Xbox One market impacts
In addition to having a direct impact on game console competitors Xbox One will also have an impact on the market for high end “enthusiast” PCs for gaming. Even though PCs will continue to offer higher levels of performance than the new generation of consoles, consoles will cost thousands less. Intel, in a 2012 Intel Developer Forum presentation, estimated that there were 30 million enthusiast PC users, and I expect the next-gen consoles to reduce the size of the enthusiast market as gamers elect to buy consoles rather than new PCs.
Intel also estimated in the same presentation that the number of mainstream PC users was about 220 million, and I expect Xbox One to also attract users in this segment. Intel, in the process of rolling out its fourth-gen Core “Haswell” processors, may not even notice the effect of Xbox, but I believe that NVIDIA Corporation (NASDAQ:NVDA) will. The problem is that both Intel Haswell processors and the AMD processors in Xbox One and Playstation 4 include very capable on-board graphics that eliminate the need for a separate graphics processor. This trend of creating ever more capable Intel architecture SOCs will continue to make the discrete graphics processor increasingly irrelevant.
The GPU segment of Nvidia has been pretty much carrying the ball in terms of growth, with the latest quarter’s revenue up 8.1% y/y to $785.6 million in Q1. Meanwhile the ARM processor segment lost momentum as revenue declined 22% y/y to $103.1 million. With its efforts to expand into the ARM market stalled, Nvidia’s dependence on its line of GPUs makes it vulnerable to the overall technology trend: eventually, discrete graphics processors will only be used for specialized scientific and engineering applications that make use of the tremendous parallel processing power of the GPU.
Living to fight another day
AMD is a clear winner in the next-gen consoles, since they sell the same number of APUs no matter how Sony and Microsoft divide the market. Sales of 20 million consoles in the coming year would add about $800 million in revenue to AMD’s Computing Solutions Division. The console wins will also help boost sales of AMD’s APU’s for PCs through a halo effect. Since a console-equivalent APU in a PC would have about the same level of performance and be very economically priced, AMD may be able to win back some of the market share (currently about 12%) that I have previously estimated it lost to Intel in Q1. At 20 million consoles, AMD would just be breaking even, but it would have escaped what many assumed was certain death.
The article Microsoft’s Most Important Hardware originally appeared on Fool.com and is written by Mark Hibben.
Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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