ARM China fired almost 100 employees mostly engineers after reporting a record 96% drop in its Net Profit in 2022. The majority of fired employees were from the high-performance computing (HPC) and system-on-a-chip (SoC) designs team. The company has assured that all the outgoing employees will be adequately compensated according to their tenure.
Arm China recorded a massive drop in its profit, even after achieving an increase in its annual revenue. In 2022, the company recorded a profit of $3.2 million as compared to $79.2 million in 2021. In the same period, the revenue grew from $665 million in 2021 to $890 million in 2022. According to Reuters, the company reported a $37 million loss in foreign exchange in 2022, compared with a gain of $9 million the previous year.
The company had a turbulent 2022, with its now-ousted CEO refusing to leave the company even after the majority voted against him. Moreover, with the ongoing US-China tech war and unfavorable political and economic conditions, the company had to go for mass layoffs to compensate for the downward trend in its profits. The mass layoffs don’t come as a surprise, as in the last few months, many American and Chinese tech companies have laid off their employees for the same reasons.
Arm China and its management struggles
Established in 2018, Arm China is a joint venture between the British semiconductor and software design company Arm and a group of Chinese investors. The parent company Arm primarily deals with designing ARM processors that are found in almost all smartphones and software development tools. Arm plays a vital role in the world’s largest computing ecosystem and works with partners like AWS, Google, MediaTek, Qualcomm, and more that use their technology across markets and applications.
Arm sells its products and services in China through Arm China. While Arm China is the only authorized platform that can sell Arm’s products, the company is allowed to sell its own independent designs and products apart from Arm, in the Chinese market.
The Japanese conglomerate SoftBank Group which owns ARM also has a minority stake in Arm China. In 2018, SoftBank Group sold the majority stake in Arm China to a group of investors who have ties with the Chinese government. This led to management and control issues as Arm China’s Ex-Chairman and CEO Allen Wu declared that Arm China was independent of its parent company. He said that Arm China was a stand-alone entity and would soon go for an independent public offering.
Even after the majority of directors voted against him, CEO Wu refused to hand over control of the company. Finally, the Shenzen government, the home government of the company had to intervene to remove Wu from his position.
Wu still holds a 16% stake in the company and said that his removal should be seen as the parent company Softbank’s strategy to regain control of Arm China. He further added that if Softbank regains control over Arm China, then the sovereignty, technological self-sufficiency and supply chain security of China would be under threat. Arm refuted this claim by stating that the company’s intellectual property rights had nothing to do with internal management changes.
Arm’s vice president of external communications Phil Hughes said that Arm China was performing well and the company was expected to grow in the coming years. He further added that the new management team had quickly restored confidence in the China ecosystem, and the company had put the previous management issues behind it. Now Arm is only focused on expanding its technology into the Chinese market.
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