It also pushes into sharp relief whether Japan’s Softbank Group sees its own $30 billion investment in ARM Ltd. in the same light. There is a sense that Softbank – with its plans to move a portion of ARM into the Vision Fund (see Saudi Arabia technology fund hungry for ARM) and talk of re-listing ARM – sees it as not only an investment opportunity but also as a cash cow to be milked and moved around for maximum financial leverage. There is a risk that conflicts or confusion could occur from holding both positions at the same time.
The much smaller, and much more marginally profitable, Imagination is privately owned by US based private equity firm Canyon Bridge Capital Partners LLC (Palo, Alto, Calif.). But with the money coming to that firm from Chinese sources, essentially the Chinese state, it is not surprising that Leo Li, co-president at Tsinghua Unigroup, has been drafted in to manage that investment (see Imagination replaces CEO with Chinese chip veteran).
Tsinghua Unigroup is essentially an instrument of Chinese state policy in the semiconductor industry. It is the owner of both Spreadtrum Communications and RDA Microelectronics, two of the most successful Chinese fabless chip companies started in recent years, and Leo Li was key to that success.
During the wave of semiconductor business consolidation 2016 and 2017 there was much discussion that China might be trying a different approach to gaining global significance in the industry. That of buying its way into the business. Numerous tilts were made at US-owned companies and almost all were rebuffed, often by the Committee on Foreign Investment in the United States (CFIUS).
Next: US saw off Chinese predation
While the US sent repeated signals that the acquisition of almost any US chip businesses by Chinese interests was not acceptable, in the UK there have always been fewer mechanisms of intervention and less inclination to use them. A lightning-fast raid by Softbank acquired ARM almost before London Stock Exchange and the UK government was aware of it. And it was Apple’s withdrawal of support for Imagination in 2016 and 2017 that left it vulnerable to takeover. When few other people could see the value China saw its opportunity to grab an engineering company and resources that were technically world-class.
It is also notable that the US insisted that China could not get hold off the MIPS processor business that was in Imagination’s ownership. Hence a deal was constructed to split Imagination with the MIPS portion being picked up by Tallwood Ventures and Canyon Bridge acquiring the remainder of Imagination with its interest in GPUs and connectivity IP.
With its Chinese-backed owner and its globally-experienced Chinese CEO, Imagination is now in a position to re-energize how its serves intellectual property market. And while ARM is now the undoubted leader in processor and GPU licensing for mobile, technology markets are forever changing. The rise of home-grown architectures and RISC-V makes ARM’s position in processor IP less certain.
And the technical front line is moving on to machine learning, support for neural networks and artificial intelligence. That fact is attested to by ARM’s decision to move senior executive Jem Davies from its graphics business, where he had masterminded ARM’s rise in GPUs, to a new machine learning division. But that also illustrates that there is everything to play for. And Imagination is now in a better position to garner support in China and elsewhere from SoC vendors who find ARM expensive or not differentiating.
The game’s afoot and now China has some skin in the game; together with patience, determination and resources that should not be doubted.
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