In 2022, Intel faced a significant setback when it lost the bid to design and manufacture the chip for Sony’s upcoming PlayStation 6 console. The competitive process saw Intel pitted against its rival, Advanced Micro Devices (AMD), which ultimately secured the deal. This loss not only dashed Intel’s hopes of landing a lucrative contract but also dealt a blow to its ambitions of expanding its fledgling contract manufacturing business, a key part of CEO Pat Gelsinger’s turnaround strategy.

Intel’s bid to supply the PlayStation 6 chip was crucial, as it could have generated billions in revenue and bolstered Intel’s foundry business, a new unit created in 2021 to offer chip manufacturing services to other companies. Intel had aimed to integrate this potential win into its plans for the foundry unit, formally launched at a San Jose event in early 2024. However, disagreements over the profit margins blocked a final agreement between Intel and Sony, leaving the door open for AMD to take the contract.

The PlayStation console business, although less profitable than other segments like artificial intelligence chips, provides steady revenue through long-term contracts, given the massive sales of consoles. For Intel, landing Sony’s business could have been a major financial boost as the company struggled to attract large clients for its advanced manufacturing process, known as 18A.

During the discussions with Sony, Intel also faced technical challenges related to backward compatibility. Sony’s consoles, including the upcoming PlayStation 6, require chip designs that support older games. Moving from AMD, the supplier of chips for the PlayStation 5, to Intel would have required costly engineering resources to ensure this compatibility—a key topic during negotiations between Sony and Intel engineers.

Sony, known for selling over 100 million units per console generation, would have pumped around $30 billion into Intel over the contract’s lifetime. But by losing the PlayStation 6 contract, Intel not only missed out on a marquee customer but also lost a critical opportunity to boost its struggling foundry business and attract other clients.

Despite this setback, Intel remains focused on its foundry efforts, although it faces other challenges, including workforce reductions and internal debates over selling certain business units. Intel’s failure to win Sony’s PlayStation 6 chip illustrates the uphill battle it faces in competing with established players like AMD and Nvidia in a highly competitive market.