AMD will earn 238M$ this year from consoles...

[MisterMac]

Couple of thoughts....


1. I find it ironic forest\centauri forecast the sales they do.
WE're living in a tablet world for the casual gamer - casual gamers bought cheap boxes in 2005\2006.
What do they buy now ? - AppleTv + Ipad to stream casual games.
(Some friends did this - but each to his own i geuss).
(that and wasn't the total sold Xbox360\ps3 count 140 million - NOT 360?! stop bringing in nintendo sales or wii or anything else - your numbers are misleading by ...beep. - count your projected revenue over half meaning 60 mil per quarter in profit perhaps).

2. What are the associative costs for licensing a XENOS + revenue?
What if the profit is actually better for XENOS pr. sold unit - rather than giving them a full package this time around.

(Their are bonusses such as WSA issues being mitigated definately - but directly is there even an increase pr. unit in profit for AMD?)

 

[RampantAndroid]

Certainly, the app store has come into existence and grown since the previous consoles were released. It'll be interesting to see how that affects things. I'd be surprised if this gen of consoles sells as well as the last, unless it somehow manages to replace EVERYTHING else you need while being cheap. I honestly believe this victory might keep AMD going, but I doubt it'll see them into a new golden age.

 

[djgandy]

People in this thread think AMD will get $60 per unit? Hilarious.

AMD making $21.9B from PS4? That's like half the total revenue the PS4 will be lucky to achieve in its lifetime.

Who is fabbing the APU? They need money too.

Back to reality. As far as I can see AMD is selling IP for the PS4. IP generally works on a big up front fee and then a per unit royalty. There may well be penalties for poor sales too. They'll be lucky to get $15 per unit. Maybe $100M up front for licensing.

I just can't see how Sony would pay $60 per unit to just sell the design. They still have to make that, add 8GB of ram, build the mobo, drives etc...

 

[Idontcare]

Ah, payroll taxes; times like these I'm glad I took that Accounting 101 class.

That's true. They're hiring lots of guys with college degrees and they will demand a high salary for the investment they made in school or else they simply will take another job.

I chose this low value in part because it shows how "small" $140 million dollars can be for AMD. If the wages used in my estimate were increased to more reasonable amounts like you mentioned, the estimated expenditures on just labor balloons quickly, and one can see that you can burn through a couple hundred millions of dollars real quick in just a quarter. And this is just for labor, not interest on the debt they issue, the capital they have to acquire and whatever other expenses they have.

Oh yeah, sorry, I wasn't trying to undermine your general position, I was just wanting to frame the base salary picture in a different light.

I very much doubt AMD's labor costs are as low as some people here wish them to be, and I base that on one specific data point we have - AMD layoffs.

There is a reason the primary cost-cutting move AMD goes to when it needs to save hundreds of millions of dollars per year is to go layoff 10% of its employees.

When they laid off 10% of their workforce they expected to save ~$200m per year.

One of Read's first major moves was to announce a plan last November to slash 10 percent of AMD's workforce to save about $200 million in operating costs.

If AMD nets $238m per year from consoles then it will generate enough cash to cover maybe 10 or 15% of its annual labor expenses.

 

[strata8]

People in this thread think AMD will get $60 per unit? Hilarious.

AMD making $21.9B from PS4? That's like half the total revenue the PS4 will be lucky to achieve in its lifetime.

Who is fabbing the APU? They need money too.

Back to reality. As far as I can see AMD is selling IP for the PS4. IP generally works on a big up front fee and then a per unit royalty. There may well be penalties for poor sales too. They'll be lucky to get $15 per unit. Maybe $100M up front for licensing.

I just can't see how Sony would pay $60 per unit to just sell the design. They still have to make that, add 8GB of ram, build the mobo, drives etc...

From what I've heard AMD doesn't have the rights to sell the IP on an x86-based processor.

 

[Arachnotronic]

AMD is selling the APU, not IP.

A lot of you forget, though, that these APUs will ship in much higher volumes than a given PC SKU, so there is probably some significant volume discounting going on.

I would expect $60/chip is completely reasonable.

 

[Sunburn74]

is 238million a lot of money these days? wasn't intels last year profits in the area of 50 billion?

 

[Homeles]

wasn't intels last year profits in the area of 50 billion?

Revenue... net income was $11 billion.

Still a ludicrous amount of money when you think about it. But in the semiconductor segment, it's really not all that much. AMD certainly would like a slice of that pie, though.

Now that I think about it, even though Intel's revenues were down last year, they should beat their previous record of 54B quite handily -- and as I've typed this, I'm kind of changing my mind. Haswell's late release might hurt their profits quite a bit. We all know that Haswell's not going to be another Sandy Bridge, and Windows 8 (even though it's awesome) isn't doing so hot. It's releasing mid-year instead of Q1 like planned.

And that's the desktop version -- the really important bits won't come until later, but hopefully they can print out hose chips and make their way into products before the back to school rush. Haswell will be absolutely fantastic for notebooks and ultrabooks, and it's going to be "good enough" for tablets, while Ivy Bridge isn't really meant for it.

It's a shame that Silvermont won't be releasing until late 2013, because it should be an incredible gain over its predecessor. 22nm tri-gate was born for Atom. And we're getting 5 years of microarchitecture improvements in one sitting. I highly doubt that Intel will make tremendous leaps in market share in the smartphone space, but it should be a healthy boost and some good exposure for them.

As for AMD: all signs point to 2013 being a better year than last year. They ate a lot of revenue loss due to the WSA last year -- a good 1 billion or so. That silly business should be over with, so we can expect better financial statements from AMD.

 

[sontin]

is 238million a lot of money these days? wasn't intels last year profits in the area of 50 billion?

It's not even 5% of AMD's revenue 2012.
And that is not even close to the 25% what AMD and supporters claimed theywill get from Sony and Microsoft...

 

[Torn Mind]

You rarely turn a company around in one fell swoop. It takes a methodical and focused effort, AMD getting in all the next gen consoles is certainly something they can build on.

Yes, I know. This is one of many events that they need to take place if they want to lock down a profitable niche somewhere, anywhere so they don't exit the market.

But some AMD loyalists just go too far in judging the impact of this contract. It's not going to suddenly make Intel shake in their boots or put AMD in a position of dominance. But it can, at the very least, stave off them having to cut down their workforce even further, which leads to issues with their future products; they already have had some issues with their past products, such as Bulldozer being unoptimized, lack of documentation, poor drivers.

 

[vampirr]

It's not even 5% of AMD's revenue 2012.
And that is not even close to the 25% what AMD and supporters claimed theywill get from Sony and Microsoft...

Intel's revenue is from various markets, this revenue is from consoles that AMD will get and we are not counting cpu, gpu market nor tablet, laptop or hybrid tablet-laptops...

 

[Idontcare]

is 238million a lot of money these days? wasn't intels last year profits in the area of 50 billion?

$238m is enough to sustain Via...to create the products that Via creates and sells.

It is not enough to sustain AMD, at least not if AMD is to continue to create the products that we've come to expect from AMD.

AMD may have snagged this generation's console market but they will need to funnel 100% of the revenue back into R&D if they are to create the products that will be needed to snag the next generation of consoles.

Otherwise it will be Nvidia or Qualcomm or Intel who powers the PS5 and XBOX1440 as AMD will then have about as much chance in getting those contracts as Via had in getting this round of contracts.

 

[Exophase]

Except, at the demands of developers Sony decided a while ago to use x86. Also, ARM isn't powerful enough for a next gen console. Meaning nVidia would only have the video card portion, with either Intel or AMD getting the CPU side.

With Intel GPU technology being pretty craptastic, that pretty much leaves AMD in the strongest position.

If 8-core Jaguars are strong enough for consoles an 8-core Cortex-A15 would have sufficed. At 2GHz that could have used as much as 20W, which is a lot but not really insurmountable and probably similar to what the 8-core Jaguars use. If more power were available there's an option to go up to 2.5GHz or so, which is probably not feasible for Jaguar.

But Jaguar was a given if AMD held the cards for designing a bulk of the APU and has to manufacture it, which may have been the only way to get GCN cores on an APU. And like you say, x86 has its own advantages for developers, although ARM may have at least became a better choice than PPC.

 

[NTMBK]

$238m is enough to sustain Via...to create the products that Via creates and sells.

It is not enough to sustain AMD, at least not if AMD is to continue to create the products that we've come to expect from AMD.

AMD may have snagged this generation's console market but they will need to funnel 100% of the revenue back into R&D if they are to create the products that will be needed to snag the next generation of consoles.

Otherwise it will be Nvidia or Qualcomm or Intel who powers the PS5 and XBOX1440 as AMD will then have about as much chance in getting those contracts as Via had in getting this round of contracts.

On the other hand, you could look at it as "thanks to the consoles, AMD can afford another VIA's worth of R&D on top of what they would have had otherwise". It may not be a vast amount in the grand scheme of the semiconductor industry, but it's still better than not having $238m.

 

[Torn Mind]

Oh yeah, sorry, I wasn't trying to undermine your general position, I was just wanting to frame the base salary picture in a different light.

I very much doubt AMD's labor costs are as low as some people here wish them to be, and I base that on one specific data point we have - AMD layoffs.

There is a reason the primary cost-cutting move AMD goes to when it needs to save hundreds of millions of dollars per year is to go layoff 10% of its employees.

When they laid off 10% of their workforce they expected to save ~$200m per year.



If AMD nets $238m per year from consoles then it will generate enough cash to cover maybe 10 or 15% of its annual labor expenses.

No worries. You post gave me opportunity to clarify and expound on my original post, as I just gave the numbers but not really a rationale for the $50000 figured used in there.

 

[Cloudfire777]

Nvidia had their GPU in PS3 because that console was ridiculous expensive. Plus the only competitor was Xbox. Meaning better margins and more sales.

Nvidia said they didn`t want to be part of the upcoming consoles because there isn`t much money to be made. That may have been an over exaggeration from their part to cover up that they lost Sony and Microsoft to AMD, but there is some very true parts about it.

Not only will BOTH Xbox and PS4 sell for a small retail price this time around, but they will also be competiting against Valve`s Steambox which is VERY alike Xbox/PS4 since they are all pure x86 consoles now. And since its x86, most games will be made to both consoles and PC since game developers see a great chance of reducing the developer costs. Meaning people will discuss wether they really want console or PC since they both share 95% of the games on the market. Combine this with Nintendo which also include games like Resident Evil, Assassin Creed etc. That was not the case with PS3 and Xbox 360 since Nintendo was mostly Mario and children games.

Long story short:
Cheaper consoles than previous generation, much fiercer competition from both PC and additional console makers, much more multi plat games = Less margin for profit = Not so lucrative anymore.

 

[Puppies04]

This contract win is a question of the existence for AMD, while not much so for nVIDIA. I am glad that AMD won something big, and this sure is. With PC & console market in somewhat decline, this is something they can hang on for upcoming years.

My understanding was that nvidia weren't interested in producing either of the consoles chips so "win" is a bit of a strong word.

 

[Exophase]

My understanding was that nvidia weren't interested in producing either of the consoles chips so "win" is a bit of a strong word.

It's easy to say they weren't interested after the fact. It might have meant something if they claimed it openly years ago.

It's especially bizarre that they'd say there's no money in consoles after strongly stating how much engineering effort they put into Shield. Which isn't going to net nearly as much as a real console win.

 

[Idontcare]

My understanding was that nvidia weren't interested in producing either of the consoles chips so "win" is a bit of a strong word.

It's easy to say they weren't interested after the fact. It might have meant something if they claimed it openly years ago.

It's especially bizarre that they'd say there's no money in consoles after strongly stating how much engineering effort they put into Shield. Which isn't going to net nearly as much as a real console win.

Puppies04, think about it, if Nvidia's dismissal of the console market truly made financial sense then why aren't they equally dismissive of putting their GPU's into box that has an ASP equal or lesser than that of a console?

As a semiconductor manufacturer, if you can't put your IC into a box that retails for $400 and still make money then that means you can't put your chip into any box that retails for $400 and expect to make money.

I think the reality of the matter is that Nvidia was simply never even a contender in this generation of consoles because they could not field an x86-based SoC and the console makers made it clear they needed an x86-based SoC to sate the game developers.

Consider the timeframe for when the negotiation for the CPU that would eventually go into the PS4 and XBOX720 were being held, and then consider the timeframe for when Nvidia was all hot and heavy about suing Intel in an attempt to leverage themselves into getting an x86 license as part of a settlement deal. :hmm:

Nvidia knew they were not a contender at that moment, which is the same timeframe when they would have decided to internally greenlight the shield project.

 

[Rezist]

Puppies04, think about it, if Nvidia's dismissal of the console market truly made financial sense then why aren't they equally dismissive of putting their GPU's into box that has an ASP equal or lesser than that of a console?

As a semiconductor manufacturer, if you can't put your IC into a box that retails for $400 and still make money then that means you can't put your chip into any box that retails for $400 and expect to make money.

I think the reality of the matter is that Nvidia was simply never even a contender in this generation of consoles because they could not field an x86-based SoC and the console makers made it clear they needed an x86-based SoC to sate the game developers.

Consider the timeframe for when the negotiation for the CPU that would eventually go into the PS4 and XBOX720 were being held, and then consider the timeframe for when Nvidia was all hot and heavy about suing Intel in an attempt to leverage themselves into getting an x86 license as part of a settlement deal. :hmm:

Nvidia knew they were not a contender at that moment, which is the same timeframe when they would have decided to internally greenlight the shield project.

Exactly, in fact there is no one who could offer the combo that AMD could.
Also weather or not Qualcomm or nVidia get the next round of consoles is pretty much out of there hands and up to ARM cpu designers. If they can't field something that gamers will see as an upgrade they won't sell it.

I'm wondering about the chip contract I mean AMD probably knew they were the only game in town and Sony/MS knew AMD is desperate for money. Also if AMD did go bankrupt could these consoles still be made since the license is not transferable.

 

[Rezist]

Nvidia had their GPU in PS3 because that console was ridiculous expensive. Plus the only competitor was Xbox. Meaning better margins and more sales.

Nvidia said they didn`t want to be part of the upcoming consoles because there isn`t much money to be made. That may have been an over exaggeration from their part to cover up that they lost Sony and Microsoft to AMD, but there is some very true parts about it.

Not only will BOTH Xbox and PS4 sell for a small retail price this time around, but they will also be competiting against Valve`s Steambox which is VERY alike Xbox/PS4 since they are all pure x86 consoles now. And since its x86, most games will be made to both consoles and PC since game developers see a great chance of reducing the developer costs. Meaning people will discuss wether they really want console or PC since they both share 95% of the games on the market. Combine this with Nintendo which also include games like Resident Evil, Assassin Creed etc. That was not the case with PS3 and Xbox 360 since Nintendo was mostly Mario and children games.

Long story short:
Cheaper consoles than previous generation, much fiercer competition from both PC and additional console makers, much more multi plat games = Less margin for profit = Not so lucrative anymore.

PS3's most expensive component was the BR drive then cell processor. They sold the IP for the gpu to sony not the chips themselves. Here AMD has to be selling the chips direct since Sony and MS can't be licensed to build x86 processors.

 

[sontin]

It's especially bizarre that they'd say there's no money in consoles after strongly stating how much engineering effort they put into Shield. Which isn't going to net nearly as much as a real console win.

There would never be a Project Shield if nVidia had no Tegra chip.

nVidia said that they needed to develop a new design from zero which only would into the console. The last time they did this they got the chipset for the desktop market.

 

[mrmt]

$238m is enough to sustain Via...to create the products that Via creates and sells.

The 238 million number should be treated as revenue, not profits. Applying a 40% gross margin, a sizable margin for embedded business, makes 96 million per year, or 24 million per quarter in gross profits. In other words, peanuts. And remember that the unit cost will drop with the time.

 

[vampirr]

The 238 million number should be treated as revenue, not profits. Applying a 40% gross margin, a sizable margin for embedded business, makes 96 million per year, or 24 million per quarter in gross profits. In other words, peanuts. And remember that the unit cost will drop with the time.

You are an idiot, that is for Q4 of 2013. Not whole year, facepalm

 

[mrmt]

You are an idiot, that is for Q4 of 2013. Not whole year, facepalm

Yeah, I'm an idiot. Happy now?