
ARM wrestles for control of Chinese joint venture - ksec
https://www.ft.com/content/0aafbbce-97d1-48b2-9af9-f792f67a0859
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SkyMarshal
Paywalled. Text below. TLDR: ARM may have lost its IP to China.

 _”Arm, the UK chip designer owned by SoftBank, is fighting a boardroom battle
with its Chinese joint venture after it tried to oust its chief executive.

In a series of statements on Wednesday, the UK group said Arm China’s board of
directors had voted on June 4 to replace Allen Wu as chairman and chief
executive, and appointed a pair of co-CEOs on an interim basis.

But Arm China has rejected the claim, with a statement on its official account
on the social media platform Weibo saying that Mr Wu “continues to serve as
its CEO”.

It noted that Arm China is “an independent legal entity registered in China
according to the law” and that it is “currently operating normally and its
support and services to Chinese customers [ . . . ] continues as always.”

Mr Wu continues legally to be in charge of Arm China and three of its
subsidiaries, Chinese corporate records show.

After the initial flurry between the two sides, Arm then said, in a joint
statement with Hopu Investments, the Chinese private equity firm that is a
major shareholder in Arm China, that Mr Wu had been investigated after
complaints of “serious irregularities” from a whistleblower and several other
current and former employees.

Concerns around Mr Wu appear to have centred on his potential business
interests outside Arm, according to one person familiar with the situation in
China. Mr Wu was initially asked to resign but refused, the person added,
adding that the situation quickly became muddied by legal complications.

The statement said that Mr Wu had failed “to disclose conflicts of interest”
and had violated the employee handbook. “The board believes that removing Mr
Wu is the most ethical and responsible decision to ensure Arm China’s long-
term stability and business prospects.”

Arm Holdings headquarters in Cambridge, UK UK based-Arm said, in a joint
statement with Hopu Investments, that Arm China chief Allen Wu had been
investigated after complaints of 'serious irregularities' from a whistleblower
and several other current and former employees © Bloomberg The person familiar
with the situation said that mistrust over Mr Wu’s leadership had grown over
the past few years both in Cambridge and China, resulting in a joint decision
to get rid of him.

Mr Wu, a US citizen, has led Arm’s China business since 2014 and became the
head of the Arm China joint venture when it was set up in 2018, according to
his LinkedIn profile.

Mr Wu did not immediately respond to a request for comment.

The boardroom fight has placed a fresh spotlight on Arm’s business in China,
which has been dogged by concerns of technology transfer after the UK group
sold a 51 per cent interest in its Chinese subsidiary to a consortium of local
financial investors and Arm partners in 2018.

Arm then formed a JV with the group, which is led by Hou An Innovation Fund, a
vehicle co-managed by the UK company and Hopu.

Arm China has grown rapidly with bases in Shenzhen, Beijing and Shanghai and
now employs almost 600 people. Arm China acts as a licensing channel between
the UK group and Chinese companies and counts Huawei as a key customer.

It was caught in the crosshairs of a US export control on companies working
with Huawei last year, and has not been able to circumvent the ban, according
to one person with direct knowledge of the situation.

Executives at Arm have repeatedly played down the risks of technology transfer
and denied its expansion in China was driven by SoftBank.

SoftBank bought Arm for £24.3bn in 2016 but it subsequently sold a 25 per cent
interest to the Vision Fund, the Saudi-backed $100bn investment vehicle.

Analysts expect the Japanese group to further sell its stake in Arm or relist
the UK group as part of a $41bn asset sale programme to fund a giant share
buyback and reduce its debt._”

