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Why is Softbank rushing to sell ARM? Softbank overinvesting in the wrong business areas and the Chinese ARM branch "going rogue" among the possible reasons

Softbank may have overinvested in ARM and is clearly well aware of the Chinese "rogue" CEO. (Image Source: Nyob.news)
Softbank may have overinvested in ARM and is clearly well aware of the Chinese "rogue" CEO. (Image Source: Nyob.news)
If Nvidia manages to buy ARM, team green will certainly have its hands full with all sorts of inherent problems in addition to all the other competing ARM clients that demand equal access to current IPs and future technologies. One such problem may have been created by Softbank itself when it began overinvesting in an IoT ARM division that did not take off, plus the Chinese ARM branch could prove a bit of a wildcard as its CEO is now trying to separate from the British branch.
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ARM’s fate is being decided as we speak, and there already are clear signs that Nvidia could seal the deal with Softbank by the end of this summer. However, new evidence shows that Softbank has been rushing to sell ARM off because of mismanaged investments and internal ARM power struggles, so Nvidia would have to “inherit” all these problems on top of having to deal with all the competing companies that still remain ARM’s clients.

In a recent NSTech article, co-founder and ex-president of ARM Holdings Tudor Brown who stepped down in 2012 explains how Softbank overinvested in ARM and prioritized the wrong business areas. After succeeding in acquiring ARM for $32 billion in 2016, Softbank thought it wisely to diversify the British company’s core semiconductor IPs with a new Internet of Things (IoT) division that needed the hiring of an additional 2,000 employees. Unfortunately, this new IoT business failed to take off, and Softbank has already reassigned two IoT-related units, which will remain under Softbank’s wing and not be sold together with ARM. Brown thinks that Softbank was hoping to see good returns in a short timeframe, but this new IoT business underperformed. Combine this with Softbank's historical losses recorded in Q1 this year and we are starting to better understand why the company is so eager to sell ARM.

Brown also foresees potential problems with Nvidia as the new ARM owner. The whole Nvidia deal appears to be fundamentally clashing with ARM’s underlying business model. ARM cannot simply be owned by one of its clients, as this would directly hinder the capacity to remain on good terms with “an unholy clan of competitors.” If the owner is not a neutral entity, the balance is automatically upset and all the other client companies will definitely feel like the access to ARM’s licensed IP’s and future technologies could be significantly restricted.

Additionally, ARM’s UK manufacturing facilities could be moved to the US, and we could see an uproar directed at the UK government for mismanaging national resources. Hermann Hauser, another ARM co-founder, believes that the UK government needs to step in and help ARM get a public sale in order to remain an independent and neutral British company. Brown, on the other hand, claims that this should have happened 4 years ago. Nevertheless, the UK government back then accepted the Softbank acquisition as “a vote of confidence in post-Brexit Britain.”

As for the internal power struggles, we hear that the Chinese ARM branch has already gone rogue, as CEO Allen Wu apparently needed to be fired in June for running an illicit investment scheme on the side, yet Wu refused to comply since he holds some leverage due to Chinese law and company registration documents. Therefore, Wu has hired a security detail and has banned representatives of the British branch from entering the Chinese premises. There are reports from some Chinese ARM employees who claim that they have been threatened and harassed in order to accept these developments. Softbank seems to be well aware of everything that is happening on the Chinese side of ARM, and this most likely constitutes another major reason for the rushed ARM sale.

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Bogdan Solca
Bogdan Solca - Senior Tech Writer - 1541 articles published on Notebookcheck since 2017
I first stepped into the wondrous IT&C world when I was around seven years old. I was instantly fascinated by computerized graphics, whether they were from games or 3D applications like 3D Max. I'm also an avid reader of science fiction, an astrophysics aficionado, and a crypto geek. I started writing PC-related articles for Softpedia and a few blogs back in 2006. I joined the Notebookcheck team in the summer of 2017 and am currently a senior tech writer mostly covering processor, GPU, and laptop news.
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> Notebook / Laptop Reviews and News > News > News Archive > Newsarchive 2020 08 > Why is Softbank rushing to sell ARM? Softbank overinvesting in the wrong business areas and the Chinese ARM branch "going rogue" among the possible reasons
Bogdan Solca, 2020-08-18 (Update: 2020-08-18)