We always warn clients that even in the best of times, Joint Ventures (JVs) in China always end in tears. And we are far from the best of times right now. There is a major example of this playing out right now with Arm China.
Arm’s China JV is, to put it simply, a bit of a mess. The Board has fired the CEO, but he has refused to leave. And owing to some peculiarities of Chinese corporate law, removing him is proving difficult.
We wanted to take a look at that as an example of the many complexities of doing business in China. We want to be clear this is not intended as a criticism of Arm. Their plight today is very much a function of the overall business climate, and there are many forces at play beyond their control.
Some quick background. Arm makes what are essentially blueprints for processors, a crucial part of many chips. Think of Arm cores as the engine of a car. Arm provides the latest designs for the engine, then the car makers put all the other pieces on top. Processors, the engine in this analogy, are expensive to design but relatively common across many part of the function sof a chip. So almost every chip which does any form of computation (as opposed to just basic sensing and reacting) uses Arm intellectual property (IP).
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