Arm's struggles to rein in its rogue China division continue, with reports in The Telegraph of a new investigation being launched regarding suspicious payments to senior executives of the Arm/China state-sponsored joint venture. Even as Nvidia's $40 billion acquisition of Arm is still going through regulatory bodies (and hitting certain snags), this particular side story from the U.K.-based company's tale may yet prove a thorn for the entire deal.
The news comes as Arm confirms in its annual accounts report that it received “allegations related to the appropriateness of payments” handed out to the upper echelon of the division. A division which is still being helmed by Allen Wu, head of the joint venture, whom Arm has failed to remove since its attempt to regain control of the Chinese division back in 2020. A situation that the report describes as being in the hands of Arm China's board of directors, which is "in the process of resolving certain disputes with a member of the senior management… which remain unresolved."
The "certain disputes" refer to the fact that Allen Wu rejected Arm China board's vote to fire him in 2020. Seemingly under the cover of Chinese law, Allen Wu has managed to remain in control of the joint venture, leading him to keep both the company seal and dismiss employees with no feedback from Arm's headquarters. Arm China has also doubled down on developing technology more in-line with China's specific requirements – although that was a part of the business strategy for the venture all along.
More worryingly for the Nvidia-Arm deal, Arm in the report said that the situation has prevented it from being able to access Arm China's accounts for a financial audit and assess the current value of its 49% stake in the venture - whose latest figure was valued at around $827 million. The remaining 51% stake is held by Chinese state-backed Hopu Investments.
Regarding the report, an Arm official responded that "Arm continues to work with all key parties to resolve the disputes relating to Arm China. We have no additional comments at this time." That may well be true, but it's unlikely that regulatory bodies will be happy with the current state of affairs and the inability of Arm to present a full account of its global business.