Will Imagination Deals Deliver MIPS to China?

　　Semiconductor industry watchers are pointedly curious about the fine print of two separate agreements governing the sale of U.K.-based IP licensor Imagination Technologies.

　　The sales of imagination was widely anticipated after the firm put itself up for sale in June, two months after its largest customer, Apple, said it would phase out use of Imagination technology in products that include the iPhone. But the deals announced Friday (Sept. 22), in which Imagination sold itself to Canyon Bridge Capital Partners and MIPS to Tallwood Venure Capital, left market watchers with several questions.

　　First, did Imagination structure both agreements in such a way as to allow Canyon Bridge — a private equity firm backed in part by the Chinese government —  to have access to MIPS CPU IP?

　　More specifically, do the two VCs — which are buying Imagination and MIPS independently — know each other?

　　Further, by agreeing to sell, has Imagination practically opened the backdoor for Canyon Bridge to access MIPS CPU IP and patents, without review by the Committee on Foreign Investment in the United States (CFIUS)?

　　Imagination Technologies last Friday unveiled two separate deals, in which the Hertfordshire, U.K.-based company sold itself to Canyon Bridge, while simultaneously agreeing to sell MIPS to Tallwood Venture Capital.

　　China’s long-standing love affair with MIPS is no secret. Chinese vendors have been using MIPS for years and Beijing has reportedly said it wants to use MIPS architecture for all future government-sponsored projects.

　　Specifics of the deals

　　First, here are some specifics of last Friday’s announcements.

　　Imagination announced it is selling itself in an all-cash deal worth 550 million pounds ($742.5 million) to Canyon Bridge Capital Partners, the VC firm whose proposal to buy Lattice Semiconductor was recently blocked by U.S. President Donald Trump.

　　Imagination announced on the same day that it had agreed to sell the company’s global MIPS CPU business for $65 million to Tallwood Venture Capital, an investment firm with offices in Palo Alto, Calif., and Wuxi, southern China.

　　Although a majority of MIPS patents were sold in 2013 to Bridge Crossing, which was created by a member-based patent holding company called Allied Security Trust, all processor-specific patents and the other parts of MIPS Technologies were sold to Imagination.

　　Imagination explained in its press release that the completion of the MIPS disposal is a condition of Canyon Bridge’s acquisition.

　　Andrew Heath, CEO of Imagination said, in a statement, “The acquisition [by Canyon Bridge] will ensure that Imagination — with its strong growth prospects — remains an independent IP licensing business, based in the U.K., but operating around the world.”

　　Had Imagination kept MIPS, Canyon Bridge’s acquisition of Imagination would certainly invite CFIUS scrutiny.

　　The MIPS CPU business, according to Imagination, includes all MIPS intellectual property and patents. The MIPS IP and patents were developed in the United States and they belong to Imagination's U.S. business unit.

　　Left unclear at this point is if Imagination’s MIPS divestment to Tallwood might face CFIUS review.

　　Industry skeptics wonder if Canyon Bridge — already barred by the U.S. government from buying Lattice — plans to put an agreement in place, for example, to get perpetual license of all of MIPS IPs from Tallwood. If so, Canyon Bridge, as one of the Chinese government’s semi-private entities, could at long last get a grip on MIPS.

　　However, at this point, there is no proof that Imagination might have coordinated the two deals specifically to help Canyon Bridge fly under CFIUS’ radar in its quest for MIPS IPs. Financial deals like this — especially when involving players from the wild, wild East of China — are an elusive quarry for regulators.

　　Who wants MIPS?

　　Setting aside Imagination’s IP on GPU and graphics-related expertise, MIPS continues to stir debate in the semiconductor industry about who will ultimately own MIPS CPU assets.

　　The last time MIPS was up for sale, in 2012, Ceva Inc. (Mountain View, Calif.), a licensor of signal processing IP, sought eagerly to buy the MIPS assets, offering $90 million. MIPS initially agreed. But then, Imagination stepped in, beating Ceva with a $100 million bid.

　　This time around when Imagination divests MIPS, Ceva would still a likely pursuer of the MIPS assets.

　　Back in 2012, Synopsys was speculated to be another potential MIPS buyer. Synopsys today offers a family of embedded RISC processors known as ARC, as a result of Synopsys’ acquisition of ARC International in 2010.  But MIPS assets could help bolster its processor portfolio.

　　When Imagination put MIPS on the block in early May, Kevin Krewell, principal analyst at Tirias Research, told us, “MIPS is still a classic CPU design with scalability and an established software ecosystem.” Krewell at that time speculated that a design house (such as Cadence, Mentor or Synopsys) would be tempted.

　　He added, “It's also possible that a leading customer like Microchip would consider buying out its license. MIPS has also been used by a number of Chinese vendors and it could be bought by a Chinese entity.” In Krewell’s opinion, there's “still an opportunity for MIPS in the market, even though it's a diminished one.”

　　It is not clear who else, besides Tallwood, was actually in the running to acquire the MIPS assets, and how Imagination came to decide on Tallwood.

　　Cast of characters

　　Both Canyon Bridge and Tallwood have high-profile executives who have worked in the U.S. semiconductor industry.

　　Canyon Bridge was founded by Benjamin Chow, a U.S. citizen born in China. With more than 20 years of private equity, venture capital, senior management and technology R&D experience, Chow is well connected to both China and Silicon Valley.

　　Chow set up Canyon Bridge in summer 2016 with funding from China Reform Management, a state-owned investment firm that became Canyon Bridge's sole investor, according to Lattice’s regulatory filings.

　　Another well-known figure at Canyon Bridge is Ray Bingham, a veteran semiconductor industry executive who served as executive chairman of Cypress Semiconductor Corp. and chairman of Flextronics.

　　Reuters reported that Chow approached Bingham last August, believing that a U.S.-based buyout fund with a U.S. partner like Bingham would trigger much less CFIUS scrutiny than a Chinese suitor.

　　Although Bingham’s reputation in the technology industry helped win the Lattice acquisition for Canyon Bridge, his presence failed to deflect CFIUS scrutiny on Canyon Bridge-Lattice.

　　Bingham’s involvement with Canyon Bridge also cost him. Bingham stepped down from Cypress's board of directors in June amid a messy proxy fight with the company's founder and longtime CEO, T.J. Rodgers.

　　Rodgers, who founded Cypress in 1982, filed suit against his former company earlier this year, alleging conflict of interest by Bingham for his ties to Canyon Bridge Partners, which was in the process of acquiring Lattice. Cypress had previously considered an acquisition of Lattice.

　　On the Tallwood front, general partner Luis Arzubi is an ex-IBMer who spent more than three decades at IBM’s Microelectronics Division. Prior to joining Tallwood, Arzubi served as the unit’s vice president and general manager. He was responsible for all semiconductor business segments at IBM.

　　Tallwood’s managing partner and founder is Dado Banatao, a familiar face who is known as a visionary in Silicon Valley. Before establishing Tallwood, Banatao was a venture partner at the Mayfield Fund. He co-founded S3, Chips & Technologies and Mostron.

　　Banatao worked in engineering and general management at National Semiconductor, Seeq Technologies, Intersil and Commodore International.