Apple is developing its own technology, but Imagination says the move will likely infringe patents
Shares in UK chip designer Imagination Technologies have plunged almost 70% after Apple said it would end a deal to use its products.
The move by Apple, Imagination’s largest customer, means the loss of lucrative royalty payments.
Imagination said Apple would stop using its products in about “15 months to two years time”.
Apple is developing its own technology, but Imagination said this would be difficult without infringing patents.
Imagination relies on Apple for about half of its revenues, with the US giant using the UK firm’s chip technology in its iPhones, iPads, and iPods under a licensing agreement.
Apple has told Imagination that it is “working on a separate, independent graphics design in order to control its products and will be reducing its future reliance on Imagination’s technology”.
The Financial Times reported last year that Apple, which owns 8% of the UK company, had held talks about buying Imagination.
In its statement, Imagination questioned whether Apple would be able to develop its own computer chip designs without breaching its intellectual property rights.
The UK 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.
“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.”
Imagination said in its latest annual report that it has other licensing deals with customers, but described the Apple contract as “essential”.
Last year, Apple paid about £60.7m in royalties to Imagination and it is forecast to pay about £65m for the current financial year.
Shares fell 180p to 88p, valuing the company at less than £250m. It was worth about £765m before the plunge.
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