Arm's former chief of the firm's Chinese joint venture is at the center of a dispute that may threaten not only the future of the JV, but also relations between foreign companies and China.
The SoftBank-owned chip designer announced in June that the company was firing Allen Wu for running a sideline investment fund alleging "conflicts of interest."
Arm China was established in 2018 between Arm and investors and focuses on the sale of chip design licenses.
The Financial Times reports that Wu operated a Chinese startup investment fund, Alphatecture, that offered Arm China customers discounts for chip designs in exchange for investing in companies under the Alphatecture umbrella.
A board member speaking to the publication at the time said that despite earlier requests to permit the creation of Alphatecture being denied, everyone at the board "knew what he was doing," adding that Allen "took the initiative" in building Arm's ecosystem in China.
Arm UK considers the situation as a conflict of interest and fired the executive. However, Arm China immediately followed with a statement that Wu would remain in his post.
Instead of leaving quietly and being replaced by another CEO, Bloomberg reports that Wu has hired his own security team and representatives from Arm are not permitted on the JV's premises.
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In addition, a source close to the matter said that a planned event to connect Chinese chip designers and Arm is no longer going ahead.
Arm has now accused Wu of "propagating false information and creating a culture of fear and confusion among Arm China employees."
"Allen's focus on his own self-preservation has also put China semiconductor innovation at risk as he has attempted to block the critical communication and support our China partners require from Arm for ongoing and future chip designs," Arm says.
Arm China has launched a salvo back, denying these claims and saying that Wu is open to negotiation.
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The ongoing battle does not just impact the fate of Arm China, but also how investment in China itself may be viewed in the future by foreign companies. Wu is the key representative of the venture and under Chinese law, is able to cling on to his position despite Arm's wish to remove him.
As the dispute has not led to a peaceful resolution and has now become both public and bitter, this may prompt foreign entities considering entering the Chinese business arena to rethink their positions -- especially if valuable IP is involved.
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The Chinese government has been called upon by both companies to step in. Unless resolved quickly, this may also become a test as to whether or not Chinese regulators are willing to rethink local laws to pacify foreign companies in dispute.
SoftBank is likely keeping a close eye on the situation as this could hamper reported plans to either fully or partially sell Arm as part of the company's $41 billion debt reduction program. SoftBank acquired Arm for approximately $31 billion in 2016 but now needs to generate cash to offset terrible financial results caused by losses within the tech giant's Vision Fund.
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