Revealed: Cambridge chip startup Flusso acquired by Chinese firm

Flusso China takeover

Cambridge-based semiconductor company Flusso has been wholly acquired by a Chinese entity for £28m, company filings reveal.

Flusso, a University of Cambridge spinout that develops flow sensor technology, announced last August that it had been “jointly acquired” by a “company and global private equity fund”.

The announcement notably omitted the name of the acquirers. However, Companies House documents filed on 6 January show that Shanghai Sierchi Enterprise Management Partnership, a special purpose vehicle, took 100% ownership of Flusso on 11 August 2022.

That same month, Flusso appointed two Chinese nationals based in Shanghai – Dan Zhou and Feiran Shi – as company directors. UKTN was unable to reach Zhou and Shi for comment.

Flusso CEO and co-founder Dr Andrea De Luca told UKTN that Shanghai Sierchi Enterprise Management Partnership is controlled by the private equity firm and company mentioned in the initial announcement.

The two acquirers were not named in the August announcement because the unnamed company is currently going through an initial public offering, De Luca said, and “chooses to not publicise its name so it doesn’t affect the IPO”.

De Luca added that the acquiring company “sells components to many of the world’s top 100 companies”.

The deal comes at a time when the UK government is heavily scrutinising deals between UK and Chinese tech companies. Last year, the government stepped in to unwind Nexperia’s takeover of Newport Wafer Fab and blocked a Beijing-based company from licensing vision sensing technology developed at the University of Manchester.

Companies are legally required to inform the government “about an acquisition that could harm the UK’s national security”.

De Luca told UKTN that “Sierchi did notify the UK government about their intention of acquiring Flusso, and Flusso supported Sierchi and the UK government throughout the entire assessment process before closing the transaction”.

The statement of share capital shows that Shanghai Sierchi Enterprise Management Partnership’s ownership is a combination of ordinary shares, deferred shares and growth shares.

What does Flusso do?

Flusso is a fabless semiconductor company, which means it designs and sells chips but does not manufacture them itself. It develops flow sensing technology to measure or regulate the flow of liquids and gasses in tubes and pipes.

Flusso’s ultra-small flow sensors are used in consumer and industrial products. It advertises its technology as having applications in servers, gaming PCs, tumble dryers, air filtration, gas detection and ventilators.

In addition to hardware, Flusso provides firmware products, which according to its website include “adaptive algorithms”.

Flusso was spun out of the University of Cambridge in 2015, commercialising technology first developed in the university’s electrical engineering department.

In June 2020, Flusso raised $5.7m in an oversubscribed Series A funding round to scale up the production of its patented technology. That included investment from Parkwalk Advisors, an active investor in UK spinouts. Other support came from the Foresight Williams Technology EIS Fund, 24 Haymarket, Cambridge Enterprise, Martlet, and Cambridge Angels.

The latest company filing shows that the above investors all exited their stake in Flusso last year during the Chinese takeover. Other former investors who sold their stake during the acquisition include the chancellor of the University of Cambridge and the founder of Cambridge GaN Devices.

De Luca also sold all of his shares in Flusso during the takeover, the filing shows.

Government clamps down on China ties

The acquisition of Flusso by a Chinese entity comes amid escalating Sino-British tensions. Towards the end of last year, Prime Minister Rishi Sunak said the so-called “golden era” of relations with China is over.

The clearest example of deteriorating UK-China relations is the government’s decision in 2020 to ban Chinese telecommunications giant Huawei from UK 5G networks over national security concerns.

High-tech industries such as telecommunications and semiconductors have become a key battleground in the geopolitical arena – and a focus of the UK’s new national security laws.

In January 2022, the National Security and Investment (NSI) Act came into force, giving the government beefed-up powers to investigate mergers and acquisitions of UK companies to “protect national security”.

The government used these powers last year to unwind the £63m acquisition of Newport Wafer Fab by Netherlands-headquartered and Chinese-owned semiconductor manufacturer Nexperia.

That decision proved controversial in the UK semiconductor industry and came after the government delayed the decision three times.

Those that support a crackdown on Chinese involvement in UK business dealings point to China’s national security laws, which force organisations to support the state’s intelligence-gathering efforts.

At the time, Nexperia said that the decision to block the deal shows the UK is “closed for business”, while the CEO of graphene electronics company Paragraf said the government must take “significant steps” to prevent similar investigations from facing lengthy delays.

De Luca told UKTN that Shanghai Sierchi Enterprise Management Partnership does not have any ties to the Chinese government.

De Luca has previously criticised semiconductor protectionism and instead called for a more collaborative approach. Writing for EE Times in November, De Luca said that “too often, the message that is put across to build a political case is that it’s all about one nation taking the lead in solving the crisis”.

Instead, De Luca wrote, “the answer is collaboration — long-term collaboration, borderless collaboration — and putting customers, not politicians, at the centre of it all”.

A spokesperson for the Department for Business told UKTN that the government is unable to comment on specific foreign takeovers.

“While commercial transactions remain primarily a matter for the parties involved, the government routinely monitors acquisitions across the economy in case of national security concerns,” the government spokesperson said.

Story updated to include comment from Flusso.