“Apple Inc is likely to pay graphics chip designer Imagination Technologies just one third of its current royalty rate as the smartphone giant wind downs their supply deal over the next two years, UBS estimated on Wednesday,” Eric Auchard reports for Reuters. “UBS analysts predicted that Imagination would become loss-making by fiscal 2019 without any Apple royalty contributions and that the British chip designer will have to consider potential cost-cutting moves to redress the balance.”
“Imagination is in talks with Apple on a new licensing deal. UBS forecasts Apple is likely to ratchet down the royalty rate it currently pays of around $0.30 to closer to $0.10 – the rate Imagination charges customers such as MediaTek,” Auchard reports. “Valuing London-listed Imagination using discounted cash flows, UBS analysts estimated its Apple business is worth 75 pence, while, without Apple, the stock is worth just 35 pence. That totals 110 pence, using a sum-of-the-parts valuation.”
Read more in the full article here.
MacDailyNews Take: R.I.P, PowerVR.
SEE ALSO:
It’s getting even tougher to be an Apple supplier – April 19, 2017
Without Apple, Imagination Technologies’ PowerVR has no future – April 10, 2017
Apple steps up homegrown GPU plans with London hiring spree – April 9, 2017
Why Apple’s ditching of Imagination is critical for the future of the iPhone – and maybe even the Mac – April 5, 2017
Apple aims for more control, less cost as it accelerates in chip design – April 5, 2017
Apple could look to buy Imagination Technologies after ditching the chip firm, share price plunge – April 4, 2017
Imagination Technologies’ shares collapse after Apple dumps UK chip designer – April 3, 2017
Apple nabs top talent from iPhone 7 GPU chipmaker Imagination Technologies – October 13, 2016
After failed takeover talks with Apple, Imagination Technologies sells stake to state-owned Chinese company – May 9, 2016
Apple in ‘advanced talks’ to acquire Imagination Technologies for PowerVR GPU – March 22, 2016
Sounds like Imagination got a little greedy..
“UBS forecasts Apple is likely to ratchet down the royalty rate it currently pays of around $0.30 to closer to $0.10 – the rate Imagination charges customers such as MediaTek,”
I get the feeling that Apple is trimming outgoing royalty rates, to reduce the sticker shock of the upcoming iPhone 8. I think they don’t want to increase the costs, so they have to make up elsewhere. Since Imagination and Qualcomm have been overcharging for royalties, it might not take much to achieve their goal, but they have to play harder ball to do it.
Basically depending on one client is dumb business… whether you’re a $100,000/yr business or $100million.