SoftBank has been trying to take ARM public since the failed acquisition by Nvidia. The Japanese company must clean up to hope to value its British jewel at 60 billion dollars. For this there is a problem to solve: the revolt of the Chinese subsidiary of ARM, at least of its CEO. SoftBank has a plan, which seems to be working, for now…
ARM disarmed against Allen Wu
The ubiquitous adventure between ARM and its subsidiary has been dragging on for two years. In 2020, the ARM China joint venture board of directors, made up of representatives from ARM’s owner SoftBank, the company itself and a Chinese investor, votes to fire CEO Allan Wu for conflict of interest. . Since the latter has simply not moved.
Allen Wu handles day-to-day business and despite ARM’s attempts, clings to his post. He still has the official seal of the company and the necessary documents to present himself as the legal representative of the joint venture in China. Faced with this situation, local authorities in Shenzhen have shown a certain passivity until recently.
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According to information from Bloomberg, talks began a few months ago and reportedly accelerated considerably in the last weeks of April. A new seal could be created, the necessary documents for a resumption of control of Arm China would be filled under the aegis of the Chinese government.
Two names are already circulating for co-lead of the company: Liu Renchen, adviser to the Chinese government and vice-dean of the Research Institute of Tsinghua University, in Shenzhen and Eric Chen, associate director of Vision Fund and negotiator of SoftBank in negotiations with the authorities.
Why such progress after years of being there? The arrival of a new Communist Party secretary from Shenzhen, Meng Fanli, is said to have played a role. Above all, it was a bold move by SoftBank and ARM that convinced the Chinese government that it could lose a lot if the situation continued to stagnate.
The race for Chinese self-sufficiency in semiconductors as an ally
SoftBank decided to directly take over 28% of the joint venture, by recovering shares from ARM. The participation of the latter would fall below the 20% or even 10% mark according to the sources. Enough to transform the Arm China subsidiary into a simple uncontrolled affiliated company. In summary, confirm the reality of the management of the subsidiary since the revolt of Allen Wu.
This little administrative game would not suit China at all. ARM is the biggest chip designer in the world, its licenses are demanded by all major companies in the world. With its change of status, Arm China would no longer have free access to ARM licenses to sell them, the subsidiary would become a lambda customer.
If Arm China develops its own chip plans, the country, in its race for semiconductor self-sufficiency, cannot do without classic ARM licenses. A strong argument to finally receive the support, at least the participation of the authorities to settle the dispute with Allen Wu.
The discussions are going well according to the testimonies collected by the FinancialTimes, but distrust is in order. It has been two years since promising exchanges ended up falling apart. A source at the British newspaper said of a possible deal, ” We still have to see if Allen will be able to derail it “.
For SoftBank and ARM, it is essential to find common ground as soon as possible. China is one of the chip designer’s biggest markets. If uncertainty continues to reign there during the IPO, the company will be much less valued.