They didn't just win the XBox and PS contracts. They won a 3rd major contract as well that has not been announced. The announcement of the XBox One and PS4 saw AMDs stocks climb from $2.48 to $4.00. Their income increased by $200 million in 2014 during the wider release of the products. As far as sales are concerned, Do you think people want to buy a console from 2013 in 2016? Sales decrease over time. AMD has probably sold every chip used in the PS4 and XBox One in 2014. Getting another contract means another production run that may include die shrunk versions. Long term winning the console market means dedicated game developer support without investment. Right now nVidia needs to invest in developers, AMD does not simply because the developer has to work with their system.
Yes that much is true. But if you also look the stock rose at the announcement of the xbox one/ps4 contracts but when the products launched the stock had already dropped to 3.27 did a raise to 4.00 and stayed that way until August then suddenly dropped to 2.68 by October. So relying on the renewal of these contracts we have probably already seen most of the boost they are going to give us. In other words they desperately need another huge market that will boost their sales figures otherwise we have seen the increase and won't see much more.
What they just did last week with the shares shows us they needed a lot of money for something. When you look it is over 500mil that they gained for the purpose of development. They are also expecting a huge quarter and that will help a lot.
They didn't just win the XBox and PS contracts. They won a 3rd major contract as well that has not been announced. The announcement of the XBox One and PS4 saw AMDs stocks climb from $2.48 to $4.00. Their income increased by $200 million in 2014 during the wider release of the products. As far as sales are concerned, Do you think people want to buy a console from 2013 in 2016? Sales decrease over time. AMD has probably sold every chip used in the PS4 and XBox One in 2014. Getting another contract means another production run that may include die shrunk versions. Long term winning the console market means dedicated game developer support without investment. Right now nVidia needs to invest in developers, AMD does not simply because the developer has to work with their system.
They didn't just win the XBox and PS contracts. They won a 3rd major contract as well that has not been announced. The announcement of the XBox One and PS4 saw AMDs stocks climb from $2.48 to $4.00. Their income increased by $200 million in 2014 during the wider release of the products. As far as sales are concerned, Do you think people want to buy a console from 2013 in 2016? Sales decrease over time. AMD has probably sold every chip used in the PS4 and XBox One in 2014. Getting another contract means another production run that may include die shrunk versions. Long term winning the console market means dedicated game developer support without investment. Right now nVidia needs to invest in developers, AMD does not simply because the developer has to work with their system.
That means about $9.50 total per console, CPU and GPU included. Is that $200M net or gross?
I would imagine these APUs are probably going for pretty low cost, since they are direct to manufacturer sale on volume contract. Probably a bit more than $9.50, but I wouldn't be surprised if it's somewhere in the $20-30 range per APU.
AMD won't be able to credit the full contract award on their balance sheet. Typically, a term contract like this will have the provider guaranteeing to provide the SKU for a set number of years at a set price structure (there may be some escalation or de-escalation in that price over time, depending on the terms). In return, the purchaser guarantees to buy some minimum volume of the SKU. The SKUs then get billed as any inventory would - per shipment, and that's how it would show up on AMD's revenue sheet for the APUs for consoles. Often, there is an up-front deposit or development fee (usually to cover things like assembly line setup or fab/development costs, or whatever), and it wouldn't surprise me at all if that is where any sudden $200M line item came from.
They didn't just win the XBox and PS contracts. They won a 3rd major contract as well that has not been announced. The announcement of the XBox One and PS4 saw AMDs stocks climb from $2.48 to $4.00. Their income increased by $200 million in 2014 during the wider release of the products. As far as sales are concerned, Do you think people want to buy a console from 2013 in 2016? Sales decrease over time. AMD has probably sold every chip used in the PS4 and XBox One in 2014. Getting another contract means another production run that may include die shrunk versions. Long term winning the console market means dedicated game developer support without investment. Right now nVidia needs to invest in developers, AMD does not simply because the developer has to work with their system.
That means about $9.50 total per console, CPU and GPU included. Is that $200M net or gross?
I would imagine these APUs are probably going for pretty low cost, since they are direct to manufacturer sale on volume contract. Probably a bit more than $9.50, but I wouldn't be surprised if it's somewhere in the $20-30 range per APU.
AMD won't be able to credit the full contract award on their balance sheet. Typically, a term contract like this will have the provider guaranteeing to provide the SKU for a set number of years at a set price structure (there may be some escalation or de-escalation in that price over time, depending on the terms). In return, the purchaser guarantees to buy some minimum volume of the SKU. The SKUs then get billed as any inventory would - per shipment, and that's how it would show up on AMD's revenue sheet for the APUs for consoles. Often, there is an up-front deposit or development fee (usually to cover things like assembly line setup or fab/development costs, or whatever), and it wouldn't surprise me at all if that is where any sudden $200M line item came from.
AMD's chip was estimated to cost about 100$ per console when XBox One and PS4 were launched:
But just where did Cleffy get that $200 million from? If you're just comparing 2014 and 2013 to each other, then you have to remember that both XBox One and PS 4 launched already in 2013, and their sales for Q4 2013 were more than their sales in Q1 2014 and Q2 2014 combined.
They didn't just win the XBox and PS contracts. They won a 3rd major contract as well that has not been announced. The announcement of the XBox One and PS4 saw AMDs stocks climb from $2.48 to $4.00. Their income increased by $200 million in 2014 during the wider release of the products. As far as sales are concerned, Do you think people want to buy a console from 2013 in 2016? Sales decrease over time. AMD has probably sold every chip used in the PS4 and XBox One in 2014. Getting another contract means another production run that may include die shrunk versions. Long term winning the console market means dedicated game developer support without investment. Right now nVidia needs to invest in developers, AMD does not simply because the developer has to work with their system.
That means about $9.50 total per console, CPU and GPU included. Is that $200M net or gross?
I would imagine these APUs are probably going for pretty low cost, since they are direct to manufacturer sale on volume contract. Probably a bit more than $9.50, but I wouldn't be surprised if it's somewhere in the $20-30 range per APU.
AMD won't be able to credit the full contract award on their balance sheet. Typically, a term contract like this will have the provider guaranteeing to provide the SKU for a set number of years at a set price structure (there may be some escalation or de-escalation in that price over time, depending on the terms). In return, the purchaser guarantees to buy some minimum volume of the SKU. The SKUs then get billed as any inventory would - per shipment, and that's how it would show up on AMD's revenue sheet for the APUs for consoles. Often, there is an up-front deposit or development fee (usually to cover things like assembly line setup or fab/development costs, or whatever), and it wouldn't surprise me at all if that is where any sudden $200M line item came from.
They didn't just win the XBox and PS contracts. They won a 3rd major contract as well that has not been announced. The announcement of the XBox One and PS4 saw AMDs stocks climb from $2.48 to $4.00. Their income increased by $200 million in 2014 during the wider release of the products. As far as sales are concerned, Do you think people want to buy a console from 2013 in 2016? Sales decrease over time. AMD has probably sold every chip used in the PS4 and XBox One in 2014. Getting another contract means another production run that may include die shrunk versions. Long term winning the console market means dedicated game developer support without investment. Right now nVidia needs to invest in developers, AMD does not simply because the developer has to work with their system.
That means about $9.50 total per console, CPU and GPU included. Is that $200M net or gross?
I would imagine these APUs are probably going for pretty low cost, since they are direct to manufacturer sale on volume contract. Probably a bit more than $9.50, but I wouldn't be surprised if it's somewhere in the $20-30 range per APU.
AMD won't be able to credit the full contract award on their balance sheet. Typically, a term contract like this will have the provider guaranteeing to provide the SKU for a set number of years at a set price structure (there may be some escalation or de-escalation in that price over time, depending on the terms). In return, the purchaser guarantees to buy some minimum volume of the SKU. The SKUs then get billed as any inventory would - per shipment, and that's how it would show up on AMD's revenue sheet for the APUs for consoles. Often, there is an up-front deposit or development fee (usually to cover things like assembly line setup or fab/development costs, or whatever), and it wouldn't surprise me at all if that is where any sudden $200M line item came from.
AMD's chip was estimated to cost about 100$ per console when XBox One and PS4 were launched:
But just where did Cleffy get that $200 million from? If you're just comparing 2014 and 2013 to each other, then you have to remember that both XBox One and PS 4 launched already in 2013, and their sales for Q4 2013 were more than their sales in Q1 2014 and Q2 2014 combined.
Not sure where they got their $90-110 number for the CPU. If it were a retail APU, yeah, that sounds about right. But this isn't a retail contract.
They didn't just win the XBox and PS contracts. They won a 3rd major contract as well that has not been announced. The announcement of the XBox One and PS4 saw AMDs stocks climb from $2.48 to $4.00. Their income increased by $200 million in 2014 during the wider release of the products. As far as sales are concerned, Do you think people want to buy a console from 2013 in 2016? Sales decrease over time. AMD has probably sold every chip used in the PS4 and XBox One in 2014. Getting another contract means another production run that may include die shrunk versions. Long term winning the console market means dedicated game developer support without investment. Right now nVidia needs to invest in developers, AMD does not simply because the developer has to work with their system.
That means about $9.50 total per console, CPU and GPU included. Is that $200M net or gross?
I would imagine these APUs are probably going for pretty low cost, since they are direct to manufacturer sale on volume contract. Probably a bit more than $9.50, but I wouldn't be surprised if it's somewhere in the $20-30 range per APU.
AMD won't be able to credit the full contract award on their balance sheet. Typically, a term contract like this will have the provider guaranteeing to provide the SKU for a set number of years at a set price structure (there may be some escalation or de-escalation in that price over time, depending on the terms). In return, the purchaser guarantees to buy some minimum volume of the SKU. The SKUs then get billed as any inventory would - per shipment, and that's how it would show up on AMD's revenue sheet for the APUs for consoles. Often, there is an up-front deposit or development fee (usually to cover things like assembly line setup or fab/development costs, or whatever), and it wouldn't surprise me at all if that is where any sudden $200M line item came from.
What would you suspect the margins to be?
Give me an educated guess
Well, I have no idea. Margins vary widely based on the industry and contract. I doubt AMD is selling these things at a loss, even early in the contract (although it wouldn't be unusual for a contract of this type to sell for a loss early on, and make up for it in volume and later efficiency improvements).
They didn't just win the XBox and PS contracts. They won a 3rd major contract as well that has not been announced. The announcement of the XBox One and PS4 saw AMDs stocks climb from $2.48 to $4.00. Their income increased by $200 million in 2014 during the wider release of the products. As far as sales are concerned, Do you think people want to buy a console from 2013 in 2016? Sales decrease over time. AMD has probably sold every chip used in the PS4 and XBox One in 2014. Getting another contract means another production run that may include die shrunk versions. Long term winning the console market means dedicated game developer support without investment. Right now nVidia needs to invest in developers, AMD does not simply because the developer has to work with their system.
That means about $9.50 total per console, CPU and GPU included. Is that $200M net or gross?
I would imagine these APUs are probably going for pretty low cost, since they are direct to manufacturer sale on volume contract. Probably a bit more than $9.50, but I wouldn't be surprised if it's somewhere in the $20-30 range per APU.
AMD won't be able to credit the full contract award on their balance sheet. Typically, a term contract like this will have the provider guaranteeing to provide the SKU for a set number of years at a set price structure (there may be some escalation or de-escalation in that price over time, depending on the terms). In return, the purchaser guarantees to buy some minimum volume of the SKU. The SKUs then get billed as any inventory would - per shipment, and that's how it would show up on AMD's revenue sheet for the APUs for consoles. Often, there is an up-front deposit or development fee (usually to cover things like assembly line setup or fab/development costs, or whatever), and it wouldn't surprise me at all if that is where any sudden $200M line item came from.
What would you suspect the margins to be?
Give me an educated guess
Well, I have no idea. Margins vary widely based on the industry and contract. I doubt AMD is selling these things at a loss, even early in the contract (although it wouldn't be unusual for a contract of this type to sell for a loss early on, and make up for it in volume and later efficiency improvements).
Full pledged cards (dGPUs) with P10 (RX470) on them sell as low as 190$ MSRP (there will be cheaper cards than that though)
Custom SoC with P10 and 8 CPU cores desnt cost 20-30$, that much i guarantee you. 100-150$ more likely.
Same goes for last gen (PS4/XBone) when they had ~HD7850 GPU on board. Naturally, as time passes things get cheaper to produce.
AMDs margins on GPUs and SoCs are much higher than CPUs, and average comes to ~31-32%
With the launch of their new GFX cards and some of their CPU,APU chips they are still having problems that will take a few years to recover. Basically they are indebt and have opened up to selling an extra 1 billion worth of the company to help pay it off. This does not necessarily mean its bad but it also doesn't imply anything good at all. Basically they are borrowing money to pay off debts. Its a cycle that every company wants to break at some point.
Many investors want to stay leveraged. It makes their ROI's look huge to their investors. As long as the terms of the debt financing aren't killing the company, there is no reason not to continue to debt finance your company. Many company owners refuse to sell equity to finance the company because it dilutes their own control of the company. Two much dilution and your next proxy vote will push you out of control. Its a common misconception that borrowing money is bad for your company. The fact is that debt financing is just another way, like equity financing, to make your company work. Its not like equity financing is free. AMD is not a new company and shareholders will be expecting dividends on all those shares they bought. Rather than paying dividends to equity holders, the owners of AMD are choosing to pay interest on loans while retaining control of the company. The fact that they are not defaulting on their credit revolvers and that their debt:EBIDTA ratios are low enough to allow them to continue borrowing money shows us that the company is financially sound.
With the launch of their new GFX cards and some of their CPU,APU chips they are still having problems that will take a few years to recover. Basically they are indebt and have opened up to selling an extra 1 billion worth of the company to help pay it off. This does not necessarily mean its bad but it also doesn't imply anything good at all. Basically they are borrowing money to pay off debts. Its a cycle that every company wants to break at some point.
Many investors want to stay leveraged. It makes their ROI's look huge to their investors. As long as the terms of the debt financing aren't killing the company, there is no reason not to continue to debt finance your company. Many company owners refuse to sell equity to finance the company because it dilutes their own control of the company. Two much dilution and your next proxy vote will push you out of control. Its a common misconception that borrowing money is bad for your company. The fact is that debt financing is just another way, like equity financing, to make your company work. Its not like equity financing is free. AMD is not a new company and shareholders will be expecting dividends on all those shares they bought. Rather than paying dividends to equity holders, the owners of AMD are choosing to pay interest on loans while retaining control of the company. The fact that they are not defaulting on their credit revolvers and that their debt:EBIDTA ratios are low enough to allow them to continue borrowing money shows us that the company is financially sound.
QTF - in our business, we often take out loans, even though we have the cash in the bank. The reason? We get a better return on our cash as investments than the interest is on the debt - so we make actually money by taking out loans versus paying out of pocket up front. The company I work for is privately held, and the list of owners is pretty exclusive, so they maintain very tight control over the direction of the company. We get very good loan rates, because we have the cash in the bank as collateral.
That, and what @Frammshamm said is absolutely true - a small reoccurring debt payment looks a lot better on a balance sheet than a huge lump sum out of pocket.
Stock price is only loosely based on the balance sheet anyway - stock price is a gut feeling for what Wall St thinks the company is worth and it's long term prospects. That doesn't always coincide with what the balance sheet, or press releases, say about a company.
They didn't just win the XBox and PS contracts. They won a 3rd major contract as well that has not been announced. The announcement of the XBox One and PS4 saw AMDs stocks climb from $2.48 to $4.00. Their income increased by $200 million in 2014 during the wider release of the products. As far as sales are concerned, Do you think people want to buy a console from 2013 in 2016? Sales decrease over time. AMD has probably sold every chip used in the PS4 and XBox One in 2014. Getting another contract means another production run that may include die shrunk versions. Long term winning the console market means dedicated game developer support without investment. Right now nVidia needs to invest in developers, AMD does not simply because the developer has to work with their system.
That means about $9.50 total per console, CPU and GPU included. Is that $200M net or gross?
I would imagine these APUs are probably going for pretty low cost, since they are direct to manufacturer sale on volume contract. Probably a bit more than $9.50, but I wouldn't be surprised if it's somewhere in the $20-30 range per APU.
AMD won't be able to credit the full contract award on their balance sheet. Typically, a term contract like this will have the provider guaranteeing to provide the SKU for a set number of years at a set price structure (there may be some escalation or de-escalation in that price over time, depending on the terms). In return, the purchaser guarantees to buy some minimum volume of the SKU. The SKUs then get billed as any inventory would - per shipment, and that's how it would show up on AMD's revenue sheet for the APUs for consoles. Often, there is an up-front deposit or development fee (usually to cover things like assembly line setup or fab/development costs, or whatever), and it wouldn't surprise me at all if that is where any sudden $200M line item came from.
AMD's chip was estimated to cost about 100$ per console when XBox One and PS4 were launched:
But just where did Cleffy get that $200 million from? If you're just comparing 2014 and 2013 to each other, then you have to remember that both XBox One and PS 4 launched already in 2013, and their sales for Q4 2013 were more than their sales in Q1 2014 and Q2 2014 combined.
Not sure where they got their $90-110 number for the CPU. If it were a retail APU, yeah, that sounds about right. But this isn't a retail contract.
A retail APU would cost much more than that. Cut out the CPU part and just the discrete GPU would cost much more than that. The nearest equivalent to the original PS4 is a Radeon HD 7850 that was something like $150 or $200 when the PS4 launched. Yes, Microsoft and Sony do get a volume discount as compared to what retail parts would cost, and the pricing is also earlier in the chain. But AMD is still making money on the parts.
The most expensive APU I see on Newegg right now is $149, with most listing at well under $100. That's retail. They may not line up perfectly with what is installed in any console right now, but the cost to manufacture for AMD won't be that dissimilar.
The 7850 may have cost that much at launch, but this isn't a discrete card with CPU, and this isn't 2012 any more.
Normally a manufacturer is lucky to get 30% of retail value for their products. That is if AMD actually makes the chips. Samsung currently makes some of their chips.
Normally a manufacturer is lucky to get 30% of retail value for their products. That is if AMD actually makes the chips. Samsung currently makes some of their chips.
A lot depends on what you regard as the retail product. I'd be surprised if Sony pays AMD at least 30% of the retail cost of a PS4 for the APU inside. But I'd be shocked if buying an Intel CPU off of New Egg means Intel gets less than 30% of the purchase price.
In discrete video cards, it's not just the GPU chip. There's also memory, power circuitry, a heatsink, a PCB, and a number of other pieces.
The most expensive APU I see on Newegg right now is $149, with most listing at well under $100. That's retail. They may not line up perfectly with what is installed in any console right now, but the cost to manufacture for AMD won't be that dissimilar.
The 7850 may have cost that much at launch, but this isn't a discrete card with CPU, and this isn't 2012 any more.
Lower end products do tend to be cheaper. One would expect larger, higher end APUs to be more expensive. There's no technical reason why AMD can't build a huge (say, 500 mm^2) APU, but there are sound practical reasons why they don't: they can't get enough memory bandwidth to feed it without doing outlandish things. The PS4 and Xbox One both do outlandish things to get enough bandwidth to the APU, of the sort that desktops and laptops are unwilling to do. But the PS4 and Xbox One probably have the two largest APUs that have ever been commercially available.
They didn't just win the XBox and PS contracts. They won a 3rd major contract as well that has not been announced. The announcement of the XBox One and PS4 saw AMDs stocks climb from $2.48 to $4.00. Their income increased by $200 million in 2014 during the wider release of the products. As far as sales are concerned, Do you think people want to buy a console from 2013 in 2016? Sales decrease over time. AMD has probably sold every chip used in the PS4 and XBox One in 2014. Getting another contract means another production run that may include die shrunk versions. Long term winning the console market means dedicated game developer support without investment. Right now nVidia needs to invest in developers, AMD does not simply because the developer has to work with their system.
That means about $9.50 total per console, CPU and GPU included. Is that $200M net or gross?
I would imagine these APUs are probably going for pretty low cost, since they are direct to manufacturer sale on volume contract. Probably a bit more than $9.50, but I wouldn't be surprised if it's somewhere in the $20-30 range per APU.
AMD won't be able to credit the full contract award on their balance sheet. Typically, a term contract like this will have the provider guaranteeing to provide the SKU for a set number of years at a set price structure (there may be some escalation or de-escalation in that price over time, depending on the terms). In return, the purchaser guarantees to buy some minimum volume of the SKU. The SKUs then get billed as any inventory would - per shipment, and that's how it would show up on AMD's revenue sheet for the APUs for consoles. Often, there is an up-front deposit or development fee (usually to cover things like assembly line setup or fab/development costs, or whatever), and it wouldn't surprise me at all if that is where any sudden $200M line item came from.
AMD's chip was estimated to cost about 100$ per console when XBox One and PS4 were launched:
Yes the article does clearly say they cost 100$ for the AMD chips. But when you compare that with total sales. 2014 they sold over 21 million consoles. Which would equate to AMD making over 2.1$ billion that year. And they pulled in 5.5 billion in that year. Which would mean that console market is a huge chunk of their total sales.
They didn't just win the XBox and PS contracts. They won a 3rd major contract as well that has not been announced. The announcement of the XBox One and PS4 saw AMDs stocks climb from $2.48 to $4.00. Their income increased by $200 million in 2014 during the wider release of the products. As far as sales are concerned, Do you think people want to buy a console from 2013 in 2016? Sales decrease over time. AMD has probably sold every chip used in the PS4 and XBox One in 2014. Getting another contract means another production run that may include die shrunk versions. Long term winning the console market means dedicated game developer support without investment. Right now nVidia needs to invest in developers, AMD does not simply because the developer has to work with their system.
That means about $9.50 total per console, CPU and GPU included. Is that $200M net or gross?
I would imagine these APUs are probably going for pretty low cost, since they are direct to manufacturer sale on volume contract. Probably a bit more than $9.50, but I wouldn't be surprised if it's somewhere in the $20-30 range per APU.
AMD won't be able to credit the full contract award on their balance sheet. Typically, a term contract like this will have the provider guaranteeing to provide the SKU for a set number of years at a set price structure (there may be some escalation or de-escalation in that price over time, depending on the terms). In return, the purchaser guarantees to buy some minimum volume of the SKU. The SKUs then get billed as any inventory would - per shipment, and that's how it would show up on AMD's revenue sheet for the APUs for consoles. Often, there is an up-front deposit or development fee (usually to cover things like assembly line setup or fab/development costs, or whatever), and it wouldn't surprise me at all if that is where any sudden $200M line item came from.
AMD's chip was estimated to cost about 100$ per console when XBox One and PS4 were launched:
Yes the article does clearly say they cost 100$ for the AMD chips. But when you compare that with total sales. 2014 they sold over 21 million consoles. Which would equate to AMD making over 2.1$ billion that year. And they pulled in 5.5 billion in that year. Which would mean that console market is a huge chunk of their total sales.
I don't recall the source, but I do recall somewhere seeing it asserted that consoles accounted for about 20% of AMD's revenue, and they get about a 10%-20% profit margin on each console chip they sell.
The most expensive APU I see on Newegg right now is $149, with most listing at well under $100. That's retail. They may not line up perfectly with what is installed in any console right now, but the cost to manufacture for AMD won't be that dissimilar.
The 7850 may have cost that much at launch, but this isn't a discrete card with CPU, and this isn't 2012 any more.
Lower end products do tend to be cheaper. One would expect larger, higher end APUs to be more expensive. There's no technical reason why AMD can't build a huge (say, 500 mm^2) APU, but there are sound practical reasons why they don't: they can't get enough memory bandwidth to feed it without doing outlandish things. The PS4 and Xbox One both do outlandish things to get enough bandwidth to the APU, of the sort that desktops and laptops are unwilling to do. But the PS4 and Xbox One probably have the two largest APUs that have ever been commercially available.
Well, the A10-78xx is a 245mm2 die, the APU in the PS4 is 228mm2. Retail price on the A10 is $149 for the high bin, and $109 for the low bin. That's in a box, with a heat sink.
Probably doesn't cost that much different to make them. Maybe it is $100 to Sony, which would be a $85-90 production cost. I have a feeling it's a lot lower than that though, because retail margins also include retailer markup, among other things, and product costs on a similar process node (both are 28nm) aren't going to be that different. Sure there will be some R&D differences on the Jaguar vs Godavari CPU cores, as well as 8 vs 20 GCN cores, but we aren't really talking R&D anymore, we are just looking at production costs.
But I got nothing to back me up, just that having a single component in a process make up 1/3 of the total cost seems outlandish. Even when it is an APU. And especially when it's locked up on a long term exclusivity contract. Everything I do with contracts tells me that Sony and Microsoft are not paying $100/APU for their consoles right now.
In 2014 AMD console sales are up and CPU/GPU sales are down. Put into context, AMD at this point was selling 3 year old CPUs as their top range model, they have been stuck on the same GPU process node for years, and the bulk of their sales were in low end APUs. If you look at 2015 when console sales dropped, they were down to $3 billion in revenue. It makes sense they had an uptick in sales in 2013 and 2014 from consoles that hid their shrinking revenue from the desktop sector. AMD will be going into 2017 with both those console contracts renewed, a new CPU architecture, a new GPU process node, a lead in gaming performance on modern titles, and a new console contract that has not been revealed. So to say it will be shrinking year for AMD is a bit weird. I would expect their revenue to hit at least $4 billion in 2017 which will be a climb from their 2016 numbers. AMD is also reaching a point when all their investments are coming to fruition. Most of the losses they incurred over the last 5 years have been due to the investments they have been making towards the future.
They didn't just win the XBox and PS contracts. They won a 3rd major contract as well that has not been announced. The announcement of the XBox One and PS4 saw AMDs stocks climb from $2.48 to $4.00. Their income increased by $200 million in 2014 during the wider release of the products. As far as sales are concerned, Do you think people want to buy a console from 2013 in 2016? Sales decrease over time. AMD has probably sold every chip used in the PS4 and XBox One in 2014. Getting another contract means another production run that may include die shrunk versions. Long term winning the console market means dedicated game developer support without investment. Right now nVidia needs to invest in developers, AMD does not simply because the developer has to work with their system.
That means about $9.50 total per console, CPU and GPU included. Is that $200M net or gross?
I would imagine these APUs are probably going for pretty low cost, since they are direct to manufacturer sale on volume contract. Probably a bit more than $9.50, but I wouldn't be surprised if it's somewhere in the $20-30 range per APU.
AMD won't be able to credit the full contract award on their balance sheet. Typically, a term contract like this will have the provider guaranteeing to provide the SKU for a set number of years at a set price structure (there may be some escalation or de-escalation in that price over time, depending on the terms). In return, the purchaser guarantees to buy some minimum volume of the SKU. The SKUs then get billed as any inventory would - per shipment, and that's how it would show up on AMD's revenue sheet for the APUs for consoles. Often, there is an up-front deposit or development fee (usually to cover things like assembly line setup or fab/development costs, or whatever), and it wouldn't surprise me at all if that is where any sudden $200M line item came from.
AMD's chip was estimated to cost about 100$ per console when XBox One and PS4 were launched:
Yes the article does clearly say they cost 100$ for the AMD chips. But when you compare that with total sales. 2014 they sold over 21 million consoles. Which would equate to AMD making over 2.1$ billion that year. And they pulled in 5.5 billion in that year. Which would mean that console market is a huge chunk of their total sales.
Finally you are starting to realize that console business is quite juicy and how stoopid those dismissing it are as both Intel and NVidia would appreciate piece of that cake but cant really compete (Intel GPUs suck and NVidias CPUs suck)
You know what I cannot wrap my head around right now? AMD is making more money then Intel and Nvidia and yet somehow they are considered the bottom feeder. Let me explain that a little before everyone explodes. Intel only made 11 billion net last year. A company that is worth over 170 billion is pulling in 11 billion a year net. And Nvidia is worth 32 billion and they are barely making 4.68 billion and I cannot figure out if that number is gross or net. Meanwhile AMD worth only 4.5 billion is making 3.5 billion net. I know assets make a huge deal when it comes to these companies but shouldn't making money be the goal here? I mean whats the point in all the assets if you can't pull in the money? Intel worth 30x more then AMD should be making 30x more money. If they cannot then they shouldn't be worth 30x more for sure.
You know what I cannot wrap my head around right now? AMD is making more money then Intel and Nvidia and yet somehow they are considered the bottom feeder. Let me explain that a little before everyone explodes. Intel only made 11 billion net last year. A company that is worth over 170 billion is pulling in 11 billion a year net. And Nvidia is worth 32 billion and they are barely making 4.68 billion and I cannot figure out if that number is gross or net. Meanwhile AMD worth only 4.5 billion is making 3.5 billion net. I know assets make a huge deal when it comes to these companies but shouldn't making money be the goal here? I mean whats the point in all the assets if you can't pull in the money? Intel worth 30x more then AMD should be making 30x more money. If they cannot then they shouldn't be worth 30x more for sure.
AMD is operating at a loss, or at least has been until very recently. It doesn't matter how much revenue and business they get as long as they're unable to turn that business into profit.
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What they just did last week with the shares shows us they needed a lot of money for something. When you look it is over 500mil that they gained for the purpose of development. They are also expecting a huge quarter and that will help a lot.
That means about $9.50 total per console, CPU and GPU included. Is that $200M net or gross?
"Be water my friend" - Bruce Lee
AMD won't be able to credit the full contract award on their balance sheet. Typically, a term contract like this will have the provider guaranteeing to provide the SKU for a set number of years at a set price structure (there may be some escalation or de-escalation in that price over time, depending on the terms). In return, the purchaser guarantees to buy some minimum volume of the SKU. The SKUs then get billed as any inventory would - per shipment, and that's how it would show up on AMD's revenue sheet for the APUs for consoles. Often, there is an up-front deposit or development fee (usually to cover things like assembly line setup or fab/development costs, or whatever), and it wouldn't surprise me at all if that is where any sudden $200M line item came from.
http://www.gamespot.com/articles/teardown-reveals-xbox-one-costs-90-more-than-ps4-to-make/1100-6416404/
But just where did Cleffy get that $200 million from? If you're just comparing 2014 and 2013 to each other, then you have to remember that both XBox One and PS 4 launched already in 2013, and their sales for Q4 2013 were more than their sales in Q1 2014 and Q2 2014 combined.
Give me an educated guess
"Be water my friend" - Bruce Lee
Because id like to see APU with an RX480 (P10) slapped inside ;P
Custom SoC with P10 and 8 CPU cores desnt cost 20-30$, that much i guarantee you. 100-150$ more likely.
Same goes for last gen (PS4/XBone) when they had ~HD7850 GPU on board. Naturally, as time passes things get cheaper to produce.
AMDs margins on GPUs and SoCs are much higher than CPUs, and average comes to ~31-32%
http://quarterlyearnings.amd.com/phoenix.zhtml?c=74093&p=quarterlyearnings
That, and what @Frammshamm said is absolutely true - a small reoccurring debt payment looks a lot better on a balance sheet than a huge lump sum out of pocket.
Stock price is only loosely based on the balance sheet anyway - stock price is a gut feeling for what Wall St thinks the company is worth and it's long term prospects. That doesn't always coincide with what the balance sheet, or press releases, say about a company.
The most expensive APU I see on Newegg right now is $149, with most listing at well under $100. That's retail. They may not line up perfectly with what is installed in any console right now, but the cost to manufacture for AMD won't be that dissimilar.
The 7850 may have cost that much at launch, but this isn't a discrete card with CPU, and this isn't 2012 any more.
In discrete video cards, it's not just the GPU chip. There's also memory, power circuitry, a heatsink, a PCB, and a number of other pieces.
Probably doesn't cost that much different to make them. Maybe it is $100 to Sony, which would be a $85-90 production cost. I have a feeling it's a lot lower than that though, because retail margins also include retailer markup, among other things, and product costs on a similar process node (both are 28nm) aren't going to be that different. Sure there will be some R&D differences on the Jaguar vs Godavari CPU cores, as well as 8 vs 20 GCN cores, but we aren't really talking R&D anymore, we are just looking at production costs.
But I got nothing to back me up, just that having a single component in a process make up 1/3 of the total cost seems outlandish. Even when it is an APU. And especially when it's locked up on a long term exclusivity contract. Everything I do with contracts tells me that Sony and Microsoft are not paying $100/APU for their consoles right now.
AMD will be going into 2017 with both those console contracts renewed, a new CPU architecture, a new GPU process node, a lead in gaming performance on modern titles, and a new console contract that has not been revealed. So to say it will be shrinking year for AMD is a bit weird. I would expect their revenue to hit at least $4 billion in 2017 which will be a climb from their 2016 numbers.
AMD is also reaching a point when all their investments are coming to fruition. Most of the losses they incurred over the last 5 years have been due to the investments they have been making towards the future.
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