A private equity fund backed by the Chinese government reportedly held talks about acquiring Imagination Technologies, the UK-based chip company currently embroiled in a row with Apple.

The UK’s Sunday Telegraph reported that Canyon Bridge Capital Partners, a private equity fund based in Silicon Valley that counts authorities in Beijing as major backers, is in the early stages of discussions that could see it acquire the semiconductor player, or parts of its business.

The report stated Imagination has become the takeover target of a handful of relatively unknown Chinese investors, after the company put itself up for sale in June, following a well-publicised dispute with its largest customer Apple.

Imagination revealed in April that Apple was set to terminate its contract for the company’s graphics intellectual property in favour of developing its own in-house alternative.

The two companies then failed to agree a royalties deal, which led to Imagination filing a dispute resolution action.

Imagination also said Apple, which plans to stop using the company’s technology within the next 15 to 24 months, would find it “extremely challenging” to design a new architecture without infringing on its IP, patents and confidential information.

Apple hit back by accusing Imagination of sitting on the news it was being dropped as a supplier for two months, stating it had first informed the company of its decision in February.

The Telegraph reported that Canyon Bridge is considered to be a serious bidder to make the acquisition.

Last year, the fund agreed to pay $1.3 billion for US microchip firm Lattice Semiconductor, however the deal has come under fire due to Canyon’s links to the Chinese government.

A US government committee is currently investigating the deal, amid national security concerns.

It remains to be seen whether a deal between Canyon and Imagination would face similar scrutiny in the UK.

After it was revealed that Imagination was to lose Apple as a customer, its share price saw a dramatic drop.

The company now has a stock market value of approximately £400 million, well below a previous peak of £2 billion.