When Apple supplier Imagination Technologies informed its shareholders of Apple’s decision to stop using Imagination’s technology within the next two years, chaos ensued. The company’s stock price dropped by more than 60 percent the same day, shaving hundreds of millions off the British tech company’s valuation.
What happened to Imagination Technologies, which supplies Apple with technology and intellectual property used in graphics processing units, is the Sword of Damocles hanging over many of Apple’s suppliers, who rely on the business they’re doing with the Cupertino-based giant to an unhealthy degree.
As our chart illustrates, many companies from different fields have their relationship with Apple to thank for more than 50 percent of their annual revenue. Relying on a single customer in such a way poses a big risk, which is why Apple’s publicly-listed suppliers often trade at lower multiples than similar companies with a more diverse customer base. It also puts Apple in a position of power in contract negotiations, where the iPhone maker can use its leverage to dictate terms and conditions.