Beijing calls on Arm to intensify chip co-operation with Chinese companies

Beijing has urged chip designer Arm to work more closely with Chinese companies in an indication of the crucial role the SoftBank-owned group plays in a semiconductor industry under intense pressure from US export restrictions.

The deputy minister of science and technology Zhang Guangjun urged Arm to deepen its co-operation with Chinese universities, research institutes and companies in a meeting with its chief executive Rene Haas in Beijing on Tuesday.

Zhang said his “ministry would continue to provide services and support for high-tech enterprises like Arm to develop in China”, according to a ministry statement on Thursday.

Arm provides the core designs for the bulk of processors made by the world’s chipmakers. Any moves to restrict China’s access to them could severely handicap its industry and further push out President Xi Jinping’s goal of semiconductor self-sufficiency.

The Haas meeting also comes at a critical time for Arm, with unresolved issues in China potentially complicating SoftBank’s plans for an initial public offering of Arm shares in New York.

For more than a year, China has held up Arm’s plan to offload its troubled joint venture in the country, with officials reluctant to sign off on the UK group’s exit from its Chinese unit.

Arm last year moved to transfer shares in its Chinese joint venture to SoftBank after spending nearly two years battling its local head Allen Wu for control of the unit. While Arm and SoftBank contend that the share transfer is complete, China has declined to process the paperwork confirming the transfer, according to current Chinese business records.

Despite Beijing’s efforts to keep Arm engaged in the country, US and UK export controls have already prevented the group from providing some of its most advanced designs to Chinese customers. The restrictions are likely to increase as Washington rallies allies to work in lockstep on stymying the development of China’s semiconductor industry.

Haas’s trip to Beijing is his first since the outbreak of the Covid-19 pandemic in 2020. The chief executive stressed China’s importance to Arm and pledged to “strengthen exchanges and dialogues in the future” as well as “actively integrate [the company] into China’s scientific and technological innovation system”, according to the ministry.

Arm China recorded a profit of $49mn on sales of nearly $700mn in the year to March 28 2022. The unit directly passes some of the money it takes in from Chinese customers to Arm by way of a licensing agreement, and Arm recognises a portion of the unit’s profits. Arm reported total sales of $2.7bn for the year.

In its annual report, the group said the transfer had been completed but not registered in China, adding that it had “been advised and understands that registration status does not affect the validity of the transfer of ownership interest in Arm China”.

A successful listing of Arm is central to SoftBank chief Masayoshi Son’s efforts to mount a turnround for the Japanese investment group, which has seen its fortunes sink with the retreat of investor enthusiasm for tech shares.

Son recently stepped back from front-line roles at SoftBank to concentrate on Arm’s debut. The group in April announced it had confidentially submitted a draft registration statement to the US Securities and Exchange Commission.

Arm did not respond to a request for comment on Haas’s China trip.