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[xbitlabs] AMD Will Receive $60 - $100 for Every SoC for Next-Gen Game Consoles - Financial Analysts. - Page 4

post #31 of 156
Quote:
Originally Posted by th3illusiveman View Post

Nvidia execs were doing damage contro. Do you really think they would say "Oh, well it was an awesome opportunity to make alot of money but unfortunately we couldn't get it"? Of course they would downplay it. AMD would not do this if there was no benefit in it for them, especially in their current financial situation.

so profit margins aren't slim? Source? Also, Nvidia can only offer a GPU, so for them, it IS slim. Luckily for AMD and for us, the APU can give us great performance at an affordable cost. The less MS/Sony has to pay for the hardware, the more they can devote on supporting it.

So with Nvidia's position in mind, GPU wise, they profit margins might actually be slim. Look at my above post. What Nvidia made in 5 years with the PS3, they made in nearly a month on the original xbox. Pretty bad difference.
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post #32 of 156
Quote:
Originally Posted by Booty Warrior View Post

Yup. If what Nvidia's execs said is true, the actual profit margins on these will be extremely slim.
Profit to any degree is profit and if it gets people talking about AMD it might lead to a bigger pay off down the road.
    
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post #33 of 156
Quote:
Originally Posted by Bennny View Post

AMD is not stupid, it is after all a business with the aim of making money. I don't think they are as daft as some people think and are probably much better at making financial decisions than the majority of people here.

The purpose of a corporation is to increase it's stock value. AMD could be selling at a loss now but in the long-term allow APU and HSA to gain traction to profit later. Just saying...


Odds are AMD is not losing money though... BUT you have to consider economic cost. AMD has fab orders producing these chips instead of orders of higher margin consumer and server chips. If the 3rd party fabs are maxed out, then they would be paying an economic cost now.

Lots of possibilities... without more data, we can only guess for now.
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post #34 of 156
I really dont think that AMD is taking a loss on these unless they dont sell. If for some reason these consoles dont break 50millioin units sold all together....then there is a problem for AMD. But I really dont see this as a bad thing. First off, if this was a guaranteed loss of money for anyone who produces the part, why would NVIDIA and INTEL apply for the job? I dont see how AMD is hurt by this contract at all. The only way to make money is to sell product. Also seeing that there is NO competition for AMD in this market is a huge bonus. If PS4 went with another manufacturer, then you could definitely argue that AMD could lose a ton of money. But instead they will be selling upto 150million chips in the next 5-7 years...that's a pretty steady income...it's not going to pay all the bills, but it's income....my bet is with profit attached, especially after a couple years.
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post #35 of 156
Quote:
Originally Posted by lacrossewacker View Post

Not that I know anything of these business transactions, but why should MS/Sony pay AMD to develop something that they're going to have to pay for again?
That's like paying a painter to paint, then buying the painting afterwards?

That's not how it works.

If you buy an off the shelf item then all the overheads, including R&D, are factored into the price you pay.

If you buy a custom solution, which this is, then the customer will pay for the design and fabrication stages. This happens in engineering all the time - you provide the bid for free but any detailed design is charged to the customer. The overheads and long term R&D is incorporated in that price too.


Also any competent artist will incorporate the cost of materials into the commission.
Edited by GingerJohn - 5/30/13 at 7:49am
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post #36 of 156
Quote:
Originally Posted by lacrossewacker View Post

so profit margins aren't slim? Source? Also, Nvidia can only offer a GPU, so for them, it IS slim. Luckily for AMD and for us, the APU can give us great performance at an affordable cost. The less MS/Sony has to pay for the hardware, the more they can devote on supporting it.

So with Nvidia's position in mind, GPU wise, they profit margins might actually be slim. Look at my above post. What Nvidia made in 5 years with the PS3, they made in nearly a month on the original xbox.
Pretty bad difference.

Different situations. Nvidia made and owned the Xbox GPU design and parts, and sold the parts to Microsoft, just like AMD is doing now. They got paid for R&D, they got paid for manufacturing those chips. It was their propietary IP, you want to purchase an entire IP and own their entire rights, the price goes up real high. Or you can license

Nvidia licensed the complete PS3 graphics chip package to Sony, retaining a small royalty fee, just like when you license something. Nvidia got paid for R&D, for licensing the product first time+royalty fee and for helping Sony to make their fabs capable of manufacturing those chips, but they didn't get paid for manufacturing it. They did a one-time huge fee and subsequent tiny fees for being the creators of that specification.

This situation has more in common with the first case than with the second.
Edited by Nonehxc - 5/30/13 at 7:55am
    
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post #37 of 156
Quote:
Originally Posted by DuckieHo View Post

Quote:
Originally Posted by Bennny View Post

AMD is not stupid, it is after all a business with the aim of making money. I don't think they are as daft as some people think and are probably much better at making financial decisions than the majority of people here.

The purpose of a corporation is to increase it's stock value. AMD could be selling at a loss now but in the long-term allow APU and HSA to gain traction to profit later. Just saying...


Odds are AMD is not losing money though... BUT you have to consider economic cost. AMD has fab orders producing these chips instead of orders of higher margin consumer and server chips. If the 3rd party fabs are maxed out, then they would be paying an economic cost now.

Lots of possibilities... without more data, we can only guess for now.

Always the voice of reason. thumb.gif
 
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post #38 of 156

Even if they only make 1$ profit from the chip, these helps them in the long, mainly PC ports since both consoles will be using AMD, the ports will be probably smoother on AMD hardware rather then Nvidia, so even if the profit margin is low its a win win situation.

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post #39 of 156
Quote:
Originally Posted by ejb222 View Post

I really dont think that AMD is taking a loss on these unless they dont sell. If for some reason these consoles dont break 50millioin units sold all together....then there is a problem for AMD. But I really dont see this as a bad thing. First off, if this was a guaranteed loss of money for anyone who produces the part, why would NVIDIA and INTEL apply for the job? I dont see how AMD is hurt by this contract at all. The only way to make money is to sell product. Also seeing that there is NO competition for AMD in this market is a huge bonus. If PS4 went with another manufacturer, then you could definitely argue that AMD could lose a ton of money. But instead they will be selling upto 150million chips in the next 5-7 years...that's a pretty steady income...it's not going to pay all the bills, but it's income....my bet is with profit attached, especially after a couple years.
You are not considering in "economic costs". To produce APUs for MS/Sony, they have to shift staff, resources, and maybe supply from their other divisions.
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post #40 of 156
Quote:
Originally Posted by Deacon View Post

Even if they only make 1$ profit from the chip, these helps them in the long, mainly PC ports since both consoles will be using AMD, the ports will be probably smoother on AMD hardware rather then Nvidia, so even if the profit margin is low its a win win situation.

I agree. This could just be part of a bigger long-term investment for AMD, it's likely MS and SONY would want to stick with an x86 APU in the future for backwards compatibility.
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