Imagination Hit by Apple Decision

UK technology developer, Imagination Technologies, had a bad week as it had to announce that Apple had said that it would not use the Imagination ip in its products from 2019. Imagination has been a supplier of ip cores to Apple for GPU use for a number of years – around 2008 or 2009 according to our database. Apple also has a shareholding in Imagination of 8% – a shareholding it has had for some years. Apple said that it planned to design its own GPUs.

Imagination’s share price dropped by two thirds and the value of the company dropped to around $300 million from more than $950 million before the announcement. Apple is currently paying around $75 million per year to Imagination in licence fees.

Imagination came out fighting and said that it had asked Apple for assurances that it would not infringe the company’s patents and said it had received no response. It believes that Apple will struggle to develop its own solutions without infringing. We have seen reports that Apple have recruited around a dozen engineers from Imagination.

Analyst Comment

This is not good news for Imagination which we have been tracking since 1994, when it was known as VideoLogic. Our first report on the company was in 1994, when we reported that the firm had done a deal to co-develop a 3D games console with NEC’s chip business. Indicating its future strength, in that report the company highlighted that its chip design was ideal for hand-held games devices.

Clearly, this can’t be just a financial issue for Apple. $75 million is nothing for Apple. If it really worried about the money, it could buy Imagination easily with its vast overseas cash resources. It must be that the company sees that the Imagination GPU technology must either be less powerful compared to competitors than it was, or that Apple has some kind of revolutionary concept that it feels can make the Imagination technology look weak. Apple must be confident that it can execute its own design as it has ‘burned its bridges’ with Imagination. (BR)