Apple To Design Its Own Mobile GPU Core Abandoning Imagination Technologies Partnership, IMG Shares Tank

Imagination Technologies may have just lost its biggest customer. The company said it's been notified by Apple that it no longer plans to license the firm's graphics processing technology and will instead build its own mobile GPUs for use in its iPhone and iPad devices. The phase-out is to occur in 15 months to two years. Barring a renegotiation, this is a bit hit to Imagination Technologies.

Apple has been licensing the firm's intellectual property for many years, dating back to when the iPod was relevant. The company's graphics IP is found in several of Apple's products, including its iPhone, iPad, iPod, and Apple Watch devices. This arrangement accounts for around half of Imagination Technologies' revenue. With Apple wanting to sever ties, investors sent the share price of Imagination Technologies on a downward free fall—it dropped more than 70 percent following the announcement.

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Imagination Technologies is skeptical that Apple can build a GPU of its own without infringing on the company's graphics 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. This evidence has been requested by Imagination but Apple has declined to provide it," Imagination Technologies said.

"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 company added.

Since being notified of Apple's intent, Imagination Technologies has been in talks with the company about revising the current license and royalty agreement between the two. That suggests that Apple isn't truly interested in kicking Imagination Technologies to the curb, and instead wants to negotiate for a lower royalty rate. It's also possible that Apple wants to renew talks to acquire the company. It was reported around this time a year ago that Apple and Imagination Technologies were discussing a possible acquisition. While this is pure speculation on our part, severing ties to devalue the company and then making a reduced buyout offer would be quite the savvy business move.

Either way, Imagination Technologies says it will make another announcement "in due course."

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