Game console chips will lead the way for AMD’s semi-custom business

Advanced Micro Devices quietly started its semi-custom chip business a year ago. And by the end of this year, it will be about 20 percent of the company’s business. AMD will do that by supplying chips to game console makers. The company is acknowledging today that it is building semi-custom chips for Sony’s PlayStation 4, and that the game console business will provide a lot of its growth over time.

Sunnyvale, Calif.-based AMD hasn’t been allowed to talk about this business much because it doesn’t have permission to do so from its customers who have not yet described everything they are doing. Microsoft is reportedly using semi-custom chips from AMD for its unannounced next-generation Xbox game console, which is expected to be unveiled on May 21.

The semi-custom chip business is run by Saeid Moshkelani, corporate vice president and general manager, who joined AMD last year from Trident Microsystems. He reports to AMD senior vice president Lisa Su. In an interview with GamesBeat, Moshkelani reiterated that he can’t preemptively announce his customers’ chips. But he acknowledged that Sony is using a semi-custom chip that uses an accelerated processing unit (APU) chip that combines AMD’s microprocessor and graphics technologies on the same piece of silicon.

“Now that Sony has announced, this is a good time to talk about the semi-custom business,” Moshkelani said. “We want to diversify, and this is a very attractive way to do it. This is also a reflection of how the market is changing.”

Moshkelani said that the business makes sense as a way to differentiate AMD’s offerings from its dominant competitor, Intel, and as a way to diversify its business beyond the PC market. AMD is the No. 2 chip maker in PC microprocessors, but it has expanded beyond x86 into ARM-based server chips as well. The trick will be whether AMD will be able to generate high volumes and high profit margins with its semi-custom chip business. Usually, custom chip deals are one or the other but not both.

Moshkelani said that one of the distinguishing factors of the semi-custom chip business is that it combines both intellectual property from AMD’s engineers as well as IP from customers who help design the chips for their own needs and better differentiation.

AMD began work secretly on the semi-custom chip business a year ago as Moshkelani arrived. Presumably, that was when it got started with design work for both Microsoft and Sony, which have likely ordered very powerful but very different APUs for their upcoming game consoles.

“Gaming is a great cornerstone of how a semi-custom business can be built,” Moshkelani said. “As a company, we are investing heavily in this business, with projects lasting anywhere from six months for design to 18 months.”

Game chips have to be built in high volume with low costs, high performance, and low power consumption. The pattern from the game console chips could play out in other markets, and Moshkelani said AMD hopes to expand its semi-custom business into other markets as well.

“AMD has a strong intellectual property portfolio and a nimble approach to chip design. That combination should help the company capitalize on new opportunities by customizing its IP building blocks for specific applications and use cases,” said Charles King, president and principal analyst of Pund-IT, Inc. “AMD’s ability to flexibly collaborate with customers should lead to the development of high-value solutions that deliver superior performance and end-user satisfaction.”

AMD said it will target gaming, set-top boxes, smart TVs, PCs, tablets, servers, high-performance computing, and infrastructure applications. The PS4 is just the first announced design.