Imagination Technologies slams Apple for ditching its iPhone GPU tech in earnings call
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.
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.
Comments
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.
They're no longer in the IT business, it's finance only, like a credit card company.
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.
Imagination is way out of line. Apple doesn’t need to prove anything, they do.
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.
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?
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 😳
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.
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.
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.