Will AMD’s EESC Earnings Remain Tied to the Console Market?
Game console market in 2017
Earlier, we saw that Advanced Micro Devices’ (AMD) EESC (Enterprise, Embedded, and Semi-Custom) segment is likely to report a revenue fall in 2Q17. The overall game console market is expected to fall in 2017 as gamers move to the mobile and PC (personal computer) gaming spaces.
The game console market is largely dominated by Sony’s (SNE) PlayStation 4, Microsoft’s (MSFT) Xbox One, and Nintendo’s Wii U. Jon Peddie Research expects console sales to fall 1% YoY (year-over-year) to 36.2 million units in 2017.
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Refreshed consoles hit the market
Console makers are looking to boost demand by launching refreshed versions of their popular consoles. Sony launched the PlayStation 4 Pro in 2016, pushing AMD’s EESC revenue to a record high of $835 million in 3Q16. AMD supplies semi-custom SoCs (system on chip) to Microsoft and Sony.
Nintendo launched its Switch console powered by NVIDIA’s (NVDA) Tegra SoC in March 2017. Microsoft plans to launch the refreshed Xbox Scorpio powered by AMD’s SoCs in 2H17. This release could push AMD’s EESC revenue to new highs in 3Q17.
AMD looks to expand beyond game consoles
The slowing game console market has encouraged AMD to reduce its reliance on gaming and expand into adjacent markets. In its 3Q16 and 4Q16 earnings calls, AMD’s CEO, Lisa Su, talked about three console design wins, of which two have materialized. According to Su, the third is a non-game console win, indicating that AMD is expanding its horizon into other markets.
Which market this non-game console will target is still a mystery. Rival NVIDIA has expanded its Tegra SoC beyond tablets and game consoles into the automotive and home automation spaces.
It’s possible that AMD will announce the details of its third console during its 2017 Analyst Day on May 16, 2017. This non-game console may not generate meaningful revenue before 2018.
Next, let’s look at AMD’s preparation for the enterprise server market.