7 months ago
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Advanced Micro Devices (NASDAQ: AMD) just rose to the occasion in an important contract negotiation. Sony (NYSE: SONY) put AMD's contract for PlayStation processors up for grabs, and mighty Intel (NASDAQ: INTC) came close to stealing the deal. But AMD walked away with a contract for the upcoming PlayStation 6, securing many millions of custom chip sales and billions of dollars in revenue.
This is good news for AMD investors, but worse tidings for Intel's shareholders. Let's break down the financial impact of this bulky Sony contract.
The evolution of PlayStation processors
The first couple of PlayStation (PS) video game consoles ran on very different hardware. The first generation, released way back in 1994, ran on a MIPS processor architecture designed by Sony's microchip division. Five years later, the PS2 featured a more advanced MIPS chip codenamed the "emotion engine" by co-developers Sony and Toshiba.
The Cell processor found in the PS3 console was a different beast. Sony and Toshiba jumped ship from the MIPS architecture, turning to the time-tested IBM PowerPC platform instead. This chip was designed for the PS3 console and also meant to drive some of the world's most powerful supercomputers. This ambitious 2006 system was not backward compatible with the MIPS design philosophy, though. That's why you couldn't just run PS2 games on the faster PS3 system -- you needed a software emulator to make those older games work, and Sony didn't support all of its PS2 games in this way.
And that's where AMD comes in. Sony decided to try another fundamental redesign, jumping to a custom version of the popular x86 architecture (PC processors, almost always made by Intel or AMD). As one of the two surviving specialists in high-performance computer graphics in 2013, AMD could deliver a more complete gaming system than the larger chip expert. again, the move to a different design philosophy undermined the PS4's compatibility with older games, but consumers around the world embraced it anyway.
That console generation was a double whammy for AMD, by the way. The contemporary Microsoft Xbox One also featured a semi-custom AMD processor. And both console giants stuck with their AMD contracts in the PS5 and Xbox Series S generation.
And now AMD has secured the contract for Sony's next-generation gaming console, presumably to be named the PlayStation 6. The Japanese company has been pretty consistent with that numbering scheme over the last 30 years, after all. And Sony has stuck with AMD solutions for more than a decade already, stretching to about 15 years if you include future sales under the new deal.
