AMD (NYSE:
AMD
) is the unlikely beneficiary of Sony's (NYSE:
SNE
) brand-new game console, PlayStation 4. The company is providing
a
single-chip custom processor
for the console, which includes an eight-core x86-64 AMD "Jaguar"
CPU and a next-gen Radeon graphics engine.
AMD has a long-standing relationship with console
manufacturers. The company acquired ATI (whose technology
appeared in Wii, Xbox 360 and GameCube) in 2006. AMD chips also
appear in Wii U.
This gives the company a near monopoly over the game industry.
PS Vita and Nintendo 3DS -- which use processors built by ARM
Holdings (NASDAQ:
ARMH
) -- are the only two new platforms that don't use AMD
technology.
Since its competitors have already chosen AMD, it is possible
that Microsoft (NASDAQ:
MSFT
) may use a different chipmaker to help build the next Xbox. In
fact, the company used two other manufacturers -- NVIDIA (NASDAQ:
NVDA
) and ARM Holdings -- to build the Surface RT tablet. Surface Pro
features Intel (NASDAQ:
INTC
) processors.
Even if Microsoft chooses one of those firms, however, AMD
stands to make billions from its contracts with Sony and
Nintendo.
From 1995 to 2013, Sony sold a total of 330.82 million
consoles. Individually, the
company sold
104.25 million PSone consoles, 153.68 million PlayStation 2 units
and 72.89 million PlayStation 3s, amounting to an average of 110
million units per device.
Based on this average on the sales total of PlayStation 3, it
is easy to assume that PlayStation 4 has the potential to sell
between 70 and 110 million units over the next several years.
According to
PCMag
, an existing eight-core processor from AMD, such as the FX-6300,
retails for $130. Assuming that the x86-64 "Jaguar" falls within
that price range, AMD could be looking at revenue of at least
$9.1 billion ($130 x 70,000,000 units = $9,100,000,000).
AMD is also providing Sony with the GPU, which (according to
PCMag) could fall within the $200 range. This may provide Sony
with an additional $14 billion in revenue ($200 x 70,000,000
units = $14,000,000,000).
These quick estimates assume that the component costs will
remain the same throughout the years in which PlayStation 4 is
produced, which is not likely to be the case. It also assumes
that Sony will sell at 70 million PlayStation 4 units, which is
far from a guarantee.
However, as these processors become cheaper to manufacture,
AMD's profit will increase. Thus, even if it charges less for the
CPU and/or GPU, it may actually earn more money.
Follow me
@LouisBedigianBZ
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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