Advanced Micro Devices recently started to design its third semi-custom accelerated processing unit for an undisclosed customer. Some believe that this third semi-custom system-on-chip will eventually power Nintendo’s next-generation game console code-named “NX”. However, AMD claims that the new SoC “expands the base” of its semi-custom business beyond gaming, which means that the APU is not developed with a game console in mind.
“We have started a new design this quarter that we believe expands our base for the semi-custom business and we are very pleased with that,” said Lisa Su, chief executive officer of Advanced Micro Devices, during the company’s earnings conference call with investors and financial analysts. “The base semi-custom business is around the game consoles.”
AMD announced two new semi-custom SoC design wins back in October, 2014. Both chips will integrate AMD Radeon graphics, one will be based on ARM architecture, another one will feature x86 general-purpose cores. One of the APUs is projected to power a “beyond gaming device”. Details about another have never been disclosed, but it is possible that it is a SoC for a gaming device. The two semi-custom system-on-chips are projected to bring the company combined total lifetime revenue of approximately $1 billion over approximately three years starting 2016.
Considering relatively short amount of time between the start of development and actual revenue shipments of AMD's third semi-custom design, it looks like the system-on-chip will not be something very complex. According to comments made by AMD around two years ago, it took it less than 24 months to design, build and tune system-on-chip for Sony PlayStation 4. However, it took years to determine requirements for the SoC as well as its architecture.
The third semi-custom design is expected to bring the first revenue to AMD in the second half of 2016. AMD expects that the addition of this APU will help the company to further grow its semi-custom business.
“I think we will still see 2016 to be a fairly solid year for the traditional, let's call it game console business, overall,” said Ms. Su. “Then as we layer on top of it some of the new wins, I think that does give us potential to grow in the second half of the year. Obviously, there is a lot to happen between now and then, but I do see semi-custom as a growth driver for us going forward.”
So far, AMD has received around $3 billion in revenue for its semi-custom SoCs that power Microsoft Xbox One and Sony PlayStation 4. The two consoles have been in production for about two years now.
While semi-custom chip business is stable and predictable, something that is important for AMD, which has not been very successful on its traditional PC and server markets in the recent years, it is not very profitable. AMD admitted last year that its console SoCs are sold with 15 – 20 per cent margin, which is considerably below typical margins for fabless semiconductor companies in general and AMD in particular.
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KitGuru Says: In fact, even combined total lifetime revenue of approximately $1 billion over approximately three years for two chips indicate that both products are rather basic and inexpensive. It is unlikely that they will power devices that are sold in very high volumes (i.e., tens of millions of units).