Splitting Up With Apple is a Chipmaker's Nightmare (engadget.com)

Apple is such a powerful company that, for third-party suppliers, it's hard not to become reliant on the cash that it pays you. Engadget adds: But when Apple says that it's done, choosing to move whatever technology you provide in house, the results can be really painful. Imagination Technologies is one such supplier, famously designing the iPhone's PowerVR graphics as well as pushing MIPS, a rival to ARM. But back in March, Imagination publicly announced that Apple was ditching it in favor of its own graphics silicon. Now, Imagination has revealed that it's going to take Apple to dispute resolution, maintaining that the iPhone maker used Imagination's IP without permission. It's the second chipmaker in recent months who believes Apple isn't playing fair, with Qualcomm counter-suing Apple in its own licensing dispute. Secondly, Imagination is going to have to sell off MIPS and Ensigma, two parts of its business that aren't as profitable as PowerVR. Gamers with long memories will remember that MIPS designed the CPUs that lurked inside the PlayStation, PS2 and Nintendo 64.

Comments

Nightmare on 1 Infinite Loop Street

[JoeyRox]

Timmy is back and this time he's angry.

One Imagines

[Luthair]

Its pretty much impossible to build a modern GPU without infringing on the patents of one of the existing players. Even Intel is stuck paying licensing fees from AMD or nVidia, its hard to see how Apple won't have to do the same.

Re:One Imagines

[Anonymous Coward]

Notably though, Imagination Tech's important patents have just expired. There's a reason that nVidia and AMD both suddenly implemented tile based renderers, and Apple suddenly decided they could viably produce their own GPU.

Going for a settlement with Apple?

[mykepredko]

For Qualcomm and Imagination, I would think that their contracts with Apple were pretty iron-clad. Apple didn't become one of the biggest companies on the planet by signing deals that wasn't in their favour. Potential for abuse by Apple when the contracts were drawn up aside, I would think that the contracts are pretty solid and Apple knows exactly what it's rights are and has protected itself.

This means that the only recourse for (former) suppliers is to go after Apple, primarily in the court of public opinion, to see if there's a chance for a settlement to avoid Apple's public reputation being damaged. Although after Jobs, I don't see how it could get any worse on that front.

Re:Going for a settlement with Apple?

[Anonymous Coward]

I've had the misfortune of dealing with Apple on the business side, and they just make stuff up as they go along. They will make all manner of completely unreasonable demands, which have nothing at all to do with the contract, and just threaten to rip up said contract if they don't get what they want. Not to mention they will get a bug up their ass about enforcing one part of the contract one week, then the next week they couldn't care less about that, but this other minor inconsequential provision is now crucial, and they'll club you over the head with the threat of ripping up the contract if you don't comply. They'll claim they have "statistics" or some such that shows you aren't in line with other similar companies, but you'll never actually get to SEE the evidence, because it's confidential or some other nonsense. You'll be assigned an Apple minder, who will typically be completely unavailable if you try calling/emailing them, but will miraculously find time in their busy schedule if it's to call/email you about something you're not doing right. Some of their mid to upper level managers will even be verbally abusive if you have face to face meetings, and they'll even ambush you. They'll invite you to Cupertino, saying it's a friendly little junket to tour the Apple facilities, except you'll be ushered into a conference room where a number of execs will accuse you of a bunch of things.

Essentially, Apple's M.O. is to just threaten to rip up your contract if you don't drop trou, bend over, and take a good ass pounding whenever they feel like giving you one. The little bits you see in stories like this don't even represent the tip of the iceberg, they're like the dusting of snow on the iceberg's surface.

Re:Going for a settlement with Apple?

[swillden]

Both of these companies may have perfectly valid complaints, but even if they don't I could see them deciding to give it a shot anyway. Suing the deepest (non-governmental) pocket in the world has to be pretty high on any aggressive corporate attorney's bucket list, and it's probably pretty easy to convince the C suite that throwing a few million into legal fees is a good bet, since the odds of convincing Apple to settle just to shut down the negative PR are probably pretty good.

And it makes even more sense to be the second company to do this, since the first has already got the negative buzz going. Or maybe they have an ironclad case. I'm just saying that the suit would make sense either way.

Typical

[Anonymous Coward]

This is one of the oldest tricks in the business book.
Get a vendor to supply OVER 35% of their entire business to you alone, then cut them off (or demand massive reductions in price) and when they falter because of the drop in revenue, you either purchase them outright for a song, or scoop up their IP when they go out of business due to Bankruptcy.

Wal*Mart is famous for doing this, so was Sears back when they had non-insane management.
I worked for a company that flat-out refused business from Sears if it exceeded more than 35% of their total income for this reason.
Many years after I left them new management discarded that idea, and lo and behold within 5 years they went bankrupt when a customer demanded a 85% reduction in prices, then let them die and bought up their IP out of Bankruptcy Court for a song and moved all manufacturing to Guatemala.

Imagination Technologies should have seen this coming.

Re:Typical

[UnknowingFool]

You should have used #DadJoke to tag this.

and that would be...

[holophrastic]

And that would be the reason my father told me never to let one client dedicate more than 30% of my business. It's also why I told my father that reliable clients sometimes get heavy discounts, to offset the lack of sales/collection efforts, which keeps them from rolling their own.

MIPS was in game consoles, sure, but

[Pezbian]

What about Silicon Graphics machines? I find it odd the article doesn't even mention SGI. I still have an O2 R12K, an Octane 2 R14K, and an Indigo 2 Impact R10K.

Re:Hopefully someone will acquire MIPS

[Onnimikki]

Microchip (based in Arizona), produces all kinds of MIPS chips via their PIC32mx and PIC32mz lines. Microchip is one of the top embedded systems chip makers. They bought ATMEL, the makers of the ATMEGA chips found on the Arduinos, last year.

Re:Apple

[Moheeheeko]

Apple is quickly building a reputation with other tech companies that they are not to be trusted. The company I work for is developing a smaller version of what we already make, with the original intention of getting them into iPhones, that view has shifted in the last year or so. Now we are avoiding interaction with Apple like the plague.

Re:You gave them permission

[Anubis IV]

Imagination doesn't make chips, so no, they didn't sell Apple chips, and Imagination hasn't yet giving Apple permission to use their technology (going forward, that is, since Apple has said it won't be paying for it). Really, the whole situation bears no resemblance to the Qualcomm case in the slightest.

At play here is that Imagination has, up to now, licensed their technologies to Apple, which Apple has used in its custom-designed chips for a few years. Apple is now claiming that their custom designs no longer rely on Imagination's technology, so they're going to stop paying. Imagination is understandably asking how that's even possible, given that the new chips presumably work the same as the old ones, which means that they likely rely on Imagination's tech.

At no point did Imagination "sell" their technology to Apple, other than as part of a licensing agreement that was contingent on continued royalty payments. So, yes, they get to have a say in how Apple uses their technology, assuming, of course, that Apple is actually still using their technology.

Re:Apple

[zlives]

not sure if its a sane long term strategy from apple, just look at the maps debacle... just because they have the cash to do every thing doesn;t mean they will do it better or heck just as good. MS is another one of those examples, how many times has MS tried to screw over oem and builders... every time crawling back.

Re:Apple

[Grishnakh]

And it's not even wise, because companies will become more reluctant to work with you in the future, and people will also dislike you for what you do, meaning some of them will buy from another company.

In the case of Apple, this just isn't true. Apple customers love Apple, no matter what they do, and will defend Apple's actions to the death if necessary. They won't buy from another company no matter what. They're also willing to make their Apple purchases their top priority, and would even take out a second mortgage on their house if necessary to continue their Apple spending habit, so there's a lot of room for Apple to keep jacking up prices to keep profits high, even if a few malcontents leave them.

Re:Apple

[Guspaz]

I'm not sure how deciding to stop buying somebody's product makes you "not to be trusted". It sucks for PowerVR, but why should Apple be obligated to only ever buy mobile GPUs from one company?

Nvidia and Tile Renderer

[DrYak]

There's a reason that nVidia and AMD both suddenly implemented tile based renderers,

Actually, Nvidia has had their own TBR patents for quite some time :
- Nvidia bought up 3DFx for their patents and their engineer back when that one went bankrupt.
- Before that, 3DFx had bought up Gigapixel, among other for their TBR patents, to be used in future product (forgot the code name) - and HSR (hidden surface removal) tech to be applied much earlier in then current product (in the then VSA-100 / Voodoo4/5/6 and in the upcoming Rampage / Spectre)

So Nvidia indirectly acquired TBR patents.
Though for the record, they were more interested in the know-how and engineer which where working on the Rampage GPU ("3DFx Spectre" cards) due to programmable pixel shaders being all the rage, and retained them to work on GeForce FX (speculation backthen that probably the pun in the name was intended... )

So in theory, they could have moved into the field much faster than ATI / AMD.
(But back at the Rampage / GeForce FX era, there where some area were TBR was problamatic : e.g. some transparency (i.e.: simple alpha-blend, back then) couldn't be handled in a single pass easily. So probably they decided not to bother.
Given that modern games work with tons of subsequent passes (transparent materials cause diffraction/distortion in a separate pass of a pixel-shader), I would suspect that it's not that much a problem anymore).

Difficulty

[DrYak]

Hopefully, as more of these patents expire, a Vulcan based open source GPU will emerge.

As the numerous past failures of attempts at opensource GPU or even opensource graphic cards have shown, making a functional and competitive graphic card is EXTREMELY difficult.

Re:Apple

[Guspaz]

They licensed GPUs from Imagination for more than a decade, you make it sound like this was a hit-and-run. Business relationships don't last forever, and it wasn't exactly abrubt considering they've been gradually replacing chunks of the GPUs with in-house designs for some time now: at this point only the fixed-function hardware is still designed by Imagination. Is it any surprise that they now want to move the last chunk over to an in-house design, like they did with their CPUs years ago?