Imagination Technologies is beginning a “dispute resolution procedure” with the U.S. technology giant after the two clashed earlier this year, said the key supplier of components for Apple products.
Vital components in Apple products allowing high-quality images on its retina displays – graphics processing units (GPU), are designed and manufactured by the U.K. firm.
Apple will be “reducing its future reliance on Imagination’s technology” over the next 15 to 24 months and said that it’s developing its own “independent graphics design”, the California based IT giant said last month.
After the announcement, shares of Imagination Technologies are down over 61 percent year-to-date and have plunged since.
Imagination said it “has been unable to make satisfactory progress with Apple to date regarding alternative commercial arrangements for the current licence and royalty agreement” and it has been in discussions with Apple regarding its commercial relationship.
“Imagination has therefore commenced the dispute resolution procedure under the licence agreement with a view to reaching an agreement through a more structured process,” the company said in a statement.
“Imagination has reserved all its rights in respect of Apple’s unauthorized use of Imagination’s confidential information and Imagination’s intellectual property rights.”
It was unable to give any more information about the logistics of the dispute resolution procedure, Imagination said when contacted by the media. Apple was not available for comment.
Indications that Apple is unlikely to buy the company — a path that was at one point potentially on the cards, is shown by the messages from Imagination, analysts said.
“A dispute resolution process has been initiated with Apple, which seemingly removes any optionality around alternative commercial arrangements being struck, or that Apple is playing some form of Machiavellian game for a price cut or to buy PowerVR at a knock-down price,” Investec analyst Roger Phillips said in a note on Thursday.
“The comment over ‘rights being reserved’ suggests the allegation of patent infringement still hangs in the air. The problem for IMG is whether it has the time and resources to pursue this avenue; this may end up being optionality for an eventual buyer of the GPU business.”
Imagination’s core graphics processing technology is PowerVR.
Since the U.S. firm accounts for the majority of the British company’s revenue, therefore Apple’s comments in April were a large blow for Imagination. Apple focusing on making its graphics chips could breach the duo’s current licensing agreement, Imagination noted in April when the two organizations clashed.
“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,” Imagination said in a press release in April.
“This evidence has been requested by Imagination but Apple has declined to provide it.”
Its mobile computing chip segment called Ensigma and its embedded processor business MIPS are sought to be sold by it, Imagination also said.
“With continued investment, the Group considers PowerVR to be well placed in mobile, automotive, digital TV/set top boxes and the rapidly emerging AR/VR (augmented reality/ virtual reality) market and having the potential to exploit investments for artificial intelligence in the medium term. Imagination will continue to make the appropriate investments in the PowerVR business,” the company said.
(Adapted from CNBC)