UK chipmaker Imagination Technologies was purchased by China-backed private capital on Friday. But Imagination's central processing unit (CPU) division was left out of the deal as Chinese investors are likely to drop U.S.-related bids after U.S. President Donald Trump blocked the sale of Lattice Semiconductor Corp.
After been dumped by Apple Inc, Imagination announced on Friday (UK time) it would be acquired by CBFI Investment, which is indirectly owned by Canyon Bridge Fund, for about 550 million pounds ($742.2 million), according to the UK company's website. It was the latest deal that the China-backed venture capital fund made after the U.S. government prohibited its acquisition of U.S. chipmaker Lattice.
The Trump administration announced it would halt the Lattice sale for national security reasons, according to an announcement published on the website of White House on September 13.
Separately, the UK company on the same day sold its CPU unit - known as MIPS - to U.S. venture capital company Tallwood Venture Capital for about $65 million, the announcement showed.
"The company's two core technologies - CPU and GPU, if those two could be sold as a package to the Chinese (buyer), it would be a very good thing," Liu Kun, vice general manager of IC Industry Research Center of CCID Consulting, told the Global Times on Sunday.
GPU stands for graphics processing unit.
"If it [Canyon Bridge] can buy both, the deal will boost the chip making industry in China," he said.
The reason the Chinese company did not buy the CPU division is that its MIPS business had a U.S. background before it was purchased by Imagination years ago, Liu noted. "Chinese investors have learned their lesson to bypass U.S.-related chip bids, especially under the Trump administration," he said.
Imagination, a former supplier of graphic chips for Apple, went up for sale in April, after the U.S. smartphone maker announced changes in its supply chain, according to a post on U.S. financial information provider seekingalpha.com in June.
Apple accounted for half of the UK chip producer's sales.
The proposed acquisition is a "very good outcome" for the company's shareholders, Andrew Heath, CEO of Imagination, was quoted as saying in the announcement. "Imagination made excellent progress both operationally and financially over the last 18 months until Apple's unsubstantiated assertions and the subsequent dispute forced us to change course," he said.
The UK firm accused Apple of breaching its own ethics after the U.S. tech giant decided to take the graphics technology in-house, media reported in July.
Still, the deal will contribute to the further development of the Chinese GPU market, as the technology can be applied in consumer electronics, Wang Yanhui, head of the Shanghai-based Mobile China Alliance, told the Global Times on Sunday.
China has been lagging behind advanced economies in terms of CPU and GPU technologies. Those two technologies can be widely used in artificial intelligence (AI)-related sectors such as virtual reality and facial recognition, the expert noted.
The Chinese government has been urging the AI industry to reach the same level as that of other advanced countries in recent years. The State Council, China's cabinet, unveiled new guidelines in July in which it set a target for the domestic AI market of surpassing 150 billion yuan ($22.7 billion) by 2020.
The global microprocessor and GPU market is expected to achieve a compound annual growth rate of 2.2 percent from 2017-22, according to a report released by global market research firm MarketsandMarkets in May. The market will be worth $83.69 billion by 2022, it forecast, and the Asia-Pacific will hold the largest share of this sector, as China is a major manufacturing hub for electronic products.
"The UK company sold its technology unit to the Chinese venture capital firm, which will help it to better tap into the Chinese market," Wang said.
It may become the case that Chinese investors will no longer seek out U.S. chip companies any longer, as the Lattice deal cost Canyon Bridge both "money and energy," Liu noted. "As a result, more Chinese companies should consider dropping U.S.-related bids," he added.
"But the U.S. should realize that its own chip production sector is a 'sunset industry' and cooperating with Chinese companies could help tap into a bigger application market," Liu said.
