Apple’s supplier battles intensify as Imagination Technologies files formal dispute

Following yesterday’s news that Qualcomm is seeking an import ban on iPhones as part of its patent royalty dispute with Apple, Imagination Technologies has filed a formal dispute over its own licensing arrangements with the iPhone maker …

Reuters reports that the company made the decision after informal talks failed.

Imagination Technologies said it had started a “dispute resolution procedure” with Apple, its biggest customer, after failing to resolve a standoff over licensing between the two companies […]

It said on Thursday it had been unable to make satisfactory progress with Apple on an alternative commercial arrangements for the current license and royalty agreement and ‘has therefore commenced the dispute resolution procedure under the license agreement with a view to reaching an agreement through a more structured process.’

The dispute between the two companies is over GPU designs that Apple licenses from Imagination for its iOS devices. Apple currently pays the company around 30 cents per device, but last month informed Imagination that it expected to begin using its own designs within two years. At that point, royalty payments would cease. Imagination claims that Apple cannot make its devices without violating its design patents.

Imagination’s shares slumped 70% on the news. UBS subsequently predicted that Apple would initially reduce the royalty payment from 30c to 10c per device, and said that Imagination would make a loss without the income stream from Apple.

The chip designer is one of six companies said to rely on Apple for half to three-quarters of their revenues.

It’s not known what form the dispute resolution procedure will take, but it is not unusual for such contracts to require the two parties to go through a specified formal procedure before either is allowed to commence legal proceedings.

Apple moving more of its chip design in-house adds weight to the idea that the company will at some point begin making ARM-based Macs.

Photo: FutureWorlds