We've watched AMD's inventories skyrocket and its market share, margins, ASPs and revenues vanish. We've already seen one inventory write-down, too. Pretty clearly AMD hasn't been able to sell its CPUs and GPUs in desirable, lucrative segments. Intel, Apple and nVidia have seen to that, shutting AMD out of segments in which it used to have respectable clout.
That leaves AMD with big headaches in the form of lots of CPUs and GPUs that it can't offload to OEMs at any price. It could write them off and pay for destruction and disposal or it could find an alternate market for the chips and dump them at or near cost to save the disposal costs and humiliation of yet another write down.
That's where consoles come in. AMD has a bunch of chips no one is willing to put into PCs or a laptops due to their markedly inferior performance compared to alternatives. Console makers lose money (subsidize) every single console, so historically have been willing (and economically able) to pay only rock bottom pricing on components (chips, storage, power supplies, etc.) that go into consoles. Console workloads are much lighter and less varied than those of a general purpose PC, so top performance of the components is less of a concern to the console maker.
You have AMD that has chips it can't sell anywhere else and console makers who can't afford to pay PC/Laptop prices for superior Intel and nVidia CPUs and GPUs. It's a match made in heaven. AMD avoids an inventory writedown and the console makers lose less per console by saving money on the chips. Most significantly there's ample evidence that this (the dumping of unwanetd CPUs and GPUs into the console market by AMD) is already in evidence. In Q3 AMD chip margins fell from ~45% to just 31%. In Q4 AMD's margins were cut in half, dropping from a miserable 31% to a laughable 15%.
Rapid margin erosion strongly suggests that AMD has been forced to migrate its chips out of higher margin segments where it cannot compete with Intel and nVidia, into lower margin high volume segments where it can dump its excess inventories.