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Apple ends deal with chipmaker Imagination Technologies, causing shares to drop 70 per cent

Alex Spencer

Imagination Technologies, the UK-based chipmaker best known for supplying Apple with graphic processors used in the iPhone, has seen share prices plunge by over two thirds after Apple announced it is ending their partnership.

The two companies signed a licensing deal for Imagination's PowerVR SGX chips back in November 2008. One month later, Apple purchased a 3.6 per cent stake in the company, for £4.2m. Imagination's GPUs (Graphics Processing Units) have since been incorporated into iPhones, iPads, iPods, Apple TV and the Apple Watch.

However, Apple has now notified Imagination it will stop using its IP in the next 15-24 months, meaning it won't see any more royalties from sales of Apple devices. The company saw £60.7m in royalties and license fees from Apple in 2016, over half of its £120m revenues for the year.

Imagination's shares have dropped to a low of an eight-year low of 76 since the news broke, down 71.7 per cent on the previous closing price of 268.25.

The company isn't ready to accept Apple's decision, however, saying in its statement about the end of the deal: "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."

Whether this means we can expect to see Apple fighting another high-profile IP legal battle remains to be seen.