It’s no secret Apple is a titan in the mobile industry but you probably didn’t know just how much their decisions can affect their partners. Well, after ditching Imagination Tech, their provider of graphics chips, the British company’s shares dropped 70%.
Imagination announced reluctantly that Apple, their biggest client, was developing its own graphics chips and therefore, would no longer need their designs. Previously, their intellectual property was key for the chips integrated in iPhones, iPads and Apple Watches.
So, what happened after the whole world learnt Apple said goodbye to the licensing deal? Shares dropped 70%, being valued at 76 pence, a 10th of the record value registered in 2012: 734 pence. If that comparison didn’t hit you hard enough, we have another one: this Monday, Imagination was valued at around $348 million, after being worth almost $1 billion seven days before that.
As you can imagine, Imagination was relying heavily on Apple for most of its revenue. Now, that they’re out of the picture, it will be hard for the licensing company to get back to recent profits. Think about it: the UK provider received a small royalty from ever chip integrated on a device and now all that is gone. The deal brought Imagination millions of dollars; last year, the fees and royalties amounted to 60.7 million pounds, which is half of the total revenue.
What can the company do in this context? First of all, try to depend less on premium devices manufacturers and grab more than 7% of the mid-range market. Then, cut a new deal with Apple – after all, they said they’re doubting Apple can manufacture chips without infringing on their patents, intellectual property and confidential information.
Expect a fierce legal battle in the near future.