Apple Hits Back at Supplier Imagination for 'Inaccurate and Misleading' Statements in Contract Dispute

Apple today hit back at disgruntled chipmaker Imagination Technologies for questioning whether it can develop new graphics technology without using the supplier's intellectual property, calling the British firm's response to Apple's decision to part ways with it "disappointing, inaccurate, and misleading."

Back in April, Imagination Technologies announced that Apple had told the U.K. firm it planned to stop using its graphics processors in consumer devices over the next two years. The news came as a shock to investors and the company's shares fell by 60 percent on the day.

imagination technologies logo
At the same time, the company criticized Apple, claiming that it doubted the tech giant could go it alone without violating Imagination's patents, intellectual property, and confidential information. One month later, the company opened a "dispute resolution procedure" with Apple after failing to resolve the disagreement.

On Friday, Apple responded to the graphics chip supplier by claiming that the firm had known for nearly two years that it was winding down the relationship. In an email statement received by Bloomberg, Apple said it first informed Imagination in late 2015 that it would no longer be buying the U.K. company's latest technology, but that it would still use its older systems.

Apple claimed that it told Imagination in 2016 that it was further reducing the relationship by initiating a clause in its contract that allows Apple to pay a lower royalty rate for using a smaller amount of intellectual property. By February 2017, Apple said it had told Imagination it was ending the relationship altogether and would no longer be making any royalty payments in up to two years' time.

Apple's statement contradicts those made by Imagination, notes Bloomberg. Last week, Imagination CEO Andrew Heath said the company was informed by Apple at the end of March "that they were certain" that products to be released in 2018 or early 2019 will no longer use Imagination's intellectual property. But Apple claimed the firm had known for longer.

"We began working with Imagination in 2007 and stopped accepting new IP from them in 2015," Apple said. "After lengthy discussions we advised them on February 9 that we expected to wind down our licensing agreement since we need unique and differentiating IP for our products. We valued our past relationship and wanted to give them as much notice as possible to adapt their future plans."

Imagination has yet to comment on Apple's statement, but the supplier's shares fell by up to 8 percent on Friday U.K. trading.

News that Apple would no longer be relying on its processors delivered a major blow to Imagination Technologies, which traditionally provides the PowerVR graphics architecture found in Apple's full range of iOS devices and receives a small royalty on every sale, which amounts to up to half of the British firm's revenue.

The company put itself up for sale in June. The formal sale process is still ongoing, despite a successful restructuring and a return to profitability for the company. Apple is unlikely to make an offer, according to a person familiar with the matter who spoke to Bloomberg.

Top Rated Comments

Quu Avatar
44 months ago

Why most companies wind up overacting against Apple?

Apple is the kind of company that only uses you long enough to learn how your technology works and then once they devise a way to get around your patents, shut you out and replicate the functionality of your solution. Alternatively they just buy you. Like they did with Siri, TouchID and so on.

EDIT:// I can see I rattled a lot of cages with this comment. Many of you replying are saying things like "welcome to capitalism" and "that's what every company does". And to that I say, well duh, that's what I just explained with my comment, it's the entire reason imagination is salty.
Score: 28 Votes (Like | Disagree)
Kaibelf Avatar
44 months ago

This is a situation where both parties are probably in the right.

1) I think that Apple felt obligated to give Imagination fair notice that they were planning to pull the rug out from under their feet, so that Imagination wouldn't feel like the rug was being pulled out from under their feet.

2) Nevertheless, the rug was pulled out from under Imagination's feet. The notice itself resulted in financial collapse. From their standpoint, they think their IP is so strong that they'll discover Apple still owes them licensing fees for whatever tech it eventually unveils. Maybe they'll be right and maybe they'll be wrong. But the problem for them is that's all in the future. Right now, those products only exist in the form of a warning that they WILL exist. And really, I think that the recent statements made by Imagination were very truthful and correct from their standpoint. They really have been putting their ducks in order and improving their business, and it's no doubt frustrating to them that they can't even verify whether or not Apple will or won't infringe their IP.

3) But this last statement by Apple is problematic for me. I seems churlish. In trying to defend itself, Apple is showing a complete lack of balance. They're saying "we totally did the right thing and those guys are lying"... but really what's happening is that the Apple statement just wants to ignore the damaging impact its warning had. Apple needs to have acknowledged the unfortunate results of their initial warning but then added that said warning was the right thing to do, in order to prepare a company whose business they valued, adding that a last minute surprise would have been worse. Then they could say they regretted the unpredictable and unforgiving nature of the market.

1. It'a not "pulling the rug out from under their feet" to simply change their supply chain (with PLENTY of notice). The entire concept of pulling a rug out from someone is that you surprise them without any warning. Are you "pulling the rug out from under the feet" of the servers at a restaurant if you find a different one you prefer and start going there instead? Do you somehow owe them lifetime business patronage?

2. I don't know what the value of my 401(k) will be in 5 years either. Should I be throwing a fit because I am not being informed? Imagination is crying about pure speculation with nothing to back it up, and the idea that Apple should clue them in to their internal trade secrets as they exit doing business with them is, at best, laughable.

3. So Imagination makes a series of accusations, then a series of threats, then complains to the press about how they are somehow victims because their gravy train is ending after being fattened up for a decade unnaturally and failing to diversify with that opportunity, and when Apple finally responds by saying that IT aren't being honest, somehow it's "churlish" and "lacking balance?" I'm not sure if you work for Imagination or some relative of yours does or something, but in the real world, people change vendors all the time, and in business, much like in life, no one owes you anything forever. Apple signed a deal, everyone made money, and then the deal ended, and they are moving on. I'm sorry that Imagination was too lazy and incompetent to get their house in order and idiotically assumed that their business would last forever, but that's frankly not Apple's problem, and last I checked Apple, and all corporations, are not there to serve as soup kitchens.
Score: 12 Votes (Like | Disagree)
gnasher729 Avatar
44 months ago

Speaking from a position of complete ignorance and lack of understanding here, why did this company make this dramatic announcement that ended up shocking investors and hurting their share value? That decision seems counter to their interests.

Is there a larger strategic advantage to such an announcement that I'm overlooking? Was it required by law?

The share value is hurt because Apple will stop buying chips from them. That can't be kept a secret. There sales numbers in 2019 will be down. I don't know about the UK laws; if it was a US company they would have to tell investors, but people would have found out anyway.

In the end, they are much better off as if Apple had never been a customer. Share price was low in 2007 and went up due to the Apple deal. Now its 2017 and the share price went down due to the end of the deal. In the meantime, the company made loads of money.
[doublepost=1499427940][/doublepost]

There must be something going on at Apple for them to suddenly screw over or not pay their core suppliers for GPU (Imagination), radio baseband (Qualcomm), power management (Dialogic), etc.

There is one thing going on at Apple: They developed their own graphics chips, they have plenty of hardware engineers to do that, and they are not suddenly screwing over Imagination; they told them two years ago that they won't need Imagination's IP anymore, so they won't be paying anymore.

Apple isn't screwing over Qualcomm. Qualcomm have been screwing over Apple for a while, and Apple had enough of it. Qualcomm has also been screwing over Samsung for a while, and Samsung had enough of it as well.
Score: 11 Votes (Like | Disagree)
mi7chy Avatar
44 months ago
There must be something going on at Apple for them to suddenly screw over or not pay their core suppliers for GPU (Imagination), radio baseband (Qualcomm), power management (Dialog), etc.
Score: 10 Votes (Like | Disagree)
Kaibelf Avatar
44 months ago

I guess it is required to inform shareholders about this sort of things.
Maybe they postponed the announcement as long as they could, but eventually they had to make it public.

They didn’t just inform shareholders. They also accused Apple of some kind of theft and demanded to know how they could possibly use another solution. It came across as desperate and juvenile, like a post-breakup post on Facebook by an angry middle school girl.
Score: 8 Votes (Like | Disagree)
morcutt11 Avatar
44 months ago
As a business owner I can tell you that anytime a majority your revenue is driven by just one or two customers, you're going to eventually have a problem. It was on Imagination to grow their business beyond Apple and that didn't happen. As for Apple using companies products/IP and eventually dumping them, why wouldn't they? When Apple initially launched the iPhone, they had no intellectual capital or IP for a vast majority of the technologies used by the phone. As such they pay royalties everywhere as everyone wants a piece of the action. Over they years, Apple has developed its own technology and evolved it to the ever-changing needs of their product. As such it is natural that they would eventually move away from some suppliers, pulling some work in-house. Additionally, it isn't surprising to see new suppliers come on board as a result of the technology evolution and changing needs of the iPhone platform.
Score: 7 Votes (Like | Disagree)

Top Stories

2020 apple shopping event

Apple Offering Up to $150 Gift Card With Select Products on Black Friday Through Cyber Monday

Monday November 23, 2020 2:53 am PST by
Apple has announced its annual four-day shopping event, offering customers up to a $150 Apple Store gift card with the purchase of select products between Black Friday and Cyber Monday in the United States. The gift card values in the United States are as follows: $150 for 16-inch MacBook Pro $150 for 21.5-inch iMac $50 for 13-inch MacBook Pro $50 for MacBook Air $50 for iPhone SE,...
0 Deals Hero

Black Friday 2020: Best Apple Deals to Plan For

Saturday November 21, 2020 10:00 am PST by
In the lead-up to Black Friday next week, we've been putting a spotlight on the best deals coming from various retailers like Best Buy and Walmart. In an effort to further prepare our readers for the best Black Friday deals, we're breaking down what we think should be on your radar for Black Friday in 2020. Note: MacRumors is an affiliate partner with some of these vendors. When you click a...
app store christmas icon

Apple Shutting Down App Store Connect From December 23 to December 27

Monday November 23, 2020 10:14 am PST by
Apple shuts down App Store Connect for a week around the holidays each year in an effort to give App Store staff time off from work. This year, App Store Connect will be unavailable from December 23 to December 27. With App Store Connect unavailable, Apple will not accept new apps or app updates, so all pricing changes and new app submissions need to be locked in before those dates for...
Target November Deals 1

Black Friday Spotlight: Target Begins Week-Long Sale With Deals on iPhone 12, Powerbeats Pro, and More

Monday November 23, 2020 8:07 am PST by
We've been tracking early Black Friday deals in our dedicated Black Friday Roundup, and in an effort to prepare our readers for the big shopping event we're highlighting sales store-by-store in the lead-up to November 27. Note: MacRumors is an affiliate partner with Target. When you click a link and make a purchase, we may receive a small payment, which helps us keep the site running....
ipad pro 2020 display

Black Friday Week Kicks Off With Up to $150 Savings on 2020 iPad Pro

Sunday November 22, 2020 2:37 pm PST by
As we head into Black Friday week, we're seeing some of the best deals of the season so far, with Amazon and Best Buy today discounting the latest iPad Pro models by up to $150 at the lowest prices we've ever tracked on these models. Note: MacRumors is an affiliate partner with some of these vendors. When you click a link and make a purchase, we may receive a small payment, which helps us keep ...
mac mini macbook pro macbook air

Apple M1 Hands-On Comparison: MacBook Air vs. MacBook Pro vs. Mac Mini

Monday November 23, 2020 3:40 pm PST by
Apple's M1 Macs are out in the wild now, but ahead of the holidays, you might still be trying to figure out which one to pick up, either for yourself or as a gift for someone else. We've got all three of the new Macs available, so we thought we'd give MacRumors readers a hands-on overview of each machine in our latest YouTube video. Subscribe to the MacRumors YouTube channel for more videos. ...
macos big sur m1 macs restore issue

Apple Provides Instructions to Fix macOS Reinstallation Errors on M1 Macs

Sunday November 22, 2020 3:30 pm PST by
Shortly after the launch of Apple's new M1 Macs, we saw reports that attempts to restore and reinstall macOS on those machines right away could result in an installation error that would leave your Mac non-functional. Specifically, the error message would read: "An error occurred preparing the update. Failed to personalize the software update. Please try again." Over the weekend, Apple p...
max tech xcode benchmark m1 macbook

Video Demos Performance Differences Between 8GB and 16GB Apple M1 MacBook Pro

Monday November 23, 2020 2:54 pm PST by
All of the M1 Mac models use the same M1 chip, so the upgrade options are limited to SSD storage space and RAM. We haven't seen many comparisons that demonstrate the difference between a machine with 8GB RAM and the upgraded 16GB RAM option, but Max Tech today shared a video highlighting the performance between an 8GB MacBook Pro and a 16GB MacBook Pro. The video includes a series of...
iPhone 6s main

Rumor Claims iOS 15 to Drop Support for iPhone 6s and Original iPhone SE

Sunday November 22, 2020 9:25 am PST by
Apple will drop support for the iPhone SE, iPhone 6s, and iPhone 6s Plus in next year's release of iOS 15, according to a rumor shared today by Israeli site The Verifier. If the rumor is accurate, that would mean iOS 15 will be compatible with the following Apple devices: 2021 iPhone series iPhone 12 Pro Max iPhone 12 Pro iPhone 12 mini iPhone 12 iPhone 11 iPhone 11 Pro iPhone 11 Pro ...
new mac mini logicpro screen

M1 Macs Able to Run Up to Six External Displays Using DisplayLink

Tuesday November 24, 2020 6:53 am PST by
It is possible to run up to six external displays from the M1 Mac mini, and five external displays from the M1 MacBook Air and MacBook Pro, with the aid of DisplayPort adapters, according to YouTuber Ruslan Tulupov. This far exceeds Apple's specified limits on external displays with the M1 Macs. Apple's host of new M1 Macs are not capable of supporting as many external displays as their...