Encirclement and suppress the joint venture company and CEO: Will Amou China become an abandoned son?

“The company has a ghost.” Amou China CEO Wu Xiongang said firmly to the tiger.On May 30, just a few hours after he sent an email “about the handling of suspected corrupt employees” to the Arm headquarters, he received a reply that his CEO position was dismissed, which made Wu Xiongang more convinced of this. This is just a small plot in the whole incident.

Produced | Tiger Sniff Technology Group

Author|Zhang Jiahao

Edit | Utada

In the summer of 2020, Amou China, the only joint venture company in the world by Arm, was in a farce of seizing power. Four declarations, twists and turns, are still out of Rashomon.

Here is a brief review.

On June 11, Arm suddenly issued a media statement, announcing that it had joined hands with major shareholder Hopu Investment to dismiss Wu Xiongang as China’s CEO in the name of harming the company’s interests.

The next day, Amou Technology issued a statement stating that Arm’s allegations were unnecessary and the removal procedure was not legal. Wu Xiongang continued to lead the company as CEO.

Encirclement and suppress the joint venture company and CEO: Will Amou China become an abandoned son? 1

On June 15th, Amou China released a joint letter with the signature of the company’s employees on its official public account to support Wu Xiongang.

Encirclement and suppress the joint venture company and CEO: Will Amou China become an abandoned son? 2

From a procedural point of view, Wu Xiongang is still the CEO of Amou China, but will he continue to lead this joint venture in the future? How did the incident end? There is still no definite result yet. But what is certain is that with Arm and Hopu Capital (Amou China’s shareholders) as one party, they and the other party, the Anmou China management team, have completely broken and trust each other again.

Wu Xiongang revealed to Huxiong that after several months of investigation, he discovered three “inner ghosts” in Arm’s headquarters in China’s legal affairs, strategy, and finance departments. The three of them worked together to make false accounts to fill their pockets. After being discovered, they disappeared collectively with their computers and USB shields, and no one could be contacted.

And this “penetration” is much more than that.

Wu Xiongang mentioned a detail. A board secretary in the company was stationed by Arm headquarters, and a customer who had contacted him secretly reported to Wu Xiongang: “I have never seen a secretary of the board of directors with such great power.”

“Arm wants to take back control of the joint venture company. They think your joint venture company is a subsidiary, so they have to listen to me completely.” Wu Xiongang said.

Arm accuses Wu Xiongang of starting another hill, Wu Xiongang believes that Arm is “arrogant and has too much interference with China”.

Even if “grabbing the official seal” in 2020 is not a new thing, as a top semiconductor company, the conflicts erupted by the Chinese management of Anmou still make people feel incredible.

On the one hand, Amou China is in a storm of seizure of power, and people’s hearts are turbulent. On the other hand, the acquisition of Arm and NVIDIA is also facing huge obstacles. This joint venture company, which was given high hopes at the beginning, is now in a dangerous crack.

A “joint venture” with the characteristics of the times

Amou Technology (China) Co., Ltd., also known as Arm China, is currently the only joint venture company in the world. Many people think that Amou China is Arm’s subsidiary in China, which is only responsible for the business in China. But in fact, the establishment and business of Amou China are very complicated.

Cambridge-based Arm is the world’s leading provider of semiconductor intellectual property (IP). The Arm architecture developed based on the reduced instruction set (RISC) has long dominated mobile devices due to its high performance and low power consumption.

It should be noted that Arm does not directly sell chips, but sells its intellectual property to downstream chip design companies, which is a cornerstone of the semiconductor industry.

After 2010, with the development of the mobile Internet, the importance and influence of the Arm architecture have become increasingly prominent. In 2018, Arm’s revenue in China accounted for 25% of the total. Huawei, Xiaomi and other smart phone manufacturers, HiSilicon, Ziguang Companies involved in other chip ICs have maintained frequent cooperation with Arm.

In order to better promote the development and landing of the Arm ecosystem in China, Arm and relevant Chinese departments have the idea of ​​establishing a joint venture. Under the premise that relevant departments have given preferential treatment and given many green lights, the entire establishment process of Amou China has been exceptionally smooth.

And Wu Xiongang, who joined Arm America in 2004, told Hu Xiu that he moved his family to Shanghai three years after joining the company and began to assist Arm’s business development in China. As the proportion of China’s business in Arm’s overall revenue continues to increase, Wu Xiongang entered the Global Executive Committee in 2014 and was appointed as the CEO of Amou China in 2017.

In May 2017, ARM and Hou’an Innovation Fund signed a memorandum of cooperation in Beijing, planning to establish a joint venture company in Shenzhen-under the premise that the Chinese party holds a controlling stake, Arm will provide technology.

It is worth noting that Hopu Innovation Fund was jointly established by Hopu Investment and Anchuang Fund. The former is a veteran private equity fund founded by Fang Fenglei, a Chinese partner of Goldman Sachs Group. Although it is set up overseas, it mainly invests in Chinese projects; the executive director of Anchuang Fund is Wu Xiongang, CEO of Amou China.

Wu Xiongang recalled to Huxiong that the reason why he chose to join hands with Hopu Capital was determined by Arm after careful consideration.

“Arm does not want to have too many scattered shareholders and tends to centralize management; in addition, Arm also hopes to find some central financial institutions or investors with a background of state-owned assets outside of industrial capital. After all, our IP market share is 95%. Above, it is likely to face the monopoly problem.” He explained.

Arm China fundraising PPT

Arm China fundraising PPT

However, the reason why he chose HOPU after many rounds of interviews with investors is actually Wu Xiongang’s “selfishness”. He hopes to find an investment institution that does not know much about technology. The advantage of this is that the two parties only have a pure financial investment relationship and will not interfere too much with the company’s future technological direction and development route.

After several years of preparations, in April 2018, Chinese investors and SoftBank Group formally signed a joint venture company-Amou China. The joint venture company is 51% owned by the Chinese and 49% owned by foreign parties, of which Arm owns 47.33% Equity.

Encirclement and suppress the joint venture company and CEO: Will Amou China become an abandoned son? 3

In addition, Amber Leading is the entity that Hopu invested in this time, accounting for 36% of the shares. The third place is the Anchuang Growth Equity Investment Partnership in Ningbo Meishan Free Trade Port Zone, which holds 13.3%. Anchuang Fund is its manager.

After a series of equity penetration, the final Chinese holding ratio was determined as “Hopu Investment owns 35% of Chinese capital, and Wu Xiongang holds 16%, totaling 51%.”

In fact, from the above equity distribution, Arm is still the largest single shareholder. However, Hopu and Chuang’an (which can be understood as Wu Xiongang’s side) signed a concerted action agreement to ensure that the Chinese side can control the joint venture. In terms of voting rights, Arm has 4 votes, Hopu Capital has 3 votes, and Wu Xiongang has 2 votes.

The composition of the board of directors is also quite complicated.

Although there are four representatives of Arm, four representatives of Chinese investors (including Wu Xiongang and three directors of Hopu Investment), one is a director elected from the “ecosystem partners”. However, only one of Hopu’s three directors is Chinese; and the four directors assigned by Arm are divided into two factions, Arm and Softbank.

Encirclement and suppress the joint venture company and CEO: Will Amou China become an abandoned son? 4

In other words, the internal powers seem to be checked and balanced, but due to the intricacies involved in the interests, the balance can be unbalanced at any time.

After its official establishment, with the backing of China, the world’s largest electronics producer and consumer country, Amou China, which is solely responsible for the authorization and distribution of Arm in China, has steadily increased its performance, and its revenue and growth have gradually been ahead of Arm as a whole.

Wu Xiongang revealed to Huxi that Amou China’s revenue in 2019 will grow by nearly 50% annually, accounting for 27% of ARM’s global IP business.

But as mentioned earlier, compared with other foreign semiconductor companies that have established offices in China, the particularity of Amou China is that it is not a mere “distribution office”, but a completely independent joint venture company that is responsible for its own profits and losses. .

Tiger Sniff’s previous article also mentioned that Amou China is also engaged in product research and development. Since its establishment, it has launched independent research and development products such as Zhouyi (artificial intelligence), Xingchen (IoT CPU core), and Shanhai (IoT platform). The vice president of ArmIP product business group strategy previously stated in an interview that the new IP property rights developed by Amou China will be owned by Amou China and can be sold not only to the Chinese market, but also to global markets outside of China through Arm.

And Wu Xiongang himself has repeatedly stated publicly that Arm China has not only become an independent Chinese company, its headquarters has been located in Shenzhen, and it is a Shenzhen local company.

In short, the complex shareholder structure, the positioning of a “Shenzhen local company”, and the ownership of R&D and patent rights have laid hidden dangers for the subsequent storm of seizing power.

The conflict broke out and why

On June 9th, Arm announced that the board of directors of Amou China had passed the decision to remove Wu Xiongang by a majority vote and had temporarily appointed two co-CEOs. The reason they gave was that as of the end of 2019, the company had received complaints from whistleblowers and several current and former employees, claiming that Wu Xiongang had privately participated in the establishment of an external dollar fund Alphatecture without the approval of the board of directors.

According to public reports, after about half a year of investigation and verification, on June 1, Arm, based on the “Articles of Association” and the “Joint Venture Contract”, internally announced the removal of Wu Xiongang’s status as director and chairman of Amou China. They claim that they have sufficient evidence in their hands and will even prosecute Wu Xiong’ang in the name of duty crime.

However, Wu Xiongang gave Hu Xiong a completely different answer to the accusations from the outside world, which was the extremely absurd scene at the beginning.

In his narration, the whole incident is very dramatic.

From June 1st to 3rd, in order to obtain 16% of the equity in Wu Xiongang’s hands, Hopu approached Wu Shang to discuss a “break-up agreement”, but ultimately did not negotiate, Wu Xiongang did not intend to hand over the equity. The result that the two parties did not agree was that Wu Xiongang was directly removed from the board of directors.

According to Wu Xiongang’s recall, on June 4, this day was the regular board time. The original board of directors announced on this day a two-year employee stock ownership plan.

“I don’t know why, the charter of the board of directors that day became a’vote to remove me'”. In the end, the board of directors approved the removal of Wu Xiongang from the positions of CEO and general manager with an overwhelming vote ratio of 7:1.

This sudden change caught Wu Xiongang off guard, but Wu Xiongang still had the weapon of “consensus agreement” in his hand. The existence of this agreement gave him the confidence to immediately respond publicly, “This board vote is not legal and does not have legal effect. “.

Since then, the story has gradually developed in the dramatic direction of “grabbing official seals”.

Amou China began publicly suing Hopu Investment and some of the directors of Arm’s headquarters began to privately send people to frequently contact the customers of the Chinese joint venture, and threatened to modify or cancel the existing contract with the joint venture.

“There are even directors who call the engineer team of the joint venture company to conduct threats and harassment against individual employees.” He revealed.

An open letter from An Mou

An open letter from An Mou

The Arm headquarters responded with a statement, pointing out that Wu Xiongang’s refusal to implement the board of directors’ resolutions and his occupation of the official seal had affected the normal operations of Amou China.

The contradiction between the two parties has thus been completely intensified.

Bloomberg reported that in order to prevent Arm’s people from entering Anmou’s office in China, Wu Xiongang even hired security personnel to stop him at the door.

“The Arm headquarters has obtained the letter of support signed by Arm CEO Simon Segars and SoftBank founder Sun Zhengyi to apply to the Shenzhen administrative agency for the new seal of the Chinese joint venture company, and then change the company’s legal person.” The article mentioned.

Due to the complicated structure of Anmou China, the removal process did not proceed as smoothly as Arm expected.

Obviously, because of the special nature of Anmou China-a joint venture and an independent board of directors, and Arm’s equity is not the majority, it cannot directly remove Wu Xiongang; and Hopu and Arm do have voting rights. Excellent, but Hopu and Wu Xiongang signed a consensus action agreement, which caused the situation to froze in place.

The SoftBank behind Arm did not play a significant role in this turmoil. “Mr. Sun is too busy, too busy.” Wu Xiongang also mentioned that SoftBank’s investment logic is to only invest and rarely intervene in daily operations. The financial report released in May 2020 shows that SoftBank has set a record 1.4 trillion yen (approximately 13 billion U.S. dollars) operating loss and is overwhelmed by it. “But Mr. Sun has arranged envoys to come to China to understand the situation.” Wu Xiongang said.

So, what exactly made the conflict between the two sides intensified, so that Arm and Hopu united against Wu Xiongang?

1. The contradiction between HOPU and Amou China: conflict of interest such as equity and investment logic

Hopu and Arm believe that the biggest problem for Wu Xiongang is the establishment of Alphatecture investment funds to invest in some start-up companies in the Arm ecosystem in mainland China, and the establishment of this fund has not been approved by the board of directors of Amou China.

In other words, they believe that Wu Xiongang is using Arm’s money and customer relationships to “set up another mountain”, and they even worry that Wu Xiongang’s separate fund will form direct competition with the two major shareholders of Hopu and Softbank.

And Wu Xiongang’s response to this is that the decision to establish the Alphatecture investment fund has been publicly discussed at a board of directors in August 2019.

Wu Xiongang pointed out to Huxiong that although one American director raised an objection, other directors voted for it.

“This resolution has been resolved by the board of directors. It is reasonable and legal! And the funds I set up myself will not compete with Arm, because Arm itself does not invest.”

As for why there is no record of the resolution passed by the board of directors, Wu Xiongang revealed that “this is the result of Hopu’s unauthorized modification of the resolution of the board of directors.”

Wu Xiongang believes that the fund is just one reason they find, and the core conflict between Hopu and himself is a conflict of interest.

This aspect is reflected in investment. “I hope to invest in some small and medium-sized start-ups, and Hopu prefers to invest in large companies that already have a certain scale. The two sides have different views on technology. But they don’t understand technology at all. I dare say that Hopu hasn’t Understand what Arm does!”

On the other hand, it is the difference between equity and listing. Wu Xiongang guessed that the reason why Hopu wanted to get back 16% of his shares was to sell the shares back to Arm to realize his and other investors’ exit.

“Hopu and Arm do not want Amou to be listed in China independently, but according to the original plan, Amou China will be listed on the Science and Technology Innovation Board within two or three years!” Wu Xiongang told Huxiong.

2. The conflict between Arm and An Mou: a subsidiary or a joint venture?

“An Mou is a joint venture company, not a wholly-owned subsidiary. The British people’s desire to control this company has long gone beyond the scope of joint ventures.” Wu Xiongang accused these British people of unimaginable desire for control.

“When a certain contract is signed, both parties will have an’information firewall’, but Arm is not willing to abide by it. At the beginning of the establishment of Arm and Arm headquarters, they agreed to’allow competition and cross authorization’, but the actual progress was not smooth. This is the British arrogant.”

According to Wu Xiongang, this kind of “arrogance” is also reflected in research and development——

“Our income from making new products far exceeds their expected income, and even directly crushing the products they make on a certain product line. This has caused them to have at least one team on their side. So much so that after we propose new product development and planning later, we (have to face) all kinds of wrangling and all kinds of malice.”

The Huawei incident is also the fuse that intensified the conflict between Arm and Amou China.

When the U.S. ban was escalated in May 2019, Arm’s UK headquarters bypassed Amou China and immediately stated that it would cut off Huawei’s supply. After that, Amou China expressed support for Huawei and would not cut off the supply. This also triggered Arm. Dissatisfaction from some people in the headquarters.

The conflicts between Arm and An Mou are the core conflicts of this farce. To remove the CEO to reclaim the equity is to regain control.

What is clear is that Wu Xiongang only owns 16% of the equity. When Hopu and Arm headquarters are on the sidelines, he has almost no chance of winning. There are even external accusations that Wu Xiongang, as a manager, should first ensure the interests of the company and shareholders, rather than openly stand on the opposite side of shareholders and let the company fall into a farce.

As for the “consensus action agreement” signed by Wu Xiongang and Hopu, lawyer Fang Fang of Shanghai Mingting Law Firm pointed out that concerted action is usually achieved through the following methods:

One is that investors/shareholders reach a consensus before the general meeting of shareholders or the board of directors to form a unanimous voting agreement;

Second, investors/shareholders entrust one of them to exercise voting rights;

Third, if investors/shareholders cannot reach a consensus, the opinion of one of them shall prevail.

In addition, the legal validity of the concerted action agreement itself is controversial, which has caused both parties to wrestle. Arm UK has always insisted on removing the board of directors’ resolution.

In response to many issues such as the current situation and how it will develop in the future, Amou China responded to Tiger Sniff in September and said that it would hold a media conference call at the end of the month. But as of press time, the meeting was not held as scheduled.

Will Amou China become an abandoned son?

The farce has not yet ended. Nvidia’s acquisition of Arm has put Amou China in the cracks of several major companies and even several countries.

According to the latest report in the Financial Times, a source close to Wu Xiongang said that after Nvidia’s acquisition of Arm, Wu Xiongang “will still be the CEO of Arm China”; but there are other reports that a person close to Wu Xiongang’s side Said: “He (Wu Xiongang) knows that he will eventually be dismissed, but this is his weapon (weight) for obtaining a resignation agreement.”

According to the information obtained by Tiger Sniff, Arm and Amou China still have not reached an agreement on Wu Xiongang, and Wu Xiongang has not given up his own interests.

This became a Rashomon.

Regarding the question of “how much impact the current acquisition will have on Amou China,” Amou China pointed out to Huxi: “This acquisition will still need to be approved by relevant departments in multiple countries in the future, which may take about 18 months. Amou China has no influence.”

Indeed, Amou’s business in China is still ongoing. On October 13, Amou China officially released the second generation of AI dedicated processor (AIProcessingUnit)-“Zhouyi” Z2AIPU, which has doubled the computing power compared with the previous generation “Zhouyi” Z1AIPU.

Encirclement and suppress the joint venture company and CEO: Will Amou China become an abandoned son? 5

However, with the advancement of trade frictions and the Arm acquisition case, the tension between Amou China and Arm has entered a critical stage.

According to Xinzhixun’s report, Arm has not received Arm China’s sales revenue share for 3 months. Arm had previously stated that if the removal of Wu Xiongang cannot be properly resolved, Arm will consider suspending support for Anmou China, “this is the last resort.”

Compared with Arm’s China’s self-developed business and Arm’s authorized business in China, the proportion of revenue is too small. Zhouyi has been updated for two generations, and the splash is not large, and the most profitable sales business is backed by It is still Arm’s technology and ecology.

If because of this turmoil, Arm used the last resort-to stop technology and licensing support, then the joint venture company’s business will be greatly affected, Wu Xiongang also admitted this to Huxiong.

In the final analysis, Amou China still depends on Arm to survive. If it is cut, the joint venture will survive in name only. If the two parties cannot reconcile, only Wu Xiongang will be out.

In fact, looking at the entire Arm, it is now in a turbulent period.

Co-founder Hermann Hauser (HermannHauser) said in an earlier interview with the media that selling Arm to Nvidia would be an industry disaster. Even after the announcement of the transaction, he created a website to collect public support and published an open letter requesting the British government to rescue ARM in order to prevent Nvidia from completing the acquisition.

It is worth noting that after Arm becomes a US company, it needs to comply with CFIUS (Committee on Foreign Investment in the United States), and it needs to comply with this regulation when exporting to markets including China and the UK.

But in fact, whether it is sold or not, the British semiconductor giant is being penetrated by the United States.

According to Wu Xiongang’s memories, when he joined Arm, about 90% of the management was based in the UK, and now probably only two or three are still in the UK, and most of the rest, including the current CEO, are based in Silicon Valley, USA . In addition, since the CEO moved to the United States in 2007, he began to recruit people on a large scale in the United States.

Considering the current Sino-US relations and the potential impact of this transaction, the transaction is likely to be rejected.

On September 27th, Academician Ni Guangnan attended the 4th Information Security Industry Development Forum and delivered a speech. He talked about the acquisition of NVIDIA. He believed that the Ministry of Commerce of China may reject the acquisition: “Now the American company NVIDIA is starting to acquire ARM. If the acquisition is successful It must be very detrimental to us, so I believe that our Ministry of Commerce may reject this merger, whether it can be completed, I don’t know.” The latest news on October 21st, China including Huawei is the most influential Several powerful technology companies have been communicating with China’s State Administration for Market Regulation, hoping that the department will either reject the transaction or add additional conditions to ensure that they can continue to use ARM’s technology.

In other words, if the transaction can take place, it is not good news for Arm Ecosystem and Amou China. For example, China has begun to gradually support the development of new architectures, such as the RISC-V instruction set that the Chinese industry has been paying attention to, even if the instruction set is not yet mature.

In other words, under the general trend of emphasizing “inner circulation”, the future position of Amou China will be even more embarrassing.

In October 2020, Arm’s CEO Simon Seggs gave the Chinese media a temporary reassurance at a media Q&A meeting on mergers and acquisitions–“Nvidia’s acquisition will not change Arm’s approach to the Chinese market. Investment, the Chinese joint venture is very important to Arm. The situation in Arm China is still under control, and there are ways to solve the management problems in China.”

At the critical moment when this acquisition case is advancing, the worst result of Amou China’s coaching change is that not only Wu Xiongang, but the entire Amou China will become abandoned.

If you pay attention to the semiconductor industry, you will find that in recent times, mergers and acquisitions have been unusually frequent. Giants such as Intel, Nvidia, and AMD are all grabbing their ground. With the proposal of several blockbuster deals, the semiconductor industry has a clear division of labor and a global collaboration model. Challenges, the golden age of globalization has passed, and the same is true for the semiconductor industry.

In the era of giant separatism, the safest way is to hold the cards issued back firmly in their own hands. This is also the bottom cause of the conflict between Arm and Anmou China.

A grain of ash of the times, falling on everyone’s head, is a mountain. Will this special joint venture company of Amou China become a victim in this process?