When a big company like Apple takes a small step, small companies feel the tremors greatly. Just ask Imagination Technologies.
The UK chipmaker company Imagination Technologies' shares took a massive dip as Apple decided not to use its graphics processing technology anymore. Apple has been reported to pursue developing its own tech; this end of the partnership sent shivers to Imagination Technologies's pockets.
Since 2008, Imagination has powered the beautiful displays of majority of Apple's products, including the upcoming iPhone 8.
Apple Out, Imagination Goes Down
According to reports, after Apple nixed its partnership, the shares of Imagination Technologies Group plunged as much as 69 percent to 85 pence ($1.06) when the London Stock Exchange opened on Monday. This is the lowest since 2009 and may be the worst daily sell-off since 1994, eclipsing the 30 percent drop during the tech bubble crisis.
The UK company gained 60.7 million pounds ($76.1 million) in license fees and royalties from Apple at the end of the fiscal year on April 30, 2016. The company expects to earn 65 million pounds ($81.2 million) more at the end of this month.
Apple is Imagination's biggest buyer, with half of its revenue coming from the Cupertino-based company. The two have been partners since 2008, when Apple decided to use Imagination's PowerVR technology to power its first line of iPhones. Apple also has an 8.2% stake in the company and it came close to taking over the chipmaker company.
Apple To Develop Own GPU? Imagination Doesn't Think So
The cessation of the partnership is the culmination of Apple's plans to develop its own graphics technology. It already has its proprietary technology for its processors and GPU is not a surprising step. Apple has not released any official statement, but Imagination Technologies released its own press release regarding the end of their partnership, with a line that effectively confirmed Apple's GPU plans.
"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 wrote.
However, Imagination doesn't think Apple can design a new GPU architecture, saying it will be "extremely challenging."
"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," it added.
Imagination confirmed that it is looking for ways to continue working with Apple, with discussions regarding "alternative commercial arrangements" on the way. With its recent freefall, it is a smart business move for Imagination.