British semiconductor giant Arm is reportedly looking to bypass its Chinese subsidiary, ArmChina, by offering IP licenses directly to Chinese customers, according to DigiTimes reporting (via Tom’s Hardware).
Arm China, established in 2002, remained a foreign-owned enterprise in the nation until 2016 when a majority (51%) stake was sold to a Chinese investor consortium.
At the time, it was hoped that the sale would help Arm comply with local regulations better as well as adapt to China’s unique needs.
Arm wants to abolish Arm China
Since 2016, Arm China has acted as an intermediary, earning itself a margin by licensing Arm’s IP to Chinese customers, however tensions between Arm and its Chinese subsidiary have been ongoing for several years, centered mostly around who controls the division.
The British company now appears to be exploring ways to circumvent the joint venture model by selling directly to China. By doing this, it would be able to increase its gross margins by eliminating the need to share projects with Arm China.
Despite tensions, Arm China continues to contribute pretty significantly to the overall business. It generated $122.6 million in the second quarter of 2024, accounting for around 13% of the overall company’s revenue.
Moreover, Arm China has been busy developing its own processor IP. In September, it launched its domestically-approved Linglong graphics and video processors, and has also reportedly been exploring general-purpose GPUs for AI and HPC, reflecting China’s push for semiconductor self-sufficiency in light of ongoing geopolitical tensions and subsequent restrictions and sanctions on imports and exports.
In a letter to shareholders following its most recent quarterly earnings report, Arm CEO Rene Haas and CFO Jason Child wrote: “We expect the migration of AI from the cloud to edge devices to drive even higher compute demand per device over time and Arm’s unprecedented share across all end markets means that Arm is uniquely positioned to benefit from this migration, which will increase royalty revenue per chip.”
TechRadar Pro has asked the company about plans to sell direct to the Chinese market, but the company did not immediately respond.
More from TechRadar Pro
These are the best cloud storage management servicesFancy an upgrade? Here are the best business laptops and best mobile workstationsHuawei is dodging advanced chip sanctions through suppliers, claims US Select Committee
