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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  • Meteor2 - Friday, May 05, 2017 - link

    STBs are a very big market. TiVo, Sky etc. Now 'sticks' like Chromecast and Fire TV. No reason a Chromecast couldn't contain a MIPS SoC. Reply
  • webdoctors - Thursday, May 04, 2017 - link

    SAD.

    Sucks when a company fails, but if folks learn anything from Venezuela, its that you should diversify and not rely on one product/customer. The Santa Clara building is right across the street from Nvidia, so it won't change the employees commute time.

    I'm a huge fan of the MIPS CPU, it sounds like IMG has all the IP to make a nice SoC, too bad their liquidating.

    It sounds like they're in arbitration right now and heading to court to sue Apple. I love how businesses use flowerly language to make things confusing:

    "A small, British Apple Inc. supplier said Thursday that it had entered into a formal dispute-resolution process with the Silicon Valley giant and intends to sell a large part of its business amid a patent fight with Apple."

    This translates to small company selling assets to hire lawyers for a long and protracted legal battle with giant. Wish folks would just write clearly rather than obfuscate with extra words.
    Reply
  • Flunk - Thursday, May 04, 2017 - link

    Honestly, I think "potential alternative commercial arrangements" is a euphemism for trying to sell themselves to Apple. Apple doesn't want MIPS or Ensigma, they want the graphics division and they can get it a lot cheaper now, after they've announced they're dropping Imagination's GPU tech. Reply
  • RaduR - Thursday, May 04, 2017 - link

    Their 2nd largest customer if I am not mistaken is Qualcomm (for their Atheros line) .
    This would make an interesting buy for Qualcomm for MIPS part of business.

    Also with their knowledge maybe they can make something worth of it. Qualcomm + MIPS may be something to wath for.

    On the other end INTEL is using Imagination GPUs , unfortunately they are out of mobile space.

    But with MIPS / x86 an especially PowerVR they may be able to do some kind of comeback.

    Intel has HUGE pockets this would be nothing compared to tehir R&D spending.

    Would you imagine MIPS cpu & PowerVR GPU with Intel foundries of future 7nm.....
    Reply
  • RaduR - Thursday, May 04, 2017 - link

    Their 2nd largest customer if I am not mistaken is Qualcomm (for their Atheros line) .
    This would make an interesting buy for Qualcomm for MIPS part of business.

    Also with their knowledge maybe they can make something worth of it. Qualcomm + MIPS may be something to wath for.

    On the other end INTEL is using Imagination GPUs , unfortunately they are out of mobile space.

    But with MIPS / x86 an especially PowerVR they may be able to do some kind of comeback.

    Intel has HUGE pockets this would be nothing compared to tehir R&D spending.

    Would you imagine MIPS cpu & PowerVR GPU with Intel foundries of future 7nm.....
    Reply
  • melgross - Saturday, May 06, 2017 - link

    Ive been trying to understand where MIPS comes into this. It's been dying for a long time. If anyone thinks it will resurrect itself, they should think again.

    Most all development is for ARM/x86. X86 on the high end, and ARM for the low end, though it's pushing into the lower x86 space, and I don't mean Atom, where Apple's SoCs, at least, are already well ahead of that.

    So where does this leave MIPS? I'm not willing to fantasize about what would happen if Qualcomm or Samsung, or anyone else bought it, but rather what the software development community will think. Why spend more time and development dollars on yet another chip family? Money has been tight lately, and I think it's a hard sell.

    So some companies use it. But out of that user space, where will substantial sales come from? What can MIPS do so much more effectively, that pouring a whole bunch of dollars at it will pay off? And what really superior features are there that hardware integration into ARM based chips would be worth while, assuming that whatever ARM license companies have will even allow them to do it?
    Reply
  • Jumangi - Thursday, May 04, 2017 - link

    Lawsuit incoming in 3...2...1... Reply
  • Laststop311 - Thursday, May 04, 2017 - link

    Really do not want to see them go. I hope they succeed. They have the best performing low wattage gpu's on the market. People need to put the work in and switch to imagination gpu's even if they are more work to integrate into arm cpu's as arm has already done the work integrating mali gpu's. Quit being cheap, all soc's other than qualcomms should be using imagination and imagination is even better than adreno. Reply
  • PixyMisa - Thursday, May 04, 2017 - link

    Seems like a good takeover target for Samsung or Huawei. Reply
  • yeeeeman - Friday, May 05, 2017 - link

    As someone said below, it is sad. At the same time, much of the blame can be attributed to them because they made the mistake to trust Apple too much. They should have tried to pursue as many manufacturers as possible to use their IP, because, lets face it, they can make a fast GPU for sure. I think in business it is imperative that at any given time you have a plan B, because plan A, as good as it might seem can go to the drain when you expect the least. And you are left with this kind of situation, where a great graphics IP (and not only) is in danger of going out of business. Still, I am sure that in the case this happens, they will be bought fast by some big company. Reply

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