Apple's Custom Graphics Chip Coming Soon?

There is no question that Apple (NASDAQ: AAPL  ) was one of the first mobile device vendors to really focus on graphics performance in its iOS devices. Further, Apple is well-known for pushing its Mac silicon supplier, Intel, pretty heavily on the development of high-performance integrated graphics. Apple knows that gaming is a major use case for mobile computing and as a result has typically optimized its system-on-chip products to offer great graphics performance.

The early days: using off-the-shelf Imagination IP
Imagination Technologies
(LSE: IMG  ) is well-known as a premier graphics IP vendor for many mobile system-on-chip products. Its graphics IP is very power efficient and offers rather excellent performance per unit of area. For years, Apple has employed graphics IP blocks designed by Imagination for its "A-series" system-on-chip products and, frankly, the results have been quite good.

This led to a major run in Imagination's stock following the release of the iPhone and, as the smartphone market in general proliferated, Imagination found a seemingly endless stream of customers for its IP. This gigantic demand allowed Imagination to beef up its R&D efforts significantly and has, in general, been a virtuous cycle for the company (although recently competitive threats from ARM, Vivante, and NVIDIA have begun to worry investors).

The future: in-house GPUs
A quick look at Apple's job boards shows that the company is very aggressively staffing up an internal GPU IP development team:

(Source: Apple.com)

It is likely that Apple will be very aggressive in designing graphics processors that are custom-tailored to the needs of its iOS products. That's not to say that Apple doesn't have a lot of leverage over at Imagination Technologies (Apple is a 9.5% shareholder of Imagination, so there's plenty of leverage), but for a major company like Apple with a world-class silicon team, using off-the-shelf IP simply isn't optimal when Apple could truly optimize the silicon to meet its exact needs (and Apple controls the entire software stack, meaning it intimately understands these needs).

The rest of the world is moving fast – Apple needs to lead
Look at Qualcomm, Intel, and NVIDIA – three merchant chip vendors that are very rapidly iterating their in-house GPU IPs at the high end. In order for Apple to continue to justify doing its own chips (and not simply caving in and buying off-the-shelf chips from the merchant vendors), it will need to develop chips that – for the products that Apple is building – are superior to what the merchant vendors are doing.

This is going to be tough. Intel, for example, is throwing gobs of R&D money at low power CPUs, next generation GPU architectures, modems, and so on. Qualcomm and NVIDIA have already proven that they can put out some pretty slick hardware with their respective Snapdragon 800/805 and Tegra 4/K1 chips. Apple needs to do better than these companies that live and breathe chips in order to "win".

Licensing off-the-shelf GPU IP at the rate that Imagination can deliver it simply won't cut it. Apple's in-house custom GPU is likely to make trade-offs much more appropriate for a very high margin, performance-oriented smartphone/tablet than trade-offs made in a "one-size-fits-all" type of deal. For low end to mid-range SoCs, off-the-shelf IP will be just fine and dandy, but for a premium product, likely not.

Foolish bottom line
Whether it's in the iPhone 6, 6s, or 7, Apple is likely to make a move to an in-house GPU architecture, likely aimed at performance levels that exceed what the current off-the-shelf IP offers today. Apple is likely to make its GPUs bigger than most, but given how much money it makes per iPhone/iPad, the higher die cost is likely worth it for the sake of leadership performance/user experience. Yet another example of Apple's innovation engine at work –even if it's not obvious to most consumers.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 15, 2014, at 3:25 PM, techy46 wrote:

    If Samsung's tanking due to shrinking ASP and GM where do you think that leaves Apple? Smart phones and tablets are just 4-10" PCs that should sell for 40-60% of a real notebooks price or $149-299 each.

  • Report this Comment On January 16, 2014, at 3:49 AM, rav55 wrote:

    If Apple needs a graphics on it's own ARM silicon then it should either buy AMD or nVidia. nVidia would be the smart choice as they already have an ARM IGP. It's just not a very good one. It would also deny Intel from ever wanting to be competitive in the IGP space or the discrete gpu space for that matter as it would be highly unlikely that Apple would sell Intel ANY license to nVidia technology.

    Apple certainly has the cash to make such a deal.

    Buying AMD would not be good for the consumer, but good for AMD share holders.

    As far as the x86 license goes, Apple would have an oppportunity to acquire it from Intel as the 2010 Intel vs US settlement agreement orders Intel to negotiate the x86 license in good faith with any new controlling interest.

    There is only so many ways that integrated 3d graphics can be designed without stepping on already established patents.

    Of course ARM graphics are not 3d graphics.

  • Report this Comment On January 16, 2014, at 4:04 AM, drowningtoaster wrote:

    It is actually very interesting. I think that industry is repeating itself with mobile and in a long run Apple will drop their CPU efforts again. But who knows.

    Imagination is like a "dark horse" here and I would really like to see some an article about them. Their best days seem to be over after TI left business. I love their PowerVR solutions, but without proper vendor support they couldn't compete with QCOM and NVDA in a long run. Maybe they will try to grab low-end segment with MIPS (anyway recent partnership with Mediatek makes sense). But if MIPS will ultimately fail, Imagination seems to be doomed. So why Intel and Apple are keeping their shares despite both companies are developing their own graphics now?

  • Report this Comment On January 16, 2014, at 1:31 PM, tempest669 wrote:

    Yes, AAPL will develop their own in house GPU. They're integrating as many hardware aspects as possible. These jobs postings don't demonstrate AAPL is eliminating IGNMF. AAPL has a broad product line this job posting could cover.

    Look at AAPL's history. They've owned ARMH stock for many, many years, then leveraged their technology when INTC would not do what they needed. They've owned IGNMF for quite awhile and need IGNMF's patents and IP to develop an in-house GPU. It would be cheaper for them to just buy out IGNMF than start a GPU from total scratch. They are not getting rid of IGNMF and history demonstrates they are highly unlikely too. IGNMF's GPU development rate more than meets AAPL's requirements, plus IGNMF already has ray-tracing in development with Caustic Graphics.

  • Report this Comment On January 16, 2014, at 3:00 PM, twolf2919 wrote:

    I don't get the point of this article - just because Apple is hiring GPU IP people, they're supposed to be developing their own GPU? What form does the current Imagination IP take - does Imagination deliver hardware to Apple or just "IP"? If it's the latter, couldn't those positions you highlight simply be for folks to "integrate" Imagination's design into Apple's chips?

    I don't agree that Apple needs to design its own GPU. As it stands, the iPhone 5s' graphics are already head and shoulder above any of its current peers. Yes, the recently released SnapDragon 800 is a bit faster as is the upcoming K1 from Nvidea, but is there any indication that Imagination can't keep up?

    Apple certainly doesn't have to build a GPU to "justify building its own chips" - their hardware team seems to be doing a pretty world-class job designing 64-bit SoC with fingerprint identification logic, etc. - and who do they have to "justify" it to?

  • Report this Comment On January 16, 2014, at 3:12 PM, tempest669 wrote:

    @twolf2919, I don't think it's out of the realm AAPL is developing their own GPU. They are vertically integrating as much as they can, probably so they can eventually leverage these technologies across multiple platforms (I'm merely speculating that).

    IGNMF (or IMG.L) is an IP company. I'm not sure how they integrate the GPU, but I would think it's part of the fab they're using. AE probably knows if he will comment.

  • Report this Comment On January 16, 2014, at 3:25 PM, twolf2919 wrote:

    @temest669,

    If the Imagine GPU is "IP" only, it seems to me that Apple is already vertically integrating this IP in their chips. What would they gain by building something from the ground up to replace it? Is there a huge "bottleneck" between the CPU and the GPU that necessitates it? Is the GPU itself too slow?

    Designing a completely new GPU isn't a small undertaking. I don't know when Apple started with its A7 development, but I imagine that took years. Apple took "baby steps" by first extending the ARM Cortex CPU. I would expect Apple to do a similar thing with the Imagination GPU (if they haven't already).

  • Report this Comment On January 16, 2014, at 3:26 PM, drowningtoaster wrote:

    @tempest669

    ARMH are doing ok now compared to Imagination. And Apple still using ARMH technology anyway. It seems highly unlikely that they are going integrate IMG.L technology same way they are doing with ARMH.

    I've also thought about buyout. It seems complementary, but with 15% INTC stake and useless (for Apple) MIPS highly unlikely. Also FTC may ban this deal.

  • Report this Comment On January 16, 2014, at 3:36 PM, tempest669 wrote:

    @twolf2919 ARMH is also "IP" in the same way IGNMF is "IP". I think they will (or are) going to develop their own GPU using IGNMF's IP & patents (under a license) because eventually desktop/laptop are going to intersect with mobile. Look at what Apple pushed with battery life on this year's MacBook Air. APPL is pushing battery life relative to performance.

    Clearly designing a GPU is a massive undertaking. That's why I disagree with the author that AAPL is going to design a GPU from scratch. There are too many patent pitfalls against mobile and desktop competitors. IGNMF is not a joker wild in GPU's. They used to be in the desktop market with the PowerVR Kyro I & Kyro II. They backed out and began focusing on low power graphics when ST Microelectronics abandoned the Kyro III GPU.

  • Report this Comment On January 16, 2014, at 3:40 PM, tempest669 wrote:

    @drowningtoaster, AAPL has been using ARMH and IGNMF since the iphone and ipads were created. They've been integrating IGNMF for years. APPL owns nearly 10% of IGNMF. The biggest obstacle would not the FTC, it would be INTC. INTC already integrates a lot of IGNMF's GPU's into the INTC integrated graphics.

    AAPL is not going to use MIPS. MIPS was a drowning ship IGNMF is trying to turn around. The best hope for MIPS is Android imo.

  • Report this Comment On January 16, 2014, at 5:55 PM, drowningtoaster wrote:

    @tempest669

    As far as I know, INTC is abandoning IGNMF in favor of their own solutions. Last time I checked GMA 500 was last Imagination-based Intel solution. Merrifield is already using different technology.

    Of course AAPL is not going to use MIPS. And this is exactly why FTC could vote against this deal. Also paying about $100 mil for this technology during possible acquisition may seem unreasonable for AAPL. That was my point.

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