Apple acquires 3.6% of Imagination to secure graphics tech for future iPhones

Cupertino (CA) – Apple has taken a 3.6% stake in UK-based Imagination Technologies Group, a company which is known for its graphics technology blueprints that served for example as the foundation for Intel graphics chips in the past. Imagination also  confirmed that an “international electronics systems company,” mentioned in its August press release, that secured a “multi-year, multi-use license” of its SGX/VXD graphics and video IP cores is Apple. The news is considered as yet another indication that Apple in fact is designing its own hardware platforms.

“Apple Inc. is subscribing for 8,200,000 new shares of Imagination Technologies Group plc at 39p per share, the mid market close price on 17 December 2008, subject only to listing and admission of the new shares,” Imagination said in yesterday’s press release. “Following the share placement, Apple will have an ownership interest of 3.6%. Apple is a licensee of Imagination’s technology.”

The company added that Apple’s application for the new shares will be admitted to trading on the London Stock Exchange, while the Official List of the UKLA has already been made.

The current iPhone and iPod touch generation integrates Imagination’s fourth-generation PowerVR MBX Lite 3D accelerator, basically a souped-up version of the second-generation chip that ran inside Sega’s Dreamcast gaming console. MBK Lite sports a tile-based rendering system and packs enough horsepower to put the iPhone and iPod touch on gaming platform map. Now that Apple officially describes the iPhone as a game console, it shouldn’t come as a surprise that the company is eyeing Imagination’s more powerful PowerVR SGX/VXD cores for future iPhones.

The SGX core provides OpenGL ES 2.0 compatibility and the Universal Scalable Shader Engine for hardware-accelerated, shader-based 3D graphics. The VXD core plays HD video on a mobile device with a power consumption comparable to the existing audio playback chips. That said, Apple’s ownership interest in Imagination is obviously a long-term deal designed to solidify the next iPhone and iPod touch as platforms in mobile gaming.

ARM, Imagination, Samsung – and Apple

How it will all play out remains to be seen, but the most likely scenario is Apple’s alleged triangulated deal with ARM, Imagination and Samsung. According to industry sources, the deal will allow Apple to create processors for the next iPhone in-house, tapping the PA Semi team of engineers led by IBM’s Mark Papermaster. This SoC is expected to be built around ARM’s processor blueprints and Imagination’s PowerVR SGX graphics cores, while Samsung will manufacture the actual silicon.

It is a risky scenario by any measure, but one that allows Apple to evolve the iPhone in terms of hardware, without having to shop for  off-the-shelf parts commonly available to its rivals. Another advantage of building its own SoCs is  a potentially reduced bill of materials in manufacturing. The only unknown variable is the main processor.

Although Apple has not been outed as an ARM licensee, analysts point to ARM’s Q2 earnings report that mentions “a leading handset OEM who bought a long-term architecture license to ARM’s current and future technology for use in mobile computing,” which very likely points to Apple. Both ZDnet and Computerworld believe ARM’s upcoming Cortex-A8 and Cortex-A9 processor designs may be used to power the expected $600 Mac netbook or the rumored Apple tablet.