Apple developing its own graphics chips news sends Imagination Technologies shares down 70%

Imagination Technologies, the UK-based chipmaker, lost 70% of its market share when its largest customer Apple revealed it was developing its own graphics unit for iPhone and iPad to improve their computer graphics quality.

Imagination on Monday (3 April) said its products would be phased out from iPhones within 15 months to two years time. According to the firm, it has just over 50% of the high-end smartphone market.

"While on the surface this is about phones, the fact Apple are leaving them means Imagination is out of everything that Apple does in future," Ben Bajarin, analyst at Creative Strategies told the Financial Times, "The GPU is front and centre as the most important component for all the interesting things they want to do in the future."

To manufacture GPU (graphics processor unit), Apple has been hiring people from Imagination Technologies. Several former managers and engineers from the firm now work at Apple, with many of them in the UK. One of them is John Metcalfe, who joined Apple as a senior director last July, had worked at Imagination for more than 15 years.

There are several more openings on Apple's job site for London-bases hardware engineers. The iPhone maker says techies can apply for a "carrier defining opportunity to get in at the ground floor as we build our UK Design Centre." Also more GPU-related positions are being advertised in Austin, Orlando, Florida and Herzliya, Israel and Silicon Valley.

Apple began recruiting people for jobs at that time described, "GPU team" in 2013. It's the same time when the company hired several AMD graphics engineers amid layoffs at Imagination.

However, Apple would need to secure intellectual property rights as GPU designing is a pretty well-covered field.

"It would be extremely challenging for Apple to design a brand new GPU (graphics processor unit) architecture from basics, that is, without infringing our IP rights and also infringing our confidential information," Andrew Heath, Imagination's chief executive, was quoted as saying by Reuters.

Imagination is hoping to revive its shares by striking a deal with Apple.

Analysts believed there could be room for compromise, and it could even be a bargaining move by Apple to reduce royalties, Reuters reported.