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Technology

SoftBank-backed Arm's spat with China unit over CEO heats up

China Arm denies ouster and says proposed interim CEO was dismissed in May

The spat between Arm Limited and its Chinese unit comes as trade tensions between U.S. and China flare up again.   © EPA/Jiji

TAIPEI -- Tensions between SoftBank-owned Arm Limited and its Chinese unit escalated on Thursday, with Arm China saying it had already dismissed one of the two men chosen by its British parent to serve as interim CEO of the local unit.

It is the second time in two days that the Chinese company has openly contradicted the U.K. company over management of Arm China. Arm Limited is a crucial player in the global chip industry, providing intellectual property used in 90% of the world's mobile processors, and its spat with Arm China comes just weeks after Washington tightened its clampdown on Huawei Technologies, the British company's largest Chinese client.

Arm Limited said on Wednesday that China Arm CEO Allen Wu was being dismissed for "serious irregularities" and would be replaced by Phil Tang and Ken Phua.

But in a post on its WeChat social media account on Thursday, the Chinese company said Tang had been dismissed from the company on May 26 "due to serious irregularities" and that he "no longer represents Arm China" in any capacity. The company added that it has "already taken legal actions to defend CEO Wu and Arm China's reputation."

Arm China had already denied in an earlier post that Wu had been dismissed, saying "Arm China is an independent entity and legally registered in China. According to all the laws and regulations, Allen Wu will continue his responsibility and role as Chairman and CEO."

Arm China's latest statement addressed the U.K. chip designer's lengthy announcement on Wednesday, in which Arm explained that it had removed Wu after discovering "serious irregularities, including failing to disclose conflicts of interest and violations of the employee handbook."

"The joint statement made by Arm and Hopu has caused a tremendous negative impact on Mr. Allen Wu and Arm China," Arm China wrote on Thursday. "The company has taken legal actions against persons involved in the matter," Arm China said in a statement on its official social platform on WeChat. "Arm China did not convene any valid board meeting, hence the company does not have any personal shuffle decision."

The U.K. company says the decision to remove Wu is backed by Hopu Investment Management, one of Arm China's investors and a well-known Chinese venture capital firm.

Arm on Thursday told the Nikkei Asian Review that it stands by its decision to remove Wu.

The management spat comes two years after the Softbank-owned U.K. chip designer ceded its control over Arm China, yielding a 51% share in the unit to Chinese investors, including Hopu, as well as state-backed entities such as the Silk Road Fund, sovereign wealth fund China Investment Corporation and Shenzhen government-owned conglomerate Shum Yip Group, leaving Arm with a 49% stake.

The $775 million sale of Arm's Chinese operations in 2018 was viewed as a significant victory for Beijing to secure crucial semiconductor technology, as Arm's chip design infrastructure serves as the chip foundation for almost all the world's mobile devices.

Arm China took over all of Arm's licenses and royalties businesses in the country, and is directly responsible for dealing with key Chinese customers, includig Huawei Technologies. All of Huawei's chip designs -- including all of the Kirin mobile processors used in its premium smartphones -- are based on Arm's intellectual property and chip blueprint infrastructure.

Arm temporarily halted all "all active contracts, support entitlements and any pending engagements" with Huawei after the Chinese company, the world's No. 2 smartphone maker, was added to the so-called Entity List by the U.S. government in May last year, BBC first reported last year.

During a personal trip to Taipei in June last year, Softbank founder Masayoshi Son said, "Arm is not stopping its relationship with Huawei, but at the same time, Arm does not want to break the law."

The U.K. company later resumed supplying Huawei with non-U.S. origin products, in compliance with the U.S. regulations.

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