Arm takes back control of its Chinese biz ahead of IPO

Arm has reportedly taken back control of its “rogue” Chinese business ahead of an expected IPO.

The Chinese venture of the British semiconductor icon began operating as an independent company and conducted its own in-house R&D to create new IP. Dylan Patel, Chief Analyst at SemiAnalysis, even penned a piece titled: ‘The Semiconductor Heist Of The Century – Arm China Has Gone Completely Rogue’.

Arm-owner SoftBank sold 51 percent of its stake in the Chinese venture, Arm Limited, to a consortium of Chinese investors for $775 million. With its remaining stake, SoftBank no longer had a majority to make any major decisions.

Arm China fired its CEO, Allen Wu, in June 2020 after he was accused of offering discounts to customers if they invested in his side hustle, Alphatecture. However, Wu refused to leave arguing that: “Arm China did not convene any valid board meeting”.

What followed was lawsuits to oust Wu from his post. In the meantime, Wu reportedly got rid of staff loyal to Arm from Arm China and even employed security guards in a bid to keep out unwanted guests to retain his position.

However, Nikkei and Reuters have reported that Wu has now been removed.

SoftBank will be pleased with the news as the certainty it provides will make it easier for the company to launch an IPO of Arm.

Arm is set to launch an IPO after the collapse of a $40 billion acquisition offer from Nvidia. The deal collapsed following scrutiny from numerous global regulators that were concerned Nvidia could limit rivals’ access to Arm’s chip designs or shift resources towards areas that benefit its new owner.

SoftBank considered and subsequently rejected the idea of pursuing an IPO (Initial Public Offering) of the company in 2019 and again in early 2020.

“We contemplated an IPO but determined that the pressure to deliver short-term revenue growth and profitability would suffocate our ability to invest, expand, move fast, and innovate,” explained Simon Segars, CEO of Arm, in January.

The company’s hand is now being somewhat forced through a lack of alternative options.

Arm has struggled from relatively flat revenues and rising costs despite the huge success of the company’s licensees such as Apple, Qualcomm, and Amazon. However, SoftBank has been keen to hype the company’s future prospects.

“Arm is becoming a centre of innovation not only in the mobile phone revolution, but also in cloud computing, automotive, the Internet of Things, and the metaverse, and has entered its second growth phase,” said Masayoshi Son, Representative Director, Corporate Officer, Chairman, and CEO of SoftBank Group.

In March, Arm announced that it was cutting up to 1,000 jobs from its global workforce. The move was seen as a bid to show potential investors that it’s running a leaner operation.

“To stay competitive, we need to remove duplication of work now that we are one Arm; stop work that is no longer critical to our future success; and think about how we get work done,” wrote Arm CEO Rene Haas in an email to staff.

Haas, the former head of Arm’s intellectual property unit, recently took over as the company’s chief executive as part of its internal strategy shakeup to help navigate it through these choppy waters.

(Photo by Laurent Perren on Unsplash)

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