Thread by @samdunningo

OUT NOW:

Our most important report yet..

It exposes how Imagination Technologies, Britain's 2nd biggest semiconductor company, which designs chips for AI, has siphoned off core assets to China.

This is BIG.

(thread)

What is this all about? Microchips. The UK doesn’t really make them, but it has 2 key companies that design them: ARM and Imagination.

Imagination specialises in creating fundamental design IP for graphics processing units. These GPUs are the key chips for advances in AI.

Imagination’s business model is to create fundamental designs for GPUs (& some other products) and license these designs out to other companies.

This depends on clients using and benefiting from, but not being able to reproduce, the designs - so they have to keep renting them.

Back in 2012, Imagination was listed on the London Stock Exchange, reaching a peak market cap of more than £2 billion. Then in 2017, Apple, Imagination’s main customer, announced that it no longer needed Imagination’s designs and would instead use its own.

Imagination crashed.

That autumn, Imagination was bought by a firm blacklisted in the US, whose funding came >99% from the Chinese government.

With the world years away from a chips + AI revolution that would see GPU companies like Nvidia grow tenfold…

… the UK let it happen.

In 2020, a row broke out. Imagination’s Chinese owners, perhaps frustrated with the way the company was being run, tried to take over Imagination’s board.

There was a LOT of political attention. The board takeover plan was dropped, but much of Imagination’s leadership left.

Our report out today shows how, at this critical juncture when a British tech giant’s ownership by China was being looked at afresh, a PR firm stepped in to “reassure UK stakeholders”.

Step up, Global Counsel, set up by Peter Mandelson.

Mandelson has boasted of Global Counsel’s “significant China footprint”. In 2021, GC organised a huge meeting between EU firms & the CCP.

£££

In late 2019, months before the takeover row, Mandelson met with China Reform, which owns Imagination. Full details in our report.

China Reform is the part of the Chinese gov't that owns Imagination. Our report looks at CR in unprecedented detail.

The fact is clear: China Reform, the owner of Britain's biggest GPU designer, is a special vehicle for China's military and national security industries.

CR’s investments include those in companies that integrate GPUs into combat drones and missiles, cyber companies, and in at least one GPU company that supplies Chinese military procurement providers.

Which brings us to possibly the biggest revelation in this the first of two papers on Imagination.

A former employee, ‘Howard’, tells us that after Imagination’s leadership changed in 2020, the company began transferring its core assets to Chinese GPU companies.

He told us how Imagination struck deals with three Chinese companies, two of which have been supported by the Chinese government as China’s GPU ‘national champions’.

This was unlike in normal licensing deals in which Imagination rents out its designs, we learnt.
How exactly?

In case you’d rather not read the full report, let me put it this way.

Suppose my business is to rent out toolboxes. I show people how to use the tools and give them a manual. Answer the odd question.

Not in my interest to give you the kit I used to make the toolbox, ...

... plus all the instructions for all the science and technology behind this kit, and then spend years teaching you how to make the kit, and the toolbox.

With all this extra stuff, and enough money, you are going to be able to make your own toolbox and toolbox-making kit.

IE…

Who exactly are the companies that got these deals?

They included China’s GPU champs: Biren Tech & Moore Threads, both part of a national strategy to stop relying on non-Chinese suppliers, one effectively part-owned by Russia, one linked to a GPU supplier to China's military.

In addition, more or less the moment the management changed in 2020, Imagination set up a joint venture in China with BAIC, a state-owned car manufacturer which also supplies the Chinese military.

GPUs are *critical* for autonomous navigation (drones, vehicles, missiles.)

Imagination's new CEO at the time: “We are very pleased to cooperate with investors such as BAIC Group… to establish an advanced automotive chip design company in Beijing. Our goal is to accelerate the formation of China’s advanced automotive chip industry cluster."

So, how has all this panned out for Imagination?

Last year, it was reported that the company would be making 20% cuts to its staff.

Imagination’s Glassdoor contains damning reviews from senior employees.

This is just Part One of our two-part report. We are working on the next part now. It looks at the evidence that has come out of an astonishing case that has been going thru court: Imagination’s former CEO suing the company.

Details like this…:

Imagination presents a worrying model for Chinese ‘investment’ in the UK. #rachelreeves

If we want to safeguard our prosperity, security and democracy, then we must urgently upgrade our China knowledge. We have to be more savvy.

@ukctransparency is calling for transparency:

Here is the link to our report ----- ukctransparency.org/imagination-te…

And to the Guardian piece reporting on it------ theguardian.com/technology/202…

If you think this is worthwhile, support us. We are on a mission to raise the UK’s 'China knowledge' game.

Our to-do list is very long.

We currently have one part-time employee (me) but are expanding our team in the new year, whilst I step back a bit.

ukctransparency.org/support-us/

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