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Exclusive-How Intel lost the Sony PlayStation business

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SAN FRANCISCO : Intel lost out on a contract to design and fabricate Sony’s PlayStation 6 chip in 2022, which dealt a significant blow to its effort to build its fledgling contract manufacturing business, according to three sources with knowledge of the events.

FILE PHOTO: Cosplayers dressed as Spider-Man walk in front of the PlayStation stand at the Paris Games Week , a trade fair for video games in Paris, France, November 5, 2023. REUTERS/Claudia Greco/File Photo

Gelsinger announced plans for Intel to create a foundry unit in 2021 and formally launched it at an event in San Jose, California, in February of this year. The PlayStation chip deal originated in Intel's design segment, but would have been a boon to the financial performance of the foundry business after this year's separation.

A dispute over how much profit Intel stood to take from each chip sold to the Japanese electronics giant blocked Intel from settling on the price with Sony, according to two of the sources. Instead, rival AMD landed the contract through a competitive bidding process that eliminated others such as Broadcom, until only Intel and AMD remained.

Sony announced the PlayStation 5 Pro last week, but has not yet unveiled the next generation. Years after its 2020 launch, Sony said it sold 20.8 million of the first-generation PlayStation 5 systems in fiscal 2023. Ensuring backward compatibility with prior versions of the PlayStation would have been costly and taken engineering resources. Allowing PlayStation users to play games they have purchased for older systems is a feature Sony often includes in a next-generation system.

Intel split its design and manufacturing operations under Gelsinger’s tenure, and has reported financial results separately since the first calendar quarter this year. In April, the company disclosed $7 billion in operating losses for the manufacturing businesses.

 

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