Microsoft and ARM holdings have come to a licensing agreement that allows Microsoft to use ARM technology in designing chips. The technology is currently used in mobile phones and tablet computers.

Microsoft has so far depended on chips designed by other firms for hardware for products like the Xbox video

game unit and mobile phones. The deal comes after competitor Apple has produced and released its own chip, based on ARM's technologies, for the iPad and iPhone 4.

A Microsoft spokeswoman had no comment on the agreement, and financial terms remain confidential.

Cambridge, England-based ARM develops and licenses chip technology in exchange for royalties and an up-front payment from chip producers.

The deal raised ARM's American depository receipts on the Nasdaq stock market by 12 percent, to US$16.15.