Intel’s attempt to secure a deal with Sony to design and manufacture the PlayStation 6 chip met an unexpected hurdle, resulting in a significant setback for the company.
In 2022, Intel competed fiercely with Advanced Micro Devices (AMD) in a bid to supply the design for Sony’s upcoming PlayStation 6 chip and to have Taiwan Semiconductor Manufacturing Co. as the contract manufacturer—a move that could have generated billions in revenue. Despite reaching the final stages, Intel ultimately lost to AMD due to unresolved profit-sharing disagreements between Intel and Sony.
According to sources familiar with the matter, Intel stood to generate a steady business from Sony’s console, a lower-margin but reliable income stream compared to high-margin sectors like artificial intelligence chips. Consequently, the PlayStation contract would have bolstered Intel CEO Pat Gelsinger’s foundry business, an initiative launched in 2021 aimed at revitalizing Intel.
The PlayStation chip’s origin was in Intel’s design segment but would have significantly benefited the foundry business post-separation at the beginning of this year. Typically, Sony’s consoles sell over 100 million units within five years. However, the profit margins and backward compatibility concerns played pivotal roles in the negotiation collapse. Intel’s inability to assure backward compatibility without substantial engineering resources contributed to Sony favoring AMD.
The negotiations spanned several months in 2022 and included high-level discussions between the two companies. Despite Intel’s efforts, AMD emerged victorious, continuing its streak after providing the PlayStation 5 chip. Intel’s spokesperson refrained from commenting specifically on the discussions but highlighted a robust customer pipeline across all business segments.
The failure to secure the PlayStation deal adds to Intel’s mounting challenges, including reported $7 billion in operating losses for its manufacturing division within the first quarter of this year. Lip-Bu Tan’s unexpected board departure and Intel’s subpar performance in the AI sector further exacerbate the situation. Strategies under consideration include potentially divesting from certain business units and reassessing its programmable chip unit, Altera.
The PlayStation 6 chip contract could have occupied Intel’s foundries for over five years and generated approximately $30 billion, according to internal projections. This significant loss underscores Intel’s struggles to attract key clients to its advanced 18A process, critical to the company’s future. Sony, meanwhile, remains aligned with AMD, ensuring continuity in their console lineage while maintaining backward compatibility and streamlined production processes.
Intel’s missed opportunity with Sony underscores ongoing challenges in securing high-profile contracts and revitalizing its foundry business under CEO Pat Gelsinger’s leadership. As the company navigates substantial operational losses and strategic dilemmas, its path forward remains fraught with hurdles.
Source: Rappler