Nvidia and AMD Place Bets On Next-Gen Gaming

Two of tech's biggest competitors are taking a very different approach to the next generation of gaming with Sony and Android, but which is making the right moves?

Comments
'

Earlier this month, Sony took to the stage in New York and unveiled the PlayStation 4. And as expected, the internet--at least within gaming circles--went into meltdown. All the classic console-launch moments were there: visually striking demos, a new controller, masses of mind-numbing exec-speak, and yes, even talk of polygons. But the most interesting part of the presentation arrived early on. There, Sony revealed the hardware that would be powering its new socially aware games console, and it was a world away from the complex, supercomputer-power touted by the PS3 and its Cell processor.

Please use a html5 video capable browser to watch videos.
This video has an invalid file format.
00:00:00
Sorry, but you can't access this content!
Please enter your date of birth to view this video

By clicking 'enter', you agree to GameSpot's
Terms of Use and Privacy Policy

With the PS4, Sony has taken what are essentially off-the-shelf PC parts and used them to build a console. That's exciting for lots of reasons: the system should be easier to develop for, and porting games from PC to console or vice-versa should be easier too. But the switch to x86 has ramifications outside of just games development. For the company behind the hardware in the PS4, it's a potential financial boon. That company is AMD, a US-based chip-maker that's been making chips since 1969.

Judging by AMD's current balance sheet, it'll no doubt be hoping that its place in the PS4 (as well as the Wii U, and potentially the next Xbox) proves lucrative. Just recently it sold its Austin-based HQ for $164 million to raise cash, while a leading analyst called it "un-investable" following an operating loss of $131 million in its quarterly earnings report. Those aren't pretty numbers for a company that was once trading at over $40 dollars a share: today its shares are worth a mere $2.60 each.

The question is how much those console deals are worth to AMD. While they're certainly not the only thing the company has going for it--its upcoming roadmap of APUs and GPUs have generally been well received--the console deals provide a steady stream of income. Indeed, the company noted on its end of year financial statement that declines in its graphics segment were "partially offset by a seasonal increase in game console revenue", so for AMD at least, the sector remains a valuable one. But its competition is fiercer than ever. Intel has gone from strength to strength with its desktop and laptop chips, while ARM continues to dominate in mobile, a market that is growing at an extraordinary rate: the most recent IDC numbers show tablet shipments at well over half of that of PC shipments and growing fast.

Judging by AMD's current balance sheet, it'll no doubt be hoping that its place in the PS4 proves lucrative.

That's bad news for AMD, which currently doesn't even have a mobile and tablet chip on the market. Meanwhile, Intel is slowly beginning to compete with its refreshed Atom CPUs, but it's AMD's other competitor that poses the greatest threat: Nvidia. For years now the two companies have been battling it out in the GPU market, and both have claimed to offer the world's fastest GPU in the past. But unlike AMD, Nvidia is posting record profits--around $174 million according to its last earnings call. And it does have a chip for mobile in the form of Tegra, not to mention it holds the current crown in GPU performance with Titan.

For AMD then, the console market is more important than ever. And that's not just from a monetary point of view: there's the potential to capture the hearts and minds of gamers and developers too. After all, if developers are primarily targeting consoles--which for the moment remains the most popular platform for playing games outside of Angry Birds--then it stands to reason they would choose to develop on AMD hardware, or make optimisations for console that are easily translated over to desktop AMD GPUs. That might not spell total disaster for Nvidia, but it could start a worrisome trend that sees developers and consumers move away from its hardware to that of its chief competitor.

No Caption Provided

It's a worry that we put to Tony Tamasi, the senior VP of content and technology at Nvidia: "Let's assume that you're right, and both Sony and Microsoft are built off an AMD chip", Tamasi told us, "we're actually kind of excited by it."

"Developers actually develop on a PC. The problem today is that when they target a console, they're targeting a piece of hardware that's more than an order of magnitude lower power than today's PCs. And frankly, that really holds back content developers. So while they could do amazing DX11 compute and awesome shader things on the PC, the fact that they have to support these very old, very low performance consoles (PS3, Xbox 360)--one of which is of course based on Nvidia--is a bummer. It impedes the content development."

"The fact the next generation consoles are kind of mid-range PCs is a good thing. From an optimisation perspective the next consoles are based on x86 CPUs, and based on essentially current generation GPUs, so there's really nothing special there. In the end, developers are trying to deliver the best experience on any platform that their game runs on. Having been through Xbox one and PS3, I can tell you that plenty of games that ran on a PS3 or ran on the first Xbox didn't have any uniquely optimised or differentiated behaviour on Nvidia on a PC than they otherwise would have had."

For Nvidia, it seems that any PC hardware in a console can provide benefits to the PC market, whether it uses the company's hardware or that of its competitor. Perhaps we won't see any AMD optimisations: only time will tell. Regardless, Nvidia has decided it doesn't want to be a part of the next-gen consoles: its hardware is nowhere to be seen in the PS4, the Wii U, or--if the rumours prove true--the next Xbox either. The question is, why not?

"Honestly, it's a business decision", says Tamasi, "having been through Xbox one and PS3, we understand the economics of that and the tradeoffs of that. We have a bunch of things going on. I'm sure there was a negotiation that went on, and we came to the conclusion that we didn't want to do the business at the price one of those guys was willing to pay. We're building all sorts of chips for Tegra, we're building LTE modems, we're building SoCs, we're building GPUs, and we're building supercomputers. We're building a whole bunch of stuff, and we had to look at console business as an opportunity cost. If we say, did a console, what other piece of our business would we put on hold to chase after that?"

No Caption Provided

"In the end, you only have so many engineers and so much capability, and if you're going to go off and do chips for Sony or Microsoft, then that's probably a chip that you're not doing for some other portion of your business. And at least in the case of Sony and Nvidia, in terms of PS4, AMD has the business and Nvidia doesn't. We'll see how that plays out from a business perspective I guess. It's clearly not a technology thing."

Unlike AMD, it seems Nvidia simply doesn't think that console market is worth entering either for the money companies like Microsoft and Sony are offering, or at the expense of other projects. Indeed, exactly how much AMD supplying chips to Sony and Nintendo contribute to the company's bottom line is a mystery, even if it is having a positive effect. But with the global video game industry predicted to reach $82 billion by 2017, there's money to be made. Of course, both companies already tap into it with their GPUs, while AMD's APUs and CPUs appeal to gamers on a budget.

"If you're going to go off and do chips for Sony or Microsoft, then that's probably a chip that you're not doing for some other portion of your business."

For Nvidia, though, it's tackling the games market in a very different way. Outside of the high-end with its GTX 690 and Titan GPUs (the latter of which is in high demand at online retailers, despite the $1000 price tag), the company is looking at mobile for growth. That comes in the form of its Android-based handheld Shield, and the larger mobile market as a whole. It's a market that's forecast to be worth $203.8 billion by 2016, and drive volumes of over a billion units, figures that completely dwarf those of the games industry.

"[Mobile] is a growing market", Tamasi tells us. "It depends on the analysts you talk to, but I don't think that any analyst believes that they expect the console hardware market to grow like the mobile market has been and continues to grow. There's more than a billion smart phones sold every year. It takes years to get to 50 million in consoles sold. Mobile is an important business for Nvidia to be in. In fact, it may be that next generation of computing is mobile. And if that's so and the computing industry transitions towards mobile, Nvidia wants to be at the head of that not at the tail."

No Caption Provided

"We believe Android consoles could be big. We're supporting the Ouya folks, and we built Shield for goodness sake, which is an Android-based handheld device. It's not a console in the traditional sense, but it is a device purpose-built for gaming. I think that to us it's more of an expression that gaming continues to be alive and well, and there's no definition of what that has to be."

Therein lies the core difference between the two companies (outside of the PC). On the one hand you have AMD, which is sticking to the tried and tested home console market. And on the other you have Nvidia, a company that believes the future of the console lies not with the likes of Sony and Nintendo, but with Android, upstarts like the $99 Ouya, and its own Shield handheld. The popularity of the likes of Ouya and GameStick is undeniable, but even the $8.5 million Ouya raised as part of its Kickstarter campaign pales in comparison to the revenue taken in by current home consoles. Perhaps they'll remain a niche, albeit one that's seemingly more attractive and more profitable to Nvidia than AMD.

Both companies have placed their bets. And both companies have much to gain, and--more so in the case of AMD--much to lose. But whatever the outcome, it's gamers and developers who benefit. Developers will have more ways to get their games in front of people than ever before; gamers will have far more choice in how they play games, and how much they have to pay to do so. That's what's so interesting about the battle between these two giants of the tech world, and why the coming years will be some of the most exciting in the history of video games.

'

Got a news tip or want to contact us directly? Email news@gamespot.com

  •   View Comments (0)
    Join the conversation
    There are no comments about this story