The Chinese head of Softbank-backed semiconductor manufacturer, Arm Technology, was removed from his position after he was caught setting up an investment firm that had directly competed with a similar business already established by the company in China. According to sources with knowledge in the matter, Arm Technology (China) chief executive, Allen Wu, was order to relinquish his position in a decision was made by SoftBank chairman Masayoshi Son and Arm chief executive Simon Segars.
Sources with direct knowledge of the company's activities revealed that Wu had established an investment fund called Alphatecture prior to his ousting. The fund mainly invested in companies that use Arm's products. While the practice may be legal and common for semiconductor companies, Wu's fund directly competed with a similar fund already established in the country by SoftBank and its joint venture partner Hopu Investment Management Co.
Softbank's fund provides capital and financial support to young tech startups in China, particularly those that otherwise cannot afford to purchase its subsidiaries' products. Wu's company essentially does the same thing and Softbank and Arm claim that its establishment presents a conflict of interest and is a clear breach of Wu's contract.
Arm China defied the order for Wu's removal, calling the allegations against the CEO as "inaccurate" and "misleading." Wu even went as far as using Arm China's official WeChat account to contest the decision. In a separate statement, Arm China claimed that investments associated with the company's ecosystem have not resulted in any conflicts with its operations or the operations of its parent company.
Wu is currently Arm China's legal representative, which means that he holds all of the company's registration documents and its company stamp. Wu has refused to relinquish possession of the stamp and if SoftBank or Arm wants to forcibly take it away from him, they would need to go through the courts; a process that will likely take years.
Sources claim that Arm and Hopu are willing to lobby the Chinese government to assist in the legal dispute. Analysts noted that the government's decision to intervene could be a huge test of the country's willingness to support overseas investors.
Softbank originally purchased Arm Technology in 2016 for $32 billion. The acquisition was the second-largest transaction for the company, behind its acquisition of Sprint Corp. Softbank eventually ceded its majority stake in the chipmaker to Hopu, reducing its stake to 49 percent. Hopu was established by a consortium of companies that include China Investment Corp, Temasek Holdings, and Silk Road Fund.
