Apple Pulls Plug On UK iPhone Technology, Shares Plunge 69%
UK based Imagination Technologies who in the past have supplied Apple with IP technology have been told that the iPhone maker has pulled the plug on the use of their technology.
The move saw the Companies shares plunge 69% after Apple notified them that will stop using its intellectual property in new products, in 15 months to 2 years, according to a statement issued tonight.
The move means Imagination Technologies risks losing future royalty payments from Apple, which considered acquiring the U.K. supplier as recently as last year.
The Company claims that Apple will struggle to avoid infringing its intellectual property rights.
“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,” Imagination Technologies said in the statement.
Imagination’s PowerVR graphics technology have been used in the graphics processing units (GPUs) of the iPhone, iPad and iPod for years and Apple is the British company’s biggest customer, responsible for around half of its revenues.
It’s also been revealed that Apple has been quietly hiring Imagination staff amid rumours that it wants to develop its own graphics technology, a move that was confirmed on Monday. Imagination said Apple expects to introduce its own technology in 15 months to two years’ time, suggesting that it will do so in next year’s iPhone, likely to be released in September 2018.
“Apple has asserted that it has been 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.
The company appeared sceptical that Apple would be able to develop its own graphics chips without using Imagination’s intellectual property, saying Apple had refused to prove it could do so.
“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 that as a result it would look for a new commercial arrangement with Apple.
Bloomberg claims that Imagination Technologies and Apple are in talks over future license and royalty agreements.
The British company received US$76.1 million in license fees and royalties from Apple in the year ended April 30, 2016, and expects to get A120M in such payments in the fiscal year ending this month, according to the statement.
“If the group is unsuccessful in challenging Apple’s position, we would expect the group to need to make significant operational changes to align the cost base to the new revenue profile,” said Oliver Knott, an analyst at N+1 Singer Ltd.