Arm Technology ends dispute, let’s see how the new management team will start a new stage?

Recently, ARM Technology (China) Co., Ltd. (hereinafter referred to as ARM Technology) released a letter to all customers and partners on its Weibo.

The letter first thanked customers and partners for their continued support for Arm Technology, and stated that the company's board of directors has properly and legally resolved Arm Technology's governance issues in accordance with the company's articles of association and relevant laws. The letter further announced that the company's new co-CEOs, Dr. Liu Renchen and Dr. Chen Xun, have begun to fully take over the operation and leadership of Arm Technology's various businesses, and have received strong support from employees.

At this point, the disputes over the management of Arm Technology over the past two years seem to have officially come to an end. We also tried to find some clues about the new stage of Arm Technology from the information released by the new management team.

1. New management team: compliance and legality

Back to April 29th, an announcement titled "ARM Technology (China) Co., Ltd. announces the appointment of new management" was officially released by the media.

The announcement stated that its board of directors passed a unanimous resolution in accordance with the company's articles of association and relevant laws and regulations to appoint Mr. Liu Renchen and Mr. Chen Xun as co-CEOs of Arm Technology and complete the industrial and commercial registration in accordance with the law. Mr. Liu Renchen and Mr. Chen Xun will jointly lead the Arm Technology team to ensure that the company operates as usual and continues to provide customers with high-quality products and services. Arm Technology will uphold its original intention, maintain close cooperation with Arm, and work with domestic and foreign partners to forge ahead on the road of supporting innovation in China's technology industry.

After this announcement came out, its legality was questioned by Arm Technology's management team at the time.

However, the current management team of Arm Technology reiterated in a subsequent response: "The company has legally obtained a new business license and official seal. From now on, the business license and seal issued on May 23, 2018 no longer have any legal effect on the company. Any use of such revoked business licenses and (or) seals is against the company's will and will constitute an infringement of the company's rights. The company reserves all rights to pursue legal liability for such acts."

The next day, direct or indirect shareholders holding a majority stake in Arm Technology jointly announced that these appointments of the company were made in full compliance with Chinese law. The announcement also emphasized that Dr. Liu Renchen had been accepted and legally registered by the local government departments in Shenzhen as the legal representative and general manager of the company, and that such appointments had come into effect.

We understand that this appointment was a joint decision of the major Chinese and foreign shareholders, not the action of a single shareholder. The new senior management team of Arm Technology also stated that today's Arm Technology has both the strong support of Chinese shareholders and the recognition of foreign shareholders. Many partners will continue to support its layout and future development in the Chinese market. This change in leadership will not affect its positioning and development as an independent company.

After a few days of silence, some media reported on May 7 that the new management of Arm Technology had officially taken office and taken over the management of the company.

The report pointed out that this well-known chip IP design and service company is making every effort to ensure the order and stability of the company's various business operations during the transition period. That morning, Mr. Liu Renchen, the new co-CEO, legal representative and general manager of Arm Technology (China) Co., Ltd., arrived at the Arm Shenzhen office in Nanshan District on time, and accompanied by internal employees, had cordial communication and exchanges with employees of various office teams to understand the progress of the department's business.

In fact, according to relevant reports, Arm Technology held an online meeting for all employees on May 6, and almost all of the company's more than 800 employees attended the meeting of the new management team. At the same time, the CEO Office and Management Committee of Arm Technology have been announced to be established. The new Management Committee of Arm Technology is mainly composed of the original management members and some old employees. More importantly, the new appointment also indicates that the company's new management has gained strong support within the company, which will further ensure the normal operation and orderly development of Arm Technology during the transition period.

It can be seen that the dispute of Arm Technology in the past two years, as a big drama in the chip industry, has transitioned to a new stage in the most compliant and legal way, and the handover process has been completed quickly. Compared with the ups and downs two years ago, there is less suspense, less back and forth, less drama and talk of one side singing and the other side coming on stage, but it seems to have ended in the most appropriate way. The industry needs less suspense and more certainty and rules. As an upstream IP supplier in the chip design industry, Arm Technology has many customers and partners in the industry. I believe that for them, they are most happy to see the dispute end and return to normal.

2. Unchanged commitment: Based on local innovation and maintaining independent development

In addition to the legality of the management changes mentioned above, there is another point that has attracted much attention in this dispute involving Arm Technology, and that is the independent development of Arm Technology in China.

According to the information, Arm Technology is a joint venture company established by Chinese investors and SoftBank Group in April 2018. The company is 51% controlled by the Chinese side and 49% by the foreign side, of which Arm owns 47.33% of the shares. According to relevant sources, according to the agreement signed by both parties, Arm Technology has the exclusive and permanent right to authorize and sell Arm intellectual property products in China. At the same time, the Chinese joint venture also has completely independent research and development rights, and can develop CPUs compatible with Arm architecture and other processors with independent architectures, and can reversely license them to Arm.

Considering the geopolitical factors in recent years and the importance of the Arm architecture, this cooperation has always been regarded as a model of Sino-foreign cooperation. This also guarantees the fundamentals of the domestic chip industry and avoids the risk of domestic companies having no Arm architecture available. But since the problems between Arm Limited, SoftBank, Hopu and the management of Arm Technology were first exposed in 2020, everyone has begun to have doubts and concerns about the future development of Arm Technology. For example, can Arm's IP still be licensed to Chinese companies? Is SoftBank really pushing the joint venture to develop IP in China as always?

In response to these issues, we found that Liu Renchen, the new co-CEO of ARM Technology, reiterated at the staff meeting on May 6 that the company will adhere to the "four unchanged" principles in its future operations:

First, the independence of ARM Technology remains unchanged. The change of the company's legal representative and CEO is not a unilateral act of any foreign shareholder. Therefore, the so-called "certain foreign shareholders took back the joint venture" is completely false.

Second, ARM's strategy remains unchanged. The change in leadership does not affect ARM's positioning and development as an independent company with a majority stake held by Chinese investors, and it will continue to maintain independent development in the future and continue to provide services and support for the development of relevant industries in China.

Third, Arm's commitment to its employees remains unchanged. Regarding the Employee Stock Ownership Plan (ESOP), the company's board of directors promised that, under the leadership of the new leadership, once the company has successfully transitioned and operations have returned to normal, it will immediately implement the ESOP and issue options to existing Arm employees.

Fourth, the framework of Arm's organizational structure remains unchanged, and there is no plan for compulsory layoffs. The new leadership will continue to deepen the talent strategy, continue to attract, train and make good use of talents.

According to another public information , when communicating with employees in the office on May 7, Liu Renchen reiterated: "The changes in the company's management and board of directors have no impact on the independence and development strategy of Arm Technology. At the same time, the company's organizational framework and commitment to employee development remain unchanged. With the arrival of the new management, Arm Technology will continue to provide services and support for the development of China's technology industry on the road of independent development and independent innovation."

From the perspective of China's chip industry, the supply of Arm IP, especially for high-performance domestic chips, is of great importance. When RISC-V was mostly only working in the IoT field, Arm CPU, due to its mature product ecosystem, has long supported the vigorous development of high-performance terminal chips such as domestic mobile phones and TVs, and has quickly entered the fields of large chips such as autonomous driving, data centers, and supercomputing. Combined with the investment boom in the chip industry in recent years, emerging domestic large chip companies have all chosen the Arm architecture as the main CPU architecture and built various scenarios around it. The commitment of the new management of Arm Technology has undoubtedly broken the rumors that Arm IP will be cut off and foreign capital will take back Arm Technology. The failure of Nvidia's acquisition and the end of the dispute of the joint venture have also made related chip companies more at ease to invest in the research and development of products based on the Arm architecture.