Why AMD has a strong hold in the game console market
Key takeaways for investors from AMD’s 3Q14 earnings review (Part 8 of 11)
AMD is poised to take advantage of market growth in embedded solutions
AMD (AMD), with its mix of CPU (central processing unit) and GPU (graphics processing unit) capabilities, is well-suited to take advantage of market growth in embedded solutions. Analysts expect discrete CPUs and GPUs to have a larger footprint in the future. Simple system on chips (or SoCs) can’t leverage GPU’s like AMD does with its Heterogeneous System Architecture (or HSA).
HSA (Heterogeneous System Architecture) extensions allow CPU and GPU to share a unified memory space, among other hybrid computing features. These unique features and capabilities make AMD’s products favorable for the embedded market. According to VDC research, embedded systems is a $9 billion market. Recent design wins by AMD in gaming consoles suggests that custom SoCs is a lucrative market. In this segment, AMD has sticky deals with game console manufacturers, Sony (SNE) and Microsoft (MSFT).
AMD is in a strong position in terms of graphics and pricing
Intel’s (INTC) 14nm products are suited to meet graphic market needs. However, 14nm parts are quite expensive for relatively less compute-intensive embedded systems. Business with Sony’s PlayStation and Microsoft Xbox is highly competitive and low-margin, so 14 nm products are a bit overpriced for them.
Intel 14nm Core M graphic capabilities are similar to AMD’s 28nm. Core M delivers ~47% better graphics when compared to its 22nm parts. AMD’s 28nm performs ~50% better in graphics in comparison to its peer Intel 22nm. Thus, Core M roughly matches AMD’s 28nm graphics capabilities. It does not seem feasible for console OEM’s (original equipment manufacturers) to pay more for Intel when they can get the same graphic capabilities with AMD at a much cheaper price.
AMD possesses better expertise on CPU compared to its peers
Nvidia (NVDA) is a leading player in the graphics market. The above chart shows the comparison of computing benchmarks of AMD and Nvidia discrete graphics cards. As the above chart shows, AMD’S CPU and GPU fare better than Nvidia. Thus, AMD’s graphics capabilities along with lower prices and better compute capabilities in comparison to its peers make AMD’s products a good solution for the game console markets.
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