According to Chinese news outlets, Arm is allegedly attempting to bypass Arm China in its IP licensing business and sell directly to Chinese customers. Although Arm has not confirmed this information, it highlights the ongoing tension between Arm and Arm China.
NetEase and Tencent Tech reported that after the expiration of certain module contracts, Arm is trying to bypass Arm China and sell directly to the Chinese market. This approach contrasts sharply with SoftBank's previous strategy, which allowed Arm China to earn a margin by acting as an intermediary to mitigate risks.
Additionally, Chinese news outlets suggest that Arm China is attempting to form a chiplet team and explore the GPGPU business, further leaning toward independent commercialization.
In 2016, SoftBank decided to form Arm China as a joint venture between UK-based Arm and Chinese investors, with Arm holding 49% and Chinese investors holding 51%. The ownership structure was intended to mitigate potential trade risks in the Chinese market.
The Chinese majority stake and Arm China's role in licensing operations, including independent R&D, have enabled it to sell to both Chinese and overseas markets. However, this ownership structure has also contributed to tension between the two entities.
Arm's main business comes from IP licensing, and in recent years, it has sought to ride the AI wave by increasing its ecosystem's visibility in areas such as AI PCs and AI accelerators. From April to June 2024 (the second quarter of 2024), Arm's revenue reached US$939 million, with Arm China contributing US$122.6 million, representing 13% of the total—indicating Arm's significant reliance on Arm China.
Arm China shares a portion of its revenue with Arm based on the Arm IP it uses, positioning it more as a major customer in China than a subsidiary. Simultaneously, Arm China has full independent R&D rights, allowing it to develop CPUs compatible with Arm architecture and other processors with its own architecture, which it can license back to Arm.
As China's semiconductor import substitution continues, Arm China's independent R&D business remains active. In mid-September 2024, Arm China launched its first domestically developed Linglong D8/D6/D2 display processors, along with the next-generation Linglong V510/V710 video processors.
