Advanced Micro Devices is on track to significantly boost percentage of revenue its gets from the embedded business. According to the company, in Q4 2013 it expects embedded products to account for 20% of revenue thanks to major design wins. While the company does not disclose details, it looks like those designs wins are next-generation game consoles from Microsoft Corp. and Sony Corp. Moreover, it appears that AMD is changing its game console business model.
?We have strong design wins for our embedded and semi-custom APUs. Initials products based on these APUs are expected to launch later this year, driving our embedded semi-custom business to more than 20% of our revenue mix by the fourth quarter,? said Rory Read, chief executive officer and president of AMD.
Last year embedded products ? including embedded accelerated processing units (APUs), embedded central processing units (CPUs), embedded chipsets and embedded graphics processing units (GPUs) ? accounted for roughly 5% of AMD?s revenue of around $5.42 billion, which was $271 million.
Embedded Business Targets Game Consoles
According to AMD, game consoles are an area of interest for the company; particularly, an area of interest for the embedded products group. Previously ? in case of graphics technologies integrated into Microsoft Xbox 360, Nintendo Wii and Nintendo Wii U ? game consoles were an area of interest of graphics products group. ATI Technologies and then AMD has never sold GPUs for game consoles, but received royalties for every single console and every game for the consoles that utilize its graphics tech (such royalty payments may account for $10 - $20 - $30 million a quarter, not hundreds of millions AMD wants to get from its embedded business). The royalties are recognized as a part of graphics products group revenue. Apparently, this is going to change.
When asked specifically about game consoles during the conference call, AMD?s Lisa Su, general manager of global business unit, who also oversees embedded business of the company, said that the firm had already received first payments for Nintendo Wii U and those were recognized as a part of graphics business revenue, but for some reasons also mentioned the embedded business unit and its revenue targets.
?On the gaming revenue, I think we talked about the Nintendo Wii U that was announced in the fourth quarter and that was part of the revenue that was reported in the graphics segment. In terms of going forward, what we said is the embedded in the semi-custom business will ramp over this period in 2013 and we are on track for that 20% revenue target by the fourth quarter,? said Ms. Su.
Based on the comments made by Lisa Su and the fact that the only viable game consoles scheduled to be unveiled this year are Microsoft Xbox Next, Sony PlayStation 4 ?Orbis?, it looks like AMD will not license its graphics and processing technologies to platform owners, but will sell semi-custom accelerated processing units to them.
Chips Instead of Licenses
Based on unofficial information, both next-generation consoles from Microsoft and Sony will utilize system-on-chips with up to eight Jaguar x86 cores and custom Radeon HD graphics engines. Considering that due to x86 license agreements with Intel AMD may have no rights to license x86 designs to any third company and has to build-in third-party IP into x86-based SoCs itself, there may be reasons why AMD is going to sell chips to console developers and not license technologies.
From many points of view, selling embedded custom APUs to Sony and Microsoft has a lot of advantages for AMD since it will naturally get more profit by selling chips than by getting license fees. On the other hand, the profit margin of such eAPUs will likely be very low. Moreover, AMD will have to handle all the manufacturing and logistics issues, which may not be too comfortable for a company with limited resources.
AMD did not officially confirm design wins with Microsoft and Sony or the changes in its relationship with console platform owners.
Tags: AMD, Jaguar, Fusion, Sony, Playstation, Xbox, Xbox Next, Microsoft, Loop, Durango, Odin, Omni, Orbis
Discussion started: 01/24/13 12:30:03 AM
Latest comment: 01/25/13 12:54:57 AM
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1.?
Never mind that the hardware in a console has 0 profit margin and all the money comes from games. $20 says AMD's 20% figure is way off the mark and their stock continues to plunge until they get bought out.
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is this Avon, 123 or 789? lol Just leave him, he earns $$$ for every negative comments towards AMD...... If they say they're going after 20%, it's realistic, and probably. That's not the question. The real question is whether that 20% is purely from the increase in sales, or because the rest of their areas are shrinking as well. Also, how much profit are they making from that revenue? I think they're a good investment, but there are always doubts, and questions. How you answer them depends on whether you agree with me on their investment attractiveness. The stocks actually rose after the earnings call. It was much lower than this at one point in the past few months, around 1.88, now its upto 2.73. Rose from what, 2.46? Something around that region. Mistaken about what? That they're a good investment? Stop drinking and posting. I suggest you take that advice yourself, that reply was for AnonymousGuy. Look again. https://www.youtube.com/watch?v=t8GTHXTEvIc Something like DISQUS or similar can help clarify who the reply was meant for. Also its got nice notifications on the dash board. The console hardware has no profits for console makers (i.e., Sony and MS) because of the loss-leader strategy where the profits are made on the games/accessories. That doesn't mean AMD is a charity and will sell its chips for no profit to Sony/MS/Nintendo. It's not like PS4/720 will be plastered all over with AMD logos for advertising. AMD will obviously trying to make more money by selling chips directly rather than licensing the components. Since they won contracts for all three next gen consoles and those consoles might sell > 200 million units over the next 7-8 years, it's not unreasonable to expect 15-20% of AMD's revenue to come from these embedded chip/APU design wins. Little profit for MS and Sony. That doesn't matter, AMD is getting paid for their chips. Only SONY and MS make Zero profit off the consol's .. the Suppliers of the hardware on the other hand DO!
. Double vision ain't good for posting however it's induced.
2.?
Its lucky for AMD for winning both consoles CPU as well as GPU supplier. The following are some of the advantages for AMD:1. Good amount of revenue for AMD.
2. Since game developers prefers consoles over PC,each and every future games would be optimized for AMDs GPU and CPU.
3. Freedom form nVidia bloatware features embedded in games like PhysX,CUDA tech,3D vision etc because the game has to run flawlessly on consoles powered by AMD.
4. Lesser driver problems faced for AMD in PC because the game is originally designed to run optimally on Radeon GCN cores for consoles.
Ultimately better gaming experiences for we PC gamers...
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Yeah, console ports will look so much better on AMD desktop cards. And that's, in th eend, a good thing...
3.?
I agree with most of your post. However I don't believe lucky is the right word to use - I'd say it was more like innovation and talent something which its competitors were not able to compete with.
4.?
Only real problem is 2013 is going to be terrible economy in general and the US in particular.
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And how is 2013 any worse then 2008-2009-2010-2011 or 2012?.. If anything the world has improved from the USA made world recession.
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