When Apple started making the iPhone, it used a generic, Samsung-made ARM system that was paired with a PowerVR GPU. Over time, Apple began crafting more and more of its own silicon, thanks to its purchase of various chip design firms. These days, the PowerVR chip on the A10 Fusion is one of very few components that Apple didn't have entire control over.
The decision to dump Imagination was probably inevitable given the company's trend towards control, but there may be another story here. Third-party analysts The Linley Group spotted that the iPhone 7 used the same PowerVR GT7600 GPU that was used for the iPhone 6S. That piece of silicon, while powerful, couldn't sustain its performance for very long and so throttles the component to avoid overheating.
Apple is well-know to be unsentimental when it comes to ditching chip makers when they can't meet performance targets. After all, the company ditched PowerPC CPUs because -- so the legend goes -- Intel's X86 silicon was getting faster while IBM and Motorola dragged their feet.
It's clearly a massive blow for Imagination, which has already said that it's planning to take the matter to the courts. After all, building a graphics platform from scratch is likely to involve using technology that other companies like Imagination has already patented. The famously-secretive Apple is also not going to look favorably upon one of its suppliers going public with this licensing dispute.
As TechCrunch explains, the split could spell doom for Imagination, since it relies upon Apple for the bulk of its cash. Even worse, is that the news has already caused Imagination's stock to freefall, dropping between 60 and 70 percent in the last few hours.