The Financial Times published materialdetailing SoftBank and Arm’s standoff with rebellious Arm China. The Japanese and British companies, which it owned for two years, could not depose the head of Allen Wu’s Chinese division, who declared him independent.
Last week, Shenzhen Chinese authorities approved the dismissal of Mr. Wu: his name was removed from Arm China’s founding documents and a new seal was affixed. The situation turned around when Chinese police broke into the company’s 24th-floor office and arrested two of Wu’s guards. Liu Renchen and Eric Chen were appointed new leaders. However, Wu ordered all employees at the Shenzhen office to work from home.
Both sides of the conflict issued orders to the entire Arm China workforce, which includes about 800 employees. Wu’s team demanded that “requests for information or the execution of orders” be reported to the new leadership “to prevent the disclosure of non-public information.” At the same time, internal IT infrastructure administrators, loyal to the old company boss, blocked emails from the new management in which SoftBank and Arm henchmen were urging humble employees and top managers to disobey Wu. The old management team also retained control of the bank accounts, website, social media pages and Shanghai office.
But then Wu’s defenses began to weaken – as one of the participants in the events said, the old CEO was “betrayed” by the IT manager. Employees were still receiving letters from Liu’s “camp,” and the page Wu used to fight SoftBank as “a large consortium of Western capital” was shut down. If Arm regains full control of the Chinese division, the British side will have to deal with an enterprise that has transformed Wu significantly in two years of unlimited power.
According to the Financial Times, he regularly fired disloyal employees and encouraged personal loyalty by hiring dozens of new employees. On Chinese New Year, Arm China employees received red envelopes with cash, only the hieroglyph on these envelopes meant not the name of the company, but the name of the CEO. He always insisted that Arm China was not a subsidiary of British Arm, but an independent company building China’s semiconductor industry – that’s why many common workers disliked Liu in advance.
Recently, 430 Arm China employees signed an open letter in support of Wu, but now some of them have admitted they signed the document under duress. However, the desire of the former CEO of Arm China to continue cooperation with Huawei, which fell under US sanctions, caused real admiration even from his enemies. Two years ago, company employees were also forced to sign an open letter – at the time it was a kind of loyalty test; Dissenters were demoted, and one of the employees said that after refusing, 80% of his customers were taken away from him.
The two-year standoff with no facelift has shown SoftBank and Arm the realities of doing business in China. The central government-controlled courts didn’t even hear the Arm China case – they only got a trial because the British company was threatened with an exit from the joint venture. At the same time, Mr. Liu, one of the two new CEOs, is a protégé of Beijing and a businessman “married” to his career and the interests of the state.