How a Silicon Valley chip pioneer landed in China

As the United States steps up its campaign to block China from acquiring key technological knowhow, the winding journey of a pioneering Silicon Valley computer chip firm is showing just how tough a task that can be.

Co-founded over 35 years ago by Stanford University professor John Hennessy, who is currently the Chairman of Alphabet Inc, MIPS Computer Systems Inc had developed a new approach to chip architectures that remains in wide use.

In late 2018 and 2019, as the U.S.-China tech trade war was in full swing, the core technology of MIPS was licensed to a Shanghai-based firm, CIP United Co Ltd, via a complex series of transactions involving companies in the Cayman Islands and Samoa.

Today, CIP controls full MIPS licensing rights for all new and existing customers in China, Hong Kong and Macau, as well as the ability to develop new derivative technologies based on the MIPS architecture, according to four people with knowledge of the situation.

"A license for all of mainland China has already been sold, lock stock and barrel," one of the people said. The deal was worth $60 million.

The details of the MIPS licensing deal and the transactions that preceded it - revealed in U.S. bankruptcy proceedings involving MIPS' parent company, Wave Computing Inc, and interviews with nearly two dozen people - offer a rare glimpse into how foreign firms were able to gain access to one strategically important American technology.

CIP United declined to comment about the MIPS licensing deal. Wave, through a public relations firm, said the company and its law firms believe its new management team "is confident the company has complied and is compliant with" rules on export, import and foreign investments regarding the MIPS licensing deal.

A 2019 CIP investor presentation, seen by Reuters, shows how the company was intent on using MIPS to help China catch up to the United States in advanced semiconductor technology, which is critical for everything from smartphones to sophisticated weaponry.

The MIPS license promises to provide "core technology" that will help China "implement the ambitious goal of Made in China 2025," the presentation stated, referring to a government program to achieve self-sufficiency in strategic industries. The United States has often cited the 2025 program as the reason for national security measures aimed at stopping China from accessing U.S. technology. A June 2018 document from the White House Office of Trade and Manufacturing Policy, states: "In policy documents such as Made in China 2025, China has articulated the target list of technology sectors it seeks to dominate. Much of recent Chinese investment behavior appears consistent with this target list."

Increasingly mindful that it has triggered U.S. backlash, Beijing began to downplay Made in China 2025, Reuters reported in 2018.