Things took a turn for the worse for Imagination last month when the Cupertino, California-based tech giant revealed that it was ending its relationship with Imagination and would start building its own graphics chips in the next two years. This caused Imagination’s share price to decline by over 50% and they have been on a downward trend since then. Without revenues from Apple, analysts have projected that the firm will become a loss-maker in two years.
Formal dispute resolution
Besides selling off two of its business units, Imagination is also kicking off a more formal dispute resolution process with Apple to ensure that the iPhone maker licenses some of the patents that the former holds in graphic chips designs. One of the two business units that Imagination is selling concentrates on licensing patents that have to do with Internet of Things and mobile technologies.
The other Imagination Technologies business unit focuses on embedded processors including MIPs, Ensigma and PowerVR. MIPS processors are mainly to be found in networking products and home entertainment devices while Ensigma processors are mainly to be found in communication devices as they are instrumental in allowing devices to pair and transmit signals across each other. PowerVR processors are, on the other hand, critical in power graphics in smartphones and tablets.
In Imagination’s view, it is impossible for Apple to develop an original graphics chip without infringing on patents held by the former. Apple has however rubbished this view forcing Imagination to seek an alternative method of dispute resolution which exists in the licensing agreement that the two companies have with each other.
“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,” wrote Imagination Technologies last month.
How the dispute is eventually resolved is critically important for Imagination in that the firm is highly dependent on the iPhone which it receives its royalty payments for its graphics chips designs. The latest annual results showed that the Imagination Technologies unit from which Apple has been licensing its graphics technology generated more than 60% of the revenue for the semiconductor firm that is based in the United Kingdom.