Apple is poised to acquire 2.2 million new shares of Imagination Technologies on July 1 at $2.36 per share. Those shares, together with Apple's latest purchases on the open market, will boost the iPhone maker's ownership interest in Imagination to 9.5 percent -- up from just 3.6 percent in December.
Apple's deal follows in the wake of Intel's announcement that it had upped its stake in Imagination to 16 percent.
Though the U.K.-based company's intellectual property (IP) for mobile applications has attracted a lot of attention, the current interest in Imagination is about more that just technology, said Jordan Selburn, iSuppli's principal analyst for semiconductor designs.
"Imagination is also attractive on a business basis," Selburn said. "In both cases, Apple and Intel looked at the company and thought it was a good investment."
Commanding More Value
Generally speaking, Imagination plays in the semiconductor arena at a very high level, Selburn observed. "If you look at the IP space in chips, a lot of it is nuts and bolts stuff: Logic gates, memory interfaces, memory generators, and so on, and on a technical basis, there is very little to stop anyone from duplicating that," Selburn said. But processor cores and high-speed interfaces represent "a bigger part of the end chip and therefore command more value, and that is what Imagination is providing."
Imagination's IP covers entire graphics and video systems, very flexible communications interfaces, and processor flows at a very application-focused level, Selburn said. "And if someone wanted to put together a high-level SoC, they could do it almost entirely with Imagination Technologies, which is pretty much alone in the space where they are competing," Selburn added. "Their high-level IP is the sort of stuff that would have been an entire chip several years ago."
Although the details are somewhat sketchy about Imagination's exact role in Apple's products, "there's no question that they play a significant part in a number of Apple's advanced mobile devices," Selburn said.
"There are a number of other people who are providing the media and communications function as an IP block" that Apple might need, "but at the individual function level," Selburn said. "Some of these other companies do a very good job -- by offering a very efficient H.264 video codec, for example -- but not at the same complete subsystem level as Imagination."
Close to the Vest
Some industry observers suspect that Apple's relationship with Imagination stretches back to July 2007, when the company announced it had licensed its graphics and video IP cores to an unnamed international electronics-systems company under a multi-use licensing agreement. "The SoCs to be developed under this license agreement will be produced for this new partner by Imagination's existing semiconductor partners and/or new chip-manufacturing partners," Imagination said.
Samsung Electronics, which provides the main applications processor for Apple's iPhone products, also signed IP licensing agreements with Imagination in April and September of 2008. The two agreements allow Samsung to manufacture semiconductor devices which integrate its range of current and future POWERVR graphics and video IP cores.
It's possible that the application processor that Samsung produces for Apple's iPhone lineup is actually based on IP from Imagination. However, neither Apple nor Imagination are saying. "Imagination tends to play their agreements fairly close to the vest," Selburn noted.
Last September, Imagination concluded a new multi-year, multi-use license agreement with the same unnamed international company, with the new agreement covering its current and future POWERVR graphics and video IP cores. "As a result of this new agreement, it is expected that Imagination's IP cores will feature in a number of new SoCs to be used in this company's future products" was all the company was willing, or able, to say.