Apple signs a new deal with its former graphics chip supplier

Remember Imagination Technologies Group? This is the U.K. company that once supplied Apple with Graphic Processing Units (GPUs) for the iPhone and iPad. But starting with 2017's iPhone X and the following year's iPad Pro, Apple starting using its own GPU designs. Apple also designs the graphics processor used on the Apple Watch. The company told Imagination Technologies Group in 2017 that within two years, it would stop using the firm's intellectual property. In September of that year, Chinese buyout firm Canyon Bridge Capital Partners bought Imagination Technologies for $663 million.

But on Wednesday, the company announced that it has reached a new licensing agreement with Apple. In a statement, Imagination Technologies said that it had "formed a new multi-year license agreement under which Apple has access to a wider range of Imagination’s intellectual property in exchange for license fees." Last year, Imagination Technologies said that if Apple refused to pay royalties to the company for the latest generation of its devices, there could be some "material uncertainty" about whether the chip designer would be able to survive.

While it isn't known whether Apple paid those royalties, Imagination says that it would be "extremely challenging for Apple to design a GPU in a way that allows them not to pay royalties to Imagination." As part of the deal, Apple will have the rights to Imagination's IP related to graphics and AI. Last year, Apple purchased the smartphone modem chip business belonging to Intel for $1 billion. It will take a few years before Apple is ready to design its own 5G modem chips, but for now, it plans on using Qualcomm's components. Last year, both companies dropped all legal action against the other and reached a multi-year chip supply and licensing agreement.

Apple also designs its own Applications Processor (AP). The A13 Bionic chipset which powers the 2019 iPhones, is manufactured by TSMC using its 7nm EUV node. The 2020 iPhones will be powered by the A14 Bionic which could be the first major AP to be produced using the 5nm node. The lower the process number, the higher the number of transistors found inside an integrated circuit. More transistors equal more power and energy efficiency.

Apple could be entering into this licensing deal with Imagination Technology to prevent a patent infringement suit, or it could plan on using some of the technology it is licensing for its own GPU design. Either way, Apple is bringing back one of its old suppliers back into the fold. What it means for iPhone customers is not yet known. But Imagination's Power VR technology can still be found in some of Apple's A-series SoCs used on certain iPads, the Apple Watch Series 3 and the Apple TV 4K.