A year on from Apple being locked in potential buyout talks with Imagination Technologies, the iPhone maker is set to abandon the British chip design company.
Shares in Imagination were in free-fall on Monday morning after Imagination confirmed it would lose its biggest customer by 2019. “Apple is of a view that it will no longer use the group’s intellectual property in its new products in 15 months to two years time, and as such will not be eligible for royalty payments under the current license and royalty agreement,” it said in a statement to the press.
The struggling UK-based semiconductor supplier axed 350 jobs last year and said it needed to slash millions of pounds in operating costs, after it warned that a slump in iPhone sales has hurt the business. Roughly half the company’s revenue derives from a licensing deal with Apple.
Apple told the company that it is “working on a separate, independent graphics design” so as it can ditch Imagination Technologies and take more control of its products, but an IP row appears to be brewing. Imagination 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.
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.
It said that talks about “potential alternative commercial arrangements for the current license and royalty agreement” were taking place with Apple, adding: “Imagination has reserved all its rights in respect of Apple’s unauthorised use of Imagination’s confidential information and Imagination’s intellectual property rights.”
Shares in Imagination are currently trading at 93.5p on the London Stock Market—down 65 percent following confirmation of Apple’s decision to rip up its contract with the firm. In 2016, Apple paid nearly £60.7 million (about $75.8 million) in royalties to the British company, which reported total sales of £120 million (about $150 million) for the 12-month period.
“There are no parties with whom the group has contractual or other arrangements which are essential to the business of the group except the contract with Apple,” Imagination said in its most recent annual report to the City.