The Xbox 360 and Playstation 3 had unusually long life-cycles of seven and eight years before the launch of their successors, the Xbox One and PS4. AMD hardware provides the processing and graphical powerful for both new machines along with Nintendo’s Wii U. Devinder Kumar, Senior Vice President and Chief Financial Officer of AMD, said in a conference discussion Tuesday that he expects the time to the next-generation of consoles will be shorter.
[T]he life cycle of the products are probably going to be shorter,” Kumar said of the current generation of consoles during a Q&A session at the Bank of America Merrill Lynch Global Technology Conference. “Our customers are already thinking about what comes next.”
“These are long life cycle products and as you know in the semi-custom space,” Kumar continued. “Three years before you introduce a product, a decision is made to use a particular company. In this case it was AMD. And then you go ahead and co-develop the product with the funding dollars frankly, mostly coming from our customers. And then when you introduce the product, there is really no expenses from R&D standpoint, no sales and marketing dollars and whatever dollars you generate from a gross margin dollar standpoint, falls to the bottom-line and that’s what excites us.”
AMD has gone all in on the semi-custom design business such as what was created for the PS4 and Xbox One. Kumar is confident that the manufacturer will have one or two more design wins to announce later this year but it’s not hard to mistake the revenue from the current console business.
Both the PS4 and Xbox One use AMD APUs that contains both the CPU and graphics processor on the chip. Between them, more than 12 million consoles have been sold through April 2014. It also produces the GPU in the Wii U which has sold approximately 6 million units worldwide since its launch in November 2012.
The good news from a consumer standpoint is that Kumar appears to be confirming that Sony, Microsoft and Nintendo are all working on their next-gen consoles despite proclamations that this may be the last dedicated console generation. Additionally, all three were designed to be as profitable as possible as quickly as possible. Indeed, Sony has said it already is generating a profit on each PS4 sold.
Part of the reason that the PS3 and Xbox 360 lasted so long was due to their manufacturing costs and the need to scrimp out every bit of revenue it could with those consoles. If the costs on the PS4 and Xbox One drop at a more reasonable rate, then both companies will be able to introduce their next generation consoles in the more usual five year timeframe.
The real question though is if AMD will win that contract again and will consumers see any benefit of backwards compatibility as a result.
AMD quotes via Seeking Alpha