Apple Hits Back at Supplier Imagination for ‘Inaccurate and Misleading’ Statements in Contract Dispute

Apple today hit back at disgruntled chipmaker Imagination Technologies for questioning whether it can develop new graphics technology without using the supplier's intellectual property, calling the British firm's response to Apple's decision to part ways with it "disappointing, inaccurate, and misleading."

Back in April, Imagination Technologies announced that Apple had told the U.K. firm it planned to stop using its graphics processors in consumer devices over the next two years. The news came as a shock to investors and the company's shares fell by 60 percent on the day.


At the same time, the company hit back at Apple, claiming that it doubted the tech giant could go it alone without violating Imagination's patents, intellectual property, and confidential information. One month later, the company opened a "dispute resolution procedure" with Apple after failing to resolve the disagreement.

On Friday, Apple responded to the disgruntled graphics chip supplier by claiming that the firm had known for nearly two years that it was winding down the relationship. In an email statement received by Bloomberg, Apple said it first informed Imagination in late 2015 that it would no longer be buying the U.K. company's latest technology, but that it would still use its older systems.

Apple claimed that it told Imagination in 2016 that it was further reducing the relationship by initiating a clause in its contract that allows Apple to pay a lower royalty rate for using a smaller amount of intellectual property. By February 2017, Apple said it had told Imagination it was ending the relationship altogether and would no longer be making any royalty payments in up to two years' time.

Apple's statement contradicts those made by Imagination, notes Bloomberg. Last week, Imagination CEO Andrew Heath said the company was informed by Apple at the end of March "that they were certain" that products to be released in 2018 or early 2019 will no longer use Imagination's intellectual property. But Apple claimed the firm had known for longer.
"We began working with Imagination in 2007 and stopped accepting new IP from them in 2015," Apple said. "After lengthy discussions we advised them on February 9 that we expected to wind down our licensing agreement since we need unique and differentiating IP for our products. We valued our past relationship and wanted to give them as much notice as possible to adapt their future plans."
Imagination has yet to comment on Apple's statement, but the supplier's shares fell by up to 8 percent on Friday U.K. trading.

News that Apple would no longer be relying on its processors delivered a major blow to Imagination Technologies, which traditionally provides the PowerVR graphics architecture found in Apple's full range of iOS devices and receives a small royalty on every sale, which amounts to up to half of the British firm's revenue.

The company put itself up for sale in June. The formal sale process is still ongoing, despite a successful restructuring and a return to profitability for the company. Apple is unlikely to make an offer, according to a person familiar with the matter who spoke to Bloomberg.


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Apple Hits Back at Supplier Imagination for ‘Inaccurate and Misleading’ Statements in Contract Dispute

Apple today hit back at disgruntled chipmaker Imagination Technologies for questioning whether it can develop new graphics technology without using the supplier's intellectual property, calling the British firm's response to Apple's decision to part ways with it "disappointing, inaccurate, and misleading."

Back in April, Imagination Technologies announced that Apple had told the U.K. firm it planned to stop using its graphics processors in consumer devices over the next two years. The news came as a shock to investors and the company's shares fell by 60 percent on the day.


At the same time, the company hit back at Apple, claiming that it doubted the tech giant could go it alone without violating Imagination's patents, intellectual property, and confidential information. One month later, the company opened a "dispute resolution procedure" with Apple after failing to resolve the disagreement.

On Friday, Apple responded to the disgruntled graphics chip supplier by claiming that the firm had known for nearly two years that it was winding down the relationship. In an email statement received by Bloomberg, Apple said it first informed Imagination in late 2015 that it would no longer be buying the U.K. company's latest technology, but that it would still use its older systems.

Apple claimed that it told Imagination in 2016 that it was further reducing the relationship by initiating a clause in its contract that allows Apple to pay a lower royalty rate for using a smaller amount of intellectual property. By February 2017, Apple said it had told Imagination it was ending the relationship altogether and would no longer be making any royalty payments in up to two years' time.

Apple's statement contradicts those made by Imagination, notes Bloomberg. Last week, Imagination CEO Andrew Heath said the company was informed by Apple at the end of March "that they were certain" that products to be released in 2018 or early 2019 will no longer use Imagination's intellectual property. But Apple claimed the firm had known for longer.
"We began working with Imagination in 2007 and stopped accepting new IP from them in 2015," Apple said. "After lengthy discussions we advised them on February 9 that we expected to wind down our licensing agreement since we need unique and differentiating IP for our products. We valued our past relationship and wanted to give them as much notice as possible to adapt their future plans."
Imagination has yet to comment on Apple's statement, but the supplier's shares fell by up to 8 percent on Friday U.K. trading.

News that Apple would no longer be relying on its processors delivered a major blow to Imagination Technologies, which traditionally provides the PowerVR graphics architecture found in Apple's full range of iOS devices and receives a small royalty on every sale, which amounts to up to half of the British firm's revenue.

The company put itself up for sale in June. The formal sale process is still ongoing, despite a successful restructuring and a return to profitability for the company. Apple is unlikely to make an offer, according to a person familiar with the matter who spoke to Bloomberg.


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Imagination Technologies Remains For Sale as No Progress Made in Dispute With Apple

British chipmaker Imagination Technologies today disclosed that its formal sale process continues, despite successful restructuring and a return to profitability in its fiscal year ended April 30, 2017. It also said it is reviewing options in its dispute with Apple, but added that no progress has been made.


"The management team have done a tremendous job over the last year, turning the business around, returning it to profitability and with a clear strategy for growth," said chairman Peter Hill. "It's therefore highly regrettable that this progress has been so severely impacted by the stance taken by Apple."

Earlier this year, Apple informed Imagination that it plans to stop using the company's patented PowerVR graphics technology in devices like the iPhone in between 15 months and two years. Accordingly, Apple said it will stop making royalty payments to the British firm by late 2018 or early 2019.

Apple instead plans to use its own in-house graphics architecture, eliminating the need to pay royalties for the PowerVR technology.

Apple is Imagination's biggest customer, reportedly accounting for up to half of the company's revenue. The chipmaker's stock plunged as much as 70 percent after it revealed Apple's plans, as analysts predict the company could become loss-making within two years without royalties from iPhone sales.

Imagination insists that Apple is making "unsubstantiated assertions," as the iPhone maker has supposedly yet to present any evidence to prove that it will no longer require the British firm's technology, at least not without violating its patents, intellectual property, and confidential information.

"Apple's unsubstantiated assertions and the resultant dispute have forced us to change our course, despite the clear progress we have been making," said Andrew Heath, CEO of Imagination Technologies.

Imagination said, following interest in the entire company, it decided to initiate a formal sale process on June 22. The chipmaker today disclosed that preliminary discussions continue with potential bidders.


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Imagination Technologies Up for Sale Following Apple Dispute

British chip maker Imagination Technologies, which lost 70 percent of its value following a dispute with Apple, has put itself up for sale, it was reported on Thursday (via Reuters).

Apple informed Imagination in April that it plans to stop using the company's PowerVR graphics technology over the next two years as it begins using its own in-house chips for products like the iPhone and iPad. The news came as a blow to the firm whose contract with Apple accounts for half its revenue.


"Imagination Technologies announces that over the last few weeks it has received interest from a number of parties for a potential acquisition of the whole group," it said.

"The board of Imagination has therefore decided to initiate a formal sale process for the group and is engaged in preliminary discussions with potential bidders."
When Apple announced it was ending its supply deal with Imagination the British firm's shares plunged 70 percent. Imagination said at the time that it doubted Apple could go it alone without violating patents, intellectual property, and confidential information.

In May the group said it had started a "dispute resolution procedure" with the American tech giant. The company said it was also selling MIPS and Ensigma – two of its three major businesses – in an attempt to shore up cash, allowing for a renewed focus on its PowerVR graphics technology. Imagination said on Thursday that it had received proposals for both businesses.

Apple has been a licensee and stakeholder in the company since at least 2008, and became a key investor in mid-2009 after raising its stake in the firm to 10 percent. Apple was reportedly in "advanced talks" to acquire Imagination Tech late last year after the British chip maker announced job cuts.

Despite confirming the talks, Apple later decided not to make a buyout offer, and instead recruited several Imagination employees as part of its efforts to build an in-house graphics team.


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Imagination Tech Starts ‘Dispute Process’ With Apple Over Chip Licensing Rights

Long-time Apple chip supplier Imagination Technologies has started a "dispute resolution procedure" with Apple after failing to resolve a disagreement over licensing between the two companies (via Reuters).

Last month, Apple informed the British chipmaker that it plans to cease using its graphics technology in consumer devices over the next two years as it transitions to using its own in-house chips for products including iPhones and iPads.


The news came as a major blow to Imagination, which receives a small royalty on every device sold, amounting to up to half of its revenue. The company's shares fell by 70 percent on the day and have barely recovered.

Imagination stated in April that it doubted Apple could go it alone without violating Imagination' patents, intellectual property and confidential information. On Thursday it said it had been unable to make satisfactory progress with Apple on an alternative commercial arrangements for the current license and royalty agreement.
"Imagination has been unable to make satisfactory progress with Apple to date regarding alternative commercial arrangements for the current licence and royalty agreement," it said.

"Imagination has therefore commenced the dispute resolution procedure under the licence agreement with a view to reaching an agreement through a more structured process. Imagination has reserved all its rights in respect of Apple's unauthorised use of Imagination's confidential information and Imagination’s intellectual property rights."
Analysts have predicted that Imagination will become loss-making by 2019 without any Apple royalties to fall back on, and that the firm will have to work out a cost-cutting strategy if it is to survive.

The company has revealed it is selling MIPS and Ensigma – two of its three major businesses – in an attempt to shore up cash, allowing for a renewed focus on its PowerVR graphics technology.

"While the Group has continued to invest in its MIPS and Ensigma businesses, it has now decided to actively market these businesses for sale, concentrate its resources on PowerVR and strengthen Imagination's balance sheet," it said.


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Apple May Cut Imagination Tech Royalties By Two Thirds as it Winds Down Chip Deal

Apple is likely to pay out just one third of its current royalty rate to Imagination Technologies as it begins winding down its supply deal with the chipmaker over the next two years, according to analysts at UBS financial services (via Reuters).

The prediction includes the expectation that British-based Imagination will become loss-making by 2019 without any Apple royalties to fall back on, and that the firm will have to work out a cost-cutting strategy if it is to survive.


Earlier this month, shares in Imagination plunged after Apple informed the company that it plans to stop using its graphics technology in Apple consumer devices in up to two years' time.

The news delivered a huge blow to Imagination Technologies, which provides the PowerVR graphics architecture found in Apple's full range of iOS devices and receives a small royalty on every sale, amounting to up to half of the British firm's revenue.

Imagination said Apple had made the decision because the tech giant was developing its own independent graphics processing chips, which would reduce its reliance on the company.

Imagination is reportedly in talks with Apple over a new licensing deal, but UBS analysts forecast that Apple is likely to bring down the royalty rate, currently at around $0.30 per unit, to closer to $0.10, which is the rate Imagination currently charges customers such as MediaTek.

Valuing Imagination based on discounted cash flows, UBS estimated the company's Apple business is worth 75 pence per share. Without Apple, the stock tumbles to just 35 pence. That totals 110 pence, using a sum-of-the-parts valuation. Imagination has a market capitalization of $370 million – 2,000 times smaller than Apple's $741 billion valuation – while its stock currently trades at 103.19 pence.


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Imagination Tech Shares Plunge as Apple Ends Deal With British Firm

Shares in Imagination Technologies plunged by 70 percent on Monday, after Apple informed the British firm that it plans to stop using its graphics technology in Apple consumer devices in up to two years' time.

Imagination said Apple had made the decision because the tech giant was developing its own independent graphics processing chips, which would reduce its reliance on the company.


The news delivers a major blow to Imagination Technologies, which traditionally provides the PowerVR graphics architecture found in Apple's full range of iOS devices and receives a small royalty on every sale, which amounts to up to half of the British firm's revenue.

In a press release posted on the company's website, Imagination said it doubted that Apple could go it alone without violating Imagination' patents, intellectual property and confidential information.
Apple has used Imagination’s technology and intellectual property for many years. It has formed the basis of Graphics Processor Units ("GPUs") in Apple’s phones, tablets, iPods, TVs and watches. Apple has asserted that it has been working on a separate, independent graphics design in order to control its products and will be reducing its future reliance on Imagination’s technology.

Apple has not presented any evidence to substantiate its assertion that it will no longer require Imagination’s technology, without violating Imagination’s patents, intellectual property and confidential information. This evidence has been requested by Imagination but Apple has declined to provide it.
The firm said that Apple's notification had triggered talks on alternative commercial arrangements for the current license and royalty agreement.

Apple has been a licensee and stakeholder in the company since at least 2008, and became a key investor in mid-2009 after raising its stake in the firm to 10 percent. Apple paid Imagination license fees and royalties totaling 60.7 million pounds for the year to end-April 2016 and is expected to pay about 65 million pounds for this year, Imagination said.

Late last year it was reported Apple was in "advanced talks" to acquire Imagination Tech after the British chip maker announced job cuts. Despite confirming the talks, Apple subsequently decided not to make a buyout offer, but several Imagination employees were recruited by Apple as part of its efforts to build an in-house graphics team.


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Future iPhones Could Support 4K Graphics and Much Faster Gaming With PowerVR Furian

Imagination Technologies today announced PowerVR Furian, its next-generation GPU architecture that promises significant improvements in graphics performance and power efficiency that could benefit future iPhones.


PowerVR Furian architecture will offer up to a 70-90% improvement in real-world gaming performance by density, including 35% better shader performance and 80% better fill rate, compared to a similar sized and clocked Series7XT Plus GPU based on current-generation PowerVR Rogue architecture.

Meanwhile, with lower power consumption, an iPhone with PowerVR Furian architecture could have longer battery life for graphics-related tasks.

Imagination Technologies confirmed to MacRumors that PowerVR Furian architecture supports 4K graphics, laying the foundation for future iPhone models to support higher-resolution gaming and other graphics-intensive tasks such as augmented or virtual reality and machine learning.
“We created Furian to address a new class of emerging applications, with a focus on efficient scalability that will extend to multiple generations of PowerVR IP cores. We’re excited to start rolling out the first 8XT IP cores based on Furian. These cores will further cement the leadership of PowerVR at the high end of mobile performance.”
Apple's graphics chip in iPhone 7 and iPhone 7 Plus is a custom-designed version of the Series7XT Plus, and many earlier iPhone models are also based on PowerVR Rogue architecture, so it is reasonable to assume that future iPhone models may use at least some of the PowerVR Furian architecture.

Imagination Technologies said the first GPUs based on PowerVR Furian, such as the Series8XT, will be announced in mid 2017, but don't expect the architecture to power the so-called "iPhone 8" this year. Imagination noted Furian-based mobile devices might not arrive until the end of 2018 at the earliest.

Apple has been a licensee and stakeholder in Imagination Technologies since at least 2008. The two companies have worked closely together over the years, with Apple being a key investor in the England-based chip designer since it raised its stake in the company to roughly 10% in 2009.

Apple was actually rumored to acquire Imagination Technologies last year, but it later said it did not plan to make an offer at the time. Nevertheless, in recent months, Apple has recruited at least two dozen employees from the chip designer, including former COO John Metcalfe, possibly to build out an in-house GPU team.


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