Imagination Technologies points at declining iPhone sales at it lays off 20% of its workforce

Imagination Technologies points at declining iPhone sales at it lays off 20% of its workforce
Imagination Technologies, the company that's best known as a GPU designer for Apple's iPhones and iPads, announced a new round of cost-cutting measures.

In an attempt to reduce costs by $18 million per year, Imagination Technologies will lay off 200 workers and close/sell some of its side businesses. It was just last month that the company announced a first round of cost-cutting measures aimed to reduce costs by $21.7 million.

Furthermore, the company also announced today that its original cost-cutting plans already included 150 layoffs. Overall, the company will lose 350 employees, or about 20 percent of its current workforce. 

Speaking to TechCrunch, Imagination said that its three core businesses, graphics and multimedia (PowerVR), processing (MIPS), and connectivity (Enigma), will be unaffected by these cost reductions.

In a letter to investors, Imagination Technologies warned that it will post on operating loss for the 12 months ending with late April. According to the company, the slowdown in iPhone shipment growth is the prime reason for its financial struggles.

At large, Imagination is a company that licenses graphics and video processing technology to other tech companies. In recent years, however, the company's business has been heavily reliant on Apple as its main customer.

Going back to the original iPhone, Apple has been exclusively using Imagination's PowerVR GPUs in its iPhones and iPads. Unfortunately for the video technology company, though, iPad sales have been falling for the past quarters. Furthermore, Apple warned that the first quarter of 2016 will probably bring the first year-over-year decline in iPhone sales.

source: Reuters via TechCrunch

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33 Comments

1. twens

Posts: 1175; Member since: Feb 25, 2012

Apple slides a bit and others are paying the price. Lol

7. Finalflash

Posts: 4063; Member since: Jul 23, 2013

Sadly, this is the cost of doing business with the most cut throat company in the world. Those profit margins just don't make themselves.

11. ph00ny

Posts: 2031; Member since: May 26, 2011

Yup. This is the exact same reason automotive giants were bailed out due to the fear of suppliers going out of business

23. quakan

Posts: 1418; Member since: Mar 02, 2011

This is the cost of a poor business strategy. Their business is reliant upon Apple's success and demanded components. Sucks for the employees that will be losing their jobs, but the leadership at this company are the ones to blame.

32. vincelongman

Posts: 5693; Member since: Feb 10, 2013

This is true IMO Their CEO recently resigned BTW They need to win back Samsung and MediaTek The Exynos 3110 and Exynos 5410 had PowerVR GPUs The Helio X10 has a PowerVR GPU (and many of MediaTek's other SoCs) But Samsung and MediaTek have switched to ARM's Mali GPUs now Not sure why I suspect management since their GPUs are still top notch

2. darkkjedii

Posts: 31039; Member since: Feb 05, 2011

That sucks.

3. vliang86

Posts: 337; Member since: Oct 05, 2015

Every company, including Apple and Saumsung, goes through this cycle. I'm pretty sure Apple's sales will pick up again when they release newer iPhones and more products.

6. xondk

Posts: 1904; Member since: Mar 25, 2014

Oh definitely but you have to wonder how it is that these are the ones that end up paying for it, and not apple itself, I think they posted great profits last year as well? especially since this is major components.

10. darkkjedii

Posts: 31039; Member since: Feb 05, 2011

Ever hear of the saying "s**t rolls down hill"? It's sad, but it's also part of big business. I'm glad to have an economy proof job, the worse it gets the busier we get.

12. marorun

Posts: 5029; Member since: Mar 30, 2015

Yeah i work at cellphone shop and even if ppl dont buy as much flagship anymore they still continue to buy as many phone in total and my cashflow stay the same as a result.

16. darkkjedii

Posts: 31039; Member since: Feb 05, 2011

Exactly.

28. xondk

Posts: 1904; Member since: Mar 25, 2014

Well....yes... But even so the company that makes the absolute core component of a phone, processor and graphics? you'd think that if anyone would be losing out it wouldn't be them? I mean if they falter and their quality drops iPhone would get significantly threatened?

13. nctx77

Posts: 2540; Member since: Sep 03, 2013

They were doing great last year because of Apple's great sales. There downfall has nothing to do with what Apple is charging them. Actually a supplier more than Lilly sell there product at their price or slightly lower to get business. Apple and other companies makes their profit margins on the other side when they sell their product to the customer at a marked up price. This company is laying off workers because of slower phones sales which means less supplies needed.

18. TerryTerius unregistered

I am not sure to what degree they can cover. The entire industry is trending downwards, especially top end phone sales where the market is most saturated. That may reverse, but it doesn't seem likely.

19. TechieXP1969

Posts: 14967; Member since: Sep 25, 2013

Not more iPhone's, better ones. Volume isn't Apple's issue, Value for the price is. Apple is still failing to understand something. Proprietary options will only make you money if peopel adopt them. Apple has very high licensing deal which basically have forced companies to make better options. SCSI and Firewire were awesome ideas, but not for what Apple wanted to charge. EIDE and USB have basically killed them off. But it wasn't just the cost, it was the the fact that these options were faster, cheaper and offered more flexibility. Apple like Microsoft just thinks that if their name is on something, that it will automatically be a hit because they both have such a high sat in so many markets and both have found out the hard way it doesn't work that way. MS thought they could just jump back into the mobile game and play and be an instant win, and so far they are still losing. Xbox was a total loss until MS kept throwing money into it until it was a success.

22. TerryTerius unregistered

This is more about market saturation and people's satisfaction with their current phones than anything else. Volume is in fact the problem. It's Samsung's problem, LG's, HTC's, Sony's, and everyone else's as well. The industry is slowing down and sales are falling almost across the board, especially at the top end where companies actually make their money. That is the primary reason all the manufacturers are struggling. The mammoths of Apple and Samsung are not immune to that. Granted, it is more of a problem for Apple who made the overwhelming majority of their profits on the back of smartphone sales than it is for Samsung who has a much more diversified portfolio. High pricing and the Apple logo has done wonders for them for nearly a decade. It didn't suddenly start becoming a problem now, despite your assertion. This has a lot more to do with the entire industry, than Apple specifically. I know you firmly believe it, but the fact that iPhones are lacking some features in comparison to their competitors doesn't really hurt Apple very much in the real world. Neither does their walled garden, which is a selling point for them. The numbers have borne that out for years.

25. nctx77

Posts: 2540; Member since: Sep 03, 2013

It true that Samsung has a more diversified portfolio, but the majority of their profits do come from the smartphone business rather it's phones or phone components.

4. Arch_Fiend

Posts: 3951; Member since: Oct 03, 2015

Damn they better hope the iPhone 7 balls harder than any iPhone ever has.

5. tedkord

Posts: 17357; Member since: Jun 17, 2009

Sympathy to the affected employees. That stinks.

8. Bernoulli

Posts: 4360; Member since: Sep 01, 2012

I could be wrong, but shouldn't the title say 'as it lays off 20....' instead of 'at it lays off 20...' just curious.

9. JunitoNH

Posts: 1946; Member since: Feb 15, 2012

Elimination of subsidies is going to affect everyone. Folks are going to think hard about investing $700 for a "phone". There are lots of used and Chinese phone options available.

20. TerryTerius unregistered

The industry has been slowing down for two years now, long before America started this trend of eliminating phone subsidies. And in most of the rest of the world, subsidies were never a thing anyway. And yes, there are... but Chinese phones are mostly doing well in Asia. Techies are a lot more aware of, and receptive to; Chinese phones than the Western world in general. Which is partially because there aren't that many Chinese brands that even sell worldwide. Although Chinese companies have basically driven a lot of their competitors profits down dramatically due to the downmarket pressure exerted by their unsustainable pricing, this isn't really on them. This has been a long time coming. The market was eventually going to reach a saturation point, and that happened in roughly the past two years. A lot moreso on the top-end, where Apple, Samsung, and everyone else actually makes most of their money. Especially with satisfaction rates being high and people not seeing as much of a reason to update their phones every year, or even every other year. As phones got better and better, this was inevitable. There are a combination of factors at play here, pricing is only one of them.

26. nctx77

Posts: 2540; Member since: Sep 03, 2013

You can say the same about iPad sales.

30. jojon

Posts: 433; Member since: Feb 11, 2014

..interesting post

14. avalon2105

Posts: 352; Member since: Jul 12, 2014

Why sell their GPUs exclusively to Apple? There is a lot of Android, WP and BB devices in need of a great GPU.

15. engineer-1701d unregistered

maybe a contract deal not allowing but in that case there are laws and rules to allow them to cut the contract and get deals with others.

24. TerryTerius unregistered

We have no idea what kind of deal was inked. Or if other manufacturers are even expressing interest in their GPU's.

27. avalon2105

Posts: 352; Member since: Jul 12, 2014

PowerVR was used in android and Symbian phones for quite some time. TI OMAP CPU + PowerVR GPU was a norm at one point, before Qualcomm bought ATI mobile division and Samsung was still on their Hummingbird CPUs. After TI withdrew from mobile CPU market Qualcomm became more or less only option and so did Adreno. Maybe Imagination Technologies did sign exclusive deal with Apple and maybe they thought they couldn't beat Adreno. Who knows. As for OEM interest in PowerVR, i'd assume there is some. Their GPUs are some of the best, if not the best in mobile market.

29. ibend

Posts: 6747; Member since: Sep 30, 2014

not really, intel mobile phone processor also use their GPU... (the one inside zenfone 2).. wish they can supply GPU for Exynos or mediatek's helio :-/

31. vincelongman

Posts: 5693; Member since: Feb 10, 2013

They did before The Exynos 3110 and Exynos 5410 had PowerVR GPUs The Helio X10 has a PowerVR GPU (and many of MediaTek's other SoCs) But Samsung and MediaTek have switched to ARM's Mali GPUs now Not sure why

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