Two more of Imagination Technologies’ top executives have submitted their resignations in protest at moves by a state-owned Chinese investor to seize control of its board, further destabilising one of Britain’s most important technology companies.
Sky News has learnt that Steve Evans, chief product officer, and John Rayfield, chief technical officer, both quit early last week amid a growing furore on both sides of the Atlantic about the future ownership of the chip developer.
Mr Evans is understood to have said in his resignation letter: “I will not be part of a company that is effectively controlled by the Chinese government.”
Their expected departures have emerged just 48 hours after the departure of Ron Black, chief executive.
The management crisis – which means that one-third of Imagination’s executive management team is set to leave – has been triggered by an attempt by China Reform Holdings to nominate a slate of directors to the Hertfordshire-based company’s board.
Last week, it emerged that an emergency board meeting convened to approve the appointments had been called off following enquiries by senior MPs concerned about the redomiciling of prized British intellectual property.
Sources said on Sunday that Mr Evans and Mr Rayfield had indicated that they were prepared to reconsider their decisions to quit if the Chinese coup attempt was abandoned.
Ray Bingham, Imagination’s chairman and now interim chief executive, is understood to be trying to convince the pair to remain with the company.
Mr Bingham is the also principal executive at Canyon Bridge Capital Partners, a formerly US-headquartered private equity firm which bought Imagination for £550m in 2017.
One source said that Mr Evans’ letter of resignation informed the company that he had “taken this decision after carefully considering the current situation with regards to the independence of our business and the future of our staff”.
“China Reform have clearly set out to take control of the business for reasons best known to themselves, and I will not be part of a company that is effectively controlled by the Chinese government.”
He added that his decision would be “of no surprise to Canyon Bridge and China Reform after the very frank exchanges we have had with them over the recent months”.
According to the source, Mr Evans’ letter concluded: “If the proposed change of control is somehow reversed and we get assurances from our investors that we can carry on with the critical investments we need to continue transforming the business I would be open to reversing my decision to resign.”
Mr Rayfield is understood to have said in his resignation letter that China Reform’s move would undermine Imagination’s ability to do business in the US.
Sky News revealed on Saturday that the Committee on Foreign Investment in the US – a powerful Washington national security body – had begun a probe into the crisis at Imagination.
The move places the British-based company, which counts Apple among its most important customers, at the centre of government investigations on both sides of the Atlantic.
On 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.
Without guarantees that Imagination’s stewardship would remain free from interference from China Reform – which has close links to Beijing – it appears unlikely that the executives who have quit would overturn their decision.
When Sky News revealed details of China Reform’s plot to take control of Imagination last weekend, 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 last week 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”.
Mr Dowden added that he was seeking an “urgent meeting” with Mr Bingham, and that the government remained committed to legislation “to give the government further powers to scrutinise foreign transactions in the form of the National Security and Investment Bill”.
CFIUS’s intervention comes two-and-a-half years after it blocked Canyon Bridge’s takeover of Lattice Semiconductors in 2017.
Canyon Bridge retains offices in the US but redomiciled to the Cayman Islands after CFIUS’s intervention in the Lattice deal.
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.
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, 11bn devices globally.
It was the tenth most prolific UK-based filer of patents in the European Union last year – ahead of Dyson and the chip designer ARM Holdings, which is owned by Japan’s SoftBank.
The foreign affairs select committee has launched a separate inquiry into “foreign asset-stripping of UK companies”, which comes in the wake of the government’s decision to give Huawei, the Chinese telecoms equipment manufacturer, a role in the construction of Britain’s 5G network.
An Imagination spokesman declined to comment on Sunday.