Microsoft Xbox One

The Xbox One contains dozens of components from various companies, Credit: Microsoft Corporation.

When Microsoft Corporation (NASDAQ:MSFT) first unveiled the Xbox One last year, the company hailed it as "the ultimate all-in-one entertainment system." To be sure, though the Xbox One has endured some bumps along the way, Microsoft still has managed to put an estimated 5 million of the consoles into consumers' hands so far. More recently, Xbox One unit sales even doubled sequentially from May to June, thanks largely to Microsoft's decision to lower the price by unbundling the Kinect -- which many gamers don't particularly appreciate -- as a required accessory.
But while the Xbox One only bears Microsoft's name on the outside, it's not the only business benefiting from the cutting-edge console. Here are three hidden companies which make products critical to the Xbox One's design.
Processing power
First up is Advanced Micro Devices (NASDAQ:AMD), which builds the Xbox One's processor, and sells it under its semi-custom SoC, or system on a chip, sub-segment. At a cost to Microsoft of around $110 per chip, AMD's processor is the single most expensive component in the Xbox One.
Keeping in mind that AMD also provides the processors for Sony's (NYSE:SNE) Playstation 4 consoles at a cost of roughly $100 per chip, its semi-custom segment has proven a much-needed boon for the chipmaker as it strives to offset weakness amid increased competition and sluggish sales in its core PC business.
As fellow fool Ashraf Eassa noted a few days ago, it should come as no surprise AMD is targeting between one to two significant new semi-custom wins -- i.e. worth at least $100 million apiece -- per year going forward. If that happens, and with AMD shares already up around 14% so far in 2014, it could serve as a solid catalyst for the stock to continue rewarding patient investors.
Power management
But the Xbox One wouldn't be able to do anything without actual power, right? Or, rather, power-management hardware, which is where Texas Instruments (NASDAQ:TXN) comes into play. TI supplies six components in the Xbox One -- four contained in the console itself, and two inside the Kinect -- all of which are dedicated to power management.
Texas Instruments doesn't break down exactly how much revenue it collects from Xbox One sales alone, and it's a tricky proposition considering TI's semiconductor products are already contained in tens of thousands of other electronic devices. However, Texas Instruments' analog segment did achieve 14% year-over-year revenue growth to nearly $2 billion last quarter, driven primarily by -- you guessed it -- strength in its power-management products. Better yet, that translated to 60% growth in analog segment operating profit, to $664 million.
With $2.8 billion in cash on its balance sheet, a 2.6% dividend, and shares trading at a reasonable 17.5 times next year's expected earnings, I think Texas Instruments stock is definitely worth a look.
The power of freedom (from wires)
Finally, consider Marvell Technology Group (NASDAQ:MRVL), from which Microsoft not only purchases Wi-Fi and Bluetooth components for each Xbox One controller, but also two wireless chips for every Xbox One console. More specifically in the console, the first is a combined MIMO chip to handle 802.11ac Wi-Fi, NFC, Bluetooth, and wireless HD video streaming, while Marvell describes the second as a "highly integrated [WLAN SoC] specifically designed to support high throughput data rates for next-generation WLAN products."
Sure enough, last week, Marvell cited strength in the console gaming market as a primary reason for the outperformance of its wireless connectivity segment, which grew sales by double digits during last year, and now comprises around 30% of Marvell's total revenue.
But console gaming isn't Marvell's only growth driver going forward; Marvell management also stated they're seeing strong interest from smartphone and wearable tech customers in the Wi-Fi and Bluetooth capabilities of their latest wireless microcontroller SoCs. If Marvell can convert that interest into additional design wins, its shareholders should benefit as a result.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Steve Symington owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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