Imagination: Patents & Losing an Essential Contract

As for Imagination, the news is undoubtedly grim, but not necessarily fatal. Imagination has never hidden the fact that Apple is their most important customer – even labeling them as an “Essential Contract” in their annual report – so it’s no secret that if Apple were to leave Imagination, it would be painful.

By the numbers, Apple’s GPU licensing and royalties accounted for £60.7M in revenue for Imagination’s most recent reporting year, which ran May 1st, 2015 to April 30th, 2016. The problem for Imagination is that this was fully half of their revenue for that reporting year; the company only booked £120M to begin with. And if you dive into the numbers, Apple is 69% of Imagination’s GPU revenue. Consequently, by being dropped by Apple, Imagination has lost the bulk of their GPU revenue starting two years down the line.

Imagination Financials: May 1st, 2015 to April 30, 2016
  Company Total GPUs Total Apple
Revenue (Continuing) £120M £87.9M £60.7M
Operating Income -£61.5M £54.7M

The double-whammy for Imagination is that as an IP licensor, the costs to the company of a single customer is virtually nil. Imagination still has to engage in R&D and develop their GPU architecture and designs regardless. Any additional customer is pure profit. But at the same time, losing a customer means that those losses directly hit those same profits. For the 2015/2016 reporting year, Apple’s royalty & licensing payments to Imagination were greater than the profits their PowerVR GPU division generated for the year. Apple is just that large of a customer.

As a result, Imagination is being placed in a perilous position by losing such a large source of revenue. The good news for the company is that their stakes appear to be improving – if slowly – and that they have been picking up more business from other SoC vendors. The problem for Imagination is that they’ll need a drastic uptick in customers by the time Apple’s payments end in order to pay the bills, never mind turning a profit. Growing their business alone may not be enough.

Which is why Imagination’s press release and the strategy it’s outlining is so important. The purpose of Imagination’s release isn’t to tell the world that Apple is developing a new GPU, but to outline to investors and others how the company intends to proceed. And that path is on continued negotiations with Apple to secure a lesser revenue stream.

The crux of Imagination’s argument is that it’s impractical for Apple to develop a completely clean GPU devoid of any of Imagination’s IP, and this is for a few reasons. The most obvious reason is that Apple already knows how Imagination’s GPUs work, and even though Apple wouldn’t be developing a bit-for-bit compatible GPU – thankfully for Apple, the code app developers write for GPUs operates at a higher level and generally isn’t tied to Imagination’s architecture – those engineers have confidential information about those GPUs that they may carry forward. Meanwhile on the more practical side of matters, Imagination has a significant number of GPU patents (they’ve been at this for over 20 years), so developing a GPU that doesn’t infringe on those patents would be difficult to do, especially in the mobile space. Apple couldn’t implement Imagination’s Tile Based Deferred Rendering technique, for example, which has been the heart and soul of their GPU designs.

However regardless of the architecture used and how it’s designed, the more immediate problem for Apple – and the reason that Imagination is likely right, to an extent – is replicating all of the features available in Imagination’s GPUs. Because Apple’s SoCs have always used GPUs from the same vendor, certain vendor-specific features like PowerVR Texture Compression (PVRTC) are widely used in iOS app development, and Apple has long recommended that developers use that format. For their part, Apple is already in the process of digging themselves out of that hole by adding support for the open ASTC format to their texture compression tools, but the problem remains of what to do with existing apps and games. If Apple wants to ensure backwards compatibility, then they need to support PVRTC in some fashion (even if it’s just converting the textures ahead of time). And this still doesn’t account for any other Imagination-patented features that have become canonized into iOS over time.

Consequently, for Imagination their best move is to get Apple to agree to patent indemnification or some other form of licensing with their new GPU. For Apple it would ensure that nothing they do violates an Imagination patent, and for Imagination it would secure them at least a limited revenue stream from Apple. Otherwise Imagination would be in a very tight spot, and Apple would face the risk of patent lawsuits (though Imagination isn’t making transparent threats, at least not yet).

Apple’s Got No Imagination The Future: Competition, Secrecy, & the Unexpected


View All Comments

  • Meteor2 - Wednesday, April 5, 2017 - link

    Not many people 'work' on a phone -- now. But with Continuum and Dex, that number is going to rise. Reply
  • raptormissle - Monday, April 3, 2017 - link

    You forgot the second part where Android SoC's shame Apple's SoC in multi-core performance. If you're going to selectively bring up single core then you should have also mentioned multi-core. Reply
  • ddriver - Tuesday, April 4, 2017 - link

    Yeah, and if only phones were all about single threaded performance, or even performance in general. I still run an ancient note 3 and despite being much slower than current flagship devices, it is still perfectly usable for me, and I do with it more things than you do on a desktop PC. Reply
  • cocochanel - Tuesday, April 4, 2017 - link

    You're looking at it from the wrong angle. The numbers speak for themselves and it all comes down to how much a company can spend on R&D. Plus how important components like GPU's have become to computing in general.
    With such small annual revenue, how much can IMG spent on R&D ? 10 million ? 20 ?
    Apple can easily spend 10-20 times that amount and not even feel a scratch. Everything being equal, how much you put into something is how much you're getting out. You want a top of the line product ? Well, it's going to cost you. If Apple is to stay at the top, their GPU's need to be on the same level as their CPU's.
    Plus, GPU's these days are used for all kinds of other things other than graphics. Look how lucrative the automotive business is for Nvidia not to mention GPU based servers.
    As for litigation and patents, gimme a break. What, just because a company bought a GPU from another for a long time, now they are supposed to do it forever ? When Apple started to buy them from IMG 10-15 years ago, it made sense at the time. Now, the market is different and so are the needs. Time to move on.
    When a company doesn't spend much on R&D, they get accused of complacency. When they want to spend a lot, now they get threatened with lawsuits. How is that for hypocrisy ?
  • Meteor2 - Wednesday, April 5, 2017 - link

    Possibly. But there's only so many ways to do something, especially if you want to do it well. Imagination have lots of patents, as the article explains. I expect to see a lot of lower-level IP being licensed. Reply
  • BedfordTim - Monday, April 3, 2017 - link

    I suspect CAD and video production programmers would beg to differ. My experience in image processing certainly contradicts your assertion.
    Apple has also apparently abandoned the prosumer market so as long as it can run the Starbucks app and PowerPoint most of their customers will be happy.
  • prisonerX - Monday, April 3, 2017 - link

    You don't have a clue what you're talking about. The CPU does most of the work becuase it's the best solution. Specialized hardware requires very static requirements and very high performance requirements. GPUs exist only becuase graphics primitives don't change much and they are very compute intensive. Also throw in that they are easily parallelized.

    I have no idea of the point you're trying to make, and neither do you.
  • ddriver - Monday, April 3, 2017 - link

    There hasn't been a single ARM chip suitable for HPC. A10 has decent scalar performance, making it a good enough solution for casual computing. But for rendering, processing, encoding and pretty much all intensive number crunching its performance is abysmal.

    That being said, there is nothing preventing from extending the throughput of SIMD units. NEON is still stuck at 128bit but can easily be expanded to match what we have in x86 - 256 and 512 bits. But then again, transistor count and power usage will rise proportionally, so it will not really have an advantage to x86 efficiency wise.
  • lilmoe - Monday, April 3, 2017 - link

    Apple doesn't seem to be interested in anything outside of the scope of consumer/prosumer computing. Latest Macbooks anyone?

    "But for rendering, processing, encoding and pretty much all intensive number crunching its performance is abysmal."

    Rendering, encoding, etc. can be offloaded to better/faster dedicated co-processors that run circles around the best core design from Intel or AMD.

    The very fact that Apple are designing their own GPUs now supports my argument that they want to build more functionality to those GPUs aside from the current GP-GPU paradigm.
  • psychobriggsy - Monday, April 3, 2017 - link

    ARM offer SVE (IIRC) that allows 512-2048-bit wide SIMD for HPC ARM designs.

    It has been suggested that Apple's GPU may in-fact be more Larrabee-like, but using SVE with Apple's small ARM cores.

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