Chip firm’s executives discuss break-up after claims of sales to military-linked businesses
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One of Britain’s biggest microchip companies may split with China following allegations that it sold technology to companies with military links.
Imagination Technologies has considered spinning off its operations as part of a planned break-up following years of contentious Chinese ownership, The Telegraph understands.
A proposal discussed by executives earlier this year involved separating Imagination into three businesses, with its Shanghai-based operations potentially taken over by the local management.
Its UK-headquartered business would continue, with its lucrative patent portfolio separated from its chip-licensing operation.
The break-up was considered this year as Imagination’s private equity owners examined a possible sale of the business.
The company has officially called off the break-up sale, although it could revisit the proposal after repeatedly seeking a buyer over the past few years.
Imagination was listed on the London Stock Exchange until 2017, when it was bought by Canyon Bridge, a private equity firm whose largest shareholder is financed by the Chinese state.
Under its existing ownership, the company has been dogged by allegations that its owners planned to relocate it to China and that it sold technology to companies later blacklisted.
Chinese investors also attempted a boardroom coup, but it was blocked over concerns it would effectively give Beijing control of the company.
Imagination has built a Chinese business under its current owners, although sales to China have been hit in recent years by US export controls.
An independent operation may enable it to sell to local businesses without being constrained by trade restrictions, as China seeks to become a major player in AI.
The Western business, based in Hertfordshire, could continue to focus on growth areas such as in-car computers for electric and driverless cars, without the China links that have weighed on the company in recent years.
“Imagination’s renewed executive leadership team has overseen an operational, client-centric transformation this year, with a strong focus on innovation. We are very excited about the interest in our groundbreaking AI-powered technologies,” a spokesman said.
Imagination’s graphics chip technology is highly prized among AI companies, and the company has licensed its designs to several Chinese companies.
Last year, a report from the UK China Transparency Centre claimed the company had been subject to “asset-stripping by the Chinese Communist Party”. It had sold semiconductor designs to Biren Technology and Moore Threads, two Chinese companies that were later added to a US blacklist.
Imagination has said it has never licensed its technology for military use.
The company told staff this year that it was considering a sale to US buyers under what it called the “Galway Project”, which sources believed could fetch $1bn (£760m).
It is believed to have abandoned the sale process amid deteriorating market conditions, although the company has repeatedly considered a sale or flotation in recent years.
Imagination’s revenues fell from $154m to $108m last year, and the company suffered a $50m loss, as a lucrative deal with Apple expired. Approximately 15pc of the company’s revenue came from China.
Last year, an employment tribunal found that Imagination had unfairly sacked its former chief executive, Ron Black, who had raised concerns about a since-abandoned move to China.
However, the tribunal said that the company had not transferred technology to China, as he had claimed.
Imagination said: “The tribunal completely rejected the main tenet of Ron Black’s claim, that Imagination was transferring technology to China in breach of legal obligations, and the judge found that Mr Black was likely to have exited the business within six months in any event as a ‘bad leaver.’”
Several British semiconductor companies have come under scrutiny for their links to China in recent years. The Chinese owners of Dutch chip company Nexperia were accused earlier this year of transferring technology from a factory in Manchester, allegations the company denied.
Lincoln-based Dynex Semiconductor, which is owned by CRRC, the state-owned Chinese rail corporation, transferred some production out of Britain last year.
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