Arm dismisses suggestion its Chinese JV has staged a ‘heist’

Arm Ltd has dismissed an analyst’s opinion that its Chinese joint venture has conducted a “heist” that has damaged the chip design firm’s prospects in China.

The heist allegation appeared in a post by Dylan Patel, chief analyst at an outfit named SemiAnalysis. The post 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 post revisits the odd situation at Arm China – known locally as An MouTechnology – which in June 2020 fired CEO Allen Wu.

Wu refused to leave his post.

Arm Ltd, the UK-based and currently-Softbank-owned chip designer, is a minority shareholder in Arm China. While it has representation on Arm China’s board and wants Wu gone, being a minority shareholder means it can’t make that happen.

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 the Board’s intentions. Transferring possession of a chop is not straightforward so even though he’s not wanted, Wu remains in charge. Lawsuits about the matter are currently percolating through the courts.

Arm Ltd is not happy that Wu remains in charge and continues to engage with China’s government to explore a resolution.

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 designs.

Patel suggests that’s the “heist” because Arm China going beyond its intended activities shows Arm Ltd has lost control. And once Arm China has its own tech it could place less emphasis on Arm Ltd tech and therefore send fewer payments back to HQ.

Arm Ltd is unworried. In conversation with The Register, company representatives said that the company is happy with the results produced by Arm China and sees nothing to worry about in the joint venture’s new strategy. On the record, Arm Ltd offered the following statement:

Another reason the “heist” interpretation is hard to sustain is Softbank’s 2018 announcement of the Arm China joint venture, which states “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.

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. ®

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