ARM in struggle for control of Chinese subsidiary
ARM had told Bloomberg news agency that the board of directors of ARM China had voted to sack its CEO Allen Wu on June 4 after complaints of conflict of interest and an internal investigation. It add that Ken Phua and Phil Tang had been appointed the venture’s interim co-CEOs.
According to reports, ARM China than responded by saying on social media that Wu was still in charge and that the board’s decision was invalid because proper procedures had not been followed. Further reports said that the Chinese venture had responded to allegations against Wu by saying that Tang had been dismissed on May 26 for “major violations.”
It is now not clear who is in charge.
ARM, which was acquired by Japan’s SoftBank in 2016, has about 6,000 employees around the world with design centres all around the world.
This power struggle has been in the making ever since ARM agreed to create to a joint venture to conduct business in China back in 2017.
It started with the formation of a venture-capital fund with Hopu Investment which then formed ARM China as a joint venture as a joint venture with ARM. In 2018 the situation evolved again with the introduction of further investors and the reduction of ARM’s stake to 49 percent.
At the time investors included: the Hopu-Arm Innovation Fund, also known as Hou An Innovation Fund, sovereign wealth fund China Investment Corp., Silk Road Fund, Singapore’s Temasak Holdings, ARM, Hopu Investment Management and Shenzhen government-owned conglomerate Shum Yip Group.
Next: It was unusual
What seemed unusual was that ARM would only have a minority stake in its own subsidiary joint venture that reportedly would be responsible for collecting intellectual property royalties. It seemed the creation of the joint venture was the price to be paid to participate in the Chinese market.
Back in 2018 China was thought to be responsible for about 25 percent of ARM’s revenues. That figure is likely to have increased in 2019 and 2020 with the success of Huawei mobile phones.
The dispute within ARM can be viewed as a proxy east-west fight in the context of US-China trade tension. It comes after Huawei was put on an entity list in 2019 and ARM stated it would comply with US requirements (see Report: ARM complies with US trade ban, cuts off Huawei). And then in this year the US has further tightened the restrictions on the provision of technology to Huawei and its chip subsidiary HiSilicon.
The dispute also comes soon after Chinese owners made similar board room moves on the control of another IP licensor Imagination Technologies Ltd. (see After moves on ARM, China tries Imagination coup and Opinion: China has had its way with Imagination).
One reason why the Chinese state may wish to see pressure exerted on the UK is that the UK government may be back tracking on a commitment to allow Huawei a place in the roll out of 5G cellular communications in the country (see UK prepares to kick Huawei out of 5G by 2023).
Related links and articles:
News articles relarted to ARM China JV:
Report: Control of ARM’s China business passes to JV
Opinion: China has had its way with Imagination
Reports: ARM agrees to create Chinese IP firm
Other news articles:
UK prepares to kick Huawei out of 5G by 2023
TSMC dragged to the altar of US manufacturing
Report: ARM complies with US trade ban, cuts off Huawei
After moves on ARM, China tries Imagination coup
Opinion: China has had its way with Imagination
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