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Advanced Micro Devices is on track to significantly boost percentage of revenue its gets from the embedded business. According to the company, in Q4 2013 it expects embedded products to account for 20% of revenue thanks to major design wins. While the company does not disclose details, it looks like those designs wins are next-generation game consoles from Microsoft Corp. and Sony Corp. Moreover, it appears that AMD is changing its game console business model.

“We have strong design wins for our embedded and semi-custom APUs. Initials products based on these APUs are expected to launch later this year, driving our embedded semi-custom business to more than 20% of our revenue mix by the fourth quarter,” said Rory Read, chief executive officer and president of AMD.

Last year embedded products – including embedded accelerated processing units (APUs), embedded central processing units (CPUs), embedded chipsets and embedded graphics processing units (GPUs) – accounted for roughly 5% of AMD’s revenue of around $5.42 billion, which was $271 million.

Embedded Business Targets Game Consoles

According to AMD, game consoles are an area of interest for the company; particularly, an area of interest for the embedded products group. Previously – in case of graphics technologies integrated into Microsoft Xbox 360, Nintendo Wii and Nintendo Wii U – game consoles were an area of interest of graphics products group. ATI Technologies and then AMD has never sold GPUs for game consoles, but received royalties for every single console and every game for the consoles that utilize its graphics tech (such royalty payments may account for $10 - $20 - $30 million a quarter, not hundreds of millions AMD wants to get from its embedded business). The royalties are recognized as a part of graphics products group revenue. Apparently, this is going to change.

When asked specifically about game consoles during the conference call, AMD’s Lisa Su, general manager of global business unit, who also oversees embedded business of the company, said that the firm had already received first payments for Nintendo Wii U and those were recognized as a part of graphics business revenue, but for some reasons also mentioned the embedded business unit and its revenue targets.

“On the gaming revenue, I think we talked about the Nintendo Wii U that was announced in the fourth quarter and that was part of the revenue that was reported in the graphics segment. In terms of going forward, what we said is the embedded in the semi-custom business will ramp over this period in 2013 and we are on track for that 20% revenue target by the fourth quarter,” said Ms. Su.

Based on the comments made by Lisa Su and the fact that the only viable game consoles scheduled to be unveiled this year are Microsoft Xbox Next, Sony PlayStation 4 “Orbis”, it looks like AMD will not license its graphics and processing technologies to platform owners, but will sell semi-custom accelerated processing units to them.

Chips Instead of Licenses

Based on unofficial information, both next-generation consoles from Microsoft and Sony will utilize system-on-chips with up to eight Jaguar x86 cores and custom Radeon HD graphics engines. Considering that due to x86 license agreements with Intel AMD may have no rights to license x86 designs to any third company and has to build-in third-party IP into x86-based SoCs itself, there may be reasons why AMD is going to sell chips to console developers and not license technologies.

From many points of view, selling embedded custom APUs to Sony and Microsoft has a lot of advantages for AMD since it will naturally get more profit by selling chips than by getting license fees. On the other hand, the profit margin of such eAPUs will likely be very low. Moreover, AMD will have to handle all the manufacturing and logistics issues, which may not be too comfortable for a company with limited resources.

AMD did not officially confirm design wins with Microsoft and Sony or the changes in its relationship with console platform owners.

Tags: AMD, Jaguar, Fusion, Sony, Playstation, Xbox, Xbox Next, Microsoft, Loop, Durango, Odin, Omni, Orbis

Discussion

Comments currently: 21
Discussion started: 01/24/13 12:30:03 AM
Latest comment: 01/28/13 06:42:55 AM
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1. 
show the post
0 15 [Posted by: AnonymousGuy  | Date: 01/24/13 12:30:03 AM]
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- collapse thread

 
is this Avon, 123 or 789? lol
10 2 [Posted by: SteelCity1981  | Date: 01/24/13 12:56:19 AM]
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Just leave him, he earns $$$ for every negative comments towards AMD......
8 2 [Posted by: tks  | Date: 01/24/13 03:49:33 AM]
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show the post
1 6 [Posted by: TA152H  | Date: 01/24/13 12:57:31 AM]
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Then you are mistaken.

The stocks actually rose after the earnings call. It was much lower than this at one point in the past few months, around 1.88, now its upto 2.73. Rose from what, 2.46? Something around that region.
6 2 [Posted by: vanakkuty  | Date: 01/24/13 01:05:01 AM]
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show the post
0 6 [Posted by: TA152H  | Date: 01/24/13 05:29:46 PM]
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Stop drinking and posting.


I suggest you take that advice yourself, that reply was for AnonymousGuy. Look again.
4 1 [Posted by: vanakkuty  | Date: 01/24/13 09:19:58 PM]
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LOL . Double vision ain't good for posting however it's induced.

https://www.youtube.com/watch?v=t8GTHXTEvIc
4 0 [Posted by: linuxlowdown  | Date: 01/25/13 12:20:54 AM]
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Thanks for the good laugh that gave me.

Something like DISQUS or similar can help clarify who the reply was meant for. Also its got nice notifications on the dash board.
1 0 [Posted by: vanakkuty  | Date: 01/25/13 12:54:57 AM]
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The console hardware has no profits for console makers (i.e., Sony and MS) because of the loss-leader strategy where the profits are made on the games/accessories. That doesn't mean AMD is a charity and will sell its chips for no profit to Sony/MS/Nintendo. It's not like PS4/720 will be plastered all over with AMD logos for advertising. AMD will obviously try to make more money by selling chips directly rather than licensing the components. Since they won contracts for all three next gen consoles and those consoles might sell > 200 million units over the next 7-8 years, it's not unreasonable to expect 15-20% of AMD's revenue to come from these embedded chip/APU design wins.
4 1 [Posted by: BestJinjo  | Date: 01/24/13 09:37:30 AM]
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Little profit for MS and Sony. That doesn't matter, AMD is getting paid for their chips.
6 0 [Posted by: KeyBoardG  | Date: 01/24/13 10:22:10 AM]
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Only SONY and MS make Zero profit off the consol's .. the Suppliers of the hardware on the other hand DO!
6 0 [Posted by: vid_ghost  | Date: 01/24/13 02:42:34 PM]
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Right on vid_ghost.
2 0 [Posted by: linuxlowdown  | Date: 01/26/13 03:46:18 AM]
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Continues to plunge? Its up 7%????
2 0 [Posted by: parkerm35  | Date: 01/28/13 06:42:55 AM]
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2. 
Its lucky for AMD for winning both consoles CPU as well as GPU supplier. The following are some of the advantages for AMD:

1. Good amount of revenue for AMD.

2. Since game developers prefers consoles over PC,each and every future games would be optimized for AMDs GPU and CPU.

3. Freedom form nVidia bloatware features embedded in games like PhysX,CUDA tech,3D vision etc because the game has to run flawlessly on consoles powered by AMD.

4. Lesser driver problems faced for AMD in PC because the game is originally designed to run optimally on Radeon GCN cores for consoles.

Ultimately better gaming experiences for we PC gamers...
13 10 [Posted by: tks  | Date: 01/24/13 04:08:57 AM]
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Yeah, console ports will look so much better on AMD desktop cards. And that's, in th eend, a good thing...
4 4 [Posted by: TAViX  | Date: 01/24/13 06:34:29 AM]
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3. 
I agree with most of your post. However I don't believe lucky is the right word to use - I'd say it was more like innovation and talent something which its competitors were not able to compete with.
7 0 [Posted by: Colinhu  | Date: 01/24/13 05:59:19 AM]
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4. 
Only real problem is 2013 is going to be terrible economy in general and the US in particular.
2 1 [Posted by: beck2448  | Date: 01/24/13 11:27:34 AM]
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And how is 2013 any worse then 2008-2009-2010-2011 or 2012?.. If anything the world has improved from the USA made world recession.
3 1 [Posted by: vid_ghost  | Date: 01/24/13 02:50:52 PM]
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5. 
architecturally, the interesting question is when AMD will start doing cpu-dram stacks. this will change the behavior of APU systems pretty dramatically - and after all, cpu-dram stacks are commonplace in the smartphone market.
0 0 [Posted by: markhahn  | Date: 01/25/13 09:35:55 AM]
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6. 
blaming economy for all what is happening on /insert name here/ market is not a universal solution. sure, the economic climate is still not great. does it affects cellphone market? or tablets? nope.

if economy is bad, most people give up large investments first - like cars, apartments, basically anything valuable that is still usable - and those types of industries suffer the most

however, cheaper investments, like consoles, middle/low cost desktops and laptops, mentioned phones and tablets, suffer much less - a console is one month of new car payment. people still buy relatively low cost goods, and don't give up them as much as most people thinks

lower CPU sale = 2-3 years (or more) olds are still "good enough"
lower GPU sale = same
lower desktop/laptop = same + more tablets

however, consoles DID get bit old - basically people who like them will invest in new ones.

on AMD and the margin of profit - who cares? they WILL get *some* money, and that's the main point. since they don't have fabs anymore, it is just a matter of how much more will they purchase from the foundry. in this scenario, any amount at any profit margin is GOOD. a surplus. and a base for future products - if they continue to make similar architecture APU/GPU, then it's easier to program /insert title/ V, if /insert title/ IV was already coded with compiler using the strengths of AMD architecture - we have a good few years of telling that Intel and AMD have different architecture (as well as NVIDIA), so what's good for one is not necessarily good for others.

if the company stays alive at all, one should expect this kind of profit from the next generation of consoles also

Microsoft support is especially important, since XBOX is supposedly "based on windows kernel", which means further optimization of kernel towards AMD-type 8-cores, and general multicore optimizations for next windows
2 0 [Posted by: snakefist  | Date: 01/27/13 08:57:09 AM]
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