Arm Holding’s venture in China, Arm China, has gone rogue, seized IP and is trying to establish itself as an independent company.

As part of its efforts to expand in China, Arm’s parent company, SoftBank, was pressured to create a joint venture in which Arm only owned 49% of the venture, Arm China. It didn’t take long for problems to develop and Arm China’s CEO, Allen Wu, went rogue. 

Despite SoftBank’s allies within Arm China voting 7-1 to fire Wu, he remained in power via the company seal. Under Chinese law, the seal gives the holder control over a company, and Arm Holdings has not been able to retrieve it from Wu. In the meantime, Wu ousted any officials in opposition to his continued leadership and hired security loyal to him.

According to SemiAnalysis, the situation has escalated significantly. Arm China has seized the Arm Holdings IP it had access to and held an event declaring its independence as a new company, 安谋科技. The new company plans to chart its own path in the semiconductor industry, building on the IP it has to create its own designs.

It’s unclear to what extent this will hurt Arm Holdings. Since this drama has been building for some time, Arm had already stopped sharing any new IP with the Chinese venture. According to SemiAnalsys, the latest CPU IP Arm China had access to was the Cortex A77. Critically, the Armv9 designs were never made available to Arm China. The Armv9 is the next generation Arm achitecture that will power future chips. Even with its most recent IP protected, however, China is still a huge market for Arm Holdings, one it may lose altogether to 安谋科技. 

The bigger issue at stake is whether Chinese authorities will step up and enforce Arm Holdings’ position, or whether they will embrace the new entity, regardless of the unethical way it was founded. So far, Chinese authorities have been of no help to Arm Holdings, which does not bode well.

Should China back 安谋科技, it will send a very clear message to other companies looking to do business in the country:

‘We won’t honor your IP and will encourage our own companies to steal, hijack and pirate your innovations. Do business here at your own peril’