British tech firm Imagination Technologies saw its share price plummet more than 60 per cent today after revealing that Apple, its biggest customer, had given notice that the company’s chip technology would be dropped from future devices.
Apple warned it will no longer use Imagination’s intellectual property in its new products in 15 months to two years’ time.
The chip-maker has supplied Apple with technology and intellectual property for years. Imagination said its tech formed the basis of graphics processor units (GPUs) in Apple’s phones, tablets, iPods, TVs and watches, and Apple has previously come close to buying Imagination outright.
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However, Apple is now "of a view that it will no longer use the group’s intellectual property in its new products in 15 months to two years time", and as such Imagination will not be eligible for royalty payments under the current license and royalty agreement.
Imagination added: "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."
The British company also believes 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".
Shares in Imagination dropped 70 per cent in morning trading and finished the day 62 per cent down at 103p, their lowest level since 2009.
The share price fall saw Imagination’s market capitalisation fall from £754m to £290m and prompted analysts to speculate that the company could become a takeover target again.
The group said Apple’s notification has led Imagination to enter discussions with the iPhone maker about potential alternative commercial arrangements for the current license and royalty agreement.
Losing Apple's business would be a huge blow to Imagination, which has recently struggled to deal with a slowing smartphone market. Despite a restructuring plan that includes job cuts and the sale of non-core business, Imagination last year posted its biggest ever loss.