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State-owned Chinese investor to seize control of chip designer Imagination

by ace
State-owned Chinese investor to seize control of chip designer Imagination

A Chinese state-controlled investor is trying to take control of Imagination Technologies Group, the British chip designer – sparking fears that its intellectual property assets may disappear from the UK.

Sky News can exclusively reveal that Imagination, which was acquired in 2017 under a £ 550 million deal, scheduled an emergency board meeting next week to discuss the appointment of four China Reform Holdings representatives as directors.

Senior lawmakers, including the chairmen of four committees selected from Commons, have been warned about the change and plan this weekend to urge Boris Johnson to intervene based on potential national security risks.

The government's intelligence agency, GCHQ, and the National Center for Cybersecurity have also been informed of developments, according to experts at Westminster.

Imagination produces graphics processing units (GPUs) for customers like Apple and Samsung and is one of the UK's most important technology companies.

Its designs are used in 30% of the world's cell phones and 40% of automotive GPUs.

Automobile industry customers include Audi, Hyundai and Toyota.

The company says products based on its intellectual property are "used by billions of people around the world on their phones, cars, homes and workplaces".

In total, his projects are present in more products than people on Earth, making him a vital participant in the & # 39; internet of things & # 39; rapidly expanding.

Imagination, based in Hertfordshire, is directly owned by Canyon Bridge Capital Partners, a private equity company based in the Cayman Islands.

Canyon Bridge's main investor is China Reform Holdings, which is one of thousands of Chinese state-owned companies and has links to the Beijing State Council, the country's top decision-making body.

Sources in Westminster said on Saturday that Imagination's senior executives were "deeply concerned" about the impending acquisition of the meeting room and its implications.

One said that the China Reform had indicated to the company that it wanted to re-kill it for China – an action that would have inevitable consequences for hundreds of important British technology jobs.

This would raise fears about the pace of & # 39; technology transfer & # 39; for the most populous nation in the world, at a time when the coronavirus pandemic is causing new international enmity towards China and raising renewed questions about globalization.

A source said the China Reform decision appears to have been programmed to coincide with "ministers' maximum point of distraction", with governments around the world almost entirely consumed by the task of dealing with COVID-19.

The imagination employs about 650 people in Britain and 900 in total worldwide.

It was the UK's tenth most prolific patent registrar in the European Union last year – ahead of Dyson and chip designer ARM Holdings, owned by Japan's SoftBank.

The relationship between Imagination and Apple, which resulted in a new licensing agreement in January, means that leading figures from the Trump administration may also raise questions about a Chinese takeover of the company's board in the UK.

A source pointed to the scenario of the fluctuating US-China trade war, suggesting that it would help to solidify Washington's opposition to that movement.

In 2017, the powerful U.S. Foreign Investment Committee (CFIUS) of the U.S. blocked Canyon Bridge's acquisition of Lattice Semiconductor, following an executive order from President Trump.

After that decision, Canyon Bridge moved its US headquarters to the light Cayman Islands.

The emergency board meeting to appoint four Chinese Reform employees as directors of Imagination is due to take place on Tuesday.

It was not clear this weekend whether Imagination executives, including CEO Ron Black, a veteran of the semiconductor industry, were consulted on the go.

Senior lawmakers, including Tom Tugendhat, who chairs the foreign affairs committee, wrote to the prime minister to request a GCHQ assessment of the national security implications of impending changes in the council.

In a joint letter from the chairmen of four Commons committees – commercial, energy and industrial strategy; digital, culture, media and sport; defense and foreign affairs – lawmakers this weekend asked Johnson to contact Imagination executives and CFIUS for more information on the China Reform.

"They want assurances that Imagination Technologies will remain a UK-based company, capable of continuing its operations and innovations here," said a person familiar with the letter.

Tugendhat told Sky News: "The transfer of technology outside the UK is costing us – not just in lost jobs, but also in lost seedbed of innovation.

"We have been so busy taking back control of Brussels that we don't seem to have noticed how quickly our companies and technologies are falling into the hands of other nations."

It is said that the imagination is legally advising whether the scam of the meeting room can be avoided.

The situation is erupting amid continued criticism of the government's decision to allow Huawei, the Chinese manufacturer of telecommunications equipment, a role in building Britain's 5G network.

Huawei's insistence on being a private company, without Beijing's control, continued to attract a skeptical response from people like Sir Iain Duncan Smith, a former conservative leader.

Last weekend, Sir Iain wrote in the Mail on Sunday that China's trading partners would need to rethink their relationship with the country as soon as the world understood the coronavirus outbreak.

"For a long time, countries have demoted themselves weakly to China in the desperate hope of winning trade deals," he wrote.

"But once we get rid of this terrible pandemic, it is imperative that we all rethink this relationship and put it on a much more balanced and honest basis."

Since the 2016 Brexit referendum, the government has sought to strengthen the UK's foreign takeover regime.

Theresa May's administration introduced a more difficult national security test for asset buyers in areas such as technology, requiring buyers to notify the government of potential problems.

The tightening of the rules came after the acquisition of ARM Holdings by SoftBank, worth £ 24 billion, in 2016.

Since then, ministers have forced Melrose Industries and Advent International to make binding commitments about their management of the GKN Holdings and Cobham industry groups, respectively.

However, they decided not to intervene in Canyon Bridge's acquisition of Imagination.

"We were encouraged that the UK government's focus is and will continue to be to accommodate this type of investment … which will help accelerate success," said Ray Bingham, Canyon Bridge partner, in 2017.

"They certainly asked about the UK headquarters, jobs in the UK, UK R&D in particular … Our focus is on creating and developing the rich technological resources that are here (in the UK)."

Imagination declined to comment on Saturday, while neither Canyon Bridge nor China Reform Holdings could be reached for comment.

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