Just over a month ago, Imagination Technologies dropped the bombshell announcement that their largest customer, Apple, would be phasing out their use of Imagination’s GPU IP in their SoC GPU designs. Specifically, Apple expects that they will no longer be using Imagination’s IP for new products in 15 to 24 months. This put Imagination in a significant pinch, as Apple is a full half of the company’s overall revenue and 69% of their GPU revenue. As a result, Imagination stands to lose the bulk of their GPU revenue starting two years down the line.

At the time the company announced that they would be engaging with Apple to discuss “potential alternative commercial arrangements” to the companies’ current agreement, and now a month later, Imagination has published a further update on that. Discussions in the last month have not made what Imagination considers satisfactory progress, and as a result they are escalating the discussion to go through the dispute resolution clause of their current contract.

Just what this will entail is unknown since the contract isn’t public, but as Imagination so delicately puts it, they’re seeking to reach an agreement with Apple “through a more structured process.” It’s unknown what will happen if this process fails, but for the moment it does not appear that a further escalation is off the table. If nothing else, Imagination will have the option of taking Apple to court for patent and IP violations once the current agreement expires. Though the company is also making it clear that they’d rather not go that far; it’s hard to imagine Imagination wants to go toe-to-toe with the most valuable company in the world, especially once their revenue takes a significant hit.

Meanwhile in Imagination’s bombshell of the month, alongside today’s Apple update, the company is also announcing that they are going to be refocusing the company to focus entirely on the GPU business. To that end, the company is putting their remaining non-GPU businesses – the MIPS CPU business and the Ensigma communications business – on the market. Imagination is not listing an expected price for either business at this time – or if they have already lined up any suitors – but the company believes that given the improved fiscal performance of these two divisions, that they are in a good position to sell the two divisions.

MIPS and Ensigma have been two of Imagination’s major efforts to diversify the company away from their original core business of GPU IP. MIPS was acquired by Imagination for $60M $100M in 2012 – about 4.5 years ago – while Ensigma has been part of the company since the turn of the millennium. MIPS in particular has been a long-running architecture in the embedded space, and along with x86, is the other alternative CPU architecture supported by Google’s Android OS. So the news that the engineering team and product portfolio behind the #2 architecture in mobile and embedded are being sold is a major development. MIPS and Ensigma are now joining Imagination’s Pure business, which is also in the process of being sold off.

In announcing this latest sale, Imagination noted that they are doing this to strengthen their balance sheet. At the risk of reading too much into a short fiscal statement, this doesn’t sound like a move that they are making with gusto, but rather something they have to do to save the company. Selling these divisions means that the company’s efforts to diversify have failed, but given their situation, it appears that focusing on their core competency is their best bet. Still, it does risk certain efforts in the long-term, such as Imagination’s OmniShield virtualization security technology, since that was a synergy play between owning both CPU and GPU IP.

As for Imagination’s GPU business, the sale of MIPS and Ensigma means that Imagination will be transitioning to a pure-play GPU IP provider. The company continues to develop new IP here, including the recent Furian architecture, so they have products. The question that remains is how they will survive (and ideally thrive) a post-Apple world; even if the companies sign a new agreement, Imagination’s fate is going to be based on how well they can sell GPU IP to the remaining SoC vendors, particularly in the STB and Android mobile spaces. With all other businesses in the process of being sold, the fate of Imagination’s GPU business will determine the fate of Imagination itself.

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  • melgross - Saturday, May 6, 2017 - link

    It's not a matter of trust. Are you saying that when you're a customer of a company, you're always a customer? You've never changed?

    This was coming at some point. They had to know something was up. Apple kept adding more and more of their own IP to the mix. Year after year. And they licensed out special designs to Apple for several years, at least. It's been a while since the first report here said that the specific design Apple was using wasn't on IMs product sheets.
  • Gothmoth - Friday, May 5, 2017 - link

    rest in peace.... who cares
  • 037marc - Friday, May 5, 2017 - link

    Rule number one is when you become an Apple supplier, you need to invest and broaden your client portfolio, with the Apple supplier money.
  • melgross - Saturday, May 6, 2017 - link

    When you become a supplier to ANY major company.
  • NetMage - Sunday, May 7, 2017 - link

    Nothing special about Apple here.
  • Tams80 - Saturday, May 6, 2017 - link

    It's a real shame, as they were the only real 'other' option in terms of architecture. MIPS and their GPUs offered some diversity to ARM's offerings and x86. A few more years may have seen it do well. Oh well.
  • Vishalaestro - Saturday, May 6, 2017 - link

    It's very good time for samsung and huawei as they can use Imagination for their exynos and kirin line of cpu's ,the mali GPU wasn't powerful as adreno in recent times .
  • VirusTheory - Saturday, May 6, 2017 - link

    They have quite a bit of GPU IP from the early days of GPU's if IIRC. Hopefully this and new IP will be enough to keep them alive . Those Kyro GPU's were awesome !
  • ericore - Sunday, May 7, 2017 - link

    "Apple uses Imagination's designs to make the GPUs for the iPhone, iPad and Apple Watch, but Apple has been working on its own graphics design on the side." Quote from Wired.com
    Let's put Imagination's lack of foresight aside for now. The problem they have is strictly positional. They unintentionally made themselves look weak. If they were to sell their patent porfolio or merge now, the offers would be also be weak. Imagination has their work cut out for them to regain better positioning which should ultimately be their top priority. Once positioning is re-established, options will open up. Hopefully that happens before they run out of money, haha.
    The clock is ticking, they are sinking but are not sunk yet.

    is terrible however because neither Nvidia nor AMD has penetrated the phone market for GPUs, I expect them to survive for several years if they choose to.
  • Tams80 - Sunday, May 7, 2017 - link

    AMD used to have mobile GPUs, they sold that part of their business to Qualcomm though.

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