IBM's Microprocessor Dominance in the Video Game Console Market

Strategic Insights -

IBM's microprocessors have played a crucial role in the success of Microsoft's Xbox, Nintendo's Wii, and Sony's PlayStation consoles. The company's decisions to aggressively redesign its chips and form partnerships with other companies have led to significant gains in sales and profitability. As a result, IBM's microelectronics division is expected to see substantial revenue growth, with projected targets of $10 billion by 2010 and $20 billion by 2015.

Key Takeaways:

  • IBM's microelectronics division is expected to see about $3.7 billion in sales of chips and associated design services this year, up from $2.9 billion last year and $2.5 billion in 2004.
  • The division is also projected to post $4 billion in revenue this year from its new "technology collaboration solutions" unit.
  • Analysts estimate that the unit is profitable, and internal projections call for it to hit $10 billion by 2010 and $20 billion by 2015.
  • IBM's deals with Microsoft, Nintendo, and Sony have given the company a portfolio of chip technologies that can be applied to other systems, including computers for medical imaging, defense, and complex simulations.
  • The company credits its deals to key decisions made in the 1990s, including aggressively redesigning its chips to prioritize efficiency and forming partnerships with other companies to leverage research and development money.
  • IBM's customization of its microprocessors for the high demands of video games has also led to significant improvements in its chip-making capabilities.

Statistics:

  • IBM's sales of chips and associated design services are expected to reach $3.7 billion this year, up from $2.9 billion last year and $2.5 billion in 2004.
  • The company's new "technology collaboration solutions" unit is projected to post $4 billion in revenue this year.
  • Internal projections call for this division to hit $10 billion by 2010 and $20 billion by 2015.
  • IBM's East Fishkill, N.Y. factory has received $3 billion in investment from the company.
  • Sony's investment in IBM's factory was $325 million in 2004.

Sources:

  • The Associated Press (no author listed) - "IBM's video game chip deals pay off big"
  • No specific date listed ( likely 2005 or 2006), quoting IBM executives and analysts