30 SECOND GUIDE: CHIP MAKING

By DAILY MAIL CITY & FINANCE

Updated: 04:12 EST, 27 September 2012

Smart: Chips are the 'brains' driving smartphone technology forward

The Daily Mail City team takes you on a whistlestop technology tour, focusing on Imagination and its long term partner Texas

Deep frying?

Put down the vinegar, this is about the chips inside computers and smartphones that give them the power to do what they do.

How are they made?

Before being manufactured, the chips have to be designed.

Firms such as Imagination Technologies do this, finding ways to make them smaller and more powerful.

If smartphones are smart, then it is because of the ‘brains’ that are in the chips. 

Then they are made?

Yes, but the real art behind the chips lies in the design rather than the manufacturing. Imagination’s customers are a host of companies to whom it sells the rights to use its chips.

While some of the largest include Apple and Samsung, one of its long-term partners is Texas Instruments.

So what?

Shares in Imagination fell sharply yesterday. While the stock is notoriously volatile, the drop comes on the back of an announcement by Texas that it is moving away from smartphones and tablet computers – a key area of growth for Imagination.

What are the implications?

Texas worked with Imagination on many releases, most recently the Kindle Fire e-book reader. Analyst James Goodman at Investec said the move could impact around a fifth of Imagination’s profits, or around £10million of royalty revenues.

Imagination shares fell 50p, or 9.6pc, to 470p.