How losing Sony's PlayStation 6 deal to AMD may have dealt another ‘big blow' to Intel

Intel lost out on a contract to design and manufacture the chip for Sony's upcoming PlayStation 6 console in 2022, dealing a significant setback to its fledgling contract manufacturing business, Reuters reported, citing three sources familiar with the matter.

The contract, which could have generated approximately $30 billion in revenue for Intel, was awarded to rival Advanced Micro Devices (AMD) after a competitive bidding process that eliminated other contenders such as Broadcom, according to the sources.

Intel and AMD were the final two contenders for the lucrative deal, which would have involved designing the chip for the forthcoming PlayStation 6 and using Taiwan Semiconductor Manufacturing Co (TSMC) as the contract manufacturer. The business would have amounted to fabricating thousands of silicon wafers a month, two sources told Reuters.

The loss represents a missed opportunity for Intel CEO Pat Gelsinger's turnaround plan, which centred on creating a foundry unit. Gelsinger announced plans for Intel's contract manufacturing effort in 2021 and formally launched it in February 2024.

According to Reuters, the deal fell through due to disagreements over profit margins, despite months of negotiations that included meetings between the CEOs, executives, and dozens of engineers from both companies.

Sources said winning the PlayStation 6 chip contract would have provided Intel with a steady stream of business, potentially occupying its foundry unit for over five years. The deal could have also helped attract other major clients to Intel's advanced 18A manufacturing process.

The setback comes at a challenging time for Intel, which recently announced plans to cut 15% of its workforce and reduce capital spending on factory expansion. The company reported $7 billion in operating losses for its manufacturing businesses in the first quarter of this year.

Sony has not yet officially announced the PlayStation 6. The company recently unveiled the PlayStation 5 Pro and reported sales of 20.8 million first-generation PlayStation 5 systems in fiscal 2023.

Typically, Sony consoles sell more than 100 million units across half a decade. The PlayStation 2, launched in 2000, sold approximately 150 million units over its lifetime.

Intel, Sony, and Broadcom did not respond to requests for comment, while AMD declined to comment, Reuters reported.