ARM Faces a Boardroom Revolt as It Seeks to Remove the CEO of Its Chinese Joint Venture

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ARM, the British silicon ship designer backed by SoftBank (TYO:9984), is currently embroiled in a nail-biting boardroom conflict, equipped with an equally appropriate dramatic flareup.

To wit, ARM issued a statement on Wednesday, disclosing that the board of its Chinese joint venture – ARM China – has approved the removal of the incumbent chairman and CEO, Allen Wu. Bear in mind that the British chip designer was purchased by the Japanese behemoth, SoftBank, in 2016 for £24.3 billion. ARM currently holds a 49 percent stake in its Chinese JV, with a consortium of investors led by the Chinese equity fund, Hopu Investment, retaining the residual 51 percent stake.

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However, just hours after the initial statement by ARM, its Chinese JV issued a contradictory statement on Weibo, reiterating that Allen Wu “continues to serve as its CEO” and that ARM China was operating as usual. The statement went on to note that:

“[Arm China is] an independent legal entity registered in China according to the law”

The statement continued:

“[ARM China is] currently operating normally and its support and services to Chinese customers [...] continues as always.”

ARM then retaliated by issuing a joint statement with Hopu Investment, accusing Wu of conflict of interest and violating employee rules. The statement further disclosed that a pertinent investigation was conducted after a whistleblower, bolstered by a number of current and former employees, alleged “serious irregularities”.

As a refresher, the crux of the allegations against Wu pertain to his dealings beyond ARM, as per the reporting by Financial Times [linked]. Moreover, as per the internal sources, Mr. Wu had been privately urged by ARM to tender resignation but he refused to comply with the directive.

Due to “conflicts of interest” and violation of employee handbook rules, a decision was taken to remove Mr. Wu. The ARM statement went on to note:

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“The board believes that removing Mr. Wu is the most ethical and responsible decision to ensure Arm China’s long-term stability and business prospects.”

In additional context, Allen Wu is a U.S. citizen and has led ARM’s Chinese operations since 2014. He went on to become the head of the chip designer's Chinese JV in 2018. Of course, this escalating boardroom conflict has shed fresh limelight on ARM China that has been reeling from allegations of facilitating intellectual property transfers to the Asian giant. Since 2018, ARM China has undergone rapid expansion, currently employing around 600 people. The venture acts as a primary licensing channel between ARM’s UK operations and a plethora of Chinese customers, including the embattled Chinese giant Huawei. Due to its intricate relations with Huawei, the chip designer has come under the purview of strict U.S. export controls vis-à-vis the Chinese tech giant.

We reported earlier in 2019 that SoftBank was mulling re-listing ARM on the stock exchange in order to raise much-needed cash. The Japanese giant is reportedly pursuing a 2023 timeline for the IPO.

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