Apple to end use of Imagination Technologies chips

UK chip designer Imagination Technologies has said Apple, its largest customer, will no longer use its intellectual property in its new products launching in less than two years’ time, causing its shares to crash nearly 70 per cent.

Apple, which has used Imagination’s chip technology in its iPhones, iPads, and iPods under a licensing agreement, told the Hertfordshire-based company that it was “working on a separate, independent graphics design in order to control its products and will be reducing its future reliance on Imagination’s technology”, Imagination said in a statement on Monday.

Imagination relies on Apple for around half of its revenues. Last year, the FT reported that the US giant held talk about acquiring the company which has been struggling to adapt to the changing market for smartphones.

Shares were down as much as 69 per cent to 85p at the start of Monday trading – their lowest level since the financial crisis in 2009. It is the company’s worst daily sell-off since it listed in 1994, far eclipsing a 30 per cent drop during the height of the tech bubble.

Imagination however said it disputed whether Apple would be able to develop its own chip designs without infringing on the company’s intellectual property rights, adding:

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.

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.

The UK company added that it would be looking at alternative arrangements for its existing licensing and royalty agreement with Apple.