Both Microsoft and Sony plan to ship their next-gen Xbox Series X and PS5 consoles on time in Holiday 2020, and mass production of each system's custom Zen 2 CPU and Navi GPU-powered SoCs will soon begin to make it happen. In a recent earnings report, AMD CEO Lisa Su confirmed production will start in Q2 2020 (April - June) in preparation for next-gen console launches later this year.
The company expects Q2 revenues to increase as Microsoft and Sony place high-volume chip orders ahead of launch, and then semi-custom earnings to spike further as both companies rev up for 2021 console supply. Sony and Microsoft make the orders 1-2 quarters ahead of time. Hardware availability may be constrained, however: Sony, in particular, plans to ship 5-6 million PlayStation 5 consoles in 2020, down 1-2 million units from the PS4's launch in 2013.
"As expected, semi-custom product revenue was negligible in the quarter, as Sony and Microsoft, both reduced inventory in advance of next-generation console launches. We expect semi-custom revenue to increase in the second quarter and be heavily weighted towards the second-half of the year, as we ramp production to support the holiday launches of the new PlayStation 5 and Xbox Series X consoles," Dr. Su said in a recent earnings call.
"We also expect to see the console gross margins improve as we go through the year. And that's the reason for the full-year guide at 45%. So usually, what happens is in the very first - second quarter is our very first quarter ramp for the consoles, and so the margin starts a little bit lower and continues to ramp as we go through the year."
Will next-gen consoles be delayed? Probably not. But the games could be.
Microsoft's Phil Spencer has been careful to say that next-gen Xbox hardware is still on track and that games development is disrupted more than hardware, but the Xbox Series X could still be delayed due to inefficient at-home console testing.
Sony has warned its investors that COVID-19 could delay the PlayStation 5, or at the very least, have an impact on first-party games.
AMD is confident in their visibility for next-gen consoles and expects Sony and Microsoft to continue making orders for the chips:
"Console gaming is a positive for us. There's lots of anticipation around the consoles. It's one of the largest launches, I think, of the year. And from that standpoint, there's no change in our view, as it relates to COVID-19 just given what we see today."
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