, etc.

Yep, add to that cloud streaming units etc etc etc.

It's a very lucrative business, especially given the rumors that PS6 will have a portable version.

 

[winjer]

Good, otherwise it would be nice room heater and probably really loud one at that.

And CPUs degrading and dying left and right.
Could you imagine another scandal like the X360 RROD.

 

[Bartski]

good guy AMD

 

[MarkMe2525]

I wonder if it is reasonable to infer a potential Intel and MS partnership from this news. Intel must believe they have a SoC that's suitable for a next gen console. Intel would have some convincing to do with their recent issues.

 

[DJ12]

Intel???

Did Sony not learn anything from Microsoft from the original XBox? Probally wasted a lot of time even entertaining the idea.

Yeah but intel are desperate now much better chance to get a favourable deal.

Sony probs just used them to bargin with amd. Amd have better cpus an gpus than Intel so it's a bit of a no brainer.

Still with no threat AMD could've got greedy too.

 

[StereoVsn]

Was Broadcom pitching ARM I wonder?

I also think that Sony was using Intel to lower AMD cost as it would be a pain for them to switch despite similar architecture.

That said, it’s too bad this fell through. Intel foundries need a shot in the arm and TSMC needs more competition.

 

[Vyse]

Intel???

Did Sony not learn anything from Microsoft from the original XBox? Probally wasted a lot of time even entertaining the idea.

Need to have something to negotiate against with AMD.

 

[flying_sq]

I hope you console guys get a 3d vcache chip

 

[Bartski]

Intel having rough few weeks

 

[ManaByte]

How much crack was Cerny smoking to consider Intel in the first place?

 

[Dr.D00p]

Probally wasted a lot of time even entertaining the idea.

Not if it kept AMD in check in terms of costs, knowing Sony had another option.

 

[LordOfChaos]

Good thing the CEO is busy posting bible quotes to evangelize on twitter

I thought Pat was good at first, but he's talked well and made plans sound good, but things are looking worse than I even thought a year ago. To lose a much needed major deal over margins is just stupid, but AMD was probably the frontrunner for full ease of compatibility anyway.

 

[OmegaSupreme]

Intel used to be the shit when it came to PC CPUs. What happened?

 

[nial]

First official piece of information highlighting the existence of the PS6 I'm guessing?

I can't find stuff right now, but we've known it's been in active development since early 2022.
It follows the same cycle of every PlayStation home console starting active development in the second year of the current one (2001 for PS3, 2008 for PS4 and 2015 for PS5).

 

[DenchDeckard]

I wonder if it is reasonable to infer a potential Intel and MS partnership from this news. Intel must believe they have a SoC that's suitable for a next gen console. Intel would have some convincing to do with their recent issues.

There's a chance, but I would be more inclined to think MS has a higher chance of getting into bed with Nvidia as they have cosied up a lot recently with their AI developments.

It makes the most sense but who knows.

 

[Bernoulli]

 

[Javi97]

30,000 million in revenue and an estimate of 100 million PS6 means that they were planning to charge $300 for each APU

 

[Mr.Phoenix]

Intel???

Did Sony not learn anything from Microsoft from the original XBox? Probally wasted a lot of time even entertaining the idea.

Usually, entertaining proposals from multiple suitors is used to keep everyone honest.

I wonder if it is reasonable to infer a potential Intel and MS partnership from this news. Intel must believe they have a SoC that's suitable for a next gen console. Intel would have some convincing to do with their recent issues.

Intel, CAN make an APU powerful enough to go into consoles. Be that the PS6 or whatever. They have all the know-how, their CPUs have been having integrated graphics forever, which basically mean they are APUs, and they have actually put out respectable discrete GPUs on the market, that were actually superior to whatever AMD has been doing in their first attempt.

The problem with intel, however, would be the price of that tailor-made hardware.

 

[Celcius]

I'm glad they're sticking with AMD to be honest
Backwards compatibility, great performance, and efficient

 

[mhirano]

Intel used to be the shit when it came to PC CPUs. What happened?

Two things happened: Lisa Su goddess tier CEO saved AMD and Intel stuborness in investing in their own fab process instead of using state-of-the-art TSMC foundries.

 

[jonnyp]

Intel???

Did Sony not learn anything from Microsoft from the original XBox? Probally wasted a lot of time even entertaining the idea.

Pretty sure they are obligated to have multiple bidders for tenders. Probably was never seriously considered.

 

[DenchDeckard]

Intel are really struggling lately. What a shame. It's embarrassing looking at what they have become. Self inflicted though.

 

[SlimySnake]

I am rocking an intel CPU and its way better than reviewers make it out to be. Especially in comparison to the zen 2 CPUs it was competing with.

it's good for Sony to hold discussions with intel. AMD has its own issues, but I like the idea of new tech in my console. AMD and Sony partnership has now resulted in not one but two consecutive underpowered consoles. I was hoping sony would switch to dedicated CPU and GPUs so we can finally start having powerful GPUs in consoles again. Enough with this combined SoC design.

 

[Boss Mog]

Probably for the best. Intel chips are horrible these days, some even having fatal flaws. AMD has proven it can deliver powerful performance with low power consumption which is important for a console chip.

 

[EverydayBeast]

Sony has always used someone other than Intel when it comes to chips (emotion, cell, etc.) it shocks people that Sony doesn’t use intel but custom chips and that’s fine.

 

[RoboFu]

I am rocking an intel CPU and its way better than reviewers make it out to be. Especially in comparison to the zen 2 CPUs it was competing with.

it's good for Sony to hold discussions with intel. AMD has its own issues, but I like the idea of new tech in my console. AMD and Sony partnership has now resulted in not one but two consecutive underpowered consoles. I was hoping sony would switch to dedicated CPU and GPUs so we can finally start having powerful GPUs in consoles again. Enough with this combined SoC design.

The absolute worse thing these last 2 gens is having nearly the exact same hardware in the two competing consoles. What's the point ? It's boring.

 

[GoldenEye98]

Intel has the greed of Nvidia without anything to actually back it up...

 

[mhirano]

The absolute worse thing these last 2 gens is having nearly the exact same hardware in the two competing consoles. What's the point ? It's boring.

It's 'boring' but this is good for customers and developers: same architecture means easier coding and porting

 

[proandrad]

Damn we could have had a PS6 overlocked to hell with a single core over 7ghz with a nvidia GPU. The $2,000 console dream is dead.

 

[SweetTooth]

AMD and Sony partnership has now resulted in not one but two consecutive underpowered consoles. I was hoping sony would switch to dedicated CPU and GPUs so we can finally start having powerful GPUs in consoles again. Enough with this combined SoC design.

GTFO with this nonsense, PS5 and Series X were adequately powerful for $399 console released in 2020

 

[Tiago Rodrigues]

Intel???

Did Sony not learn anything from Microsoft from the original XBox? Probally wasted a lot of time even entertaining the idea.

You're not smart unless you look at the entire market before making a decision like this.

Sony were probably 99% AMD but they for sure always have to look at everything before making a final decision.