Imagination Technologies slams Apple for ditching its iPhone GPU tech in earnings call

Posted:
in General Discussion edited July 2017
Apple's previous chip manufacturer Imagination Technologies has returned to profitability on paper, but has made no progress with Apple regarding its contention that the iPhone manufacturer won't be able to make its own GPU technology without infringement.




In Imagination's latest earnings report, CEO Andrew Heath referenced Apple's declaration that it would cease licensing, and paying for, his company's GPU technology multiple times. Imagination continues to refute claims that Apple will be able to develop its own technology without infringing on its intellectual property, and said that because of Apple's moves, it had to change course on a recovery plan.

"Apple made an unsubstantiated claim, which obliged us to inform the markets, leading to a significant decrease in our share price. The claim has led us to invoke a contractual dispute resolution procedure and has created significant uncertainty with respect to our business, including our employees," said Heath. "We do not believe this to be acceptable business practice nor in line with Apple's own ethics statements regarding suppliers."

Imagination is the creator of mobile graphics processing architectures, most notably the PowerVR architecture, which is used in a number of smartphones, tablets, and other compact devices. Apple uses the company's architecture in many of its products, including iPhones, iPads, the Apple TV, Apple Watch, and iPods.

Apple announced in the beginning of April that it would stop using Imagination's technology within two years. The UK firm's shares plunged in value by more than 60 percent in the immediate wake of the announcement, and 70 percent to date.

Apple was said to be in talks to acquire Imagination early last year, though ultimately no such deal was made. Apple has asserted that it has been "working on a separate, independent graphics design in order to control its products."

As a result of Apple's withdrawal, Imagination offered up its MIPS and Ensigma businesses to concentrate on the imminent PowerVR Furian architecture. However, in the end of June, Imagination declared that it had received interest from a number of parties in the entire company.

Apple's license fees and royalties represented revenue of $75.8 million for the 2015-2016 financial year, and rose to approximately $81 million for the fiscal year that ended on April 2017.

While evidence supporting Apple's claim that it can produce its own GPU for mobile devices has been requested by Imagination, Apple has declined to provide any to the company. Imagination reiterated in its earnings that Apple also has not accepted overtures from Imagination for potential alternative commercial arrangements for continued licensing.

Imagination may have returned to profitability based on continuing operations, but is still taking a hit from discontinued operations -- but less than that of a year ago. The impact of the discontinued operations will diminish as the fiscal year continues.
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Comments

  • Reply 1 of 25
    tipootipoo Posts: 1,144member
    They had too many of their eggs in one basket, sucks but that's the way it goes. 

    I don't think Apple did much wrong here - Imagination is surely ahead of where they would have been without Apple money for the last decade. 
    netmageSoli
  • Reply 2 of 25
    rob53rob53 Posts: 3,257member
    Apple's license fees and royalties represented revenue of $75.8 million for the 2015-2016 financial year, and rose to approximately $81 million for the fiscal year that ended on April 2017. 

    I would have thought licensing fees would have been much higher but considering the number of iPhones and iPads sold during 2016 (~250M, guessing based on several sites), that's only 30-cents/iOS device. Qualcomm must have been charging a whole lot more. I have no problem with 30-cents for an important component like the GPU, which isn't a standards-based device.
    Soli
  • Reply 3 of 25
    larryjwlarryjw Posts: 1,031member
    Imagination is now merely a shell corporation. It does not make stuff. It merely attempts to collect licensing fees on past efforts. 

    They're no longer in the IT business, it's finance only, like a credit card company. 

  • Reply 4 of 25
    leavingthebiggleavingthebigg Posts: 1,291member
    Each time I read a statement made by Imagination about Apple's GPU, I wonder when Imagination will accept it is the only company talking and talking negatively about a customer that gave an 18-24 months licensing contract termination notice. The path Apple took with Imagination hurts. No doubt. The path Apple could have taken is give a licensing contract termination notice as the Apple GPU was being presented to the world. 

    netmagetdknoxwatto_cobrabshankanton zuykov
  • Reply 5 of 25
    ksecksec Posts: 1,569member
    rob53 said:
    Apple's license fees and royalties represented revenue of $75.8 million for the 2015-2016 financial year, and rose to approximately $81 million for the fiscal year that ended on April 2017. 

    I would have thought licensing fees would have been much higher but considering the number of iPhones and iPads sold during 2016 (~250M, guessing based on several sites), that's only 30-cents/iOS device. Qualcomm must have been charging a whole lot more. I have no problem with 30-cents for an important component like the GPU, which isn't a standards-based device.
    And if you compare you have to paid a maximum of $100M / year to just use HEVC, and many many times more for 4G LTE this ~$80M IP surely seems very little for something as important as GPU.

    But when you put this next to ARM, Apple paid no where near this amount for CPU. ( It is an Architecture License )
    Apple are already customizing alot for the GPU already. They are also not using any services from IMG for drivers development, from Nvidia and AMD we know GPU is nothing without drivers, and drivers are the major cost with GPU development.    

    So they Story goes Apple is not really getting a great deal. They wanted a lower price license, IMG with the new CEO played Hard ball and even wanted to hike the price. Apple did what they could and offer to acquire them. They refuse and here we are.

    P.S - Those words from the IMG CEO about Ethics are pathetic. Apple could switch to Nvidia or ARM Mali should they choose to. And he should count himself lucky he is not in the era when Steve Jobs is still alive.  
    watto_cobracalibshank
  • Reply 6 of 25
    williamhwilliamh Posts: 1,035member
    Apple’s products are usually sold for more than 2 years. To stop using the Imagination technology, they’ll have to replace the whole mobile product line starting very soon. 

    Imagination is way out of line. Apple doesn’t need to prove anything, they do. 
    netmagewatto_cobracalibshankanton zuykov
  • Reply 7 of 25
    tangeytangey Posts: 31member
    IMG as the IP designer and supplier (a finance company...yeah right), would have known quite a ways in advance, even if Apple had not made a formal statement. Licensing happens 12-18 months before the IP ends up in products. It can actually be longer than that.

    So IMG would have realised that Apple was not licensing the next gen technology (They recently announced Furian), and that would have been a clear red flag.
  • Reply 8 of 25
    fracfrac Posts: 480member
    Whilst not enjoying the outlook for a U.K. Company, Imagination has been quite undervalued for many years on the Stock Exchange with many analysts concerned with their 'all eggs in one basket' business ré Apple. So it's not a new thing. 
    I also don't quite get their beef with Apple for two particular reasons.
     One...and correct me if I'm wrong, I can't ever recollect a company getting eighteen to twenty four months notice by their major income source.That amounts to a wake up call. These sort of decisions are usually a closely protected secret up until a time when a major change happens. The disclosure was Imagination's, not Apple's. Instead, they wasted the grace period opportunity by going straight into a public squabble that enforces their difficulties in the eyes of prospective buyers. Not a good move. And sympathy is in short supply in conglomerate-land anyway. 
    Secondly, I don't see what claim they have over IP, until Apple actually produces their graphics solution...which they're still working on so it would be impossible to tell Imagination much at all even if Apple was inclined to share development secrets? Have they learned nothing in the last ten years or so? 
    netmagecalicornchipbshankanton zuykov
  • Reply 9 of 25
    fracfrac Posts: 480member
    larryjw said:
    Imagination is now merely a shell corporation. It does not make stuff. It merely attempts to collect licensing fees on past efforts. 

    They're no longer in the IT business, it's finance only, like a credit card company. 

    Too many merely(s). Nothing is that simple. 
    So all the companies - many hundreds, whose technology is incorporated in the iPhone, are just finance corps acting as bankers while masquerading as IT concerns?
    well that's one way of viewing the industry I suppose  😳
  • Reply 10 of 25
    wizard69wizard69 Posts: 13,377member
    larryjw said:
    Imagination is now merely a shell corporation. It does not make stuff. It merely attempts to collect licensing fees on past efforts. 

    They're no longer in the IT business, it's finance only, like a credit card company. 

    That is complete garbage.   Imagination engineers GPU designs and the sells thise designs to others like Apple.  That is real engineering if a real product.  
    netroxstantheman
  • Reply 11 of 25
    wizard69wizard69 Posts: 13,377member
    williamh said:
    Apple’s products are usually sold for more than 2 years. To stop using the Imagination technology, they’ll have to replace the whole mobile product line starting very soon. 

    Imagination is way out of line. Apple doesn’t need to prove anything, they do. 
    Im certainly expecting Apples new GPU with the new iPhones this falll.  

    However you are wrong about Apple having to prove anything.  They will have to demonstrate that none of Imaginations tech is in the new GPU.   That might be easy or it might be hard depending upons Apples approach.   Interestingly they could partner with the likes of AMD too do a custom chip blowing Imagination out of the water.  If they do the entire architecture in house they have far bigger problems with proof.  
    cali
  • Reply 12 of 25
    wizard69wizard69 Posts: 13,377member
    Apple is cerainly generating interesting rumors for those interested in computer tech these days.  With the Apple GPU all but confirmed, the rumored AI supporting chip and the A10X we have a lot to keep our interests.  

    I have to wonder if Apples dive into GPU design is driven by the desire to integrate AI functionality there.   This would be done to make maximum use of SOC space.  I just have a hard time believing that they would be able to justify a separate AI chip for cell phone usage.  In any event im pretty excited about what is coming this fall in the way of hardware tech.  

    Hardware usually proceeds software by at leastva year or two so the new hardware could suggest what iOS 14 will be like.  We could see some dramatic differences in iOS two years from now.  
    cornchipradarthekat
  • Reply 13 of 25
    polymniapolymnia Posts: 1,080member
    If I lost a client, I don't think I'd choose to air all this publicly. I'd rather update my portfolio to show new prospects what I did for my (soon-to-be) former client. There have to be lots of bit players in the tech world who'd love to work with the firm that engineered the graphics hardware that powered the first 10 years of iPhone's success. 

    But it I suppose there are lots of stake-holders whose compensation is tied to stock performance. They are thinking short term, when a long view is probably better for the company as a whole. 

    Then again, I'm a glass-half-full kinda guy. 
  • Reply 14 of 25
    SoliSoli Posts: 10,038member
    This whole situation is odd since I think Apple still owns about 1/7th of the company.   I know this sucks for Img Tech, but if your largest customer wants or needs something you can't provide they find solutions. Didn't Apple recently talk about machine learning and AR on the GPU? If I were to guess, I don't think this is about the licensing costs. I don't take the bus because it's too costly, I don't take it because it's not getting me from point A to B fast enough.
    edited July 2017 cornchipbshank
  • Reply 15 of 25
    I like how they say that Apple can't make their own GPU without infringing. Apple makes the best ARM chips out there, you think the people who make the best ARM chips couldn't also recruit the people who make the best mobile GPUs? You think those people aren't chomping at the bit to design something when they know the exact use case for it?
    bshank
  • Reply 16 of 25
      If they do the entire architecture in house they have far bigger problems with proof.  
    I believe it is up to Imagination to prove Apple is using their tech. The burden in on Imagination not Apple IB.
    bshankanton zuykov
  • Reply 17 of 25
    stanthemanstantheman Posts: 332member
    Whatever Apple needed to do to supplant Imagination technology in iPhone was likely initiated a couple of years ago, if not sooner.  These things take time. 
    cornchip
  • Reply 18 of 25
    radarthekatradarthekat Posts: 3,855moderator
    polymnia said:
    If I lost a client, I don't think I'd choose to air all this publicly. I'd rather update my portfolio to show new prospects what I did for my (soon-to-be) former client. There have to be lots of bit players in the tech world who'd love to work with the firm that engineered the graphics hardware that powered the first 10 years of iPhone's success. 

    But it I suppose there are lots of stake-holders whose compensation is tied to stock performance. They are thinking short term, when a long view is probably better for the company as a whole. 

    Then again, I'm a glass-half-full kinda guy. 
    In the United States, a publicly held company must disclose any adverse material change in their business, in a timely manner.  I'd guess that same rule would exist in the U.K.  So Imagination would not have been able to just sit on the fact their largest source of revenue has given notice to decline to renew its contract.
    welshdog
  • Reply 19 of 25
    Rayz2016Rayz2016 Posts: 6,957member
    polymnia said:
    If I lost a client, I don't think I'd choose to air all this publicly. I'd rather update my portfolio to show new prospects what I did for my (soon-to-be) former client. There have to be lots of bit players in the tech world who'd love to work with the firm that engineered the graphics hardware that powered the first 10 years of iPhone's success. 

    But it I suppose there are lots of stake-holders whose compensation is tied to stock performance. They are thinking short term, when a long view is probably better for the company as a whole. 

    Then again, I'm a glass-half-full kinda guy. 
    In the United States, a publicly held company must disclose any adverse material change in their business, in a timely manner.  I'd guess that same rule would exist in the U.K.  So Imagination would not have been able to just sit on the fact their largest source of revenue has given notice to decline to renew its contract.
    Yes, the are legally required to disclose, but they're not legally required to destroy their future prospects by whining and threatening to sue a current customer. I'd be wary of working with them if this is how they behave at the end of a contract. 
    edited July 2017 radarthekatanton zuykov
  • Reply 20 of 25
    anton zuykovanton zuykov Posts: 1,056member
    rob53 said:
    Qualcomm must have been charging a whole lot more. I have no problem with 30-cents for an important component like the GPU, which isn't a standards-based device.
    It is not per "an important component, like the GPU".
    It is only a fee for the use of IP (no rhyme was intended).
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