Arm Says It Has 'successful Working Relationship' With Chinese Joint Venture Run By CEO Who Refuses To Leave

Arm has downplayed an analyst's view that its Chinese joint venture conducted a "heist" that damaged Arm's prospects in the Middle Kingdom.

The chip biz is referring to this piece by Dylan Patel, chief analyst at an outfit named SemiAnalysis, which is titled: "The Semiconductor Heist Of The Century – Arm China Has Gone Completely Rogue, Operating As An Independent Company With Inhouse IP/R&D."

The article revisits the odd situation at Arm China – known locally as AnMou Technologies – which in June 2020 fired CEO Allen Wu. The exec was reportedly accused of offering discounts to Arm China customers if they invested in his side business, Alphatecture.

Wu refused to leave his post.

Arm, the UK-based and Softbank-owned processor core designer, is a minority shareholder in Arm China, and has representatives on the joint venture's board. When that board voted in favor of removing Wu last year, the CEO ignored it, alleging: "Arm China did not convene any valid board meeting."

Crucially, Wu retains Arm China's company chop — an item akin to a company's official seal. Under Chinese law, possessing the chop gives Wu authority over the company regardless of its board's intentions. Transferring possession of a chop is not straightforward so even though he's not wanted by Arm, Wu remains in charge. Lawsuits battling over the future of the outfit are percolating through the courts.

Arm is not happy Wu remains in charge, and continues to engage with China's government to explore a resolution. Wu, meanwhile, has reportedly ousted Arm loyalists from Arm China, and employed security guards to keep Arm out of the biz. Last year and now, he asserts Arm China is an independent, Chinese-owned entity.

Despite being under a cloud, Wu has been busy. Arm China has recently announced what it calls a "two-wheel drive A+X strategy" that will see it continue to promote and localise Arm designs and strike out to create its own chip blueprints.

Patel suggests that's the "heist" because Arm China going beyond its intended activities shows Arm has lost all control. And once Arm China has its own processor tech, it could place less emphasis on Arm's architectures and therefore send fewer payments back to HQ. He noted:

Patel also observed that "no IP has been stolen," and that "Arm has halted the transfer of any IP" to any organizations on the US government's Entity List – the roster of companies Uncle Sam would rather American businesses didn't work with for national security reasons.

In conversation with The Register this week, Arm's spokespeople claimed it is satisfied with the results produced by Arm China, and that it isn't too worried about the joint venture's strategy. On the record, they told us:

We note that Softbank's 2018 announcement of the Arm China joint venture stated: "Arm believes this joint venture, which will license Arm semiconductor technology to Chinese companies and locally develop Arm technology in China, will expand Arm's opportunities in the Chinese market."

That Arm China is now seeking to create a new line of business, while explicitly stating that it continues to work with Arm designs, appears not to suggest a "heist" has taken place. Rather than robbery, instead insubordination, mutiny, or rebellion.

Even if Arm China were to back away from Arm designs, it would be doing itself a disservice. The Arm ecosystem is enormous, and device makers and developers would be loath to step away from it to learn the intricacies of a new player with small market share. Dumping Arm would also deprive Chinese licensees of the export opportunities generated by global demand for Arm's tech.

China's desire to achieve greater technological self-sufficiency could conceivably accelerate local adoption of a new made-in-China platform by fiat — but such a decision would also stymie the Middle Kingdom's ambition of putting big data analytics sand 5G networks at the heart of its economy in the next five years. ®

This article was revised after publication to include more of Arm China's backstory.

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