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Intel's Shift: PlayStation Loss and Military Gain

Vydáva MEXEM EUROPE

September 16, 2024
(GMT+2)

Intel Corporation {{ m-tag option="price" ticker="INTC" currency="USD" }}, a key player in the semiconductor industry, recently faced contrasting outcomes in its business ventures. Despite losing a significant contract to design and manufacture the chip for Sony's upcoming PlayStation 6, a deal that would have significantly bolstered Intel's nascent contract manufacturing business, the company saw a lift in its stock prices following news of a substantial U.S. military contract.

The PlayStation Contract Slip: A Missed Opportunity

In 2022, Intel was outbid by AMD {{ m-tag option="price" ticker="AMD" currency="USD" }} and TSMC in the competitive bid to secure the PlayStation 6 chip contract. This deal would have supported thousands of silicon wafer fabrications a month and marked a significant victory for Intel's design and foundry business, which is central to CEO Pat Gelsinger's turnaround strategy.

However, Intel's stock rose after Bloomberg News reported that It had qualified for up to $3.5 billion in federal grants under the Chips and Science Act. This funding is part of the Secure Enclave program, which aims to enhance the production of advanced chips with applications in military and intelligence.

Economic Impacts of the PlayStation Deal Loss

The loss of the PlayStation deal was a setback for Intel, as the console chip business, while less profitable than areas like AI chips, provides steady revenue and utilizes existing technology. Sony's PlayStation consoles, which typically sell over 100 million units every five years, are now powered by custom chips designed by AMD. The shift from AMD to Intel posed risks concerning backward compatibility, which is crucial for allowing older games to play on new systems.

U.S. Military Contract

Intel's financial health has been under pressure, evidenced by a drastic 58% plunge in its stock price this year. The company announced a 15% workforce reduction to save $10 billion and decreased capital expenditures to refocus its strategic efforts. Despite these challenges, the new military contract represents a significant opportunity to stabilize and potentially grow Intel's business in the high-demand sector of secure and advanced semiconductor manufacturing.



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