AMD: Xbox One and PS4 To See Record High Sales Next Year – Predicts End of Cycle for Current Gen Consoles by 2019


AMD is the provider of the APUS inside the consoles by both manufacturers and is one of the most knowledgeable entities in the supply chain. We previously revealed its plans to supply chips for next generation consoles and the company has now stated on more than one occasion that it expects the current generation consoles to have a life cycle till 2019. It has also stated that it expects 2016 to see more console sales as compared to 2015, something that should help boost revenue for the chip maker.

AMD: Consoles to have even more sales next year, current cycle will probably end in 2019

Sales of the custom APU inside the Xbox One and PS4 make up a good chunk of AMD's revenue, something investors are very much interested in. Fortunately, this means that we get to hear about AMD's thoughts on the console roadmaps in investor and technology conferences. A few weeks back, we exclusively reported that AMD is preparing to supply chips for next generation consoles with 5x the performance per watt and increased focus on VR in 2018. This time-frame fits in perfectly with recent comments by company officials.

The Raymond James Technology Conference was recently held (on 8th December) and AMD's CTO Devinder Kumar made some interesting comments regarding the life cycle of the consoles as well as the expected sales next year:

Yeah I think the launch of these products happened in 20 -- late 2013. So if you count 2013 by '13, '14, '15 we are about to enter '16. If you go to the past years and look at -- if you say it’s a seven year cycle then '16 is kind of right in the middle there. And the thing to remember is based on the information that has been provided let’s take the play station game consoles, the ramp of this product and the performance of this and from an overall standpoint is the best compared to any prior generation of play station, right. So that’s obviously very helpful from a viewpoint of the ramp in the product happening and we see from where we sit right now the strength continuing into 2016 and that’s why I said earlier that we expect the units overall in the current generation of game consoles being higher in '16 than in '15. (Transcript: SeekingAlpha)

Counting 2013, there area total of 7 years in the expected life span of the Xbox One and PS4. This means that once we transition to 2016, only 3 years remain before the new consoles arrive. It is worth noting that the cycle could end before this as well (as early as 2017) as noted by AMD's CEO, Lisa Lu at the 18th Annual Credit Suisse Technology Conference:

Yes, so I think the way to think about gaming is the game console cycle is usually anywhere from five to seven years or usually in the -- on the longer side and this cycle has been really good. I think it’s been really good both, Sony and Microsoft have really marketed well through the value proposition.

The peak of game consoles are probably anywhere from the third to fourth year. We believe this year game console units are up relative to last year. From our visibility next year will be up relative to this year and it’s really about continuing to satisfy that amidst is higher for more gaming. So, I view it as a continued good market for AMD. (Transcript: SeekingAlpha)

As we can see, according to AMD's projections, console sales should peak out next year. It is also interesting to note that the company expects a traditional 7 year cycle for the current generation of consoles, even though the PC Gaming industry is getting increasingly powerful hardware, resulting in an ever-growing gap between between the consoles and an average gaming PC. That said, it is unlikely that we will see the cycle cut short since it would be contrary to the profit motive of both companies. It was originally thought that a PS4 with more powerful hardware was a possibility thanks to x86 hardware, since AMD does not have any plans (currently) to supply new chips to Sony, this remains unlikely as well.

A more energy efficient APU (and PS4 version), however, with the same approximate power could be on the table. Die shrinks and process maturity could result in a much more cooler and slimmer PS4, but will have approximately the same horsepower as the original. Naturally, the same holds true for Xbox One as well – although the company has not officially discussed any such plans so far. In any case, the next year should be a good year for console sales - and will probably constitute the heyday for this generation. That reminds me, the Xbox One and PS4 bundles are back at their $299 pricing for Christmas over at Amazons folks.