Lower royalty rates chip away at Imagination

THE RISE of cheap smartphones in emerging economies has led to a leap in royalty payments to chip designer Imagination Technologies.

The company, which is locked in a bidding war to acquire US-based chip designer MIPS, has seen a 66 per cent year-on-year rise in royalty revenues in the last six months, it said yesterday. This was down to a 90 per cent increase in the sales of chips that use Imagination’s technology, such as those in Apple’s iPhone.

However, shares in the company fell slightly, as analysts flagged a drop in average royalty rates. Rising sales of cheap smartphones in China and other emerging economies means Imagination is licensing more chips using cheaper technology.

The company’s losses in its Pure digital radio division also widened in the six months to the end of October.

Imagination reported a 27 per cent increase in group revenues to £71.4m, although profits were flat at £10.5m.

Chief executive Hossein Yassaie was unfazed by the average royalty decline. “[All parts of the chip business] are all growing together so the transition is not an issue,” he said.