Imagination in trouble as Apple slashes its royalty rate


Apple patches things up with mobile GPU maker Imagination
Imagination has confirmed that Apple will no longer use its graphics processing technology.
Photo: Apple

Not only is graphics chip designer Imagination Technologies getting kicked to the curb so Apple can bring its chipmaking technology in-house, but the company is also set to have its remaining royalty rate cut.

According to a new report, Apple is planning to pay Imagination just one-third of its current royalty rate as it winds down its supply deal with the British company over the next two years.

UBS analysts think that doing so is likely to cause Imagination to have to undergo cost-cutting moves, since Apple presently represents more than half the company’s total income. The deal Apple reportedly plans to broker involves paying closer to $0.10 per chip, rather than the $0.30 it currently pays. This is the rate Imagination charges customers such as MediaTek.

Imagination has previously asked Apple for proof that the GPU it is developing does not make use of intellectual property owned by Imagination, although it says that, “Apple has declined to provide” this.

This time last year, Apple confirmed it had held preliminary takeover talks with Imagination, but opted against making an offer for the company. In October, it was reported that Apple had turned to poaching Imagination talent to build its own GPU team.

Imagination is reportedly just one of several companies Apple may sever ties with in the name of “in-sourcing” to give it more control and better profit margins. In addition, power-management chip company Dialog Semiconductor and Synaptics, which owns iPhone display driver chipmaker company Renesas, may also be up for chop.

Source: Reuters


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