Reports in the national press on 20 August revealed that Plessey Semiconductors, a Plymouth-based company stated to be one of Europe’s oldest semiconductor companies and the world’s most technically advanced microLED business, had been acquired by Haylo Labs, an offshoot of Haylo Ventures. In its own press release, Plessey Semiconductors omitted to mention that around £85M of Haylo Labs’ investment funding was derived from Goertek, a Chinese electronics manufacturer of high precision components, wearable, VR/AR, hearable and home products.
The media, though, verified this, additionally reporting statements from within the UK’s investment security construct to the extent that the acquisition had been approved.
According to research published by the Australian Strategic Policy Institute (ASPI) and repeated in British national media on 24 August, Goertek collaborates with China’s military and security organisations in support of the Chinese Communist Party’s military-civil fusion strategy. UK-China Transparency’s online research indicates that this is likely true. Goertek’s founder was educated at Beihang University, one of China’s key Chinese military research universities known as the ‘Seven Sons of National Defence’, and was a delegate to the 14th National People’s Congress, China’s highest organ of state power. The company sponsored Beihang’s smart innovation technology research centre and partners with the Qingdao Research Institute, an entity proscribed by the US Government for its military connections. 30% of the company’s net profit in 2023 was reportedly attributable to government subsidies.
Contacts within the British Government’s investment security apparatus have revealed to UK-China Transparency that full due diligence might not have been completed, possibly – though not definitively – due to Goertek’s interest in Haylo’s acquisition being in loan, rather than share, capital.
There are indications that the relationship between Goertek, active in the Chinese military-industrial complex, and Plessey goes beyond the provision of profit-seeking capital investment by the former and suggests a deeper strategic relationship.
In recent years, prior to Haylo Labs’ acquisition and the Goertek loan, one individual has served simultaneously as a director of a company owned by Plessey and at a Chinese semiconductor company part-owned by Goertek. A second individual who is a NED at another company owned by Haylo Ventures appears to serve simultaneously as Goertek’s sales director.
The record of Plessey’s CEO may also be important. The principal people behind Haylo Ventures, Haylo Labs and now Plessey Semiconductors appear to have met at WaveOptics, a company founded in 2014 by three BAE Systems employees who had been working on head up displays and head mounted displays for military customers. Backed by venture capitalists Octopus Ventures from the start, David Hayes, now CEO of Plessey Semiconductors, was employed in 2017 as CEO to transform WaveOptics from an R&D enterprise to a product business. This led to its sale to the US-listed Snap Inc for a reputed $500M in 2021, by which Hayes likely netted Octopus Ventures (whose latest investment was $39M, in 2019 (Round C funding)) a tidy return.
At that point, key partners included “Chinese original design manufacturer Goertek”. Indeed, in November 2018, WaveOptics had signed an exclusive waveguide production partnership with the Chinese company. According to its press release, “this partnership will enable high volume manufacturing of WaveOptics diffractive waveguides for augmented reality (AR) wearables, such as smart glasses, at a price point to enable the mass market. Waveguides are the key optical component in AR wearables.”
One goal of the Chinese Communist Party’s ‘Made in China 2025’ industrial strategy is to onshore technologies initially developed in the West, principally through (a) research collaborations; (b) technology transfer; (c) company acquisition; and (d) low-cost manufacturing. This strategy does not consist purely of centralised state direction, but of a network of systems incentivising private and semi-private actors to support the strategy and profit from doing so. This context, and the links between Goertek and Plessey (which may be deeper than outlined above), suggest Goertek may be seeking key knowledge and IP instead of a straightforward financial return.
Whilst UK-China Transparency welcomes investment in strategic industries within the UK, it believes that – in this case – greater transparency is warranted.
The technology developed by Plessey Semiconductors is evidently of use in the commercial marketplace, but it also has applications within the defence and security sector, including within advanced radar, long-range communications and electronic warfare. There is no evidence that any IP associated with Plessey Semiconductors or WaveOptics was ever improperly passed to Goertek and nor is it possible at this stage to state, despite the connections between Goertek and Beihang University, that the technologies developed within these companies have been transferred into the Chinese defence enterprise in connection to the CCP strategy of military-civil fusion.
Most likely, the relationships between the companies mentioned above and their Chinese partners are primarily commercial and mutually beneficial in nature. It may be, though, that this acquisition will herald a classic tale of asset stripping through lopsided technology or knowledge transfer – as has happened in other cases, for example, that of Imagination Technology – and a risk to the UK’s or Plessey‘s competitiveness in this area. At the very least, the relationship with Goertek will have to be carefully managed.
Further transparency and scrutiny are therefore needed. It is possible that by using loan capital, instead of share capital, to create a relationship with Plessey, Goertek has effectively (and lawfully) bypassed the means of scrutiny put in place by the National Security and Investment Act.
Plessey and Haylo Ventures were contacted for comment, but provided none.