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Allen Wu Xiongang, executive chairman and CEO of Arm Technology (China) Co Ltd. speaks on Arm China AI Platform Zhouyi at the 5th World Internet Conference in Wuzhen, 2018. Photo: SCMP/Simon Song

Power struggle at China joint venture of chip designer Arm continues as CEO refuses to step down

  • Arm’s board is continuing to work with the government to resolve the situation

UK-based chip design company Arm said on Wednesday that the head of its China joint venture, Allen Wu, is still refusing to relinquish his post despite a June 4 board decision to remove him following an internal investigation that showed he “put at risk” the interests of the company’s shareholders.

SoftBank Group Corp-owned Arm, which specialises in chip design software and whose clients include Huawei Technologies Co, said in an emailed statement that the board is continuing to work with the government to resolve the situation.

“Allen has refused to relinquish the company chop and step down, while propagating false information and creating a culture of fear and confusion among Arm China employees,” Arm said in a statement on Wednesday.

Arm also accused Wu of blocking “critical communication between Chinese chip design companies and Arm for technical support for ongoing and future chip designs, putting China’s semiconductor innovation at risk".

The power tussle at Arm China comes at a delicate time, as the British firm gets caught in the middle of US moves to cut off Western technology supplies to China’s dominant smartphone and telecommunications equipment maker Huawei, amid US charges that the Shenzhen-based company is a national security threat.

Huawei under more pressure in Europe after UK ban, EC report

The joint venture was founded in April 2018 between Arm and a consortium led by Chinese equity fund Hopu Investment, Shum Yip Holdings, state-backed China Investment Corp, and Belt & Road projects-focused Silk Road Fund. Arm owns 49 per cent of Arm China, while the consortium holds the rest.

Calls to Arm China’s Beijing and Shenzhen offices went unanswered on Wednesday.

Wu’s original removal by the parent’s board was sparked by an internal investigation.

“Following a whistle-blower complaint and several other current and former employee complaints, an investigation was undertaken by Arm Ltd.,” Arm said in a June 4 statement jointly issued with Hopu. “Evidence received from multiple sources found serious irregularities, including failing to disclose conflicts of interest and violations of the employee handbook.”

However, Arm China rejected these claims and said that Wu continued to serve as its CEO and had carried out his duties in accordance with “relevant laws and regulations.”

In an open letter posted on Tuesday on its official WeChat account, Arm China accused Arm and Hopu Investment of pressing the Chinese joint venture's customers to modify or scrap existing contracts amid the boardroom battle.

“Some directors of Hopu Investment and Arm in the UK have sent people to contact customers of the joint venture, and threatened to modify or cancel the existing contracts with the joint venture,” according to the open letter.

Legal experts have said the dispute will require careful handling by Arm due to local regulations, and that the legal process could take years.

“Senior management including the CEO, are appointed by the board of directors, and removal should be favoured by a majority of shareholders,” Kenneth Zhou, a Beijing-based partner at international law firm WilmerHale, told the Post in June. “’[However] companies incorporated in China abide by Chinese corporate laws and by-laws, and are not bound by terms applicable to their foreign parent companies.”

As the legal representative of Arm China, Wu holds the company’s registration documents and the company seal, or stamp. Changing the legal representative requires taking possession of the company stamp – something Wu has refused to relinquish.

With offices in Beijing, Shanghai and Shenzhen, Arm China has taken off in the country as an exclusive licensing channel between the UK group and Chinese companies. It has over 200 Chinese customers, according to company information.

Wu, a US citizen with an MBA from the University of California, has led Arm’s China business since 2014, and became the CEO of Arm China in 2018.

This article appeared in the South China Morning Post print edition as: Arm mainland venture’s CEO ‘refuses to step down’