Aug 31, 2021 05:00:00

Arm's Chinese joint venture declares independence from Arm, takes over some licenses and customers in the Chinese market

The Arm architecture developed by the semiconductor company Arm is used in billions of chips used in mobile phones, automobiles, microcontrollers, Amazon Web Services (AWS) servers, etc. Arm was originally a British company, but was acquired by Softbank in 2016. After that, although it was announced that it would be sold to NVIDIA, the Chinese joint venture that had the licensing rights in China unilaterally declared independence and seized the intellectual property (IP) licensing rights. Semiconductor-related blogger Dylan Patel explains that the runaway continues.

The Semiconductor Heist Of The Century | Arm China Has Gone Completely Rogue, Operating As An Independent Company With Inhouse IP/R&D - by Dylan Patel - SemiAnalysis
https://semianalysis.substack.com/p/the-semiconductor-heist-of-the-century

In June 2018, SoftBank sold 51% of its Chinese subsidiary Arm Technology to a Chinese investment consortium with the aim of conducting Arm's IP business in China. It became a joint venture. Arm China now has exclusive rights to license and manage Arm IP within China.

Notice Regarding Joint Venture of China Business at Subsidiary (Arm) | SoftBank Group Corp.
https://group.softbank/news/press/20180605

However, after that, it was discovered that Arm China's CEO Allen Wu offered Arm China's customers a discount on the license fee, in exchange for which he was inviting investment in his company. In 2020, Arm and shareholders agreed to oust CEO Wu, and Arm China's board voted 7 to 1 to remove CEO Wu, citing conflicts of interest.

However, he said that he could not legally execute the dismissal because CEO Wu held the company seal. China, like Japan, is a registered seal society where seals have legal effect, and various procedures at a company cannot be carried out without a company seal. In other words, even though the board of directors has resolved to dismiss CEO Wu, CEO Wu remains in substantial control of the company while refusing to dismiss him.

CEO Wu kicked out senior executives who sided with Arm at the board and sued Arm China's board in the name of Arm China. With Arm's influence removed, Arm China was completely out of Arm's hands and went out of control.

Of course, Arm did not remain silent and retaliated by suspending licensing of new IP. For example, major technologies such as Arm's CPU Cortex A77 and AWS's uniquely designed Graviton and Neoverse series are not sent to Arm China. Also, the new architecture Armv9 announced in May 2021 has not been provided to Arm China. On top of that, Arm is trying to appeal to the Chinese government that 'Arm China will adversely affect China's semiconductor industry.'

With the suspension of new licenses, it was thought that Arm China's recklessness would also subside. However, Arm China held an event to officially declare independence from Arm and appealed that 'Arm China is China's largest semiconductor IP supplier.' In addition, Arm China announced a new IP called the 'XPU line' that it developed independently. We have declared that we will release our own NPU and VPU for mobile devices such as smartphones and IoT devices in the future.

As a result, while claiming independence from Arm, Arm China will take away some of Arm's IP and grab the Chinese market, which is the second largest in the world. Mr. Patel said, ``Arm China is the most famous example of a runaway Chinese joint venture.In China, IP has been stolen and copied for decades, but this Arm China case has never been seen before. It may be the most daring attempt in the world, ”he commented.

Furthermore, Mr. Patel said, ``It is unclear what effect this Arm China runaway will have on the acquisition of NVIDIA, but it is clear that Softbank's short-sighted pursuit of profit caused such a large-scale problem.'' He criticized Softbank's way of doing things.