MADISON, Wis. -- Imagination Technologies Group disclosed Thursday (May 4) that it has started a "dispute resolution procedure" with Apple, as their negotiations have stalled. With the potential loss of Apple -- which accounts for about half of the U.K.-based company’s revenue -- looming large, Imagination is fighting for its survival.
Not coincidentally, the company revealed plans to sell two businesses. Going on the block are MIPS, whose CPU business is focused on embedded processor market, and Ensigma, which offers IP licensing for connectivity in mobile computing.
These moves mark the end of Imagination’s ambitious dream to compete with its rival ARM as an IP licensing powerhouse with GPU, CPU and connectivity technologies.
Imagination today says it now hopes to “concentrate its resources on PowerVR and strengthen Imagination’s balance sheet.”
Despite Imagination’s stated plan to sell off MIPS and Ensigma to save its PowerVR business, many industry observers believe Imagination might eventually go up for sale.
Kevin Krewell, principal analyst at Tirias Research, told EE Times, “I expect that after the issues with Apple are resolved, Imagination itself will be sold. The results of the Apple resolution will determine Imagination's value at that time.”
Disputes with Apple
Imagination said last month that Apple had notified the firm it was developing its own graphics chips, Apple would no longer use Imagination's processing designs in 15 months to two years’ time.
Imagination’s discussions with Apple thus far apparently yielded very little progress. In a statement issued Thursday, the company said, “Imagination has been unable to make satisfactory progress with Apple to date regarding alternative commercial arrangements for the current licence and royalty agreement.” Imagination “has therefore commenced the dispute resolution procedure under the licence agreement with a view to reaching an agreement through a more structured process,” the company added.
Asked what such “a more structured process” entails, an Imagination spokeswoman declined to elaborate.
In April, Imagination expressed doubts that Apple could go it alone without violating Imagination’s patents. Although industry analysts foresaw possible legal action against Apple, sources tell EE Times that Imagination isn’t currently planning any lawsuits.
It’s widely understood that Imagination would face major challenges proving that Apple is infringing Imagination’s graphics engine IP. This is largely because Apple’s own new graphics chips -- which Apple claimed do not use Imagination’s processing designs -- won’t reach the market for more than a year. While Apple has every incentive to stall negotiations, it’s hard to imagine how Imagination could possibly make any breakthrough in discussions with Apple.
Who will buy MIPS?
Over the past month, Imagination’s board reviewed its business composition and decided dump MIPS and Ensigma. Industry debate now shifts inevitably to who might eventually acquire MIPS.
Krewell told us, “MIPS is still a classic CPU design with scalability and an established software ecosystem.” Krewell expects that a design house (such as Cadence, Mentor or Synopsys) will look at it.
He added, “It's also possible that a leading customer like Microchip would consider buying out its license. MIPS has also been used by a number of Chinese vendors and it could be bought by a Chinese entity.” In Krewell’s opinion, there's “still an opportunity for MIPS in the market, even though it's a diminished one.”
Imagination's First Half, FY2017 Results
PowerVR generated 67 percent of Imagination's revenue in 1H, FY17, which ended in Dec., 2016. (Source: Imagination)
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