Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
Allen Wu, who recently served as executive chairman and chief executive of Arm Technology (China), is seen speaking about the company’s artificial intelligence platform, Zhouyi, during the 5th World Internet Conference held in Wuzhen, in eastern China's Zhejiang province, on November 7, 2018. Photo: Simon Song

SoftBank chip tech firm Arm says China joint venture CEO fired for ‘serious irregularities’

  • The controversy comes at a sensitive time for British firm Arm amid an escalating clash between the US and China over technology leadership
  • Arm continues to supply technology to Huawei, which runs chip design unit HiSilicon
SoftBank Group Corp’s Arm and its Chinese chip joint venture clashed publicly on Wednesday over whether the venture’s chief executive had been fired, a dispute that threatens to disrupt a company central to the global semiconductor industry.

The British firm said on Tuesday that the board of Arm Technology (China) – jointly owned by Arm and investors including China’s sovereign wealth fund – voted to remove chief executive Allen Wu and replace him with a pair of interim co-chief executives.

Hours later, Arm China posted a statement to its official WeChat account asserting that Wu was still in charge and the venture was operating normally. The British firm then fired back to say it stood by its original statement, adding that Wu had been fired after an investigation uncovered undisclosed conflicts of interest and violations of employee rules.

“Following a whistle-blower complaint and several other current and former employee complaints, an investigation was undertaken by Arm Limited,” the company said in its latest statement, jointly issued with shareholder Hopu Investment. “Evidence received from multiple sources found serious irregularities, including failing to disclose conflicts of interest and violations of the employee handbook.”

Allen Wu, the former executive chairman and chief executive of Arm Technology (China). Photo: Weibo

The dispute comes at a sensitive time for Arm and its 49 per cent-owned Chinese affiliate, when Western companies are struggling to navigate an escalating clash between the US and China over technology leadership.

Any prolonged conflict could also have ramifications for Arm, whose semiconductor architecture underpins most of the world’s mobile devices. The British firm relies on major Chinese companies like Huawei Technologies for a large portion of its global revenue, and leans on Arm China to help it conduct business in the world’s biggest smartphone market.

Arm typically maintains a low profile, licensing its designs and collecting royalties via consumer brand companies, from Apple to Samsung Electronics. The dispute over Wu’s status, however, thrust it uncharacteristically into the spotlight, igniting a plethora of stories online about how the US-educated executive was still Arm China’s legal head honcho. Wu himself was cited several times in local media pledging to work with Huawei last year, when Washington first banned the sale of American software and circuitry to the world’s largest telecommunications equipment supplier and second biggest smartphone vendor.

“Arm is a UK-based company but they have a huge amount of activities in the US and in the US ecosystem,” said Alex Capri, a research fellow at the Hinrich Foundation. “What could make this really messy is that the US could start to put pressure on Arm to cut off its Chinese entity.”

Why UK chip software company ARM will keep working with Chinese partners

Capri pointed to Washington’s prior move to stop Dutch semiconductor equipment maker ASML’s supply of advanced technology to China. He said potential US pressure on Arm may prod its Chinese venture to try and operate as a stand-alone or separate entity, but that will still have huge implications for Huawei, whose chip design unit HiSilicon depends on Arm’s technology.

“This is what Arm China’s going to do – embed itself in a ring-fenced Chinese operation, but it will be super messy,” Capri said.

SoftBank acquired Arm for US$32 billion in 2016 in one of its largest acquisitions, a deal intended to further Masayoshi Son’s ambition of creating a global Internet of Things ecosystem. The company licenses the fundamentals of chips for companies that make their own semiconductors, and also sells processor designs. Most of the world’s smartphones depend on Arm’s technology, and it is trying to expand into servers and personal computers.

Arm China was then formed in 2018 when SoftBank sold 51 per cent of the subsidiary to a consortium that included China Investment Corp, the Silk Road Fund and Singaporean state investment firm Temasek Holdings. It now operates offices in Shenzhen, Beijing and Shanghai and acts as an intermediary between Arm in Britain and clients like Huawei.

Huawei’s HiSilicon becomes first mainland Chinese chip company to enter top 10 in global sales

Arm said the board had appointed Ken Phua and Phil Tang as Arm China’s interim co-chief executives. But Arm China said on WeChat that Wu remained in charge. “In accordance with relevant laws and regulations, Allen Wu continues to serve as chairman and CEO,” the post read.

It is unclear how the public dispute would affect Arm’s relationships in the world’s second largest economy. The company has been ensnared in Washington’s campaign against Huawei because of its central role in semiconductor architecture. The US, home to many of the world’s chip makers and a chunk of Arm’s operations, wants to block Huawei’s access to key chip technology after labelling the company a national security threat – something the Chinese telecoms gear maker has consistently denied.

Arm has said it will comply with the so-called US Entity List restrictions. It continues to supply technology to Huawei’s HiSilicon, but it is unclear if it can license future designs to the Chinese company.