Intel (INTC.O), opens new tab lost out on a contract to design and fabricate Sony’s PlayStation 6 chip in 2022, which dealt a significant blow to its effort to build its fledgling contract manufacturing business, according to three sources with knowledge of the events.

The effort by Intel to win out over Advanced Micro Devices (AMD.O), opens new tab in a competitive bidding process to supply the design for the forthcoming PlayStation 6 chip and Taiwan Semiconductor Manufacturing Co (2330.TW), opens new tab as the contract manufacturer would have amounted to billions of dollars of revenue and fabricating thousands of silicon wafers a month, two sources said.

Intel and AMD were the final two contenders in the bidding process for the contract.

Winning the Sony (6758.T), opens new tab PlayStation 6 chip design business would have been a victory for Intel's design segment and would have doubled as a win for the company's contract manufacturing effort, or foundry business, which was the centerpiece of Intel CEO Pat Gelsinger’s turnaround plan.

Gelsinger announced plans for Intel to create a foundry unit in 2021 and formally launched it at an event in San Jose, California, in February of this year. The PlayStation chip deal originated in Intel's design segment, but would have been a boon to the financial performance of the foundry business after this year's separation.

A dispute over how much profit Intel stood to take from each chip sold to the Japanese electronics giant blocked Intel from settling on the price with Sony, according to two of the sources. Instead, rival AMD landed the contract through a competitive bidding process that eliminated others such as Broadcom (AVGO.O), opens new tab, until only Intel and AMD remained.

Discussions between Sony and Intel took months in 2022, and included meetings between the two companies’ CEOs, dozens of engineers and executives.

In response to Reuters reporting about the PlayStation 6 talks and Intel's failure to win the business, an Intel spokesperson said: “We strongly disagree with this characterization but are not going to comment about any current or potential customer conversations. We have a very healthy customer pipeline across both our product and foundry business, and we are squarely focused on innovating to meet their needs.”

Reuters