Shares of Infineon Technologies AG (Nasdaq: IFX) rose over 11 percent on Wednesday after the German chip maker announced a deal with Nokia.

In a statement, the firm said that its E-Gold chip will be used in Nokia's new line of entry level, low-cost phones.

American Depositary Receipts (ADRs) of Infineon rose 11.55 percent by mid-day trading, increasing $1.63 to $15.74 on the Nasdaq Stock Market.

The chip is designed for voice-centric phones with features such as color display, text messages, MP3 quality ring tones and applications such as Integrated Handsfree and Speaking Clock.

Nokia aims to further improve the power performance in our entry level phones and reduce their size. Adding Infineon’s single-chip solution to Nokia’s portfolio of chipset suppliers helps us ensure access to optimized solutions for this important market, said Soren Petersen, Senior Vice President, Entry Business Unit, Nokia.

The deal will help boost the German chip-maker's communications division, which has seen a slump since one of its largest partners, BenQ, went bankrupt.

When it released its earnings results last week, the company said that it was confident of winning new mobile phone contracts to offset business lost through BenQ's collapse.