MPs summon China-owned firm execs over security concerns
By Simon Jack Business editor 14 April 2020
Related Topics Coronavirus pandemic
Image copyright Imagination Technologies
A leading UK-based firm will be summoned on Tuesday by MPs to answer questions over security concerns.
There are concerns that the Chinese owner of Imagination Technologies has renewed efforts to transfer ownership of sensitive security software to companies controlled by China.
Lawmakers worry the coronavirus crisis is diverting attention from controversial technology transfers.
The fear is that networks in the UK, Europe and the US could be compromised.
Speaking to the BBC, Tom Tugendhat, the chair of the Foreign Affairs Select Committee said he was concerned that technology developed by Imagination Technologies, based in Hertfordshire, could be used to fine tune the design of so-called “backdoors” into strategically important digital infrastructure.
“The world has changed and companies – particularly tech companies – are on the frontline,” said Mr Tugendhat.
“Whoever writes the code, writes the rules for the world, more than any regulation passed by bureaucrats. There’s no point in taking back control from Brussels, only to hand it over to Beijing.”
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Imagination Technologies was acquired by a US-based but Chinese state-owned investment firm called Canyon Bridge in September 2017, which is in turn owned by a Chinese state-owned investment fund called China Reform.
Mr Tugendhat said Theresa May’s government approved the acquisition on the basis that Canyon Bridge was licensed and regulated by US law.
Since then it has moved its headquarters to the Cayman Islands and as such is no longer a US-controlled entity.
Several senior executives, including chief executive Ron Black, have stepped down recently citing concerns about the future direction and ownership of the company.
Chief product officer Steve Evans and chief technical officer John Rayfield also resigned recently.
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.”
An attempt by China Reform to stage a boardroom coup ten days ago by appointing four of its own directors were aborted, but the call for evidence comes amid renewed concerns that the Chinese owners of Imagination are preparing a fresh attempt to transfer sensitive technology patents to mainland China.
Image copyright Barcroft Media Image caption Huawei executives were quizzed by MPs about whether China would have the ability to snoop on UK mobile network communications in April 2019
As well as designing graphics and virtual reality software for computer chips, industry experts say that Imagination also produces software which can detect whether any weaknesses in sensitive digital networks – so-called “backdoors” are the result of error or intention.
The UK has already approved the limited use of Chinese-owned Huawei equipment in the construction of new superfast 5G networks that promise to deliver better connectivity for use in autonomous cars, utilities, power stations, the national health service and many others.
There is no suggestion that Huawei is directly connected to Imagination, or its ultimate owners – the state-owned China Reform investment fund.
The call for evidence comes a day after EU competition chief Margrethe Vestager warned that companies across the EU – many of which have been or are being pushed the brink of bankruptcy by the economic effects of Coronavirus – are vulnerable to takeover from Chinese companies.
In the UK, the Treasury is considering plans for the state to take ownership stakes in thousands of businesses, to prevent mass bankruptcies of businesses unable or unwilling to take on extra debt.
The situation is delicate as many EU countries are gratefully accepting donations of virus-fighting equipment from China. The country, which appears to be “first in – first out”, is now emerging from a crisis from which it bore the initial brunt.
Neither Imagination Technologies, nor its owner China Reform returned the BBC’s request for comment.