The UK has lost both its major processor IP providers to foreign buyers in the past year, with Softbank buying ARM and Imagination Technologies announcing its £550m sale to private equity company Canyon Bridge Capital Partners.
The announcement of the second deal came shortly after the launch of the new iPhone X, the first Apple handset sporting an inhouse GPU (graphics processing unit) design instead of one based on Imagination’s IPR. The loss of Apple as a customer was a massive blow to a company which was already facing tougher competition (including from ARM’s own GPU design, Mali) and struggling to diversify its business. It responded with plans to sell its non-core business units, including processor IP firm and ARM rival MIPS; it subsequently put the whole company up for sale.
Imagination will be sold to CBFI Investment, a newly formed entity managed by Canyon Bridge, which has backing from Chinese government funds (the same company recently saw its bid to acquire US-based Lattice Semiconductor blocked on national security grounds by President Trump). For that reason, presumably, the Imagination transaction will exclude the firm’s US operations, which are centered on MIPS. MIPS itself will be sold to Tallwood Venture Capital for $65m, and the Canyon Bridge purchase is subject to completion of that smaller deal.
That $65m figure is tiny considering that MIPS was once a significant player in the processor wars, challenging ARM, Intel and PowerPC, and it still has a strong base in broadband equipment and set-top boxes. But it failed to break into ARM’s mobile stronghold and though it has scored some strong IoT partnerships, especially in China, its star is clearly waning. Its value to a buyer is further diminished because, when it was acquired by Imagination, most of its intellectual property was left out of the deal, and placed in the hands of a consortium led by ARM itself.
Canyon Bridge is now setting out its stall to convince UK antitrust regulators to approve its deal. It said CBFI “intends to invest in Imagination’s research and development capabilities in the UK”, and does not plan “to make any changes as regards to continuing employment of employees and management”.
Imagination CEO Andrew Heath said: “Imagination has made excellent progress both operationally and financially over the last 18 months until Apple’s unsubstantiated assertions and the subsequent dispute forced us to change course”. The company filed a dispute resolution action against Apple after the larger firm ended their commercial arrangement and the two companies failed to agree a royalties deal. It remains to be seen whether Imagination will find cause to challenge Apple’s new inhouse GPU in the courts, having once said that it would be very hard for the iPhone maker to design its own chip without any recourse to Imagination patents.
Ray Bingham, a partner at Canyon Bridge said: “With our backing and investment Imagination can continue to invest in developing its technology, attract and hire the best engineers, and acquire and service customers globally. This transaction is in line with Canyon Bridge’s strategy of providing equity and strategic capital to enable technology companies to reach their full growth potential by opening new markets through our collaborative investment approach. We are investing in UK talent and expertise in order to accelerate the expansion of Imagination, particularly into Asia, where its technology platform will lead the continued globalization of British-developed innovation.”