Apple is set to start designing its own graphics chips, ending its relationship with long time partner Imagination Technologies. The announcement has sparked a share sell of and a potential legal battle.
Apple uses Imagination's Technologies to make the GPUs for the iPhone, iPad and Apple Watch, but Apple has been working on its own graphics design on the side. In a recent statement, Imagination said that Apple had ended its contract, and would stop using its intellectual property within 15 months to two years.
That's a significant issue for the British tech company, since last year Apple's license fees and royalties were worth £60.7 million in revenue to Imagination — about half of its overall revenue — and the announcement has sent its share price into a free fall, shedding 70% of its value.
Imagination isn't taking the news lightly, saying it seems difficult to believe Apple designed its own GPU from scratch without making use of any of Imagination's own IP. In a statement the company said: ”Apple has not presented any evidence to substantiate its assertion that it will no longer require Imagination’s technology, without violating Imagination’s patents, intellectual property and confidential information. This evidence has been requested by Imagination but Apple has declined to provide it."
It added: "Further, Imagination believes that it would be extremely challenging to design a brand new GPU architecture from basics without infringing its intellectual property rights, accordingly Imagination does not accept Apple’s assertions."
A legal battle could be avoided, as Imagination said the two firms remain in negotiations — suggesting it hopes Apple's departure may be halted with a new license agreement. Apple has declined to comment.
Apple owns 8% of Imagination. Last year rumours were confirmed that the iPhone company had considered acquiring Imagination, but eventually chose not to make a bid, though it did reportedly poach around 20 Imagination employees. The failed deal ended a bad year for Imagination, with then CEO Hossein Yassaie stepping down after a series of profit warnings and job cuts, and the sale of its Pure digital radio division.