Apple will start designing its own graphics chips, ditching long-time partner Imagination Technologies — sparking a share sell-off and a potential legal battle.
Apple uses Imagination's designs to make the GPUs (Graphics Processing Units) for the iPhone, iPad and Apple Watch, but Apple has been working on its own graphics design on the side.
Imagination said in a statement that Apple had ended its contract, and would stop using its intellectual property within 15 months to two years.
That's a problem for the British tech company, as last year Apple's license fees and royalties were worth £60.7 million in revenue to Imagination — about half of its takings — and the revelation sent its share price into a free fall, losing 70% of its value.
No surprise then that Imagination isn't taking the break-up kindly, saying it seems difficult to believe Apple designed its own GPU from scratch without making use of any of Imagination's own IP.
"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," the company said in a statement.
"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 declined to comment.
Apple owns an 8% slice of Imagination, and last year confirmed rumours that it had considered an acquisition, but eventually opted not to make a bid, though it did reportedly poach two-dozen Imagination staffers.
The failed deal topped off a rough 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.