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Keeping in mind poor sales of Nintendo Wii U game consoles as well as slowing market of dedicated gaming platforms in general, financial analysts do not think that shipments of the next-generation game consoles from Microsoft and Sony Corp. to set records. Still, there will be around five million units of the two consoles shipped in 2013, which will be a good news for struggling Advanced Micro Devices, which will supply system-on-chips for the consoles.

“Our base assumption (in line with our Japan colleagues) is 2.5 million PlayStation 4 units and 2.3 million Xbox Next “Durango” units [are to be] shipped in Q4 2013,” said Shawn Webster, a analyst with Macquarie Equities Research, in a note to clients, reports Tech Trader Daily blog.

Since both Microsoft’s third-generation Xbox as well as Sony’s PlayStation 4 are based on semi-custom AMD Fusion system-on-chips with eight Jaguar general-purpose x86 cores, AMD Radeon HD 7000-derived graphics processors and other special-purpose hardware units, Advanced Micro Devices will be among the main companies to benefit from sales of the new consoles.

 

The analysts estimate that AMD will charge on average $60 per system-on-chip for PS4 and Xbox “Durango”, which will bring the company at least $288 million in revenue this year. Previously AMD only received royalties from game console platform owners for using chips with their technologies; starting from next-generation of consoles, AMD will sell chips to its partners. The improved earnings from console business will be shown as a major victory of AMD’s current management.

“We estimate that average selling prices for the company‘s game console business are roughly $60 due to its premium specifications. As a result, we are adding roughly $96 million of Sony/Xbox console chip revenue for AMD in Q3 2013 and $228 million in Q4 2013, and raising our CY13 and CY14 revenue estimates,” said Mr. Webster.

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 rather 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, Microsoft and Sony did not comment on the news-story.

Tags: AMD, Jaguar, Fusion, x86, Radeon, Sony, Playstation, Orbis, Microsoft, Xbox, Durango, 28nm

Discussion

Comments currently: 13
Discussion started: 03/20/13 02:34:47 PM
Latest comment: 03/26/13 11:13:37 AM
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1. 
Sales of an additional 5 million AMD APUs in '13 should help things nicely.
5 0 [Posted by: beenthere  | Date: 03/20/13 02:34:47 PM]
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2. 
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0 3 [Posted by: tedstoy  | Date: 03/20/13 07:10:15 PM]
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5 million of total console sales of 720 and PS4 is wishful thinking in 2013, especially if they launch before the big holiday/Xmas season? It's more like a conservative estimate if anything. AMD already projected that at least 20% of their revenue in Q4 2013 will come from IPs. The number will likely be even greater than Macquarie is estimating. There is a lot of pent-up demand for next gen consoles. Since Wii U wasn't truly a next gen console (hardware or graphics wise), many people are saving money now for PS4/720.
1 0 [Posted by: BestJinjo  | Date: 03/26/13 11:13:10 AM]
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3. 
A 288 million dollar profit alone won't be enough to get AMD out of the red considering the billions of dollars in lost revenues that they lost in the past 7 years, but it's a good start in the right direction.
4 2 [Posted by: SteelCity1981  | Date: 03/20/13 09:51:29 PM]
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That's right SteelCity. The console/ gaming market isn't going to be enough to turn this company back to gold. It needs to get its chips into other things. Hence it is branching out into the embedded market. I can foresee a move into next gen 4k TVs, a market far bigger than consoles. It will also look toward the automotive industry where cars will increasing employ advanced preemptive safety systems. The medical industry is another. These are markets as big as tablets and phones.
2 2 [Posted by: linuxlowdown  | Date: 03/21/13 12:29:17 AM]
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It's not profit - it's revenue. Revenue is the total AMD got from MS/Sony, profit is the bit left over after AMD pay all the costs to build the chips and that is probably very small - guestimate 10% so that would be 28.8 million profit. Then that 29 million is going to be paying for all the R+D work AMD had to do designing the chips for the consoles. That will take several years probably, only after that does AMD really start to make money from this.
1 0 [Posted by: Dribble  | Date: 03/22/13 04:37:40 AM]
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It's revenue, not profit.
0 0 [Posted by: BestJinjo  | Date: 03/26/13 11:13:37 AM]
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4. 
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1 4 [Posted by: Tristan  | Date: 03/21/13 03:23:50 AM]
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Not when you sell in volume. For goodness sake, businesses can't do business ripping each other off. Costs are properly negotiated to be a win-win.
2 2 [Posted by: linuxlowdown  | Date: 03/21/13 05:18:42 AM]
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Yeah, win-win. Do you remember NV-M$ frictions about first XBOX GPU price ?
0 1 [Posted by: Tristan  | Date: 03/21/13 08:40:29 AM]
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You don't know the gross margins on the PS4 chip. Hence your conclusion The analysts have no clue really, like usual.
2 1 [Posted by: vanakkuty  | Date: 03/21/13 08:07:09 AM]
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5. 
People keep estimating profits or costs on license fees, whereas AMD will get paid for each chip it churns out. The ones it can`t sell to Sony and MS, it will sell on the desktop market etc. The Chip will sell for at least $100 based on A10 Trinity+ Volume price ($70 approx to make say), that still leaves AMD with $30 <Approx> profit for each chip, If 5 Million sell in 2013 (Thats 150 Million profit).

AMD have always made good profits on its APU line, I don`t see why it will be any different.
1 1 [Posted by: keysplayer  | Date: 03/21/13 08:31:43 AM]
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6. 
Speculations. Just look at the sales of PSP Vita and Wii U...
0 2 [Posted by: TAViX  | Date: 03/21/13 08:34:40 AM]
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