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Imagination under UK government scrutiny

Canyon Bridge violated the deal

Posted: By Jon Peddie 04.14.20

When Canyon Bridge Partners, which is owned by China Reforma Chinese state-owned investment fund, sought to buy Imagination Technologies in 2017, Theresa May's government approved the acquisition on the basis that Canyon Bridge was licensed and regulated by US law.

When the Trump administration blocked Canyon Bridge’s attempted acquisition of Lattice Semiconductor in September 2017, Canyon Bridge moved its headquarters from the U.S. to the Cayman Islands, so it was no longer under U.S. jurisdiction.

Last week Canyon Bridge sought to overthrow Imagination Technologies’ BOD and move the company to China, causing the CEO Ron Black to resign and then get fired. In addition to Black leaving, Chief product officer Steve Evans and chief technical officer John Rayfield also resigned recently having said, "I will not be part of a company that is effectively controlled by the Chinese government."

The U.K. government interceded to block the BOD take over and prevent Imagination from moving the company. The U.K. government is concerned that if Canyon Bridge transfers Imagination’s technology to China it could compromise sensitive security aspect in the UK, Europe, and the US.

Speaking to the BBC, Tom Tugendhat, the chair of the Foreign Affairs Select Committee said he was concerned that technology developed by Imagination Technologies, based in Hertfordshire, could be used to fine-tune the design of so-called "backdoors" into strategically important digital infrastructure.

"The world has changed and companies — particularly tech companies — are on the frontline," said Mr. Tugendhat.

"Whoever writes the code, writes the rules for the world, more than any regulation passed by bureaucrats. There's no point in taking back control from Brussels, only to hand it over to Beijing."

As well as designing graphics and virtual reality software for computer chips, industry experts say that Imagination also produces software which can detect whether any weaknesses in sensitive digital networks—so-called "backdoors" are the result of error or intention.

This blatant and aggressive move by the Chinese government has raised the sensitivity in the UK, US, ad EU to Chinese interference compounding the already inflamed issue of Huawei’s potentially compromised systems.

EU competition chief Margrethe Vestager warned that companies across the EU—many of which have been or are being pushed the brink of bankruptcy by the economic effects of Coronavirus—are vulnerable to a takeover from Chinese companies.

What recourse the UK government has in this situation may be drug through the courts for years. However, it is unsettling to Imagination’s customers, not the least of which is Apple that recently signed a new arrangement with Imagination. Still, a few more chapters to go in this saga.