In 2022, Intel lost a major contract to design and manufacture the chip for Sony’s PlayStation 6, a blow to its contract manufacturing business.
Intel and Advanced Micro Devices (AMD) were the main bidders for the deal. AMD emerged victorious. Taiwan Semiconductor Manufacturing (TSMC) was aiming to be the contract manufacturer. The contract could have generated billions in revenue for Intel and provided a steady stream of orders for its fledgling foundry business, Reuters news report said.
Intel’s push to secure PlayStation 6 chip deal was part of the strategy of CEO Pat Gelsinger to revitalize the company by establishing it as a significant player in the semiconductor foundry market. Intel’s failure to clinch the deal comes at a time when its foundry division, launched in 2021, has struggled to gain large clients. The contract, projected to be worth $30 billion over several years, would have provided a major boost to Intel’s contract manufacturing unit and its advanced 18A process, which is seeking more big-name customers.
The bidding process for the PlayStation 6 chip began in 2022, with both Intel and AMD vying for Sony’s business. Pricing disagreements, particularly over Intel’s profit margins, played a key role in the company’s inability to finalize the deal with Sony. Backward compatibility concerns, stemming from the fact that AMD designed the chip for the PlayStation 5, complicated the potential partnership between Intel and Sony.
AMD, which currently supplies chips for the PlayStation 5, secured the PlayStation 6 contract, continuing its dominance in the gaming console market. The decision is seen as a safe choice for Sony, ensuring a seamless transition for consumers from the PlayStation 5 to the PlayStation 6, particularly in terms of game compatibility.
In 2023, AMD posted 9 percent drop in gaming segment revenue reported 9 percent drop in gaming segment revenue to $6.2 billion primarily due to lower semi-custom sales.
Intel’s failure to secure the contract marks another challenge for the company as it struggles with declining revenue and an underperforming foundry division. The company reported $7 billion in losses for its manufacturing businesses in early 2023, and it has announced workforce reductions and cuts to its capital spending on factory expansions. The loss of the PlayStation 6 chip deal also highlights Intel’s ongoing struggle to compete with semiconductor giants like AMD and Nvidia in the rapidly evolving chip market.
The missed opportunity underscores Intel’s need for a main customer to solidify its foundry business. Had Intel won the PlayStation 6 deal, the contract could have sustained its foundry operations for over five years, providing much-needed financial stability. For now, however, AMD’s win solidifies its position in the gaming console space, while Intel will need to explore other avenues to expand its foundry and design business.
