Dive Brief:

• Imagination Technologies, a British microchip design company, is feeling the pinch after major client Apple announced plans to develop its own graphics-capable chips, Quartz reported Monday.
• The company experienced a 70% drop in stock value after the announcement. Apple made up over 40% of the chip maker's revenue last year for £60.7 million ($76 million). The company's fate has long been tied to its buyer's success.
• Imagination intends to explore potential patent violations as a result of the change, believing that Apple cannot manufacture its own microchips without violating the company's copyrights.

Dive Insight:

Suppliers are in a delicate position. Not only are they continually pressed to offer savings, but are also always at risk of being replaced. How can they best navigate these dangerous waters? 

Ideally, a supplier should stay one step ahead of its clients, continually innovating in ways a manufacturer cannot easily replicate, nor resist. This where R&D comes in; remaining a supplier to a top company means never resting on your laurels but rather continually improving or even escalating capacity and quality while remaining cost competitive. In a way, a supplier should seek to become invaluable to its buyer through both product and service. Relationships are key. 

And yet, there's always a lurking threat when working with a company which is itself an innovator. Wherever a "We can do it better" mentality exists, those associated would do well to stay one step ahead. It's a painful lesson to learn, but a key one.

Here's one more lesson: suppliers should be wary of overdependence on a buyer and, if possible, position themselves to transition to other buyers if necessary. Business decisions do not always come from your friendly procurement partner, after all.