Actually AMD sold off it's fab in March of last year, 2012.  Prior to that, in 2008 it contributed it's fabrication business to jointly build another company that eventually became GlobalFoundries.  AMD likely still owned it's portion of the fab business when it entered into contracts with any company.  So any contracts that they held would have been included in the sale if not conditions would have been set in the contract on the basis of a sale.

That out of the way, GlobalFoundries not only does the fab work for AMD, but they also work with IBM.  In fact, on an early rumor regarding the next Xbox IBM and GlobalFoundries were listed as working on the CPU.  So it is possible that AMD is doing the engineering, while the CPU includes ARM cores and Power cores, and GlobalFoundries is doing the fab work.

That being said, the original Xbox 360 with a Power 5+ core consumed 203W, with the latest version it's down to 115W.  I have to imagine with an even smaller die (28nm vs. 45nm) IBM would have been able to develop an even more efficient processor from the Power7 family.   I mean in a 50% size reduction (90nm to 45nm) they cut power a little less than 50%.  Why would they not be able to do that again?   Not to mention, ARM-based processors are typically extremely efficient since they're used in mobile devices.  So could it be possible, even remotely, that Microsoft, IBM, and AMD could have designed a SOC with lower power consumption than the current specs would suggest, and couldn't GlobalFoundries, being both a partner with IBM and AMD, and likely receiving the benefit of any manufacturing deal with Sony or Microsoft, would have sold those contracts with the sale of their shares? 

That's the problem of basing a discussion on rumor is the fact that there are reasonable assumptions we can make based on the facts that don't necessarily mesh with other rumors.  Eventually this discussion will come down to beating a dead horse or being inconclusive as they all do. 

And yes, I know the PS3's GPU was outdated.  But the Cell processor in the GPU helped to keep the PS3 from being obsolete immediately on day one.

Somewhat right, but mostly wrong.

You assume that next-gen companies are going to monetize games the same way they always have. That is constantly evolving, and we especially saw that last-gen. You went from games having an ARP of ~$50 for the Wii and ~$60 for the X360/PS3 to >$60 thanks to DLC, themes, avatars, and microtransactions.

So where does next gen go? More digitally-distributed content. This is where the X720/PS4 have a huge advantage over the previous generation, as they have an entire generation of lessons learned. Sony and MS have likely gathered billions of data points, and fleshed out many KPIs when it comes to designing the next generation interface, as well as online system. Such things can't simply be added to the 360/PS3, and that is why next gen is valuable.

So what am I talking about? The reality is that digitally-distributed content makes publishers more money. A LOT more money. Instead of making $30 on a $60 title that will not be available in 6 months to $45 on a $60 title, plus a 70% cut of DLC, plus a persistent retail store online that can constantly drive users to the experience. Castle Crashers is a good example of that. Its been out for >4 years on Xbox Live Arcade, but its still a top-five title in regards to annual sales, even excluding DLC. Furthermore, they're still charging $15 USD almost every day on it.

That is what the next-gen publisher is going to crave, which is something that the previous generation consoles did good at, but not great. Many X360s came with only a small amount of HD space, which meant many users couldn't download large libraries of content. We seemingly believe that Microsoft will include an HDD with every console, which will help significantly. Furthermore, we should see online penetration rise from ~70% to ~90% with next-gen consoles. What does that mean? Everyone wants online, and the new networks will be able to support it (which again means more money for publishers).

So it may be true that there are ~140 million consoles out there for this current generation (PS3/X360), but how many of them still work? 70%? How many of them are online? 70%, or so. How many of them actively seek out digital content for their games? 30%? In that scenario, you end up with a mere 20.6 million users that actively participate in becoming high-value gamers.

Next gen developers see that, and know that, and want far more users generating far more money. Imagine a world where 1 Call of Duty release will sell a few thousand copies every month at an ARP of $50 for not months, but years if not approaching a decade. Long-tail sales are the holy grail of gaming, and next-gen will help publishers reach that.

As for persuading consumers with this huge shift - I think Microsoft has the most brilliant idea with their $99 subscription-based Xbox. I believe that Microsoft will push this in the next generation, and if they do, will make the WiiU irrelevant overnight (and force Sony into a very disadvantageous situation if they cannot emulate it).

Why? Because you go from requiring $399 for the next-gen experience down to a paltry $199 or less. Not only this, you also force users to purchase a monthly online pass for content which repays Microsoft's huge loss-leading activity. Why does that matter? Because it means the said user is online, ensuring that their eyes are far more likely to download content for said games, increasing their ARP by very effective margins.

So in the whole scheme of things, publishers are going to have a huge incentive to push for the next generation, rather than continual catering to the 360 crowd. You're right in that they can port to it without a huge loss in fidelity, and that means that publishers won't have to take huge risks going forward, which gives them all the more reason to step up to next gen.

I think I agree. I think there will be many people dissapointed in the power of the next gen systems, and I think especially MS will go the Wii route, and realese a "2 360's ducktaped together with a Kinect" kind of console.

For Sony, Microsoft, Nintendo and all third party publishers the next generation of consoles is a dark dangerous road ...

If you produce a console that is powerful enough to really impress gamers on visuals alone, the console manufacturers will have to take massive upfront losses to sell them at a price consumers will accept and third party publishers will risk their entire company "betting" on games that take full advantage of this hardware.

If you bet on innovation and produce a more modest console there is no certainty that gamers will buy into your concept, or that third party publishers will know how to produce good games for your system.

The middle ground isn't that safe either because, while there can be a synergy in the approach resulting in a system that was the best of both approaches, there is always the potential of either approach canceling the benefit of the other out; or worse, having the worst of both approaches.

Part of the reason I think the industry is in this "mess" is a result of things getting way out of hand in the previous generation. If Sony and Microsoft produced more modest systems and sold them at $300 without taking much of a loss, game development budgets wouldn't have increased as dramatically as they did and more third party publishers would be alive and healthy, and the performance increase that could be justified over those consoles would be more impressive to the typical gamer.

I don't think so.

This was the case every generation - developers usually still put out ports for the old consoles, but eventually new gen picks up steam and does just fine. A couple exclusive highly hyped games are enough to make people move a generation up.

Interesting. Sony will probably rely on 1st parties for awhile. I don't know about Microsoft.

There were already a rare set of real long-term exclusives this gen by 3rd parties, at least a far smaller amount than the PS2 enjoyed. There will be an even smaller number this coming generation.

Its a simple fact of the required ROI and the high costs of games on these systems. Now the 3rd parties won't have an SD Wii to fall back on with casualz cheap-o titles.

However, don't think that the next gen, including WiiU, doesn't have features that will push devs to not put the same or even a lower-end game on PS360. The entire architecture format has changed to be GPU centric and that is an area where even WiiU greatly surpasses PS360.

Of course in 2013 we'll see some games on all 5 platforms plus PC. However, by the end of 2014 that will pretty much be non-existent with the exception of possibly Madden, etc.

What is your response to this?:

Interesting theory. If what you say is true, that consumers are going to stick with the PS3 & 360 to play their games, then how would you explain the growing lack of interest for the PS3 & 360? Last year saw a huge drop in software sales and this year will be even worse. It's especially bad for new IPs which at this point in time have little chance to be successful unless it's associated with a well-known brand. 

These signs suggest that consumers are definitely losing interest in the PS3 & 360. This loss of interest could be explained by one of two explanations: (1) This is a new and permanent loss as a result of general apathy for home console gaming; or (2) this is just a cyclical loss and interest will regain with next gen consoles. If it's the former, then the PS4 & 720 will be killed, but because of a dying market, not 3rd parties supporting the PS3 & 360. If it's the latter, then the PS4 & 720 will reignite interest in gaming. 

I would assume you don't agree with these explanations; both of them contradicts your claim that consumers & developers will flock to the PS3 & 360 over the PS4/720. So what is your explanation for the diminished interest in the PS3 & 360? I personally think the loss of interest in the PS3 & 360 is a testament to the fact that consumers are interested in new consoles, and will embrace the PS4 & 720, especially if there's huge improvements in OS, functionality, motion control, and other features.

Pokoko makes a good point about RAM. There has actually been quite a few complaints about limited RAM for current consoles. In fact, many games are faulted as a result of it. I think it's likely that developers will at least use more RAM than what the current generation allows. 

Bumping this thread to point out that the major shown third party games for PS4 (Diablo, Watch Dogs, Destiny) are all PS3/PS4 dual launches. If this pattern continues it's a serious risk that all but dedicated Sony fans will have no need to actually buy a PS4.

I'm going to concede that Killzone's opening could not have been done on PS3, but that also means the console will be even more expensive than I was expecting. In any case third parties will be held back by the dual platform requirement for some time, Killzone was the only thing shown that truly requires next gen.