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Pro Analysis

Breakingviews: Apple proves once again it can be cold-blooded with suppliers

A person walks by an Apple Store.
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A person walks by an Apple Store.

Apple has imagined away the future of one of its suppliers of chip know-how. Imagination Technologies lost more than 60 percent of its market value – a hit of over 450 million pounds – after the iPhone maker said it would stop using the UK firm's technology in 15 months to two years' time.

Imagination's intellectual property is used in graphics chips found in iPhones, iPads and Apple Watches. The loss hits Imagination in two ways. The damage to its business is obvious. In the year to last April, fees and royalties from Apple totaled 61 million pounds. That's about half the British company's sales from continuing operations. Moreover, there are "minimal" direct costs associated with this revenue, according to the company, meaning pre-tax profit, estimated to approach 30 million pounds in the year to April 2018, could flip into a similarly sized loss.