AMD wins Sony’s PS6 chip deal over Intel

Sony selected AMD to supply the processor for the PlayStation 6 after talks with Intel broke down over backward-compatibility and revenue-sharing issues, according to a report by Reuters published this week.

Why Intel lost the PS6 bid

Sony and Intel engineers and executives spent months negotiating how to preserve backward compatibility if Sony switched from AMD-based processors to Intel silicon. The core technical challenge was ensuring games that ran on AMD chips would continue to run properly on Intel processors.

PS6 processor close-up — PS6 processor will be supplied by AMD (Image: CryptoFX/Shutterstock)

The negotiations collapsed because the two companies could not agree on how much Intel would earn per processor it designed. Manufacturing for any Intel-designed chips in this deal would have been handled by Taiwan Semiconductor Manufacturing Co. (TSMC).

Had Intel supplied processors for PS6 models, it stood to gain as much as US$30 billion in revenue, roughly R$165 billion, according to Reuters. Intel disputed that characterization in its response to the agency, saying: “We strongly disagree with that characterization, but we will not comment on any conversations with current or potential customers.”

AMD’s position going into the deal

AMD, Intel and Nvidia logos side by side — AMD and Intel trail Nvidia in the AI chip and GPU race (Image: Robert Way/Shutterstock)

AMD arrives at the PS6 selection with several relevant business dynamics:

Products for data centers account for more than half of AMD’s sales (source).
AMD executive Jack Huynh said the company merged its gaming RDNA graphics and data-center CNDA efforts into a single architecture called “UDNA.”
For gaming, AMD’s stated priority is to scale performance at lower price points, according to Huynh.
Despite gains, AMD remains behind Nvidia in the market for AI chips and GPUs.

Intel’s troubles that affected negotiations

Intel entered talks while facing several operational and financial challenges that framed its bargaining position:

The company has struggled to capitalize on the AI chip market.
Its Raptor Lake processors have shown defects.
Intel outsourced production of some next-generation chip technologies to TSMC.
Its chip fabrication division posted US$7 billion in losses in 2023.
In July, Intel announced 15,000 layoffs.
Intel delayed a planned chip factory in Ohio, as reported by the Wall Street Journal (source).
Intel plans to supply its troubled “giant chip” to Microsoft, despite manufacturing difficulties.