Foreign Affairs Committee Chair Sounds Alarm Over ‘Stealth’ Chinese Purchase of Cambridge Chip Startup

Conservative MP Alicia Kearns, chair of the Foreign Affairs Committee, speaks during a debate on the Procurement Bill in Parliament, Westminster, London, on Jan. 9, 2023. (Screenshot via The Epoch Times)

Foreign Affairs Committee Chair Alicia Kearns on Wednesday wrote to Business Secretary Grant Shapps, calling for a review into the Chinese takeover of a UK semiconductor company.

She said the investment into Cambridge University start-up Flusso wasn’t reviewed under the National Security and Investment Act because the name of the acquirer was not mentioned when the takeover was announced in August, and that the “opacity surrounding this takeover suggests that the buyers intended it to be carried out by stealth.”

Flusso CEO and co-founder Andrea De Luca said Shanghai Sierchi Enterprise Management Partnership, the acquiring vehicle, did notify the UK government about their purchasing intention.

It comes as the UK government blocked or imposed restrictions on a number of Chinese takeovers of British companies that are involved in the UK’s critical infrastructure or dual-use technologies, or technologies that have both civilian and military applications.

The Acquisition

Flusso, a fabless semiconductor company, designs micro-electromechanical system flow sensors. It developed the FLS-110, which it described as “the world’s smallest flow sensor.”

The company was set up in 2016 as a spin-out from the University of Cambridge. It boasts of being “fully embedded in the Cambridge tech cluster” and having access to the city’s “world-class technology expertise, skills, and support.”

In August 2022, Flusso announced its £28 million ($31 million) takeover by “a company and a global private equity (PE) fund,” but didn’t name the acquirer.

According to Companies House documents, Shanghai Sierchi Enterprise Management Partnership bought 100 percent of Flusso’s shares on Aug. 11, 2022.

On the same day, Shi Feiran and Zhou Dan, both based in Shanghai, were appointed as directors of the company.

According to South China Morning Post, Chinese corporate registry information shows that Sierchi was set up at the end of 2021. The report said Sierchi is 80 percent owned by Zhenxin Equity Investment Partnership, a subsidiary of Shanghai-based investment conglomerate Baoding Investment that has “a number of private and state-owned backers.”

The Epoch Times has not been able to independently verify the information, but Flusso is listed on the website of Baoding Investment as one of its investment projects.

It’s unclear who owns the other 20 percent of Sierchi.

UK Tech News (UKTN), which first reported on the revelation of the Chinese buyer’s identity, cited De Luca as saying Sierchi is controlled by the private equity firm and company mentioned in the August announcement.

De Luca also told the publication that the unnamed company “chooses to not publicise its name” because it’s going through an initial public offering and doesn’t want to affect the IPO.

Under the UK’s National Security and Investment Act, businesses and investors may be legally required to notify the government about certain sensitive acquisitions.

De Luca told UKTN that Sierchi did notify the UK government and that Flusso had "supported Sierchi and the UK government throughout the entire assessment process before closing the transaction.”

Kearns: Economic and National Security Concern

In her letter to Shapps, Kearns said Baoding is 73 percent controlled by the Chinese regime, meaning the UK, in “waving through” the transaction, is giving the Chinese Communist Party (CCP) “direct access to one of our leading tech start-ups in an area of vital strategic importance.”

Citing the UK government’s recent intervention in the Chinese acquisition of Welsh microchip company Newport Wafer Fab and vision-sensing technology from the University of Manchester under its new national security law, the Foreign Affairs Committee chair argued the takeover of Flusso “most certainly meets the threshold for a review.”

Kearns warned of the CCP’s ambition to become a tech superpower and establish geopolitical leverage, saying the Chinese takeover of leading company in designing and selling flow sensors “represents a significant economic and national security concern.”

The relationship between the UK and the Chinese regime has become increasingly strained following Beijing’s upending of democracy and the rule of law in Hong Kong, its reciprocal sanctioning of British politicians who are vocal critics of its human rights abuses in Xinjiang, and the beating of a Hong Kong protester by Chinese diplomats in Manchester.

Prime Minister Rishi Sunak said in a major foreign policy speech on Nov. 28 last year that the so-called “golden era” of the Sino–British relationship is over, and that the UK will strengthen its resilience and economic security.

Since the National Security and Investment Act come into effect last year, successive business secretaries have made 14 interventions in foreign investments over national security concerns, eight of which targeted Chinese buyers.

Following the acquisition of Newport Wafer Fab by Chinese-owned Dutch company Nexperia, Shapps on Nov. 16 ordered the newly-named Nexperia Newport Limited to sell most of its shares, ruling the takeover had breached national security laws.

After former Business Secretary Jacob Rees-Mogg issued an order in September last year blocking Redrock Investment Ltd.—a subsidiary of China’s state-owned State Development and Investment Corp.—from accessing sensitive information about Britain’s power grid, the acquirer decided not to proceed with the acquisition, according to a notice of revocation of Rees-Mogg’s order published on Dec. 20.