The owners of Imagination Technologies Group have committed to keeping most of its workforce in the UK in an attempt to defuse the escalating row over a state-backed Chinese investor’s effort to seize control of its board.
Sky News has seen a letter from Canyon Bridge Capital Partners – which bought the British chip developer in 2017 for £550m – to the foreign affairs select committee in which it defends its track record as Imagination’s shareholder.
Three of Canyon Bridge’s top executives said that Imagination “remains domiciled in the UK, and the UK remains the company’s base of operations”.
“Senior management will continue to operate out of the UK in the foreseeable future, and the strategic direction of the business will continue to be set from the UK,” they said.
“[Canyon Bridge] can affirm that under its ownership, the majority of Imagination’s employees will remain based in the UK.”
Since Sky News revealed efforts by China Reform Holdings – a state-backed investor in Canyon Bridge’s funds – to take control of Imagination’s board, three of the Hertfordshire-based group’s top executives have quit.
One wrote in his resignation letter: “I will not be part of a company that is effectively controlled by the Chinese government.”
Canyon Bridge told MPs investigating the situation, which insiders believe would be a precursor to redomiciling Imagination to China, that the board appointments were no longer under discussion.
However, MPs and former company executives are sceptical that the plans have been abandoned.
Ray Bingham, the interim CEO of Imagination and one of the authors of the letter to the committee, said that Canyon Bridge was “committed to interacting transparently with politicians and officials; this is the approach which we have taken since Imagination Technologies was acquired by Canyon Bridge in 2017 and we welcome the chance to maintain this dialogue with you”.
Canyon Bridge insisted that the absence of any redundancy programme since the 2017 takeover and the fact that the bulk of its research and development activity took place in the UK were proof of its commitment to Imagination’s future in Britain.
In a note accompanying their letter, they said that Imagination filed 304 patents last year, “putting it in the top 15 patent filers in the UK, [compared to 250 patent filings in 2017]”.
Earlier this week, Sir Hossein Yossaie, who ran Imagination until 2016, had urged ministers to prevent the company being redomiciled.
The latest development in the row over China Reform’s attempts to gain control of the Apple supplier comes days after Sky News revealed that the Trump administration had also begun investigating the situation.
The intervention by Washington’s Committee on Foreign Investment in the US (CFIUS) comes two-and-a-half years after it blocked Canyon Bridge’s takeover of Lattice Semiconductors in 2017.
Imagination’s relationship with Apple, which was rekindled in January with a new licensing deal, is expected to be a focal point of CFIUS’s enquiries.
Ron Black, the chief executive, and Steve Evans, chief product officer, are among the senior employees who have resigned over the dispute.
Mr Bingham is understood to be trying to convince Mr Evans and John Rayfield, who resigned as chief technical officer, to remain with the company.
Last Friday, Imagination issued a statement containing news of Mr Black’s departure and saying that its shareholders were committed to increasing the chip designer’s investment in the UK.
It was, however, short on detail about safeguards to ensure that it would remain a UK-headquartered company.
When Sky News revealed details of China Reform’s plot to take control of Imagination ten days ago, one insider said that the move appeared to have been timed at “the point of maximum distraction” for ministers dealing with the coronavirus pandemic.
Since then, Oliver Dowden, the culture secretary, has told MPs that the government is urgently seeking clarity about the situation amid concerns about the pace of ‘technology transfer’ to China.
He said that officials were “working with their counterparts in the departments for Business, Energy, and Industrial Strategy, the National Cyber Security Centre, the Foreign Office, and Cabinet Office as a matter of urgency to understand the facts”.
The British company’s sale to Canyon Bridge was approved by the US government subject to its disposal of MIPS, a graphics processing unit operating in the US.
MIPS was sold to Tallwood Venture Capital, a California-based investor, which subsequently combined it with Wave, an artificial intelligence processing business.
Imagination boasts that its graphics processing units (GPUs) are used in 30% of the world’s mobile phones and, in total, 11 billion devices globally.