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Esperpento at ARM China: the fired CEO does not leave and takes control to confront his parent, ARM

In 2016 ARM deployed its division in the Asian giant. Although the official name is Anmou Technologies, everyone referred to her as ARM China. ARM sold 51% of the company’s capital to Chinese investors, who paid $ 775 million for that stake.

In June 2020 something happened. The board of directors of ARM China – with several directors of ARM on it – made the decision to fire Allen Wu, the CEO of that company. An investigation had pointed to possible conflicts of interest, but that did not matter to the head of ARM China, who refused to leave his post and ended up taking control of the firm. The situation is chaotic and there are those who describe this event as “the heist of the century on the semiconductor industry“.

Game of Thrones in the semiconductor segment

How is it possible that Wu is still in control despite the council’s decision? The answer lies in the fact that Wu maintains certain rights to the company, the so-called ‘chops’.

This kind of ‘official seal’ allows Wu to have absolute authority under Chinese law despite the board of directors. Although ARM does not want, Wu is still in command, and now the lawsuits and legal processes make it unclear how this story will end.

ARM’s strategic decision in 2016 tried to be the vehicle that would allow this company to sell its intellectual property (its chip designs) in China, but now Wu claims that ARM China is “controlled by China” and is starting to promote their own intellectual property and services.

As explained in Technode, the intention of Softbank – current owner of ARM – was to be able to operate in China acting on behalf of a legal company, but that peculiar CEO Has made that whole strategy falter. Wu has created the so-called “Open NPU Innovation Alliance” (ONIA) that could end up competing globally with ARM.

At the moment ARM China does not claim that it is independent, but it does claim that it is operating independently and is controlled by China. The chaotic situation has sparked lawsuits that could take years to resolve, and its impact is clear for any company that intends to act as ARM did when trying to open new lines of business in China.

In 2019 ARM discovered that Wu had been taking advantage of his privileged position to attract investment for Alphatecture, his own fund to invest in tech startups. The council met a year later to dismiss him by a total majority (seven to one), but Wu refused to leave his post, and the aforementioned possession of that ‘official seal’ has allowed him to remain in office and even raise a singular split .

Arm1
Arm1

On August 26, Wu’s position was clear: ARM China launched a new trademark called Core Power to promote its own chips and services. Not only that: in addition to licensing ARM’s intellectual property, they are developing their own, and in their press releases they no longer use the name ARM China, but rather “Anmou Technologies”, their legal and official name in China.

The situation poses many problems for ARM, which not only made huge profits from this division – in 2020 the Chinese market accounted for 27% of ARM’s revenue – but now everything is complicated. First, because of this event that some describe as “robbery”. Second, due to the confusing situation of the potential purchase of ARM by NVIDIA (yet to be decided). And third, because of the other threat to ARM, which comes from that increasingly popular architecture called RISC-V.

The analysts do clarify that so far there has been no theft of intellectual property as such. ARM officials seemed not to be concerned with their relationship with ARM China despite the situation, but the truth is that the situation is much more complicated than ARM wants to acknowledge. Now it remains to be seen what happens with Anmou Technologies and with an Allen Wu who seems determined to stand up who until recently was not only its parent company, but also its great ally.