Apple Inc. (AAPL) and Britain’s Imagination Technologies (LON: IMG) reached an agreement on Thursday for the English microchip firm to continue producing electronics components over the course of several more years. The precise length of the new contract was not revealed, but jittery investors in Imagination Technologies were reassured that its stock would continue to rise. News of the deal triggered a round of enthusiastic purchases, pushing share prices of the smaller company up at least 20 percent on the London Stock Exchange.
Apple Inc.’s principal purchases from Imagination are Series6 PowerVR GPUs, which are incorporated into the A7 chipset to provide advanced graphics capabilities. The A7 is used in all variants of the iPhone 5, plus the current models of iPad and iPad Mini manufactured by the Cupertino enterprise. The graphics processors are slated to be upgraded to the new Series6XT version in the near future, which may appear in Apple devices in 2015.
Though Apple Inc. is by no means Imagination’s sole customer, it is still a key client of the firm and owns 10 percent of the smaller company’s shares. Perhaps due to the recent slump in Imagination’s stock market performance, which had cost the company a staggering 70 percent of its share value, Apple confirmed for the first time ever that the British firm’s graphics intellectual property is used in many AAPL products.
Though many of the deal’s details are naturally private, the terms appear to give Apple Inc. (AAPL) broad access to video and graphics cores made by Imagination over the next few years. In exchange, Imagination will receive both licensing fees and royalties from the devices that make use of their intellectual property. These devices are likely to include all models of iPhone designed during the contract’s period of validity.
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