David Davis, the former Brexit secretary, urged the ministers to probe a Chinese offer to take control of the Imagination Technologies group when there are concerns that the assets of the British chip designer may be transferred from the United Kingdom.
Sky News saw a letter from Mr. Davis to Oliver Dowden, the secretary for digital, culture, media and sports, asking the government “to investigate this potential change of control of an important British strategic asset and , if necessary… to intervene to ensure that there is no change of control. “
The growing clamor for government intervention is linked to an effort by China Reform Holdings – which has close ties to Beijing – to appoint four directors to the Imagination board of directors at an emergency meeting on Tuesday.
If the move takes place, it could give China Reform enough control over Imagination to trigger a new merger of the company and its assets in China.
In his letter, Mr. Davis asked Mr. Dowden whether the government had the power to prevent “British-owned intellectual property from becoming Chinese property” and whether it had a list of British technology companies that could not be sold under Chinese control.
He also asked if there were “legal mechanisms in place to prevent people who work directly or indirectly for the Chinese state from serving on the board of directors of a British company.”
Sky News said on Saturday details of China Reform’s effort to take over the board of the chip designer, who counts Apple and Samsung among its biggest customers.
Imagination was taken over in 2017 by Canyon Bridge Capital Partners, a Cayman Islands-based private equity firm, under a £ 550m deal.
Canyon Bridge’s main investor is China Reform, which is said to have given assurances at the time of the deal that it would be passive.
The chairs of four select committees in the House of Commons have written to Boris Johnson to ask the Prime Minister to intervene due to potential national security risks.
The government intelligence agency GCHQ and the National Cyber Security Center have also been informed of the development of the situation.
Iain Duncan Smith, the former conservative leader and a staunch critic of Beijing, also spoke on Sunday, telling Sky News that the China Reform coup attempt was “part of a pattern.”
“The totalitarian government has a strategic ambition to dominate the main world markets and the raw materials necessary to manufacture everything from microprocessors to batteries,” he said.
“They plan to make the world dependent on China and thus dominate us all.
“It is time for the UK and the West to think again. “
Imagination designs graphics processing units (GPUs) used in 30% of mobile phones worldwide and, in total, 11 billion devices worldwide.
The Hertfordshire-based company employs around 600 people in the UK – these highly sought after technology jobs may be at risk if the company is transferred to China.
A source said China Reform had told the company that it ultimately wanted to send it back to China – a move that would heighten growing fears about the pace of “technology transfer” to the world’s most populous nation.
They added that China’s reform decision appeared to coincide with “the point of maximum distraction” for ministers, with governments around the world almost entirely absorbed in the task of dealing with the coronavirus epidemic.
The imagination was the tenth most prolific British patent applicant in the European Union last year – ahead of Dyson and the chip designer ARM Holdings, which belongs to the Japanese company SoftBank.
The relationship between Imagination and Apple, which led to the signing of a new license agreement in January, means that figures from the Trump administration could also raise questions about a Chinese takeover of the board of directors of the British company.
In 2017, the powerful U.S. Committee on Foreign Investment in the United States (CFIUS) blocked a takeover by Canyon Bridge of Lattice Semiconductor following an executive order from President Trump.
Following this decision, Canyon Bridge relocated its headquarters from the United States to the slightly affected Cayman Islands.
The imagination is said to take legal advice as to whether the coup in the conference hall can be avoided.
The situation breaks out amid continued criticism of the government’s decision to allow Huawei, the Chinese telecommunications equipment maker, to play a role in the construction of the UK’s 5G network.
Since the 2016 Brexit referendum, the government has sought to strengthen the regime for foreign takeovers of British companies.
Theresa May’s administration has introduced a more stringent national security test for buyers of assets in areas such as technology, requiring buyers to notify the government of any potential problems.
Mr. Davis declined to comment on the contents of his letter, while Imagination also declined to comment.