It looks like the Imagination Technologies CEO just fell on his sword for no particular official reason. SemiAccurate doesn’t have to look to far to come up with a good reason given the recent news of an impending takeover of the company.
Last week SemiAccurate told you that the Chinese owners of Imagination Technology, through their effective proxy Canyon Bridge Capital Partners Inc, wanted to stack the board with the intention of moving the company to China. This was a direct result of the Trump administration’s shattering trust in the US as a reliable partner in technology and trade. This has pushed China to the conclusion that they need a comprehensive technology stack in China from here on out.
To that end, China needs to control the IP and has been going on a purchasing spree to get it over the past few years. The next step is to move it, or at least enough of it that Chinese companies that need the tech can’t be arbitrarily shut down by outsiders with ulterior motives. When the Trump administration broke trust with, well lets face it, everyone, this went from something the Chinese saw as a long term goal to one of the top, if not the top, national priorities.
Last week’s attempted stacking of the board, now backed off from, to do just that was the first major public step to accomplish that goal. Due to the blowback surrounding that play, it became clear that the overt method of accomplishing the move would likely not work so it appears to be shelved for the moment. Given that the fund that owns Imagination is Chinese already, the end result looks to be a matter of when rather than if.
So the news of the day is that Imagination CEO Ron Black, the guy who saved the company, placated customers, lured Apple back, and turned everything around is suddenly out. There wasn’t even an excuse like, “he wanted to spend more time with his family”, he is just gone. The replacement is Ray Bingham, Executive Chairman of Canyon Bridge. No other high level changes were mentioned if there were any.
In the end this unquestionably the right thing for China to do for their own national security but the methodology was far too ham-handed. A subtler and longer term building up the Chinese branch of Imagination while familiarizing those engineers with the IP would have been a far better approach. We would go so far as to question the outright move to mainland China overall, the value of the company is in the IP, patents, and designs, but those are mostly worthless without engineers who understand them.
A customer is far less likely to license your design if there is no support and no help when issues arise during implementation. Customers are also unlikely to license that IP if they know the country doing so is not a reliable partner, something which the US is currently not but ironically China mostly is. Then there are national security concerns, can a western company license Chinese IP and still sell to certain large market segments? There is no clear answer to most of these questions but we will learn the answers in practice soon enough.
That brings us to the interesting part, what is going on inside Imagination at the moment. SemiAccurate can shed a little light on some aspects of this.
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Disclosures: Charlie Demerjian and Stone Arch Networking Services, Inc. have no consulting relationships, investment relationships, or hold any investment positions with any of the companies mentioned in this report.
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