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Imagination is Reportedly set to lower Apple's Royalty Rate to One-Third

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It's being reported today that Apple is likely to pay graphics chip designer Imagination Technologies just one third of its current royalty rate as the smartphone giant winds down their supply deal over the next two years, according to UBS's estimation. 

 

More specifically, 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.

 

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.

 

Earlier this month, the British designer of graphical processing units used in smartphones said its largest customer would stop using its technology within 15 to 24 months, causing the stock to lose nearly two thirds of its value in a single day. For more read the full Reuters report here.

 

On April 03 Patently Apple posted a report titled "News of Apple Ending their Contract with Imagination Technologies in 2018 Sends Shares Plunging." The lowering of the royalty rate doesn't change Apple's current plan of phasing Imagination's graphics processors.

 

Being an Apple supplier is getting tougher every year. Bloomberg has an excellent report on this today titled "The Life of an Apple Supplier is Getting Even Tougher." The extensive report will provide you with an overview of the matter and notes that the trend could be bad in some ways for Apple.

 

Bloomberg's report notes that "the main risk is that Apple misses new technology trends what bubble up through a large supply chain. Relying more on internally created components, it'll have fewer suppliers lining up to show it the latest innovations."

 

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