No one appears to have mentioned the important meta game going on: Intel bidding as a credible alternative supplier. For Intel, by bidding they get to undercut AMD's profits. For Sony, they get a credible alternative which they can pretend would be a viable choice. Thus forcing a slightly better deal from AMD. We saw similar articles related to the Switch 2. That time it was AMD acting as spoiler to Nvidia. Nvidia re…
Nvidia got the bid for Switch when they were basically dumping those unwanted Tegra to Nintendo for an incredibly low price.
Xbox and Playstation dont earn AMD much profits at all. AMD had this Custom Processor segment to barely keep them surviving, people may forget AMD was only worth ~$3B market cap in 2016. They are now at ~$250B.
On the subject of software compatibility though, one thing I got it wrong was my prediction of having AAA titles on Xbox and PS would have helped AMD's market share on PC, given those titles are already optimised on Xbox and PS anyway. That didn't happen at all. And Nvidia continue to dominate.