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Who Loses If Apple Inc. Goes In-House With Chips? (AAPL)

Nvidia and AMD could face stiff competition, and lose their foothold in Macs

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As of last Friday’s close, Imagination Technologies — the semiconductor company responsible for the striking graphics of Apple Inc.’s (NASDAQ:AAPL) phones, tablets and watches — was worth more than $270 per share. Flash forward not even a week, and shares of the London-based tech company are barely hanging onto triple digits.

Who Loses If Apple Inc. Goes In-House With Chips? (AAPL)
Source: Shutterstock

As you perhaps guessed, Apple is indeed to blame.

In most mobile devices, graphics processing is integrated within something that’s called a “system on a chip” application processor. Semiconductor companies like Advanced Micro Devices, Inc. (NASDAQ:AMD), Intel Corporation (NASDAQ:INTC), Nvidia Corporation (NASDAQ:NVDA) and Qualcomm, Inc. (NASDAQ:QCOM) own the designs for both the graphics components and computing components of such chips.

Apple, on the other hand, own most of its SoCs, from the Ax series in your iPhone to the Sx series in your Apple Watch. But for its phones, tablets and TV, Apple buys the intellectual property for the GPU from Imagination Technologies — or at least it used it. Now, Tim Cook & Co. have decided they want to make and own their own GPUs for all mobile devices.

Apple was once considering buying Imagination Technologies to this end, but has simply announced abandonment instead. Hence, the plummet for Imagination, which gets over half its revenue from the iPhone king.

Naturally, Imagination Technologies is a little upset and has already more than hinted this news is fertile ground for a lawsuit.

“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. This evidence has been requested by Imagination but Apple has declined to provide it,” it said in a statement.

But a lawsuit between Apple and Imagination Technologies is a David-and-Goliath battle if I’ve ever seen one. Apple (like most tech companies) is no stranger to such conflicts and has plenty of cash to settle and move on.

Meanwhile, the desire to control the IP for its GPU is more than logical considering graphics are the key to everything from machine learning to augmented reality. This is especially true, as Wired noted, because Apple is playing catch-up in those areas.

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Article printed from InvestorPlace Media, http://investorplace.com/2017/04/apple-inc-in-house-chips-aapl/.

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