- Arm and Arm China are reportedly engaged in a tense corporate governance conflict.
- And Arm losing control of its joint venture will complicate Nvidia’s reported efforts to buy Arm from SoftBank.
UK-based chip designer Arm appears to no longer be in control of its joint-venture business unit, Arm China. In May, Arm fired Allen Wu, the head of Arm China, but Wu refused to acknowledge the decision and has continued overseeing operations of the business unit, according to Bloomberg.
Arm China also reportedly won’t let members of the UK parent entity onto its premises. Last week, Arm China issued a statement reaffirming its commitment to “empowering the foundation of China’s semiconductor industry.” Meanwhile Arm has attempted to exude a calm and confident air, telling Nikkei Asian Review: “The Arm China board is working closely with government authorities to peacefully resolve the current issue and ensure Allen Wu is unable to commit further harmful or disruptive actions.”
The internal strife between Arm and Arm China signals a further bifurcation of semiconductor supply chains, as part of a proxy battle between US-aligned nations and China. Arm controls 49% of Arm China; the remaining 51% of the company is owned by Chinese interests, per Nikkei Asian Review.
If it fully cuts ties with its UK counterpart, Arm China could ensure that it maintains the ability to supply semiconductor architecture licenses to China-based companies. The company may perceive this ability to be under threat, considering the US’ recent attempts to cut China-based companies off from critical suppliers such as Intel, Advanced Micro Devices (AMD), and Taiwan Semiconductor Manufacturing Company (TSMC). Arm China’s IP could be used by the likes of Huawei and Semiconductor Manufacturing International Corporation (SMIC), as China attempts to prop up a self-sufficient semiconductor supply chain.
SoftBank is reportedly looking to sell Arm to Nvidia, but the tensions between Arm and Arm China complicate this endeavor. Late last week, Bloomberg reported that Nvidia is now in “advanced talks” to purchase Arm from the beleaguered Japanese investment giant SoftBank. If Arm China is no longer answering to its UK parent company, however, the proprietary value of Arm’s IP may depreciate considerably, since there could be two companies independently licensing Arm chip architectures.
And even if Arm manages to reach a favorable agreement with Beijing over the conflict with Allen Wu, the continued tensions between the US and China will put any company that acquires Arm in a tenuous position. Nvidia may not be altogether deterred from making an acquisition under these circumstances, but it will certainly bear the conflict in mind as it proceeds in discussions with SoftBank.
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