AMD Xbox One deal valued at USD3-billion revenue

At the Xbox One reveal event, Microsoft said that they were looking at a console market shipping up to a billion units in the next five years, citing opportunities created by the Xbox One’s interactive TV and new internet capabilities that could extend the target market for consoles considerably.

To date, the Xbox 360 has sold more than 77.2 million consoles worldwide, slightly ahead of the PS3’s estimated 77 million units sold for the year ending in 2013. Both are overshadowed by the Wii, which has sold a staggering 99.84 million units worldwide, and the venerable Playstation 2, still selling strong at 155 million units and counting.

Neither Sony nor Microsoft will ever reach those numbers with current-generation consoles and both are looking to increase their revenue streams with their next-generation offerings. But as they do and as they extend their reach into new territories, mainly one company benefits from all this expansion: AMD.

Xbox One’s innards, powered by AMD.

Ex-AMD employee Bob Feldstein updated his LinkedIn page after the Xbox One reveal, detailing his role in the development of the console before leaving to join Nvidia. According to Feldstein, the deal that AMD struck with Microsoft was worth over US$3-billion, a figure later parroted by AMD’s Director of Business Transformation, Ben Allen.

$3-billion might not sound like a lot, but neither Feldstein nor Allen detailed if this was a figure for per-year sales or over the span of the Xbox One’s estimated natural life time. If you take it for the console’s lifetime and estimate that the PS4 has the same value, then AMD is potentially earning a billion Dollars in profit from these deals per year for the next six years. It is a rather cosy position.

And this is also discounting the fact that a lot of the R&D was done last year. AMD sells a mid-range GPU, codenamed Bonaire, which appears on the market as the HD7790 and was seen by Tom’s Hardware as early as May 2012. Its the cousin of the graphics cores found in the Xbox One and PS4 and features the same hardware layout, power-saving technologies and a host of other tricks AMD built into it as well. AMD is already selling thew HD7790 and that is presumably helping with recovering development costs.

PowerColor’s HD7790

In addition, the CPU architecture inside the two consoles, codenamed Jaguar, also appears in AMD’s Temash and Kabini processors, low-power APU chips designed for low-cost tablets and notebooks. That R&D is already being paid off as well. The fact that the two next-gen consoles also give AMD a platform to tweak the design and final performance of Jaguar when it arrives for desktop processors in 2014 is an advantage that cannot be downplayed.

With both consoles, including the Radeon chips in the Xbox 360, Wii and Wii U, all running AMD hardware in addition to a whole new market of tablets and a surprisingly adept range of desktop APUs, AMD will be selling and shipping more processors and graphics chips than it ever has before. That’s only good news for a company slowly bringing itself back from the brink of bankruptcy.